X4 Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. X4 is a late-stage clinical biopharmaceutical company with no product-sales revenue to date. Its lead candidate, oral mavorixafor, is being developed for WHIM syndrome and certain chronic neutropenic disorders.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue from product sales | None | None | None | None |
| Research and development expense | $19.1 million | $14.1 million | $56.7 million | $42.0 million |
| Selling, general and administrative expense | $8.1 million | $6.0 million | $25.6 million | $20.5 million |
| Operating loss | $27.2 million | $20.2 million | $82.3 million | $62.0 million |
| Net loss | $2.3 million | $21.6 million | $82.0 million | $64.8 million |
| Net loss per share | $0.01 | $0.26 | $0.48 | $1.32 |
| Cash used in operating activities | Not provided for quarter | Not provided for quarter | $68.8 million | $58.0 million |
Liquidity and debt: At September 30, 2023, cash and cash equivalents were $131.6 million and short-term marketable securities were $10.1 million, totaling $141.7 million; restricted cash was an additional $1.0 million. Total assets were $173.3 million, total liabilities $105.7 million, and stockholders’ equity $67.6 million. Long-term debt was $54.3 million net of discount, against $55.0 million principal outstanding. The Hercules facility bears interest at the greater of 10.15% or prime plus 3.15%; its effective annual rate was 13.6% at quarter-end.
Cash, cash equivalents and restricted cash increased $9.6 million during the first nine months, to $132.6 million. Financing provided $88.4 million, including $60.4 million net proceeds from the May private placement and $22.5 million of Hercules borrowings. Investing used $10.1 million, principally for marketable securities.
Margins: Not meaningful because the company had no product-sales revenue. It continued to report operating losses.
Material changes versus prior periods
- Operating expenses increased: R&D rose $5.0 million in Q3 and $14.7 million for the nine months; SG&A rose $2.1 million and $5.1 million, respectively. Drivers included NDA preparation, manufacturing and clinical-trial costs, a $5.0 million Genzyme milestone accrual, and commercial-readiness hiring and costs.
- Q3 net loss was substantially lower than in 2022 despite a larger operating loss, primarily because of a $25.2 million noncash gain from the decrease in fair value of Class C warrant liabilities. The nine-month warrant fair-value gain was $0.7 million. This is a valuation item, not operating revenue or cash generation.
- Nine-month operating cash use increased by $10.8 million year over year, reflecting higher R&D and, to a lesser extent, SG&A spending.
- Common shares issued and outstanding increased from 121.7 million at December 31, 2022 to 164.7 million at September 30, 2023; 167.3 million were outstanding as of November 7, 2023. The filing also reports substantial outstanding warrants and pre-funded warrants, creating potential dilution.
Outlook, developments and risks
- The FDA accepted the mavorixafor NDA for WHIM syndrome on October 30, 2023, granted Priority Review and set an April 30, 2024 action date. The company said the FDA was not then planning an advisory committee meeting. X4 was preparing for a potential U.S. launch in the first half of 2024; approval and launch are not assured.
- X4 reported that its Phase 3 WHIM trial met its primary and first key secondary endpoints, and reported statistically significant infection-rate reductions and favorable tolerability over the 52-week trial. These are company-reported trial results, not an FDA approval determination.
- The company expected to share additional Phase 2 chronic-neutropenia data in the first half of 2024 and initiate a pivotal global Phase 3 trial in that indication in the first half of 2024.
- Management said existing cash, cash equivalents and marketable securities were expected to fund operations into 2025, but additional capital would be needed to fund operations in 2025 and beyond. The filing also projects a potential breach of the Hercules minimum-cash covenant in Q1 2025 without additional funding or other cash inflows. The facility requires at least $20 million of qualified cash through January 2025, with later requirements subject to terms and milestones.
- The August 2023 Hercules amendment extended interest-only payments through March 2025 and increased total facility capacity to $115 million. X4 had borrowed $55 million by quarter-end; access to additional tranches is conditional, and part of the capacity requires lender discretion.
- A $5.0 million Genzyme development milestone was accrued in the nine-month period and achieved October 30, 2023. The filing also identifies a further $7.0 million of regulatory milestones as reasonably possible, but not yet probable, within the following eight to nine months.
- Key risks include dependence on mavorixafor, regulatory review and clinical outcomes, the need for additional financing and possible dilution, single-source manufacturing, patient enrollment, market size and reimbursement, intellectual-property and license obligations, and restrictive debt covenants. X4 reported no material legal proceedings.
Important facts for investors to verify
- FDA review progress, the April 30, 2024 action date, any regulatory requests, and whether approval and a launch occur on the company’s expected timeline.
- Actual cash burn and financing needs, availability and conditions of remaining Hercules borrowing capacity, and compliance with the minimum-cash covenant.
- Final and additional clinical-trial data, including safety, durability and Phase 3 plans for chronic neutropenic disorders.
- The effects of warrant remeasurement on reported results and the potential dilution from outstanding warrants, pre-funded warrants, equity awards and future fundraising.
- Timing and payment of Genzyme milestones, plus commercial manufacturing readiness, supply continuity, launch spending and reimbursement prospects.