X4 Pharmaceuticals, Inc. — Q1 2021 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2021. X4 is a clinical-stage biopharmaceutical company with no product sales to date. Its lead candidate, mavorixafor, was in a global Phase 3 trial for WHIM syndrome, with Phase 1b trials for severe congenital neutropenia (SCN) and Waldenström’s macroglobulinemia. X4 also described early-stage candidates X4P-002 and X4P-003.
Financial highlights
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| License revenue | $0 | $3.0 million |
| Research and development expense | $12.1 million | $8.9 million |
| General and administrative expense | $5.8 million | $4.7 million |
| Operating loss | $17.9 million | $10.6 million |
| Net loss | $18.7 million | $11.1 million |
| Net loss attributable to common stockholders | $26.9 million, including an $8.2 million deemed dividend | $11.1 million |
| Basic and diluted loss per share | $1.30 | $0.56 |
| Net cash used in operating activities | $18.4 million | $15.5 million |
Revenue, margins, and profitability. There were no product sales and no license revenue in Q1 2021. The prior-year quarter included a $3.0 million Abbisko license milestone. With no product revenue, operating margins are not meaningful; X4 reported continued operating and net losses.
Cash, debt, and liquidity. At March 31, cash and cash equivalents were $114.9 million, versus $78.7 million at December 31, 2020; restricted cash was $1.7 million. Total cash, cash equivalents, and restricted cash at quarter-end were $116.7 million. The increase reflected $55.0 million of financing cash inflow, principally the March private placement, partly offset by operating cash use and other outflows. Long-term debt had a $32.5 million principal balance and a $33.4 million carrying value. The Hercules loan bears interest at a stated variable rate with an 8.75% floor; its effective annual rate was 10.7% at quarter-end. Principal payments are scheduled to begin in February 2023, with maturity in July 2024.
Material changes and financing
- Net loss rose by $7.5 million year over year. Higher R&D spending reflected mavorixafor clinical programs, early-stage candidate work, and increased personnel-related and other unallocated costs. G&A also increased, mainly from personnel and stock-based compensation.
- On March 23, X4 closed a private placement of common stock and pre-funded warrants for $55.0 million gross proceeds. The filing reports approximately $51.5 million net proceeds after offering costs. The financing triggered a reduction in the Class B warrant exercise price to $8.70 and an $8.2 million deemed dividend for common-stockholder loss-per-share purposes.
- Common shares issued and outstanding were 23,426,429 at March 31; the filing reports 23,655,660 outstanding as of May 3, 2021.
- Cash used in investing activities was $0.5 million. Financing cash inflow was $55.0 million, compared with $5.0 million in Q1 2020.
Outlook, risks, and unusual items
- Management estimated existing cash would fund operating and capital expenditure needs into Q4 2022. However, the filing states that substantial doubt exists about X4’s ability to continue as a going concern within one year after issuance, primarily because management projected a potential breach of the Hercules minimum-cash covenant in Q2 2022. Hercules could demand repayment if the company defaults.
- X4 had a non-binding letter of intent for a potential Abingworth co-development arrangement that could provide up to $70 million, but it was not executed or funded at filing. If a definitive agreement was not signed by June 15, 2021, Abingworth could require repurchase of its $2.0 million of shares at the original price; the option exercise deadline was amended to July 15, 2021.
- Management expected top-line Phase 3 WHIM data in 2022, initial Waldenström’s trial data in the first half of 2021, and initial SCN data in 2021 if trial progress permitted. SCN enrollment was difficult during the pandemic, and the filing describes slower enrollment and site delays across clinical programs.
- Management expected G&A expenses to grow during 2021. X4 expected adequate global mavorixafor supply through 2021, while identifying reliance on a single API manufacturer and a single finished-product manufacturer as a risk.
- COVID-19 could continue to disrupt trial enrollment, site operations, drug delivery, supply chains, regulatory interactions, and access to capital. Other key risks include clinical-trial outcomes, regulatory approval, additional financing needs, dilution, and reliance on licensed intellectual property and third parties.
- The company reported no material legal proceedings, no defaults upon senior securities, effective disclosure controls as of March 31, and no material changes in internal control over financial reporting during the quarter.
Investor facts to verify
- Whether the Abingworth co-development agreement was finalized, its actual funding and terms, and the outcome of the share repurchase option.
- Cash runway and compliance with the Hercules minimum-cash covenant, including any extensions, waivers, or repayment demands.
- Progress, enrollment, safety findings, and timing of results for the WHIM, SCN, and Waldenström’s trials, particularly in light of COVID-related delays.
- Actual financing costs and dilution from the private placement, warrant repricing, and any further equity or debt issuance.
- Whether mavorixafor supply, manufacturing capacity, regulatory plans, and the stated clinical milestones remain on schedule.