Part I Financial Information [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Xilio Therapeutics, Inc.'s unaudited condensed consolidated financial statements, reflecting its pre-revenue status and significant operating losses driven by research and development [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets increased to $120.7 million, driven by cash from financing, while total liabilities decreased and stockholders' deficit widened to $136.5 million due to net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $99,767 | $19,238 | | Total current assets | $105,572 | $20,590 | | Total assets | $120,725 | $36,317 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $12,871 | $22,155 | | Total liabilities | $34,292 | $41,602 | | Total stockholders' deficit | ($136,455) | ($83,287) | | Total liabilities, convertible preferred stock and stockholders' deficit | $120,725 | $36,317 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the nine months ended September 30, 2021, net loss increased to $56.1 million, driven by higher operating expenses, with R&D at $39.8 million and G&A at $15.7 million Statement of Operations Highlights (in thousands) | Account | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Research and development | $39,836 | $26,243 | | General and administrative | $15,652 | $7,725 | | **Total operating expenses** | **$55,488** | **$33,968** | | Loss from operations | ($55,488) | ($33,968) | | **Net loss** | **($56,099)** | **($34,447)** | | Net loss per share, basic and diluted | ($76.18) | ($72.02) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash used in operations was $63.6 million, offset by $144.8 million from financing, resulting in cash, cash equivalents, and restricted cash of $101.3 million Cash Flow Highlights (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($63,589) | ($23,386) | | Net cash used in investing activities | ($722) | ($2,080) | | Net cash provided by financing activities | $144,842 | $9,904 | | **Increase (decrease) in cash, cash equivalents & restricted cash** | **$80,531** | **($15,562)** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's biotechnology business, including its October 2021 IPO raising $116.3 million, expected cash runway into 2024, and significant accounting policies and financing activities - The company completed its IPO on October 26, 2021, receiving net proceeds of approximately **$116.3 million**[48](index=48&type=chunk)[50](index=50&type=chunk). All outstanding preferred stock was converted into **18,398,248 shares** of common stock[109](index=109&type=chunk) - Management expects that cash and cash equivalents as of September 30, 2021, combined with the net proceeds from the IPO, will be sufficient to fund operating requirements and capital expenditures into **2024**[51](index=51&type=chunk)[121](index=121&type=chunk) - In September 2021, the company amended its loan agreement with PacWest, borrowing **$10.0 million** under a new term loan to repay the prior balance. The amendment extended the interest-only payment period through December 31, 2022, and increased a one-time fee payable upon IPO to **$0.8 million**[77](index=77&type=chunk) - During the first nine months of 2021, the company raised approximately **$144.9 million** in net proceeds from the issuance of Series B and Series C convertible preferred stock[86](index=86&type=chunk)[88](index=88&type=chunk)[165](index=165&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition, results of operations, and business strategy, highlighting increased operating expenses, liquidity from the recent IPO, and future funding requirements for its immuno-oncology pipeline [Overview](index=24&type=section&id=Overview) Xilio, a biotechnology company, develops tumor-selective immuno-oncology therapies with lead candidates XTX101 and XTX202, and recently completed an IPO raising $116.3 million to fund its pipeline - The company's most advanced product candidates are **XTX101** (an anti-CTLA-4 monoclonal antibody) and **XTX202** (an interleukin 2 therapy)[115](index=115&type=chunk) - An IND for XTX101 was cleared in June 2021, and a Phase 1/2 clinical trial was initiated in September 2021. An IND for XTX202 was cleared in October 2021, with a Phase 1/2 trial anticipated in **Q1 2022**[115](index=115&type=chunk) - The company completed its IPO on October 26, 2021, raising aggregate net proceeds of approximately **$116.3 million**[116](index=116&type=chunk) - Existing cash and cash equivalents, together with IPO proceeds, are expected to fund operations and capital expenditures into **2024**[121](index=121&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2021, total operating expenses increased by $21.5 million to $55.5 million, driven by higher R&D costs for XTX202 and increased G&A expenses Comparison of Operating Expenses (in thousands) | Expense Category | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $39,836 | $26,243 | $13,593 | | General and administrative | $15,652 | $7,725 | $7,927 | | **Total operating expenses** | **$55,488** | **$33,968** | **$21,520** | Research and Development Expenses by Program (in thousands) | Program | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | Change | | :--- | :--- | :--- | :--- | | XTX202 | $13,524 | $4,091 | $9,433 | | XTX101 | $5,340 | $9,769 | ($4,429) | | Other/Indirect R&D | $9,966 | $6,816 | $3,150 | | Personnel-related | $11,006 | $5,567 | $5,439 | | **Total R&D Expenses** | **$39,836** | **$26,243** | **$13,593** | - The increase in R&D expense was primarily due to a **$9.4 million** increase for the XTX202 program, driven by manufacturing and preclinical activities, and a **$5.4 million** increase in personnel costs[158](index=158&type=chunk) - The increase in G&A expense was primarily due to a **$3.7 million** increase in personnel-related costs and a **$3.5 million** increase in professional fees related to ongoing business activities[155](index=155&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2021, the company had $99.8 million in cash, with operations funded by $144.8 million from financing and $63.6 million used in operations, expecting funds to last into 2024 - As of September 30, 2021, the company had cash and cash equivalents of **$99.8 million**[159](index=159&type=chunk) - Net cash provided by financing activities for the nine months ended Sep 30, 2021 was **$144.8 million**, primarily from the issuance of Series B and Series C convertible preferred stock[165](index=165&type=chunk) - Net cash used in operating activities for the nine months ended Sep 30, 2021 was **$63.6 million**, primarily due to a net loss of **$56.1 million**[162](index=162&type=chunk) - The company believes its existing cash and cash equivalents, together with the net proceeds from its IPO, will fund operating expenses and capital expenditure requirements into **2024**[171](index=171&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Xilio is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Xilio is not required to provide quantitative and qualitative disclosures about market risk[190](index=190&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[192](index=192&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[193](index=193&type=chunk) Part II Other Information [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risks, including significant operating losses, dependence on early-stage product candidates, development uncertainties, manufacturing complexities, reliance on third parties, lack of commercialization experience, intense competition, intellectual property challenges, and regulatory complexities [Risks Related to Financial Position and Capital Requirements](index=38&type=section&id=Risks%20Related%20To%20Our%20Limited%20Operating%20History%2C%20Financial%20Position%20and%20Capital%20Requirements) The company faces risks from significant operating losses, no revenue generation, and the need for substantial additional funding to advance its pipeline, given its limited operating history and unproven technology - The company has incurred significant operating losses since inception, with a net loss of **$56.1 million** for the nine months ended September 30, 2021, and an accumulated deficit of **$141.2 million**[197](index=197&type=chunk) - Substantial additional funding is needed to complete development and commercialization. Existing cash, including IPO proceeds, is not sufficient to complete development of any current product candidate[204](index=204&type=chunk)[206](index=206&type=chunk) - The company's approach using its GPS platform is unproven, and it has not yet demonstrated the ability to successfully complete clinical trials, obtain regulatory approvals, or commercialize a product[213](index=213&type=chunk) [Risks Related to Discovery and Development](index=42&type=section&id=Risks%20Related%20to%20the%20Discovery%20and%20Development%20of%20Our%20Product%20Candidates) The business is highly dependent on early-stage product candidates XTX101 and XTX202, facing high risks of clinical failure, potential delays, and severe side effects, with preclinical results not predictive of human outcomes - The business is highly dependent on the success of its current product candidates, which are in early stages of development and face a high risk of failure[219](index=219&type=chunk) - Preclinical development is uncertain, and positive results in preclinical studies (e.g., for XTX101 and XTX202) may not be replicated in human clinical trials[228](index=228&type=chunk)[230](index=230&type=chunk) - Clinical trials may be substantially delayed or suspended due to numerous factors, including patient enrollment difficulties, manufacturing issues, or unfavorable results[232](index=232&type=chunk) - Product candidates may cause undesirable or severe side effects, which could delay or prevent regulatory approval or limit their commercial profile[247](index=247&type=chunk) [Risks Related to Commercialization](index=58&type=section&id=Risks%20Related%20to%20Commercialization) The company lacks commercialization experience and faces intense competition, with market potential and successful reimbursement uncertain, and no guarantee of market acceptance even if products are approved - The company has no commercialization experience and currently lacks a sales force, marketing, or distribution capabilities[304](index=304&type=chunk) - The company faces substantial competition from established therapies and other companies developing immunotherapies, including those with similar mechanisms like anti-CTLA-4 (e.g., Yervoy) and IL-2 therapies[305](index=305&type=chunk)[307](index=307&type=chunk)[310](index=310&type=chunk) - Successful commercialization depends on obtaining favorable insurance coverage and reimbursement, which is increasingly difficult due to pricing pressures and challenges from third-party payors[326](index=326&type=chunk) [Risks Related to Intellectual Property](index=63&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success relies on obtaining and maintaining patent protection, but faces risks of insufficient patent scope, loss of in-licensed IP, costly infringement lawsuits, and inability to protect trade secrets - The company's success depends on obtaining and maintaining patent protection, but the patent process is uncertain and may not provide a meaningful competitive advantage[336](index=336&type=chunk)[337](index=337&type=chunk) - The company relies on in-license agreements for key patent rights (e.g., from AskGene for IL-2/IL-15 programs, City of Hope for anti-CTLA-4) and faces risks of losing these rights if it fails to comply with diligence or payment obligations[346](index=346&type=chunk)[348](index=348&type=chunk) - The company may be subject to third-party claims of intellectual property infringement, which could lead to costly litigation, substantial damages, or being blocked from commercializing its products[375](index=375&type=chunk) - The company may not be able to protect the confidentiality of its trade secrets, which could allow competitors to duplicate its technological achievements[372](index=372&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=101&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered equity transactions, including stock option grants and exercises, and the October 2021 IPO which raised $116.3 million in net proceeds, none of which were used as of September 30, 2021 - During **Q3 2021**, the company granted stock options to purchase **408,777 shares** of common stock and issued **2,585 shares** upon option exercises[531](index=531&type=chunk) - Upon closing its IPO on October 26, 2021, all outstanding preferred stock converted into **18,398,248 shares** of common stock[533](index=533&type=chunk) - The company received aggregate net proceeds of approximately **$116.3 million** from its IPO. As of September 30, 2021, none of these proceeds had been used[536](index=536&type=chunk) [Exhibits](index=102&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, stock incentive plans, key agreements, and officer certifications - Lists key corporate documents and agreements filed as exhibits, including the **2021 Stock Incentive Plan**, **Loan and Security Agreement with Pacific Western Bank**, and officer certifications[538](index=538&type=chunk)