X4 Pharmaceuticals(US:XFOR)2021-03-19 20:49Part I Item 1. Business A late-stage biopharmaceutical company developing novel oral therapies for rare diseases related to the CXCR4 pathway - The company's lead product candidate, mavorixafor, is a first-in-class, oral, small molecule antagonist of the CXCR4 receptor, targeting rare diseases like primary immunodeficiencies and certain cancers27 - Mavorixafor is in a pivotal Phase 3 global clinical trial (4WHIM) for WHIM syndrome, with top-line data expected in 2022 and has been granted Breakthrough Therapy, Fast Track, and Rare Pediatric Designations by the FDA285455 - The company is also conducting Phase 1b trials for mavorixafor in Severe Congenital Neutropenia (SCN) and Waldenström's macroglobulinemia, with initial data from the Waldenström's trial expected in the first half of 2021306164 X4 Pharmaceuticals Clinical Pipeline (as of Dec 31, 2020) | CANDIDATE | INDICATION | PRECLINICAL | PHASE 1 | PHASE 2 | PHASE 3 | | :--- | :--- | :--- | :--- | :--- | :--- | | Mavorixafor (X4P-001) | WHIM syndrome | | | | Phase 3 | | | Waldenström's Macroglobulinemia | | Phase 1b | | | | | Severe Congenital Neutropenia (SCN) | | Phase 1b | | | | | Clear cell renal cell carcinoma (ccRCC) | | | Phase 2a | | | X4P-002 | Glioblastoma multiforme (GBM) | Preclinical | | | | | X4P-003 | Primary immuno-deficiencies (PID) | Preclinical | | | | - The company relies on key in-license agreements, including an exclusive license from Genzyme for the CXCR4 receptor intellectual property, which includes up to $25.0 million in milestone payments and tiered royalties9294 - X4 Pharmaceuticals depends on single-source third-party manufacturers: Aptuit for the mavorixafor active pharmaceutical ingredient (API) and Mayne Pharma for the finished drug product capsules878890 Item 1A. Risk Factors The company faces significant risks from its history of financial losses, dependence on a single product, and operational challenges - The company has a history of significant operating losses, with a net loss of $62.1 million in 2020 and an accumulated deficit of $194.2 million as of December 31, 2020, and may never achieve profitability182 - The company will require substantial additional funding as its existing cash of $78.7 million is not sufficient for the next 12 months, raising going concern risks187188 - The business is almost entirely dependent on the success of its lead product candidate, mavorixafor, and failure to commercialize it would substantially harm the business201202 - The COVID-19 pandemic is adversely affecting business operations, causing delays in clinical trial site activation and slower patient enrollment225362 - The company is dependent on a single third-party manufacturer for the mavorixafor API and finished product, with no redundant supply arrangements in place306307 - The company relies on license agreements with Genzyme and others for critical intellectual property, the termination of which could halt product development214 Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments405 Item 2. Properties The company leases its corporate headquarters in Boston and laboratory and office space in Vienna, Austria - The company's corporate headquarters is a leased 28,000 sq. ft. office space in Boston, MA, with the lease expiring November 30, 2026406 - A new lease for 1,200 square meters of laboratory and office space in Vienna, Austria was signed, which expires in March 2027407 Item 3. Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not currently subject to any material legal proceedings408 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable409 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq (XFOR), and it does not anticipate paying dividends - Following the merger in March 2019, the company's common stock began trading on the Nasdaq Global Market under the symbol "XFOR"412 - The company has never declared or paid cash dividends and does not intend to in the foreseeable future414 Item 6. Selected Financial Data As a smaller reporting company, this disclosure is not required - The company is not required to provide this disclosure as it qualifies as a smaller reporting company417 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company's net loss widened to $62.1 million amid rising R&D costs, raising substantial going concern doubts Results of Operations Comparison (2020 vs. 2019) | (in millions) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | License revenue | $3.0 | $— | $3.0 | | Research and development | $41.9 | $30.2 | $11.7 | | General and administrative | $21.0 | $17.6 | $3.4 | | Total operating expenses | $62.9 | $51.7 | $11.2 | | Loss from operations | ($59.9) | ($51.7) | ($8.2) | | Net loss | ($62.1) | ($52.8) | ($9.3) | - The company's financial condition raises substantial doubt about its ability to continue as a going concern, with cash of $78.7 million expected to fund operations only into Q1 2022450451 - Research and development expenses increased by $11.7 million to $41.9 million in 2020, primarily due to higher clinical expenses for the three ongoing mavorixafor trials438 - The COVID-19 pandemic has caused disruptions, including delayed trial site initiation and slower patient enrollment, which could adversely affect clinical development timelines429430 - As of December 31, 2020, the company has borrowed an aggregate of $32.5 million under its loan agreement with Hercules Capital455 Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this disclosure is not required - The company is not required to provide this disclosure as it qualifies as a smaller reporting company483 Item 8. Financial Statements and Supplementary Data This section indicates the company's financial statements are appended to the report - The required financial statements are appended to the Form 10-K report484 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures The company reports no disagreements with its accountants on accounting and financial disclosures - None485 Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020487 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework490 - The annual report does not include an attestation report from its accounting firm regarding internal control as the company is an "emerging growth company"491 Item 9B. Other Information There is no other information to report in this section - None493 Part III Items 10-14 Required information is incorporated by reference from the company's 2021 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's 2021 Proxy Statement495496497 Part IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements and exhibits filed with the report - The consolidated financial statements are included starting on page F-1 of the report502 - All financial statement schedules have been omitted because they are not applicable or the required information is otherwise provided504 Item 16. Form 10-K Summary This item is not applicable, and no summary is provided - None511 Financial Statements and Notes Report of Independent Registered Public Accounting Firm The auditor's report expresses substantial doubt about the company's ability to continue as a going concern - The auditor's report contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern due to recurring losses and negative cash flows523 Consolidated Financial Statements The company reported a net loss of $62.1 million for 2020 and ended the year with $78.7 million in cash Key Financial Data (Year Ended Dec 31) | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Balance Sheet | | | | Cash and cash equivalents | $78,708 | $126,184 | | Total assets | $122,871 | $160,698 | | Total liabilities | $50,072 | $31,478 | | Total stockholders' equity | $72,799 | $129,220 | | Accumulated deficit | ($194,175) | ($132,044) | | Statement of Operations | | | | License revenue | $3,000 | $— | | Research and development | $41,932 | $30,163 | | General and administrative | $20,942 | $17,640 | | Net loss | ($62,131) | ($52,807) | | Net loss per share | ($3.09) | ($4.63) | | Cash Flows | | | | Net cash used in operating activities | ($58,818) | ($48,055) | Notes to Consolidated Financial Statements The notes detail the going concern issue, license agreements, debt facility, and significant subsequent events - Note 1 reiterates that conditions raise substantial doubt about the company's ability to continue as a going concern, as existing cash is only sufficient to fund operations into Q1 2022541543 - Note 3 details the license agreement with Abbisko, under which the company recognized $3.0 million in revenue in 2020, with potential future milestones up to $208.0 million626627628 - Note 7 describes the Hercules Loan Agreement, under which $32.5 million was drawn as of Dec 31, 2020, and includes a minimum cash covenant effective January 1, 2022647649 - Note 13 discloses significant U.S. federal and state net operating loss (NOL) carryforwards of $242.6 million and $237.5 million, respectively, which are subject to a full valuation allowance701704 - Note 16 discloses significant subsequent events in March 2021, including a private placement to raise gross proceeds of approximately $55.0 million and a potential co-development agreement for up to an additional $65.0 million712714