X4 Pharmaceuticals, Inc Q1 FY2020 Earnings Call

Greetings, and welcome to the X4 Pharmaceuticals First Quarter Financial and Operating Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Candice Ellis, Director of Corporate Communications and Investor Relations at X4. You may begin.

Thank you, operator, and good morning everyone. Thanks so much for joining us as we provide a recap of our first quarter and recent activities to present our financial results and discuss the impact of the COVID-19 pandemic on our business. Presenting on today's call will be our Chief Executive Officer, Dr. Paula Ragan; and our Chief Financial Officer, Adam Mustafa. Following prepared remarks by each, we will open the call to your questions, and they will be joined by our Senior Vice President of Research and Development, Renato Skerlj; and our Senior Vice President of Technical Operations and Quality, Mary DiBiase. As a reminder on today's call, we will be making forward-looking statements regarding our regulatory and product development plans, as well as our research activities. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 10-K on file with the SEC and in our Form 10-Q that we expect to be filed later today. I'd now like to turn the call over to our Chief Executive Officer, Paula Ragan.

Thanks, Candice, and thank you everyone for joining us on the call this morning, particularly during these challenging times. We hope you are all healthy and safe. We'd like to start today's call by talking about the COVID-19 pandemic and our response here at X4. As with most Massachusetts-based companies in mid-March, we made the decision to enact a mandatory work-from-home policy for our employees with non-laboratory-based work, which includes a vast majority of our personnel in both the U.S. and Austria. We maintained a very small number of lab-based employees, compliantly working in shifts in our Vienna, Austria research facility to maintain certain laboratory activities. Our primary goal of taking these actions was to maintain the health and safety of the X4 team and mitigate the risks of spreading the virus amongst staff, as well as to protect those in the clinical setting, where we have ongoing trials, and the broader patient communities at risk. We are pleased to report that everyone at X4 is well and that the pandemic has had minimal impact on our internal business operations to date. Throughout the pandemic, we've been able to successfully leverage technology and communication tools to continue to execute our strategy while working remotely and in virtual settings. Importantly, we've been able to virtually meet with our clinical trial investigators and with regulatory authorities. We have stayed in close touch and continue to work effectively with our partners and collaborators, and we have had positive and productive interactions with our investors and analysts, both at our well-attended Analyst Day in early April and more recently via virtual investor conferences and non-deal roadshow activities. We've also been regularly assessing the impacts of COVID-19 on our current clinical development activities and timelines while working to minimize the impact on our programs. Following input from certain of our clinical trial sites and patient groups, and our associated review of this input, we are providing updates through our clinical trial timelines today. As you know, we are currently conducting three clinical trials with our lead candidate mavorixafor, our first-in-class small molecule antagonist of the chemokine receptor CXCR4, a receptor that plays a key role in enabling the healthy trafficking of immune cells and effective immuno-surveillance. We are conducting a pivotal Phase 3 trial in patients with WHIM syndrome, a rare inherited primary immunodeficiency disease, and two Phase 1b trials, both proof of concept trials of mavorixafor: one in patients with severe congenital neutropenia or SCN, which is a group of rare blood disorders characterized by abnormally low levels of certain types of white blood cells, and the other in combination with the tyrosine kinase inhibitor ibrutinib in patients with Waldenstrom's macroglobulinemia, which is a rare form of non-Hodgkin's lymphoma. First, let's discuss our WHIM trial. As a reminder, the 4WHIM study is a global 52-week randomized double-blinded placebo-controlled clinical trial of mavorixafor for the treatment of WHIM, being carried out at numerous sites across multiple countries globally. Given the best information we have at this time from participating sites in the Phase 3 study, we are now estimating that due to the impact of the COVID-19 pandemic, the timing of our topline data from the trial will be delayed into 2022, having previously guided to the second half of 2021. We would like to note that we believe the global nature of the trial diversifies our overall risks. In addition, we are considering impact mitigation measures such as remote patient visits and virtual monitoring where possible. Despite this anticipated delay, we are more optimistic than ever regarding the market opportunity in WHIM. In April, we conducted a very well-attended virtual analyst day. During the event, we were joined by Dr. David Dale, a world expert in the translational research and clinical care of patients with WHIM syndrome, who presented a clinician's view of WHIM and also participated in a fireside chat with our Medical Director of Rare Disease, Dr. Sarah Cohen. Dr. Dale highlighted both the challenges that physicians can face in diagnosing and treating WHIM patients, and the clear unmet needs for disease-modifying therapies for this rare disease patient population. He concluded by detailing the mechanistic and therapeutic rationale and the promising potential for the use of mavorixafor to treat WHIM syndrome. We were also able to hear firsthand from a newly diagnosed WHIM patient, a 37-year-old woman named Kirsty, who walked us through her journey with WHIM. Although at times heart-wrenching, Kirsty gave us an invaluable account of her lifelong struggles with the complications of WHIM, which included frequent bouts of bacterial pneumonia, sepsis, a spinal fracture at the age of 10 from long-term steroid use and weight gain, multiple operations for various diagnosed carcinomas, migraines, COPD, and bronchiectasis, and countless visits to the hospital. It's our primary goal for this event to put a face on WHIM syndrome for those not familiar with the disease. Being able to hear both the physician and the patient perspectives on WHIM allowed us to accomplish this while also educating the external community about the nature of the disease. The other goal of our event was to present the results of our recently completed market research on the prevalence of WHIM in the United States. During 2019, and the early part of 2020, we completed two research studies. The first was based on a broad survey of more than 50,000 physicians, which was followed by a large number of confirmatory phone interviews with a subset of physicians who have reported diagnosing WHIM patients. The results of the study provided support for the prevalence estimate of between 1,000 and 1,300 diagnosed WHIM patients in the U.S. today. We also presented results from research using artificial intelligence, interrogating a database of more than 300 million anonymized patient records that span 10 years of insurance claims to help identify patient records that reflect the face of WHIM. This robust algorithm then searched the database conservatively, identifying between 800 and 2,400 additional potential but unconfirmed and undiagnosed WHIM patients. Based on all this research, we were able to provide updated guidance on the estimated range of diagnosed and undiagnosed WHIM patients in the U.S. to be between 1,800 and 3,700 WHIM patients, a significant increase from our prior estimate of approximately 1,000 WHIM patients in the U.S. We believe these numbers may represent just the tip of the iceberg and that the true prevalence of WHIM patients may well exceed these initial estimates due to under-diagnosis, which we believe is likely due to the number of factors that hamper routine genetic testing for CXCR4 mutations. To counter these factors and also capture this additional undiagnosed patient population, we are continuing our effort to increase WHIM awareness. We've launched our sponsored genetic testing program PATH4WARD in collaboration with Invitae. We have deployed our MSLs to engage targeted physicians with potential WHIM patients. And we continue to support multiple advocacy organizations representing key patient groups. In addition, our research also gave us insights into which physicians are diagnosing and seeing WHIM patients most frequently. The results were consistent with what we have seen previously and reinforced our belief that calling on immunologists, hematologists, and infectious disease specialists should enable specialty sales efforts to target these physician groups most effectively and efficiently. In other good news related to our WHIM program, we recently received notice that our submitted abstract for the 25th Congress of The European Hematology Association or EHA was accepted as a poster presentation. The poster presentation will detail results from our ongoing open-label extension of our Phase 3 trial of mavorixafor in WHIM patients. The initial data from the Phase 2 trial supported and then formed the design of our ongoing Phase 3 study. Abstracts are expected to be published online a week from today, May 14th. We are looking forward to the EHA meeting, which is being held virtually this year from June 11th through June 14th, 2020. Now let's move on to our program in severe congenital neutropenia. This Phase 1b trial is a 14-day proof of concept trial designed to assess the safety and tolerability of daily oral mavorixafor in 45 patients with SCN and other selected congenital neutropenia disorders. Based on input from sites and patient surveys similar to what we obtained for our WHIM Phase 3 trial, we are now expecting the timeline of initial data to be delayed into 2021, where we previously expected to report initial data in the second half of this year. Let's now turn to our Waldenstrom's program. As a reminder, this is a Phase 1b multi-center open-label dose escalation clinical trial designed for safety and tolerability of mavorixafor in combination with ibrutinib, as well as to obtain certain efficacy signals in patients with Waldenstrom's. Based on trial sites' feedback and patient surveys, we believe that patient enrollment is expected to be minimally impacted in this cancer setting, and we are pleased to maintain our guidance, continuing to expect initial data from the study in the second half of this year. And some additional good news: we were issued two new U.S. patents that further strengthen our robust patent portfolio and are expected to provide exclusivity through 2038 for mavorixafor, our lead therapeutic candidate with additional protection specific to WHIM syndrome. Despite the current uncertain times, we remain optimistic about the broad opportunities for mavorixafor. While our priority is always the safety and well-being of our patients, we are working hard to put plans in place to minimize further impacts of COVID-19, and we are committed to providing further updates including narrowing our guidance on the timing of clinical milestones, as we gain greater clarity. I am now going to turn it over to Adam to discuss our financial results for the quarter. Adam?

Thank you Paula, and thanks to all of you on the call today. As presented in our press release this morning, I would summarize our financial activities and results for the first quarter of 2020. During the quarter, we amended our credit agreement with Hercules Capital, increasing our potential borrowing capacity to $50 million. We currently have $25 million of potential funds available to us under this debt facility. Also, during the quarter, we became eligible to receive a $3 million milestone payment from Abbisko Therapeutics, our solid tumor oncology partner for the Greater China region. This represented the first milestone stemming from our collaboration arrangement and was tied to the closing of financing by Abbisko. We received this $3 million payment in April. As of March 31, 2020, X4 had $117 million in cash, cash equivalents, and restricted cash. We continue to expect that our cash and cash equivalents will fund our operations into early 2022. Note that this guidance does not include any potential proceeds from the amended Hercules debt facility or cash exercise proceeds from investors holding our outstanding warrants. We are continuing to monitor the impact of the COVID-19 pandemic and to manage our cash and working capital accordingly. As mentioned, license revenues of $3 million from Abbisko were recognized in the first quarter of 2020. Note that the receipt of these funds is not reflected in our cash position as the cash was received in April. There were no similar revenues recorded in the comparable period in 2019. Research and development expenses were $8.9 million for the first quarter ended March 31, 2020, as compared to $5.7 million for the comparable period in 2019. General and administrative expenses were $4.7 million for the first quarter of 2020, as compared to $4.8 million for the comparable period in 2019. Our net loss was $11.1 million for the first quarter compared to a net loss of $10.9 million for the comparable period in 2019. With that, why don't we open it up to questions, operator?

Our first question comes from Stephen Willey at Stifel. Your line is open. Stephen, can you hear us?

Yes, hello. Can you hear me?

Yes, we can hear you now.

Okay, sorry about that. Was just wondering what the runway guidance on the balance sheet contemplates just in terms of Waldenstrom's and SCN clinical development activity for 2021?

Yes, Steve, good question. So, that contemplates our continued current trials. The Phase 1b trials did not contemplate clinical trials thereafter such as registration studies, etc.

Okay. And in terms of Waldenstrom's can you maybe just provide a little bit of an update with respect to what the initial data disclosure looks like by year-end? Are we still assuming this is just going to be mavorixafor mediated impacts on patient IgM levels and whether or not you're targeting a medical conference here before the end of this year for data dissemination?

Hi Steve, I'll take that. The data disclosure will include information on 12 to 18 patients for the Phase 1b trial regarding safety tolerability and IgM levels, as you mentioned. As for aligning it with a medical conference, we are unable to predict how the data submission will align with the timelines of these conferences. We aim to share that information. The actual formats and processes are still to be confirmed.

Okay. Lastly, if some of these delays turn out to be significant, do you expect to potentially reduce your medical affairs activity related to patient identification in 2021, or can you maintain that effort despite the extended trial timelines?

Sure. I mean I think we're always monitoring our investments with our runway in data flow. I think we'll be able to continue our current pace around medical affairs. We can always control the ramp of that to ensure that we are optimally balancing continued investment and patient identification with trial enrollments. So, I think there's enough flexibility there that allows us to run the business and maintain our guidance at this point.

Great. Thanks for taking the questions.

Thank you. And our next question comes from the line of Joel Beatty with Citi. Your line is open.

Hi thanks for taking the questions. The first one is on the WHIM syndrome delay into 2022. Could you help frame what could impact the data coming in early 2022 versus late 2022?

Sure, Joel. Hi. So, I think at this point given the dynamics of COVID and how there's just massive global uncertainty in terms of countries reopening hospitals, patients, there's that's really the major sling for everything as you can appreciate. The input that we've had to date is diverse, with some favorable input and some more conservative input. So, we can't really provide any more details. But certainly as we gain greater clarity, and I'm sure most of the rest of the world is waiting for greater clarity on how the reopening of countries and particular businesses and hospitals will unfold. So, we'll keep you updated.

Good, that makes sense. Given that these delays are due to COVID, do you anticipate any flexibility from the FDA that could assist as these programs develop?

Yes, both the FDA and EMA have already issued guidance that allows for as much offsite examinations as possible, and they're providing supporting mechanisms for all companies to do that. We're taking advantage of that when patients need it. So, we actually feel we do have some clarity and are implementing that based on existing guidance.

Great. Thank you.

And our next question is from the line of R.K. with H.C. Wainwright.

Thank you. Good morning, Paula and Adam. I have a couple of quick questions. Regarding the trials where the topline data is being delayed, can you provide some information on what percentage of these studies have enrolled participants? Additionally, how do you plan to manage the situation considering the timeline? Will there be any issues with understanding the data if someone misses a dose in between? What are your thoughts on managing these aspects for the final analysis?

Yes. So, thanks R.K. I think the protocols are very robustly designed from a power perspective. So, we are not really concerned about any anecdotal missing of data. Obviously, we have to continue to monitor that but I don't think that's going to be an issue certainly for the primary endpoints. Our study is robustly designed. We are appropriately measuring safety assessments as always even in the context of pre-COVID and post-COVID. I do think we have a very good handle on our design and I think the design will withstand the variability of the COVID environment at this point. And we've had input from our clinicians to support that view as well.

Can you provide any updates on the enrollment for the study? What percentage needs to be enrolled?

So, pre or post-COVID we've never indicated we got on enrollments sort of play-by-play. So, we will look forward to sharing when we're fully enrolled at a future point.

Okay. And then a little bit on the relationship with Abbisko. So, what is expected next by your partner Abbisko and where do they want to take this drug next?

Sure. Abbisko is moving forward with mavorixafor plus the checkpoints in triple-negative breast cancer as their initial indication. They are starting that study, and we do not yet have guidance on when enrollment will begin or when data will be available. You can conservatively estimate that it will be more of a 2022 timeframe at this point due to the long-term nature of initial trials in solid tumor oncology.

Thank you. Thanks for taking the questions.

And our next question comes from the line of Laura Christianson from Cowen. Your line is open.

Hi. Good morning. Thanks for taking my question. I appreciate these are very uncertain times and some people have already dug into this. But I'm just trying to get a better sense of the current status of the clinical trial site, how many of them are closed? And how many of them do you expect will be reopening more in the near term and whether you're considering adding any additional sites to make up for time?

That's a great question. Regarding the breakdown of open and closed sites for WHIM, it's involved with 25 different countries, and the number of sites is even higher. Unfortunately, I can't provide a comprehensive overview of the variability. As you've likely seen in the news, situations vary significantly between countries and regions. Currently, we don’t anticipate opening additional sites beyond what we have already projected. Patients and clinicians are waiting for COVID to resolve in cases where it has affected sites. We believe that once this situation improves, we will be able to effectively continue operating this trial and achieve full enrollment.

Perfect. Thanks for taking my question.

Our next question comes from the line of Trevor Allred with Oppenheimer. Your line is open.

Hi, everyone. Thanks for taking my question. I just have then about SCN and WHIM. I was wondering if you had any feedback of community on how this patient population is likely affected by the pandemic? Thanks.

I'm sorry Trevor. Your line is breaking up really bad and we cannot understand you.

Okay. How is this now? Can you hear me now?

We can hear you a little bit better.

Okay. I just wanted to know if you had any feedback from the community on how COVID is impacting both SCN and the WHIM population?

Yes, thank you for the question. We're indeed very concerned about our patients and have been engaging with them through our patient advocacy groups and surveys. As you might expect, patients with immunodeficiency are especially sensitive to the pandemic, which is understandable given the recent intense news coverage. Additionally, these patients are highly motivated with their advocacy groups, which provides an advantage for some of these groups. The situation is dynamic, and we will continue to listen and pursue our trials.

Great. Thanks.

Thank you. And our next question comes from the line of Mayank Mamtani with B. Riley FBR.

Hi. Good morning team. This is Sahil Kazmi on for Mayank. Thanks for taking the question. A couple of quick ones from us. I just wanted to get an idea on the enrollment for the Waldenstrom's trial. Is this something that patients have started to enroll into, just looking at clinicaltrials.gov? And maybe as a follow-up, what are you doing differently to sort of maintain the timelines for the readouts this year? Does it have something to do with the urgency to treat? Thank you.

Sure. Yes. So the trial is enrolling. There's always a lag between kind of updates in clinicaltrials.gov and reality. So the trial is enrolling. In terms of the kind of the uniqueness of this patient population and our confirmed guidance, there's a few things that are involved. Obviously, the number of Waldenstrom's patients that are already mobilized via a very strong patient advocacy group is a favorable situation for the whole population. Our clinicians are world-recognized clinicians who certainly have their patients first and foremost in their minds, both in terms of the assessment of the risk of COVID but also the assessment of the risk of being double median pop-up patients who are at greater risk for disease progression. So, we think the combination of the advocacy from the patients, from the clinicians, and then our current operations effort to open up sites in line with what we can expect for data by the end of this year.

Great. And then maybe a quick one on the WHIM and SCN programs. Can you remind us if there are any sort of operational synergies in terms of how you identify these patients? Any overlap in the sites?

In terms of the site overlap, there's very minimal site overlap and that's intentional, because we do want to make sure that the sites can focus on the trials. Oftentimes, if you have multiples, it creates a bit of communication confusion. So, we've been somewhat intentional on separating those out. In terms of patient identification synergy, certainly a lot of these patient advocacy groups umbrella multiple types of neutropenia, both with SCN and WHIM. So there are some synergies in terms of our patient interactions via advocacy groups. And then our Invitae collaboration, which is free diagnostic testing that we're providing for the patient community and physician community certainly creates a lot of synergy, because it invites SCN, WHIM and/or other potential causes for these congenital immunodeficiencies.

Great. Thanks for taking my questions.

Our next question comes from Arlinda Lee with Canaccord. Your line is open.

Hi, everyone. Thank you for taking my questions. I'm curious if you've made any changes to how you collect data or monitor patients during COVID, and whether this might reduce the need for some office visits. Thank you.

Sure. Arlinda, are you asking, are we amending the protocol, that kind of question?

Yes.

Sure. Yes. So we are trying to create additional flexibility and probably it would allow us to do more offsite assessment for patients, so that for any of those that we feel are at risk for going into the hospital setting that we have that option for them. So we are moving forward with that, and that is consistent with already what the FDA and EMA are providing guidance to support.

Okay. Is it possible to do, like, send a visiting nurse or something like that to collect the blood?

Yes, it is. And we've actually had experience with that in our Phase 2 trial as well.

Okay, great. Thanks. And then on the enrollment, I know you guys were talking about a delay in general, but I'm wondering how maybe the cadence of inbound and if you could give some color on the bolus of patients that may be building up that you're not currently enrolling?

Sure. I mean the patients are there and motivated. The clinicians are supportive. At the end of the day, we need to recognize the challenges that COVID introduces. So that's really the three-legged stool. Again, two of the three are strong and I think consistent pre-COVID. It really is very much about the variability that COVID is introducing against site-by-site, even patient-by-patient, clinician-by-clinician. Some of these clinicians at some point were diverted and are returning. So there are a lot of variability originated in COVID and that's where one is set. I think it becomes clear, we'll be able to refine our guidance.

Thank you very much.

Thank you. And I am not showing any further questions. So I'll now turn the call back over to Paula Ragan for closing remarks.

Thank you very much everyone for joining us today. We hope you continue to stay safe, stay healthy, and we really invite any other further questions. So please don't hesitate to reach out to Candice. Thank you so much again and have a great day.

Ladies and gentlemen, this does conclude the program. You may now disconnect.