X4 Pharmaceuticals, Inc Q3 FY2020 Earnings Call

Greetings and welcome to X4 Pharmaceuticals Third Quarter Financial and Operating Results Conference Call. 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 Investment Relations at X4. You may begin.

Thank you, Operator. And good morning everyone. Thanks so much for joining us today. Presenting on today's call, we have our Chief Executive Officer, Dr. Paula Ragan, and our Chief Financial Officer, Adam Mostafa. Following prepared remarks by each, we'll open the call to your questions. And they'll be joined by our Senior Vice President of Technical Operations and Quality, Dr. Mary DiBiase. As a reminder on today's call, we'll be making forward-looking statements regarding our regulatory and product development plans, as well as our research activities. These statements are subjected to risks and uncertainties that may cause actual results to differ from those forecasted. The descriptions of these risks can be found in our most recent Form 10-K and filed with the SEC in our forthcoming Form 10-Q. I'd now like to turn the call over to our CEO, Paula Ragan.

Thanks, Candice. And thank you everyone for joining us on the call this morning. We hope you’re all continuing to stay safe and healthy. We are pleased to report today that while the operating environment remains challenging due to the ongoing COVID-19 pandemic, we continue to advance our Mavorixafor Clinical Development Program. Let me begin with a review of our most recent accomplishments. We are pleased to announce the publication of our positive Phase 2 safety and efficacy data for mavorixafor in the WHIM syndrome, in the journal Blood, which we believe further recognizes the significant potential of our lead candidate in this patient population. As a reminder, WHIM syndrome is a rare inherited primary immunodeficiency disease caused by mutations in the chemokine receptor CXCR4, a receptor that plays a key role in enabling the healthy trafficking of immune cells and effective immuno-surveillance. Mavorixafor, our first-in-class small molecule antagonist of the chemokine receptor CXCR4, is being developed as a once-daily oral therapy. While the comprehensive data published in Blood expands on previously presented data, there are new results presented including patient-level data regarding the specific effects on neutrophils, lymphocytes, and monocytes as well as the effect of increasing doses of mavorixafor on total white blood cell counts. In addition, the manuscript provided the most up-to-date long-term safety and pharmacokinetic data and presented a detailed analysis of the clinical benefits of the extended mavorixafor therapy on infection rates and work burdens. This important publication in the Official Journal of the American Society of Hematology provides key third-party validation of the data supporting our clinical strategy including the selection of the dose, primary biomarker endpoints, and secondary clinical endpoints for our ongoing pivotal Phase 3 clinical trial. The published results continue to reinforce our beliefs that by down-regulating the CXCR4/CXCL12 signaling pathway, mavorixafor has the potential to be the first disease-modifying therapy for the more than 3,500 estimated diagnosed and undiagnosed WHIM patients in the U.S. We're also thrilled to be granted Fast Track Designation by the FDA for mavorixafor and WHIM syndrome. Through the Fast Track Program, X4 is eligible for more frequent meetings with the FDA to discuss the Drug Development Plan, protocols, and clinical data that would support mavorixafor’s potential approval for WHIM. This key regulatory achievement further recognizes the significant unmet need of WHIM syndrome and mavorixafor’s potential to treat the challenging disease. As a reminder, mavorixafor was previously granted Breakthrough Therapy Designation by the FDA as well as Orphan Drug status by the FDA and the European Commission for the treatment of WHIM syndrome. Let me now provide an update on our ongoing Clinical Development Program for mavorixafor. Importantly, despite continued uncertainties surrounding COVID-19, we remain focused on advancing our Clinical Development Program. We continue to enroll patients in our Phase 3 WHIM syndrome Trial and make good progress across the various regulatory and clinical aspects of the trial. We are diversified across numerous sites and countries around the world, each of which has its own regional and site-level COVID-19 considerations. We are working with the sites to maintain enrollment momentum in the trial and include additional services such as in-home patient visits to mitigate the impacts of COVID-19. We continue to anticipate top-line Phase 3 data in WHIM syndrome in 2022 and intend to provide further clarity on the timeline as soon as we are able to do so. Our Phase 1B trial in severe congenital neutropenia also continues to make progress and we anticipate initial data from this 14-day Proof of Concept Study in 2021. Similar to the Phase 3 WHIM syndrome Trial, we intend to provide further clarity around our SCN Trial timeline as soon as we are able to do so. In Waldenstrom's macroglobulinemia or WM, a rare form of lymphoma, we are continuing to enroll patients although COVID-19-related delays have had some impact as we recently disclosed. We expect the availability of the initial Phase 1B clinical results in the first half of next year, a slight delay from our previous guidance of the second half of this year. In order to mitigate COVID-19-related patient-travel concerns in the study we are focused on implementing home-health visits. We are in regular dialogue with our investigators and through our Patient Advocacy Team with patients to understand their needs given the extended challenges of the COVID pandemic. We are confident that we have an effective plan in place to properly address the impact of COVID-19 on our WM study. As a reminder, this Phase 1B Clinical Trial is expected to enroll between 12 and 18 patients with WM and is a multi-center open-label dose-escalation clinical trial assessing the safety and tolerability of mavorixafor in combination with ibrutinib. The trial is being conducted as a part of a collaboration with the Leukemia and Lymphoma Society to accelerate the development of mavorixafor for the treatment of Waldenstrom's. The results of this study will share safety and important efficacy signals, and we expect that these data will inform future FDA discussions regarding the potential registration trial in WM. Lastly, I would like to welcome two new additions to the X4 leadership team, Dr. Art Taveras, who started earlier this week as our new Chief Scientific Officer. Art is an experienced CSO who is joining us from Comet Therapeutics, a privately held company focused on CoEnzyme A science and NME metabolism, where he also served as CSO. Prior to his role at Comet, he founded and was chief scientific officer of Transform Therapeutics, where he led the discovery of a novel next-generation CXCR2 antagonist for the treatment of cancer. In addition, Art held key leadership roles in drug discovery at Biogen and at Schering-Plough earlier in his career. With his significant expertise in chemokine-related chemistries, decades of drug discovery experience and inspiring leadership, Art is an ideal fit to lead our R&D initiative and further foster our evolution towards becoming a global rare-disease company. In addition, we recently extended our Board of Directors with the appointment of Alison Lawton, an industry veteran who strengthens our Board's expertise across many strategic fronts. Ms. Lawton most recently served as CEO of Kaleido Biosciences and having previously served as consulting Chief Operating Officer to the Company and as a member of X4's Corporate Advisory Board. Alison brings a unique understanding of X4's core scientific and corporate goals. I look forward to working closely with her again. With that, I'll now turn the call 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 will summarize our financial activities and results for the Third Quarter of 2020. As of September 30th, 2020, X4 had $90.7 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 this guidance does not include the $25 million in potential and contingent proceeds from our Hercules Debt Facility or any cash exercise proceeds from investors holding our outstanding warrants. Research and development expenses were $11.4 million for the third quarter of 2020, as compared to $8.6 million for the comparable period in 2019. R&D expenses included $1 million of certain non-cash expenses for the quarter ended September 30th, 2020. General and administrative expenses were $5.6 million for the third quarter of 2020, as compared to $4.4 million for the comparable period in 2019. G&A expenses included $1.4 million of certain non-cash expenses for the quarter ended September 30th, 2020. Finally, our net loss was $17.4 million for the third quarter of 2020 as compared to a net loss of $17.7 million for the comparable period in 2019. Net loss included $2.5 million for certain non-cash expenses for the quarter ended September 30th, 2020. With that, let's open up the call for questions.

Thank you. Please stand by while we compile the Q&A roster. Our first question comes from Stephen Willey, with Stifel. Your line is now open.

Hi all. This is Helen on for Steve. Just two quick questions from me. So first, you mentioned that you're focused on implementing home-health visits for patients enrolled in the Waldenstrom's trial, you're going to mitigate some of the effects from COVID. Is that same strategy being applied to the WHIM and SCN trials as well and if so how is that going? Thanks.

Sure. Thanks, Helen, for the question. So yes, the home health is being implemented for our studies where it makes sense for the chronic dosing, which is both WHIM and Waldenstrom's. Obviously, patients are coming in over many months. For SCN, it makes less sense given the actual period of the study's only two weeks of treatment, so the home health is focused solely on WHIM and Waldenstrom's.

Okay. That makes sense. And then can you provide any updates regarding X4P-003, X4P-002? Are either of these assets in IND-enabling studies at this point? And then also can you just remind us how those two assets are being differentiated from each other? I know 002 is engineered across the blood-brain barrier but I was just wondering if you could give a little more color on 003? Thank you.

Great. No, thank you. We're happy to talk about our preclinical programs that are going really well. So, 003 is the most advanced of the two. It is approaching IND-enabling studies, and then typically after that it's about a year to get into the clinics. We are extremely excited with the profile that we've been seeing come together with this particular molecule. The differentiation between 003 and mavorixafor is that it does engineer out some of the minor but meaningful profiles of mavorixafor. For example, 003 does not have a food effect likely. Of course, we have to prove that out, but so far everything is looking very good. And we've also engineered out some of the drug-drug interaction profiles, again although minor, it certainly makes an important step forward for patients and clinicians to not have to worry about that. So, that's moving forward very nicely. 002 is behind 003 in late-lead optimization and again it's making good progress in terms of finding that right profile between brain exposure and plasma exposure and we're really excited to continue to advance that to support further development for some of those serious brain cancers that we hope to address.

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

Hi guys. I was hoping that you could provide an update on the enrollment for the WHIM syndrome? And then I also feel curious on preclinical programs. Might we be expecting any data presentations on this anytime in the near future? Thank you.

Great. So just with respect to enrollment on WHIM. As consistent with the past, we're not providing any specifics other than to say that we're on track with our top-line data in 2022 and we are seeing patients who continue to enroll in the trial even despite the global pandemic, so we are really happy to see the patients' commitments and the site's commitment to continue to advance the trial. With respect to the preclinical program data, that's a great question and it kind of segues very nicely to X4's recent announcement this week of hiring our Chief Scientific Officer, Art, who we're very pleased to have someone with his tremendous experience in drug development and drug discovery. So, I think while we don't have any specific data around our preclinical programs, stay tuned because I think we'll have some updates coming into next year.

Thank you. Our next question comes from Joel Beatty with Citi. Your line is now open.

Hi everyone. This is Shawn speaking on behalf of Joel. Thank you for addressing my questions. I have two today. First, regarding the Waldenstrom's data expected in the first half of next year, could you discuss your plans for rolling out that data? Additionally, what insights do you expect from the results? Beyond any complete responses, are there specific biomarkers that would assure you that any efficacy signals are attributed to your drug rather than the combination treatment? For my follow-up on WHIM, could you provide an update on patient identification and the current number of patients in your EAP program?

Thank you, Shawn, it's great to hear from you. I'll address your questions. Regarding the Waldenstrom's data, we are conducting an open-label trial aimed at providing a strong data set that can be easily interpreted. We want to work closely with key opinion leaders associated with our trials to determine the best way to present the data, ensuring that we can communicate it effectively within the broader treatment landscape. We will share more details as they become available. Concerning the results, it is crucial for everyone to understand that with ibrutinib alone, there is a clear response profile seen within the first three to six months for patients with CXCR4 mutations. Unfortunately, only about a third of these patients achieve what is termed a "major response," which means their IgM levels drop by more than 50% from baseline. This is a disappointing reality for many patients, as not a significant number experience deep IgM responses. We will present data from the initial three to six months of treatment and hope to surpass that 30% response rate in the results we release in the first half of next year, so please stay tuned. Additionally, regarding WHIM patients, we are optimistic about our trial progress. Although there have been challenges in enrolling sites due to COVID, we feel very confident about our patient availability. This is a long-term commitment for our company, and we are making strides in education and awareness through our medical science liaison teams in the U.S. and Europe. Our efforts at various virtual conferences have started to gain traction, engaging the broader community and raising awareness about WHIM among clinicians, as well as directly reaching out to patients. We are excited about the company’s long-term trajectory in support of the anticipated commercial approval of mavorixafor for these patients.

Great. Thank you so much, Paula.

Okay.

Thank you. Our next question comes from Mayank Mamtani with B. Riley Securities. Your line is now open.

Hi. Good morning team. This is Sato on for Mayank. Congrats on all the progress. Just a few questions from us this morning. First off, as it relates to the Waldenstrom's program and now expecting the data first-half next year, is this more enrollment related more than anything else in terms of monitoring responses? And should we still expect data on that 12-to-18 patient range?

Yes. So if I understood your question at the beginning, what's the shift, or did I get that right? So I'm sorry.

No, no. That's exactly right. Yes.

Yes. The delays are mainly due to enrollment issues primarily in the U.S., with a couple of sites outside the U.S. As you can understand, COVID has led to varying travel restrictions for patients based on their location and comfort levels. This is why the shift to in-home health services has been beneficial to address these challenges, and we are confident that this will help us enroll more consistently. Regarding the data, we will need to wait and see. It’s an open-label trial involving 12 to 18 patients, and outcomes will depend on their health and safety. We hope to share findings related to efficacy signals around the IgM level drops in the first half of next year.

Great. That's helpful. And maybe just a brief follow-up as it relates to the SCN program. Can you just remind us, is this still a single-site in Washington I believe, on ClinicalTrials.gov? And then, you know, given the compromised nature of the patients how do you plan to sort of manage enrollment concerns acknowledging that 14 days is that short treatment window and maybe at-home visits don't meet because much sense here?

Yes. I have been consistent since the start of COVID; the SCN trial has always been our most challenging because it is a translational research study. From the patients' perspective, they need to weigh the risks and benefits with their clinicians to determine if it makes sense for them. The University of Washington is in a state that is open, and we have other open sites as well. However, there is often a delay in updates on ClinicalTrials.gov. Ultimately, this study presents the greatest challenge in balancing respect and concern for the potential risks to these patients, particularly the added risks due to COVID, alongside the investigators' eagerness to explore this mechanism and support patients with these needs. So, stay tuned. This will unfold in 2021, and we look forward to refining our approach as we gain more insights.

Great. That's really helpful. Thanks for taking our questions. And congrats for the progress.

Thank you.

Thank you. Our next question comes from Arthur Yu He with H.C. Wainwright. Your line is now open.

Hey, good morning everyone. This is Arthur for RK. So I just have a quick question or the follow-up on the WM strategy. So could you guys remind us, the dose level across the patient and what can we read through from the WHIM syndrome study in terms of the optimal dose level for...

Great.

... the WM? Thank you. Yes.

Sure. Great question. So let's just start with the current Phase 3 dose in WHIM which is 400 milligrams once per day, and that drug is obviously treated as a single-agent therapy for WHIM; how we've crossed back into Waldenstrom's is we're starting at 200 milligrams per day. The rationale behind that is that we do need to consider the potential, even though it's low drug-drug interactions between mavorixafor and ibrutinib to make sure that the exposure of those two drugs are not impacted in any direction by co-administering them. So hence we started at a 200 milligrams once-per-day dose level. And we're confident that that's already a highly active level based on what we saw in WHIM at 200 milligrams per day in healthy volunteers. You see a very nice robust bump in white blood-cell mobilization, and also the trough levels from known PK are certainly in the highly active range. So we feel good about where we're starting it in terms of being able to see clinical activity. After that starting dose, we just want to keep pushing the dose until you get to the classic kind of maximum dose per patient, so the dose escalation levels are then 400 and 600 after each patient clears the 200 milligrams dose.

Thank you. Our next question comes from Laura Christianson with Cowen. Your line is now open.

Hi. Good morning guys. Thanks for taking my question. On Waldenstrom's, I was wondering if you could just talk a little bit more about how we expect mavorixafor might fit into the treatment paradigm if it's approved, just what's the potential for mavorixafor for it to be used first line in combination with ibrutinib and CXCR4-positive patients?

Our current study is examining patients who are either treatment naive or have undergone up to three lines of treatment. We will begin with a small group of patients to evaluate the potential of this drug as a front-line option in combination therapy. Based on the data we gather, I believe we will start to understand where this drug is most beneficial in terms of treatment lines. In the U.S. and mainly in Europe, ibrutinib is generally used in the second line, although it is approved for other lines as well. There is some divergence between the current market usage of ibrutinib and what our data will reveal. The most compelling data sets resulting from the combination will influence clinicians' perceptions on its use, creating opportunities for broader application. Ultimately, the data will guide how clinicians decide to use this treatment for their patients.

Perfect. And then just a quick one for Adam. I'm wondering how that purchase agreement that you recently put in place might impact your expected cash runway?

Yes. Thanks, Laura. So, right now I think our primary objective is to continue to track towards key milestones like Waldenstrom's in the first half and think about opportunistic ways to extend the runway based on that progress. The stock purchase agreement I think is a helpful tool in our financial tool bag to potentially utilize as we progress the business, but I think it represents a little bit more in the way of downside protection or insurance policy, if you will, given the external environment. So that's how that sort of stacks up in terms of our financial strategy.

Thank you. Our next question comes from Zegbeh Jallah with ROTH Capital. Your line is now open.

Good morning guys. Thanks for the update. I think I'm probably just going to ask one again about the preclinical pipeline with Art on board, as you mentioned. I just want to know how you expect to kind of leverage his broad expertise, do you plan to broaden out the pipeline or pursue additional indications with some of your earlier line preclinical programs?

Sure. So, thanks so much. And yes, we feel incredibly fortunate to have Art joined given his strong drug discovery experience and biology overlap in the chemokine world. So, I think when we think about not only mavorixafor but also our two pre-clinical programs, and of course we really need to operate and hit our near-term milestones. For example, I do think if the drug mavorixafor shows activity in Waldenstrom's, there’s a tremendous amount of support for CXCR4 more broadly and certain leukemias and lymphomas. I think between Art's experience in the biology and then complementing what we're learning in the clinic, that will really help us enable to prioritize how we can either develop mavorixafor and/or possibly 003 to expand the total market that we could potentially explore and hopefully benefit patients with our drug.

Thanks, Paula. And then just a follow-up here. I'm not even sure if you can answer this one, but I think on the last call we had, you noted that we weren't capping patients that were pre-treated or not pre-treated for the Waldenstrom's study, which is going to try to roll into what you said. But can you provide any comments on if you're enrolling more pre-treated patients or are you enrolling more non-patients?

Oh no, we - there's no profile yet that we're really able to disclose. We'll certainly do that when we share the data. I do like to point back to the literature; with respect to the double mutant patients regardless of what line of therapy they have, there's an unmet need. So I do think the consistency or the impact that having a CXCR4 mutation is important; I think that creates a nice homogenic patient population for us to study and we'll look forward to sharing that data in the first half of next year.

Thank you.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Paula Ragan for closing remarks.

Thank you so much. Well thank you again today for joining us. We sincerely appreciate your interest in X4 and look forward to continuing to provide updates on our progress as we approach multiple key catalysts in our business. If you have any further questions, please don't hesitate to reach out. Thank you again, and enjoy the rest of your day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.