X4 Pharmaceuticals, Inc Q2 FY2022 Earnings Call

Greetings. And welcome to X4 Pharmaceuticals Second Quarter Financial and Operating Results Conference Call. At this time, all participants are in a 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, Dan Ferry from LifeSci Advisors. Please begin.

Thank you, Operator, and good morning, everyone. Presenting on today’s call will be X4’s Chief Executive Officer, Dr. Paula Ragan; the company’s Chief Financial Officer, Adam Mostafa. Following prepared remarks by each, we will open up the call to your questions and will be joined by Chief Scientific Officer, Art Taveras; Chief Medical Officer, Diego Cadavid; and Chief Operating Officer, Mary DiBiase. As a reminder, on today’s call, the company will be making forward-looking statements regarding regulatory and product development plans, as well as 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 X4’s most recent filings with the SEC, including this quarter’s 10-Q, which is expected to be filed after market close today. I’d now like to turn the call over to X4’s President and CEO, Dr. Paula Ragan. Paula?

Thanks, Dan, and thank you, everyone, for joining us on the call this morning. As you have seen from our latest announcement, the past few months validated and enabled our focus here at X4. As a result, we believe we are well positioned to deliver significant future value both to patients and to our shareholders as we approach key milestones over the next six to twelve months. Most importantly, we completed a PIPE financing in late June in a highly challenging market, raising gross proceeds of approximately $56 million, with support from both new and existing top-tier life science investors. At the same time, we entered into an amendment to our debt agreement with Hercules Capital, who also invested in the PIPE to extend the interest-only period of our loan facility by up to twelve months, pushing it out into 2024. The amendment is subject to achieving certain financial and business milestones. We estimate this amendment loan structure could result in a cash savings of up to $20 million over the interest-only period. More recently, we announced our decision to focus our efforts and resources towards advancing our lead clinical candidate, mavorixafor, for the treatment of chronic neutropenic disorders, including WHIM syndrome, our lead clinical indications. While the data from our cancer programs continue to show promise, we will be presenting an update on data from our Phase 1b trial in Waldenström’s in just a minute. We are now pivoting our efforts towards unlocking the full value of our oncology portfolio only through potential strategic partnerships, enabling us to focus on making the largest possible impact on chronic neutropenia patients in the near term. We continue to believe that commercializing mavorixafor and providing a new therapeutic option to individuals with life-threatening CN disorders has the potential to revolutionize the treatment landscape, which is currently only served by injectable therapies that have been associated with a high burden of treatment, dose-dependent side effects like severe bone pain, and increased cancer risk in some patients. We are, therefore, very excited about our upcoming expected milestones, which include the following: in late September, we are planning an investor event to present data from our now fully enrolled proof-of-concept Phase 1b clinical trial in patients with chronic neutropenic disorders. As a reminder, our lead compound, mavorixafor, is a CXCR4 antagonist being dosed in clinical trials as a once-daily oral therapy. By inhibiting the CXCR4 receptor, we have demonstrated across multiple clinical trials and multiple therapeutic indications that mavorixafor can help regulate white blood cells, increasing the mobilization of neutrophils, lymphocytes, and monocytes into the bloodstream. These effects have been achieved across all patient populations studied, regardless of their CXCR4 mutation status. Mavorixafor has also demonstrated an excellent tolerability profile across hundreds of patients, some of whom have been receiving mavorixafor for more than two years. Our Phase 1b clinical trial in chronic neutropenia is now fully enrolled at 25 patients, and enrollment is near final with a small number of additional patients expected. The trial examines neutrophil and other white blood cell responses to mavorixafor for treatment. Patients in the study had a range of neutropenic conditions, including severe congenital neutropenia, idiopathic neutropenia, and cyclic neutropenia. Some patients received a standard-of-care called granulocyte colony-stimulating factor or G-CSF, and some have not. We look forward to presenting this trial’s initial full data set in patients with a diverse set of CN disorders at our event in September. We expect these results will help inform the regulatory path forward for mavorixafor in chronic neutropenic disorders, and we look forward to sharing more of what that pathway might look like once we have gained clarity following the presentation of the data to regulatory authorities. Our next notable and certainly potentially transformative milestone will be the unveiling of our data from our pivotal Phase 3 for WHIM trial, which is still on track for the fourth quarter. As you know, these results are expected to support our first regulatory filing in the U.S., which is now expected early in the second half of 2023. We have been very encouraged to see a high percentage of patients coming off study choose to continue in the open-label extension phase of the trial. As you may know, WHIM syndrome is a rare genetic immunodeficiency disorder caused by gain-of-function mutations in the CXCR4 receptor. WHIM syndrome is characterized by HPV-associated warts, hypogammaglobulinemia, multiple types of infections, and myelokathexis, which causes leukemia and neutropenia in many patients, reducing the body’s ability to mount a healthy immune response. X4’s global Phase 3 trial is the first placebo-controlled trial in WHIM syndrome. To help put the upcoming Phase 3 results into context, in our third quarter earnings call, we plan to discuss what success might look like from this trial, reviewing both the primary and secondary endpoints that we have previously aligned on with the FDA, as well as some additional information about our early commercial efforts, patient finding initiatives, and the continued expanding landscape of the disease profiles and diagnosis of WHIM syndrome. Before I pass it over to Adam to discuss the quarter’s financial results, we did want to provide a brief overview of our new response data from the Phase 1b mavorixafor trial in patients with Waldenström’s macroglobulinemia, a rare B-cell lymphoma. As mentioned, we aim to unlock the full value of our oncology portfolio only through potential strategic partnerships. We believe the favorable data from this trial will meaningfully support that potential option. Please note that we will be uploading a summary of the deck to our website with these results shortly. As detailed in today’s press release, 16 patients were enrolled in the clinical trial, which is a Phase 1b open-label multicenter, single-arm study evaluating the safety and efficacy of mavorixafor in combination with the BTK inhibitor, ibrutinib, in adults diagnosed with Waldenström’s and confirmed to have MYD88 and CXCR4 mutations, a double mutation status that has been associated with poor responses to standard-of-care. Specifically, the presence of CXCR4 mutations has also been shown to negatively impact patients' responses to ibrutinib as manifested by delayed responses, inferior depth of response, and/or shorter progression-free survival. In the study, all patients received oral once-daily doses of 420 milligrams of ibrutinib and escalating doses of 200 milligrams, 400 milligrams, and 600 milligrams of oral mavorixafor, also once daily. As of June 2022, 10 of the 12 evaluable patients, or 83%, had achieved a major response to therapy, which is defined as a greater than 50% reduction in serum IgM from baseline. Nine of the 12 evaluable patients had disease relapsed or were refractory to prior treatments entering the study. Of these relapsed/refractory patients, eight of the nine evaluable, or 89%, achieved a major response. In the treatment-naive patients, major responses were seen in all patients escalated to greater than the starting 200-milligram dose of mavorixafor. Looking at the data over time, adding mavorixafor to ibrutinib was associated with a higher major response rate at nine months, twelve months, and twenty-four months compared to previously recorded major response rates achieved with ibrutinib monotherapy, which historically achieved a maximum of 57% major response rates at twenty-four months in a similar patient population. To date, treated patients have all achieved elevations in absolute neutrophil counts or ANC, with no neutropenic events reported. This is meaningful as more than 40% of patients typically experience some decreased neutrophil counts with ibrutinib monotherapy. Interestingly, patients also experienced fewer infections over time with chronic combination dosing. Assessment of infection risk is a labeled warning and precaution while on ibrutinib monotherapy. No major safety signals due to mavorixafor have been identified in the trials as of the data cutoff. Mavorixafor in combination with ibrutinib showed a safety profile similar to ibrutinib monotherapy across the sixteen patients, which included eight patients escalated to the highest dose of 600 milligrams of mavorixafor. We also wanted to highlight that in June, mavorixafor was granted Orphan Drug Designation by the U.S. Food and Drug Administration for the treatment of patients with Waldenström’s, regardless of the CXCR4 mutation status. As presented at EHA earlier this year, mavorixafor has demonstrated in vitro the ability to disrupt the bone marrow crosstalk and increase Waldenström cancer cell sensitivity to treatment regardless of CXCR4 mutation status, supporting the potential that mavorixafor may have utility across a broad range of lymphoma. The Phase 1b clinical trial is expected to be completed in the fourth quarter of 2022 when the last patient is dosed, and with the support of our investigators, we aim to provide full and final results in a future journal publication. Finally, we also mentioned earlier, with our new sharpened focus on chronic neutropenic disorders, further clinical studies in Waldenström’s will now be subject to completing a strategic partnership. We believe these promising data, which will be uploaded to our website, support that future potential opportunity. In our July announcement, we also mentioned that further work in our preclinical oncology candidate, X4P-002 is concluding IND-enabling toxicology studies, and that an IND filing will now be subject to completing a strategic partnership. As a reminder, 002 is a novel small molecule, CXCR4 antagonist, that has been shown to cross the blood-brain barrier with potential applicability across a number of leukemias and lymphomas. In total, we believe that the mavorixafor oncology data to date, plus the promise of our 002 candidate, presents a partner overall package of great potential, and we will report on our potential success in the continued advancement of these valuable assets at the time when this potential partnership is secured. With that, I will now turn it over to Adam to discuss our results for the quarter before we open up the call for questions. Adam?

Thanks, 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 second quarter ended June 30, 2022. At the end of the second quarter, we had $48.7 million in cash, cash equivalents, and restricted cash. On June 30th, as Paula mentioned, we announced a PIPE financing of approximately $56 million in gross proceeds. The financing closed on July 6th and proceeds from the deal are not reflected in the June 30th cash number. However, including the PIPE funds, our recently announced cost-cutting measures that we estimate will result in approximately $25 million in savings through the end of 2023, and the recent amendment to our loan agreement with Hercules, we have extended our cash runway guidance into the third quarter of 2023. Research and development expenses in the quarter were $13.8 million, which compares to $13.2 million for the comparable period in 2021. SG&A expenses were $6.7 million for the second quarter, as compared to $5.8 million for the comparable period in 2021. Finally, X4 reported a net loss of $21.2 million for the second quarter of 2022, which includes approximately $1.5 million in non-cash expenses, as compared to a net loss of $19.6 million for the comparable period in 2021. We will now open up the call for your questions.

Thank you. The first question comes from Stephen Willey with Stifel. Please go ahead.

Yeah. Good morning. Thanks for taking the questions. Maybe just a couple. So on the chronic neutropenia side, are you able to say how many patients enrolled in the Phase 1b around background G-CSF? And then I know there’s been some discussion around wanting to target those patients who experience some kind of given number of baseline severe infection events, and just curious if you can also kind of speak to how many patients you have enrolled to meet that infection event criteria as well? And then I have a follow-up?

Yeah. So I will start, and then I will ask Diego to queue in to give some more detail. But just at a very high level, Steve, we will be having a pretty good blend of patients that are neutropenic with or without G-CSF. So actually that’s the most important question. So there will be a pretty nice data set to show what mavorixafor is doing in neutropenic patients, because ultimately that’s what we are trying to achieve. Amongst that whole bucket, there’s actually a nice kind of 50-50 blend between those who are on or off G-CSF. So the question is how this drug is going to help patients, and I think we are going to have a nice data set to show that target population that we aim to kind of declare some initial positivity around that. And then, I think, the second question was around infection sort of baseline. We have collected some of that information, but ultimately, this is really a response study, so to speak. So, Diego, let me invite you in to give some more color on that.

Yeah. Hello, Stephen. Yeah. This current study was enrolled around looking at increasing neutrophil counts, and we got, as Paula said, a pretty good number on G-CSF or not on G-CSF, and we look forward to presenting that data at the September event. Because this is a short-term treatment, we will not focus on infections. But you are right; we are looking carefully as we plan for the next study, as to what is the right population. Ultimately, we know that severe infections are really important clinical outcomes, so we are looking at it carefully.

Okay. That’s helpful. On the Waldenström’s side, and forgive me if I missed it, but are you able to say what the median time to major response rate was? I know that there’s been some interest in the notion of mavorixafor not only improving the rates of major response but also improving the kinetics of response?

Okay. I will start by addressing the challenge regarding the time to major response. The complexity arose from the dose escalation design of the study, as we began with a low dose and then needed to maintain that dosage. While we can certainly calculate it, I believe that it may be less informative since we were focused on patient exposure and the dose escalation when designing this trial. I understand your interest, but I don’t think we will be sharing that data due to the confounding factors related to the study design.

Got it. And then just lastly for Adam, I guess, I just want to confirm that the updated cash runway guidance doesn’t assume any exercises of warrants?

That’s correct, Steve. Yeah. No assumption of any warrants or any additional proceeds of any kind in that new runway.

Excellent. Thanks for taking the questions.

The next question comes from Eva Privitera with Cowen. Please go ahead.

Hi. Hi. Good morning and congratulations on the Waldenström’s data and thank you for taking our questions. Can you maybe tease out the major responses for Waldenström’s, what were the VGPR rates specifically in the overall population, as well as the relapse and refractory?

We have not yet published that information. Historically, we have released one VGPR result in the past. We have completed the study, so we expect to share the findings in early Q4, including all the subtypes of responses. We look forward to sharing that data with you soon.

Okay. Great. Thanks. And my second question pertains to the Phase 1b in severe congenital neutropenia, how long follow-up do you anticipate there will be in the September data presentation?

Diego, why don’t you take that one?

Yeah. Eva, thank you for the question. So, as Paula mentioned earlier, we expect this study to be fully enrolled. Most of the patients were treated with a single dose, and then there is a 30-day post-dosing safety assessment. I believe we will have a full or close to full data available to us to discuss in September.

Perfect. That’s helpful. So for that 30-day time point, what would you consider to be meaningful data taking into account G-CSF being available to these patients?

Yes. Because they were dosed with mavorixafor, most of them for a single dose, the 30-day meaningful data is mostly around the absence of any safety signals post-dose, and that we have never seen, but we are checking anyway. It is not an efficacy readout. The 30-day is around safety.

The next question comes from Mayank Mamtani with B. Riley Securities. Please go ahead.

Good morning, team. Thanks for taking my question and congrats on a productive quarter. So maybe just a follow-up on prior questions, you are looking at three subtypes of chronic neutropenia, congenital, idiopathic, and cyclic. Just can you help us understand how utilization of G-CSF looks like in the real world across those? And what sort of, at a high level, you are looking to learn in this Phase 1b study that at least helps you put a framework in place if you do decide to engage the regulators for a study focusing on one or two or all forms of these patients? And then I have a follow-up?

Yes. Go ahead, Diego.

Yes, Paula, I can address that question. So in general, most of the G-CSF use is for acute treatment to prevent sequela of neutropenia in the context of chemotherapy for people with cancer. There is also use of G-CSF for chronic conditions and it is used broadly across these three types: severe congenital, cyclic, as well as idiopathic. Many patients are not on chronic therapy at all, or in fact, it’s used only intermittently. This speaks to the high unmet need with mavorixafor for being an oral and, so far, well-tolerated therapy. We are thinking moving forward that mavorixafor indeed could become the standard-of-care for chronic neutropenia, and we will be investigating to what extent you may or may not need some G-CSF, and that’s something that maybe the case for patients that have very severe bone marrow. But we believe the majority of patients could be treated with mavorixafor, and we plan to study that over the next few months and years.

Great. And just quickly on the WHIM syndrome Phase 3 detail, we are looking forward to that at the third quarter earnings call in mid-November. Can we assume that in your topline press release, you will provide a comprehensive data set of primary and secondary endpoints, including infections, wart burden, and similar data?

Yeah. I will take that, and thanks Mayank. Yeah. In our press release, we will certainly be focusing on the data set that tells the story, right? The drug we believe is disease-modifying. Obviously, we have a study design, but of course, the primary and the secondary endpoints. What we are looking forward to is presenting a data set that helps tell the story and the impact of the drug across the various clinical aspects of the disease. So, we will certainly look forward to sharing that story as it evolves.

Okay. Great. And just my final question on Waldenström’s, just clarify for us, just clearly from a data generation standpoint, what’s the expectation? Would you be able to effectively engage with strategic partners? Are you — could you do this starting tomorrow, or is that something you may think could make more sense once you have the fuller data set that you guys discussed earlier?

Yeah. I will start, and then Adam can always chime in. But I think whenever there’s exciting data, I think that’s an opportunity for gaining interest from the external world. We already have some existing relationships and conversations, certainly with AbbVie, given they have given free drug to support the trial. So these are just sort of natural continuations of conversations that are certainly more aligned with the data, right? That’s always the spark to initiate conversations, Mayank. So we will keep you posted as things evolve and when we are able to communicate. Adam, do you want to chime in anything else?

Yeah. No. I think, as Paula said, we are pleased with the clinical profile of the data. We think that there’s a strong future and potential there for us. We are dedicating resources and allocations toward our exciting chronic neutropenia and WHIM programs. But we look forward to continued progress and we will come back and update the market as we see how things plan out with a potential partner pursuing our oncology efforts.

Thanks for taking my questions.

The next question comes from Arthur He with H.C. Wainwright. Please go ahead.

Good morning, Paula. And this is Arthur in for RK. I just want to have a quick follow-up on the Waldenström data. Could you remind us from these 12 evaluable patients why they were not all escalated to the 600-milligram dose level?

Sure. Diego, do you want to take that?

Yeah. I can speak to that. So there are different reasons. Some patients were enrolled and dropped off rapidly for different reasons. One was having difficulty swallowing, so, of course, that patient was dosed only at 200 milligrams and never escalated. There were patients who were doing really well at 400 milligrams and they were also escalated, but they were doing already so well that they opted not to. There’s a reason for each one. Overall, most of them did escalate and remain at 600 milligrams, and as you have seen from the data, getting very good clinical responses. We believe 600 milligrams is really well tolerated and that data will be available to any potential interested partners as those that can be advanced into a further study.

Thanks for the additional color and thank you for taking my question.

As there are no more questions from the phone line, this concludes the question-and-answer session. I would like to turn the conference back over to Paula Ragan for any closing remarks.

Well, thank you again for joining us today. As always, we appreciate your continued support of X4 as we look forward to important near-term milestones that we believe will bring us one large step closer to improving the lives of our patients with chronic neutropenic disorders. Thank you again and have a great day.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.