X4 Pharmaceuticals, Inc Q4 FY2022 Earnings Call

Thank you for standing by. This is the conference operator. Welcome to X4 Pharmaceuticals Fourth Quarter and Full Year 2022 Earnings Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation there’ll be an opportunity to ask questions. It's now my pleasure to introduce your host, Dan Ferry from LifeSci Advisors. Please go ahead.

Thank you, operator. And good morning, everyone. Presenting on today's call will be X4's Chief Executive Officer Dr. Paula Ragan and Chief Financial Officer, Adam Mostafa. Following prepared remarks, we will open the call to your questions and will be joined by, Interim Chief Medical Officer, Dr. Murray Stewart, Chief Commercial Officer, Mark Baldry, Chief Scientific Officer, Dr. Art Taveras, and Chief Operating Officer, Dr. 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 filings with the SEC from time to time, including this Company’s latest 10-Q filing on November 3, 2022, and in the 10-K for 2022, 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. As we mentioned in the press release this morning, we could not be more pleased with the progress we made in 2022, advancing our lead candidate, mavorixafor towards commercialization, and most importantly, towards helping patients in need. We believe our clinical trial data continue to speak volumes, unequivocally demonstrating mavorixafor’s ability to chronically raise circulating levels of neutrophils, lymphocytes, and monocytes. As you may be aware, following our strategic announcement last July, when we tightened our focus to advance mavorixafor in chronic neutropenic disorders, we achieved two significant development milestones, announcing positive clinical results from both our Pivotal Phase 3 trial of mavorixafor in WHIM syndrome and our Phase 1b clinical trial of mavorixafor in certain chronic neutropenic disorders. Most importantly, in late November, we announced the success of our Pivotal Phase 3 clinical trial, evaluating oral mavorixafor in people with WHIM syndrome with the study meeting its primary endpoint and first key secondary endpoint, achieving statistically significant and clinically relevant longer times above threshold for both absolute neutrophil count and absolute lymphocyte counts versus placebo. Mavorixafor also demonstrated good tolerability in its robust 52-week, randomized, placebo-controlled, double-blinded trial. Note that mavorixafor is the first and only oral therapy to demonstrate durable improvements in severe chronic neutropenia and lymphopenia, the hallmarks of WHIM syndrome, which is a rare combined immunodeficiency, for which there are no approved treatments. Since the November data announcement, we have continued to analyze the clinical results from the Phase 3 WHIM trial, and expect to be able to present additional data from the trial at one or more medical conferences in the second quarter of 2023. We plan to host an investor call around the time of the first presentation, and we'll update you as we have more information on the exact schedule. Importantly, these results are expected to include additional secondary and some exploratory endpoints, including assessments of infection rates, severity, duration, and types of infections, as well as the effect on patients' wart burden and certain vaccine titer data. We now have scheduled a pre-NDA meeting with the U.S. Regulatory authorities in Q2 to discuss next steps in advancing mavorixafor towards an NDA submission. Pending input from the FDA, we continue to anticipate submitting the NDA early in the second half of this year, which we hope will lead us to our first product approval in the first half of 2024. Also last year back in September, we presented positive data from our Phase 1b clinical trial in chronic neutropenic disorders. The study demonstrated the ability of a single oral dose of mavorixafor to normalize absolute neutrophil counts or ANC, in those with the most severe forms of neutropenia, and across all chronic neutropenic disorders studied, which included idiopathic, cyclic, and congenital neutropenia. Normalization of ANC was demonstrated with mavorixafor as a monotherapy and in combination with the only approved treatment for severe neutropenia, injectable granulocyte colony-stimulating factor, or GCSF. Impressively, 100% of patients responded; we could not have hoped for more in this initial study. This early trial has now been expanded into a Phase 2 clinical trial to assess the long-term durability, safety and tolerability of oral mavorixafor more broadly in those diagnosed with idiopathic cyclic or congenital chronic neutropenia. Participants are currently being enrolled in the Phase 2 CN trial and we expect to be able to report clinical data from the study in Q2 or Q3 of this year. The timing of this will obviously be dependent on the rate of enrollment. And we do plan to present a robust data set when we announce the first results from this trial. These proof of concept data we are generating in our Phase 1 and 2 trials are aimed to unlock an even broader potential of mavorixafor, one, where we could potentially offer a differentiated oral and well-tolerated treatment option to upwards of 50,000 people diagnosed with chronic neutropenic disorders in the U.S. We also expect to be able to provide clarity on both the scope and the possible timing of our planned Phase 3 clinical program for mavorixafor in chronic neutropenic disorders in the second or third quarter of this year. At this time, we expect the Phase 3 trial will likely be a randomized, placebo-controlled trial studying the safety and efficacy of mavorixafor on top of standard of care, with likely a primary endpoint measuring changes in neutrophil count and secondary endpoints related to the reduction in infections. But we expect to know a lot more following a meeting with the FDA to specifically discuss the path forward of mavorixafor for these certain chronic neutropenic disorders. Throughout 2022, through both our clinical and scientific research programs, we were able to gain much greater insight into mavorixafor’s ability to address the unmet needs in chronic neutropenic disorders, including WHIM syndrome. We are particularly pleased that almost all of our submitted abstracts were accepted for either oral or poster presentations at prominent medical conferences during the year, including the AAAAI meeting early in the year, the CIS annual meeting in spring, EHA, the NICER Symposium, and ESID over the summer, and the National Organization for Rare Disease summit in the fall. We also had quite a large presentation at the annual meeting of the American Society of Hematology or ASH in December, garnering strong interest both at our presentations and our X4 booth. Throughout the year, our presentations not only highlighted new insights into the breadth of genotype and phenotype of people with WHIM syndrome, helping to identify both additional patients and helping to educate treating physicians, but also demonstrated new understanding into mavorixafor’s mechanism of action, principally its ability to induce maturation and mobilization of white blood cells from the bone marrow into blood circulation and enabling immune surveillance and response. Our research also deepened our understanding of the diverse and significant needs of the patient community through interviews and survey engagements, helping us define what is turning out to be a larger than expected U.S. population of patients living with chronic neutropenic disorders. These milestones throughout the year, along with the continued support of our investors and analysts, also successfully completed two large financing rounds, raising gross proceeds of more than $120 million, despite continued challenging biotech market conditions. Currently, we have a strong balance sheet to help us propel our pre-commercial efforts for mavorixafor and WHIM and further advance our mission to deliver mavorixafor to help those across a range of chronic neutropenic disorders. I’ll turn it over to our CFO, Adam Mostafa, to review the fourth quarter and full year 2022 financials. Adam?

Thanks, Paula. And thanks to all of you for being on the call with us today. As Paula mentioned, we were able to strengthen our balance sheet significantly in 2022, and particularly in December, when we completed a public offering that yielded gross proceeds of approximately $65 million. That left us with $123 million in cash, cash equivalents, and restricted cash as of December 31. We expect that our cash will fund our operations into the second quarter of 2024. In addition, as a result of the positive top-line results from the 4WHIM clinical trial, the covenant under our loan agreement with Hercules Capital, requiring that the company maintain minimum cash of $30 million was lowered to $20 million. On January 6 of this year, we also entered into an agreement with Hercules that amended and restated all prior loan and security agreements, and that included an extension of the interest-only payment period through the third quarter of 2024. And to further extend the interest-only period to the first quarter of 2026, if certain milestones are achieved. R&D expenses were $19 million and $61.1 million for the fourth quarter and full year ended December 31, 2022, respectively, as compared to $12.2 million and $50.6 million for the comparable periods in 2021. And note that R&D expenses included $0.5 million and $2.5 million of certain non-cash expenses for the fourth quarter and full year ended December 31, respectively. SG&A expenses were $6.6 million and $27 million for the fourth quarter and full year of 2022 respectively, as compared to $7.1 million and $24.7 million for the comparable periods in 2021. And note here, SG&A expenses included $0.6 million and $2.7 million of certain non-cash expenses for the fourth quarter and full year ended December 31, respectively. Finally, we reported a net loss of $25.8 million and $90.5 million for the fourth quarter and full year ended December 31, as compared to $30.2 million and $88.7 million for the comparable periods in 2021. Net losses include $1.1 million and $5.2 million of non-cash expenses for the fourth quarter and full year respectively. And with that, why don't we open up the call for your questions?

Our first question comes from Stephen Willey of Stifel. Please go ahead.

Hi guys, this is Julie on for Steve, can you guys hear me okay?

Yes, thanks.

Okay, great. I have two quick questions. First, can you provide more details about the timing of the chronic neutropenia data? What do you plan to disclose when these data are available? My second question is about partnerships; can you give us an update on the progress you've made in that area? Lastly, I've noticed an increase in R&D costs. Could you shed some light on that as well? Thank you.

Sure, I’ll address the question regarding the CN deliverables for Q2 and Q3, and then I’ll pass it to Adam to discuss partnering and R&D costs. We have been clear that we are planning an open-label Phase 2 study in chronic neutropenia, where we aim to present data from several patients over a few months of chronic dosing to assess durability, consistent with what we've observed in other patient populations treated with chronic mavorixafor. We are definitely on track to achieve this and believe that having more data is beneficial. Therefore, we are allowing ourselves some flexibility. Last year, we observed a very positive response from 25 patients with CN data. We are committed to providing a comprehensive data set for our investors, patients, and physicians. This added flexibility for the Q2 and Q3 timeframe will help us accomplish that. I hope that clarifies things, and now I’ll hand it over to Adam to discuss the partnership and R&D costs.

Thank you. So with respect to partnering, we continue to explore discussions; we don't have any significant update for today and don't obviously want to speak on behalf of any potential partners. But it is an area that we are considering in terms of moving our drug forward and capital-raising activities in the future. With respect to R&D, we did notice an increase year-over-year likely that relates to clinical operations costs in the chronic neutropenia trial, which in part led to the data that we revealed back in September that Paula mentioned; it also relates to additional clinical operations and CMC costs that support both chronic neutropenia and the WHIM trial, leading up to our top-line data late last year. So that's a little color on background for the R&D.

Thank you.

Our next question comes from Divya Rao of TD Cowen. Please go ahead.

Hello, thanks for taking my question. This is Divya on for Marc. I guess, on the trial in CN, do you guys expect to run the Pivotal in all chronic neutropenia, or do you expect to run separate trials for those? And I have one other question.

Sure, would you like to take that?

Yes, so I mean, in Phase 1, we were able to look at the different populations: congenital, idiopathic, and cyclical. And for a big registrational study, we'd hope to be able to include similar groups, and you can include them in one study by stratifying. So in other words, you get balanced across the different groups. So rather than do three separate studies, you can do them all in one study by accounting for stratification.

Okay, that's helpful. And then, I guess, in terms of the secondary endpoints that you plan to present from the Phase 3 trial sometime in Q2, I guess what infection rates do you think physicians and patients will be clinically meaningful?

Sure, I'll start and then certainly ask Murray and others to chime in. But, our Phase 2 data, which align with breakthrough therapy designation in WHIM syndrome demonstrated a reduction of infection rates of about 50% after a year; we're certainly hoping that type of direction continues. We're extremely excited about the Phase 2 data. We designed a robust study for the Phase 3, and not only, of course, infection rates, but there's a whole host of things that we've mentioned in terms of duration, severity, type; we look forward to sharing the totality of the data. But, Murray, if you want to chime in any further, that would be great.

The only thing to add in is, in the WHIM population, you might expect people to have an annualized infection rate of about four. And that’s a mean; some people get more than five infections and some people get two or three infections, but the mean is about four. And obviously, from our Phase 2, we saw about a 40% reduction. Bear in mind that the study we did was under COVID, and there have been concerns about whether we would see fewer infections in COVID. When we present the data, we'll be looking at the annualized infection rate and we'll examine the different components of infection, including, as Paula mentioned in the call, severity, duration, repeated infections, as well as vaccine titers, quality of life, and safety.

That's helpful. Thank you.

Our next question comes from Ted Tenthoff of Piper Sandler. Please go ahead.

Great, thank you very much. Shaping up to be a very exciting year. Two quick questions. And I'm assuming that maybe you're waiting for acceptance, but what are the conferences you anticipate presenting data at, for the Phase 3 data in the second quarter? And when it comes to the chronic neutropenia readout, is it more than likely that's going to be a press release followed up by a biomedical meeting, or are you targeting a specific medical meeting? Thank you so much.

Hi Ted, thanks for the great question. So we're currently aiming to present either at CIS, which is in the second or third week of May, or EHA, which is in the second or third week of June. We are still waiting to hear, so we're looking forward to refining that type of information. So please stay tuned. And then, in terms of the CN data, we would expect to provide some additional context around it from that just a press release; we certainly think this will be an exciting data set to inform both the KOL and the investor communities around. So we think we'll provide a more robust type of format, not likely linked to an individual conference, but perhaps an investor or R&D day on behalf of X4.

Great, that's very helpful. I am looking forward to the data and the regulatory filings. Thank you very much.

Thanks so much, Ted.

Our next question comes from Mayank Mamtani of B. Riley Securities. Please go ahead.

Hi, good morning team. I have a couple of quick questions. First, can you remind us about the timeline for the potential EU filing for mavorixafor and WHIM syndrome?

Sure, Murray, can you take that?

Yes, so obviously, we want to use the same dataset. So within the next six to 12 months, we'll be filing in the EU following on from the NDA filing.

Okay, perfect. And then maybe as we switch to the U.S. launch here. Can you give us an update on any commercial or launch preparation activities, including how you're thinking about the Salesforce engaging with different patient advocacy groups, etc. Thank you very much.

Sure. Thanks, Mark, would you like to take that?

Sure, thanks. Yes. While we are advancing on our regulatory timelines, we are also starting to prepare for our commercial launch. We are preparing the market, the product, and the company for a successful debut. A small field team is currently gathering information about the physicians and identifying where we might encounter WHIM patients. We are educating about WHIM disease and encouraging earlier diagnoses, as we know that earlier diagnosis leads to better patient outcomes. So that's the current status.

And then maybe one quick follow-up, how much of that work is there overlap with the chronic neutropenia population? As you think about the future, obviously acknowledging a little bit earlier days in that program?

Mark, go ahead.

Yes, WHIM syndrome is a form of chronic neutropenia. So everything we're learning today is really a helpful foundation for us as we think about our strategies in chronic neutropenia and other primary immune deficiency. So, everything we're doing now, I think, is teaching us about the unmet need, and primary immune deficiency, and this can all be helpful for us as we build our plans.

Excellent. Thanks so much for taking our questions.

Our next question comes from Kristen Kluska of Cantor Fitzgerald. Please go ahead.

Hi, good morning, everybody. Thanks for taking our questions. So it sounds like you're planning to have a potentially robust conference attendance this year with data but similar to how we learned new insights on WHIM syndrome, genotype phenotype, patient identification, unmet need, and other factors for both CN and WHIM. Do you think we could learn additional data regarding the market opportunity at these conferences? Again, in addition to some data disclosures this year?

I think, Kristen, it's a great question. So we actually have been publishing our market analyses and we've done some excellent work on ICD-10 codes with respect to chronic neutropenia. And as we generate even more in-depth and more refined analyses along those lines, we'll certainly look forward to publishing that data. Not specific plans yet, but the team is working very hard to make sure we are defining the right population for treatment and that unmet need and alignment of course with market potential, so stay tuned.

Okay, thanks. And in light of the WHIM syndrome data that you presented at the end of last year, curious if you're getting any read-through in terms of getting patients and investigators excited about enrolling and also the potential in the CN program?

I definitely think there's crosswalk for excitement. But I'm going to turn that over to Murray to expand on that.

The investigators, the principal investigators have been seeing the data and they're very excited by the data in WHIM, and already they're thinking about wanting to enroll in the CN study. So I think they can see the link between neutropenia, WHIM and CN. And they're excited about mavorixafor; I mean, historically, they've gotten GCSF, which has its limitations. And I think they are excited to see a potential oral therapy for WHIM and CN.

Thank you. Looking forward to seeing some of the presentations this year.

Thanks, Kristen.

Our next question comes from RK of H.C. Wainwright. Please go ahead.

Thank you. Good morning, Paula. I think most of my questions have been answered. Just trying to understand, in this next meeting that you want to have with the FDA before you file, what sort of clarifications are you trying to get so that you're well-equipped when you file?

Thanks, RK. Murray, would you like to take that?

Yes, so this is a standard pre-NDA meeting. So most companies work that all companies have to have a pre-NDA meeting, and we make sure we clarify the most appropriate things. So we covered all areas. So are they comfortable with the non-clinical data? Are they comfortable that the data actually show the drug is effective and safe and has a positive risk-benefit? We discuss whether there are any CMC issues, and the whole point of the pre-NDA meeting is so when we move ahead to file, the FDA is not surprised by anything, and we're not surprised by anything.

Thanks.

This concludes the question and answer session. I would like to turn the conference back over to Paula Ragan for any closing remarks.

Thank you, operator. Well, as you can hopefully hear from our tones today, we're very excited about the year ahead and the road beyond. We thank you again for joining us today and hope you all have a wonderful day. Thank you.

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