X4 Pharmaceuticals, Inc Q1 FY2023 Earnings Call

Greetings, and welcome to X4 Pharmaceuticals' First Quarter 2023 Earnings Conference Call. As a reminder, the 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 President and Chief Executive Officer, Dr. Paula Ragan; and Chief Financial Officer, Adam Mostafa. Following prepared remarks, we will open the call to your questions. And we'll 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. Description of these risks can be found in X4's filings with the SEC, including the company's latest 10-K for the year 2022, and this quarter's Form 10-Q, which is expected to be filed today. I'd now like to turn the call over to Dr. Paula Ragan. Paula?

Thanks, Dan, and thank you, everyone, for joining us on the call this morning. We hope to make this an efficient call today and focus on what we hope will be value-building milestones throughout the rest of 2023. This is truly an exciting time at X4 as we continue to advance our lead investigational candidate, Mavorixafor, towards commercialization in the first potential chronic neutropenic disorder, WHIM syndrome. As you know, in late 2022, we announced that our Phase 3 clinical trial evaluating once daily, oral Mavorixafor in people with WHIM syndrome had met its primary endpoint and first key secondary endpoints, with Mavorixafor achieving statistically significant and clinically relevant longer times above threshold levels for both absolute neutrophil and absolute lymphocyte counts versus placebo, and demonstrating good tolerability in the trial. Subsequently, we announced that our late-breaker abstract reporting additional data from the Phase 3 WHIM trial was accepted for oral presentation at this year's meeting of the Clinical Immunology Society taking place from May 18th through the 21st in St. Louis. Dr. Raffaele Badolato, who is a professor of pediatrics at the University of Brescia in Italy and an investigator in the 4WHIM clinical trial, will present at 11:30 AM Central Time on Sunday, May 21st. Although this session will only be accessible live to the conference attendees, we will be posting the slides on our website concurrent with the presentation. Following the publication of conference abstracts by CIS on the morning of May 16th, we will be hosting an investor event later that day at 4:00 PM to present data on additional secondary endpoints from the trial, including results on infection burden among other outcome metrics. You can register for that event on our website or through the link provided in this morning's earnings press release. We will be hearing commentary from a diverse panel of immunologists, hematologists, and rheumatologists, all of whom have expertise in treating immunodeficiencies, and several of whom were investigators in the 4WHIM Phase 3 trial. During the May 16th event, we will be hearing unique perspectives from three individuals who have been diagnosed with WHIM and have been experiencing WHIM syndrome symptoms since birth. Finally, we expect doctors Shimamura and Tarrant to join us live for Q&A following the formal presentation. During the event, we expect to provide an update on our US regulatory activities for Mavorixafor for the treatment of WHIM syndrome as we continue to be on track to file a US new drug application early in the second half of 2023 and prepare for a potential launch in the US in the first half of 2024. Concurrent with all of this, we continue to enroll participants in our ongoing Phase 2 trial evaluating the safety and efficacy of Mavorixafor for the treatment of idiopathic, cyclic, and congenital chronic neutropenia, and we believe we are on track to announce the clinical data and provide clarity on the scope and timing of the expected CN Phase 3 clinical program in the Q2/Q3 timeframe. In our release this morning, we also announced that we will be presenting a poster at CIF, highlighting the results of what we believe is the first research study to assess the correlation between the incidence of serious infection events, or SIEs, and the severity of chronic neutropenia. This abstract will also be published on May 16th. Concurrent with the poster presentation, which is on Saturday, May 20th at 1:30 PM Central Time, we will be adding the poster to our website. As a result of our development efforts and our published data to date, we continue to believe that due to its demonstrated ability to elevate levels of white blood cells, Mavorixafor has the potential to be a breakthrough for those with WHIM syndrome and other chronic neutropenic disorders. We look forward to updating you on our progress throughout the year as we advance our mission to bring innovation to these patient populations in need. I'll now turn it over to our CFO, Adam Mostafa, to review the quarter financials.

Thanks, Paula, and thanks to all of you for being on the call with us today. At the end of the first quarter ended March 31, 2023, X4 had $94.4 million in cash, cash equivalents, and restricted cash. We believe that these funds are sufficient to support company operations into the second quarter of 2024. Our research and development expenses were $22.1 million for the first quarter, which compares to $14.1 million for the comparable period in 2022. R&D expenses for the first quarter included $0.8 million of certain non-cash expenses and a $5 million accrual for an in-licensing milestone payment that the company deems probable of occurring. Our selling, general, and administrative expenses were $7.2 million for the first quarter as compared to $7.7 million for the comparable period in 2022. SG&A expenses included $0.8 million of certain non-cash expenses for the quarter. Lastly, we reported a net loss of $24 million for the first quarter ended March 31, 2023, as compared to $22 million for the comparable period in 2022. Net loss included $1.6 million of stock-based compensation expense and a $5.4 million gain for the change in fair value of our Class C warrant liability for the first quarter. With that, why don't we open up the call for your questions.

Stephen Willey, Stifel.

Good morning, everyone. This is Chun Yang for Steve. I have two quick questions. First, Adam, could you provide more details about the increase in R&D expenses? Second, are there still ongoing discussions regarding potential partnerships, and when can we expect updates on that front? That's all from me. Thank you.

Thanks for the question. The increase in the R&D line this quarter is related mostly to a $5 million accrual payment, which is for an in-licensing or regulatory-related milestone that we deemed probable of occurring. On the partnership front, we continue to look at beneficial ways to finance the company. That could include, for example, geographic rights types of partnerships. When we have something material to report, we'll certainly do that.

Mayank Mamtani, B. Riley Securities.

Hi, this is William on for Mayank today. Congratulations on your continued success. Two questions from us. One of them, a follow-up. I'm just curious about the infection data on infection rates that you'll be presenting at both the CIS and your KOL. If you can provide any extra information or color on what we might see at these two presentations? And then are these going to be largely overlapping in new data or should we expect different data cuts from each of these presentations? Thanks and then one follow-up.

Thanks for the question. As we highlighted in our press release, we're looking forward to sharing more data around the burden of infection, which can relate to frequency, severity, and duration among other metrics. Those are all relevant and important to clinicians, and you'll actually get to hear their perspective directly from the ones we've outlined on today's call. In terms of the different data and different venues, so the data sets will be primarily the same. One is more oriented to the clinical communities, and the other is for a broader audience within the investor community, but effectively, the data sets are going to be quite similar.

Got it. That's very helpful. Regarding your upcoming Phase 3, as well as Phase 2 study execution, could you provide any insight you gained during your FDA discussions and what your plans are following the Phase 2 data release? How are your plans going forward?

For clarity, this is around the chronic neutropenia study? Yes, sorry about that. So for chronic neutropenia, we continue to guide that we will provide additional data in Q2 or Q3, and we will have completed interactions with the agency so that we can have clarity on a Phase 3 registration program. Those are in progress right now, and we look forward to sharing the additional data, which will primarily focus on durability of neutrophil count. The crosswalk in all of these neutropenic patients, including WHIM, is looking for durable elevations of white blood cell counts, including neutrophil counts, and then the correlation with infection. We thought we had nice data in chronic neutropenia with the Phase 1b, after a single dose, given the positive result. Now we are looking forward to sharing future data that will hopefully be consistent with WHIM, which shows nicely durable elevations from the CN data and the registration trial research that will look for infection changes in benefit. We are likely to maintain a size similar to that you are testing with WHIM.

Thanks. I appreciate all that, and congratulations again. Thank you for taking our questions.

Eva Privitera, TD Cowen.

Hi, good morning, and thanks for taking our questions. For the Phase 2 chronic neutropenia update, what can we expect in terms of how many patients and how long the duration of follow-up?

So we're actively enrolling. I'm sorry, Eva. Go ahead.

Yeah, and what's the split of the congenital, idiopathic, and cyclic patients roughly? And also the split of patients dosed with monotherapy versus combo with G-CSF?

We're still actively enrolling, so I can't answer any of the split questions because, similar to the Phase 1b, we have a nice wide funnel, and we're trying to be as broad a population as possible. More to come on that when we have the data. In terms of the number of patients, we're aiming for somewhere between 15 and 25. We're trying to get as robust a count as possible. We really thought the data set from the Phase 1b was valuable because you had enough across a couple of buckets to make some generalizations. That's what we're aiming for, but of course, it’s always about recruitment and timing. We look forward to sharing a meaningful update around durability and meeting patients as soon as we can in Q2 or Q3.

Great. Thanks for that. On the Phase 3 WHIM presentation, secondary endpoints that will be presented at CIS, what level of reduction in infection rates and what burden do you think are clinically meaningful?

I can share with you what we saw in the Phase 2. The agency granted us breakthrough therapy designation on the Phase 2 WHIM data, which I believe showed about a 40% to 50% reduction in infection rates over a year. This was a different benchmark, of course, because we were using patients’ historical controls. That certainly sets the mark from the agency perspective, and they view that as clinically relevant and meaningful to grant us the breakthrough therapy designation. We will provide the totality of data, including all the infection information in just a couple of weeks.

RK, H.C. Wainwright.

Thank you. Good morning, Paula and Adam. This is RK from H.C. Wainwright. I think if I do my job right on May 16th and 21st, I should know all about Mavorixafor. At the same time, you're putting five KOLs together on the 16th. Should we expect these folks to be talking about additional neutropenic conditions where Mavorixafor could be used? Also, would this help you to initiate conversations regarding subtypes of SCN, in the sense where SCN is generated due to various causes? Will some color around that come up in these conversations for potential indication expansions for Mavorixafor?

Thanks so much, RK. Great questions. Our breadth of KOLs from the US and Europe, includes experts in hematology, immunology, and some rheumatology, where some of these patients are managed. We felt we wanted to have that nice universe of experiences commenting on our data on WHIM, but some of them certainly have relevance in treating a larger number of chronic neutropenia patients. For those who have experience, they will be able to incorporate their perspectives into the conversations. We look forward to the Q&A around that topic about future indications.

Thank you. Looking forward to these two events.

Thank you so much, RK.

Kristen Kluska, Cantor Fitzgerald.

Good morning. This is Rick on for Kristen. Thank you for taking our questions. To set the stage ahead of the CIS conference and WHIM, could you talk a little bit about the setting, the audience you're expecting at CIS, and how getting in front of this audience could help inform what you understand as the prescriber community focusing on WHIM?

Sure. At CIS, the audience will primarily be immunologists. Mark has a team participating in this conference. I will turn it over to him to provide additional color. Mark?

Thanks, Paula. Hi, Rick. We're looking forward to being at CIS where many of our customers will be. We have a number of meetings set up with key customers, and we'll have a company booth there as well, which is focused on raising disease awareness of WHIM. We think it's going to be a very valuable conference for us as the excitement builds around the release of that Phase 3 data.

Great. And maybe just one more on the CN poster presentation you announced for CIS. Could you provide some insight into what we could expect from this real-world patient data that you discussed? Should we expect mostly patients managed on G-CSF? Will you provide any information on genetic background for the patients in this study?

It's a higher-level study than that. We don't get into genetics, as that’s sometimes not even captured in electronic medical records. It's a higher-level study on the populations diagnosed with different types of chronic neutropenia. There are different ICD-10 codes, and we can drill down on their clinical histories in terms of their severe infection events. The poster will illustrate real-world evidence connecting degrees of neutropenia with severity around morbidity and potentially mortality. We look forward to sharing that poster and will follow up as the community digests the information.

Excellent. Thank you very much.

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

Thank you. We appreciate everyone attending today and look forward to having your interest in our upcoming May 16th event. Have a great rest of your day. Take care.

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