X4 Pharmaceuticals - Q2 2024

Transcript

Operator (participant)

Good morning, everyone, and welcome to X4 Pharmaceuticals' second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. You may register to ask a question at any time by pressing star one on your telephone keypad. Also, today's call is being recorded, and if you should need any assistance during the call today, please press star zero. It is now my pleasure to introduce your host, Mr. Dan Ferry from LifeSci Advisors. Dan, please go ahead.

Dan Ferry (Managing Director)

Thank you, operator, and good morning, everyone. Thank you for joining us today. Presenting on today's call will be Dr. Paula Ragan, X4's President and CEO, and the company's Chief Financial Officer, Adam Mostafa. Following prepared remarks, we will open up the call to your questions and we'll be joined by Chief Commercial Officer, Mark Baldry, Chief Medical Officer, Dr. Christophe Arbet-Engels, Chief Operating Officer, Dr. Mary DiBiase, Chief Scientific Officer, Dr. Art Taveras, and Jose Juves, Head of Corporate and Patient Affairs. As a reminder, on today's call, the company will be making forward-looking statements regarding regulatory and product development and commercialization plans, as well as research activities and financial projections. 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 year's Form 10-K, which was filed on March 21, 2024, and in the company's Form 10-Q for the second quarter, which is expected to be filed later today. I'll now turn it over to Paula Ragan. Paula?

Paula Ragan (President and CEO)

Thanks so much, Dan, and welcome everyone. I'll just start by saying, what an incredible year we've had so far. Just a few weeks ago, we celebrated the tenth anniversary of X4. When we founded the company a decade ago, a small group of us had a vision to advance our lead asset, an orally active CXCR4 antagonist called mavorixafor, to help those with rare diseases who have few to no treatment options. As you saw this past April, we were able to realize this vision, receiving US approval of mavorixafor, branded as XOLREMDI, for the treatment of WHIM syndrome, a rare primary immunodeficiency. The US launch of XOLREMDI is now underway, and our full commercial team is in place, and WHIM patients twelve years and older are now being treated with the only approved therapy targeting the underlying cause of their disease.

Sales guidance on XOLREMDI will come at a future point. However, today I'd like to highlight our strong launch progress. Overall, we've been very pleased with the launch to date. Our launch meeting in early May was a great success, where we completed the training and education of our field teams, enabling them to hit the ground running. We got product into our distribution channels very quickly and had our first patients on commercial drugs within just a few weeks of product approval. Coordination with our specialty pharmacy, PANTHERx Rare, has gone smoothly, and we've already received positive feedback on the patient support services provided through our X4 Connect and Nurse Educator programs. And very encouragingly, reimbursement decisions have been coming through quickly, with almost all patients currently on therapy receiving reimbursement via prior authorizations and medical exceptions.

Our commercial team is fully deployed across the U.S., calling on key hematologists and immunologists. To date, there has been limited ability to establish centers of excellence for the WHIM community. We knew this going in and therefore are continuing to execute on our disease awareness and education campaigns, as well as leveraging our strong relationships with patient advocacy groups. We recently participated in the annual meeting of the Immune Deficiency Foundation, or IDF, where we engaged with physicians, patients, and advocates, and members of our team visited with the Jeffrey Modell Foundation in New York just a few weeks ago. Through all of these efforts, we have become better at engaging with the treating physicians, understanding physician and patient questions, and, most importantly, building a community of interest around WHIM syndrome across the U.S.

We also continue to leverage the positive data from our pivotal phase 3 trial in WHIM that were published in April in Blood, The Journal of the American Society of Hematology. These and new data from the trial and its open label extension phase were presented at the annual meeting of the Clinical Immunological Society, or CIS, in early May. As we reported at the time, the CIS poster revealed that longer-term treatment with XOLREMDI was associated with durable improvements in neutrophil and lymphocyte counts, as well as reductions in annualized infection rates, and that no new safety signals had been observed during the OLE phase of the trial, with some participants treated for more than two years. We also made tremendous progress this past quarter in our development of mavorixafor for those with chronic neutropenia, another rare immunodeficiency.

At our investor event in late June, we presented positive interim clinical data from our ongoing Phase 2 clinical trial, demonstrating that once-daily oral mavorixafor was generally well-tolerated and durably increased participants' absolute neutrophil counts, or ANC, both as a monotherapy and in combination with stable doses of injectable granulocyte colony-stimulating factor, or G-CSF, out to as long as 6 months. Importantly, 100% of evaluable participants who had completed the 6-month study as of the mid-May cutoff date achieved target ANC increases of greater than 500 cells per microliter at months 3 and 6.... on once daily mavorixafor as a monotherapy and in combination with stable G-CSF dosing. In addition, participants on mavorixafor monotherapy achieved mean ANC levels above the lower limit of normal for CN at 3 and 6 months.

Mavorixafor monotherapy also durably increased ANC in participants with severe CN, defined as ANCs less than 500 cells per microliter at baseline, achieving mean ANCs of 800-1,000 cells per microliter, which is the ANC range targeted by experts for patients with severe CN. Feedback on these interim results from the physician community has been positive, and we were pleased to see the durable impact of mavorixafor as a monotherapy and in combination with stable dose G-CSF. These interim data support our strong belief that mavorixafor may be able to address the needs of the CN patients and their physicians.

Specifically, the desire for an oral treatment that does not carry short or long-term dose-related toxicities described with G-CSF use, and for an oral treatment that also increases ANC levels and lessens the risk and severity of infections, whether used on its own or in combination with G-CSF. We're now expecting to present the full data from the phase 2 CN trial in November, ahead of the American Society of Hematology, or ASH meeting. This data set will include results from the group of participants receiving mavorixafor and those who are allowed to dose adjust G-CSF from baseline. We've been asked what success looks like for these data that'll be presented in November. The good news is, we already know what success looks like from our WHIM phase 3 study and subsequent approval in the U.S.

In that 52-week study, mavorixafor meaningfully increased neutrophils and lymphocytes over a sustained period, reducing infection rate, duration, and severity. From the interim CN phase 2 results we shared in June, we saw again that mavorixafor as a monotherapy and in combination with G-CSF, can increase ANCs to levels expected to reduce infections. In November, we'll be looking to replicate what we saw in June across all participants in the mavorixafor monotherapy and MAV plus stable dose G-CSF groups, who completed the 6 months of the trial. From the third group, we'll be looking for data that supports physicians' ability to reduce G-CSF dosing while on mavorixafor and maintain patients' ANCs at clinically meaningful levels. Finally, we'll be also looking for continued tolerability and safety of mavorixafor, as seen in all of our other clinical programs to date.

In June, we also announced the initiation of our global pivotal phase 3 clinical trial, branded the FORWARD study, evaluating the efficacy, safety, and tolerability of oral once-daily mavorixafor with and without stable doses of G-CSF in people with congenital, acquired primary autoimmune, or idiopathic CN, who are experiencing recurrent and/or serious infections. The 52-week FORWARD trial is a randomized, double-blind, placebo-controlled, multicenter study aiming to enroll 150 participants. The clinical operations team is in full swing, opening up sites, and we are on track to fully enroll the trial in mid-2025. We believe that the interim phase 2 CN data presented to date strongly support our decision to initiate the phase 3 trial, as well as its design.

Importantly, we believe that the interim results de-risk the phase 3 trial, given that the ANC increases seen in CN patients to date mirror those and are successfully completed for a WHIM phase 3 trial, where similar levels of ANC increases led to clinical benefit by reducing the frequency, duration, and severity of infections. As we focus our efforts on the FORWARD CN trial, we are also looking to maximize the global opportunity in WHIM syndrome. We expect an MAA submission to the European Medicines Agency for mavorixafor and WHIM syndrome by early 2025, while we also explore additional potential opportunities in geographies where we may be able to efficiently leverage our U.S. FDA approval. With that, I'll now turn it over to our CFO, Adam Mostafa, to review the second quarter financials. Adam?

Adam Mostafa (CFO)

Thanks, Paula, and thanks to all of you for being on the call with us today. As we had previously discussed, upon FDA approval of XOLREMDI, we were awarded a priority review voucher, or PRV, based on mavorixafor's rare pediatric disease designation. We monetized this PRV very shortly after receipt, and in May, we recognized a gain on the sale to a third party for $105 million in cash. So as of the end of the second quarter, X4 had $169.5 million in cash, cash equivalents, restricted cash, and short-term marketable securities. We believe these funds are sufficient to support our company operations into late 2025. I want to note that this projected runway does not include potential future XOLREMDI revenue.

For the 3 months ended June 30, we reported revenues of $0.6 million and cost of revenue of $0.3 million related to the sale of XOLREMDI. This cost of revenue includes approximately $0.2 million of licensed costs, including sales-based royalties and operational milestones capitalized as an intangible asset and amortized over the life of the underlying intellectual property. We would like to note that there was a small amount of inventory stocking at our specialty pharmacy during the quarter, and this is reflected in the sales number. Research and development expenses were $20.9 million for the second quarter, compared to $15.6 million for the comparable period in 2023. R&D expenses for the second quarter of 2024 included $1.2 million of non-cash expense.

Selling general and administrative expenses were $13.3 million for the second quarter of 2024. This compares to $10.2 million for the comparable period in 2023. SG&A expenses for the second quarter also included $1.2 million of non-cash expense. Finally, we reported net income of $90.8 million for the second quarter of 2024, compared to a net loss of $55.7 million for the comparable period in 2023. Note that net income in the current period included the sale of the PRV for $105 million, as well as a non-cash gain of $20.2 million related to the fair value remeasurement of the company's Class C warrants liability. I'll now turn it back to Paula for some concluding remarks.

Paula Ragan (President and CEO)

As you can see, all of these accomplishments mark a significant step forward for X4, now a fully integrated biopharmaceutical company. As we continue to explore additional uses for and maximize the global potential of mavorixafor for patients, we look forward to reporting on our sales, regulatory, and clinical progress over the coming 6-12 months. We'll now open up the call for your questions. Operator?

Operator (participant)

Thank you, Dr. Ragan. Ladies and gentlemen, at this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, star one for questions. We'll go first this morning to Kristen Kluska of Cantor.

Kristen Kluska (Equity Research Analyst)

Hey, good morning, everybody, and congratulations on reaching 10 years. That's a great milestone, and how better to celebrate with a drug approval this year? So first I wanted to ask how you believe physicians are going to measure success differently in a commercial setting versus the clinic for XOLREMDI. Will it be primarily on patient anecdotes, reports around infections, or anything else to consider?

Paula Ragan (President and CEO)

Thanks, Kristen. I'll turn it over to Mark to give some perspective on what they're hearing from the field.

Mark Baldry (Chief Commercial Officer)

Yeah, the launch is well underway, Kristen, and what's exciting is that, you know, we're hearing that physicians and patients have been waiting for a treatment that targets the underlying cause of the disease. And so now we have the approval of XOLREMDI. It's really opening up these conversations and allowing us to help physicians become aware of the disease, recognize the patients in their practice, and then think about, you know, how they can help these patients with XOLREMDI. We know from the market research that it's really the impact on infections that drives the value of XOLREMDI for physicians, for patients and payers. So that's really what I think physicians will be looking for as they get more experience with the product.

Kristen Kluska (Equity Research Analyst)

Thank you for that. Can you give us a sense of how partnership discussions ex-U.S. are going at this stage? Just curious, your press release noted some ways you're looking to maximize the value of mavorixafor beyond WHIM syndrome CN. Curious if in these conversations, this has come up with potential partners about ways that they can also potentially utilize this drug in other indications as well.

Paula Ragan (President and CEO)

Yeah. So thanks, Kristen. I mean, when we currently think about the FDA approval, there are certain regions in the world that can leverage that existing approval. So there's some exploration there currently ongoing. Adam can comment more on the more strategic sides of potential collaborations.

Adam Mostafa (CFO)

Yeah. Thanks, Kristen. So, certainly there is interest, and we're have discussions, as Paula mentioned, ongoing with potential partners. We'll certainly come back and update the market as appropriate if, if we're gonna consummate a transaction. But I think given the recent approval and our recent positive chronic neutropenia Phase 2 data, there's only growing interest in this area.

Kristen Kluska (Equity Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. We go next now to Ted Tenthoff at Piper Sandler.

Ted Tenthoff (Managing Director and Senior Research Analyst)

Great. Thank you very much for taking my question. And yeah, it's exciting to see some revenues at the company. That's, I know a lot of work has gone to get that first couple hundred thousand dollars, and I know it'll grow from here. My question had to do with sort of characterizing the patients that are on drug. Can you give us a sense for how many patients are on drug, and anything about the sort of the backlog? And if you're not able to give us direct patient numbers, maybe tell us sort of a little bit about the journey of patients that you're seeing as you sort of get them into commercial use of XOLREMDI. Thank you.

Paula Ragan (President and CEO)

Thanks so much, Ted. So I think, you know, we won't be breaking down any details and continue to report on revenue, but, I mean, we're overall extremely pleased with just the cascade of commitment that the company has made, and then now we're experiencing the receipt of that commitment in the communities as we head out. But Mark can add some more color on kind of how they're seeing the journey from the diagnosis and education support all the way through patients on drug.

Mark Baldry (Chief Commercial Officer)

Yeah, and I think, you know, the first thing to remember, this is an ultra-rare disease, and so, the key here is to begin to really raise awareness, both through our-- the conversations we're having with physicians, our engagement with, you know, the patient advocacy groups, and also through our, our digital marketing campaigns, 'cause that's where we can get extended reach. And we've refreshed our, disease awareness campaign. We've also launched our branded XOLREMDI digital campaigns.... So we're really, creating this kind of momentum around the conversations. And the patients, you know, as Paula mentioned on the call, all of the patients that were in the open label extension have been prescribed XOLREMDI, here in the U.S.

And so, from there, we're just learning more and more about how the patients have been waiting for a treatment that targets their disease, and they're now having those conversations with physicians.

Ted Tenthoff (Managing Director and Senior Research Analyst)

Great. That's really helpful. I appreciate the additional color.

Operator (participant)

Thank you. We go next now to RK at HC Wainwright.

Ramakanth Swayampakula (Managing Director and Senior Research Analyst)

Thank you. Good morning, Paula and Adam, and congratulations on the 10 years and also the launch. In terms of, I know it's early, early stages of the launch, but when you go and attend these conferences, such as the Immunodeficiency Conference, how are you know, what is it that you're hearing, you know, from physicians and patients at this point in terms of getting ready to act, to take, to adopt the drug? And also, have you learned anything else that needs to be looked at in terms of improving... I'm not saying improving, you know, getting the adoption at to a better level from the get-go?

Paula Ragan (President and CEO)

So thanks so much, RK. I think, you know, we're very pleased with kind of the cascade of thinking and development. And certainly what we're hearing, and Mark will add to this, is number one, they're excited about a targeted therapy, and I'll even add the oral targeted therapy. It's been a field of injectable treatments with varying degrees of study and rigor. Our phase 3 was phenomenally successful, showing, you know, infection burden reduction across rate, severity, and duration. So that is a great story to begin with and a great data set to share. And then in terms of the clinicians, of course, they're all on their own journey, even understanding the disease and then learning about the benefits of XOLREMDI. But I'll turn it over to Mark to add some color to that as well.

Mark Baldry (Chief Commercial Officer)

Yeah, exactly. I think it's really now that we have an approved product, it's really energized physicians to go back and really look in their practice for these patients who, before now, have really had no treatment available for their disease. And so now we've actually given them a reason to go back, look for these patients, make the diagnosis, and then have a conversation with the patient about XOLREMDI.

Ramakanth Swayampakula (Managing Director and Senior Research Analyst)

Fantastic. And then, for the SCN indication, so between now and if there is an interim analysis for the forward study, is there any other data that will be presented, so that we can understand how this program is moving forward?

Paula Ragan (President and CEO)

Sure. So, as we shared today, we'll be giving the full, Phase II data set in November of this year. So of course, we were extremely pleased with the data set already, but it was interim. So we've already seen durable responses of the drug as monotherapy and then sustained and durable, responses in addition to stable G-CSF. So the final puzzle piece is just exploring, in what circumstances G can get reduced. So that full data set will come in November, which is gonna be certainly well-timed, just before ASH. We'll be at the ASH meeting to help support the CN, community and also, get the word further out on our trial enrollments.

So it's an excellent timing perspective, and then we'll look forward, as appropriate, to giving updates on how the whole study is going, but certainly, that will be a 2025 update.

Ramakanth Swayampakula (Managing Director and Senior Research Analyst)

Perfect. Thank you very much for taking my questions, Paula.

Paula Ragan (President and CEO)

Thanks, RK.

Operator (participant)

We'll take our next question now from Leah Cann of Brookline Capital Markets.

Leah Cann (Biotechnology Research Analyst)

Good morning. I have a financial question. So Adam, could you help us with the number of fully diluted shares at the end of the quarter, including the pre-funded warrants?

Adam Mostafa (CFO)

Sure, thanks. So there's about $167 million basic shares, regular shares outstanding, $33 million pre-funded warrants, so $200 million share equivalents, if you will. And then there are $75 million warrants that are cash only. Those are divided into two tranches, one $30 million tranche, one $45 million tranche. So overall, $275 million in fully diluted shares. There's some historical warrants you'll see later today in our 10-Q that are significantly out of the money and are typically not included, but that accounts for a small piece.

Leah Cann (Biotechnology Research Analyst)

Thank you so much. Most helpful.

Operator (participant)

You will go next now to Stephen Willey at Stifel.

Stephen Willey (Managing Director)

Yeah, good morning. Thank you for taking the questions. Could you maybe just talk a little bit about, and again, I understand that it's early, but, the kinetics of the reimbursement process. I know, the paperwork that is required sometimes for these higher price rare disease drugs, can, can be a somewhat lengthy process. Just curious if you have an early read, just based on the limited experience thus far, as to what that process might look like from just a timing perspective?

Paula Ragan (President and CEO)

... Sure, Stephen. I mean, I'll turn it over to Mark. I think classic ultra-rare disease typically has barriers that a lot of these insurance companies naturally provide, given the magnitude of the drug and its options for patients. But the good news is, I think we've had a very experienced team well ahead of this, so I'll turn it over to Mark to give some insights there.

Mark Baldry (Chief Commercial Officer)

Yeah. Thanks, Paula. Hi, Steve. Yeah, as Paula mentioned during the call, payers are using their standard methods for new drugs, and so, you know, they're looking at PAs and exceptions process. But these are working quite smoothly, and patients have been able to access XOLREMDI. Of course, we also have our full suite of patient service programs through our X4 Connect, which is our patient hub, and this ensures that patients are quickly get quick access to the product while we work through the reimbursement. But it's good to see the process working smoothly.

Stephen Willey (Managing Director)

Okay, that's helpful. And, maybe a guidance question, not one related to, actual sales, but, just curious how you're thinking about communicating enrollment progress in the phase 3 FORWARD trial going forward. Should we expect updates in conjunction with certain milestones hit, like 50%? Or, is this just going to be kind of a moving target, and we'll hear about it when we hear about it?

Paula Ragan (President and CEO)

Yeah. Thanks, Steve. I think we'll, we'll always aim to communicate meaningful progress. Of course, we don't wanna make any commitments just 'cause it's a 2025 target, and it's almost a year away at this point. However, certainly as we get confidence under our belt here, we'll be able to provide some more specifics, but again, I would say that's a 2025 zone to share.

Stephen Willey (Managing Director)

Okay. And then maybe just another financial question for Adam. SG&A just looks to be down about 25% sequentially, which I guess I wouldn't have anticipated in the context of undertaking a launch. So can you just remind us if there's anything either unique to the one quarter number or this quarter number that impacts that SG&A line item? Thank you.

Adam Mostafa (CFO)

Sure. Thanks, Steve. Yeah, so this second quarter number is probably more representative of a typical recurring figure. The first quarter, as we mentioned last time, had a number of one-time, non-recurring, sort of start-up related costs to building a sales force and getting the launch underway early in the year ahead of approval. So that quarter was a little more inflated, if you will, on the SG&A line than I would expect going forward. So that's why the drop looks as it does.

Stephen Willey (Managing Director)

Very helpful. Thanks for taking the questions, and, congrats on the progress.

Paula Ragan (President and CEO)

Thanks, Steve.

Operator (participant)

Thank you. We go next now to David Bautz at Zacks Small Cap Research.

David Bautz (Senior Analyst)

Hey, good morning, everybody. Question on the mechanism for how prescriptions are filled. Are they filled on a monthly basis? Is it multiple monthly? And then if you could talk a little bit about how revenue is recognized in relation to when those prescriptions are filled.

Paula Ragan (President and CEO)

Sure. So I mean, I don't think we have intended to disclose kind of the play-by-play for our patients. I mean, as we mentioned with our current revenue line, it does blend, obviously, both an inventory build as well as revenue recognition for individual patients that are now on commercial therapy. So I don't think at this point we're ready to provide any more details, but certainly, you know, we do want, we do understand the market's interest in helping them forecast. So as we head into, you know, later this year, in 2025, we'll try to provide a bit more metrics, which really can help provide some benefit to you all as we think about how the product will grow over time.

David Bautz (Senior Analyst)

Okay, thanks for taking the question.

Paula Ragan (President and CEO)

Thank you.

Operator (participant)

Thank you. Ladies and gentlemen, it appears we have no further questions this morning. Dr. Ragan, I'd like to turn things back to you, ma'am, for any closing comments.

Paula Ragan (President and CEO)

Well, thank you so much, operator. Thank you everyone for joining the call today, and we hope you have an excellent rest of your day. Take care.

Operator (participant)

Thank you, Dr. Ragan. Ladies and gentlemen, again, that does conclude today's X4 Pharmaceuticals second quarter earnings call. Again, thanks so much for joining us, everyone, and again, we wish you all a great day. Goodbye.