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X4 Pharmaceuticals, Inc.
8/8/2024
meaningful levels. Finally, we'll be also looking for continued tolerability and safety of Mavericks IV as seen in all of our other clinical programs to date. In June, we also announced the initiation of our Global Pivotal Phase III clinical trial, branded the FORWARD Study, evaluating the efficacy, safety, and tolerability of oral once daily Mavericks IV with and without stable doses of GCSF 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-blinded, 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 II CN data presented to date strongly support our decision to initiate the Phase III trial as well as its design. Importantly, we believe that the interim results de-risk the Phase III trial, given that the ANC increases seen in CN patients to date mirror those in our successfully completed IV-WIM Phase III 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 Mavericks IV and WHIM syndrome by early 2025, while we also explore additional potential opportunities and 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?
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 Zolt Remedy, we were awarded a Priority Review Voucher, or PRV, based on Maverick X4'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 ZorMD revenue. For the three months ended June 30th, we reported revenues of $0.6 million and cost of revenue of $0.3 million related to the sale of ZorMD. This cost of revenue includes approximately $0.2 million of license 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.
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 Maverick's score for patients, we look forward to reporting on our sales, regulatory, and clinical progress over the coming 6 to 12 months. We'll now open up the call for your questions. Operator?
Thank you, Dr. Reagan. Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, star 1 for questions. We'll go first this morning to Kristen Kluska of Kantor.
Hey, good morning everybody and congratulations on reaching 10 years. It'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 Zolremdi. Will it be primarily on patient anecdotes, reports around infections or anything else to consider?
Thanks, Kristen. I'll turn it over to Mark to give some perspectives on what they're hearing from the field.
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 Zol Remedy. 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 how they can help these patients with Zol Remedy. We know from the market research that it's really the impact on infections that drives the value of Zol Remedy 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.
Thank you for that. And can you give us a sense of how partnership discussions ex-U.S. are going at this stage? And just curious, your press release noted some ways you're looking to maximize the value of Mavericks for beyond Wynn syndrome and CN. So curious if in these conversations this has come up with potential partners about ways that they can also potentially utilize this drug and other indications as well.
Yeah, so thanks, Kristen. I mean, when we currently think about the FDA approval, there are certain regions of 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.
Yeah, thanks, Kristen. So, certainly there is interest and we have discussions, as Paul mentioned, ongoing with potential partners. We'll certainly come back and update the market as appropriate if we're going to consummate a transaction. But I think given the recent approval and our recent positive chronic utropenia phase two data, there's only growing interest in this area.
Great. Thank you.
Thank you. We go next now to Ted Tintoff at Piper Sandler.
Great. Thank you very much for taking my question. And, yeah, it's exciting to see some revenues at the company. I know a lot of work has gone to get that first couple hundred thousand dollars, and I know it will grow from here. My question had to do with sort of characterizing the patients that are on drugs. Can you give us a sense for how many patients are on drugs and anything about sort of the backlogs 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 Zolundi. Thank you.
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 drugs.
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 the conversations we're having with physicians, our engagement with, you know, the patient advocacy groups, and also through our digital marketing campaigns, because that's where we can get extended reach. And we've refreshed our disease awareness campaign. We've also launched our branded Zol Remdi 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 Zol Remdi 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.
Great. That's really helpful. I appreciate the additional color.
Thank you. We go next now to RK at HC Wainwright.
Thank you. Good morning, Paula and Adam. Congratulations. on the 10 years and also the launch. In terms of, I know it's 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 from physicians and patients at this point in terms of getting ready 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 that option to a better level from the get-go?
Thanks so much, R.K. 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 three was phenomenally successful, showing infection burden reduction across rate, severity, and duration. So that is a 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 Zol Remedy. But I'll turn it over to Mark to add some color to that as well.
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. Now we've actually given them a reason to go back, look for these patients, make the diagnosis, and then have a conversation with a patient about Zol Remedy.
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?
Sure. So, as we shared today, we'll be giving the full phase two 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 GCSF. 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 going to 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 enrollment. 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.
Perfect. Thank you very much for taking my questions, Paul.
Thanks, RK.
We'll take our next question now from Leah Kan of Brookline Capital Markets.
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?
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, $130 million tranche, $145 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.
Thank you so much. Most helpful.
You would go next now to Stephen Wiley at Stiefel.
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 be a somewhat lengthy process. And 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.
Sure, Steve. 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.
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 Cell Remedy. 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. 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?
Yeah, thanks, Steve. I think we'll always aim to communicate meaningful progress. Of course, we don't want to make any commitments just because it's a 2025 target and it's almost a year away at this point. However, certainly as we get to 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.
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 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. 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 startup-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 does.
Very helpful. Thanks for taking the questions, and congrats on the progress.
Thanks, Steve.
Thank you. We go next now to David Bouts at Zaxos Small Cap Research.
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.
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 in 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.
Okay. Thanks for taking the question. Thank you.
Thank you. And ladies and gentlemen, it appears we have no further questions this morning. Dr. Reagan, I'd like to turn things back to you, ma'am, for any closing comments.
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.
Thank you, Dr. Reagan. 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.