X4 Pharmaceuticals, Inc. (XFOR) Q3 2019 Earnings Report, Transcript and Summary

Greetings and welcome to X4 Pharmaceuticals Third Quarter 2019 Financial Results and Business Update Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Stephanie Carrington, Managing Direction of Investor Relations at Westwicke. You may begin.

Thank you, Operator. Good morning, everyone, and welcome to X4 Pharmaceuticals Third Quarter 2019 Financial Results and Business Update Conference Call. I'm joined today by X4 Pharmaceuticals Chief Executive Office, Dr. Paula Ragan; Chief Medical Officer, Dr. Lynne Kelley; and Chief Financial Officer, Adam Mostafa. Now turning to today's call, Paula will provide an overview of recent developments, Lynne will discuss clinical development progress, and Adam will recap the financial results for the third quarter. We will then open the call to your questions. But before we begin, I would like to remind you that X4 will be making certain forward-looking statements during this call. Forward-looking statements include but are not limited to statements regarding X4's plans or the development of Mavorixafor X4P-001 or any of its other product candidates including with respect to clinical trials X4 plans to initiate, the design, rate of patient enrollment, and clinical site initiation for its clinical trials, potential benefits of Mavorixafor including as a treatment for advanced renal cell carcinoma, WHIM, Waldenstrom's, or severe congenital neutropenia, the safety, durability, and efficacy of Mavorixafor, X4's plans to announce future trial results, and X4's plans to partner with any current or future third parties. Any statements made in this call that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ significantly from those projected including without limitation the risks and uncertainties detailed in X4's most recent annual report on Form 10-K filed with the Securities and Exchange Commission or SEC as updated by X4's current report on Form 8-K filed with the SEC on April 11, 2019, and in all other filings X4 makes with the SEC from time-to-time. All forward-looking statements made during this call are based on information available to X4 as of today, and X4 specifically disclaims any obligation to update these statements provided on this call as a result of future events or otherwise. Now turning today's call X4 Pharmaceuticals CEO, Paula Ragan. Go ahead, Paula.

Thank you, Stephanie, and thank you, everyone, for joining us in this morning's call. We are very pleased to be speaking with all of you today. This is our first business update call since we completed our reverse merger with Arsanis, and X4 Pharmaceuticals Inc. commenced trading as a public company on NASDAQ in March of 2019, and the completion of our follow on equity offering in April of 2019. Our team has been very active on multiple fronts since that time. As a reminder, we are advancing the clinical development of Mavorixafor, a potentially first-in-class, once-daily, oral, small-molecule antagonist of the chemokine receptor CXCR4 across multiple indications. During the third quarter of 2019, we received notice that the European Commission had granted orphan drug designation to Mavorixafor for the treatment of WHIM Syndrome, which followed the same designation received from the FDA in October of 2018. Our core development plans for Mavorixafor are focused on three rare disease areas as follows. We initiated a pivotal Phase 3 global clinical trial for Mavorixafor for the treatment of WHIM Syndrome in June 2019. We are currently enrolling patients in this trial and are on track to fully enroll the trial by the middle of 2020. We also remain on track to provide a WHIM prevalence and patient identification update by the end of the first quarter of 2020. We initiated a Phase 1b clinical trial of Mavorixafor for the treatment of severe congenital neutropenia earlier this week, and preparations are underway to initiate the Phase 1b clinical trial of Mavorixafor for the treatment of Waldenstrom's macroglobulinemia during the final quarter of 2019. Lynne will elaborate shortly regarding the progress that we're making across each of these trials. On September 30 at the European Society for Medical Oncology 2019 Congress in Barcelona, we released positive results from the Phase 2a portion of our 65-patient, open-label, Phase 1/2 clinical trial of Mavorixafor in combination with Axitinib or Inlyta in patients with advanced clear cell renal cell carcinoma. We believe these promising results demonstrated a meaningful improvement in medium progression-free survival in a heavily pre-treated patient population with poor prognoses and provided clinical evidence that continues to support Mavorixafor's potential role in inducing immune-related anti-tumor responses and bolsters the published evidence which has shown a generally favorable safety and tolerability profile. We are encouraged by these data, including the data from the eight patients - or 12% - who remain on combination therapy with Mavorixafor and Axitinib for more than 12 months past the primary endpoint. We are actively engaging and partnering discussions as we look forward to continuing to explore the potential benefit of Mavorixafor in underserved cancer patients with solid tumors, including as a potential triple-combination agent in addition to tyrosine kinase inhibitors and checkpoint inhibitor therapies or in combination with other standard of care treatments. Also in the third quarter of 2019, we entered into an agreement with Abbisko Therapeutics to develop and commercialize Mavorixafor in combination with checkpoint inhibitors or other agents in Greater China with a focus on solid-tumor oncology indication. We retained full rest-of-world rights to develop and commercial Mavorixafor outside of Greater China for all indications and the ability to utilize any data generated from this collaboration for X4's rest-of-world development program. We have continued to build out our organization on multiple fronts to prepare to deliver out milestones in 2020 and beyond. Over the vast past months, we have strengthened our executive team as exemplified by our recent hires. Renato Skerlj, Ph.D., was appointed our Senior Vice President of Research and Development in September. Dr. Skerlj has over 25 years of experience leading the discovery and development of small-molecule drugs to treat rare diseases, cancer, infection, and neurodegenerative diseases. In addition, he was one of the original founders of X4 Pharmaceuticals, and it's great to have him join as an R&D leader for our talented team and Vienna. Derek Meisner has joined us this week as General Counsel. His legal career has spanned over two decades, and he's a seasoned legal veteran who brings in-house experience at both biotechnology-related companies and security firms. In addition, Bill Aliski joined our board of directors in the third quarter. He brings more than two decades of biopharmaceutical executive leadership experience at both public and private companies with significant expertise in global rare disease commercialization, including a particular focus on commercial strategy, pricing, reimbursement, and market access. We are very pleased to have Bill at this point in time for the company as we begin to lay the groundwork for a commercial organization. I'd now like to turn the call over to our Chief Medical Officer, Dr. Lynne Kelley.

Thank you very much, Paula. Our pivotal Phase 3 global clinical trial for the treatment of WHIM Syndrome is well underway. As you may recall, the global 4WHIM trial is a 52-week, randomized, double-blind, placebo-controlled, multicenter study designed to evaluate the safety and efficacy of Mavorixafor in genetically confirmed WHIM patients. The trial is designed to enroll up to 28 subjects in approximately 20 countries, followed by an open label extension trial. The primary efficacy endpoint for the trial will compare the level of circulating neutrophils relative to a clinical meaningful threshold of 500 cells per microliter in response to Mavorixafor versus placebo measured during multiple 24-hour periods over the course of 52 weeks. Secondary endpoints include infection rates, wart burden, and assessments of immune system function and quality of life. The trial is currently enrolling patients, and we are in the process of activating sites globally. We remain on track to fully enroll the trial in the middle of 2020 timeframe. We would also like to remind you that there's a WHIM Phase 2 open-label trial update planned for next year. Earlier this week, we initiated a Phase 1b clinical trial in severe congenital neutropenia or SCN. This is a rare blood disorder characterized by abnormally-low levels of certain blood cells. This trial is planned as a 14-day exploratory trial to assess for genetic profiles of the SCN patients at baseline, assess safety and tolerability, and examine responses to Mavorixafor in up to 45 patients across SCN and exploratory subpopulations. One additional benefit of this trial is that it may enable us to correlate genetic profiles with potential Mavorixafor responses supporting future development of Mavorixafor as a targeted therapy in a genetically predefined population of SCN. We are also on schedule to commence a Phase 1b clinical trial in Waldenstrom's macroglobulinemia during this final quarter of 2019. As a reminder, Waldenstrom's is a rare form of Non-Hodgkin's Lymphoma and has an estimated prevalence of greater than 13,000 patients in the United States and European Union. 30% to 40% of Waldentrom's patients have a WHIM-like mutation in the CXCR4 gene. This trial is currently being designed as a multinational study to asses Mavorixafor in combination with Ibrutinib in patients with MYD88 plus CXCR4 mutations. We will be examining safety to determine the optimum dose and will gain some insights into activity to assessing IgM levels in the blood. High IgM levels are a hallmark biomarker of the disease and we believe any decrease seen will be - enable us to gain an early understanding of the potential of Mavorixafor to provide benefit in the CXCR4 mutant-focused patient population. Thank you all, and I will now turn the call over to our Chief Financial Officer, Adam Mostafa.

Thank you very much, Lynne. As of September 30, 2019, cash, cash equivalents, and restricted cash were $77 million as compared to $96 million as of June 20, 2019. This decrease of approximately $19 million reflected cash used to fund operating activities during the third quarter and included a $6.5 million cash payment for full repayment of X4's loans with FFG. Note this repayment was part of the debt refinancing executed with Hercules in June 2019 under which we still have $5 million in borrowing availability. Research and development expenses were $8.6 million for the third quarter of 2019 as compared to $8.9 million for the second quarter of 2019. General and administrative expenses were $4.4 million for the third quarter of 2019 as compared to $4.6 million for the second quarter of 2019. During the third quarter 2019, we transferred the rights to develop and commercialize the ASN200, 300, and 500 programs acquired through the merger with Arsanis. Accordingly, we do recognize our IPR&D intangible assets and recorded a $4 million charge during the three months ended September 30, 2019. Accordingly, we derecognized our IP R&D and tangible assets and recorded a $4 million charge during the three months ended September 30th, 2019. The charge reflects the write-off of the IP R&D balance of $4.9 million less $900,000 of cash received from the sale during the quarter. Net loss was $17.7 million for the third quarter of 2019, or a net loss per basic and diluted share of $1.22, as compared to a net loss of $13.4 million for the second quarter of 2019 or net loss per basic and diluted share of $1.02. Excluding the IPR&D charge, net loss for the third quarter 2019 was approximately the sum of the R&D and G&A expenses in the quarter as mentioned. We will now turn the call over to the operator for Q&A.

[Operator Instructions]. I show our first question comes from Marc Frahm from Cowen and Company. Please go ahead.

Maybe on the SCN trial that you just started, you gave some detail, I assume you're looking for some particular family of mutations within SCN. Can you maybe give some of the breakdown of maybe how many mutations you expect to enroll within the 45 patients and if there are specific subcohorts that you're looking for.

Thanks, Marc, for the questions. This is Paula and Lynne will add commentary. So we're looking predefined, we're looking at certain mutations called GATA2, G6PC3 and a few other very recent genetically defined immunodeficiencies that appear to have some overlap with CXCR4 pathway. We're also using a large panel that would cover additional genes associated with immunodeficiencies and screening all patients against that so we can fully understand the breadth of these patients' mutations and correlate that with potential response to Mavorixafor.

Thank you. Our next question comes from Stephen Wylley from Stifel. Please go ahead.

Hi, this is Ellen [ph] on for Steve. Just one question, there was an abstract yesterday released evaluating families with WHIM syndrome that I believe sounds serious infections requiring hospitalization to be relatively rare, so I think it was about one per year. I know inception rate is a secondary endpoint with the Phase 3 WHIM trial. So, I was just wondering if you expect serious infections to be as low as that abstract suggest and if so, just how will you evaluate any type of delta resulting from treatment on Mavorixafor with like hospitalizations related to infection. Thanks.

So, we have seen - we just saw the abstract for that yesterday. The mutation is actually autosomal dominant with variable penetration, so I think there's a breadth of patients that present some with very serious life threatening infections and some with mild or chronic infections that result in some of the long-term sequelae. We in the setting in the clinical trial have prospectively out together an infection adjudication committee that is independent from the company of three experts that will be helping to assess the infections that happen both in the placebo group ad well as potentially in the treatment arm. And so, we are looking at that. We expect - we have done some previous work looking at infection rates from the Phase 2 patients. And then we'll be sharing that later on in 2020 when we share the Phase 2 report.

Okay, great, and then just one more question from me. What kind of differences if any do you expect to see in response between patients that have SCN versus other types of congenital neutropenia disorders? Thank you.

I think we expect the - we know that X4 is able to mobilize white blood cells and especially neutrophils. So, we wouldn't expect anything different. I think what we're expecting to learn is all about the different mutations and whether or not the responsiveness. So, it really isn't in form Phase 1b trial in terms of our movement forward. Paula, do you have anything to add?

No, I think we just want to comment that we are looking for magnitude of response. We do expect responses in essentially all patients given the mechanism of action. Important correlation is the magnitude of the response with the correlating genetic profile.

Thank you. Our next question comes from Joel Beatty from Citi. Please go ahead.

First one on the WHIM patient identification update in the first quarter of next year. Could you provide maybe a little more information on the types of analyses or approach that you're using to help identify patients.

Sure. We haven't explicitly shared the tools that X4 is using, although it will highlight what other rare disease companies typically use to approach how to triangulate prevalence. The typical tools are electronic medical records research. They are also looking at existing genetic databases either housing kind of retrospective samples or forward looking samples. And we have disclosed the collaboration with Envitay [ph] where we're prospectively providing genetic screening for physicians for patients of unknown diagnosis. So, across those three types of approaches we'll be able to give you updates on some of those initiatives that X4 is pursuing.

Great. And then another question on the Phase 3 and WHIM syndrome, I know it's still early on in enrollment. I guess could you give a sense of the confidence in the timing of enrollment and if there were some initial patients that were kind of waiting to get in that trial that were able to then enroll early or is it type of enrollment pattern that may be ramping up overtime as folks get online.

I think you hit the nail on the head in terms of your sites on online. We have identified patients and our biggest hurdle right now is the paperwork and regulatory aspect of the different sites globally. And so we are actively not only right now recruiting patients but we are actively getting those sites up online globally to enroll the patients. We are confident that we will have full enrollment by the mid 2020 time period as we've always given guidance.

Great. And then one last question, it's kind of a science question on the mechanism of action in various indications. It seems like Mavorixafor for neutropenia is increasing the mobilization of neutrophils. And I'm wondering if you could help reconcile that with what you saw in the oncology setting where it seems like it was decreasing mobilization of MDSCs but which I believe largely consist of neutrophils. So, it seems like the effect on neutrophils may be a little bit different between those two settings.

Sure. Thanks, Joel. This is Paula. So, the mechanism of action is actually - or the root cause of the disease is somewhat different in those two different settings. So in the tumor microenvironment, there is evidence to support there's an overproduction of CXCL12 which is the sole ligand of CXCR4 and that over production causes the differential chemotaxis of MDSCs versus other non-immunosuppressive cells. Publications in Nature Medicine support actually the differentiated attraction of immunosuppressive cells in the tumor microenvironment based on that chemokine. So, in some ways it's an overproduction of CXCL12 as the root cause of the problem in the tumor microenvironment. And when you disturb that signaling, you're able to reestablish the normal immune cell trafficking with CD8-positive T cells which we have shown with our Phase 1b trial in melanoma. And WHIM syndrome is the inverted problem. The ligand is normal and the mutated receptor keeps the white blood cells trapped in the bone marrow where they're initially produced. So, it's still a trafficking issue related to the aberrant signaling, it's just a different origin of the lack of trafficking response. I hope that helps answer your question.

[Operator Instructions]. Our next question comes from Swayampakula Ramakanth from H.C. Wainwright. Please go ahead.

To start off on Waldenstrom's trial, what needs to be accomplished before the start of the Phase 1b trial to your planning to start this quarter right away?

We've already submitted the protocol to the FDA and we already have our primary sites identified and then we're getting to the paperwork for the IRB submissions. So there is nothing, we're just marching through the typical cadence of any clinical trial. And we have worked with the investigators closely already and think we're in good shape.

Staying on the topic, I'm just trying to understand what sort of confidence you have in Mavorixafor for this indication since we have seen quite a few clinical candidates not being successful for Waldenstrom's syndrome.

Well, I think we're confident of the success. And I think there's an unmet clinical need that has been both reinforced by the discussions with the agency and investigators as the combination double mutants with the MYD88 and the CXCR4 mutations certainly have a shallower and a worse outcome. And there is no alternative trial right now that will be enrolling patients with that profile. And so, while there is other drugs such as ibrutinib and zanubrutinib trials that exist or have been completed. There's nothing that addresses a double mutant population right now.

Okay, thank you. And then the last question for me is the collaboration, the relationship that you have initiated with Abbisko in China. Could you give us some color as to how Abbisko is planning to run this development program and when we could really potentially hear about initiation of clinical studies in China, if they need to be done there.

So, we have created a joint steering committee. We are working on the appropriate protocols and the cadence. We're not ready to share at this time what those are. But the collaboration between ourselves and the clinical and business side of the teams on both sides of the ocean are actually going forward quite nicely.

Thank you. I show no further questions in the queue. At this time, I'd like to turn the call over to Paula Ragan, CEO, for closing remarks. Please go ahead.

Thank you very much for joining the call today. We look forward to continuing to share progress as it evolves. And I wish everyone a great day. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.