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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-38295
_____________________________________________________________________________________

X4 PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
27-3181608
(I.R.S. Employer
Identification No.)
61 North Beacon Street, 4th Floor
Boston, Massachusetts
(Address of principal executive offices)
02134
(Zip Code)
(857) 529-8300
(Registrant’s telephone number, including area code)
____________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockXFORThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒


As of May 1, 2023, the registrant had 122,207,488 shares of common stock outstanding.



Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2023 and 2022

2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, or the (“Exchange Act”), that relate to future events or to our future operations or financial performance. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this report, regarding, among other things:
the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and related preparatory work and the period during which the results of the trials will become available, as well as our research and development programs;
the potential benefits, including clinical utility, that may be derived from any of our product candidates;
the timing of and our ability to obtain and maintain regulatory approval of our existing product candidates or any product candidates that we may develop in the future, and any related restrictions, limitations, or warnings in the label of any approved product candidates;
our plans to research, develop, manufacture and commercialize our product candidates;
the timing of our regulatory filings for our product candidates, along with regulatory developments in the United States and other foreign countries;
the size and growth potential of the markets for our product candidates, if approved, and the rate and degree of market acceptance of our product candidates, including reimbursement that may be received from payors;
the benefits of U.S. Food and Drug Administration (“FDA”) and European Commission designations, including, without limitation, Fast Track, Orphan Drug and Breakthrough Therapy;
our commercialization, marketing and manufacturing capabilities and strategy;
our ability to attract and retain qualified employees and key personnel;
our competitive position and the development of and projections relating to our competitors or our industry;
our expectations regarding our ability to obtain and maintain intellectual property protection;
the success of competing therapies that are or may become available;
our estimates and expectations regarding future operations, financial position, revenues, costs, expenses, uses of cash, capital requirements or our need for additional financing;
our ability to continue as a going concern;
our plans to in-license, acquire, develop and commercialize additional product candidates;
the impact of laws and regulations;
our plans to identify additional product candidates with significant commercial potential that are consistent with our commercial objectives;
our ability to raise additional capital;
our strategies, prospects, plans, expectations or objectives; and
3


other risks and uncertainties, including those listed under the section titled “Risk Factors” in this Quarterly Report.


You should refer to the section titled “Risk Factors" in this Quarterly Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.



4


SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS

Our business faces significant risks and uncertainties. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. You should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” in Part I, Item 1A of this Quarterly Report. Some of the more significant risks include the following:

We have incurred significant losses and have not generated revenue from product sales since our inception. We expect to continue to incur losses for the foreseeable future, and we may never achieve or maintain profitability.

Our liquidity position raises substantial doubt about our ability to continue as a going concern and we will require substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate any product development programs or commercialization efforts.

Raising additional capital may cause dilution to our investors, restrict our operations or require us to relinquish rights to our technologies or product candidates. Future debt obligations may expose us to risks that could adversely affect our business, operating results and financial condition and may result in further dilution to our stockholders.

We depend almost entirely on the success of our lead product candidate, mavorixafor, which we are developing for the potential treatment of chronic neutropenic disorders, including WHIM (Warts, Hypogammaglobulinemia, Infections, and Myelokathexis) syndrome and, contingent on a potential strategic partnerships, for the treatment of Waldenström’s. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, mavorixafor or any other product candidate.

The regulatory review and approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, including mavorixafor, our business will be substantially harmed.

We depend on license agreements with Genzyme, Beth Israel Deaconess Medical Center, Georgetown University and Dana-Farber Cancer Institute to permit us to use patents and patent applications. Termination of these rights or the failure to comply with obligations under these agreements could materially harm our business and prevent us from developing or commercializing our product candidates.

The results of clinical trials may not support our product candidate claims.

We may fail to enroll a sufficient number of patients in our clinical trials in a timely manner, which could delay or prevent clinical trials of our product candidates.

If the commercial opportunity for mavorixafor in chronic neutropenic disorders, including WHIM syndrome, is smaller than we anticipate, our potential future revenue from mavorixafor for the treatment of any of the diseases may be adversely affected and our business may suffer.

Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

A breakthrough therapy designation or Fast Track designation by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and neither of these designations increases the likelihood that our product candidates will receive marketing approval.

Product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any, including marketing withdrawal.

If, in the future, we are unable to establish sales and marketing capabilities or to selectively enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.

We face substantial competition that may result in others discovering, developing or commercializing products before or more successfully than we do.

Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for our product candidates outside of the United States, which would limit our market opportunities and could harm our business.

5


Even if we are able to commercialize mavorixafor or any other product candidate that we develop, the product may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

We have no experience manufacturing our product candidates on a large clinical or commercial scale and have no manufacturing facility. We are currently dependent on a single third party manufacturer for the manufacture of mavorixafor, the active pharmaceutical ingredient (“API”) and a single manufacturer of mavorixafor finished drug product capsules. If we experience problems with these third parties, the manufacturing of mavorixafor could be delayed, which could harm our results of operations.

We rely on third-party Contract Research Organizations (“CROs”) to conduct our preclinical studies and clinical trials. If these CROs do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

Disruptions in our supply chain could delay the commercial launch of our product candidates.

Our employees, principal investigators, CROs and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We may depend on such collaborations for the development and commercialization of our product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of our product candidates.

If we are unable to protect our intellectual property rights, our competitive position could be harmed.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our future success depends on our ability to retain executives and to attract, retain and motivate key personnel in a competitive environment for skilled biotechnology personnel.

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

Our term load contains restrictions that limit our flexibility in operating our business.

Our business could be adversely affected by economic downturns, inflation, increases in interest rates, natural disasters, public health crises such as the COVID-19 pandemic, political crises, geopolitical events, such a the war in Ukraine, or other macroeconomic conditions, which have in the past and may in the future negatively impact our business and financial performance.

Our stock price has been and is likely to continue to be volatile and fluctuate substantially.


6


PART I FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS.
X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
March 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$93,406 $121,718 
Research and development incentive receivable658 1,152 
Prepaid expenses and other current assets4,158 5,807 
Total current assets98,222 128,677 
Property and equipment, net 986 1,104 
Goodwill17,351 17,351 
Right-of-use assets6,844 7,229 
Other assets1,002 1,225 
Total assets$124,405 $155,586 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$5,992 $7,777 
Accrued expenses11,762 12,034 
Current portion of lease liability1,175 1,198 
Current portion of long-term debt554 1,315 
Total current liabilities19,483 22,324 
Long-term debt, net of discount and current portion31,827 32,304 
Lease liabilities3,377 3,603 
Warrant liability (Note 4)17,692 23,131 
Other liabilities350 173 
Total liabilities72,729 81,535 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value, 500,000,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 122,207,488 and 121,667,250 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
122 122 
Additional paid-in capital452,431 450,786 
Accumulated other comprehensive loss(119)(119)
Accumulated deficit(400,758)(376,738)
Total stockholders’ equity51,676 74,051 
Total liabilities and stockholders’ equity
$124,405 $155,586 




The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
20232022
Operating expenses:
Research and development$22,063 $14,113 
Selling, general and administrative7,241 7,664 
Gain on sale of non-financial asset (509)
Total operating expenses29,304 21,268 
Loss from operations(29,304)(21,268)
Other income (expense), net:
Interest income835 3 
Interest expense(1,109)(913)
Change in fair value of derivative liability— 176 
Change in fair value of warrant liability5,439 — 
Other income, net123 60 
Total other income (expense), net5,288 (674)
Loss before provision for income taxes(24,016)(21,942)
Provision for income taxes4 23 
Net loss and comprehensive loss(24,020)(21,965)
Deemed dividend on Class B Warrant price reset (2,259)
Net loss attributable to common stockholders$(24,020)$(24,224)
Net loss per share attributable to common stockholders—basic and diluted
$(0.16)$(0.72)
Weighted average shares of common stock outstanding—basic and diluted
145,967 33,737 









The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)


Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 2022121,667,250 $122 $450,786 $(119)$(376,738)$74,051 
Vesting of restricted stock units540,238 — — 
Stock-based compensation expense1,645 1,645 
Net loss(24,020)(24,020)
Balance at March 31, 2023122,207,488 $122 $452,431 $(119)$(400,758)$51,676 



Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’ Equity
SharesAmount
Balance at December 31, 202128,127,657 $28 $347,374 $(119)$(282,871)$64,412 
Issuance of common stock, redeemable common stock and pre-funded warrants for the purchase of common stock, net of issuance costs
2,512,902 3 5,817 5,820 
Exercise of warrants100 — — 
Vesting of restricted stock units, net of shares withheld and retired to satisfy tax obligations168,817 (12)(12)
Stock-based compensation1,459 1,459 
Net loss(21,965)(21,965)
Balance at March 31, 202230,809,476 $31 $354,638 $(119)$(304,836)$49,714 





9


X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net loss$(24,020)$(21,965)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense1,645 1,459 
Depreciation and amortization expense127 133 
Non-cash lease expense385 366 
Accretion of debt discount225 198 
Change in fair value of warrant liability(5,439) 
Other(51)(120)
Changes in operating assets and liabilities:
Prepaid expenses, other current assets and research and development incentive receivable2,084 1,633 
Accounts payable(1,714)(713)
Accrued expenses496 (984)
Lease liabilities(250)(236)
Net cash used in operating activities(26,512)(20,229)
Cash flows from investing activities:
Acquisition of property and equipment(9)(22)
Net cash used in investing activities(9)(22)
Cash flows from financing activities:
Employee taxes paid related to net share settlement of vested restricted stock units (12)
Fees paid to amendment loan and security agreement and issuance costs related to the sale of warrants(381)(114)
Repayments of borrowings under loan and security agreement(1,300)(795)
Proceeds from sale of shares of common stock, and pre-funded warrants, net of issuance costs (1)
(443)5,877 
Net cash (used in) provided by financing activities(2,124)4,956 
Effect of exchange rate changes on cash, cash equivalents and restricted cash50 (69)
Net decrease in cash, cash equivalents and restricted cash(28,595)(15,364)
Cash, cash equivalents and restricted cash at beginning of period123,028 83,108 
Cash, cash equivalents and restricted cash at end of period$94,433 $67,744 
(1) For the three month period ended March 31, 2023, includes payment of issuance costs related to December 2022 public sale of shares of common stock and pre-funded warrants







The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    NATURE OF THE BUSINESS AND BASIS OF PRESENTATION

X4 Pharmaceuticals, Inc. (together with its subsidiaries, the “Company”) is a late-stage clinical biopharmaceutical company focused on the research and development of novel therapeutics for the treatment of rare diseases and those with limited treatment options, with a focus on conditions resulting from dysfunction of the immune system. The Company’s lead clinical candidate is mavorixafor, a small molecule antagonist of the chemokine receptor CXCR4 that is being developed as an oral, once-daily therapy. Due to its ability to increase the mobilization of mature, functional white blood cells from the bone marrow into the bloodstream, the Company believes that mavorixafor has the potential to provide therapeutic benefit across a variety of chronic neutropenic disorders, including WHIM (Warts, Hypogammaglobulinemia, Infections, and Myelokathexis (“WHIM”)) syndrome, a rare, primary immunodeficiency, and certain cancers. Following announcement of positive top-line data from the Company’s global, pivotal, Phase 3 clinical trial in November 2022, the Company is preparing a United States regulatory submission seeking approval of oral, once-daily mavorixafor in the treatment of people aged 12 years and older with WHIM syndrome. The Company is also currently enrolling participants in a Phase 2 clinical trial in people with certain chronic neutropenic disorders following positive results from a Phase 1b clinical trial evaluating mavorixafor in people with idiopathic, cyclic, or congenital neutropenia that were presented in the third quarter of 2022. The Company also conducted a proof-of-concept Phase 1b clinical trial of mavorixafor in combination with ibrutinib in people with Waldenström’s macroglobulinemia (“Waldenström’s”), a rare form of lymphoma. The Company reported positive results from the Waldenström’s Phase 1b trial in the third quarter of 2022 and concluded the trial in December 2022. Any further studies of mavorixafor in Waldenström’s or other oncology indication will be subject to completing a strategic partnership. The Company is headquartered in Boston, Massachusetts and has an additional facility in Vienna, Austria.
Going Concern Assessment—In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) (“ASU 2014-15”), the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. Since inception, the Company has incurred significant operating losses and negative cash flows from operations. As of March 31, 2023, the Company had $93.4 million of cash and cash equivalents, an accumulated deficit of $400.8 million and net cash used in operating activities of $26.5 million. The Company has a covenant under its Second Amended and Restated Loan and Security Agreement with Hercules Capital Inc. (“Hercules”) that requires that the Company maintain a minimum level of cash of $20 million, subject to reduction to $10 million upon the achievement of operational milestones. Based on its current cash flow projections and with no additional funding, the Company believes it will not be able to maintain the minimum cash required to satisfy this covenant beginning in the first quarter of 2024. In such event, the lender could require the repayment of all outstanding debt.

Management has assessed the Company’s ability to continue as a going concern in accordance with the requirements of ASC 205-40 and determined that the Company’s accumulated deficit, history of losses and future expected losses met the ASC 205-40 standard for raising substantial doubt about the Company’s ability to continue as a going concern. The Company does not have adequate financial resources to fund its forecasted operating costs for at least one year after the date that these condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

To finance its operations, the Company will need to raise additional capital, which cannot be assured. Unless and until the Company reach’s profitability in the future, it will require additional capital to fund our operations, which could be raised through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations and strategic alliances. If the Company is unable to obtain funding, it could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which would adversely affect its business prospects, or it may be unable to continue operations.

Principles of Consolidation—The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including X4 Pharmaceuticals (Austria) GmbH, which is incorporated in Vienna, Austria (“X4 Austria”), and X4 Therapeutics, Inc. All significant intercompany accounts and transactions have been eliminated.

11

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unaudited Interim Condensed Consolidated Financial Statements— The condensed consolidated balance sheet at December 31, 2022 that is presented in these interim condensed consolidated financial statements was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated financial statements are unaudited. The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2022 included in the 2022 Annual Report filed with the SEC on March 21, 2023. In the opinion of management, all adjustments, consisting only of normal recurring adjustments as necessary, for the fair statement of the Company’s condensed financial position, condensed results of its operations and cash flows have been made. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023.

Use of Estimates— The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the impairment or lack of impairment of long-lived assets including operating lease right-of-use assets and goodwill, and assumptions underlying the fair value of warrant liabilities. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. As of the date of issuance of these consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s consolidated financial statements.
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies—The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 21, 2023. Since the date of those consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.
Cash and Cash Equivalents— The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consisted of money market funds as of March 31, 2023 and December 31, 2022.
Restricted Cash
(in thousands)As of March 31, 2023As of December 31, 2022
Letter of credit security: Waltham lease$250 $250 
Letter of credit security: Vienna Austria lease206 205 
Letter of credit security: Boston lease571 855 
Total restricted cash$1,027 $1,310 
Restricted cash included in prepaid expenses and other current assets$250 $285 
Restricted cash included in other assets$777 $1,025 
In connection with the Company’s lease agreements for its facilities in Massachusetts and Austria, the Company maintains letters of credit, which are secured by restricted cash, for the benefit of the respective landlord.
12

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the sum of the total of amounts shown in the Company’s condensed consolidated statements of cash flows as of March 31, 2023 and December 31, 2022:
 
(in thousands)March 31, 2023December 31, 2022
Cash and cash equivalents$93,406 $121,718 
Restricted cash, current portion250 285 
Restricted cash, non-current777 1,025 
Total cash, cash equivalents and restricted cash$94,433 $123,028 
Goodwill— Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company has determined that it operates in a single operating segment and has a single reporting unit.
The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform an interim quantitative impairment test, whereby the Company compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of its net assets, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than its carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit. There were no triggering events during the three months ended March 31, 2023 that necessitated an interim impairment test of goodwill.

Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), as amended. ASU 2016-13 requires that financial assets measured at amortized cost, such as trade receivables, be presented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial asset. The new guidance requires enhanced disclosures related to trade receivables and associated credit losses. The Company adopted ASU 2016-13 on January 1, 2023. As the Company did not have accounts receivable on its consolidated balance sheet as of the date of adoption, there was no impact to the adoption of ASU 2016-13.

3.    LICENSE, COLLABORATION AND FUNDING AGREEMENTS
Research and Development Incentive Program
The Company participates in a research and development incentive program provided by the Austrian government whereby the Company is entitled to reimbursement by the Austrian government for a percentage of qualifying research and development expenses and capital expenditures incurred by the Company’s subsidiary in Austria. As of March 31, 2023, the amount due under the program is $0.7 million, which amount is included in research and development incentive receivable in the condensed consolidated balance sheet. During the three months ended March 31, 2023 and 2022, the Company recorded $121.0 thousand and $135.3 thousand, respectively, of income related to the program within the condensed consolidated statements of operations as other income.

License and Collaboration Agreements
In July 2014, the Company entered into a license agreement with Genzyme (the “Genzyme Agreement”) pursuant to which the
Company was granted an exclusive license to certain patents and intellectual property owned or controlled by Genzyme related to the CXCR4 receptor to develop and commercialize products containing licensed compounds (including but not limited to
mavorixafor) for all therapeutic, prophylactic and diagnostic uses, with the exception of autologous and allogenic human stem cell therapy. Under the terms of the Genzyme Agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize licensed products for use in the field in the United States and at least one other major market country.
13

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Company is obligated to pay Genzyme milestone payments in the aggregate amount of up to $25.0 million, contingent upon the achievement by the Company of certain clinical-stage regulatory and sales milestones with respect to licensed products. During three months ended March 31, 2023, the Company accrued $5.0 million related to a development milestone under the Genzyme Agreement as the Company believes that it is probable under ASC Topic 450, Contingencies, that the milestone will be achieved. The $5.0 million accrued payment has been recorded within research and development expense on the condensed consolidated statements of operations. An additional $7.0 million of regulatory milestone payments are not yet probable but are reasonably possible of becoming payable with the next twelve to eighteen month period under the Genzyme Agreement. The Company is also obligated to pay Genzyme tiered royalties based on net sales of licensed products that the Company commercializes under the agreement.

Gain on Sale of Non-Financial Asset
During the three months ended March 31, 2022, a third party, who had previously acquired rights to certain intellectual property from the Company, terminated the arrangement and transferred these rights back to the Company. Also during the three months ended March 31, 2022, the Company transferred these rights to another third party in return for $0.5 million. The Company has no continuing involvement in any ongoing research and development activities associated with the intellectual property. The Company concluded that these third parties are "non-customers" as the underlying intellectual property transferred to and from these third parties supports potential drug candidates that are not aligned with the Company's strategic focus and, therefore, are not an output of the Company's ordinary activities. Accordingly, the Company accounted for the sale of the intellectual property as the sale of a non-financial asset under ASC Topic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets ("ASC 610-20"), and included the gain in gain on sale of non-financial asset for the three months ended March 31, 2022.

There were no material modifications of the Company’s license or collaboration agreements during the three months ended March 31, 2023.


4.    FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:
Fair Value Measurements as of March 31, 2023 Using:
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents—money market funds$70,959 $14 $ $70,973 
$70,959 $14 $ $70,973 
Liabilities: 
Embedded derivative liability$ $ $10 $10 
Class C warrant liability— — 17,692 17,692 
$ $ $17,702 $17,702 
Fair Value Measurements as of December 31, 2022 Using:
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents—money market funds$70,170 $2,858 $ $73,028 
$70,170 $2,858 $ $73,028 
Liabilities:
Embedded derivative liability$ $ $10 $10 
Class C warrant liability— — 23,131 23,131 
$ $ $23,141 $23,141 

14

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company’s cash equivalents consisted of money market funds invested primarily in short term commercial paper, asset- backed securities, certificate of deposits and repurchase agreements. The money market funds were valued based on reported market pricing for the identical assets, which represents a Level 1 measurement, or by using inputs observable in active markets for similar securities, which represents a Level 2 measurement.

The following table provides a roll-forward of the aggregate fair values financial instruments for which fair values are determined using Level 3 inputs:
(in thousands)Embedded Derivative LiabilityClass C Warrant LiabilityTotal
Balance as of December 31, 2022$10 $23,131 $23,141 
Change in fair value (5,439)(5,439)
Balance as of March 31, 2023$10 $17,692 $17,702 

Embedded Derivative Liability The fair value of the embedded derivative liability recognized in connection with the Company’s loan agreement with Hercules (see Note 7), which is associated with additional fees due to Hercules upon events of default, was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of this embedded derivative liability, which is reported within other non-current liabilities on the condensed consolidated balance sheets, is estimated by the Company at each reporting date based, in part, on the results of third party valuations, which are prepared based on a discounted cash flow model that considers the timing and probability of occurrence of a redemption upon an event of default, the potential amount of prepayment fees or contingent interest upon an event of default and the Company’s risk-adjusted discount rate of 14%.

Class C Warrant Liability In December 2022, the Company issued Class C Warrants for the purchase of shares of its common stock in a public offering of common stock. The Class C Warrants are accounted for as a liability on the condensed consolidated balance sheet and are adjusted to fair value at period end through “other income (expense)” in the condensed, consolidated statements of operations and comprehensive loss.

The Company calculated the fair value of the Class C Warrants using the Black-Scholes option pricing model, which represents a Level 3 measurement within the fair value hierarchy, with the following inputs:

March 31, 2023December 31, 2022
Common stock price$0.87$0.99
Risk-free interest rate3.9 %4.0 %
Expected term (in years)4.7 years4.9 years
Expected volatility91.9 %101.7 %
Expected dividend yield % %














15

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:
(in thousands)March 31, 2023December 31, 2022
Leasehold improvements$228 $228 
Furniture and fixtures1,274 1,268 
Computer equipment173 173 
Software24 24 
Lab equipment642 639 
2,341 2,332 
Less: Accumulated depreciation and amortization(1,355)(1,228)
$986 $1,104 
Depreciation and amortization expense related to property and equipment was $127 thousand and $133 thousand for the three months ended March 31, 2023 and 2022, respectively.
6.    ACCRUED EXPENSES

Accrued expenses consisted of the following:
(in thousands)March 31,
2023
December 31,
2022
Accrued employee compensation and benefits$2,742 6,592 
Accrued external research and development expenses7,721 3,906 
Accrued professional fees924 571 
Accrued deferred financing fees 591 
Other375 374 
$11,762 $12,034 
7.    LONG-TERM DEBT
Long-term debt consisted of the following:
(in thousands)March 31,
2023
December 31,
2022
Principal amount of long-term debt$32,500 $32,500 
Debt discount, net of accretion(767)(196)
Cumulative accretion of end of term payments648 1,315 
Long-term debt$32,381 $33,619 
Less: current portion$(554)$(1,315)
Long-term debt, net of current portion$31,827 $32,304 
Hercules Loan Agreement, As Amended
In October 2018, the Company entered into a Loan and Security Agreement (the “Hercules Loan Agreement”), as amended most recently in January 2023, with Hercules, under which the Company has borrowed an aggregate of $32.5 million of term loans to date representing the maximum borrowings. Borrowings under the Hercules Loan Agreement accrues interest at a variable rate equal to the greater of (i) 10.15% or (ii)  The Wall Street Journal prime rate plus 3.15%. In an event of default and until such event is no longer continuing, the interest rate applicable to borrowings would be increased by 4.0%.

Borrowings under the Hercules Loan Agreement are repayable in monthly interest-only payments through September 2024, and in equal monthly payments of principal and accrued interest from October 1, 2024 until the maturity date of the loan on April 1, 2026; provided, however, if certain conditions are met and the Company achieves certain operational and financial milestones,
16

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the maturity date will be extended to July 1, 2027. The Company may prepay all, but not less than all, of the outstanding borrowings, subject to a prepayment premium of 3.0% of the principal amount outstanding as of the date of repayment. In addition, the Hercules Loan Agreement provides for payments of $0.8 million and $1.3 million payable on July 1, 2023 and April 1, 2026, respectively, which payments are accelerated upon the prepayment of the borrowings upon the Company’s election or upon default of the loan. Borrowings under the Hercules Loan Agreement are collateralized by substantially all of the Company’s personal property and other assets except for its intellectual property (but including rights to payment and proceeds from the sale, licensing or disposition of the intellectual property).

Under the Hercules Loan Agreement, the Company has agreed to affirmative and negative covenants. Pursuant to the Hercules Loan Agreement, the Company is required to maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than $20.0 million. Upon the FDA’s approval of the sale and marketing of mavorixafor for the treatment to patients with WHIM syndrome with a label claim that is generally consistent with that sought in the Company’s New Drug Application filing, the required level shall be reduced to $10.0 million. A breach of any of the covenants under the Hercules Loan Agreement could result in a default under the loan. Upon the occurrence of an event of default under the loan facility with Hercules, the lender could elect to declare all amounts outstanding, if any, to be immediately due and payable and terminate all commitments to extend further credit. If there are any amounts outstanding that the Company is unable to repay, Hercules could proceed against the collateral to secure such indebtedness.

The Hercules Loan Agreement also restricts the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.
The Company recognized interest expense under the Hercules Loan Agreement as follows:
(in thousands)Three Months Ended March 31,
20232022
Total interest expense$884 $909 
Non-cash interest expense$225 $198 
The annual effective interest rate of the Hercules Loan Agreement as of March 31, 2023 is 13.8%. There were no principal payments due or paid under the Hercules Loan Agreement during the three months ended March 31, 2023. An end-of-term payment of $1.3 million was paid during the three months ended March 31, 2023 in conjunction with the second amendment and restatement of the Hercules Loan Agreement, which was entered into on January 6, 2023. The Company concluded that the amendment and restatement represented a modification to the debt. Accordingly, fees paid to third parties directly related to the amended and restated debt were expensed as incurred and fees paid to Hercules in conjunction with the amendment and restatement were deferred and are being amortized to interest expense over the life of the debt arrangement using the effective interest method.
As of March 31, 2023, future principal and accrued end-of-term payments due under the Hercules Loan Agreement were as follows (in thousands):
Year Ending December 31,Total
2023$554 
20244,750 
202520,386 
20267,458 
Long-term debt$33,148 

8.    LEASES
17

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company has lease agreements for its facilities in Boston, Massachusetts, which is the Company’s principal executive office; Vienna, Austria, which is the Company’s research and development center; and Waltham, Massachusetts, which the Company has sublet to a third party. There are no restrictions or financial covenants associated with any of the lease agreements.
Vienna Austria Leases— The Company has an operating lease for approximately 1,200 square meters of laboratory and office space in Vienna, Austria (“Vienna Lease”), which commenced in February 2021 for a term of 7 years. The annual base rent for the Vienna Lease is approximately $285 thousand.
Boston Lease— The Company leases approximately 28,000 square feet of office space in Boston, Massachusetts (“Boston Lease”), which serves as the Company’s headquarters. Base rental payments are approximately $1.1 million annually, plus certain operating expenses. The term of the Boston Lease will continue until November 2026, unless earlier terminated. The Company has the right to sublease the premises, subject to landlord consent and also has the right to renew the Boston Lease for an additional five years at the then prevailing effective market rental rate. The Company is required to maintain a security deposit in the form of a letter of credit for $0.6 million for the benefit of the landlord.
Waltham Lease— The Company leases approximately 6,000 square feet of office space in Waltham, Massachusetts (“Waltham Lease”). The Waltham Lease, as amended, commenced on January 1, 2019, and expires on December 31, 2023. The base rent is approximately $0.3 million annually. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, which costs are not included in the determination of the leases’ right-of-use assets or lease liabilities. The Company is subleasing the space to a third party for the duration of the lease. The right-of-use asset is being amortized to rent expense over the five-year term of the lease.

As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.
The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows:
(dollars in thousands)Three Months Ended March 31,
Lease Cost20232022
Fixed operating lease cost$522$530 
Total lease expense$522$530 
Other information
Operating cash flows from operating leases$346 $342 
Sublease income$49 $49 
Weighted-average remaining lease term—operating leases3.8 years
Weighted-average discount rate—operating leases11.3 %


18

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Maturities of lease liabilities due under lease agreements that have commenced as of March 31, 2023 are as follows (in thousands)
Maturity of lease liabilitiesOperating
Leases
2023 (remainder of the year)$1,210 
20241,378 
20251,406 
20261,337 
2027285 
Thereafter48 
Total lease payments5,664 
Less: interest(1,112)
Total operating lease liabilities as of March 31, 2023$4,552 

9.    COMMITMENTS AND CONTINGENCIES
The Company has agreements with contract manufacturing organizations (“CMOs”) for the production of mavorixafor for use in clinical trials. The Company’s agreement with the CMO who produces batches of drug substance for use in the Company’s clinical drug supply contains cancellation provisions that would require the Company to pay up to the full contract value upon cancellation. As of March 31, 2023, the Company has approximately $0.8 million of such commitments in place subject to cancellation provisions.
Indemnification Agreements— In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnification obligations. The Company is not currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of March 31, 2023 or December 31, 2022.
Legal Proceedings— The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to any legal proceedings.

10.    COMMON STOCK AND COMMON STOCK WARRANTS
As of March 31, 2023, the Company’s Restated Certificate of Incorporation authorized the Company to issue 500 million shares of common stock, par value $0.001 per share. The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of any preferred stock that may be issued. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any. No cash dividends have been declared or paid to date.
In connection with previous public and private sales of shares of its common stock, the Company has issued warrants and pre-funded warrants, which are exercisable for the purchase shares of the Company’s common stock. All outstanding warrants and pre-funded warrants are currently exercisable and do not have price reset provisions. Upon the closing of these public and
19

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
private offerings, the Company received approximately 99% of the exercise price for the pre-funded warrants, for which the remaining exercise price is equal to or less than $0.01 per share.

As of March 31, 2023, the Company’s outstanding warrants and pre-funded warrants to purchase shares of common stock consisted of the following:
Issuance DateNumber of
Shares of
Common
Stock Issuable
Exercise
Price
Expiration Date
October 25, 20165,155 $19.78 October 24, 2026
December 28, 2017115,916 $19.78 December 28, 2027
September 12, 201820,220 $19.78 September 12, 2028
October 19, 201820,016 $19.78 October 19, 2028
March 13, 20195,000 $19.78 March 12, 2029
April 16, 20193,866,154 $13.20 April 15, 2024
November 29, 20191,250,000 $12.00 (a)n/a
March 23, 202150,000 $8.70 (b)n/a
November 9, 20212,008,032 $4.98 (c)n/a
March 3, 2022766,666 $1.80 (d)n/a
July 6, 202213,276,279 $1.095 (e)n/a
July 6, 202250,925,365 $1.095 July 6, 2027
December 9, 202232,762,947 $1.50 December 9, 2027
December 9, 20226,800,000 $1.10 (f)n/a
111,871,750 
(a) In November 2019, the Company received $11.999 per pre-funded warrant, or $21.0 million in aggregate proceeds. Each pre-funded
warrant may be exercised for an additional $0.001 per pre-funded warrant. (b) In March 2021, the Company received $8.69 per pre-funded warrant, or $435 thousand in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant. (c) In November 2021, the Company received $4.97 per pre-funded warrant, or $10.0 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant. (d) In March 2022, the Company received $1.79 per pre-funded warrant, or $1.4 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant. (e) In July 2022, the Company received $1.094 per pre-funded warrant, or $14.5 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.001 per pre-funded warrant. (f) In December 2022, the Company received $1.099 per pre-funded warrant, or $7.5 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.001 per pre-funded warrant.

11.    STOCK-BASED COMPENSATION
Summary of Plans— The Company has the following equity incentive plans:
The X4 Pharmaceuticals Inc. 2015 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2015 Plan”);
The X4 Pharmaceuticals Inc. 2017 Equity Incentive Plan (the “2017 Plan”); and
The X4 Pharmaceuticals Inc. 2019 Inducement Equity Incentive Plan (the “2019 Plan”)
The Company also has the following employee stock purchase plan:
The X4 Pharmaceutical Inc. 2017 Employee Stock Purchase Plan (the “2017 ESPP”)

These plans are administered by the Board of Directors or by a committee of the Board of Directors. The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years. Incentive stock options granted to employees and restricted stock awards granted to employees, officers, members of the board of directors, advisors, and consultants of the Company typically vest over four years. Non-statutory options granted to employees, officers, members of the board of directors, advisors, and consultants of the Company typically vest over three or four years. Shares that are expired, terminated, surrendered or canceled under the Plans without having been fully exercised will be available for future awards. In
20

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.

As of March 31, 2023, there are an aggregate of approximately 1.0 million shares of common stock available for issuance under the Company’s equity incentive plans. Approximately 150,000 shares of common stock remain available for issuance under the 2017 ESPP.

Stock Option Valuation— The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees, directors and non-employees.
Three Months Ended March 31,
20232022
Risk-free interest rate3.6 %2.0 %
Expected term (in years)6.06.1
Expected volatility90.8 %94.5 %
Expected dividend yield0 %0 %
Stock Options
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2023:
Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term (Years)
Aggregate
Intrinsic
Value (in thousands)
Outstanding as of December 31, 20222,021,480 $6.99 6.5$1 
Granted834,900 0.90 
Forfeited and Expired(26,080)8.68 
Outstanding as of March 31, 20232,830,300 $5.18 8.0$ 
Exercisable as of March 31, 20231,163,500 $9.72 6.1$ 
Vested and expected to vest as of March 31, 20232,210,011 $6.20 7.6$ 
 
There were no stock options exercised in the three months ended March 31, 2023 and 2022. The weighted average grant-date fair value per share of stock options granted during the three months ended March 31, 2023 and 2022 was $0.69 and $1.42, respectively.

Restricted Stock Units— The following table summarizes the Company's restricted stock unit activity for the three months ended March 31, 2023:
Number of
Shares
Unvested as of December 31, 20221,680,563 
Granted4,694,691 
Vested(540,238)
Unvested as of March 31, 20235,835,016 
During the three months ended March 31, 2023, the Company granted performance-based restricted stock units (“PRSUs”) to its employees. The PRSUs vest 50% based on the Company’s achievement of each of two operational milestones conditioned on the grantee’s continued employment with the Company. As of March 31, 2023, neither of the two performance criteria had been met. The Company believes that the achievement of these operational milestones is probable and, accordingly, stock-based compensation expense has been recognized for the awards using the accelerated attribution model based on the fair value of the awards as of the date of grant and management’s best estimate of the date each operational milestone will be achieved. The
21

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Company will update its estimates related to the probability and timing of achievement of the operational milestones each period until the award either vests or is forfeited.
Stock-Based Compensation— As of March 31, 2023, total unrecognized compensation expense related to unvested stock options and restricted stock units was $6.2 million, which is expected to be recognized over a weighted average period of 1.3 years.
Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:
Three Months Ended March 31,
(in thousands)20232022
Research and development expense$831 $704 
Selling, general and administrative expense814 755 
Total stock-based compensation$1,645 $1,459 

Stock Appreciation Rights— On November 7, 2022 (the “Grant Date”), the compensation committee of the Board of Directors
approved special retention and recognition grants of stock appreciation rights (“SARs”) pursuant to the 2017 Plan to the Company’s President and Chief Executive Officer, the Company’s Chief Financial Officer and Treasurer, and certain other executive officers of the Company. The SARs have a measurement price per SAR equal to $1.80, the closing price per share of the Company’s common stock on the Grant Date, and each grant of SARs will have a maximum term of ten years from the Grant Date. Unless otherwise determined by the Board of Directors, the SARs will be settled in cash upon exercise. The settlement value will be based on the difference between the closing price of the Company’s common stock on the date of settlement less $1.80 multiplied by the number of SARs exercised. The SARs will vest and become exercisable in equal annual installments on the first, second, and third anniversaries of the Grant Date, subject to the recipient remaining an employee of the Company through and including each applicable vesting date.

The calculation of the fair value of the outstanding SARs as of March 31, 2023 includes the closing price of the Company’s common stock of $0.87 and the following assumptions on a weighted average basis:

March 31, 2023
Risk free rate3.6 %
Expected term (years)5.61
Expected volatility90.8 %
Expected dividend yield %
Expected forfeiture rate22 %

The SARs are accounted for as liability awards as settlement will be in the form of cash unless the Board of Directors authorizes settlement in shares of the Company’s common stock and such shares are available to be issued from the 2017 Plan. The Company currently intends to settle the SARs in cash if and when exercised. Compensation expense is recorded based the fair value of the SARs, as determined using the Black-Scholes option valuation model, using an accelerated attribution method as the SARs vest. The Company remeasures the fair value of the outstanding SARs each period until settlement and adjusts life-to-date compensation expense to the period end SARs fair value. For the three months ended March 31, 2023, the Company recognized $403 thousand of compensation expense related to the SARs.

12.    INCOME TAXES
The Company did not record a U.S. federal or state income tax benefit for its losses for the three months ended March 31, 2023 and 2022, due to the conclusion that a full valuation allowance is required against the Company’s U.S. federal and state deferred tax assets. For the three months ended March 31, 2023 and 2022, the Company recorded an immaterial income tax provision related to its Austrian subsidiary.

22

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13.    NET LOSS PER SHARE
Basic and diluted net loss per share attributable to common stockholders was calculated as follow:
Three Months Ended March 31,
(in thousands, except per share data)20232022
Numerator:
Net loss$(24,020)$(21,965)
Deemed dividend as a result of Class B warrant price reset
 (2,259)
Net loss attributable to common stockholders
$(24,020)$(24,224)
Denominator:
Weighted average shares of common stock outstanding—basic and diluted
145,967 33,737 
Net loss per share attributable to common stockholders— basic and diluted
$(0.16)$(0.72)

Basic and diluted weighted average shares of common stock outstanding for the three months ended March 31, 2023 and March 31, 2022 include the weighted average effect of outstanding pre-funded warrants for the purchase of shares of common stock for which the remaining unfunded exercise price is $0.01 or less per share. During the three months ended March 31, 2022, in accordance with the Company’s Class B Warrant agreement, the exercise price of each outstanding Class B Warrant was adjusted to the price of shares of the Company’s common stock sold in public or private offerings to the extent such price is lower than the previous Class B warrant price. These price adjustments were accounted for as a deemed dividend that adjusts net loss available to common shareholders for purposes of basic earnings per share. The deemed dividend was calculated using the Black-Scholes pricing model, taking into account historical volatility of the Company’s common stock and the estimated remaining life of the outstanding Class B Warrants. The Class B Warrants expired in December 2022.
The Company’s potentially dilutive securities include outstanding stock options, unvested restricted stock units and warrants to purchase shares of common stock for the three months ended March 31, 2023 and 2022. All potentially dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share, and thus they are considered “anti-dilutive.” Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended March 31,
20232022
Options to purchase shares of common stock2,830,300 2,049,158 
Unvested restricted stock units5,835,016 1,940,788 
Warrants to purchase shares of common stock (excluding prefunded warrants, which are included in basic shares outstanding)
87,720,773 9,449,028 
96,386,089 13,438,974 




23


Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (“SEC”), on March 21, 2023, the (“Annual Report”). This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are a late clinical-stage biopharmaceutical company discovering and developing novel therapeutics for the treatment of rare diseases and those with limited treatment options, with a focus on conditions resulting from dysfunction of the immune system.

Our lead clinical candidate is mavorixafor, a small molecule antagonist of chemokine receptor CXCR4 that is being developed as an oral, once-daily therapy. Due to its ability to increase the mobilization of mature, functional white blood cells from the bone marrow into the bloodstream, we believe that mavorixafor has the potential to provide therapeutic benefit across a variety of chronic neutropenic disorders, including WHIM (Warts, Hypogammaglobulinemia, Infections, and Myelokathexis) syndrome, a rare, primary immunodeficiency.

In November 2022, we announced positive top-line data from our global, pivotal, Phase 3 clinical trial (4WHIM) evaluating the safety and efficacy of mavorixafor in people with WHIM syndrome. While data review and analysis of the secondary and exploratory endpoints of the 4WHIM trial are ongoing, we plan to present additional results at a company event and at several medical meetings during the second quarter of 2023. We are currently preparing a U.S. New Drug Application (“NDA”) seeking approval of oral, once-daily mavorixafor in the treatment of people aged 12 years and older with WHIM syndrome. This NDA submission is expected early in the second half of 2023.

We are also currently advancing mavorixafor in a Phase 2 clinical trial in people with certain chronic neutropenic disorders following positive results from a Phase 1b clinical trial of mavorixafor in people with idiopathic, cyclic, or congenital neutropenia. Participants are now being enrolled in this Phase 2 clinical trial and we expect to provide an update on clinical results in the second or third quarter of 2023. We also expect to provide clarity on the scope and timing of our planned Phase 3 chronic neutropenia clinical program in the second or third quarter of 2023.

We believe that successfully developing mavorixafor and providing new therapeutic options to individuals diagnosed with certain chronic neutropenic disorders has the potential to revolutionize the treatment landscape, which is principally served by injectable therapies that are frequently associated with treatment-limiting adverse events.


Our Pipeline
https://cdn.kscope.io/77cccd6ecaec50de007a0fc955569c8b-Pipeline_03-06-2023.jpg

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To date, we have not generated revenue from product sales and do not expect to generate significant revenue from the sale of our products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

Macroeconomic Considerations
Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including the COVID-19 pandemic, rising inflation, the U.S. Federal Reserve raising interest rates and the Russia-Ukraine war, have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.”

Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022
The following table summarizes the results of our operations for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,
20232022Change
(in thousands)
Operating expenses:
Research and development$22,063 $14,113 $7,950 
Selling, general and administrative7,241 7,664 (423)
Gain of sale of non-financial asset— (509)509 
Total operating expenses29,304 21,268 8,036 
Loss from operations(29,304)(21,268)(8,036)
Total other income (expense), net5,288 (674)5,962 
Loss before provision for income taxes(24,016)(21,942)(2,074)
Provision for income taxes23 (19)
Net loss$(24,020)$(21,965)$(2,055)
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates, including employee salaries and related expenses, preclinical and clinical development expenses for our product candidates; internal and third-party costs of manufacturing our drug products for use in our preclinical studies and clinical trials; facility, depreciation and other expenses; costs related to compliance with regulatory requirements; and payments made under third-party licensing agreements. We expense research and development costs as incurred.
Three Months Ended March 31,
20232022Change
(in thousands
Direct research and development expenses by product candidate:
Mavorixafor $15,272 $6,149 $9,123 
X4P-00271 888 (817)
X4P-00314 90 (76)
    Unallocated expense
6,706 6,986 (280)
Total research and development expenses$22,063 $14,113 $7,950 

Research and development expenses increased $8.0 million in the three months ended March 31, 2023 as compared to the same period in the prior year. Research and development expenses were higher in the current period due to higher accrued in-license fees. During the three month period ended March 31, 2023, we accrued $5.0 million related to a development milestone under
25


our Genzyme agreement as we believe that it is probable that the milestone will be achieved. Research and development expenses were also higher in the current period due to higher thrid party costs associated with our pivotal Phase 3 clinical trial of mavorixafor for the treatment of people aged 12 years and older with WHIM syndrome.
Selling, General and Administrative Expenses   
Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in sale and marketing, executive, finance and administrative functions. Selling, general and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, and audit services. Selling, general and administrative expenses were generally consistent as compared to the prior year. We expect selling, general and administrative expenses will grow in the future as we continue to build out our selling, general and administrative functions.

Other Income (Expense), Net   


Three Months Ended March 31,
20232022Change
(in thousands)
Interest income$835 $$832 
Interest expense(1,109)(913)(196)
Change in fair value of derivative liability— 176 (176)
Change in fair value of Class C warrant liability5,439 — 5,439 
Other income (expense)123 60 63 
Total other income (expense), net$5,288 $(674)$5,962 

Other income (expense), net, for the three months ended March 31, 2023 increased as compared to the same period in the prior year primarily due to a reduction in the fair value of our Class C warrants, which were issued in the fourth quarter of 2022 and are accounted for as a liability as fair value. We value these Class C warrants using the Black-Scholes option pricing model. A 10% increase (decrease) in the price of our common stock, which is a key input to the valuation model, would result in approximately $2.3 million of expense (income), respectively. Other income (expense), net, also increased in the current period as compared to the same period in the prior year due to an increase in interest income on our money market investments due to a general increase in interest rates and an increase in our invested funds.
Provision for Income Taxes
We did not record a U.S. federal or state income tax benefit for our losses for the three months ended March 31, 2023 and 2022, respectively, due to our conclusion that a full valuation allowance is required against our U.S. federal and state deferred tax assets. For the three months ended March 31, 2023 and 2022, we recorded an immaterial amount of income tax expense related to our Austrian subsidiary.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have funded our operations primarily with proceeds from sales of common stock, warrants and prefunded
warrants for the purchase of our preferred stock and our common stock, sales of preferred stock, proceeds from the issuance of
convertible debt and borrowings under loan and security agreements.

ATM Sales Agreement We have entered into a Controlled Equity OfferingSM Sales Agreement (“ATM Sales Agreement”), with B. Riley Securities, Inc., Cantor Fitzgerald & Co., and Stifel, Nicolaus & Company, Incorporated (collectively the “Sales Agents”), pursuant to which we may offer and sell, at our sole discretion through one or more of the Sales Agents, shares of our common stock having an aggregate offering price of up to $50 million. To date, we have sold approximately $14.3 million of our common stock, net of offering costs, under the ATM Sales Agreement.

26


LPC Agreement In January 2022, we entered into an agreement, (the “LPC Agreement”) with Lincoln Park Capital Fund LLC (“Lincoln Park”), pursuant to which we have the right to sell to Lincoln Park shares of our common stock, having an aggregate value of up to $50.0 million, subject to certain limitations and conditions, at our request during a 36-month period. The shares of common stock that we may sell under the LPC Agreement are capped at 5.6 million, which amount may be adjusted under certain conditions as defined in the LPC Agreement. In January 2022, we raised $3.0 million from the sale of shares of our common stock through the LPC Agreement.

Public and Private Equity Offerings Over the past several years we have funded our operations primarily from sales of common stock, warrants and prefunded warrants through both public offerings and private placements. For example, most recently in December 2022, we sold shares of common stock and, in lieu of common stock, warrant and pre-funded warrants to purchase shares of common stock in a public offering for gross proceeds of $65.1 million, before offering expenses.

Hercules Loan Agreement In January 2023, we entered into a Second Amended and Restated Loan and Security Agreement (the “Hercules Loan Agreement”) with Hercules Capital, Inc., as agent and lender, and Hercules Capital Funding IV LLC and Hercules Capital Funding Trust 2022-1, as lenders (collectively, “Hercules”), which agreement amended and restated the Amended and Restated Loan and Security Agreement dated as of June 27, 2019, as subsequently amended from time to time (the “Previous Loan Agreement”). The Hercules Loan Agreement provides for a term loan of $32.5 million and an interest-only payment period through October 1, 2024, provided however, if certain conditions are met, then the interest-only payment period will be extended to January 1, 2026. To date, we have borrowed the full $32.5 million under the Hercules Loan Agreement, and such amount remains outstanding as of March 31, 2023.

Going Concern— Since our inception, we have incurred significant operating losses and negative cash flows from our operations. We have not yet commercialized any products and we do not expect to generate revenue from sales of any products for several years, if at all. As of March 31, 2023, our cash and cash equivalents were $93.4 million, and our restricted cash balance was $1.0 million. We have a covenant under our Hercules Loan Agreement that currently requires that we maintain a minimum level of cash of $20.0 million, subject to reduction to $10 million upon the achievement of operational milestones. Based on our current financial projections and with no additional funding, we believe we will not be able to maintain the minimum cash required to satisfy this covenant beginning in the first quarter of 2024. In such event, the lenders could require the repayment of all outstanding debt.

Management has concluded that substantial doubt exists about our ability to continue as a going concern for the one-year period following the issuance of our condensed consolidated financial statements for the period ended March 31, 2023. To finance our operations, we will need to raise additional capital, which cannot be assured. Unless and until we reach profitability in the future, we will require additional capital to fund our operations, which could be raised through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations and strategic alliances. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations.

Cash Flows
The following table summarizes our cash flow activities for each of the periods presented:
Three Months Ended March 31,
20232022
(in thousands)
Net loss$(24,020)$(21,965)
Adjustments to reconcile net loss to net cash used in operating activities(3,108)2,036 
Changes in operating assets and liabilities616 (300)
Net cash used in operating activities(26,512)(20,229)
Net cash used in investing activities(9)(22)
Net cash (used in) provided by financing activities(2,124)4,956 
Effect of exchange rate changes on cash, cash equivalents and restricted cash50 (69)
Net decrease in cash, cash equivalents and restricted cash(28,595)(15,364)
Cash, cash equivalents and restricted cash, beginning of period$123,028 $83,108 
Cash, cash equivalents and restricted cash, end of period$94,433 $67,744 

27


Operating Activities During the three months ended March 31, 2023, net cash used in operating activities was $26.5 million, primarily resulting from our net loss of $24.0 million, adjusted for noncash expenses of $3.1 million and changes in our operating assets and liabilities of $0.6 million. Non-cash expenses primarily includes the change in fair value of our Class C warrant liability, stock-based compensation expense, non-cash lease expense and non-cash interest expense. Net cash used in operating activities for the three months ended March 31, 2022 was $20.2 million, primarily resulting from our net losses of $22.0 million, adjusted for noncash expenses of $2.0 million and changes in our operating assets and liabilities of $0.3 million. Net cash used in operating activities increased during the three months ended March 31, 2023 as compared to the same period in the prior year primarily due to an increase in our research and development expenses.
Investing Activities During the three months ended March 31, 2023 and 2022, cash used in investing activities were in each period less than $0.1 million.
Financing Activities During the three months ended March 31, 2023, net cash used in financing activities was $2.1 million, consisting primarily of fees paid to Hercules for the amendment and restatement of our Hercules Loan Agreement, including the settlement of a $1.3 million end-of-term payment. During the three months ended March 31, 2022, net cash provided by financing activities was $5.0 million, consisting primarily of $5.9 million of proceeds from a private placement equity offering that closed during the period and the sale of shares of our common stock to Lincoln Park, partially offset by $0.8 million of end-of-term payments made pursuant to our Hercules Loan Agreement.
Funding Requirements
We believe that our cash and cash equivalents will allow us to fund operations into the second quarter of 2024. However, as noted above, based on our current financial projections we believe we would be in violation of a minimum cash covenant of the Hercules Loan Agreement with Hercules in the first quarter of 2024. In order to fund operations and satisfy the minimum cash covenant in the Hercules Loan Agreement, we will be required to raise additional capital, which may be through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations and strategic alliances. During 2023 and beyond, assuming no changes to our current operational expectations, we expect our expenses to continue to increase in connection with our ongoing activities, particularly as we advance the current and anticipated clinical trials of our product candidates in development. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our funding requirements. Our short term and long term funding requirements will depend on and could increase significantly as a result of many factors, including:
the scope, number, initiation, progress, timing, costs, design, duration, any potential delays, and results of clinical trials and nonclinical studies for our current or future product candidates, particularly our Phase 2 clinical trial of mavorixafor for the treatment of patients with chronic neutropenic disorders;
the outcome, timing and cost of regulatory reviews, approvals or other actions to meet regulatory requirements established by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies for our product candidates than those that we currently expect;
our ability to obtain marketing approval for our product candidates;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights covering our product candidates, including any such patent claims and intellectual property rights that we have licensed from Genzyme pursuant to the terms of our license agreement with Genzyme;
our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;

Hercules Loan Agreement
Please see Note 7 to the notes to our condensed consolidated financial statements for a full description of our Hercules Loan Agreement.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical
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experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

During the three months ended March 31, 2023, there were no material changes to our critical accounting policies as reported for the year ended December 31, 2022 as part of our Annual Report. In addition, see Note 2 of these condensed consolidated financial statements under the heading “Recently Adopted Accounting Pronouncements” for new accounting pronouncements or changes to the accounting pronouncements during the three months ended March 31, 2023.
Smaller Reporting Company Status
We are a smaller reporting company (“SRC”) as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K. We may take advantage of certain of the scaled disclosures available to smaller reporting companies for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As an SRC, we are not required to provide the information requested by this Item.
Item 4    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2023, and have concluded that, based on such evaluation, our disclosure controls and procedures were effective as of March 31, 2023 at the reasonable assurance level. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II: OTHER INFORMATION
Item 1.    LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceedings against us that we believe could have a material adverse effect on our business, operating results or financial condition.
Item 1A.    RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could decline and you may lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur.

Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant losses and have not generated revenue from product sales since our inception. We expect to continue to incur losses for the foreseeable future and we may never achieve or maintain profitability.
We are a late clinical-stage biopharmaceutical company. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval or become commercially viable. Since inception, we have incurred significant operating losses. Our net losses were $93.9 million, $88.7 million and $62.1 million for the years ended December 31, 2022, 2021 and 2020 respectively, and were $24.0 million for the quarter ended March 31, 2023. As of March 31, 2023, we had an accumulated deficit of $400.8 million. We have funded our operations to date primarily with proceeds from sales of common stock, warrants and prefunded warrants for the purchase of our preferred stock and our common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we may never generate product revenue or achieve profitability.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years as we conduct additional clinical trials for our product candidates; continue to discover and develop additional product candidates; acquire or in-license other product candidates and technologies; maintain, expand and protect our intellectual property portfolio; hire additional clinical, scientific and commercial personnel; establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval; seek regulatory approvals for any product candidates that successfully complete clinical trials; establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval; and add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues.

Our ability to generate profits from operations and thereafter to remain profitable depends heavily on:
the scope, number, progress, duration, endpoints, cost, results and timing of clinical trials and nonclinical studies of our current or potential future product candidates, including in particular the scope, progress, duration, endpoints, cost, results and timing for completion of our Phase 2 clinical trial of mavorixafor for the treatment of chronic neutropenic disorders;
our ability to raise sufficient funds to support the development and potential commercialization of our product candidates;
the outcomes and timing of regulatory reviews, approvals or other actions;
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our ability to obtain marketing approval for our product candidates;
our ability to establish and maintain licensing, collaboration or similar arrangements on favorable terms and whether and to what extent we retain development or commercialization responsibilities under any new licensing, collaboration or similar arrangement;
the success of any other business, product or technology that we acquire or in which we invest;
our ability to maintain, expand and defend the scope of our intellectual property portfolio;
our ability to manufacture any approved products on commercially reasonable terms;
our ability to establish a sales and marketing organization or suitable third-party alternatives for any approved product;
the number and characteristics of product candidates and programs that we pursue;
hire additional clinical, regulatory and scientific personnel; and
incur additional legal, accounting and other expenses associated with operating as a public company.
Based on our current plans, we do not expect to generate significant revenue from product sales unless and until we (or a potential future licensee or collaborator) obtain marketing approval for, and commercialize, one or more of our current or potential future product candidates. Neither we nor a licensee may ever succeed in obtaining marketing approval for, or commercializing, our product candidates and, even if we do, we may never generate revenues that are significant enough to generate profits from operations. Even if we do generate profits from operations, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to generate profits from operations and remain profitable would decrease our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations. A decline in our value could also cause you to lose all or part of your investment.
We may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans. For example, we experienced delays in clinical trial site activation and slower patient enrollment in some of our clinical trials as a result of the COVID-19 pandemic, which delayed our expectations regarding our ability to report data from those trials. Assuming that we complete the development of and obtain marketing approval for any of our product candidates, we will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may encounter unforeseen expenses, difficulties, complications and delays, and may not be successful in such a transition.
Our liquidity position raises substantial doubt about our ability to continue as a going concern and we will require substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce