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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, 2022
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 9, 2022, the registrant had 30,823,573 shares of common stock outstanding.




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 timing, progress and reporting of results of our current trials of mavorixafor, including our global Phase 3 clinical trial in patients with Warts, Hypogammaglobulinemia, Infections, and Myelokathexis (“WHIM”), syndrome, our Phase 1b clinical trial in combination with ibrutinib in patients with Waldenström’s macroglobulinemia, and our Phase 1b clinical trial as monotherapy in patients with Severe Congenital Neutropenia (“SCN”) and chronic neutropenia disorders;
the initiation, timing, design, progress and results of our current and future preclinical studies and clinical trials of X4P-002 and X4P-003 or any of our other product candidates or our research and development programs that we pursue;
the impact of the ongoing COVID-19 pandemic on our business, operations, strategy, goals and anticipated timelines;
the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic and its variants, including the diversion of hospitals serving as our clinical trial sites and of hospital staff or independent physicians supporting the conduct of our clinical trials;
the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic;
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 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;

3


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 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; and
our strategies, prospects, plans, expectations or objectives.

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.
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 initially for the treatment of WHIM syndrome, for the treatment of SCN and chronic neutropenia disorders, for the treatment of Waldenström’s, and contingent on a potential strategic partner, for the treatment of clear cell renal cell carcinoma (“ccRCC”). We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, mavorixafor or any other product candidate.
We expect to develop mavorixafor, and potentially future product candidates, in combination with other therapies, which exposes us to additional risks.
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, Dana-Farber Cancer Institute, and Georgetown University 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 in WHIM syndrome, SCN or Waldenström’s 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.
If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates, or our entry into licensing, collaboration or similar arrangements, could be delayed or prevented.
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, which may result in others discovering, developing or commercializing products before or more successfully than we do.
5


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.
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 minimal 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 clinical 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.
We may engage in future acquisitions or in-licenses of technology that could disrupt our business, cause dilution to our stockholders and harm our financial condition and operating results.
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.
The global COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our business, including our clinical trials and preclinical studies.
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 stock price is expected to continue to be volatile.
We are an “emerging growth company,” and a “smaller reporting company” and as a result of the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors.
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, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$66,427 $81,787 
Research and development incentive receivable868 747 
Prepaid expenses and other current assets3,586 5,344 
Total current assets70,881 87,878 
Property and equipment, net 1,403 1,514 
Goodwill17,351 17,351 
Right-of-use assets8,344 8,710 
Other assets1,646 1,723 
Total assets$99,625 $117,176 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$3,569 $4,283 
Accrued expenses6,877 7,870 
Current portion of lease liability1,109 1,075 
Current portion of long-term debt3,415 795 
Total current liabilities14,970 14,023 
Long-term debt, net of discount and current portion29,809 33,139 
Lease liabilities4,482 4,776 
Other liabilities650 826 
Total liabilities49,911 52,764 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value, 125,000,000 shares authorized as of each of March 31, 2022 and December 31, 2021; 30,809,476 and 28,127,657 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
31 28 
Additional paid-in capital354,638 347,374 
Accumulated other comprehensive loss(119)(119)
Accumulated deficit(304,836)(282,871)
Total stockholders’ equity49,714 64,412 
Total liabilities and stockholders’ equity
$99,625 $117,176 




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,
20222021
Operating expenses:
Research and development$14,113 $12,104 
Selling, general and administrative7,664 5,832 
Gain on sale of non-financial asset(509) 
Total operating expenses21,268 17,936 
Loss from operations(21,268)(17,936)
Other income (expense):
Interest income3 2 
Interest expense(913)(891)
Change in fair value of derivative liability176 (31)
Other income, net60 186 
Total other expense, net(674)(734)
Loss before provision for income taxes(21,942)(18,670)
Provision for income taxes23 6 
Net loss and comprehensive loss(21,965)(18,676)
Deemed dividend on Class B Warrant price reset(2,259)(8,239)
Net loss attributable to common stockholders$(24,224)$(26,915)
Net loss per share attributable to common stockholders—basic and diluted
$(0.72)$(1.30)
Weighted average shares of common stock outstanding—basic and diluted
33,737 20,751 









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

X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE COMMON STOCK AND 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, 202128,127,657 $28 $347,374 $(119)$(282,871)$64,412 
Issuance of common stock and prefunded warrants for the purchase of common stock, net of issuance costs of $1742,512,902 3 5,817 5,820 
Vesting of restricted stock units, less shares withheld and retired to satisfy tax obligations168,817 (12)(12)
Exercise of warrants100
Stock-based compensation expense1,459 1,459 
Net loss(21,965)(21,965)
Balance at March 31, 202230,809,476 $31 $354,638 $(119)$(304,836)$49,714 





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9

X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)


Redeemable Common StockCommon StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’ Equity
SharesAmountSharesAmount
Balance at December 31, 2020  16,305,731 $16 $267,077 $(119)$(194,175)$72,799 
Issuance of common stock, redeemable common stock and pre-funded warrants for the purchase of common stock, net of issuance costs
229,885 1,875 6,041,951 7 49,633 49,640 
Exercise of stock options5,860 40 40 
Exercise of pre-funded warrants1,072,887 1 1 
Stock-based compensation1,258 1,258 
Net loss(18,676)(18,676)
Balance at March 31, 2021229,885 $1,875 23,426,429 $24 $318,008 $(119)$(212,851)$105,062 

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


X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
Net loss$(21,965)$(18,676)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense1,459 1,258 
Depreciation and amortization expense133 106 
Non-cash lease expense366 314 
Accretion of debt discount198 178 
Other(120)99 
Changes in operating assets and liabilities:
Prepaid expenses, other current assets and research and development incentive receivable1,633 (711)
Accounts payable(713)(23)
Accrued expenses(984)(786)
Lease liabilities(236)(160)
Operating lease right-of-use asset, net of non-cash portion (43)
Net cash used in operating activities(20,229)(18,444)
Cash flows from investing activities:
Acquisition of property, equipment and intangible assets(22)(496)
Net cash used in investing activities(22)(496)
Cash flows from financing activities:
Proceeds from exercise of stock options and pre-funded warrants and issuance of shares of common stock under employee stock purchase plan 41 
Employee taxes paid related to net share settlement of vested restricted stock units(12) 
Proceeds from borrowings under loan and security agreements, net of issuance costs(114) 
Repayments of borrowings under loan and security agreement(795) 
Proceeds from sale of shares of common stock, redeemable common stock and pre-funded warrants, net of issuance costs5,877 55,000 
Net cash provided by financing activities4,956 55,041 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(69)(143)
Net (decrease) increase in cash, cash equivalents and restricted cash(15,364)35,958 
Cash, cash equivalents and restricted cash at beginning of period83,108 80,702 
Cash, cash equivalents and restricted cash at end of period$67,744 $116,660 
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of property, equipment and right-of-use assets included in accounts payable and accrued expenses$ $17 
Acquisition of right-of-use asset financed by lease liabilities$ $1,343 
Issuance costs not yet paid related to sale of shares of common stock, redeemable common stock and pre-funded warrants$ $3,485 




The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11

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, development and commercialization of novel therapeutics for the treatment of rare diseases. The Company’s lead product candidate, mavorixafor, is a potential first-in-class, once-daily, oral inhibitor of CXCR4 and is currently in a Phase 3 clinical trial for the treatment of Warts, Hypogammaglobulinemia, Infections, and Myelokathexis (“WHIM”) syndrome, a rare, inherited, primary immunodeficiency disease caused by genetic mutations in the CXCR4 receptor gene. The Company is also conducting a 14-day, proof-of-concept Phase 1b clinical trial of mavorixafor in patients with Severe Congenital Neutropenia (“SCN”) and chronic neutropenia disorders, and a Phase 1b clinical trial of mavorixafor in combination with ibrutinib in Waldenström’s macroglobulinemia (“Waldenström’s”). The Company is headquartered in Boston, Massachusetts and has an additional facility in Vienna, Austria.
Going Concern Assessment—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 these condensed consolidated financial statements are issued. As of March 31, 2022, the Company had $66.4 million of cash and cash equivalents. Based on its current operating plan, the Company believes that its existing cash and cash equivalents will be sufficient to fund its operating expense and capital expenditure requirements into the fourth quarter of 2022. However, as further discussed in Note 7, the Company has a covenant under its loan agreement with Hercules Capital Inc. (“Hercules”) that requires that the Company maintain a minimum level of cash, as defined, beginning on September 1, 2022. Based on its current financial projections, the Company believes it would be in violation of this covenant in the third quarter of 2022. If the Company is in violation of this covenant, Hercules could require the repayment of all outstanding debt.

As a result, the Company believes that, in the aggregate, these conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. Nevertheless, the accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In order to fund its operations beyond the fourth quarter of 2022, the Company is seeking to raise funds potentially 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 future funding when needed, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or pre-commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. There is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Impact of the COVID-19 Pandemic— Beginning in late 2019 and continuing into 2022, the outbreak of COVID-19 has resulted in the declaration of a global pandemic and adversely affected economic activity across virtually all sectors and industries on a local, national and global scale. Impacts to the Company’s business have included temporary closures or postponements of activation of its clinical trial sites or facilities, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing clinical trials, including patient enrollment at a slower pace than initially projected and the diversion of healthcare resources away from the conduct of the Company’s clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as the Company’s clinical trial sites and hospital staff supporting the conduct of the Company’s clinical trials. While global vaccination efforts are underway and certain jurisdictions, including Massachusetts, where the Company is headquartered, have reopened businesses and governmental agencies, there remain limitations on the physical operations of businesses and prohibitions on certain non-essential gatherings, and the Company is unable to accurately predict the full impact that COVID-19 will have due to numerous uncertainties, including the duration of the outbreak, the result of vaccination efforts, resurgence of the virus, actions that may be taken by governmental authorities, the impact on the Company’s business including its clinical programs and timelines, and the impact to the business of its service providers and partners.

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, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 17, 2022 (the “2021 Annual Report”). Since the
12

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
date of those consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.
Risks and Uncertainties—The impact of the ongoing COVID-19 pandemic has been and, notwithstanding vaccination efforts, is expected to continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. Impacts to the Company’s business have included temporary closures or postponements of activation of its clinical trial sites or facilities, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing clinical trials, including patient enrollment at a slower pace than initially projected and the diversion of healthcare resources away from the conduct of the Company’s clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as the Company’s clinical trial sites and hospital staff supporting the conduct of the Company’s clinical trials.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biotechnology industry with research and development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; and the challenges of complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it is expected also to have the effect of heightening many of the other risks and uncertainties discussed above.
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.
Unaudited Interim Condensed Consolidated Financial Statements— The condensed consolidated balance sheet at December 31, 2021 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 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, 2021 included in the 2021 Annual Report. 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, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Use of Estimates— The preparation of the Company’s condensed 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 condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these condensed 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 the constraint of variable consideration from contracts with customers. 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. The COVID-19 pandemic has impacted and is expected to continue to impact the clinical development timelines for certain of the Company's clinical programs. As of the date of issuance of these condensed 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 condensed consolidated financial statements.
13

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 2022 and December 31, 2021.
Restricted Cash
(in thousands)As of March 31, 2022As of December 31, 2021
Letter of credit security: Waltham lease250 250 
Letter of credit security: Vienna Austria lease212 216 
Letter of credit security: Boston lease855 855 
Restricted cash included in other assets$1,317 $1,321 
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.
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, 2022 and December 31, 2021:
 
(in thousands)March 31, 2022December 31, 2021
Cash and cash equivalents$66,427 $81,787 
Restricted cash, non-current1,317 1,321 
Total cash, cash equivalents and restricted cash$67,744 $83,108 
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, 2022 that necessitated an interim impairment test of goodwill.

Recently Adopted Accounting Standards
In May 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 was issued to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants for the purchase of common shares) that remain classified as equity following the modification or exchange. ASU 2021-04 is effective January 1, 2022 for the Company. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted
In June 2016, the FASB 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. In accordance with ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivative and Hedging (Topic 815), and Leases (Topic 842)- Effective
14

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dates, as the Company meets the definition of a “smaller reporting company”, the Company has elected to defer the adoption of ASU 2016-13 until January 1, 2023. The Company expects that the adoption of ASU 2016-13 may accelerate the timing and could increase the level of credit loss expense in the consolidated statement of operations and will likely require an increased level of disclosure in the notes to the consolidated financial statements.

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, 2022, the amount due under the program is $0.9 million, which amount was included in research and development incentive receivable in the condensed consolidated balance sheet. During the three months ended March 31, 2022 and 2021, the Company recorded $0.1 million and $0.3 million, respectively, of income related to the program within the condensed consolidated statements of operations as other income.

License and Collaboration Agreements
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 as part of gain on sale of non-financial asset for the period ended March 31, 2022.

There were no material modifications of the Company’s license or collaboration agreements during the three months ended March 31, 2022.



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, 2022 Using:
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents—money market funds$ $2,626 $ $2,626 
$ $2,626 $ $2,626 
Liabilities: 
Embedded derivative liability$ $ $645 $645 
$ $ $645 $645 
15

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fair Value Measurements as of December 31, 2021 Using:
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents—money market funds$20,000 $27,793 $ $47,793 
$20,000 $27,793 $ $47,793 
Liabilities:
Embedded derivative liability$ $ $821 $821 
$ $ $821 $821 

The Company’s cash equivalents consisted of money market funds invested in U.S. Treasury securities. 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 Liability
Balance as of December 31, 2021$821 
Change in fair value(176)
Balance as of March 31, 2022$645 

Embedded Derivative Liability The fair value of the embedded derivative liability recognized in connection with the Company’s loan agreement with Hercules (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%.


5.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
(in thousands)March 31, 2022December 31, 2021
Leasehold improvements$228 $228 
Furniture and fixtures1,254 1,251 
Computer equipment169 150 
Software33 33 
Lab equipment576 576 
2,260 2,238 
Less: Accumulated depreciation and amortization(857)(724)
$1,403 $1,514 
Depreciation and amortization expense related to property and equipment was $133 thousand and $106 thousand for the three months ended March 31, 2022 and 2021, respectively.

6.    ACCRUED EXPENSES
16

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

Accrued expenses consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Accrued employee compensation and benefits$3,784 5,417 
Accrued external research and development expenses2,013 1,507 
Accrued professional fees762 632 
Other318 314 
$6,877 $7,870 


7.    LONG-TERM DEBT
Long-term debt consisted of the following:
(in thousands)March 31,
2022
December 31,
2021
Principal amount of long-term debt$32,500 $32,500 
Debt discount, net of accretion127 277 
Cumulative accretion of end of term payments597 1,157 
Long-term debt$33,224 $33,934 
Less: current portion of long-term debt$(3,415)$(795)
Long-term debt, net of current portion$29,809 $33,139 
Hercules Loan Agreement, As Amended
In October 2018, the Company entered into a Loan and Security Agreement (the “Hercules Loan Agreement”), as amended in December 2018, June 2019, March 2020, December 2020 and February 2022, with Hercules, under which the Company has borrowed an aggregate of $32.5 million of term loans to date. The Hercules Loan Agreement provides for maximum borrowings of up to $50.0 million, which include, subject to Hercules investment committee’s sole discretion, a right of the Company to request that Hercules make additional term loan advances in an aggregate amount of up to $17.5 million through December 31, 2022. Borrowings under the Hercules Loan Agreement accrues interest at a variable rate equal to the greater of (i) 8.75% or (ii) 8.75% plus The Wall Street Journal prime rate minus 6.0%. 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 January 1, 2023, and in equal monthly payments of principal and accrued interest from February 1, 2023 until the maturity date of the loan, which is July 1, 2024. The Company may prepay all, but not less than all, of the outstanding borrowings, subject to a prepayment premium of up to 1.0% of the principal amount outstanding as of the date of repayment. In addition, the Hercules Loan Agreement provides for payments of $1.3 million and $0.8 million payable on July 1, 2023 and July 1, 2024, respectively, which payments are accelerated upon the prepayment of the borrowings upon the Company’s election on 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 their intellectual property (but including rights to payment and proceeds from the sale, licensing or disposition of the intellectual property).

As noted above, on February 9, 2022, the Company entered into Amendment No. 3 the Hercules Loan Agreement. The amendment primarily added a financial milestone that if met by June 30, 2022 would modify the minimum cash covenant contained in the Hercules Loan Agreement, which is effective beginning September 1, 2022, as further described below. The Company concluded that the amendment represented a modification to the debt. Accordingly, fees paid to third parties directly related to the amended debt were expensed as incurred and fees paid to Hercules in conjunction with the amendment were deferred and will be amortized to interest expense over the life of the debt arrangement using the effective interest method.


17

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Pursuant to the Hercules Loan Agreement, effective as of the earlier of (a) certain specified events impacting the Company’s Phase III trial of mavorixafor for the treatment of WHIM syndrome and (b) September 1, 2022, the Company at all times thereafter must maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than or equal to the greater of (i) $30.0 million or (ii) 6 multiplied by a metric based on prior months’ cash expenditures; provided, however, that from and after the Company’s achievement of certain financing milestones through June 30, 2022, the Company must maintain cash in an account or accounts in which Hercules has a first priority security interest in an aggregate amount of $30.0 million. Following the achievement of certain operational performance milestones, the required level shall be reduced to the greater of $20.0 million, or, if the Company had not met the financing milestones noted above, 3 multiplied by the current cash expenditures metric; and provided further, that subject to the achievement of certain milestones, this covenant will be extinguished. 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)For the Three Months ended March 31,
20222021
Total interest expense$909 $890 
Non-cash interest expense$198 $178 
The annual effective interest rate of the Hercules Loan Agreement as of March 31, 2022 is 10.7%. There were no principal payments due or paid under the Hercules Loan Agreement during the three months ended March 31, 2022. An end-of-term payment of $0.8 million was paid during the three months ended March 31, 2022 in accordance with the Hercules Loan Agreement.
As of March 31, 2022, future principal and end-of-term payments due under the Hercules Loan Agreement were as follows (in thousands):
Year Ending December 31,Total
2022$ 
202319,802 
202413,295 
Long-term debt$33,097 

8.    LEASES
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 $300 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 $1.0 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
18

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Company is required to maintain a security deposit in the form of a letter of credit for $0.9 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 approximately five years from the commencement date. 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, 2022 and 2021 were as follows:
(dollars in thousands)For the Three Months Ended March 31,
Lease Cost20222021
Fixed operating lease cost$530$476 
Short-term lease costs42 
Total lease expense$530$518 
Other information
Right-of-use asset obtained in exchange for operating lease liabilities$ $1,343 
Operating cash flows from operating leases$342 $323 
Sublease income$49 $49 
Weighted-average remaining lease term—operating leases4.7 years
Weighted-average discount rate—operating leases11.3 %


Maturities of lease liabilities due under lease agreements that have commenced as of March 31, 2022 are as follows (in thousands)
Maturity of lease liabilitiesOperating
Leases
2022 (remainder of the year)$1,194 
20231,619 
20241,384 
20251,412 
20261,318 
Thereafter363 
Total lease payments7,290 
Less: interest(1,699)
Total operating lease liabilities as of March 31, 2022$5,591 

9.    COMMITMENTS AND CONTINGENCIES
The Company has agreements with Contract Research Organizations (“CROs”) pursuant to which the Company and the CROs are conducting clinical trials of mavorixafor for the treatment of WHIM syndrome, Waldenström’s and SCN and chronic
19

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
neutropenia disorders. The Company may terminate these agreements by providing notice pursuant to the contractual provisions of such agreements and would incur early termination fees. The Company also has agreements with contract manufacturing organizations (“CMOs”) for the production of mavorixafor for use in clinical trials.
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, 2022 or December 31, 2021.
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, 2022 and December 31, 2021, the Company’s Restated Certificate of Incorporation authorized the Company to issue 125,000,000 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.

On March 3, 2022, the Company entered into a securities purchase agreement pursuant to which it agreed to issue and sell to an investor (the “Investor”), in a private placement (the “Q1 2022 Private Placement”), 900,000 shares of common stock at a price of $1.80 per share, which represents the volume weighted average price per share of the Company’s common stock as quoted on the Nasdaq Stock Market for the thirty (30) consecutive-day trading day period ending on March 2, 2022, and pre-funded warrants to purchase 766,666 shares of common stock at a purchase price of $1.79 per pre-funded warrant (representing the price of $1.80 per share minus the $0.01 per share exercise price of each such prefunded warrant). The pre-funded warrants are exercisable at any time after their original issuance date and will have no expiration date. The Q1 2022 Private Placement closed on March 7, 2022 and the Company received gross proceeds of 3.0 million, before deducting offering expenses payable by the Company.

Also, on March 3, 2022, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor, pursuant to which the Company agreed to register for resale the shares of common stock purchased by the Investor and the shares of common stock underlying the pre-funded warrants held by the Investor (the “Registrable Securities”). Pursuant to the Registration Rights Agreement, the Company filed a registration statement covering the resale of the Registrable Securities on April 22, 2022.
In connection with its issuance of common stock in a public offering that closed on November 29, 2019, the Company issued 5,416,667 Class B warrants, which are exercisable for shares of the Company’s common stock or pre-funded warrants to purchase shares of the Company's common stock. The Class B warrants were immediately exercisable upon issuance, had an initial exercise price of $15.00 per share and expire on a date that is the earlier of (a) the date that is 30 calendar days from the date on which the Company issues a press release announcing top-line data from its Phase 3 clinical trial of mavorixafor for the treatment of patients with WHIM syndrome (or, if such date is not a business day, the next business day) and (b) November 28, 2024. The Class B warrants have a contingent price adjustment feature pursuant to which the exercise price of the Class B warrants is adjusted to the lowest weighted average offering price at which the Company sells its common stock or certain securities convertible into or exercisable for the Company's common stock in one or more subsequent offerings, if the weighted
20

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
average offering price for such offering is below $15.00. On March 3, 2022, the exercise price of the Class B warrants was adjusted to $1.80 as a result of the Q1 2022 Private Placement.
In connection with previous equity offerings, the Company has issued pre-funded warrants, which are exercisable into one share of the Company's common stock, are immediately exercisable upon issuance, and for which the remaining exercise price is equal to or less than $0.01 per share.

The following table provides a roll forward of outstanding warrants for the three month period ended March 31, 2022:
Number of warrantsWeighted Average Exercise PriceWeighted Average Contractual Term (Years)
Outstanding and exercisable warrants to purchase common shares as of December 31, 202113,257,160 $7.962.72
Issued766,666 $1.80
Exercised(100)
Outstanding and exercisable warrants to purchase common shares as of March 31, 202214,023,726 $6.912.47

As of March 31, 2022, the Company’s outstanding 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, 20195,416,567 $1.80 November 28, 2024
November 29, 20191,750,000 $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
14,023,726 
(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 $3.0 million in aggregate proceeds. Each pre-funded warrant may be exercised for an additional $0.01 per pre-funded warrant.

21

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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, 2022, there are an aggregate of approximately 550,000 shares of common stock available for issuance under the Company’s equity incentive plans. Approximately 270,000 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,
20222021
Risk-free interest rate2.0 %0.9 %
Expected term (in years)6.16.0
Expected volatility94.5 %101.4 %
Expected dividend yield0 %0 %
Stock Options
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022:
Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term (Years)
Aggregate
Intrinsic
Value (in thousands)
Outstanding as of December 31, 20211,916,051 $10.01 7.8$ 
Granted232,850 1.85 
Forfeited and Expired(99,743)23.52 
Outstanding as of March 31, 20222,049,158 $8.43 7.9$11 
Exercisable as of March 31, 20221,029,146 $10.44 6.8$ 
Vested and expected to vest as of March 31, 20221,798,855 $8.84 7.7$8 
 
There were no stock options exercised in the three months ended March 31, 2022. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2021 was $13 thousand. The weighted average grant-date fair value per share of stock options granted during the three months ended March 31, 2022 and 2021 was $1.42 and $6.52, respectively.
22

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

Restricted Stock Units— The following table summarizes the Company's restricted stock unit activity for the three months ended March 31, 2022:
Number of
Shares
Unvested as of December 31, 2021925,101 
Granted1,242,756 
Vested(192,255)
Forfeited(34,814)
Unvested as of March 31, 20221,940,788 
During the three months ended March 31, 2022, the Company granted time-based restricted stock units to employees. These restricted stock units vest annually over a two or three year period. Stock-based compensation expense is being recognized for these time-based awards ratably based on the intrinsic value of the awards as of the date of grant, less estimated forfeitures.
Stock-Based Compensation— As of March 31, 2022, total unrecognized compensation expense related to unvested stock options and restricted stock units was $8.5 million, which is expected to be recognized over a weighted average period of 2.0 years.
Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:
Three Months Ended March 31,
(in thousands)20222021
Research and development expense$704 $577 
Selling, general and administrative expense755 681 
Total stock-based compensation$1,459 $1,258 

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, 2022 and 2021, 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, 2022 and March 31, 2021, the Company recorded an immaterial income tax provision related to its Austrian subsidiary.

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)20222021
Numerator:
Net loss$(21,965)$(18,676)
Deemed dividend as a result of Class B warrant price reset (Note 10)
(2,259)(8,239)
Net loss attributable to common stockholders
$(24,224)$(26,915)
Denominator:
Weighted average shares of common stock outstanding—basic and diluted
33,737 20,751 
Net loss per share attributable to common stockholders— basic and diluted
$(0.72)$(1.30)

23

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basic and diluted weighted average shares of common stock outstanding for the three months ended March 31, 2022 and March 31, 2021 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 quarters ended March 31, 2022 and March 31, 2021, in accordance with the 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 are accounted for as a deemed dividend that adjusts net loss available to common shareholders for purposes of basic earnings per share. The deemed dividend is 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 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, 2022 and 2021. 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,
20222021
Options to purchase shares of common stock2,049,158 1,858,154 
Unvested restricted stock units1,940,788 1,135,419 
Warrants to purchase shares of common stock (excluding prefunded warrants, which are included in basic shares outstanding)
9,449,028 9,474,403 
13,438,974 12,467,976 




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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 17, 2022, 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. Such factors may be amplified by the ongoing COVID-19 pandemic and its potential impact on our business and the overall global economy.
Overview
We are a late-stage clinical biopharmaceutical company focused on the research, development and commercialization of novel therapeutics for the treatment of rare diseases, with an initial focus on people with immune system dysfunction. Our lead product candidate, mavorixafor, is a first-in-class, small molecule inhibitor of the chemokine receptor CXCR4 and is being developed as a once-daily oral therapy. Due to mavorixafor’s demonstrated ability to antagonize CXCR4 and improve the healthy maturation and trafficking of white blood cells, we believe that mavorixafor has the potential to provide therapeutic benefit across a wide variety of diseases, including primary immunodeficiencies (“PIDs”) and certain types of cancer.

We are currently studying the safety and efficacy of mavorixafor in a global Phase 3 clinical trial of mavorixafor for the treatment of patients with Warts, Hypogammaglobulinemia, Infections, and Myelokathexis (“WHIM”) syndrome, a rare, inherited PID, caused by genetic mutations in the CXCR4 receptor gene. We are also conducting a Phase 1b clinical trial of mavorixafor in people with a range of chronic neutropenia disorders, both with and without CXCR4 mutations, and a Phase 1b clinical trial of mavorixafor in combination with the Bruton tyrosine kinase inhibitor (“BTKi”) ibrutinib in people with Waldenström’s macroglobulinemia (“Waldenström’s”), a rare B-cell lymphoproliferative disorder, and confirmed mutations to both the CXCR4 and MYD88 genes.

We completed enrollment of our global Phase 3 clinical trial of mavorixafor, which we refer to as the 4WHIM trial, in the third quarter of 2021, with 31 patients enrolled, and currently expect to report top-line data from the trial in the fourth quarter of 2022. We have completed enrollment with 16 patients in the Waldenström’s trial and are continuing to enroll patients in the chronic neutropenia trial.

The U.S. Food and Drug Administration (“FDA”) has granted certain special designations to mavorixafor, including Breakthrough Therapy Designation for the treatment of adults with WHIM syndrome, Fast Track Designation for adults with WHIM syndrome, and Rare Pediatric Designation for the treatment of people aged 12 to 18 with WHIM syndrome, which could result in accelerated review and approval by the agency. We have begun building our commercial team in anticipation of a possible New Drug Application (“NDA”) submission to the FDA in the second half of 2023, with the goal of obtaining approval for mavorixafor for the treatment of people in the United States, aged 12 and older with WHIM syndrome, should the final Phase 3 data support the filing of an NDA.

We announced positive preliminary data from both of the ongoing Phase 1b clinical trials of mavorixafor during 2021, and we are continuing patient enrollment in the chronic neutropenia trial. Additional data are expected from the Phase 1b clinical trial in chronic neutropenia by the end of the third quarter of 2022 and from the Phase 1b clinical trial in Waldenström’s in the second half of 2022.

In addition to mavorixafor, we are advancing earlier-stage product candidates to further expand our pipeline. We have advanced a lead optimization program: X4P-003, a second-generation CXCR4 antagonist designed to have enhanced properties relative to mavorixafor, potentially enabling broader opportunities in CXCR4 disorders and primary immunodeficiencies. A second program, X4P-002, which is a CXCR4 antagonist designed to cross the blood-brain barrier and provide appropriate therapeutic exposures to potentially treat brain cancers in combination therapy, is in Investigational New Drug-enabling studies. We are also continuing to leverage our insights into CXCR4 biology and our research capabilities to identify other targets and develop additional product candidates. We anticipate filing an Investigational NDA of X4P-002 with the FDA in the fourth quarter of 2022 to enable its advancement into clinical development.

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
25


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.

Our Pipeline
https://cdn.kscope.io/22a45ff739847003d219550a580ad08a-xfor-20220331_g1.jpg
1. X4 Pharmaceuticals, Data on File. Phase 2 open label extension (OLE) trial for WHIM ongoing 2. Company market research. Qessential market research, 2019 and IPM . ai artificial intellegence study, 2020 3. Estimate using Andersen et al. J Intern Med. 2016 Jun: 279(6):566-75 4. WM Epidemiology Analysis Nemetz Group.     

COVID-19 Business Update
In light of the ongoing COVID-19 pandemic, we have implemented business continuity measures designed to address and mitigate the impact of the COVID-19 pandemic on our employees, our business, including our clinical trials, supply chains and third-party providers. We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans and response strategy. Following easing of governmental restrictions, in the fourth quarter of 2020, we opened our new corporate headquarters in Boston, Massachusetts under a return-to-work plan with a limited phased approach that is principles-based and local in design, with a focus on employee safety and optimal work environment. While we are currently operating under a “hybrid” model where full-time in-person attendance in the office is optional, all employees who have been fully vaccinated have returned to the office. While we are experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the COVID-19 pandemic and continued uncertainty, our business, financial condition, results of operations and growth prospects could be materially adversely affected.

Clinical Development
With respect to clinical development, we continue to implement risk-based approaches in accordance with FDA and European Medicines Agency (“EMA”) COVID-19 guidance, which includes virtual and remote patient visits and monitoring where possible, while prioritizing patient safety, maintaining trial continuity and preserving data integrity. We have experienced, and expect to continue to experience, a disruption or delay in our ability to initiate trial sites and/or enroll and assess patients in several of our clinical programs as a result of the ongoing COVID-19 pandemic, notwithstanding substantial vaccination efforts. While not currently impacted, there could be an impact on our ability to supply study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations (“CROs”) or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the ongoing COVID-19 pandemic. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience further disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Supply Chain
We continue to work closely with our third-party manufacturers, distributors and other partners to manage our supply chain activities and mitigate potential disruptions to our clinical supply as a result of the ongoing COVID-19 pandemic. We have business continuity plans in place and have manufacturing plans that will meet our global supply demands going forward. To best support our patients, we continue to work with our vendors to provide the option for direct-to-patient drug shipments from
26


clinical sites. If the ongoing COVID-19 pandemic impacts essential distribution systems we could experience disruptions to our supply chain and operations, which could adversely impact our ability to carry out our clinical trials.

Regulatory Activities
We expect that we could experience delays in the timing of review and/or our interactions with the FDA or the European Commission (“EC”) due to, for example, inability to conduct planned physical inspections related to regulatory approval, or the diversion of efforts of the FDA or EC and attention to approval of other therapeutics or other activities related to COVID-19, which could delay approval decisions with respect to the preparation and submission to the FDA of a new drug application (“NDA”), or the preparation and submission to the EC of a Marketing Authorization Application (“MAA”), and otherwise delay or limit our ability to make planned regulatory submissions or obtain new product approvals.

Financial Impact
The ongoing COVID-19 pandemic continues to evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes the results of our operations for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021Change
(in millions)
Operating expenses:
Research and development$14.1 $12.1 $2.0 
Selling, general and administrative7.7 5.8 1.9 
Gain of sale of non-financial asset(0.5)— (0.5)
Total operating expenses21.3 17.9 3.4 
Loss from operations(21.3)(17.9)(3.4)
Total other expense, net(0.7)(0.7)— 
Loss before provision for income taxes(22.0)(18.6)(3.4)
Provision for income taxes— — — 
Net loss$(22.0)$(18.6)$(3.4)
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,
20222021Change
(in millions)
Direct research and development expenses by product candidate:
Mavorixafor $6.1 $6.3 $(0.2)
X4P-0020.9 0.2 0.7 
X4P-0030.1 0.6 (0.5)
    Unallocated expense
7.0 5.0 2.0 
Total research and development expenses$14.1 $12.1 $2.0 

The increase in research and development expenses in each period was primarily due to an increase in head count within our manufacturing, regulatory and clinical operations functions, resulting in higher compensation expenses, including stock-based compensation. In addition, unallocated research and development expense increased due to additional facility costs associated
27


with our leased facilities, which are allocated to research and development departments based on head count. Research and development expenses also increased due to additional non-clinical costs related to advancing our XP-002 oncology program.
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 higher as compared to the prior year primarily due to an increase in stock-based compensation costs, higher recruiting costs and an increase in facility costs. Head count in selling, general and administrative functions was relatively consistent with the prior period. We expect selling, general and administrative expenses will grow in the future as we continue to build out our selling, general and administrative functions.

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 us, terminated the arrangement and transferred these rights back us. Also during the current period, we transferred these rights to another third party in return for $0.5 million. We have no continuing involvement in any ongoing research and development activities associated with the intellectual property. We 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 our strategic focus and, therefore, are not an output of our ordinary activities. Accordingly, we classified this transaction as a Gain on Sale of Non-Financial Asset for the period ended March 31, 2022. There was no such transaction in the same period of the prior year.

Other Expenses, Net
 
Three Months Ended March 31,
20222021Change
(in millions)
Interest expense$(0.9)$(0.9)$— 
Change in fair value of derivative liability0.2 — 0.2 
Other income— 0.2 (0.2)
Total other expense, net$(0.7)$(0.7)$— 
Other expenses, net, for the three months ended March 31, 2022 were consistent with same period in the prior year.
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, 2022 and 2021, 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, 2022 and 2021, we recorded an immaterial amount of income tax expense related to our Austrian subsidiary.

Liquidity and Capital Resources
To date, we have primarily funded our operations with proceeds from sales of common stock, warrants and pre-funded warrants for the purchase of our preferred stock and common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements, such as our existing loan and security agreement with Hercules Capital, Inc. (the “Hercules Loan Agreement”) as more fully described in the notes to our condensed consolidated financial statements included herein.

In August 2020, we entered into a Controlled Equity OfferingSM Sales Agreement, (the “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 $50.0 million. We are currently subject to General Instruction I.B.6 to Form S-3 (the “Baby Shelf Rule”), and the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our existing registration statement on Form S-3 is limited to one-third of the aggregate market
28


value of the voting and non-voting common equity held by non-affiliates. We will be limited by the Baby Shelf Rule until such time as our public float exceeds $75.0 million. As a result of the Baby Shelf Rule, we currently may offer and sell shares of our common stock having an aggregate offering price of up to $23.3 million from time to time through the Sales Agents.

In March 2021, we entered into a securities purchase agreement with several institutional and accredited investors pursuant to which we sold shares of common stock and, in lieu of common stock, pre-funded warrants to purchase shares of common stock for gross proceeds of $53.0 million, before deducting offering expenses payable by us. In November 2021, we raised approximately $10.0 million through the sale of pre-funded warrants to an investor.

In January 2022, we entered into a common stock purchase agreement with Lincoln Park Capital Fund LLC (“Lincoln Park”) pursuant to which Lincoln Park has committed to purchase, at our request from time to time over a 36-month period, shares of our common stock having an aggregate offering price of up to $50.0 million, subject to certain limitations. In March 2022, we raised $3.0 million for the sale of shares of our common stock and pre-funded warrants for the purchase of shares of common stock in a private placement.

To date we have borrowed $32.5 million through our Hercules Loan Agreement. Under this facility we may borrow additional $17.5 million in term loans through December 2022 at the lender’s sole discretion. Principal payments under the Hercules Loan Agreement commence in February 2023, and the agreement matures in July 2024.

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, 2022, our cash and cash equivalents were $66.4 million, and our restricted cash balance was $1.3 million. We expect that our research and development and selling, general and administrative expenses will continue to increase as we focus on completing the necessary development, obtaining regulatory approval and preparing for potential commercialization of our product candidates. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022. As further discussed in Note 7 to our condensed consolidated financial statements, our Hercules Loan Agreement has a covenant that would require us to maintain a minimum level of cash beginning on September 1, 2022, which date is extended if we meet certain financial milestones related to third-party funding. Based on our current financial projections, we believe we would be in violation of this covenant in the third quarter of 2022. If we are in violation of this covenant, Hercules could require the repayment of all outstanding debt.

As a result, we believe that, in aggregate, these conditions raise substantial doubt about our ability to continue as a going concern for the one-year period following the issuance of these condensed consolidated financial statements for the quarterly period ended March 31, 2022. Unless and until we reach profitability in the future, we will require additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third party funding, marketing and distribution arrangements and 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 pre-commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations.

29


Cash Flows
The following table summarizes our cash flow activities for each of the periods presented:
Three Months Ended March 31,
20222021
(in thousands)
Net loss$(21,965)$(18,676)
Adjustments to reconcile net loss to net cash used in operating activities2,036 1,955 
Changes in operating assets and liabilities(300)(1,723)
Net cash used in operating activities(20,229)(18,444)
Net cash used in investing activities(22)(496)
Net cash provided by financing activities4,956 55,041 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(69)(143)
Net (decrease) increase in cash, cash equivalents and restricted cash(15,364)35,958 
Cash, cash equivalents and restricted cash, beginning of period$83,108 $80,702 
Cash, cash equivalents and restricted cash, end of period$67,744 $116,660 

Operating Activities   During the three months ended March 31, 2022, net cash used in operating activities was $20.2 million, primarily resulting from our net loss of $22.0 million, adjusted for noncash expenses of $2.0 million and changes in our operating assets and liabilities of $0.3 million. Non-cash expenses primarily includes 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, 2021 was $18.4 million, primarily resulting from our net losses of $18.7 million, adjusted for noncash expenses of $2.0 million and changes in our operating assets and liabilities of $1.7 million. Net cash used in changes in our operating assets and liabilities primarily consisted of a decrease in
accrued expenses primarily due to the annual payment of accrued bonuses.
Investing Activities   During the three months ended March 31, 2022 and 2021, cash used in investing activities of less than $0.1 million and $0.5 million, respectively, related primarily to purchases of equipment for our facility in Boston during the three months ended March 31, 2022, and for furniture and laboratory equipment purchases related to our leased facility in Vienna, Austria during the three months ended March 31, 2021.
Financing Activities   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. During the three months ended March 31, 2021, net cash provided by financing activities was $55.0 million, consisting of gross proceeds on our private placement sale of shares of our common stock before offering costs and redeemable common stock repayments.
Funding Requirements
As noted above, the Hercules Loan Agreement contains a minimum cash covenant that is effective on September 1, 2022 (which date is extended if we meet certain financial milestones related to third party funding). Based on our current operating cash flow projections and with no additional funding, we would be in violation of this minimum cash required to satisfy this covenant in the third quarter of 2022. To fund our operations, we are required to raise additional capital, which may be through a combination of equity offerings, such as through our ATM Sales Agreement or through our common stock purchase agreement with Lincoln Capital, debt financings, including refinancing of our Hercules Loan Agreement or entering into new debt arrangements with other third-parties, marketing and distribution arrangements and collaborations and strategic alliances. Our ability to raise such funds cannot be assured. During 2022 and beyond, 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 3
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pivotal clinical trial of mavorixafor for the treatment of patients with WHIM syndrome, our Phase 1b clinical trial of mavorixafor in SCN and chronic neutropenia disorders, and our Phase 1b clinical trial of mavorixafor in Waldenström’s;
the continued global impact of the ongoing COVID-19 pandemic and its effect on our ongoing clinical trials, our supply chain and the financial markets in general;
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;
the cost and timing of completion of commercial-scale outsourced manufacturing activities with respect to 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 cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own;
the success of any other business, product or technology that we acquire or in which we invest;
the costs of acquiring, licensing or investing in businesses, product candidates and technologies;
our need and ability to hire additional management and scientific and medical personnel;
the costs to continue to operate as a public company, including the need to implement additional financial and reporting systems and other internal systems and infrastructure for our business;
market acceptance of our product candidates, to the extent any are approved for commercial sale; and
the effect of competing technological and market developments.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development efforts or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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 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.

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During the three months ended March 31, 2022, there were no material changes to our critical accounting policies as reported for the year ended December 31, 2021 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, 2022.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not EGCs.

In addition, we are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures 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 a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, 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 Securities Exchange Act of 1934, as amended (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, 2022, and have concluded that, based on such evaluation, our disclosure controls and procedures were effective as of March 31, 2022 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, 2022 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 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-stage clinical biopharmaceutical company with a limited operating history. Since inception, we have incurred significant operating losses. Our net losses were $88.7 million, $62.1 million and $52.8 million for the years ended December 31, 2021, 2020 and 2019 respectively, and were $22.0 million for the quarter ended March 31, 2022. As of March 31, 2022, we had an accumulated deficit of $304.8 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 expect to continue to incur significant expenses and increasing operating losses for at least the next few 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. 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 have delayed our expectations regarding our ability to report data from those trials, and we may encounter additional delays, disruptions and other direct and indirect negative effects of the ongoing COVID-19 pandemic on our clinical trials. 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. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. The net losses we incur may fluctuate significantly from quarter to quarter and year to year.
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 3 trial of mavorixafor for the treatment of Warts, Hypogammaglobulinemia, Infections, and Myelokathexis (“WHIM”) syndrome, our Phase 1b clinical trial of mavorixafor for the treatment of Severe Congenital Neutropenia (“SCN”) and other chronic neutropenia disorders, and our Phase 1b clinical trial of mavorixafor for the treatment of Waldenström’s macroglobulinemia (“Waldenström’s”);    
our ability to raise sufficient funds to support the development and potential commercialization of our product candidates;
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the outcomes and timing of regulatory reviews, approvals or other actions;
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; and
the number and characteristics of product candidates and programs that we pursue.
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. 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.
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.
Our operations have consumed a large amount of cash since inception. We expect our research and development expenses to increase in future periods as we continue to advance the clinical development of our product candidates and prepare for the launch and commercialization of any product candidates for which we receive regulatory approval, including potentially building our own commercial organization to address the United States and certain other markets. In addition, if we obtain marketing approval for any of our product candidates that are not then subject to licensing, collaboration or similar arrangements with third parties, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. Furthermore, we expect to incur additional costs associated with operating as a public company.
As of March 31, 2022, we have cash and cash equivalents of $66.4 million. We have a covenant under our Hercules Loan Agreement that requires that we maintain a minimum level of cash, as defined, beginning on September 1, 2022. Based on our current cash flow projections and with no additional funding, we believe we may not be able to maintain the minimum cash required to satisfy this covenant. In such event, Hercules could require the repayment of all outstanding debt. We expect to seek additional funding to sustain our future operations and to satisfy certain covenants under our debt facility with Hercules, which may include raising funds through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. While we have successfully raised capital in the past, our ability to raise capital in future periods is not assured.

In addition, adequate additional financing may not be available to us on acceptable terms, or at all. Under General Instruction I.B.6 to Form S-3 (the “Baby Shelf Rule”), the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates. As of March 22, 2022, the aggregate market value of our common stock held by non-affiliates was $69,999,467, which was calculated based on 30,567,453 shares of our common stock outstanding held by non-affiliates as of that time, and at a price of $2.29 per share, the closing price of our common stock on March 9, 2022. We therefore are limited by the Baby Shelf Rule as of the filing of our Annual Report on Form 10-K for the
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fiscal year ended December 31, 2021, until such time as our public float exceeds $75.0 million. As a result of the Baby Shelf Rule, we currently may offer and sell shares of our common stock having an aggregate offering price of up to $23.3 million from time to time.
We will require substantial additional funding to carry out our business plans, including the clinical development of mavorixafor. Further, even if and when we believe we have sufficient capital for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. We cannot be certain that additional funding will be available on acceptable terms, or at all. The ongoing COVID-19 pandemic has already resulted in a significant disruption of global financial markets. If the disruption continues or future variants of COVID-19 emerge globally, we could experience an inability to access additional capital when and if needed. If we are unable to raise additional capital when needed or in sufficient amounts or on terms acceptable to us, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts of one or more of our product candidates or one or more of our other research and development initiatives.
We also could be required to:
seek new or additional collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or
relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
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 3 trial of mavorixafor for the treatment of WHIM syndrome, our Phase 1b clinical trial of mavorixafor for the treatment of SCN and chronic neutropenia disorders, and our Phase 1b clinical trial of mavorixafor for the treatment of Waldenström’s;
the clinical development plans that we establish for these product candidates;
the number and characteristics of product candidates and programs that we develop or may in-license;
the outcome, timing and cost of regulatory reviews, approvals or other actions to meet regulatory requirements established by the U.S. Food and Drug Administration (“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 or from other third parties;
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;
the cost and timing of completion of commercial-scale outsourced manufacturing activities with respect to 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 cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own;
the success of any other business, product or technology that we acquire or in which we invest;
the costs of acquiring, licensing or investing in businesses, product candidates and technologies;
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our need and ability to hire additional management and scientific and medical personnel;
the costs to operate as a public company, including the need to implement additional financial and reporting systems and other internal systems and infrastructure for our business;
market acceptance of our product candidates, to the extent any are approved for commercial sale;
the effect of competing technological and market developments; and,
business interruptions resulting from pandemics and public health emergencies, including those related to the ongoing COVID-19 pandemic, geopolitical actions, including war and terrorism or natural disasters including earthquakes, typhoons, floods and fires.
If we do not raise additional capital in sufficient amounts, or on terms acceptable to us, we may be prevented from pursuing discovery, development and commercialization efforts, which will harm our business, operating results and prospects.
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.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The ongoing COVID-19 pandemic has already resulted in a significant disruption of global financial markets. If the disruption persists or if future variants of COVID-19 emerge globally, we could experience an inability to access additional capital. Other than our common stock purchase agreement with Lincoln Park Capital Fund LLC (“Lincoln Park”), pursuant to which Lincoln Park is obligated, subject to certain limitations, to purchase up to $50.0 million in the aggregate of shares of our common stock, subject to certain limitations and conditions, we do not have any committed external sources of funds and may seek to raise additional capital at any time. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends or other distributions, acquiring or licensing intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business and may result in liens being placed on our assets and intellectual property. For example, our debt facility with Hercules contains a minimum cash     financial covenant that we project we would be in violation of in the third quarter of 2022 based on our current cash flow projections, assuming we do not raise additional funding. If we default on such indebtedness, with Hercules or a future lender, we could lose such assets and intellectual property.
If we raise additional funds through licensing, collaboration or similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research and development programs or product candidates or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds through equity or debt financings or through licensing, collaboration or similar arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We have not generated revenues from any product sales since inception and may never become profitable.
To date, we have not generated revenues from any product sales. Our ability to generate revenue and become profitable depends upon our ability to successfully obtain marketing approval and commercialize our product candidates, including mavorixafor, X4P-002, X4P-003 or other product candidates that we may develop, in-license or acquire in the future. Even if we are able to successfully achieve regulatory approval for these product candidates, we are unable to predict the extent of any future losses and do not know when any of these product candidates will generate revenue for us, if at all. Our ability to generate revenue from mavorixafor or any of our current or future product candidates also depends on a number of additional factors, including our ability to:
successfully complete development activities, including all necessary nonclinical studies and clinical trials;
complete and submit New Drug Applications (“NDAs”), to the FDA and obtain regulatory approval for indications for which there is a commercial market;
complete and submit marketing applications to, and obtain regulatory approval from, foreign regulatory authorities;
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set and obtain a commercially viable price for our products;
obtain commercial quantities of our products at acceptable cost levels;
develop a commercial organization capable of sales, marketing and distribution for the products we intend to sell ourselves in the markets in which we have retained commercialization rights;
find suitable collaborators to help us market, sell and distribute our approved products in other markets; and