X4 Pharmaceuticals, Inc. (XFOR) Earnings Call Transcript & Summary

Okay. Hello, everyone. I'm Max Skor. I'm a biotech analyst with Morgan Stanley. Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And now moving on, I would like to thank Paula Ragan, CEO of X4 Pharmaceuticals for joining me. I guess we would like to start off -- would you like to start off with any opening remarks? Then we can dive into the Q&A.

Yes, no. Well, thanks so much for hosting us. It's a great conference. It's nice to kick off the fall with the energy here in the city. And yes, just X4 had a really big year to start with. So just very quickly, kind of summarizing in the last few months and then zooming out big picture, but we've had a drug -- our first drug approval of XOLREMDI in a rare form of immunodeficiency, great positive Phase II data for our next broader-immunodeficiency indication, and then we sold our PRV in record time. But what that really enables us to do as a company is to achieve our vision. Our vision is to create a lasting product that can impact as many patients with immunodeficiencies as possible. This group of patients live every day like we lived with COVID for those first few years. They have a high risk of severe recurrent infections and sometimes life-threatening or life-ending in certain cases. And it's been a group of patients that have been predominantly ignored or it's a very complex set of diseases. So we are really excited to be a company committed to this space and to bring possibly the first oral treatment in certain cases, certainly with WHIM syndrome and with our broader indication in CN. So we're in a great place, being now a fully integrated pharma company, launching our first product and hopefully on our way to serving even more patients as possible.

Great. Thank you. So just to kind of level set, mavorixafor, the generic name for XOLREMDI, can we just talk about the mechanism of action, specifically how does CXCR4 antagonism impact the bone marrow, leading to increased circulation of neutrophils and lymphocytes?

Yes. So that's great. So all of us hopefully have white blood cells circulating in our blood stream to help us fight infection, that's the army that is needed to address bacterial, viral or the whole spectrum of foreign pathogens, and white blood cells are made in the bone marrow. All of these cells have some form of CXCR4 expressed on them as they journey through their evolution into fully functioning immune cells in the bloodstream. And probably the most impactful component of their journey is their maturation and then migration ability. Imagine if you had a well-trained army that was locked up, it's not going to really do the job. So mavorixafor enables the migration of white blood cells from the bone marrow into the circulation so that they're then released and can perform their immune surveillance job. In immunocompromised patients, this migration component of capability is significantly impacted. So mavorixafor overcomes that, helps these cells migrate from the bone marrow and become the effective immune cells and disease-fighting army that is needed for health and safety.

Great. So pivoting to the recent approval of XOLREMDI for WHIM syndrome in April 2024, congratulations. Let's -- we can start high level, talking about a brief overview of WHIM syndrome, severity, incidents, prevalence, et cetera.

Yes. So WHIM syndrome is a severe combined form of an immunodeficiency. So all of the white blood cells that I described earlier, they're all suppressed and locked in the bone marrow, predominantly because of an over signaling in a cascade called CXCL12/CXCR4, so mavorixafor intervenes that step and helps these cells move forward. So it's a rare form of immunodeficiency that's congenital. These patients are born with this problem. To date, we've really focused our efforts in the U.S. So today, we feel comfortable saying there's about 1,000 patients with WHIM syndrome in the U.S. And the approval of XOLREMDI is the first drug ever specifically approved to target the origins of their disease. We're so excited about the partnership that we had with the FDA or the collaboration to get this drug approved in this rare population. The label itself describes how meaningful the drug is in terms of our reduction in infection rate, which was 60% as well as a component of severity. And so we're really grateful to the entire communities that helped get this drug first approved as the only targeted treatment for WHIM syndrome.

Targeted treatment and expanding on that, you're actually addressing the underlying cause of disease, and that's included in the label. How -- could you expand a bit on how that's differentiated?

Yes. So specifically with WHIM syndrome, these patients are defined by having an over signaling of a chemokine receptor called CXCR4. And what that does is it kind of holds these white blood cells in check. They're almost imprisoned in your bone marrow in an extreme case, and by antagonizing we have an oral once-daily CXCR4 antagonist. That's the mechanism of action of mavorixafor. And what that does is it actually blocks that brake, and it allows the gas to proceed and enable white blood cells to circulate. And then more importantly, clinically, it's certainly cell counts are meaningful to predict the patient's risk. But at the end of the day, we saw in our Phase III study, a reduction in rate, severity and duration of infections quite meaningfully. So this drug is really hopeful to transform these patients' lives from sort of a risk-on situation where they're living very much like the COVID lives we all experienced to hopefully a much more normalized life because their immune system are now capable of responding to infections.

Great. And diving a bit deeper into the patient profile. I imagine internally, you have estimates on the penetration rate of the 1,000 patients -- U.S. patients. But can you talk a bit about is there a spectrum of severity? What percentage do you think will be really first comers to this medication?

Yes. So the way -- we've done a lot of market research. So the 1,000 in our view, is really representing that moderate-to-severe end of the spectrum. There certainly are likely -- all rare diseases have the full spectrum of mild, moderate and severe. But I think what we've shown with our Phase III study and what we believe is representative of the overall market is who are still getting those repeated severe infections. Our Phase III showed that these patients were getting 4 to 5 infections in a year, and they had about 7 weeks of illness per year. Thankfully, with the XOLREMDI treatment in the Phase III, we saw a reduction to about 1.5 infections per year and only 2 weeks in total of illness or infections a year. So I think we are incredibly pleased with that data set, and that is going to help drive, of course, the utility of it across the patients who still need it, which are the ones that are getting these recurrent infections.

Okay. Now pivoting to the launch. Can you talk a bit about the price, payer coverage, what kind of sales force you're putting together?

Yes. So we shared that -- so we were launched in the U.S. We have about 2 dozen people in the field, including our sales force as well as our medical science liaisons and patient advocacy individuals. And we -- that covers the full country. So it's actually a very specialized, very experienced group of people that we've been able to thankfully attract to join X4, they have rare disease experience. It's really about driving education, awareness and then helping support with the physician and the patient. We have a hub, a payer -- I'm sorry, a hub system where patients and physicians can utilize the start forms to really get patients on quick-start therapy and then help them navigate the payer coverage in the meantime as well.

And are these patients -- is there a pretty good understanding of where the patients are going to seek treatment? What the care is like, geography breakdown?

Yes. So we've been in the field for a couple of years, obviously, pre-commercial with education and awareness. So we do have kind of our tiers. We have physicians that we know that are managing WHIM patients today. And then we broaden those tiers out as we've done market research and begin to develop tiers of relationships and tiers of awareness. So we certainly feel very comfortable again with that 1,000 number and then how quickly we penetrate that is really a cascade of working through these different layers of relationships and also education and awareness around the recent approval of XOLREMDI.

And as you had said previously, this is the first approval for WHIM syndrome. But is there -- how are these patients currently being addressed? What's the competitive landscape look like? I know IVIG, G-CSF and then, of course, plerixafor, but that's -- I don't think that's used specifically for WHIM syndrome. Similar mechanism.

Yes. Yes. So the standard of care is heterogeneous like the disease, and they're basically trying to address the different slices of the disease as really versus the underpinnings or the single root cause. So yes, these patients, if they have low immunoglobulin levels, they can be prescribed intravenous or subcu immunoglobulins. In our Phase III, we still saw a benefit on top of that. So there is still unmet need even despite IG. And at times, they are given G-CSF. In particular, in WHIM patients, the bone marrow pain associated with G-CSF administration is exceedingly high. So it's used in very limited ways and sort of in more rescue situations. So I would say these patients have a heterogeneous and piecemeal standard of care. We certainly expect that a once-daily oral treatment that has the benefit and safety profile that mavorixafor has will have -- will really become the underpinnings of their care long term.

Okay. That's helpful. Last question on WHIM is, whether you're on track to submit your European MAA by early 2025. Is everything on track there?

Yes. Absolutely, we are pleased. I mean, we started this journey with our European regulators many years ago where we sought scientific advice so that we can make sure our Phase III was lined up with their expectations. And then, of course, now with the study completed, we've gone back to them with basically, like it's like a pre-NDA meeting equivalent with the MAA, and we are nicely on track, clear on what the expectations are. We'll be delivering that, filing early 2025.

And how does the prevalence look in Europe?

Very similar. There's no -- sometimes with these rare genetic diseases, you'll find pockets that are more founder effect related, so there'll be enriched populations. But interestingly, with WHIM syndrome, it's been a pretty consistent prevalence across the world that we found directly. Certain regions in the world you kind of propense -- have sort of higher propensity of rare diseases in general, but no founder effect per se in terms of the genetics.

Okay. That's helpful. I guess the last question, but this is also pivoting to chronic neutropenia, which is a much larger indication. You also have studies underway there. How did the results in WHIM syndrome inform your approach to testing mavorixafor for chronic neutropenia?

Yes. Now that is a great connection because -- so WHIM syndrome is a form of congenital neutropenia. It's very specific in design, which was a great way to start our clinical development strategy at kind of a higher and enriched population to help for success. But that's where we really can crosswalk very nicely. What we have seen with mavorixafor in WHIM, is an increase of neutrophil counts to about 800 to 1,000 cells per microliter and this really consistent benefit in infection burden. So rate, severity and duration were nicely reduced with mavorixafor in our Phase III. Neutrophils then crosswalk into chronic neutropenia. These patients similarly have low neutrophil counts and they need to boost those to fight infections. So as we've generated data in WHIM syndrome connecting it -- it's called ANCs, absolute neutrophil counts, to reduce infection burden, we can now crosswalk or begin to crosswalk what we're seeing in chronic neutropenia because similarly, our ANCs are nicely boosted over time in CN. So we can hopefully draw that conclusion and give us huge conviction to move forward as quickly as possible with our CN Phase III.

Okay. Could we talk about the target patient profile, severity of these patients, prevalence, anything there for chronic neutropenia?

Yes. So chronic neutropenia is an easier disease to study because it's a larger population, and therefore, there's more information in our health care records and actually more diagnostic codes to truly identify these patients. So to date in the United States, there are about 50,000 patients with diagnosed chronic neutropenia, ICD-10 code. So it's a much easier group to track over time. From that first sort of market research that we've done, we recognize that about 1/3 of those patients, 15,000, are truly high unmet need. They're either refractory or unable to take G-CSF, which is the only approved treatment or they're just -- sometimes they're contraindicated because of their etiologies of their CN. So that patient population, the 15,000, is how we've now targeted our Phase III trial design. It is focusing on high unmet need, refractory patients to G-CSF. They have recurrent severe infections and low neutrophil counts. So we believe if we are successful with our CN Phase III as we were in WHIM, we're really going to continue to unlock the benefit of this drug for even a much larger patient population.

Okay. Before jumping into the data you've presented so far, can we just talk about how G-CSF is currently used and as you talked about the unmet need there?

Yes. So G-CSF is the only approved drug to chronically treat severe chronic neutropenia or SCN is the label. The drug on the positive, of course, do help with infection benefit. When you increase neutrophil counts, it's very nicely correlated with a decrease in infections. And maybe this audience might be more familiar with like chemotherapy-induced neutropenia, right? You give someone chemo. Unfortunately, it wipes out their bone marrow and they have very high risk of infections. G-CSF is used to treat those patients acutely to kind of bridge them through their chemo. So again, it's a nicely validating approach to neutrophil counts up, infections down. Now we are moving to a completely different population. These people are not on chemo. They're just -- their own primary disease is that their bone marrow is suppressed, and they can't produce enough neutrophils. So these patients are also given G-CSF to try to help restore their neutrophil counts, and on the positive side, it does. However, G-CSF has very significant long-term risks in terms of increased malignant transformation to the bone marrow. So some physicians are very hesitant to give it chronically over time. And then if you think about these poor patients, they are experiencing the bone pain that you experience with G-CSF but it's for the rest of their life. It's not a bridge until they get through chemo. It is daily to weekly depending upon their frequency of injections. And it's a tough drug to take. It was not really designed to be a chronic prophylactic treatment. So we believe with mavorixafor, if an oral, safe, once-daily can help also reduce that infection burden, it will again kind of create the right drug for these patients to be sustainable for their life-long journey.

Okay. Great. Recently, you presented follow-up Phase II data, if I'm correct. Maybe initially, we can talk about the Phase II trial design, enrollment criteria, the severity of this patient population and then just data to date.

Yes. So the Phase II study, I mean, again, X4 is really always trying to do the most sort of groundbreaking approach. No one has studied chronic neutropenia in 30 years since G-CSF. So our Phase II was really the kind of level set. Let's take this population, understudied, misunderstood and just begin the journey of what happens when you give mavorixafor, same doses in WHIM, to these patients regardless of how they walk in the door. So some were neutropenic without G-CSF, some were neutropenic still on G-CSF and some were normal on G-CSF, but interested in seeing if they could ever reduce it. So those were kind of the 3 tracks that we explored with our Phase II, it was an all-comers exploratory trial. So in June, we actually got to share information on 2 of those 3 questions. So can the drug impact neutrophils as a monotherapy? Patients came in neutropenic, they actually should have been on G-CSF, but they were not. They're either refractory or their risk is too high. Nicely, they took mavorixafor oral, once daily, and we see this nice, sustained curve of neutrophil counts increasing, very similar to what we saw with WHIM Phase III. So again, it gives us confidence this drug has the possibility of helping their infections. The second category was patients who are on stable G-CSF, can you give the drug safe in combination with G? And can you see an effect? Or is there some ceiling with 2 drugs? The beauty of that second channel that we saw is, of course, we can give it safely. That was a very positive outcome. And then number two, there isn't a ceiling effect. When you add mav to G-CSF, you actually see an increase of almost an additional 3,000 cells per microliter on average. That's a really big jump. That's double what we really need to be normal. So it was a really nice resounding combination effect. And then that led us to, hey, this looks like you can actually reduce G-CSF. You could pull away some of that drug that is the harder of the 2 to take, frankly, and that leads us to the third question, which we have yet to present data on, that will come in November. When you combine the drug and they achieve a -- neutrophil counts, can you start to back off of G-CSF so it becomes more tolerable and less risky to the patient? So those are the last set of data, that'll come in November. We did have a couple of patients anecdotally that we presented about a year ago. And the answer looks pretty good, but of course, we need a fulsome data set. We'll have 8 patients worth of data coming in November.

Eight patients, okay. And could you kind of set expectations going into the November readout? What are the key efficacy or clinically relevant endpoints that you're looking at? I know ANC, change in ANC, is there a threshold you're hoping to hit there?

Yes. So the most important thing is always the doctor and the patient. What is relevant to them. So in this universe of treating chronic neutropenia today, physicians will target about 800 to 1,000 in these patients to get -- they want to see ANCs of about 800 to 1,000 on an absolute scale to feel like they've reduced their risks enough. And enough means -- G-CSF is a tough drug to take, so they're always trying to kind of titrate that balance. So the Phase II study, we said, use mavorixafor and G-CSF as you would in your normal clinical practice. So clinicians were targeting 800 to 1,000 as their metric of when they can adjust the dose. So what we can expect in November is, what does that look like? Can we achieve that clinical target of 800 to 1,000 with mavorixafor alone? Can we do it in combination with G or some reduced proportion of G? So that will be helpful for sort of the overall spectrum of opportunity to potentially either completely back patients off or back them off meaningfully so that they have much less G. Or I still think some patients will always need G. In the spectrum of human immuno disease, there's always going to be those tough to treat ones. We don't want to exclude those, but we'll start to see what that full picture look like.

So the patients who are on G going into the study where you'll see 8 patients' worth of data in November. What was their baseline neutrophil counts approximately?

Yes. So it is variable. So some are neutropenic meaning below 1,500, but some of them are also in the normal range, which is above 1,500. So what the win is for these 8 patients is, can they stay around 1,000 -- 800 to 1,000 with mavorixafor, but with some or a lot less G, or no G. So that's really the metric for success is. Can you get them into their clinical target zone, that is current standard of care today, with either just mav or mav plus much less G, or -- we'll see what that balance between mav, mav plus G is.

And the physicians, it's up to them in regards to how they'd like to titer down the G?

Yes. The challenge with G, I mean, we'd love to create some formula that is sort of an automatic, but G-CSF is a very tough drug to administer. The same patient -- or 2 different patients with the same weight could have dramatically different reactions to G-CSF. So it is very individualized, which makes it hard to manage patients. Like literally, we have some patients that have to -- they come in for their G-CSF treatment alone. It takes the many months to find the right dose. So this 6-month trial on 8 patients will help us begin to sort of, I would say, create guardrails around what we think is possible. But at the end of the day, hopefully, when the drug is used commercially, it will be always in the patients -- in the physician's hands to determine how that happens.

And I imagine you've spoken to many KOLs. Do you think there's a disconnect between investor expectations or how investors are digesting these data and what KOLs and physicians are?

Absolutely. So I mean I think what I think is hardest for investors is lack of benchmark. Really, I mean, we are in a brand-new therapeutic area, just immunodeficiencies in general. And then chronic neutropenia, there hasn't been anything for 30 years. So it's very difficult for today's investor to know what good looks like. Our KOLs that treat patients and our clinicians who treat patients every week and month know what good looks like. They know they want to see that 800 to 1,000 target, and they believe that when they see that, that's going to translate into infection benefit. And we've proven that in WHIM syndrome, right, that same target and same expectations were proven out with mav and WHIM and our ultimate approval of XOLREMDI. So I think the investor community just needs more time to really connect those dots, right? We have an approval with XOLREMDI, that profile for approval is already looking good enough with mavorixafor and CN, certainly from the clinician's perspective because they're helping us enroll the Phase III, and certainly, you'll hear that directly from the KOLs as we bring them on some of our investor calls. We're very excited about a safe oral, once daily, fixed dose drug, simple to administer and hopefully something that can support these patients throughout their life.

Okay. I think that's a good pivot now. We can now talk about the Phase III trial, how the Phase II kind of informed the Phase III design moving forward as either monotherapy. Basically thought process behind the pivotal Phase III trial.

Yes. So the Phase III trial, starting with the product and working backwards, we want to deliver something that is clinically meaningful for patients. Today in the U.S., that's a 15,000 number that I mentioned. These are the folks with recurrent infections with or without G-CSF. They just -- the standard of care is not delivering what they need, and they are getting repeat chronic infections and severe ones. And over time, actually you lose function. So you lose lung function, you lose hearing function. So we know what long-term implications of those repeated infections are. So our Phase III study design is to target those severe patients. To join the study, you must have had at least 2 infections in the year prior. That's the definition of recurrence. And then you must be neutropenic. You must show an abnormally low neutrophil count which puts you at risk. So those are the inclusion criteria. Now those inclusion criteria can be on top of whatever standard of care you have. About 2/3 of the patients we'll enroll in the study will not have anything on board. Those are the refractory or intolerant or just not able to be administered G-CSF. Some of those will still have some G-CSF on board. They're able to tolerate at least the right dose but still not achieve a full clinical response. So that's the study design because we think that design will ultimately target the high unmet need patients regardless of standard of care who still need more and are still at high risk.

So there's not a dedicated monotherapy arm?

No, so there is, there's a [ hunt ]. So just -- it's a randomized placebo-controlled double-blinded study, very high bar, 1 year to complete the study on treatment. And about 2/3 of the patients will be on monotherapy, balanced across both arms. So 60 -- I'm sorry, about 90 patients out of the 150 will be on monotherapy, mavorixafor alone, or placebo. And then about the remaining 60 will be on whatever background G-CSF as long as they meet the inclusion criteria and also balanced across each arm.

Okay. Great. And how is enrollment going? If you can talk about that at all.

Good. Absolutely. I mean I'm sure folks familiar with our industry, a Phase III trial is always the highest operational lift for any company. It's all about numbers. So just a benchmark, our WHIM Phase III had about 30 patients and about 18 sites. Now we're going for a fivefold multiple of that, fivefold operational kind of challenge. But we've been there, done that before. So I would say we have direct learnings from the WHIM Phase III that apply to our operational success in CN. And thankfully, there's not another global pandemic going on right now, which was certainly a lot of headwinds for immunocompromised patients during 2020 to 2022. So we are in a very good position. We know the site. We know the countries and we know the regulators. That site activation curve is coming first and then that patient enrollment curve is following very nicely. We fully expect to enroll the study by midyear next year.

And then the -- there's no interim readout. When will be the final data set come?

Yes. No interim readout. I can assure you as a small cap biotech we would love something as fast, as soon as possible, but we won't sacrifice the integrity of a trial. So it will be a full readout approximately a year after enrollment. So mid-2026, was data second half of 2020 -- Phase III data second half of '26 is where we're looking at.

Okay. Great. And then on your second quarter earnings call, you reported $170 million in cash, cash equivalents, which is expected to provide a runway into late '25. Could you just walk me through a bit of your thoughts on capital allocation? You have the launch going on, the Phase III, finishing up the Phase II. Any thoughts around the financials?

Yes. So we recognize the kind of the continued drumbeat of the company. In terms of milestones are the additional data in CN at the end of this year, MAA approval early -- sorry, submission and approval kind of early next year to later next year and then CN Phase III data second half of 2026. You mentioned cash through the end of -- end of 2025. So we do have capital needs. There's a lot of ways that we're exploring to solve for that. So we have shared that we're looking for an ex-U.S. partnership. Certainly, with the ingredients of an FDA approval, great CN Phase II data and an MAA submission on the horizon, that certainly are the right ingredients for a successful recipe for an ex-U.S. partnership, assuming we get the right terms. As certainly, our cash runway doesn't include revenue from XOLREMDI. So there's always extensions beyond that. And other non-dilutive way certainly will be around sort of royalty deals, et cetera. So we do think we have a few levers to continue to pull on as we try to continue to capitalize the company. And certainly, equity is always on the table for companies at the right time. Of course, right now, we don't think the value proposition is right at this point for an equity component, but we have lots of options and are looking forward to our execution in the next few quarters.

So in regards to XOLREMDI guidance, revenue expectations, consensus. Any thoughts on that, basically?

Yes. No, I think the analysts have done a nice job kind of appreciating that. In 2024, it's really like building the infrastructure to enable that funnel and then 2025 is really where the revenue starts to pick up and have more of a material impact on our burn. Beyond that, again, 2026 and beyond, there's always a lot of wildcards as you get further out, but we feel reasonably represented. But at the end of the day, our job is about execution and delivering, and we certainly look forward to doing that.

Great. In the last few minutes, is there anything else I missed? Anything you think investors should be focusing on to get a better understanding of the X4 story?

Yes. I mean I think we have a simple story. And I think I will -- we've had the pleasure of talking to a lot of great investors here today. We have a simple story. We have an oral, once-daily treatment in this really neglected patient population, those shown at least in WHIM syndrome to correlate neutrophils up and infections down. And we have a much larger population coming imminently behind that, of which we've already shown neutrophils up. So I think we're in a really exciting moment in this company's history. We have an approved drug. We're launching, and we have something following fast on its heels. And we're here to stay. So we look forward to more opportunities to share in the future, and you can fact check me a year from now.

I guess last question, IP protection. How does that look going out?

Absolutely. so I've come from Genzyme on the deal side. So IP has always been a big focus of ours. We have issued U.S. patents through 2038 on the book -- sorry, it's called the fingerprint patent, on mavorixafor, this is the same type of IP that Biogen used on Tecfidera, so the composition claims have been off, but now we have composition claims on the full drug substance. My COO is here, and she knows exactly how important that is and how robust our processes are to support that. It's U.S. granted, I think it's also ex U.S. granted. And of course, we continue to build the multiple ring fences around IP, so a number of issued methods of treatment as well.

Well, great. Thank you very much. I really appreciate it.

I appreciate the time. Thank you, everyone. Thank you.

Thanks.