X4 Pharmaceuticals, Inc

Current report

The following discussion and analysis is intended to provide material information around events and uncertainties known to management that are relevant to an assessment of the financial condition and results of operations of X4 Pharmaceuticals and should therefore be read in conjunction with our audited Consolidated Financial Statements and the related notes thereto and other disclosures included as part of this Annual Report on Form 10-K, including the disclosures under Part I, Item 1A. Risk Factors.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in or implied by these forward-looking statements.

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For the discussion of the financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to our Annual Report on Form 10-K filed with the SEC on March 21, 2024.

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Overview

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We are a biopharmaceutical company discovering, developing, and commercializing novel therapeutics for the treatment of rare diseases and those with limited treatment options, with a focus on conditions resulting from dysfunction of the immune system. On April 29, 2024, we announced that the U.S. FDA approved our NDA for mavorixafor, which is being marketed in the U.S. under the trade name XOLREMDI, for use as an oral, once-daily therapy in patients aged 12 years of age and older with WHIM (warts, hypogammaglobulinemia, infections, and myelokathexis) syndrome, to increase the number of circulating mature neutrophils and lymphocytes. WHIM syndrome (Warts, Hypogammaglobulinemia, Infections, and Myelokathexis) is a rare combined primary immunodeficiency and chronic neutropenic disorder. Concurrent with the U.S. approval of XOLREMDI and pursuant to its Rare Pediatric Disease designation, the FDA granted us a PRV that we sold to another drug sponsor shortly thereafter.

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XOLREMDI Commercial Launch

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We are currently engaged in our U.S. launch of XOLREMDI in WHIM syndrome, continuing our engagements with physicians and rare disease patient advocacy organizations and our disease-awareness campaign to further the understanding of WHIM syndrome and educate patients and physicians on the importance and benefits of early diagnosis. We have entered into agreements with a third-party logistics organization and a specialty pharmacy to support the distribution of XOLREMDI in the U.S., to mitigate barriers to product access, and to provide a suite of patient support services to help patients through their treatment journey. We submitted a Marketing Authorisation Application (“MAA”) to the European Medicines Agency (“EMA”) in early 2025 seeking regulatory approval to commercialize mavorixafor for WHIM syndrome outside of the U.S. Such MAA was accepted for processing by the EMA in January 2025. As discussed further below, on January 13, 2025, we entered into a License and Supply Agreement (the “Norgine Agreement”) with Norgine Pharma UK Limited (“Norgine”), pursuant to which Norgine is granted an exclusive license to distribute, market and sell our drug product for all indications in the European Economic Area, Switzerland, the United Kingdom, Australia and New Zealand. In February 2025, we announced that we had entered into an agreement with taiba rare to distribute and commercialize XOLREMDI for the treatment of WHIM syndrome in select Middle East and North African countries. We continue to explore additional potential commercial and distribution opportunities in geographies where we may be able to efficiently leverage any of our regulatory approvals.

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The U.S. approval of XOLREMDI in the WHIM syndrome indication is the first for mavorixafor, which is an orally active, selective antagonist of chemokine receptor CXCR4, a key regulator of the movement of immune cells throughout the body. Due to its ability to increase the mobilization of white blood cells from the bone marrow into the bloodstream, we believe that mavorixafor has the potential to provide therapeutic benefit across a variety of immune system disorders in addition to WHIM syndrome.

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Phase 2 Clinical Study in Chronic Neutropenia

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Following positive results from a Phase 1b clinical study of a single dose of mavorixafor in people with idiopathic, cyclic, and congenital chronic neutropenia (“CN”), we recently completed and announced positive results from a Phase 2 clinical study evaluating the durability of effect, safety, and tolerability of chronic dosing of once-daily oral mavorixafor with or without concurrent treatment with injectable granulocyte colony-stimulating factor (“G-CSF”) in the same patient population.

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The results from the completed six-month study showed that once-daily oral mavorixafor was generally well tolerated and durably increased participants’ absolute neutrophil counts (“ANC”) both as a monotherapy and in combination with G-CSF, the only therapy approved in the U.S. for severe chronic neutropenia. In addition, when tested in combination with G-CSF, mavorixafor treatment enabled physicians to substantially reduce G-CSF dosing while maintaining normal mean ANC levels.

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Phase 3 Clinical Trial in Chronic Neutropenia

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We continue to progress our global, pivotal Phase 3 clinical trial, (the “4WARD” study) to evaluate the efficacy, safety, and tolerability of oral, once-daily mavorixafor (with or without stable doses of G-CSF) in people with congenital, acquired primary autoimmune, or idiopathic CN who are experiencing recurrent and/or serious infections. The 52-week trial is a randomized, double-blind, placebo-controlled, multicenter study aiming to enroll 150 participants. We believe we are on track to complete enrollment in the 4WARD study in the third or fourth quarter of 2025.

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We believe that successfully developing and commercializing mavorixafor to provide a new therapeutic option to individuals diagnosed with certain immunodeficiencies has the potential to revolutionize the current treatment landscape, which is principally served by injectable and infused therapies.

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2025 Restructuring

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In February 2025, we implemented a strategic restructuring of our business operations, workforce and capital spending to focus efforts on advancing mavorixafor to treat those with chronic neutropenia, while also optimizing its U.S. promotion of XOLREMDI (the “2025 Restructuring”). As part of the 2025 Restructuring, we implemented a net reduction of our employee headcount by 43 employees, or approximately 30% of our total workforce. The strategic restructuring activities include (i) discontinuing of research efforts, (ii) closing of our facility in Vienna, Austria, (iii) pausing pre-clinical drug candidate programs, (iv) scaling the U.S. commercial field team and supporting roles across our business and (v) streamlining other spending to support the ongoing clinical development of mavorixafor for the larger population of those with chronic neutropenia. We estimate that the workforce reduction will be substantially completed in the first quarter of 2025. We estimate that it will incur charges of approximately $3.0 million for severance and other employee termination-related costs, primarily in the first quarter of 2025. We expect the 2025 Restructuring will decrease annual spending by $30 to 35 million and believe it will have sufficient funds to support operations into the first half of 2026. The estimate of costs that we expect to incur related to the 2025 Restructuring as well as the decrease in annual spending, and the timing thereof are subject to a number of assumptions and actual results may differ.

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We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the actions described for the 2025 Restructuring above.

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On January 13, 2025, we entered into the Norgine Agreement, pursuant to which Norgine is granted an exclusive license to distribute, market and sell our product mavorixafor for all indications in the European Economic Area, Switzerland, the United Kingdom, Australia and New Zealand following regulatory approval. Pursuant to the terms of the Norgine Agreement, we received an upfront payment of €28.5 million upon signing of the agreement and could receive up to €226.0 million upon the achievement of certain regulatory, commercial and sales milestones. We will also receive escalating, double-digit royalties of up to mid-twenties on any future net sales of our drug product by Norgine. Norgine will be responsible for all market access and commercialization activities and will eventually hold all marketing authorizations in the licensed territories. We will manufacture and supply drug product to Norgine for a supply price derived from our product manufacturing cost plus a low double-teen digit margin.

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Results of Operations

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Comparison of the Years Ended December 31, 2024 and 2023

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The following table summarizes the results of our operations for the periods indicated:

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Product Revenue, Net

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Net revenue from the sale of our drug product was $2.6 million for the year ended December 31, 2024. There was no product revenue in the prior periods. We sell our approved drug product in the U.S. to a specialty pharmacy that dispenses the product to patients who have been prescribed our drug product by their health-care providers. We also sell our drug product through international distributors. There were no sales to international distributors for the year ended December 31, 2024. Net revenue includes reserves for distributor discounts, estimated rebates that we may owe to U.S. government payors, future co-pay assistance payments that we may owe for patients who enroll in our patient assistance program, and for potential product returns. As we have just recently launched our first drug product in the U.S. in 2024, we have limited history of returns or downstream rebates or co-pay assistance payments. Therefore, we expect to adjust these estimates quarterly as new information becomes available.

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Cost of Revenue

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For the year ended December 31, 2024, cost of revenue was $0.8 million. There was no cost of revenue in prior periods.

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Cost of revenue primarily consists of $0.5 million of amortization of an intangible asset related to accrued and paid milestone payments associated with our Genzyme license agreement, $0.2 million of sales-based royalty payments accrued and paid under our Genzyme license agreement, and $0.1 million of drug product costs.

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Research and Development Expenses

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Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates, including employee salaries and related expenses for personnel in our clinical operations, biostatistics, medical affairs, manufacturing and technical, quality and regulatory affairs departments; external expenses incurred in connection with the clinical development of our product candidates, including under agreements with third parties, such as consultants and contract research organizations (“CROs”); the cost of manufacturing drug products for use in our clinical trials, including under agreements with third parties, such as consultants and contract manufacturing organizations (“CMOs”); facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance; and costs related to compliance with regulatory requirements. We expense research and development costs as incurred. We capitalized as intangible assets certain milestone payments due under our key in-license agreement.

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Research and development expenses increased by $9.6 million for the year ended December 31, 2024, as compared to the prior year primarily due to an increase in unallocated expense. Unallocated expense increased primarily due to an increase in personnel within our research and development functions, primarily inour clinical operations, biostatistics, medical affairs, manufacturing and technical, and quality organizations.

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We expect that our research and development expenses, particularly for our mavorixafor programs, will be relatively consistent over the next several years as we continue to conduct our clinical trials of mavorixafor in chronic neutropenic disorders. Research and development expenses related to our X4P-002 and X4P-003 programs was not significant in 2024 or 2023 relative to our overall research and development expenses.

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Selling, General and Administrative Expenses

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Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation for personnel in sales 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.

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Selling, general and administrative expenses increased by $26.0 million to $61.5 million for the year ended December 31, 2024 as compared to $35.5 million in the prior year. The increase in selling, general and administrative expense was primarily due to an increase of $15.2 million in selling and marketing expenses, including increases in sales and marketing personnel and external marketing costs to support the ongoing launch activities of our approved product, XOLREMDI in the U.S. Selling, general and administrative expenses also increased due to an increase of $10.8 million in general and administrative expenses, primarily due to higher legal, corporate communications, accounting, information technology, and professional service costs associated with the ongoing commercialization of our drug product.

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Gain on Sale of Non-Financial Asset

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During the year ended December 31, 2024, we entered into contractual arrangement with a third party that transferred the rights to a Priority Review Voucher (“PRV”) awarded to the Company as a result of the FDA’s approval of XOLREMDI. The PRV was accounted for as an intangible asset with no accounting cost basis. The third party purchased the PRV for $105.0 million. As a result of the transfer of control of the PRV to the third party, the Company derecognized the associated intangible asset and recorded a gain through “gain on transfer of nonfinancial assets.” There was no such transaction in year ended December 31, 2023 and we do not expect similar PRV sales in the future.

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Operating Expenses

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Our operating expenses decreased by $68.6 million for the year ended December 31, 2024 as compared to the prior year. Excluding the impact of the PRV sale, operating expenses increased $36.4 million in the current year as compared to the prior year, primarily due to an increase in head count to support our U.S. launch of XOLREMDI and to support our 4WARD clinical trial. As a result of the strategic restructuring of our workforce and capital spending to focus efforts on advancing mavorixafor to treat those with chronic neutropenia, while also optimizing its U.S. promotion of XOLREMDI, we expect that our operating expenses will decrease by approximately $30.0 million to $35.0 million in 2025.

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Other (Expense) Income, Net

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The increase in other (expense) income, net, of $7.2 million for the year ended December 31, 2024 as compared to 2023 was primarily due (i) lower income resulting from the decrease in the fair value of outstanding Class C warrants, which are accounted for as a liability and are remeasured to fair value each period, as compared to the prior year and, (ii) an increase in interest expense associated with the Hercules Loan agreement due to more borrowings outstanding during the current period. These increases were partially offset by higher interest income earned in the current year on our marketable security portfolio as compared to the prior year.

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Income Taxes