UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
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 ☐
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).
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 filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller 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
Number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding on November 25, 2021:
References to Xilio
Unless otherwise stated, all references to “us,” “our,” “we,” “Xilio,” “Xilio Therapeutics,” “the Company” and similar references in this Quarterly Report on Form 10-Q refer to Xilio Therapeutics, Inc. and its consolidated subsidiaries. Xilio Therapeutics and its associated logos are registered trademarks of Xilio Therapeutics, Inc. Other brands, names and trademarks contained in this Quarterly Report on Form 10-Q are the property of their respective owners.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” or the negative of these words or other comparable terminology, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
● | the initiation, timing, progress and results of our research and development programs and preclinical studies and clinical trials; |
● | our plans to develop and, if approved, subsequently commercialize any product candidates we may develop; |
● | the timing of and our ability to submit applications for, and obtain and, if approved, maintain regulatory approvals for our product candidates; |
● | our estimates regarding expenses, future revenue, capital requirements and need for additional financing; |
● | our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and cash equivalents; |
● | the potential advantages of our current and future product candidates; |
● | the rate and degree of market acceptance of our product candidates, if approved; |
● | our estimates regarding the addressable patient population and potential market opportunity for our current and future product candidates; |
● | our commercialization, marketing and manufacturing capabilities and strategy; |
● | our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates; |
● | our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives; |
● | the impact of government laws and regulations; |
● | our competitive position and expectations regarding developments and projections relating to our current or future competitors and any competing therapies that are or become available; |
● | developments relating to our competitors and our industry; |
● | our ability to establish and maintain collaborations or obtain additional funding; |
2
● | our expectations regarding the time during which we will be an emerging growth company under the JOBS Act; and |
● | the impact and scope of the COVID-19 pandemic on our business, operations, strategy, goals and anticipated milestones, as well as our response to the pandemic. |
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly those described in the “Risk Factors” section in Part II, Item 1A of this Quarterly Report on Form 10-Q, that could cause actual results or events to differ materially from the forward-looking statements that we make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or enter into.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, performance or achievements may be materially different from what we expect. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
Risk Factor Summary
Our business is subject to numerous risks that, if realized, could materially and adversely affect our business, financial condition, results of operations and future growth prospects. These risks are discussed more fully in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:
● | Our business is highly dependent on the success of our current product candidates, which are in the early stages of development and will require significant additional preclinical and clinical development before we can seek regulatory approval for and commercially launch a product. |
● | Our approach to the discovery and development of product candidates based on our technological approaches is unproven, and we do not know whether we will be able to develop any products of commercial value. |
● | Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on our business. |
● | We may encounter substantial delays in the commencement or completion, or termination or suspension, of our clinical trials, which could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects. |
● | Our product candidates may cause undesirable or unexpectedly severe side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any. |
● | 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. |
● | We expect to develop certain of our product candidates in combination with third-party drugs and we will have limited or no control over the safety, supply, regulatory status or regulatory approval of such drugs. |
3
● | Manufacturing biologics is complex, and we may experience manufacturing problems that result in delays in our development or commercialization programs. |
● | We face risk related to our reliance on our current and any future third-party contract manufacturers, or CMOs. For example, the CMOs on which we rely may not continue to meet regulatory requirements, may have limited capacity and may experience interruptions in supply, any of which could adversely affect our development and commercialization plans for our product candidates. |
● | We expect to rely on third parties to conduct, supervise and monitor IND-enabling studies and clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business, reputation and results of operations. |
● | We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do. |
● | If we are unable to obtain and maintain patent protection for any product candidates we develop or for other proprietary technologies we may develop, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates and technology similar or identical to our product candidates and technology, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected. |
● | We rely on in-license agreements for patent rights with respect to our product candidates and may in the future acquire additional third-party intellectual property rights on which we may similarly rely. We face risks with respect to such reliance, including the risk that we could lose these rights that are important to our business if we fail to comply with our obligations under these licenses. |
● | The COVID-19 pandemic may affect our ability to initiate and complete preclinical studies, delay the initiation of our planned and any future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, each of which could result in adverse effects on our business, on raising capital and on our operations. |
Availability of Other Information About Xilio Therapeutics
Investors and others should note that Xilio Therapeutics communicates with its investors and the public using its company website (www.xiliotx.com), including but not limited to investor presentations and scientific presentations, filings with the U.S. Securities and Exchange Commission (SEC), press releases, public conference calls and webcasts. You can also connect with Xilio Therapeutics on Twitter (@xiliotx) or LinkedIn. The information that Xilio Therapeutics posts on these channels and websites could be deemed to be material information. As a result, Xilio Therapeutics encourages investors, the media and others interested in Xilio Therapeutics to review the information that it posts on these channels, including Xilio Therapeutics’ investor relations website, on a regular basis. This list of channels may be updated from time to time on Xilio Therapeutics’ investor relations website (ir.xiliotx.com) and may include other social media channels than the ones described above. The contents of Xilio Therapeutics’ website or these channels, or any other website that may be accessed from its website or these channels, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
4
TABLE OF CONTENTS
Page | ||
6 | ||
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 | 6 | |
7 | ||
8 | ||
10 | ||
11 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |
37 | ||
37 | ||
38 | ||
38 | ||
101 | ||
102 | ||
5
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
XILIO THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
| September 30, |
| December 31, | |||
2021 | 2020 | |||||
ASSETS |
|
|
|
| ||
Current assets |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Prepaid expenses |
| |
| | ||
Other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Restricted cash |
| |
| | ||
Property and equipment, net |
| |
| | ||
Operating lease right-of-use asset |
| |
| | ||
Other non-current assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
| ||
Current liabilities |
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|
|
| ||
Accounts payable | $ | | $ | | ||
Accrued expenses |
| |
| | ||
Operating lease liability, current portion |
| |
| | ||
Notes payable, current portion |
| — |
| | ||
Other current liabilities |
| |
| | ||
Total current liabilities |
| |
| | ||
Notes payable, net of current portion |
| |
| | ||
Operating lease liability, net of current portion |
| |
| | ||
Other liabilities, long-term |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 7) |
|
|
|
| ||
Convertible preferred stock (Series A, A-1, A-2(A), A-2(A-1), B and C), $ |
| |
| | ||
Stockholders’ deficit |
|
|
|
| ||
Common stock, $ |
|
| ||||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ deficit |
| ( |
| ( | ||
Total liabilities, convertible preferred stock and stockholders’ deficit | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||
Operating expenses |
|
|
|
|
|
|
|
|
| ||||
Research and development | $ | | $ | | $ | | $ | | |||||
General and administrative |
| |
| |
| |
| | |||||
Total operating expenses |
| |
| |
| |
| | |||||
Loss from operations |
| ( |
| ( |
| ( |
| ( | |||||
Other income (expense), net |
|
|
|
|
|
|
|
| |||||
Other expense, net |
| ( |
| ( |
| ( |
| ( | |||||
Total other income (expense), net |
| ( |
| ( |
| ( |
| ( | |||||
Net loss and comprehensive loss | ( | ( | ( | ( | |||||||||
Net loss per share, basic and diluted | ( | ( | ( | ( | |||||||||
Weighted average common shares outstanding, basic and diluted |
| |
| |
| |
| |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Preferred Units and Convertible Preferred Stock and Members’ and Stockholders’ Deficit
(In thousands, except share and unit data)
(Unaudited)
| Series A |
| Series A-1 |
| Series B |
| Series C |
|
|
|
|
|
| Total | |||||||||||||||||||||
Convertible | Convertible | Convertible | Convertible | Members' and | |||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
|
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Deficit | |||||||||
Balance at December 31, 2020 | | $ | | | $ | | | $ | | — | $ | — | | $ | — | $ | | $ | ( | $ | ( | ||||||||||||||
Issuance of Series B convertible preferred stock, net of issuance costs of $ |
| — |
| — |
| — |
| — |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||
Issuance of Series C convertible preferred stock, net of issuance costs of $ |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| |
| — |
| — |
| — |
| — |
| — | |||||||||
Vesting of restricted common stock |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| — | |||||||||
Exercise of stock options |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| |
| — |
| | |||||||||
Equity-based compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | |||||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||||||
March 31, 2021 |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | — | $ | | $ | ( | $ | ( | |||||||||
Vesting of restricted common stock |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| — | |||||||||
Exercise of stock options |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| |
| — |
| | |||||||||
Equity-based compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | |||||||||
Net loss |
| — |
| — |
| — |
| — |
| — | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | |||||||||||
June 30, 2021 |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | — | $ | | $ | ( | $ | ( | |||||||||
Vesting of restricted common stock |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
|
| — |
| — | ||||||||||
Exercise of stock options |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| |
| — |
| | |||||||||
Equity-based compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | |||||||||
Net loss |
| — |
| — |
| — |
| — |
| — | — |
| — | — |
| — |
| — |
| — |
| ( |
| ( | |||||||||||
September 30, 2021 |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | — | $ | | $ | ( | $ | ( |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Preferred Units and Convertible Preferred Stock and Members’ and Stockholders’ Deficit - Continued
(In thousands, except share and unit data)
(Unaudited)
Series A | Series A-1 | Series B |
|
| Total | |||||||||||||||||||||||||||||||||||||||||||||
Series A | Series A‑1 | Series B | Convertible | Convertible | Convertible | Members' and | ||||||||||||||||||||||||||||||||||||||||||||
Preferred Units | Preferred Units | Preferred Units | Preferred Stock | Preferred Stock | Preferred Stock | Common Units | Common Stock | Additional | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||
| Units |
| Amount |
| Units |
| Amount |
| Units |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
|
| Units |
| Amount |
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Deficit | ||||||||||||
Balance at December 31, 2019 | | $ | | | $ | | | $ | | — | $ | — | — | $ | — | — | $ | — | | $ | — | — | $ | — | $ | | $ | ( | $ | ( | ||||||||||||||||||||
Issuance of Series B Preferred units, net of issuance costs of $ | — |
| — |
| — |
| — |
| |
| |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |||||||||||||
Equity-based compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||||||
March 31, 2020 |
| | $ | |
| | $ | |
| | $ | |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| | $ | — |
| — | $ | — | $ | | $ | ( | $ | ( | ||||||||||||
Effect of reorganization |
| ( |
| ( | ( |
| ( |
| ( |
| ( |
| | $ | |
| | $ | |
| | $ | |
| ( |
| — |
| |
| — |
| — |
| — |
| — | |||||||||||||
Vesting of restricted common stock |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| — | ||||||||||||
Equity-based compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||||||
Net loss |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||||||||
June 30, 2020 |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| | $ | |
| | $ | |
| | $ | |
| — | $ | — |
| | $ | — | $ | | $ | ( | $ | ( | ||||||||||||
Vesting of restricted common stock |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| — |
| — |
| — | ||||||||||||
Exercise of stock options |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| |
| — |
| | ||||||||||||
Equity-based compensation expense |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| — |
| | ||||||||||||
Net loss |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — |
| — |
| — | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||||||||||
September 30, 2020 |
| — | $ | — |
| — | $ | — |
| — | $ | — |
| | $ | |
| | $ | |
| | $ | |
| — | $ | — |
| | $ | — | $ | | $ | ( | $ | ( |
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
XILIO THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30, | ||||||
| 2021 |
| 2020 | |||
Cash flows from operating activities: | ||||||
Net loss |
| $ | ( |
| $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
| ||
Depreciation and amortization |
| |
| | ||
Non-cash interest expense |
| |
| ( | ||
Equity-based compensation expense |
| |
| | ||
Loss on disposal of property and equipment | | — | ||||
Change in fair value of warrant and derivative liabilities |
| |
| | ||
Changes in operating assets and liabilities: |
|
| ||||
Prepaid and other assets |
| ( |
| | ||
Operating lease right-of-use asset |
| |
| | ||
Accounts payable |
| ( |
| | ||
Accrued expenses and other liabilities |
| ( |
| | ||
Operating lease liability |
| ( |
| ( | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities: |
|
|
|
| ||
Purchases of property and equipment |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: |
|
|
|
| ||
Repayments of debt principal | ( | — | ||||
Proceeds from debt issuance, net of issuance costs |
| |
| — | ||
Payments of finance lease |
| ( |
| ( | ||
Proceeds from issuance of Series B preferred units, net of issuance costs |
| — |
| | ||
Proceeds from issuance of Series B convertible preferred stock, net of issuance costs | | — | ||||
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs | | — | ||||
Proceeds from exercise of stock options |
| |
| | ||
Net cash provided by financing activities |
| |
| | ||
Increase (decrease) in cash, cash equivalents & restricted cash |
| |
| ( | ||
Cash, cash equivalents and restricted cash, beginning of period |
| |
| | ||
Cash, cash equivalents and restricted cash, end of period |
| $ | |
| $ | |
Supplemental cash flow disclosure: |
|
|
|
| ||
Cash paid for interest |
| $ | |
| $ | |
Supplemental disclosure of non-cash activities: |
|
|
|
| ||
Right-of-use assets obtained in exchange for operating lease liabilities |
| $ | — |
| $ | |
Right-of-use assets obtained in exchange for finance lease liabilities |
| $ | — |
| $ | |
Tenant improvements funded by landlord |
| $ | — |
| $ | |
Capital expenditures included in accounts payable or accrued expenses | $ | | $ | | ||
Deferred offering costs included in accounts payable or accrued expenses | $ | | $ | — | ||
Recognition of derivative liability in connection with long-term debt facility |
| $ | |
| $ | — |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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XILIO THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, unless otherwise stated)
(Unaudited)
1. Description of Business, Organization and Liquidity
Description of Business
Xilio Therapeutics, Inc., incorporated in Delaware in June 2020, is a biotechnology company focused on harnessing the immune system to achieve deep and durable clinical responses to improve the lives of patients with cancer.
For purposes of these condensed consolidated financial statements, the “Company” refers to Xilio Therapeutics LLC (formerly Akriveia Therapeutics Inc., Akriveia Therapeutics LLC and Akrevia Therapeutics LLC) prior to the reorganization described below, and Xilio Therapeutics, Inc. after such reorganization. The Company’s headquarters are based in Waltham, Massachusetts.
Organization
Akriveia Therapeutics Inc. was incorporated in Delaware in June 2015. In May 2016, Akriveia Therapeutics Inc. completed its first tax free reorganization, and the parent entity became Akriveia Therapeutics LLC. Akriveia Therapeutics LLC subsequently changed its name to Akrevia Therapeutics LLC in May 2018 and then to Xilio Therapeutics LLC in February 2020. In June 2020, the Company completed a series of transactions pursuant to which Xilio Therapeutics LLC became a direct, wholly owned subsidiary of Xilio Therapeutics, Inc., and all of the outstanding membership interests of Xilio Therapeutics LLC were exchanged for equity securities of Xilio Therapeutics, Inc. and Xilio Therapeutics, Inc. became the parent entity (the “Reorganization”). The purpose of the transaction was to reorganize the corporate structure so that existing investors would own capital stock in a corporation rather than equity interests in a limited liability company.
Upon consummation of the Reorganization, the historical consolidated financial statements of Xilio Therapeutics LLC became the historical consolidated financial statements of Xilio Therapeutics, Inc.
Liquidity
Since inception, the Company has devoted substantially all of its financial resources and efforts to research and development activities.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing research programs and conducting additional research programs, advancing the Company’s current and future product candidates into preclinical and clinical development, seeking marketing approvals for any product candidates that successfully complete clinical trials, obtaining, expanding, maintaining and defending the Company’s intellectual property, and hiring additional clinical, regulatory, and scientific personnel. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and will need to obtain regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.
On October 26, 2021, the Company completed its initial public offering (“IPO”) of common stock and issued and sold an aggregate of
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the closing of the IPO, all shares of the Company’s then outstanding preferred stock automatically converted into an aggregate of
Prior to its IPO, the Company had primarily funded its operations with proceeds from the sale of convertible preferred units and convertible preferred stock and a debt financing. As of September 30, 2021, the Company had cash and cash equivalents of $
2. Summary of Significant Accounting Policies
Basis of Presentation
These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission, (the “SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).
In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that the Company either (1) irrevocably elects to “opt out” of such extended transition period or (2) no longer qualifies as an emerging growth company. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of its initial public offering or such earlier time that it is no longer an emerging growth company.
The Company’s significant accounting policies are disclosed in the audited consolidated financial statements included in the Company’s final prospectus for its IPO, dated October 22, 2021, and filed with the SEC, pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Prospectus”). Since the date of such audited consolidated financial statements, there have been no changes to the Company’s significant accounting policies except as noted below.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021 and 2020, the statements of cash flows for the nine months ended September 30, 2021 and 2020 and the condensed consolidated statements of preferred units and convertible preferred stock and members’ and stockholders’ deficit for the nine months ended September 30, 2021 and 2020 are unaudited. The financial data and other information contained in the notes thereto as of and for the three and nine months ended September 30, 2021 and 2020 are also unaudited. The condensed consolidated balance sheet data as of December 31, 2020 was derived from the Company’s audited consolidated financial statements included in the Prospectus.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only
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normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2020, and the notes thereto, included in the Prospectus.
The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ended December 31, 2021, or any other interim periods, or any future year or period.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of expenses during the reporting period. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Factors that may affect estimates, include expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. Significant estimates of accounting reflected in these condensed consolidated financial statements include, but are not limited to, estimates related to accrued expenses, contingent liabilities associated with the consummation of specified transactions, including an initial public offering, the valuation of equity-based compensation, including incentive units, stock options and restricted common stock, and income taxes. Actual results could differ from those estimates.
Cash Equivalents and Restricted Cash
The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. Cash equivalents, which consist of money market accounts, are stated at fair value. Restricted cash primarily represents a letter of credit issued to the landlord of the Company’s facility lease and is reflected in non-current assets on the accompanying condensed consolidated balance sheets.
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
| | ||
Total cash, cash equivalents and restricted cash as shown on the condensed consolidated statement of cash flows | $ | | $ | |
Deferred Offering Costs
The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until the related financings are consummated. After consummation of the equity financing, such costs are reclassified as a reduction to additional paid-in capital generated as a result of the related financing. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately and accounted for as operating expenses in the condensed consolidated statements of operations and comprehensive loss. Deferred offering costs are presented as a component of other current assets on the condensed consolidated balance sheets. As of September 30, 2021, the Company capitalized $
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Comprehensive Loss
Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss includes net loss and the change in accumulated other comprehensive loss for the period. The Company did not have any items of comprehensive loss other than its net loss for the three and nine months ended September 30, 2021 and 2020.
Equity-Based Compensation
The Company utilizes significant estimates and assumptions in determining the fair value of its equity and equity-based awards. Beginning in the nine months ended September 30, 2021, the Company determined the fair value of shares of its common stock underlying stock-based awards granted using a hybrid approach. The hybrid approach is a scenario-based analysis and where one or more of the scenarios allocate the equity value utilizing the option-pricing method (“OPM”). When using the hybrid approach, the Company estimates the probability-weighted value across multiple scenarios but used the OPM to estimate the allocation of value within at least one of the scenarios. In addition to a scenario using the OPM, the hybrid method also considers an initial public offering scenario in which the shares of convertible preferred stock are assumed to convert to common stock. The future value of the common stock in the initial public offering scenario was discounted back to the valuation date at an appropriate risk adjusted discount rate. In the hybrid method, the present value indicated for each scenario was probability weighted to arrive at an indication of value for the Company’s common stock.
Recently Adopted Accounting Pronouncements
The Company did not adopt any new accounting standards during the nine-month period ended September 30, 2021. The Company continues to evaluate accounting standards that were recently issued but not yet adopted as of September 30, 2021.
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3. Fair Value Measurements
The Company measures the following financial liabilities at fair value on a recurring basis. The fair value of these liabilities was determined as follows (in thousands):
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| 2021 |
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Financial liabilities: |
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Debt derivative liability | $ | | $ | — | $ | — | $ | | ||||
Other derivative liability |