What changed in this filing

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Item 1A. Risk Factors

2023-11-09 compared with 2023-08-14 · 53 added, 46 removed, 1646 unchanged (6% of the section changed)

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Our recurring losses from operations and the early development stage of our lead product candidates raise substantial doubt regarding our ability to continue as a going concern.

If we are unable to raise substantial additional capital to finance our operations, we may be forced to delay, reduce or eliminate one or more of our research and development programs or other operations.

As of June 30, 2023, we had cash and cash equivalents of $75.4 million.

If we are unable to raise sufficient additional capital in the near term, we will need to implement cost reduction strategies, which could include delaying, limiting, reducing or eliminating both internal and external costs related to our operations and research and development programs.

As of September 30, 2023, we had cash and cash equivalents of $59.8 million.

We believe that our existing cash and cash equivalents will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the end of the second quarter of 2024.

However, since our cash and cash equivalents as of June 30, 2023 are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability to continue as a going concern.

In addition, our cash forecasts are based on assumptions that may prove to be wrong, and we could use our available capital resources earlier than we currently expect.

However, since our cash and cash equivalents as of September 30, 2023 are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there is substantial doubt about our ability to continue as a going concern.

To continue to fund our operations, our management has developed plans, which in the near term primarily consist of raising additional capital through one or more of the following:

equity or debt financings;

collaborations, partnerships or licensing transactions;

or other sources.

However, there can be no assurance that we will be able to complete any such transaction on acceptable terms or otherwise, and we may be unable to obtain sufficient additional capital in the near term.

If we are not able to secure sufficient additional capital, we will need to implement cost reduction strategies, which could include delaying, limiting, reducing or eliminating both internal and external costs related to our operations and research and development programs.

In addition, if our efforts to secure sufficient additional capital in the near term are unsuccessful, we may in the future need to seek to engage in one or more other strategic alternatives, including without limitation, the sale or divestiture of some or all of our assets or proprietary technologies.

If we are unsuccessful in our efforts in the near term to raise additional capital or in the future to engage in one or more other strategic alternatives, we could be required to liquidate, dissolve or otherwise wind down our operations.

Furthermore, our cash forecasts are based on assumptions that may prove to be wrong, and we could use our available capital resources earlier than we currently expect.

Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may exhaust our available capital sooner than planned.

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● the impact of public health crises, including epidemics and pandemics such as the COVID-19 pandemic, on our business, operations, strategy, goals and anticipated milestones, as well as our response to such epidemics or pandemics;

● the costs of maintaining or expanding our operations and continuing to operate as a public company;

● our ability to continue as a going concern.

● the costs of maintaining our operations and continuing to operate as a public company;

● whether we are able to overcome the substantial doubt about our ability to continue as a going concern.

We will require additional capital to sustain our operations.

We currently do not have any committed external sources of funds and adequate additional capital may not be available to us on acceptable terms, or at all.

We expect to seek additional capital through one or more of the following:

equity or debt financings;

collaborations, partnerships or licensing transactions;

or other sources.

However, there can be no assurance that we will be able to complete any such transaction on acceptable terms or otherwise, and we may be unable to obtain additional capital.

In addition, our ability to raise additional capital may be adversely impacted by potential worsening economic conditions, both inside and outside the U.S., including without limitation heightened inflation, capital market volatility, interest rate and currency rate fluctuations, any potential economic slowdown or recession, the COVID-19 pandemic (including variants of COVID-19) and geopolitical events, including trade wars or civil or political unrest.

We can give no assurance that we will be able to secure additional capital to support our operations, or if such funds are available to us, that such additional funding will be sufficient to meet our needs.

As a result, we may need to implement cost reduction strategies, which could include delaying, limiting, reducing or eliminating certain costs related to our operations and research and development programs.

These factors raise substantial doubt about our ability to continue as a going concern, and our failure to raise capital, on attractive terms or at all, would have a material adverse effect on our business, results of operations and financial condition.

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To the extent that we incur additional indebtedness, we would become obligated to make payments to repay the loan balance with interest.

The incurrence of any additional indebtedness would result in additional payment obligations.

Under our loan and security agreement with Pacific Western Bank, or PacWest, we are required to comply with certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to declare dividends, limitations on our ability to sell or dispose any part of our business or property and other operating restrictions that could adversely impact our ability to conduct our business, and

any agreements governing any other indebtedness that we may incur could require us to comply with additional covenants.

The incurrence of any additional

indebtedness would result in additional payment obligations.

If we raise funds through collaborations and licensing arrangements with third parties, we may have to relinquish valuable rights, partially or fully, to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms unfavorable to us.

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If our product candidates are not successfully developed and approved, we may never generate any revenue.

Our net losses were $42.0 million and $46.0 million for the six months ended June 30, 2023 and 2022, respectively, and $88.2 million for the year ended December 31, 2022.

As of June 30, 2023, we had an accumulated deficit of $291.1 million.

Our net losses were $58.7 million and $65.8 million for the nine months ended September 30, 2023 and 2022, respectively, and $88.2 million for the year ended December 31, 2022.

As of September 30, 2023, we had an accumulated deficit of $307.9 million.

To date, we have funded our operations primarily through proceeds from our initial public offering, or IPO, the sale of preferred units and convertible preferred stock and a debt financing.

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Even if we successfully complete clinical trials and obtain regulatory approval for one or more of our product candidates, our product candidates may not be commercially successful.

In addition, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates.

In addition, we will continue to incur substantial research and

development and other expenditures to develop and market additional product candidates.

We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

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Since inception, we have devoted substantially all of our financial resources and efforts to performing research and development activities.

Our approach to the discovery and development of tumor-activated product candidates using our geographically precise solutions, or GPS, platform is unproven, and we do not know whether we will be able to develop any approved products of commercial value.

Our approach to the discovery and development of tumor-activated product candidates using our geographically precise solutions, or GPS, platform is unproven, and we do not know whether

we will be able to develop any approved products of commercial value.

In addition, each of our product candidates is either in early clinical or preclinical development, and all of our other development programs are still in discovery stages.

We have not yet demonstrated an ability to successfully complete any clinical trials, obtain regulatory approvals, manufacture a commercial-scale product, or arrange for a third party to do so on our behalf, or conduct the sales and marketing activities necessary for successful product commercialization.

Consequently, any predictions made about our

future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.

Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biopharmaceutical products.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

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In the event that the FDA requires us to complete additional preclinical studies, or we are required to satisfy other FDA requests prior to commencing clinical trials, the start of our clinical trials may be delayed.

Even after we receive and incorporate guidance from these regulatory authorities, the FDA or other regulatory authorities could disagree that we have satisfied their requirements to commence any clinical trial or change their position on the acceptability of our trial design or the clinical endpoints selected, which may require us to complete additional preclinical studies or clinical trials or impose stricter approval conditions than we currently expect.

Even after we receive and incorporate guidance from these regulatory

authorities, the FDA or other regulatory authorities could disagree that we have satisfied their requirements to commence any clinical trial or change their position on the acceptability of our trial design or the clinical endpoints selected, which may require us to complete additional preclinical studies or clinical trials or impose stricter approval conditions than we currently expect.

There are equivalent processes and risks applicable to clinical trial applications in other countries, including countries in the European Union, or EU.

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We cannot be certain of the timely completion or outcome of our preclinical testing and studies, and we cannot predict if the FDA or other regulatory authorities will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of our programs.

As a result, we cannot be sure that we will be able to submit INDs or similar applications for our current or future preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.

As a result, we cannot be sure that we will be able to submit INDs or similar applications for our current or future preclinical programs on the timelines we expect, if at

all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.

Preclinical studies and clinical trials are expensive, time-consuming and difficult to design and implement, and involve uncertain outcomes.

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However, there is no guarantee these preclinical results will be replicated in clinical trials.

Similarly, there can be no assurance that interim or preliminary clinical data or results, including without limitation the preliminary Phase 1 data reported for XTX101, including the partial response observed in one patient treated with XTX101, or the preliminary intra-tumoral pharmacodynamic data reported for four patients treated with XTX202, will be predictive of future clinical data or results.

Similarly, there can be no assurance that interim or preliminary clinical data or results, including without limitation the preliminary Phase 1 data reported for XTX101, including the partial response observed in one patient treated with XTX101, or the preliminary Phase 1/2 clinical data reported for XTX202, will be predictive of future clinical data or results.

Many companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development and we cannot be certain that we will not face similar setbacks.

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Our failure to successfully initiate and complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our product candidates would significantly harm our business.

We cannot guarantee that our clinical trials will begin as planned or be completed on schedule, if at all, or that

we will not need to restructure our clinical trials.

We cannot guarantee that our clinical trials will begin as planned or be completed on schedule, if at all, or that we will not need to restructure our clinical trials.

Significant preclinical study or clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates, which may harm our business and results of operations.

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The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion.

We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons.

The enrollment of patients depends on many factors, including:

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Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or might require us to abandon one or more clinical trials altogether.

Enrollment delays in our clinical trials may result in increased development costs for our product candidates, slow down or halt our product candidate development and approval process and jeopardize our ability to seek and obtain the marketing approval required to commence product sales and generate revenue, which would cause the value of our company to decline and limit our ability to obtain additional capital, if needed.

Enrollment delays in our clinical trials may result in increased development costs for our product candidates, slow down or halt our product candidate development and approval process

and jeopardize our ability to seek and obtain the marketing approval required to commence product sales and generate revenue, which would cause the value of our company to decline and limit our ability to obtain sufficient additional capital.

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.

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From time to time, we may publish interim top-line or preliminary data from our clinical trials.

For example, in May 2023, we reported preliminary Phase 1 data from our clinical trial for XTX101, which data included a partial response observed in one patient treated with XTX101.

For example, in May 2023, we reported preliminary data from our Phase 1 clinical trial for XTX101, and in November 2023, we reported preliminary data from our Phase 1/2 clinical trial for XTX202.

Preliminary and interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.

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We intend to develop our clinical-stage product candidates, and likely other future product candidates, in combination with third-party cancer drugs, which may be either approved or unapproved.

For example, as part of our ongoing Phase 1/2 clinical trial for XTX202, we plan to evaluate XTX202 for the treatment of solid tumors both as monotherapy and in combination with other agents potentially including, but not limited to, anti-PD-1/PD-L1 agents or tyrosine kinase inhibitors.

For example, as part of our ongoing Phase 1/2 clinical trial for XTX101, we plan to evaluate XTX101 in combination with atezolizumab (Tecentriq®) in patients with microsatellite stable colorectal cancer.

Our ability to develop and ultimately commercialize our current product candidates, and any future product candidates, used in combination with third-party drugs will depend on our ability to access such drugs on commercially reasonable terms for clinical trials and their availability for use with our commercialized product, if approved.

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If MMP activity in human tumors is not sufficient to cleave the masking protein domain, the potential efficacy of our product candidates would be limited.

We have no assurance that our product candidates will successfully progress from preclinical studies into clinical development and ultimately marketing approval.

We have invested substantially all of our efforts and financial resources in developing our initial product candidates and our future success is highly dependent on the continued successful development of our technology and product candidates.

We have no assurance that our product candidates will successfully progress through clinical development and ultimately marketing approval.

We have invested substantially all of our efforts and financial resources in developing our initial product candidates and our future success is highly dependent on the outcome of our ongoing clinical trials and the successful development of our technology and product candidates.

In addition, the clinical trial requirements of the FDA and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate may vary according to the type, complexity, novelty and intended use and market of the potential products.

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Subject to the results of current or future clinical trials and our ability to raise sufficient additional capital to support our growth strategy, we expect to grow our organization in the future, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

As of July 31, 2023, we had 84 full-time employees.

As of October 31, 2023, we had 81 full-time employees.

Subject to the results of current or future clinical trials and our ability to raise sufficient additional capital to support our growth strategy, we expect to experience future growth in the number of our employees and the scope of our operations, particularly in the areas of clinical development, regulatory and medical affairs, and, if any of our product candidates receive marketing approval, sales, marketing and distribution.

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Any future transactions could increase our near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research and development expenses, any of which could affect our financial condition, liquidity and results of operations.

Future acquisitions may also require us to obtain additional capital, which may not be available on favorable terms or at all.

Future acquisitions may also require us to obtain sufficient additional capital, which may not be available on favorable terms or at all.

These transactions may not be successful and may require significant time and attention of management.

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Despite any precautions that we or any third parties on whom we depend take for catastrophic events, including terrorist attacks, wars or other armed conflicts, geopolitical tensions or trade wars, pandemics or natural disasters, these events could result in significant disruptions to our research and development, manufacturing, preclinical studies, clinical trials, and, ultimately, if approved, the commercialization of our products.

Long-term disruptions in the infrastructure caused by these types of events, such as natural disasters, which are increasing in frequency due to the impacts of climate change, the outbreak of wars or other armed conflicts (such as Russia’s invasion of Ukraine), the escalation of hostilities, geopolitical tensions or trade wars, acts of terrorism or “acts of God,” particularly involving geographies in which we or third parties on whom we depend have offices, manufacturing or clinical trial sites, could adversely affect our businesses.

Long-term disruptions in the infrastructure caused by these types of events, such as natural disasters, which are increasing in frequency due to the impacts of climate change, the outbreak of wars or other armed conflicts, the escalation of hostilities, geopolitical tensions or trade wars, acts of terrorism or “acts of God,” particularly involving geographies in which we or third parties on whom we depend have offices, manufacturing or clinical trial sites, could adversely affect our businesses.

Although we carry business interruption insurance policies and typically have provisions in our contracts that protect us in certain events, our coverage might not include or be adequate to compensate us for all losses that may occur.

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Unfavorable global economic conditions could adversely affect our business, financial condition, stock price and results of operations.

General economic conditions, both inside and outside the U.S., including without limitation heightened inflation, capital market volatility, interest rate and currency rate fluctuations, any potential economic slowdown or recession, banking disruptions, the COVID-19 pandemic (including variants of COVID-19) and geopolitical events, including trade wars or civil or political unrest (such as the ongoing war between Ukraine and Russia), have resulted in a significant disruption of global financial markets.

General economic conditions, both inside and outside the U.S., including without limitation heightened inflation, capital market volatility, interest rate and currency rate fluctuations, any potential economic slowdown or recession, banking disruptions, the COVID-19 pandemic (including variants of COVID-19) and geopolitical events, including trade wars, civil or political unrest, wars or other armed conflicts, have resulted in a significant disruption of global financial markets.

If the disruption persists or deepens, we could experience an inability to raise additional capital.

In addition, market volatility, high levels of inflation and interest rate fluctuations may increase our cost of financing or restrict our access to potential sources of future capital.

For example, the prime rate has recently exceeded the interest rate

floor of 4.75% under our loan and security agreement with PacWest, which has increased the amount of cash needed to service our outstanding indebtedness.

For example, the prime rate has recently exceeded the interest rate floor of 4.75% under

our loan and security agreement with PacWest, which has increased the amount of cash needed to service our outstanding indebtedness.

Adequate additional financing may not be available to us on acceptable terms, or at all.

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Our principal stockholders and management own a significant percentage of our common stock and exert significant control over matters subject to stockholder approval.

As of July 31, 2023, our executive officers, directors, holders of 5% or more of our common stock and their respective affiliates beneficially owned shares in the aggregate representing a majority of our outstanding common stock.

As of October 31, 2023, our executive officers, directors, holders of 5% or more of our common stock and their respective affiliates beneficially owned shares in the aggregate representing a majority of our outstanding common stock.

As a result of their share ownership, these stockholders, if they act together, would have the ability to influence our management and policies and would be able to significantly affect the outcome of matters requiring stockholder approval such as elections of directors, amendments of our organizational documents or approvals of any merger, sale of assets or other major corporate transaction.

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001-40925), filed with the Securities and Exchange Commission on April 3, 2023)

Amended and Restated Non-Employee Director Compensation Policy

Amended and Restated Loan and Security Agreement, dated as of May 5, 2023, by and between Xilio Development, Inc.

and Pacific Western Bank (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-40925), filed with the Securities and Exchange Commission on May 9, 2023)

Second Amended and Restated Employment Agreement, dated August 3, 2023, by and between the Registrant and Christopher Frankenfield (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-40925), filed with the Securities and Exchange Commission on August 3, 2023)

Employment Agreement, dated September 5, 2023, by and between the Registrant and Kevin Brennan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No.

001-40925), filed with the Securities and Exchange Commission on September 5, 2023)

Consulting Agreement, dated September 8, 2023, by and between the Registrant and Martin Huber, M.D.

Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-40925), filed with the Securities and Exchange Commission on August 14, 2023)

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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XILIO THERAPEUTICS, INC.

August 14, 2023

November 9, 2023

/s/ René Russo

René Russo, Pharm.D.

Chief Executive Officer

President and Chief Executive Officer

(Principal Executive Officer)

August 14, 2023

November 9, 2023

/s/ Kevin Brennan

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors