What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-14 · 105 added, 76 removed, 208 unchanged (47% of the section changed)

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Our molecules are engineered to localize activity within the tumor microenvironment with minimal systemic effects, resulting in the potential to achieve enhanced anti-tumor activity and increasing the population of patients who may be eligible to receive our medicines.

Our most advanced tumor-activated, clinical-stage product candidates are:

XTX101, an Fc-enhanced, anti-CTLA-4 monoclonal antibody, or mAb;

XTX301, an interleukin 12, or IL-12, therapy;

and XTX202, an interleukin 2, or IL-2, therapy.

To date, we have presented clinical data across these programs showing initial clinical validation for each of these molecules and our tumor-activated approach.

In addition to our clinical-stage product candidates, we are continuing to leverage our differentiated research platform and expertise in developing tumor-activated I-O therapies to advance preclinical development for tumor-activated bispecific molecules and immune cell engager molecules (including tumor-activated cell engagers and tumor-activated effector-enhanced cell engagers).

As a result of our strategic portfolio reprioritization announced in March 2024, we are focusing on rapidly advancing clinical development for XTX301 and XTX101 and advancing differentiated bispecific and cell-engager molecules in preclinical development, and we plan to explore strategic opportunities to continue to develop XTX202 in combination with other agents while discontinuing further investment in XTX202 as a monotherapy.

To date, we have financed our operations primarily from proceeds raised through private placements of preferred units and convertible preferred stock, a debt financing, our initial public offering, or IPO, of common stock in October 2021, private placements of our common stock and prefunded warrants, and an upfront payment under our exclusive license agreement with Gilead Sciences, Inc., or Gilead.

To date, we have presented data across our clinical-stage programs showing initial clinical validation for each of those molecules and our tumor-activated approach.

Our most advanced clinical-stage product candidates are XTX101, an Fc-enhanced, tumor-activated, anti-CTLA-4 monoclonal antibody, or mAb, and XTX301, a tumor-activated, engineered interleukin 12, or IL-12, therapy.

We are currently focusing on rapidly advancing clinical development for XTX101 in combination with atezolizumab (Tecentriq®) through our clinical trial collaboration with F.

Hoffmann-La Roche Ltd., or Roche, and XTX301 through our exclusive license agreement with Gilead Sciences, Inc., or Gilead.

In March 2024, we announced plans to discontinue further investment in XTX202, a tumor-activated, engineered interleukin 2, or IL-2, which was being evaluated in a Phase 2 clinical trial as a monotherapy, and to explore strategic opportunities to continue to develop XTX202 in combination with other agents.

In addition to our clinical-stage product candidates, we are continuing to leverage our differentiated research platform and expertise in developing tumor-activated I-O therapies to advance preclinical development for differentiated tumor-activated bispecifics and immune cell engagers (including tumor-activated cell engagers and tumor-activated effector-enhanced cell engagers).

To date, we have financed our operations primarily from proceeds raised through private placements of preferred units and convertible preferred stock, a debt financing, our initial public offering, or IPO, of common stock in October 2021, private placements of our common stock and prefunded warrants, an upfront payment under our license agreement with Gilead and our at-the-market, or ATM, offering program.

We have not generated any revenue from product sales and do not expect to generate any revenue from product sales for at least the next several years, if at all.

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Even if we are able to generate revenue from product sales, we may not become profitable.

Since inception, we have incurred significant operating losses, including net losses of $17.2 million and $22.6 million for the three months ended March 31, 2024 and 2023, respectively, and a net loss of $76.4 million for the year ended December 31, 2023.

As of March 31, 2024, we had an accumulated deficit of $342.7 million.

Since inception, we have incurred significant operating losses, including net losses of $31.1 million and $42.0 million for the six months ended June 30, 2024 and 2023, respectively, and a net loss of $76.4 million for the year ended December

As of June 30, 2024, we had an accumulated deficit of $356.6 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future, particularly to the extent we:

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As a result, we will need substantial additional capital to support our continuing operations and pursue our strategy.

As of March 31, 2024, we had cash and cash equivalents of $34.0 million.

Based on our current operating plans, we anticipate that our existing cash and cash equivalents as of March 31, 2024, together with the $30.0 million upfront payment received in April 2024 under our license agreement with Gilead and approximately $14.6 million in aggregate gross proceeds received in April 2024 from private placements with certain existing investors and Gilead, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

As of June 30, 2024, we had cash and cash equivalents of $74.9 million.

Based on our current operating plans, we anticipate that our existing cash and cash equivalents as of June 30, 2024 will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

Since these amounts may not 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.

For more information, refer to “—Liquidity and Capital Resources—Capital Requirements and Going Concern” below and Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Recent Developments

Exclusive License Agreement and Stock Purchase Agreement with Gilead

In March 2024, we entered into an exclusive license agreement and a stock purchase agreement with Gilead.

Under the license agreement, our wholly-owned subsidiary, Xilio Development, Inc., or Xilio Development, granted Gilead an exclusive global license to develop and commercialize XTX301, our tumor-activated IL-12 product candidate, and specified other molecules directed to IL-12.

Xilio Development is responsible for conducting clinical development for XTX301 in the ongoing Phase 1 clinical trial through an initial planned Phase 2 dose expansion clinical trial.

Following the delivery by Xilio Development of a specified clinical data package for XTX301 related to the Phase 1 clinical trial and planned Phase 2 clinical trial, Gilead can elect to transition responsibilities for the development and commercialization of XTX301 to Gilead, subject to the terms of the license agreement and payment by Gilead of a $75.0 million transition fee.

Under the stock purchase agreement, Gilead agreed to purchase up to $25.0 million in common stock or, at Gilead’s election, prefunded warrants, including approximately $13.5 million in our common stock in connection with entering into the license agreement and approximately $11.5 million in up to three additional private placements through March 2025.

We have received approximately $46.8 million to date under these agreements, including an upfront cash payment of $30.0 million received in April 2024 under the license agreement and $16.8 million in aggregate gross proceeds from the sale and issuance of common stock and prefunded warrants to Gilead under the stock purchase agreement.

We are eligible to

receive up to $600.7 million in additional contingent payments under these agreements, which include (i) up to approximately $8.2 million in proceeds from up to two additional private placements, (ii) the $75.0 million transition fee and (iii) up to $517.5 million in specified development, regulatory and sales-based milestones.

Prior to the potential transition fee, up to $25.7 million of the total additional contingent payments are related to the potential additional private placements and a near-term development milestone.

In addition, we are eligible to receive tiered royalties ranging from high single digits to mid-teens on annual global net product sales.

March 2024 Private Placement

In March 2024, we entered into a securities purchase agreement with certain existing accredited investors, including Bain Capital Life Sciences and Rock Springs Capital, and issued and sold an aggregate of 1,953,125 shares of our common stock at a price of $0.64 per share and prefunded warrants to purchase up to an aggregate of 15,627,441 shares of our common stock at a purchase price of $0.6399 per prefunded warrant share, through a private investment in public equity financing.

The prefunded warrants have an exercise price of $0.0001 per share of common stock, are immediately exercisable and remain exercisable until exercised in full.

The private placement closed in April 2024, and we received aggregate gross proceeds of approximately $11.3 million, before deducting placement agent fees and expenses payable by us.

We expect to use the proceeds from the private placement to fund working capital and other general corporate purposes.

Financial Operations Overview

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For the foreseeable future, we expect substantially all of our revenue, if any, would be generated from our license agreement with Gilead.

For more information on our license agreement with Gilead, please see Note 6 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Operating Expenses

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Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated balance sheets as prepaid expenses or accrued research and development expenses.

We record cost-sharing payments under our clinical trial collaboration with F.

Hoffmann-La Roche Ltd., or the Roche clinical collaboration, as a reduction of research and development costs upon the achievement of each study development event specified in the clinical supply agreement.

We record cost-sharing payments under our clinical trial collaboration with Roche as a reduction of research and development costs upon the achievement of each study development event specified in the clinical supply agreement.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are capitalized as assets, even when there is no alternative future use for the research and development.

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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We expect that our research and development expenses will remain approximately the same or will continue to increase for the foreseeable future as we advance our programs and our current or future product candidates into and through the development phase.

We expect that our research and development expenses will

remain approximately the same or will continue to increase for the foreseeable future as we advance our programs and our current or future product candidates into and through the development phase.

We expect our discovery research efforts and our related personnel costs to remain consistent with historical levels.

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We also expect to continue to incur additional expenses related to intellectual property as we file patent applications to protect intellectual property arising from our research and development activities.

In the event we are unable to obtain

sufficient additional capital in the near term, we will need to implement cost reduction strategies that seek to reduce our general and administrative expenses while maintaining sufficient infrastructure to support our planned research and development activities and operations as a public company.

In the event we are unable to obtain sufficient additional capital in the near term, we will need to implement cost reduction strategies that seek to reduce our general and administrative expenses while maintaining sufficient infrastructure to support our planned research and development activities and operations as a public company.

Restructuring

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Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):

Comparison of the three months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

License revenue

Total revenue

Operating expenses

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Total other income, net

License Revenue

We recognized $2.4 million in license revenue for the three months ended June 30, 2024 under the license agreement and stock purchase agreement that we entered into with Gilead in March 2024.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2024 and 2023 (in thousands):

The following table summarizes our research and development expenses for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

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Total research and development expenses

Research and development expenses decreased by $5.7 million from $16.1 million for the three months ended March 31, 2023 to $10.4 million for the three months ended March 31, 2024.

Research and development expenses decreased by $2.0 million from $13.2 million for the three months ended June 30, 2023 to $11.2 million for the three months ended June 30, 2024.

The changes in research and development expenses were primarily due to the following:

● XTX101 costs decreased by $1.2 million from $0.7 million for the three months ended March 31, 2023 to $(0.5) million for the three months ended March 31, 2024, primarily driven by a $2.0 million cost-sharing payment that we earned under our Roche clinical collaboration during the three months ended March 31, 2024 and recorded as a reduction in research and development expenses, partially offset by a $0.7 million increase in clinical development activities related to our Phase 1 clinical trial;

● XTX202 costs increased by $1.4 million, primarily driven by an increase in clinical development activities related to our Phase 1/2 clinical trial;

● XTX301 costs decreased by $1.9 million, primarily driven by a $2.0 million decrease in manufacturing activities relating to the initial supply of clinical trial material in the comparable period and a $0.1 million decrease in preclinical activities, partially offset by a $0.1 million increase in clinical development activities related to our Phase 1 clinical trial;

● XTX101 costs increased by $1.6 million, primarily driven by a $1.0 million development milestone that we incurred under our CTLA-4 monoclonal antibody license agreement with WuXi Biologics (Hong Kong) Limited, or WuXi Biologics, during the three months ended June 30, 2024 and a $0.6 million increase in clinical development activities related to our ongoing Phase 1/2 clinical trial evaluating XTX101 in combination with atezolizumab;

● XTX202 costs decreased by $1.3 million, primarily driven by a decrease in clinical development activities related to our Phase 1/2 clinical trial as a result of discontinuing further investment in XTX202 as a monotherapy;

● XTX301 costs increased by $0.6 million, primarily driven by a $1.0 million increase in clinical development activities related to our ongoing Phase 1 clinical trial, partially offset by a $0.4 million decrease in manufacturing activities related to the purchase of the initial supply of clinical trial material occurring in the comparable period;

● other early programs and indirect research and development expenses decreased by $1.3 million, primarily driven by a decrease in external expenses related to preclinical research and development activities;

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General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended March 31, 2024 and 2023 (in thousands):

The following table summarizes our general and administrative expenses for the three months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

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Total general and administrative expenses

General and administrative expenses decreased by $1.3 million from $7.4 million for the three months ended March 31, 2023 to $6.1 million for the three months ended March 31, 2024.

General and administrative expenses decreased by $1.1 million from $6.9 million for the three months ended June 30, 2023 to $5.8 million for the three months ended June 30, 2024.

The changes in general and administrative expenses were primarily due to the following:

● personnel-related costs decreased by $0.7 million, primarily driven by a $0.6 million decrease in salaries, bonuses and benefits due to lower general and administrative headcount and a $0.2 million decrease in recruiting costs, partially offset by a $0.1 million increase in stock-based compensation;

● professional and consulting fees decreased by $0.4 million, primarily driven by a $0.7 million decrease in consulting and other professional related fees, partially offset by a $0.3 million increase in legal fees primarily related to the Gilead license and stock purchase agreements;

● personnel-related costs decreased by $0.3 million, primarily driven by a $0.1 million decrease in salaries, bonuses and benefits due to lower general and administrative headcount and a $0.1 million decrease in stock-based compensation;

● professional and consulting fees decreased by $0.6 million, primarily driven by a $0.4 million decrease in legal fees and a $0.2 million decrease in consulting and other professional related fees;

● facility-related and other general and administrative expenses decreased by $0.2 million, primarily driven by lower costs related to directors’ and officers’ liability insurance and a reduction in other general and administrative expenses.

Restructuring

We recognized $0.9 million in restructuring expenses for the three months ended March 31, 2024.

The restructuring expenses were associated with our strategic portfolio reprioritization and workforce reduction announced in March 2024 and consisted of employee severance and benefits continuation costs related to the workforce reduction.

We recognized less than $0.1 million in restructuring expenses for the three months ended June 30, 2024, consisting of employee outplacement service costs related to the workforce reduction announced in March 2024.

Other Income, Net

Other income, net, decreased by $0.6 million from $0.9 million for the three months ended March 31, 2023 to $0.3 million for the three months ended March 31, 2024.

Other income, net, was relatively unchanged and was $0.8 million for both the three months ended June 30, 2024 and 2023.

This was primarily due to an offsetting decrease in interest income earned on our cash and cash equivalents due to a lower average cash balance and lower interest expense on our note payable as a result of the repayment of the remaining principal under our loan agreement with PacWest in March 2024.

Comparison of the six months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended

License revenue

Total revenue

Operating expenses

Research and development

General and administrative

Restructuring

Total operating expenses

Loss from operations

Other income, net

Total other income, net

License Revenue

We recognized $2.4 million in license revenue for the six months ended June 30, 2024 under the license agreement and stock purchase agreement that we entered into with Gilead in March 2024.

Research and Development Expenses

The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended

Other early programs and indirect research and development

Personnel-related

Total research and development expenses

Research and development expenses decreased by $7.7 million from $29.3 million for the six months ended June 30, 2023 to $21.6 million for the six months ended June 30, 2024.

The changes in research and development expenses were primarily due to the following:

● XTX101 costs increased by $0.3 million, primarily driven by a $1.3 million increase in clinical development activities related to our ongoing Phase 1/2 clinical trial evaluating XTX101 in combination with atezolizumab and a $1.0 million development milestone that we incurred under our CTLA-4 monoclonal antibody license agreement with WuXi Biologics during the six months ended June 30, 2024, partially offset by a $2.0 million cost-sharing payment that we earned under our Roche clinical collaboration during the six months ended June 30, 2024 that was recorded as a reduction in research and development expenses;

● XTX301 costs decreased by $1.3 million, primarily driven by a $2.4 million decrease in manufacturing activities related to the purchase of the initial supply of clinical trial material occurring in the comparable period, which

was partially offset by a $1.2 million increase in clinical development activities related to our ongoing Phase 1 clinical trial;

● other early programs and indirect research and development expenses decreased by $4.3 million, primarily driven by a decrease in external expenses related to preclinical research and development activities;

● personnel-related costs decreased by $2.6 million, primarily driven by a $2.2 million decrease in salaries, bonuses and benefits due to lower research and development headcount and a $0.2 million decrease in stock-based compensation.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended

Personnel-related

Professional and consulting fees

Facility-related and other general and administrative expenses

Total general and administrative expenses

General and administrative expenses decreased by $2.3 million from $14.3 million for the six months ended June 30, 2023 to $12.0 million for the six months ended June 30, 2024.

The changes in general and administrative expenses were primarily due to the following:

● personnel-related costs decreased by $1.0 million, primarily driven by a $0.7 million decrease in salaries, bonuses and benefits due to lower general and administrative headcount and a $0.3 million decrease in recruiting costs;

● professional and consulting fees decreased by $1.0 million, primarily driven by a decrease in consulting and other professional related fees;

● facility-related and other general and administrative expenses decreased by $0.4 million, primarily driven by lower costs related to directors’ and officers’ liability insurance and a reduction in other general and administrative expenses.

Restructuring

We recognized $1.0 million in restructuring expenses for the six months ended June 30, 2024.

The restructuring expenses were associated with the workforce reduction announced in March 2024 and consisted of employee severance, benefits continuation and outplacement service costs.

Other Income, Net

Other income, net, decreased by $0.6 million from $1.6 million for the six months ended June 30, 2023 to $1.0 million for the six months ended June 30, 2024.

The decrease in other income, net was primarily due to a decrease in interest income earned on our cash and cash equivalents due to a lower average cash balance and lower interest expense on our note payable as a result of the repayment of the remaining principal under our loan agreement with PacWest in March 2024.

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We have not yet commercialized any of our product candidates, which are in preclinical or early clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all.

To date, we have financed our operations primarily from proceeds raised through private placements of preferred units, convertible preferred stock, common stock and prefunded warrants, a debt financing, our IPO and a license agreement.

Through March 31, 2024, we have received an aggregate of $378.9 million in gross proceeds from such transactions, including $225.5 million in gross proceeds from the sale and issuance of preferred units and convertible preferred stock, $10.0 million in gross proceeds from our debt financing with PacWest, $129.9 million in gross proceeds from our IPO, and $13.5 million in gross proceeds from the sale and issuance of common stock to Gilead in a private placement.

As of March 31, 2024, we had cash and cash equivalents of $34.0 million.

In April 2024, we received approximately $44.6 million in aggregate gross proceeds related to the $30.0 million upfront payment under our license agreement with Gilead and approximately $14.6 million in aggregate gross proceeds from the sale and issuance of common stock and prefunded warrants to certain existing investors in a private placement and to Gilead in an additional private placement.

In November 2022, we filed a universal shelf registration statement on Form S-3 with the SEC, or Form S-3, to register for sale up to $250,000,000 of our common stock, preferred stock, debt securities, units and warrants, which we may issue and sell from time to time in one or more offerings, which became effective on November 18, 2022 (333-268264).

In November 2022, we also entered into a sales agreement, or the Sales Agreement, with Cowen and Company LLC, under which we may issue and sell shares of our common stock, from time to time, having an aggregate offering price of up to $75.0 million, subject to the terms and conditions of the Sales Agreement.

Through the filing date of this Quarterly Report on Form 10-Q, we have not issued or sold any shares of our common stock pursuant to the Sales Agreement.

Issuances or sales of common stock pursuant to the Sales Agreement, if any, would be made under the Form S-3 and the corresponding prospectus related to the issuance and sale of shares of common stock pursuant to the Sales Agreement.

The extent to which we use the Sales Agreement as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from other sources, and whether we are then subject to limitations on our ability to use Form S-3 to sell more than one-third of the aggregate market value of our public float in the trailing 12-month period.

Accordingly, we may not be able to sell shares under the Sales Agreement at prices or in amounts that we deem acceptable, and there can be no assurance that we will sell any shares of common stock pursuant to the Sales Agreement.

Through June 30, 2024, we have received an aggregate of $430.5 million in gross proceeds from such transactions, including $225.5 million in gross proceeds from the sale and issuance of preferred units and convertible preferred stock, $10.0 million in gross proceeds from our debt financing with PacWest, $129.9 million in gross proceeds from our IPO, the $30.0 million upfront payment under our license agreement with Gilead, $28.1 million in gross proceeds from the sale and issuance of common stock and prefunded warrants to certain existing accredited investors and Gilead in private placements and $7.0 million in gross proceeds from the sale and issuance of common stock under our sales agreement with Cowen and Company LLC for our ATM offering program.

As of June 30, 2024, we had cash and cash equivalents of $74.9 million.

In November 2022, we filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of our common stock, preferred stock, debt securities, units and warrants, which we may issue and sell from time to time in one or more offerings, which became effective on November 18, 2022 (333-268264).

In November 2022, we also entered into the sales agreement with Cowen and Company LLC under which we may issue and sell shares of our common stock under the Form S-3, from time to time, having an aggregate offering price of up to $75.0 million, subject to the terms and conditions of the sales agreement.

Through June 30, 2024, we have issued and sold 7,000,000 shares of our common stock pursuant to the sales agreement for aggregate gross proceeds of $7.0 million.

However, the extent to which we use the sales agreement as a source of additional funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from other sources, and whether we are then subject to limitations on our ability to use Form S-3 to sell more than one-third of the aggregate market value of our public float in the trailing 12-month period, which limitations will remain in place until such time as our public float exceeds $75 million.

Accordingly, we may not be able to sell additional shares under the sales agreement at prices or in amounts that we deem acceptable, and there can be no assurance that we will sell any additional shares of common stock pursuant to the sales agreement.

In addition, subject to the terms and conditions of our stock purchase agreement with Gilead, through March 2025, we may, at our election, cause Gilead to purchase up to approximately $8.2 million of additional shares of common stock (including, at Gilead’s sole election, prefunded warrants in lieu of shares of common stock) in up to two additional private placements, at all times subject to Gilead not being deemed a beneficial owner of greater than 19.9% of our common stock upon the closing of the applicable additional private placement with Gilead.

The following table provides information regarding our cash flows for each period presented (in thousands):

Three Months Ended

Six Months Ended

Net cash provided by (used in):

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Financing activities

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Operating Activities

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The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally due to stock-based compensation, depreciation and amortization, as well as changes in components of operating assets and liabilities, which are generally due to increased expenses and timing of vendor payments.

During the three months ended March 31, 2024, net cash used in operating activities of $10.5 million was primarily driven by our net loss of $17.2 million, partially offset by changes in operating assets and liabilities of $4.4 million and net non-cash expenses of $2.3 million.

During three months ended March 31, 2023, net cash used in operating activities of $25.3 million was primarily driven by our net loss of $22.6 million and changes in operating assets and liabilities of $4.9 million, partially offset by net non-cash expenses of $2.3 million.

During the six months ended June 30, 2024, net cash provided by operating activities of $9.5 million was primarily driven by the $39.1 million received from Gilead under the license agreement and stock purchase agreement that was recorded as deferred revenue at the outset of the arrangement and net non-cash expenses of $4.2 million, partially offset by our net loss of $31.1 million and remaining changes in operating assets and liabilities of $2.8 million.

During the six months ended June 30, 2023, net cash used in operating activities of $41.8 million was primarily driven by our net loss of $42.0 million and changes in operating assets and liabilities of $4.5 million, partially offset by net non-cash expenses of $4.7 million.

Investing Activities

We had no cash flows related to investing activities during the three months ended March 31, 2024.

During the three months ended March 31, 2023, net cash used in investing activities of $0.2 million consisted of purchases of property and equipment.

During the six months ended June 30, 2024 and 2023, net cash used in investing activities of less than $0.1 million and $0.5 million, respectively, consisted of purchases of property and equipment.

Financing Activities

During the three months ended March 31, 2024, net cash provided by financing activities of $1.0 million consisted of proceeds from the sale and issuance of common stock to Gilead in the initial private placement, partially offset by repayments of debt principal under our loan agreement with PacWest and payments on our finance lease for certain lab equipment.

During three months ended March 31, 2023, net cash used in financing activities of $1.7 million consisted of repayments of debt principal under our loan agreement with PacWest and payments on our finance lease for certain lab equipment.

During the six months ended June 30, 2024, net cash provided by financing activities of $21.0 million consisted of proceeds from the sale and issuance of common stock and prefunded warrants to certain existing accredited investors and Gilead in private placements and proceeds from the sale and issuance of common stock under our ATM offering program, partially offset by repayments of debt principal under our loan agreement with PacWest and payments on our finance lease for certain lab equipment.

During the six months ended June 30, 2023, net cash used in financing activities of $2.7 million consisted of repayments of debt principal under our loan agreement with PacWest and payments on our finance lease for certain lab equipment partially offset by proceeds from the issuance of common stock under our employee stock purchase plan.

Loan and Security Agreement

In November 2019, Xilio Development entered into a loan and security agreement with PacWest, as amended and restated in May 2023, with us as a guarantor, or the loan agreement.

Under the loan agreement, in November 2019, we borrowed $10.0 million under a term loan.

In November 2019, Xilio Development entered into a loan and security agreement with PacWest, as amended and restated in May 2023, with us as a guarantor.

In November 2019, we borrowed $10.0 million under a term loan pursuant to the loan agreement.

Borrowings under the loan agreement were collateralized by substantially all of the assets of Xilio Development, excluding intellectual property.

Interest on amounts outstanding accrued at a variable annual rate equal to the greater of (i) the prime rate plus 0.25% or (ii) 4.75%.

We made interest-only payments on the outstanding

balance through December 31, 2022.

We commenced making equal monthly payments of principal plus interest in January 2023, and we were required to make such payments until the term loan matured on June 30, 2024.

We made interest-only payments on the outstanding balance through December 31, 2022.

We commenced making equal monthly payments of principal plus interest in January 2023.

In the first quarter of 2024, we repaid all amounts outstanding under the loan agreement, and PacWest released all security interests in our and our subsidiaries’ assets.

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Additionally, the United States is experiencing a workforce shortage, which in turn has created a competitive wage environment that may also increase our operating costs in the future.

As of March 31, 2024, we had cash and cash equivalents of $34.0 million.

As of June 30, 2024, we had cash and cash equivalents of $74.9 million.

However, we have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we anticipate.

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Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:

● the scope, progress, results and costs of research and development for our current and future product candidates, including our current and planned clinical trials for our clinical-stage product candidates, XTX101, XTX301, and XTX202, and ongoing preclinical development for our current and future product candidates;

● the scope, progress, results and costs of research and development for our current and future product candidates, including our current and planned clinical trials for our clinical-stage product candidates, XTX101 and XTX301, and ongoing preclinical development for our current and future product candidates;

● our ability to implement and maintain cost reduction strategies, as well as the timing of such cost reductions;

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● our ability to maintain our clinical collaboration to further develop XTX101, our Fc-enhanced tumor-activated anti-CTLA-4, in combination with atezolizumab, including the cost-sharing arrangements of such collaboration;

● the timing and amount of milestones, equity investments and other contingent payments under our partnership with Gilead for XTX301;

● the timing and amount of cost-sharing payments under our clinical collaboration with Roche for XTX101 and milestones, additional equity investments and other contingent payments under our partnership with Gilead for XTX301;

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

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To the extent that we raise additional capital through the sale of equity or securities convertible into or exchangeable for equity, the ownership interest of our existing stockholders may be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

Additional debt and preferred equity, if available, may also involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require that we issue warrants, which could potentially dilute the ownership interest of our existing stockholders.

Additional debt and preferred equity, if available, may also involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require that we issue additional warrants, which could potentially dilute the ownership interest of our existing stockholders.

Critical Accounting Policies and Use of Estimates

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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 2. Management’s Discussion and Analysis