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Item 7. Management’s Discussion and Analysis

2025-03-11 compared with 2024-04-01 · 143 added, 128 removed, 246 unchanged (52% of the section changed)

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You should carefully read the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

We are a clinical-stage biotechnology company discovering and developing tumor-activated immuno-oncology, or I-O, therapies with the goal of significantly improving outcomes for people living with cancer without the systemic side effects of current I-O treatments.

We are leveraging our proprietary platform to build a pipeline of novel, tumor-activated I-O molecules that are designed to optimize the therapeutic index by localizing anti-tumor activity within the tumor microenvironment, including tumor-activated cytokines and antibodies (including bispecifics) and immune cell engagers (including tumor-activated cell engagers and tumor-activated effector-enhanced cell engagers).

We are a clinical-stage biotechnology company discovering and developing tumor-activated, or masked, immuno-oncology, or I-O, therapies with the goal of significantly improving outcomes for people living with cancer without the systemic side effects of current I-O treatments.

We are leveraging our proprietary platform to advance a pipeline of novel, tumor-activated I-O molecules that are designed to optimize the therapeutic index by localizing anti-tumor activity within the tumor microenvironment, including masked antibodies, bispecifics, cytokines and immune cell engagers.

Current I-O therapies have curative potential for patients with cancer.

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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.

In 2023, we 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).

To date, we have financed our operations primarily from proceeds raised through private placements of preferred units and convertible preferred stock, a debt financing and our initial public offering, or IPO, of common stock in October 2021.

To date, we have presented data across our clinical-stage programs showing clinical validation for our tumor-activation platform.

Our most advanced clinical-stage product candidates are vilastobart (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.

In addition to our clinical-stage product candidates, we are leveraging our proprietary tumor-activation platform to advance multiple preclinical programs for a masked PD-1/IL-2 bispecific and masked T cell engager molecules.

Recent Developments

Collaboration, License and Option Agreement with AbbVie Group Holdings Limited

On February 10, 2025, our wholly owned subsidiary Xilio Development, Inc., or Xilio Development, entered into a collaboration, license and option agreement with AbbVie Group Holdings Limited, or AbbVie, for up to four programs leveraging our proprietary tumor-activation technology and platform, consisting of (i) an exclusive option for (a) an initial program to discover, develop and commercialize masked T cell engager molecules for an agreed upon initial target and backup target, which we refer to as the initial option program, and (b) subject to the terms of the agreement, up to two additional programs to discover, develop, and commercialize masked T cell engager molecules for an initial target and backup target determined at the time of program initiation, each of which we refer to as an additional option program and (ii) an exclusive license for a program to develop and commercialize a masked antibody-based immunotherapy, which we refer to as the collaboration program.

We refer to the initial option program and the additional option programs, collectively, as the option programs.

Under the agreement, we granted AbbVie an option to obtain an exclusive global license to exploit products discovered and developed under the initial option program.

During the three-year period following the effective date of the agreement, AbbVie has the right to initiate up to two additional option programs by (a) selecting an initial target and backup target for each such additional option program (excluding the target known as PSMA) and any other target for which we have

completed specified activities prior to lead selection) and (b) paying us an additional program nomination fee for each additional option program.

In addition, on an option program-by-option program basis, prior to the initiation of specified activities related to lead optimization and selection for the initial target for such option program, AbbVie has a one-time right to substitute the initial target with the backup target agreed upon by the parties at the time of option program initiation, subject to the payment by AbbVie of a one-time substitution fee with respect to such substituted target and the other terms of the agreement.

For the initial option program, AbbVie’s option right is exercisable beginning on the effective date of the agreement, and for each additional option program, AbbVie’s option right is exercisable following delivery of written notice of nomination of such additional option program.

For each option program, prior to option exercise, we will be responsible for conducting preclinical discovery and development up to the completion of investigational new drug application enabling studies, subject to AbbVie paying us option extension fees upon completion of specified stages of preclinical discovery and development.

Unless AbbVie elects to extend preclinical development through the next stage and pays the applicable option extension fee, AbbVie’s option right terminates within a specified time period following completion of each stage of preclinical development.

Upon exercising its option for an option program, AbbVie will be responsible for any remaining preclinical development, if applicable, and all clinical development, regulatory and commercialization activities with respect to licensed products under the applicable option program.

In connection with the collaboration program, we granted AbbVie an exclusive global license to exploit products discovered and developed under the collaboration program.

We are responsible for conducting all preclinical development through lead generation, and AbbVie is responsible for all further development and commercialization activities for any licensed products generated under the collaboration program.

Under the agreement, we received $52.0 million in total upfront payments, consisting of a cash payment of $42.0 million and an equity investment of $10.0 million in our common stock at a purchase price of $2.30 per share.

In addition, we will be eligible to receive up to approximately $2.1 billion in additional contingent payments, consisting of (i) up to $305.0 million in aggregate program nomination fees, preclinical development option extension fees and option fees for the option programs and (ii) up to $1.8 billion in aggregate development, regulatory and sales-based milestones for all option programs and the collaboration program.

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

Stock Purchase Agreement and Investor Rights Agreement with AbbVie Inc.

In connection with the execution of the agreement, on February 10, 2025, we entered into a stock purchase agreement with AbbVie Inc.

pursuant to which we issued and sold 4,347,826 of our shares of common stock to AbbVie Inc.

in a private placement at a purchase price of $2.30 per share for an aggregate purchase price of $10.0 million.

Liquidity and Going Concern Overview

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, upfront payments under our license agreement with Gilead Sciences, Inc., or Gilead, and collaboration agreement with AbbVie 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.

Recent Developments

Exclusive License Agreement with Gilead

On March 27, 2024, our wholly-owned subsidiary, Xilio Development, Inc., or Xilio Development, entered into an exclusive license agreement with Gilead Sciences, Inc., or Gilead, pursuant to which it 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 will be responsible for conducting clinical development for XTX301 in the ongoing Phase 1 clinical trial through an initial planned Phase 2 dose expansion.

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 license agreement, we are eligible to receive approximately $43.5 million in upfront payments, including a cash payment of $30.0 million and an initial equity investment by Gilead of approximately $13.5 million of our common stock at a purchase price of $1.97 per share.

The initial equity investment closed on March 28, 2024, and the $30.0 million upfront cash payment is payable by Gilead within a specified time period promptly following signing of the license agreement.

We will be eligible to receive up to $604.0 million in additional contingent payments, which include (i) the proceeds from up to three additional private placements of common stock, (ii) the $75.0 million transition fee and (iii) specified development, regulatory and sales-based milestones.

Prior to the potential transition fee, up to $29.0 million of the total contingent payments are related to the potential additional private placements of common stock 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.

In connection with the execution of the license agreement, on March 27, 2024, we entered into a stock purchase agreement with Gilead.

In addition to the initial equity investment by Gilead of approximately $13.5 million of our common stock, through March 27, 2025, we may, at our election and subject to the terms and conditions of the stock purchase agreement, cause Gilead to purchase up to approximately $11.5 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 three additional private placements at a predetermined price per share specified therein, at all times subject to Gilead not being deemed the beneficial owner of greater than 19.9% of our common stock upon the closing of the applicable additional private placement with Gilead.

If Gilead elects to purchase prefunded warrants, each prefunded warrant will have an exercise price of $0.0001 per share of common stock, be immediately exercisable and remain exercisable until exercised in full.

Gilead may not exercise its prefunded warrants to the extent that it would beneficially own more than 19.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise.

Any prefunded warrants that may be issued to Gilead in an additional private placement with Gilead will be in substantially the same form as the prefunded warrants issued to investors in the March 2024 private placement.

March 2024 Private Placement

On March 28, 2024, we entered into a securities purchase agreement with certain existing accredited investors, including Bain Capital Life Sciences and Rock Springs Capital, to issue and sell 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 will have an exercise price of $0.0001 per share of common stock, be immediately exercisable and remain exercisable until exercised in full.

We anticipate receiving aggregate gross proceeds from the private placement of approximately $11.3 million, before deducting placement agent fees and expenses payable by us.

The private placement is expected to close on April 2, 2024, subject to the satisfaction of customary closing conditions.

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

Strategic Portfolio Reprioritization and Workforce Reduction

On March 27, 2024, our board of directors approved a strategic portfolio reprioritization and restructuring.

As part of the strategic portfolio reprioritization and restructuring, we plan to:

● focus on rapidly advancing clinical development for XTX301 and XTX101 and leveraging our promising research platform to advance differentiated bispecific and cell-engager molecules;

● discontinue further investment in XTX202 as a monotherapy and explore strategic opportunities to continue to develop XTX202 with other agents;

● undertake efforts to further reduce our expenses and streamline our operations, including a reduction in headcount of 15 employees, representing approximately 21% of our workforce immediately prior to the workforce reduction.

Repayment of Loan and Security Agreement

In the first quarter of 2024, we repaid all amounts outstanding under the loan and security agreement, as amended, with Pacific Western Bank, or PacWest, and PacWest released all security interests in our and our affiliates’ assets.

Liquidity and Going Concern Overview

Since inception, we have incurred significant operating losses, including net losses of $76.4 million and $88.2 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $325.5 million.

Since inception, we have incurred significant operating losses, including net losses of $58.2 million and $76.4 million for years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, we had an accumulated deficit of

$383.8 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 of December 31, 2024, we had cash and cash equivalents of $55.3 million.

Based on our current operating plans, we anticipate that our cash and cash equivalents as of December 31, 2023, together with (i) the $30.0 million upfront payment under the license agreement with Gilead, (ii) the approximately $13.5 million in proceeds from the initial private placement with Gilead, which closed on March 28, 2024, and (iii) the approximately $11.3 million in gross proceeds from our private placement, which is expected to close on April 2, 2024 (subject to customary closing conditions), and after giving effect to (a) one-time costs and anticipated future cost savings associated with our strategic portfolio reprioritization and workforce reduction announced in March 2024 and (b) the repayment in the first quarter of 2024 of the outstanding loan balance under our loan and security agreement with Pacific Western Bank, will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

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.

In addition, since these amounts may not be sufficient to fund our operations for at least twelve months from the date of issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, there is substantial doubt about our ability to continue as a going concern.

Based on our current operating plans, we anticipate that our cash and cash equivalents as of December 31, 2024, together with the $52.0 million in upfront payments received in the first quarter of 2025 in connection with our collaboration agreement with AbbVie, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2026.

Since these amounts are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, there is substantial doubt about our ability to continue as a going concern.

Our management has developed plans to fund our operations, which primarily consist of raising additional capital through one or more of the following:

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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.

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

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

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

Financial Operations Overview

We have not generated any revenue since inception and do not expect to generate any revenue from the sale of products for at least the next several years, if at all.

We have not generated any revenue from the sale of products since inception and do not expect to generate any revenue from the sale of products for at least the next several years, if at all.

If our development efforts for our current or future product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales.

In March 2024, Xilio Development entered into the license agreement with Gilead pursuant to which we are eligible to receive $43.5 million of upfront payments, including a cash payment of $30.0 million and an initial equity investment by Gilead of approximately $13.5 million of our common stock at a purchase price of $1.97 per share.

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

For more information on our collaboration and license

agreements with Gilead and AbbVie, please see Note 6, Collaboration and License Agreements, and Note 14, Subsequent Events, respectively, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

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 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., which we refer to as 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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● our ability to hire and retain key research and development personnel;

● the costs associated with the development of any additional product candidates we develop or acquire through collaborations;

● the costs associated with the development of any additional product candidates we acquire or develop through collaborations, partnerships, licenses or similar transactions;

● our successful enrollment in and completion of clinical trials;

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We anticipate that our general and administrative expenses will remain consistent with historical levels as we maintain our infrastructure to support our research and development activities.

We also expect to continue to incur significant expenses associated with operating as a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services attributable to maintaining compliance with exchange listing standards and U.S.

We also expect to continue to incur significant expenses associated with operating as a public company, including increased costs for accounting, audit, legal, regulatory and tax-related services attributable to maintaining compliance with exchange listing standards and U.S.

Securities and Exchange Commission, or SEC, requirements, directors’ and officers’ liability insurance costs and investor and public relations costs.

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

In connection with our strategic portfolio reprioritization and restructuring in March 2024, we undertook efforts to reduce our expenses and streamline our operations, including a reduction in headcount of 15 employees, representing approximately 21% of our workforce immediately prior to the workforce reduction.

Restructuring expense consists of costs directly incurred as a result of restructuring initiatives, and includes employee severance payments, benefits continuation, outplacement services and related expenses.

Other Income, Net

Other income, net consists primarily of interest income earned from our cash and cash equivalents, interest expense principally on the note payable under our debt arrangement with PacWest and amortization of the debt discount related to debt issuance costs.

Other income, net consists primarily of interest income earned from our cash and cash equivalents, interest expense principally on the note payable under our former debt arrangement with Pacific Western Bank, or PacWest, and amortization of the debt discount related to debt issuance costs.

Since our inception, we have not recorded any U.S.

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The remaining federal NOL carryforwards and our state NOL carryforward will expire beginning in 2035.

These loss carryforwards are available to reduce future federal taxable income, if any.

These loss carryforwards are available to reduce future federal taxable

income, if any.

As of December 31, 2024, we also had federal and state research and development credit carryforwards of approximately $10.2 million and $3.8 million, respectively, which may be available to offset any future income tax and which will begin to expire in 2033.

These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities.

Utilization of our NOL carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986, or Section 382, as well as similar state provisions.

These “ownership changes”, as defined by Section 382, may limit the amount of NOL and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively.

In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

Since our formation, we have raised capital through the issuance of units and capital stock on several occasions.

These financings may have resulted in an “ownership change”.

We have not yet completed a detailed study of our inception to date “ownership change” activity.

Utilization of our NOL carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, as well as similar state provisions.

These “ownership changes”, as defined by Section 382 of the Code, may limit the amount of NOL and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively.

In general, an ownership change as defined by Section 382 of the Code results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

In the second quarter of 2024, we had an ownership change as defined by Sections 382 and 383 of the Code.

As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards and other pre-change tax attributes to offset such taxable income may be subject to limitations, which could result in increased future tax liability to us and could have an adverse effect on our future results of operations.

In addition, we have not yet conducted a study of our research and development credit carryforwards.

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Comparison of the Years Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

The following table summarizes our results of operations for years ended December 31, 2024 and 2023 (in thousands):

License revenue

Total revenue

Operating expenses

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General and administrative

Restructuring

Total operating expenses

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Total other income, net

License Revenue

We recognized $6.3 million in license revenue for the year ended December 31, 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 years ended December 31, 2024 and 2023 (in thousands):

vilastobart (XTX101)

Other early programs and indirect research and development

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The decrease in research and development expenses was primarily due to the following:

● XTX101 costs decreased by $4.6 million, primarily driven by a $2.0 million cost-sharing payment that we earned under our Roche clinical collaboration and recorded as a reduction in research and development expenses and a decrease of manufacturing costs of $2.2 million due to costs associated with the production of drug substance and drug product incurred during the year ended December 31, 2022 for which there were no comparable costs during the year ended December 31, 2023;

● XTX202 costs increased by $3.6 million, primarily driven by a $5.3 million increase in clinical development activities related to our Phase 1/2 clinical trial, partially offset by a $1.3 million decrease in manufacturing activities and a $0.2 million decrease in preclinical activities;

● XTX301 costs decreased by $5.0 million, primarily driven by a $4.6 million decrease in manufacturing activities relating to the initial supply of clinical trial material in the comparable period, a $2.4 million decrease in preclinical activities and a $0.2 million decrease in regulatory activities relating to the filing of our investigational

new drug application in the comparable period, partially offset by a $2.3 million increase in clinical development activities related to our Phase 1 clinical trial;

● personnel-related costs decreased by $1.1 million, primarily driven by a $0.6 million decrease in salaries, bonuses and benefits due to lower research and development headcount, which was partially offset by an increase in average compensation, a $0.3 million decrease in stock-based compensation and a $0.2 million decrease in recruiting costs.

● vilastobart costs increased by $5.4 million, primarily driven by $4.5 million in aggregate development milestones that we incurred during the year ended December 31, 2024 under our CTLA-4 monoclonal antibody license agreement with WuXi Biologics (Hong Kong) Limited and our amended and restated exclusive license agreement with City of Hope, and a $2.8 million increase in clinical development activities related to our ongoing Phase 1/2 clinical trial evaluating vilastobart in combination with atezolizumab, partially offset by a $2.0 million increase in cost-sharing payments earned under our Roche clinical collaboration from $2.0 million for the year ended December 31, 2023 to $4.0 million for the year ended December 31, 2024, which were recorded as a reduction in research and development expenses;

● XTX301 costs decreased by $1.4 million, primarily driven by a $2.5 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;

● XTX202 costs decreased by $4.7 million, primarily driven by a decrease in clinical development activities as a result of discontinuing further investment in XTX202 as a monotherapy;

● other early programs and indirect research and development costs decreased by $6.3 million, primarily driven by a decrease in external expenses related to preclinical research and development activities;

● personnel-related costs decreased by $4.1 million, primarily driven by a $3.4 million decrease in salaries, bonuses and benefits due to lower research and development headcount and a $0.5 million decrease in stock-based compensation.

General and Administrative Expenses

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The decrease in general and administrative expenses was primarily due to the following:

● personnel-related costs decreased by $0.9 million, primarily driven by a $0.8 million decrease in stock-based compensation, as the prior year period included $0.6 million in non-recurring compensation expense resulting from the modification of previously issued stock options;

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

● personnel-related costs decreased by $1.2 million, primarily driven by a $1.1 million decrease in salaries, bonuses and benefits due to lower general and administrative headcount and a $0.4 million decrease in stock-based compensation, partially offset by a $0.4 million increase in recruiting and other personnel-related costs;

● professional and consulting fees decreased by $0.5 million, primarily driven by a $0.9 million decrease in consulting and other professional related fees, partially offset by a $0.5 million increase in legal fees;

● facility-related and other general and administrative expenses decreased by $0.5 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 year ended December 31, 2024.

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

Other Income, Net

Other income, net increased by $1.8 million from $0.9 million for the year ended December 31, 2022 to $2.7 million for the year ended December 31, 2023.

The increase in other income, net was primarily due to an increase in interest income earned on our cash and cash equivalents due to higher interest rates and lower interest expense on our note payable under our debt arrangement with PacWest as a result of the commencement of the repayment of principal beginning in January 2023.

Other income, net decreased by $0.4 million from $2.7 million for the year ended December 31, 2023 to $2.3 million for the year ended December 31, 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.

Liquidity and Capital Resources

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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.

Through December 31, 2023, we have received an aggregate of

$350.9 million in net proceeds from such transactions, including $116.4 million in net proceeds from our IPO, $224.5 million in net proceeds from the sale and issuance of preferred units and convertible preferred stock, and $10.0 million in net proceeds from our debt financing with PacWest.

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, upfront payments under our license agreement with Gilead and collaboration agreement with AbbVie and our ATM offering program.

Through December 31, 2024, we have received an aggregate of $437.7 million in gross proceeds from such transactions, including $224.5 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, $36.3 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, or Cowen, from our existing ATM offering program.

As of December 31, 2024, we had cash and cash equivalents of $55.3 million.

Under the license agreement with Gilead, we are eligible to receive approximately $43.5 million in upfront payments, including a cash payment of $30.0 million and an initial equity investment by Gilead of approximately $13.5 million of our common stock at a purchase price of $1.97 per share.

On March 28, 2024, we entered into a securities purchase agreement with certain existing accredited investors pursuant to which we expect to receive approximately $11.3 million of gross proceeds upon closing of the March 2024 private placement, which is expected to close on April 2, 2024 (subject to customary closing conditions).

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 Annual Report on Form 10-K, 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.

In February 2025, we received $52.0 million in total upfront payments in connection with the collaboration agreement with AbbVie.

ATM Offering Program

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 entered into a sales agreement with Cowen under which we could issue and sell shares of our common stock, from time to time, having an aggregate offering price of up to $75.0 million under a sales agreement prospectus filed as part of the Form S-3.

In March 2025, we terminated the sales agreement with Cowen, which terminated the offering and sale of shares of our common stock registered under the sales agreement prospectus.

As of the termination of the sales agreement with Cowen, we had sold an aggregate of 8,550,000 shares of our common stock for aggregate gross proceeds of approximately $9.1 million, and shares of common stock having an aggregate offering price of approximately $65.9 million remained unsold.

In March 2025, we entered into a new sales agreement with Leerink Partners, LLC, or Leerink, under which we may issue and sell shares of our common stock, from time to time, having an aggregate offering price of up to $50.0 million under a sales agreement prospectus filed as part of the Form S-3.

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

Net cash used in:

Net cash provided by (used in):

Operating activities

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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 year ended December 31, 2024, net cash used in operating activities of $18.4 million was primarily due to our net loss of $58.2 million, partially offset by changes in operating assets and liabilities of $31.8 million and net non-cash expenses of $8.1 million.

During the year ended December 31, 2023, net cash used in operating activities of $68.6 million was primarily due to our net loss of $76.4 million and changes in operating assets and liabilities of $1.7 million, partially offset by net non-cash expenses of $9.4 million.

During the year ended December 31, 2022, net cash used in operating activities of $75.7 million was primarily due to our net loss of $88.2 million, partially offset by net non-cash expenses of $10.5 million and changes in operating assets and liabilities of $2.0 million.

Investing Activities

During the years ended December 31, 2023 and 2022, net cash used in investing activities of $0.5 million and $1.9 million, respectively, was due to purchases of property and equipment.

During the years ended December 31, 2024 and 2023, net cash used in investing activities consisted of purchases of property and equipment.

Financing Activities

During the year ended December 31, 2024, net cash provided by financing activities of $29.2 million consisted of aggregate net proceeds of $25.7 million from the sale and issuance of common stock and prefunded warrants to certain existing accredited investors and Gilead in private placements and aggregate net proceeds of $6.8 million from the sale and issuance of common stock under our ATM offering program, partially offset by repayments of debt principal of $3.3 million under our loan agreement with PacWest and payments on our finance lease for certain lab equipment.

During the year ended December 31, 2023, net cash used in financing activities of $6.5 million consisted of repayments of debt principal 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 and the exercise of stock options.

During the year ended December 31, 2022, net cash used in financing activities of $0.1 million consisted primarily of payments on our finance lease for certain lab equipment, partially offset by proceeds received from the exercise of stock options.

Capital Requirements and Going Concern

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Inflation generally affects us by increasing our cost of labor and certain services.

We do not believe that inflation had a material effect on our financial statements included elsewhere in this Annual Report on Form 10-K.

We do not believe that inflation had a material effect on our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

However, the United States has recently experienced historically high levels of inflation.

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As of December 31, 2024, we had cash and cash equivalents of $55.3 million.

Based on our current operating plans, we anticipate that our cash and cash equivalents as of December 31, 2023, together with (i) the $30.0 million upfront payment under the license agreement with Gilead, (ii) the approximately $13.5 million in proceeds from the initial private placement with Gilead, which closed on March 28, 2024, and (iii) the approximately $11.3 million in gross proceeds from our private placement, which is expected to close on April 2, 2024 (subject to customary closing conditions), and after giving effect to (a) one-time costs and anticipated future cost savings associated with our strategic portfolio reprioritization and workforce reduction announced in March 2024 and (b) the repayment in the first quarter of 2024 of the outstanding loan balance under our loan and security agreement with PacWest, will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

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.

In addition, since these amounts are not expected to be sufficient to fund our operations for at least twelve months from the date of issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, there is substantial doubt about our ability to continue as a going concern.

Our management has developed plans to fund our operations, which primarily consist of raising additional capital through one or more of the following:

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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.

The accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K have been prepared on a going

concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business for the foreseeable future.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business for the foreseeable future.

The consolidated financial statements do not include

any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Because of the numerous risks and uncertainties associated with product development, and because the extent to which we may enter into additional collaborations with third parties for the development of our product candidates is unknown, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with advancing the research and development of our product candidates.

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, vilastobart 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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● the extent to which we may acquire or in-license other products, product candidates, technologies or intellectual property, as well as the terms of any such arrangements;

● 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;

● our ability to maintain our clinical collaboration to further develop vilastobart in combination with atezolizumab, including the cost-sharing arrangements of such collaboration;

● the timing and amount of cost-sharing payments under our clinical collaboration with Roche for vilastobart;

● the timing and amount of milestones, option-related fees and other contingent payments under our license agreement with Gilead for XTX301 and our collaboration agreement with AbbVie for tumor-activated immunotherapies;

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

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In addition, our product candidates, if approved, may not achieve commercial success.

Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if ever.

Our commercial revenues, if any, will be derived from sales of products that we do not expect

to be commercially available for several years, if ever.

Accordingly, we will need to obtain substantial additional capital to achieve our business objectives.

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

Market volatility resulting from adverse changes in domestic and international fiscal, monetary and other policies and political relations, regional or global conflicts, uncertainty around global economic conditions, instability in financial markets, current or future pandemics or other factors could also adversely impact our ability to access capital as and when needed.

Market volatility resulting from adverse changes in domestic and international fiscal, monetary and other policies and political relations, regional or global conflicts, uncertainty around global economic conditions, instability in the financial markets, current or future pandemics or other factors could also adversely impact our ability to access capital as and when needed.

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.

Contractual Obligations

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Loan and Security Agreement

In November 2019, we entered into a loan and security agreement with PacWest, as amended, which we refer to as the loan agreement, under which we borrowed $10.0 million under a term loan.

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

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%.

As of December 31, 2023, the interest rate on the term loan was 8.75%.

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.

As of December 31, 2023, the outstanding principal balance under the loan agreement was $3.3 million.

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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We have not included payments contingent upon the achievement of certain development, regulatory or commercial milestones on our consolidated balance sheets.

For further information regarding certain of our license agreements and amounts that could become payable in the future under those agreements, please see Note 6, Collaboration Agreements and Intellectual Property Licenses, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

For further information regarding certain of our license agreements and amounts that could become payable in the future under those agreements, please see Note 6, Collaboration

and License Agreements, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

In addition, we are party to certain agreements with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes.

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While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.

Research and Development Expenses and Related Accruals

License Revenue

Our license revenue to date is comprised of amounts recognized from our license agreement with Gilead.

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers , or ASC 606.

Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

To determine the appropriate amount of revenue to be recognized for arrangements that we determined are within the scope of ASC 606, we perform the following five steps:

(i) identification of the contract with the customer;

(ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations;

and (v) recognition of revenue when (or as) we satisfy each performance obligation.

The promised good or services in our arrangements typically consist of license rights to our intellectual property and research and development services.

Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer.

Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources or (ii) the promised good or service is separately identifiable from other promises in the contract.

In assessing whether promised goods or services are distinct, we consider factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

We estimate the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract.

The consideration may include both fixed consideration and variable consideration.

At the inception of each arrangement that includes variable consideration and at each reporting period, we evaluate the amount of potential payment and the likelihood that the payments will be received.

We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method better predicts the amount expected to be received.

If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price.

Our contracts often include development and regulatory milestone payments.

At contract inception and at each reporting period, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are not included in the transaction price.

At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

We allocate the transaction price based on the estimated standalone selling price of the underlying performance obligations or in the case of certain variable consideration to one or more performance obligations.

We must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract.

We utilize key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation.

Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts we would expect to receive for each performance obligation.

For performance obligations consisting of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Research and Development Expenses and Related Accruals and Prepaid Expenses

Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries, stock-based compensation and benefits, facilities costs and laboratory supplies, depreciation, manufacturing expenses and external costs of outside vendors engaged to conduct planned clinical development, preclinical development, manufacturing and manufacturing process development and other research support activities.

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In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly.

If the actual timing of the

performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly.

Nonrefundable advance payments for goods and services that will be used in future research and development activities are initially capitalized and subsequently expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

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To date, there have been no material differences between our estimates of such expenses and the amounts incurred.

Stock-Based Compensation

We issue stock-based awards to employees, directors and non-employees, generally in the form of stock options.

We measure employee stock-based compensation based on the grant date fair value of the stock-based awards and recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation , or ASC 718.

We recognize forfeitures as they occur.

We classify stock-based compensation expense in the consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified, as applicable.

Determination of the Fair Value of Stock-Based Awards

We estimate the fair value of our stock options granted with service-based conditions using the Black-Scholes option pricing model, which requires inputs of subjective assumptions, including:

(i) the expected volatility of our common stock, (ii) the expected term of the award, (iii) the risk-free interest rate, (iv) expected dividends and (v) the fair value of our common stock.

We completed our IPO in October 2021, and as a result there has not been a significant amount of time for which there has been a public market for the trading of our common stock, including a lack of company-specific historical and implied volatility data, therefore we base the estimate of expected volatility on the historical volatilities of a representative group of publicly traded guideline companies.

For these analyses, we select companies with comparable characteristics and with historical share price information that approximates the expected term of the stock-based awards.

We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period that approximates the calculated expected term of our stock options.

We will continue to apply this method until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

We estimate the expected term of our stock options granted to employees and directors using the simplified method as prescribed by the SEC Staff Accounting Bulletin No.

107, Share-Based Payment , whereby the expected term equals the average of the vesting term and the original contractual term of the option.

We utilize this method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term and the plain nature of our stock-based awards.

The expected dividend yield is assumed to be zero as we have no current plans to pay any dividends on common stock.

We have elected to use the expected term for stock options granted to non-employees, using the simplified method, as the basis for the expected term assumption.

However, we may elect to use either the contractual term or the expected term for stock options granted to non-employees on an award-by-award basis.

Subsequent to the completion of our IPO in October 2021, the fair value of our common stock has been determined based on the share price of our common stock on the Nasdaq Global Select Market.

Emerging Growth Company and Smaller Reporting Company Status

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This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies.

We have 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, we 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 we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an emerging growth company.

We have 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, we 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 we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an emerging growth company.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

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What changed 10-K

Item 7. Management’s Discussion and Analysis