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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 125 added, 136 removed, 192 unchanged (58% of the section changed)

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As a result of many factors, including those factors set forth in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

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, antibodies, bispecifics and immune 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.

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 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.

On November 7, 2024, we reported initial data from Phase 1C dose escalation for vilastobart in combination with atezolizumab (Tecentriq®) in patients with advanced solid tumors.

We are currently advancing clinical development for vilastobart in combination with atezolizumab in a Phase 2 clinical trial in patients with microsatellite stable colorectal cancer, or MSS CRC, under our clinical trial collaboration with F.

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, 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 advancing clinical development for vilastobart in combination with atezolizumab (Tecentriq®) in a Phase 2 clinical trial in patients with metastatic microsatellite stable colorectal cancer, or MSS CRC, under a co-funded clinical trial collaboration with F.

Hoffmann-La Roche Ltd, or Roche.

We expect to report initial Phase 2 data for vilastobart in combination with atezolizumab in approximately 20 patients with MSS CRC in the fourth quarter of 2024 and in a total of approximately 40 patients with MSS CRC in the first quarter of 2025.

We are also advancing clinical development for XTX301 in a Phase 1 clinical trial in patients with advanced solid tumors under our exclusive license agreement with Gilead Sciences, Inc., or Gilead, and plan to report safety, pharmacokinetic and pharmacodynamic data from the ongoing Phase 1 clinical trial for XTX301 in the fourth quarter of 2024.

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 XTX501, our tumor-activated PD-1/IL-2, which is designed to selectively stimulate PD-1 positive antigen-experienced T cells and enhance their function and is currently advancing in initial investigational new drug application, or IND, enabling activities, and to advance preclinical programs for tumor-activated immune 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.

In January 2025, we announced initial data from the ongoing Phase 2 clinical trial, and we plan to report additional data from the Phase 2 clinical trial, including additional response assessments and further follow-up on the previously reported data, at the 2025 American Society of Clinical Oncology Annual Meeting.

XTX301 is currently advancing in clinical development in a Phase 1 clinical trial in patients with advance solid tumors under our exclusive license agreement with Gilead Sciences, Inc., or Gilead.

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 have 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 high single digits on annual global net product sales for the option program and tiered royalties ranging in the mid-single digits on annual global net product sales for the collaboration program.

Subject to the terms, conditions and specified exceptions set forth in the agreement, until the agreement is terminated or expires with respect to an option program or the collaboration program, we have agreed to work exclusively with AbbVie with respect to the target for (i) each option program and (ii) the collaboration program.

In addition, we have agreed to work exclusively with AbbVie with respect to the backup target for each option program until the expiration of the applicable target substitution period.

Unless earlier terminated in accordance with its terms, the agreement will expire upon expiration of the last royalty term for the last licensed product.

AbbVie may terminate the agreement for convenience upon specified time periods.

On an option program-by-option program basis, if AbbVie elects not to pay the applicable option extension fee following completion of each stage of preclinical development, or if AbbVie elects not to exercise its option right and pay the option exercise fee for the applicable option program, then the agreement will automatically terminate with respect to such option program.

Subject to the terms and specified exceptions set forth in the agreement, either party may terminate the agreement for the other party’s uncured material breach or insolvency.

Stock Purchase Agreement and Investor Rights Agreement with AbbVie Inc.

In connection with the execution of the collaboration, license and option 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.

The stock purchase agreement contains customary terms and conditions, including closing conditions, mutual representations, warranties and covenants for each of us and AbbVie Inc.

In addition, pursuant to the terms of an investor rights agreement entered into by and between us and AbbVie Inc.

in connection with the stock purchase agreement, AbbVie

agreed to certain transfer and standstill restrictions.

In addition, AbbVie Inc.

is entitled to certain registration rights with respect to the shares issued pursuant to the stock purchase agreement following termination of the transfer restrictions.

We and AbbVie Inc.

each granted the other party customary indemnification rights in connection with the registration of the shares issued pursuant to the stock purchase agreement.

Liquidity and Going Concern Overview

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 initial public offering, or IPO, of common stock in October 2021;

upfront payments under our collaboration and license agreements with AbbVie and Gilead;

and sales of common stock through at-the-market, or ATM, offerings.

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 $45.1 million and $58.7 million for the nine months ended September 30, 2024 and 2023, respectively, and a net loss of $76.4 million for the year ended December 31, 2023.

As of September 30, 2024, we had an accumulated deficit of $370.7 million.

Since inception, we have incurred significant operating losses, including net losses of $13.3 million and $17.2 million for the three months ended March 31, 2025 and 2024, respectively, and a net loss of $58.2 million for the year ended December 31, 2024.

As of March 31, 2025, we had an accumulated deficit of $397.0 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 September 30, 2024, we had cash and cash equivalents of $61.3 million.

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

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 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.

As of March 31, 2025, we had cash and cash equivalents of $89.1 million.

Based on our current operating plans, we anticipate that our existing cash and cash equivalents as of March 31, 2025 will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2026.

to continue as a going concern.

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

additional equity or debt financings;

additional collaborations, partnerships or licensing transactions;

or other sources.

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

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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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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.

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.

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

For more information on our collaboration, license and option agreement with AbbVie and our license agreement with Gilead, please see Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Operating Expenses

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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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● 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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● our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;

● general economic conditions, including inflation.

● general economic conditions, including inflation and the imposition of new or revised global trade tariffs.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.

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Results of Operations

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

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

Comparison of the three months ended March 31, 2025 and 2024

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended

September 30,

License revenue

Collaboration and license revenue

Total revenue

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Total other income, net

License Revenue

We recognized $2.3 million in license revenue for the three months ended September 30, 2024 under the license agreement and stock purchase agreement that we entered into with Gilead in March 2024.

Collaboration and License Revenue

We recognized $2.9 million in collaboration and license revenue for the three months ended March 31, 2025 under the collaboration, license and option agreement and stock purchase agreement with AbbVie and the license agreement and stock purchase agreement with Gilead.

We did not recognize any collaboration and license revenue for the three months ended March 31, 2024 under our agreements with AbbVie and Gilead, as we entered into those agreements in February 2025 and March 2024, respectively.

Research and Development Expenses

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

Three Months Ended

September 30,

vilastobart (XTX101)

Other early programs and indirect research and development

Personnel-related

Total research and development expenses

Research and development expenses decreased by $0.3 million from $11.1 million for the three months ended September 30, 2023 to $10.8 million for the three months ended September 30, 2024.

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

● vilastobart costs increased by $6.3 million, primarily driven by $3.5 million in aggregate development milestones that we incurred during the three months ended September 30, 2024 under our CTLA-4 monoclonal antibody license agreement with WuXi Biologics (Hong Kong) Limited, or WuXi Biologics, and our amended and restated exclusive license agreement with City of Hope, as well as a $2.0 million cost-sharing payment earned under our Roche clinical collaboration during the three months ended September 30, 2023, which was recorded as a reduction in research and development expenses;

● XTX301 costs increased by $0.4 million, primarily driven by an increase in clinical development activities related to our ongoing Phase 1 clinical trial;

● XTX202 costs decreased by $4.0 million, primarily driven by a decrease in clinical development activities as a result of discontinuing further investment in XTX202 as a monotherapy, as well as invoiced investigator costs being lower than previously estimated amounts for the three months ended September 30, 2024;

● other early programs and indirect research and development expenses decreased by $1.7 million, primarily driven by a decrease in external expenses related to preclinical research and development activities;

● personnel-related costs decreased by $1.3 million, primarily driven by a $1.1 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 three months ended September 30, 2024 and 2023 (in thousands):

The following table summarizes our research and development expenses for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended

September 30,

Personnel-related

Professional and consulting fees

Facility-related and other general and administrative expenses

Total general and administrative expenses

General and administrative expenses were $6.3 million for each of the three months ended September 30, 2024 and 2023.

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

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

● professional and consulting fees increased by $0.2 million, primarily driven by an increase in legal fees;

● facility-related and other general and administrative expenses decreased by $0.1 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 a credit of $41,000 in restructuring expenses for the three months ended September 30, 2024, related to a change in estimate for costs of continuation of certain employee benefits related to the workforce reduction announced in March 2024.

Other Income, Net

Other income, net, increased by $0.1 million from $0.6 million for the three months ended September 30, 2023 to $0.7 million for the three months ended September 30, 2024.

The increase in other income, net, was primarily due to 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 nine months ended September 30, 2024 and 2023

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

Nine Months Ended

September 30,

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 $4.6 million in license revenue for the nine months ended September 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 nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended

September 30,

vilastobart (XTX101)

Other early programs and indirect research and development

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Total research and development expenses

Research and development expenses decreased by $8.0 million from $40.4 million for the nine months ended September 30, 2023 to $32.4 million for the nine months ended September 30, 2024.

Research and development expenses decreased by $2.1 million from $10.4 million for the three months ended March 31, 2024 to $8.3 million for the three months ended March 31, 2025.

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

● vilastobart costs increased by $6.7 million, primarily driven by $4.5 million in aggregate development milestones that we incurred during the nine months ended September 30, 2024 under our CTLA-4 monoclonal antibody license agreement with WuXi Biologics and our amended and restated exclusive license agreement with City of Hope and a $2.0 million increase in clinical development activities related to our ongoing Phase 1/2 clinical trial evaluating vilastobart in combination with atezolizumab;

● XTX301 costs decreased by $0.9 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 $1.6 million increase in clinical development activities related to our ongoing Phase 1 clinical trial;

● vilastobart costs, which include $2.0 million of cost-sharing payments earned under our Roche clinical collaboration during both the three months ended March 31, 2025 and 2024, and which were recorded as a reduction in research and development expenses, increased by $0.3 million, primarily driven by an increase in clinical development activities related to our ongoing Phase 1/2 clinical trial evaluating vilastobart in combination with atezolizumab;

● XTX301 costs decreased by $0.2 million, primarily driven by a $0.1 million decrease in manufacturing activities and a $0.1 million decrease in clinical development activities related to our ongoing Phase 1 clinical trial;

● XTX501 costs, which were not separately tracked during the three months ended March 31, 2024 as we had not begun performing IND-enabling studies, increased by $0.5 million primarily due to manufacturing activities related to IND-enabling studies;

● XTX202 costs decreased by $3.1 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 expenses decreased by $6.0 million, primarily driven by a decrease in external expenses related to preclinical research and development activities;

● other early programs and indirect research and development costs increased by $0.7 million, primarily driven by an increase in external expenses related to preclinical research and development activities;

● personnel-related costs decreased by $0.3 million, primarily driven by a $0.2 million decrease in salaries, bonuses and benefits due to lower research and development headcount and a $0.1 million decrease in stock-based compensation.

General and Administrative Expenses

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

Nine Months Ended

September 30,

The following table summarizes our general and administrative expenses for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended

Personnel-related

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Total general and administrative expenses

General and administrative expenses decreased by $2.3 million from $20.6 million for the nine months ended September 30, 2023 to $18.3 million for the nine months ended September 30, 2024.

General and administrative expenses increased by $2.4 million from $6.1 million for the three months ended March 31, 2024 to $8.5 million for the three months ended March 31, 2025.

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

● personnel-related costs decreased by $1.1 million, primarily driven by a $1.0 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 $0.7 million, primarily driven by a $0.9 million decrease in consulting and other professional related fees, partially offset by a $0.2 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.

● personnel-related costs increased by $0.9 million, primarily driven by a $0.5 million increase in salaries, bonuses and benefits due to higher general and administrative headcount and a $0.5 million increase in recruiting and other personnel-related costs, partially offset by a $0.2 million decrease in stock-based compensation;

● professional and consulting fees increased by $1.6 million, primarily driven by an increase in legal fees and other professional costs;

● facility-related and other general and administrative expenses decreased by $0.1 million, primarily driven by a decrease in costs related to directors’ and officers’ liability insurance.

Restructuring

We recognized $0.9 million in restructuring expenses for the nine months ended September 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.

We did not recognize any restructuring expenses for the three months ended March 31, 2025.

We recognized $0.9 million in restructuring expenses for the three months ended March 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, decreased by $0.4 million from $2.3 million for the nine months ended September 30, 2023 to $1.8 million for the nine months ended September 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.

Other income, net, increased by $0.3 million from $0.3 million for the three months ended March 31, 2024 to $0.6 million for the three months ended March 31, 2025.

The increase in other income, net, was primarily due to an increase in interest income earned on our cash and cash equivalents due to a higher average cash balance.

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.

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, a license agreement and our ATM offering program.

Through September 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 September 30, 2024, we had cash and cash equivalents of $61.3 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 such 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.

During the three months ended September 30, 2024, we did not sell any shares of our common stock pursuant to the sales agreement.

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.

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 collaboration and license agreements with AbbVie and Gilead;

and sales of common stock through ATM offerings.

Through March 31, 2025, we have received an aggregate of $491.8 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, $72.0 million in upfront cash payments under our collaboration and license agreements with AbbVie and Gilead, $46.3 million in gross proceeds from the sale and issuance of common stock and

prefunded warrants to certain existing accredited investors, Gilead and AbbVie in private placements and $9.1 million in gross proceeds from the sale and issuance of common stock through our ATM offerings.

As of March 31, 2025, we had cash and cash equivalents of $89.1 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 could issue and sell from time to time in one or more offerings, which became effective on November 18, 2022 (333-268264), or the Prior S-3 Shelf.

In November 2022, we entered into a sales agreement, or the Cowen Sales Agreement, with Cowen and Company LLC 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 Prior S-3 Shelf.

During the year ended December 31, 2024, we issued and sold 7,000,000 shares of our common stock pursuant to the Cowen Sales Agreement at a price of $1.00 per share for aggregate gross proceeds of $7.0 million.

During the three months ended March 31, 2025, we issued and sold an additional 1,550,000 shares of our common stock pursuant to the Cowen Sales Agreement at a weighted average price of $1.3348 per share for aggregate gross proceeds of approximately $2.1 million.

In March 2025, 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 May 8, 2025 (333-285703), or the New S-3 Shelf.

In March 2025, we terminated the Cowen Sales Agreement and we entered into a new sales agreement with Leerink Partners, LLC, or the Leerink Sales Agreement, under which we may issue and sell shares of our common stock from time to time at an aggregate offering price of up to $50.0 million.

Prior to the effectiveness of the New S-3 Shelf, the offering of shares under the Leerink Sales Agreement was registered under the Prior S-3 Shelf.

In connection with the effectiveness of the New S-3 Shelf, the registration of such offering under the Prior S-3 Shelf was terminated and such offering was registered under the New S-3 Shelf.

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

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used in):

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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 nine months ended September 30, 2024, net cash used in operating activities of $4.2 million was primarily driven by our net loss of $45.1 million, partially offset by changes in operating assets and liabilities of $34.8 million, which includes 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 $6.2 million.

During the nine months ended September 30, 2023, net cash used in operating activities of $55.2 million was primarily driven by our net loss of $58.7 million and changes in operating assets and liabilities of $3.5 million, partially offset by net non-cash expenses of $7.0 million.

During the three months ended March 31, 2025, net cash provided by operating activities of $29.0 million was primarily driven by changes in operating assets and liabilities of $40.2 million, which includes the $49.1 million recorded as deferred revenue in connection with our collaboration, license and option agreement and stock purchase agreement with AbbVie, and net non-cash expenses of $2.0 million, partially offset by our net loss of $13.3 million.

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.

Investing Activities

During the nine months ended September 30, 2024 and 2023, net cash used in investing activities consisted of purchases of property and equipment.

During the three months ended March 31, 2025 and 2024, net cash used in investing activities consisted of purchases of property and equipment.

Financing Activities

During the nine months ended September 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 nine months ended September 30, 2023, net cash used in financing activities of $4.9 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.

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.

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.

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.

During the three months ended March 31, 2025, net cash provided by financing activities of $4.8 million primarily consisted of proceeds from the sale and issuance of common stock to AbbVie in a private placement and proceeds from the sale and issuance of common stock through ATM offerings.

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 a 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.

Capital Requirements and Going Concern

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If the inflation rate continues to increase it may affect our expenses, such as employee compensation and research and development charges due to, for example, increases in the costs of labor and supplies.

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 September 30, 2024, we had cash and cash equivalents of $61.3 million.

Additionally, the biotechnology industry is subject to a competitive wage environment that may also increase our operating costs in the future.

As of March 31, 2025, we had cash and cash equivalents of $89.1 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.

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 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.

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

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

additional equity or debt financings;

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

The accompanying condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q 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.

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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:

Our future capital requirements, both short-term and long-term, 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, vilastobart and XTX301, and ongoing preclinical development for our current and future product candidates;

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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 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 and milestones, additional equity investments and other contingent payments under our partnership with Gilead for XTX301;

● our ability to maintain our collaboration and license agreements with AbbVie and Gilead;

● the timing and amount of milestones, option-related fees and other contingent payments under our collaboration, license and option agreement with AbbVie for tumor-activated immunotherapies and our license agreement with Gilead for XTX301, as well as the scope, costs and timing of our development obligations under these agreements;

● our ability to maintain our clinical trial collaboration with Roche to further develop vilastobart in combination with atezolizumab, including the timing and amount of cost-sharing payments under the collaboration;

● general economic conditions, including inflation and the imposition of new or revised global trade tariffs;

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

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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.

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 additional warrants, which could potentially dilute the ownership interest of our existing stockholders.

Contractual Obligations

During the three months ended March 31, 2025, there have been no material changes to our contractual obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods.

These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future.

We base our estimates on historical experience, known trends and events and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Changes in estimates are reflected in reported results for the period in which they become known.

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported revenue and expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ materially from these estimates under different assumptions or conditions.

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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