Xilio Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q includes forward-looking statements that involve risks and uncertainties. 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. Overview 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. However, their potential is significantly curtailed by systemic toxicity that results from activity of the therapeutic molecule outside the tumor microenvironment. 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 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. 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, 24 Table of Contents 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 25 Table of Contents Inc. 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. All of our programs are in early clinical or preclinical development. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve profitability. 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 $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: ● continue to advance our current research programs and conduct additional research programs; ● advance our current product candidates and any future product candidates we may develop into preclinical and clinical development; ● seek marketing approvals for product candidates that successfully complete clinical trials, if any; ● obtain, expand, maintain, defend and enforce our intellectual property; ● hire additional research, clinical, regulatory, quality, manufacturing and general and administrative personnel; ● establish a commercial and distribution infrastructure to commercialize products for which we may obtain marketing approval, if any; ● continue to discover, validate and develop additional product candidates; ● continue to manufacture increasing quantities of our current or future product candidates for use in preclinical studies, clinical trials and for any potential commercialization; ● acquire or in-license other product candidates, technologies or intellectual property; and ● incur additional costs associated with current and future research, development and commercialization efforts and operations as a public company. As a result, we will need substantial additional capital to support our continuing operations and pursue our strategy. 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. 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 26 Table of Contents 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. ​ Financial Operations Overview Revenue 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. 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 Research and Development Expenses Research and development expenses consist primarily of costs incurred for our discovery efforts, research activities and development and testing of our programs and product candidates. These expenses include: ● personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions; ● costs incurred with third-party contract development and manufacturing organizations, or CDMOs, to acquire, develop and manufacture materials for both preclinical studies and current or future clinical trials; ● costs of funding research performed by third parties that conduct research and development and preclinical activities on our behalf; ● costs incurred with third-party contract research organizations, or CROs, and other third parties in connection with the conduct of our current or future clinical trials; ● costs of sponsored research agreements and outside consultants, including their fees and related expenses; ● costs incurred to maintain compliance with regulatory requirements; ● fees for maintaining licenses and other amounts due under our third-party licensing agreements; ● expenses incurred for the procurement of materials, laboratory supplies and non-capital equipment used in the research and development process; and ● depreciation, amortization and other direct and allocated expenses, including rent, maintenance of facilities and other operating costs, incurred as a result of our research and development activities. 27 Table of Contents We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific deliverables using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated balance sheets as prepaid expenses or accrued research and development expenses. We record cost-sharing payments under our clinical trial collaboration with 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. The capitalized amounts are expensed as the related goods are delivered or the services are performed. We use our personnel and infrastructure resources for our discovery efforts, including the advancement of our platform technology, developing programs and product candidates and managing external research efforts. A significant portion of our research and development costs have been, and will continue to be, external costs. We track these external costs, such as fees paid to CDMOs, CROs, preclinical study vendors and other third parties in connection with our manufacturing and manufacturing process development, clinical trials, preclinical studies and other research activities by program. Due to the number of ongoing programs and our ability to use resources across several projects, personnel-related expenses and indirect or shared operating costs incurred for our research and development programs are not recorded or maintained on a program-by-program basis. Research and development activities are central to our business model. 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 our discovery research efforts and our related personnel costs to remain consistent with historical levels. In addition, as we progress our most advanced product candidates in clinical development, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into, or may enter into license, acquisition, option or other agreements to acquire the rights to future products and product candidates. In the event we are unable to raise sufficient additional capital in the near term to fund our operations, we will be required to adopt cost reduction strategies that seek to maintain our ability to continue the development of our most advanced product candidates in clinical development while otherwise reducing our overall research and development expenses. At this time, we cannot reasonably estimate or know the nature, timing and projected costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates or programs. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of: ● the scope, timing, costs and progress of preclinical and clinical development activities; ● the number and scope of preclinical and clinical programs we decide to pursue; ● our ability to implement and maintain cost reduction strategies, as well as the timing of such cost reductions; ● our ability to maintain our current research and development programs; ● our ability to establish an appropriate safety profile for our product candidates with IND-enabling studies; ● our ability to hire and retain key research and development personnel; ● 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; 28 Table of Contents ● our ability to successfully complete clinical trials with safety, potency and purity profiles that are satisfactory to the U.S. Food and Drug Administration, or the FDA, or any comparable foreign regulatory authority; ● our receipt of regulatory approvals from applicable regulatory authorities; ● our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates; ● our ability to commercialize products, if and when approved, whether alone or in collaboration with others; ● the continued acceptable safety profiles of the product candidates following approval, if any; ● our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if any of our product candidates are approved; ● the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder, if any; ● 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; and ● 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. We may never succeed in obtaining regulatory approval for any product candidate we may develop. General and Administrative Expenses General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits, recruiting and stock-based compensation, for personnel in our executive, finance, legal, business development, human resources and other administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional and consulting fees for accounting, auditing, tax, human resources and administrative consulting services; board of directors’ fees; insurance costs; and facility-related expenses, which include depreciation costs and other allocated expenses for rent, maintenance of facilities and other general administrative costs. These costs relate to the operation of the business and are in support of but separate from the research and development function and our individual development programs. Costs to secure and defend our intellectual property are expensed as incurred and are classified as general and administrative expenses. 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 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. 29 Table of Contents Restructuring In connection with the March 2024 strategic portfolio reprioritization and restructuring, 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 former debt arrangement with Pacific Western Bank, or PacWest, and amortization of the debt discount related to debt issuance costs. Results of Operations 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 ​ ​ ​ ​ March 31, ​ ​ ​ ​ 2025 2024 Change Revenue ​ ​ ​ ​ ​ Collaboration and license revenue ​ $ 2,930 ​ $ — ​ $ 2,930 Total revenue ​ 2,930 ​ — ​ ​ 2,930 Operating expenses ​ ​ ​ ​ ​ ​ Research and development ​ $ 8,266 ​ $ 10,400 ​ $ (2,134) General and administrative ​ 8,515 ​ 6,139 ​ 2,376 Restructuring ​ ​ — ​ ​ 948 ​ ​ (948) Total operating expenses ​ 16,781 ​ 17,487 ​ (706) Loss from operations ​ (13,851) ​ (17,487) ​ 3,636 Other income, net ​ ​ ​ Other income, net ​ 586 ​ 284 ​ 302 Total other income, net ​ 586 ​ 284 ​ 302 Net loss ​ $ (13,265) ​ $ (17,203) ​ $ 3,938 ​ 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. 30 Table of Contents Research and Development Expenses The following table summarizes our research and development expenses for the three months ended March 31, 2025 and 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ March 31, ​ ​ ​ ​ 2025 2024 Change vilastobart ​ $ (193) ​ $ (523) ​ $ 330 XTX301 ​ ​ 979 ​ ​ 1,215 ​ ​ (236) XTX501 ​ ​ 469 ​ ​ — ​ ​ 469 XTX202 ​ ​ 52 ​ ​ 3,164 ​ ​ (3,112) Other early programs and indirect research and development ​ ​ 2,375 ​ ​ 1,698 ​ ​ 677 Personnel-related ​ ​ 4,584 ​ ​ 4,846 ​ ​ (262) Total research and development expenses ​ $ 8,266 ​ $ 10,400 ​ $ (2,134) ​ 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, 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 costs increased by $0.7 million, primarily driven by an increase in external expenses related to preclinical research and development activities; and ● 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. ​ 31 Table of Contents General and Administrative Expenses The following table summarizes our general and administrative expenses for the three months ended March 31, 2025 and 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ March 31, ​ ​ ​ ​ 2025 2024 Change Personnel-related ​ $ 4,444 ​ $ 3,575 ​ $ 869 Professional and consulting fees ​ ​ 3,238 ​ ​ 1,662 ​ ​ 1,576 Facility-related and other general and administrative expenses ​ ​ 833 ​ ​ 902 ​ ​ (69) Total general and administrative expenses ​ $ 8,515 ​ $ 6,139 ​ $ 2,376 ​ 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 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; and ● 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 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, 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 Sources of Liquidity Since our inception, we have incurred significant operating losses and negative cash flows from operations. 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; 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 32 Table of Contents 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. Cash Flows The following table provides information regarding our cash flows for each period presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2025 2024 Net cash provided by (used in): ​ ​ ​ ​ Operating activities ​ $ 28,978 ​ $ (10,502) Investing activities ​ (22) ​ — Financing activities ​ 4,832 ​ 954 Net increase (decrease) in cash, cash equivalents and restricted cash ​ $ 33,788 ​ $ (9,548) ​ Operating Activities Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support our business. We have historically experienced negative cash flows from operating activities as we invested in research and development of our product candidates, including preclinical studies, clinical trials, manufacturing and manufacturing process development. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally due to stock-based compensation, depreciation and amortization, as well as changes in components of operating assets and liabilities, which are generally due to increased expenses and timing of vendor payments. During the three months ended March 31, 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. 33 Table of Contents 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 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 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 We expect our future capital requirements to increase substantially over time in connection with our ongoing research and development activities, particularly as we advance our current and planned clinical development of our product candidates and maintain the research efforts and preclinical activities associated with our other existing programs and discovery platform. In addition, we expect to continue to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future. 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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. However, the United States has recently experienced historically high levels of inflation. 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 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. 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. 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 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. 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. The condensed 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. 34 Table of Contents 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 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; ● our ability to implement and maintain cost reduction strategies, as well as the timing of such cost reductions; ● the scope, prioritization and number of our research and development programs; ● the scope, costs, timing and outcome of regulatory review of our product candidates; ● the costs of securing manufacturing materials for use in preclinical studies, clinical trials and, for any product candidates for which we receive regulatory approval, if any, commercial supply; ● the costs and timing of future commercialization activities for any of our product candidates for which we receive regulatory approval; ● the amount and timing of revenue, if any, received from commercial sales of any product candidates for which we receive regulatory approval; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims; ● 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 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; and ● whether we are able to overcome the substantial doubt about our ability to continue as a going concern. Identifying potential product candidates and conducting preclinical studies and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. 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. Accordingly, we will need to obtain substantial additional capital to achieve our business objectives. 35 Table of Contents Our expectation with respect to our ability to fund our currently planned operations is based on estimates that are subject to various risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to management and there can be no assurance that our current operating plan will be achieved in the time frame anticipated by us, and we may exhaust our available capital resources sooner than we expect. 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 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 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 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. Except as described in Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no changes to our critical accounting policies appearing in our Annual Report on Form 10-K for the year ended December 31, 2024. Emerging Growth Company and Smaller Reporting Company Status As an emerging growth company, or EGC, under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. 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. 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. 36 Table of Contents We are also a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an EGC, in which case we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.