XFOR: Initiating Coverage of X4 Pharmaceuticals; Investing on More Than Just a WHIM…
NASDAQ:XFOR
READ THE FULL XFOR RESEARCH REPORT
Initiating Coverage
We are initiating coverage of X4 Pharmaceuticals, Inc. (NASDAQ:XFOR) with a valuation of $4.50. X4 is a biopharmaceutical company developing therapies for rare diseases with a focus on those arising from a dysfunction of the immune system. The company’s lead development candidate, mavorixafor, is a small molecule antagonist of chemokine receptor CXCR4. Mavorixafor is able to mobilize mature, functional white blood cells from the bone marrow into the bloodstream and thus may provide benefit for a wide range of chronic neutropenic disorders, including WHIM (Warts, Hypogammaglobulinemia, Infections, and Myelokathexis) syndrome, a rare, primary immunodeficiency. X4 recently announced positive results from the 4WHIM Phase 3 clinical trial for the treatment of patients with WHIM syndrome. Based on these positive results, we anticipate the company filing a new drug application (NDA) early in the second half of 2023.
NDA Set to be Filed Early in Second Half of 2023
X4 announced positive topline results from the Phase 3 4WHIM trial in November 2022. The results showed that mavorixafor achieved clinical and statistical superiority over placebo (P<0.0001) when measuring the length of time that participants’ absolute neutrophil count (ANC) remained above a clinically meaningful threshold of 500 cells per microliter over 24-hour periods at four time points throughout the 52-week trial. Similar results were seen for absolute lymphocyte count (ALC). In May 2023, the company announced additional positive results showing an approximate 60% reduction in annualized infection rate. Based on the positive results, we anticipate X4 filing a new drug application (NDA) with the U.S. FDA early in the second half of 2023.
Sale of Priority Review Voucher Could Extend Cash Runway
Following a $65 million private placement in May 2023, we estimate that X4 currently has cash and cash equivalents of approximately $150 million, which we estimate will fund operations into the fourth quarter of 2024. Mavorixafor has been granted Rare Pediatric Designation by the FDA for the treatment of WHIM syndrome, thus approval of mavorixafor for WHIM syndrome could also include the issuance of a priority review voucher (PRV). PRVs are fully transferable and a number of them have recently sold for approximately $100 million each.
Expanding Mavorixafor Opportunity Through the Treatment of Chronic Neutropenic Disorders
Given mavorixafor’s ability to increase neutrophil counts in WHIM syndrome patients, X4 tested the compound in a Phase 1b trial in patients with chronic neutropenia. The objectives of the trial were to determine if mavorixafor could normalize neutrophil levels in those with severe neutropenia, with moderate neutropenia also taking granulocyte-colony stimulating factor (G-CSF), and those with normal neutrophil levels also taking G-CSF. The results showed that 100% of participants responded to therapy as defined by an increase in ANC >500 cells/µL, including those on G-CSF therapy. The company will be following up on these results with a Phase 2 trial to evaluate the use of daily mavorixafor with or without G-CSF for up to six months in patients with CN. There are an estimated 48,000 chronic neutropenia patients in the U.S. G-CSF is the only currently available treatment option and it carries a host of adverse side effects.
Valuation
We value X4 using a probability-adjusted discounted cash flow model that takes into account potential future revenues of mavorixafor for the treatment of WHIM and CN in the U.S. along with the sale of the PRV. We model for X4 to commercialize mavorixafor on its own in the U.S. We expect commercialization of the compound in international markets only after a partnership is obtained.
WHIM syndrome is a very rare disease, and a precise incidence and prevalence is not well established. In 2021, data was presented at the American Society of Hematology Meeting (ASH 2021) that utilized artificial intelligence to estimate the prevalence of WHIM syndrome in the U.S. The study estimated a prevalence of 1,803 to 3,718 WHIM look-alike patients in the U.S. (e.g., diagnosed or undiagnosed WHIM syndrome), thus for modeling purposes we are estimating approximately 2,500 WHIM patients in the U.S. We estimate a yearly price for treatment of $300,000, which we believe is warranted based on the data accumulated thus far and the positive impact the drug appears to have on reducing the number of infections and their severity/duration in WHIM patients.
We model for the NDA to be filed in the third quarter of 2023 and for FDA approval to be granted in the first half of 2024, which will also be accompanied by the issuance of a PRV. We estimate the PRV will be sold for $100 million shortly after being granted. We currently estimate peak sales for the treatment of WHIM of $300 million six years after launch. Following the initiation of a Phase 3 study for the treatment of CN in 2024, we estimate approval in that indication in 2027 and for peak sales of $1 billion six years after launch. Using a 15% discount rate and an 85% probability of approval in WHIM and a 50% probability of approval in CN leads to a net present value of $95 million for mavorixapor for the treatment of WHIM and $816 million for the treatment of CN. We calculate the net present value for the PRV is $85 million.
Combining the NPVs for the WHIM indication, the CN indication, the PRV, the company’s current cash position, and the potential cash from the exercise of warrants leads to a net present value for the company of $1.3 billion. We estimate X4’s current fully diluted share count is approximately 285.5 million, which leads to a valuation of $4.50 per share.
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