Results of Operations

The company reported an operating loss of $37 million for the first quarter of 2024, an increase of $8 million compared to the first quarter of 2023. The higher operating loss was primarily driven by increased spending to support the commercial launch of XOLREMDI as well as higher stock-based compensation costs.

Research and Development Expenses

Research and development expenses decreased by $2.2 million in the first quarter of 2024. This was mainly due to lower clinical trial costs for mavorixafor as the pivotal Phase 3 trial was completed in 2023. These decreases were partially offset by higher personnel costs in the research and development department.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $10 million in the first quarter of 2024. The company incurred additional costs to build out its commercial infrastructure and sales force to support the launch of XOLREMDI. Outside consulting and legal fees also increased related to commercial launch activities.

Other Expense

Other expense increased by $20 million in the first quarter of 2024 primarily due to a non-cash loss related to the fair value adjustment of the Class C warrant liability. This liability is marked-to-market each quarter based on the company’s stock price, which increased significantly in the first quarter.

Cash Flows

The company used $34 million of cash for operating activities during the first quarter of 2024 compared to $27 million in the prior year period. The increase was mainly attributable to higher net losses in the current period, excluding non-cash items, as well as investments related to the commercial launch.

Liquidity and Capital Resources

The company had $81 million of cash, cash equivalents and marketable securities at the end of the first quarter of 2024. Based on current projections, the company will need to raise additional capital in 2025 to fund ongoing operations and meet debt covenants. Management has concluded there is substantial doubt about the company’s ability to operate as a going concern within one year.

Hercules Loan Agreement

The loan agreement with Hercules currently provides $55 million of borrowed funds and the capacity for the company to draw an additional $60 million, subject to certain conditions. However, based on projections the company expects it may not meet a minimum cash covenant in the first quarter of 2025 without additional capital or changes to the business plan.

Funding Requirements

The company estimates its short term and long term funding needs may increase significantly depending on the scope and timing of clinical trials required for regulatory approvals. Delays or increased costs for the development programs would negatively impact the funding requirements and capital needed to operate the business.

Critical Accounting Policies

There were no material changes to the company’s critical accounting policies during the first quarter of 2024. As a smaller reporting company, certain scaled disclosures are available and applied by management where applicable.

In summary, the company is launching its first commercial product but continues to operate at a loss. Spending increased in the first quarter of 2024 to build out the commercial infrastructure and sales force. The company may require additional capital by early 2025 to meet debt covenants and fund operations. There is substantial doubt about the company’s ability to operate as a going concern within one year without changes to the business plan or additional funding.