Xilio Therapeutics, Inc. (NASDAQ:XLO) is a clinical-stage biotechnology company dedicated to discovering and developing tumor-activated immuno-oncology (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. The company's novel platform technology enables the engineering of tumor-activated molecules designed to optimize the therapeutic index by localizing anti-tumor activity within the tumor microenvironment.

Xilio's most advanced tumor-activated, clinical-stage product candidates are XTX101, an Fc-enhanced, anti-CTLA-4 monoclonal antibody; XTX301, an interleukin 12 (IL-12) therapy; and XTX202, an interleukin 2 (IL-2) therapy. The company has presented clinical data across these programs showing initial clinical validation for each of these molecules and its tumor-activated approach.

In addition to its clinical-stage product candidates, Xilio is continuing to leverage its differentiated research platform and expertise to advance preclinical development for tumor-activated bispecific molecules and immune cell engager molecules, including tumor-activated cell engagers and tumor-activated effector-enhanced cell engagers.

Financials

As a clinical-stage company, Xilio has not yet generated any revenue from product sales. For the year ended December 31, 2023, the company reported an annual net loss of $76.4 million and an annual operating cash outflow of $68.6 million. The company's annual free cash flow for the same period was negative $69.1 million.

Looking at the company's latest quarterly results, for the three months ended March 31, 2024, Xilio reported a net loss of $17.2 million and used $10.5 million in operating cash flow. The company's free cash flow for the quarter was negative $10.5 million.

As of March 31, 2024, Xilio had cash and cash equivalents of $34.0 million. Based on the company's current operating plans, this cash balance, together with the $30.0 million upfront payment received in April 2024 under Xilio's exclusive license agreement with Gilead Sciences, Inc. and approximately $14.6 million in aggregate gross proceeds from private placements with certain existing investors and Gilead, is expected to fund the company's operating expenses and capital expenditure requirements into the second quarter of 2025.

However, Xilio has stated that these amounts may not be sufficient to fund its operations for at least twelve months from the date of issuance of the condensed consolidated financial statements, and there is substantial doubt about the company's ability to continue as a going concern. To address this, Xilio's management has developed plans to continue to fund the company's operations, primarily through raising additional capital.

Strategic Partnerships and Collaborations

In March 2024, Xilio's wholly-owned subsidiary, Xilio Development, Inc., entered into an exclusive license agreement with Gilead Sciences, Inc. Under the agreement, Gilead was granted an exclusive global license to develop and commercialize Xilio's tumor-activated IL-12 product candidate, XTX301, and other specified molecules directed toward IL-12.

Xilio is responsible for conducting clinical development for XTX301 in the ongoing Phase 1 clinical trial through an initial planned Phase 2 dose expansion clinical trial. Following the delivery of a specified clinical data package for XTX301, Gilead can elect to transition responsibilities for the development and commercialization of XTX301 to Gilead, subject to the terms of the license agreement and payment of a $75.0 million transition fee.

In addition, Xilio entered into a stock purchase agreement with Gilead, under which Gilead agreed to purchase up to $25.0 million in Xilio's common stock or prefunded warrants, including approximately $13.5 million in the initial private placement and up to $11.5 million in additional private placements through March 2025.

Xilio has also entered into a clinical trial collaboration with F. Hoffmann-La Roche Ltd. to evaluate XTX101, Xilio's tumor-activated, Fc-enhanced anti-CTLA-4 monoclonal antibody, in combination with atezolizumab (Tecentriq®) in a Phase 1/2 clinical trial.

Business Overview

Xilio's approach to the discovery and development of tumor-activated product candidates using its proprietary platform technology is unproven, and the company does not know whether it will be able to develop any approved products of commercial value. However, the company's initial clinical and preclinical results have been promising.

Xilio's most advanced tumor-activated, clinical-stage product candidates, XTX101, XTX301, and XTX202, are currently in early clinical or preclinical development. The company is also continuing to leverage its differentiated research platform and expertise to advance preclinical development for tumor-activated bispecific molecules and immune cell engager molecules.

Xilio's strategy is to rapidly advance clinical development for XTX301 and XTX101, while exploring strategic opportunities to continue to develop XTX202 in combination with other agents and discontinuing further investment in XTX202 as a monotherapy. The company is also focused on advancing its differentiated bispecific and cell-engager molecules in preclinical development.

Risks and Challenges

Xilio faces several risks and challenges common to clinical-stage biotechnology companies, including the uncertainty of successfully completing preclinical studies and clinical trials, obtaining regulatory approvals, and commercializing any approved products. The company's ability to continue as a going concern is also a significant risk, as it may need to raise additional capital in the near term to fund its operations.

Additionally, Xilio's reliance on third-party contract development and manufacturing organizations (CDMOs), including a CDMO located in China, exposes the company to risks related to supply chain disruptions, regulatory compliance, and geopolitical tensions.

Outlook and Conclusion

Despite the risks and challenges, Xilio's innovative approach to developing tumor-activated I-O therapies, its promising clinical and preclinical data, and its strategic partnerships with Gilead and Roche suggest that the company has the potential to make significant advancements in the treatment of cancer. However, Xilio's ability to continue as a going concern and successfully execute on its development plans will depend on its ability to secure additional capital in the near term.

Investors should closely monitor Xilio's progress in advancing its clinical-stage product candidates, its ability to establish additional strategic partnerships, and its efforts to address its going concern risk through capital-raising activities. The company's success or failure in these areas will be crucial in determining the long-term viability and potential of Xilio's unique approach to cancer treatment.