X4 Pharmaceuticals, IncXFOR
X4 Pharmaceuticals, Inc Debt Disclosure
LONG-TERM DEBT
Long-term debt consisted of the following:
| (in thousands) | December 31, 2023 | December 31, 2022 | |||||||||
| Principal amount of long-term debt | $ | 55,000 | $ | 32,500 | |||||||
| Debt discount, net of accretion | (917) | (196) | |||||||||
| Cumulative accrual of end of term payments | 487 | 1,315 | |||||||||
| Long-term debt | 54,570 | 33,619 | |||||||||
| Less: current portion of long-term debt | — | (1,315) | |||||||||
| Long-term debt, net of current portion | $ | 54,570 | $ | 32,304 | |||||||
Hercules Loan Agreement
In October 2018, the Company entered into a Loan and Security Agreement, which has been subsequently amendment from time to time, with Hercules Capital Inc. In January 2023, the Company entered into a Second Amended and Restated Loan and Security Agreement (the “Second A&R Hercules Loan Agreement”) with Hercules Capital, Inc., as agent and lender, and Hercules Capital Funding IV LLC and Hercules Capital Funding Trust 2022-1, as lenders (collectively, “Hercules”). On August 2, 2023, Hercules and the Company entered into an amendment (the “Amendment”) to the Second A&R Hercules Loan Agreement, (as amended by the Amendment, the “Hercules Loan Agreement”) with Hercules. The Hercules Loan Agreement provides for a term loan facility of up to $115.0 million, under which the Company has borrowed an aggregate of $55.0 million of term loans to date representing the maximum borrowings as of December 31, 2023. The term loan facility includes:
(i) $32.5 million outstanding (the “Conversion Balance”) prior to effectiveness of the most recent amendment in August 2023;
(ii) a $22.5 million term loan tranche drawn upon the closing of the Amendment;
(iii) an additional tranche of up to $20.0 million, which will be available in either one or two drawings following potential U.S. approval of mavorixafor in individuals with WHIM syndrome (“Approval”) until the earlier of (A) 45 days following Approval and (B) September 30, 2024 in the case of the first drawing, and until December 15, 2024 in the case of a second drawing;
(iv) an additional tranche of $7.5 million, which will be available following achievement of a certain clinical development-related milestone through the earlier of (A) 45 days following achievement of such milestone and (B) December 15, 2024; and
(v) an additional tranche of up to $32.5 million, which will be available subject to approval by Hercules in its sole discretion.
Borrowings under the Hercules Loan Agreement accrue interest at a variable rate equal to the greater of (i) 10.15% or (ii) The Wall Street Journal prime rate plus 3.15%. In an event of default and until such event is no longer continuing, the interest rate applicable to borrowings would be increased by 4.0%. Borrowings are repayable in monthly interest-only payments through March 1, 2025, and in equal monthly payments of principal and accrued interest from April 1, 2025 (the “Amortization Date”) until the maturity date of the loans. The Amortization Date may be extended to October 1, 2026, if Approval occurs on or prior to
September 30, 2026 and no event of default occurs. The loans mature on October 1, 2026; provided, however, that such maturity date will be extended to July 1, 2027 if the Amortization Date is extended pursuant to the foregoing sentence. At the Company’s option, the Company may prepay all, but not less than all, of the outstanding borrowings, subject to a prepayment premium of 2% during the one-year period from January 6, 2024 to January 5, 2025 and 1% thereafter. In addition, the Hercules Loan Agreement provides for payment of end-of-term fees of $2.1 million plus 3.5% of the aggregate principal amount of loans drawn, if any, subsequent to the Amendment, payable upon the earlier of maturity or the repayment in full of all obligations under the Hercules Loan Agreement. Borrowings under the Hercules Loan Agreement are collateralized by substantially all of the Company’s personal property and other assets except for its intellectual property (but including rights to payment and proceeds from the sale, licensing or disposition of the intellectual property).
Under the Hercules Loan Agreement, the Company has agreed to affirmative and negative covenants. Prior to January 31, 2025, the Company must maintain cash in an account or accounts in which Hercules has a first priority security interest (“Qualified Cash”) in an aggregate amount equal to at least $20.0 million.
•On and after January 31, 2025, such amount must equal at least 20% of the aggregate principal amount of loans outstanding under the Hercules Loan Agreement.
•From and after January 31, 2025, the Company must maintain trailing six-month net product revenue of at least 55% of its forecast as approved by the Company’s Board of Directors (the “Performance Covenant”). However, the Performance Covenant will be waived during any period in which:
(i) the Company maintains Qualified Cash in an aggregate amount equal to at least 75% of loans outstanding under the Amended Loan Agreement or
(ii) both (x) the Company maintains a Market Capitalization (as defined in the Hercules Loan Agreement) of at least $450.0 million and (y) the Company maintains Qualified Cash in an aggregate amount equal to at least 45% of loans outstanding.
The Hercules Loan Agreement also restricts the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.
The Company recognized interest expense under the Hercules Loan Agreement as follows:
| (in thousands) | For the years ended | ||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Total interest expense | $ | 5,777 | $ | 3,989 | $ | 3,642 | |||||||||||
| Non-cash interest expense | $ | 929 | $ | 918 | $ | 756 | |||||||||||
The annual effective interest rate on the Hercules Loan Agreement as of December 31, 2023 was 13.6%. There were no principal payments due or paid under the Hercules Loan Agreement during the year ended December 31, 2023. End-of-term payments of $2.1 million and $0.8 million were paid during the years ended December 31, 2023 and 2022, respectively, in accordance with the Hercules Loan Agreement.
As of December 31, 2023, future principal payments and accrued end-of-term payments due under the Hercules Loan Agreement were as follows (in thousands):
| Year Ending December 31 | Total | ||||
| 2024 | — | ||||
| 2025 | 24,720 | ||||
| 2026 | 30,767 | ||||
| Long-term debt, including end-of-term payments | $ | 55,487 | |||
As of December 31, 2022, the Company had the intent and ability to refinance the short-term principal obligations of the Hercules Loan Agreement to long-term, as demonstrated by entering into the Second A&R Hercules Loan Agreement on January 6, 2023. Therefore, short-term debt on the December 31, 2022 consolidated balance sheet includes only the accrued portion of certain end-of-term payments due within one year of the consolidated balance sheet date that remained due within one year of the
consolidated balance sheet date following the January 6, 2023 refinancing.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Mar 21, 2024 | Showing above |
| 2022 | Mar 21, 2023 | |
| 2021 | Mar 17, 2022 | |
| 2020 | Mar 19, 2021 | |
| 2019 | Mar 12, 2020 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.