Xenetic Biosciences, Inc. (NASDAQ:XBIO) is a biopharmaceutical company dedicated to advancing innovative immune-oncology technologies that address hard-to-treat cancers. With a strong focus on its proprietary DNase platform, Xenetic is positioning itself as a promising player in the rapidly evolving field of cancer immunotherapy.
Business Overview and History Xenetic Biosciences, Inc. was incorporated in the state of Nevada and began operations in the early 2000s. The company, now headquartered in Framingham, Massachusetts, has built a broad patent portfolio over the years. Xenetic's core technology, the DNase platform, is designed to improve the outcomes of existing cancer treatments, including immunotherapies, by targeting neutrophil extracellular traps (NETs). These structures have been implicated in cancer progression and resistance to treatment. Xenetic's lead program is focused on advancing its systemic DNase program into clinical trials as an adjunctive therapy for pancreatic carcinoma and other locally advanced or metastatic solid tumors.
In its early stages, Xenetic faced challenges in advancing its drug candidates through the development process, as none of its products had received regulatory marketing authorization or approval in the U.S. or other countries. Despite these setbacks, the company remained committed to its research and development activities, focusing its internal efforts on the advancement of its PolyXen technology.
Over time, Xenetic has established strategic collaborations with biotechnology and pharmaceutical companies to develop its proprietary PolyXen drug delivery platform. These partnerships have resulted in royalty payments to Xenetic, providing a source of non-dilutive funding to support its operations. The company has historically relied on sales of its equity securities to fund its activities and has faced challenges in maintaining compliance with the listing requirements of the Nasdaq Stock Market. In 2019, Xenetic underwent a 1-for-10 reverse stock split to regain compliance with Nasdaq's minimum bid price requirement.
Financial Performance Xenetic's financial performance has been mixed in recent years. For the full year 2023, the company reported total revenue of $2.54 million, compared to $1.71 million in 2022. This increase was primarily driven by higher royalty revenue from the company's PolyXen partnerships. However, Xenetic has continued to incur significant operating losses, with a net loss of $4.13 million in 2023 and $6.55 million in 2022.
In the most recent quarter (Q3 2024), Xenetic reported revenue of $614,243, representing a modest 0.5% year-over-year growth. The net loss for the quarter was $436,671, with operating cash flow (OCF) and free cash flow (FCF) both at -$459,037. The decreases in net income, OCF, and FCF were primarily attributed to increased research and development expenses related to the advancement of the company's DNase platform.
Xenetic's financial performance is closely tied to its two main product segments: the DNase platform and the PolyXen platform. The company's primary focus is on advancing the DNase platform, which aims to improve outcomes of existing cancer treatments. During the nine months ended September 30, 2024, research and development expenses for the DNase platform decreased by approximately $0.3 million, or 10.8%, to $2.25 million from $2.52 million in the comparable period in 2023. This decrease was primarily due to reduced spending on process development efforts, partially offset by increased pre-clinical development costs.
The PolyXen platform, while not the primary focus of development efforts, continues to generate royalty revenue through partnerships. For the three and nine months ended September 30, 2024, Xenetic reported royalty revenue of $614,240 and $1.85 million, respectively, which remained relatively flat compared to the same periods in 2023.
Liquidity As of December 31, 2023, Xenetic had $9.0 million in cash and cash equivalents, providing a runway to fund its ongoing operations and research and development activities. The company's cash position decreased from $13.1 million at the end of 2022, reflecting the continued investment in its DNase-based oncology program and other research initiatives.
More recently, as of September 30, 2024, Xenetic reported a cash position of $6.84 million. The company's working capital stood at $6 million, down from $8.8 million at the end of 2023, primarily due to the net loss of $2.9 million for the nine-month period. Xenetic maintains a strong liquidity position with a current ratio and quick ratio both at 6.96. Notably, the company has no debt, resulting in a debt-to-equity ratio of 0.
Operational Highlights and Milestones Throughout 2023 and into 2024, Xenetic has made significant progress in advancing its DNase-based oncology program. The company has entered into several collaborative agreements to further develop this technology, including a Research Funding Agreement and a Material Transfer Agreement with the University of Virginia (UVA) to advance the systemic DNase program.
Xenetic has also presented positive preclinical data on the potential of co-administration of DNase I with chimeric antigen receptor (CAR) T cells in a syngeneic B16 melanoma murine model of lung metastasis. These findings suggest that the synergistic action of DNase I and CAR T cells may enhance the therapeutic efficacy of adoptive immunotherapy.
In addition, the company has presented data demonstrating that systemic DNase I combined with an α-CTLA-4 antibody can promote antitumor immunity and generate immunological memory against microsatellite stable, mismatch repair-proficient colorectal carcinoma (CRC) tumors in preclinical models.
Risks and Challenges Despite the promising progress, Xenetic faces several challenges and risks that investors should be aware of. As a clinical-stage biopharmaceutical company, Xenetic is subject to the inherent risks associated with drug development, including the potential for delays or failures in clinical trials, regulatory approvals, and commercialization efforts.
The company also operates in a highly competitive landscape, with established players and well-funded competitors in the immuno-oncology space. Xenetic's ability to differentiate its DNase-based technology and secure a meaningful market share will be crucial to its long-term success.
Additionally, Xenetic's reliance on strategic partnerships and collaborations exposes the company to risks related to the performance and strategic priorities of its partners, which could impact the development and commercialization of its technologies.
Outlook and Conclusion Xenetic Biosciences has positioned itself as a promising innovator in the field of immuno-oncology, with a focus on its proprietary DNase platform. The company's progress in advancing its DNase-based oncology program, coupled with the growing body of preclinical data, suggests that Xenetic may be on the cusp of translating its research into tangible clinical outcomes.
As Xenetic continues to navigate the challenges of drug development and the competitive landscape, investors will be closely watching for the company's ability to successfully execute on its clinical strategy, secure additional strategic partnerships, and manage its financial resources effectively. With a strong intellectual property portfolio and a dedicated team of researchers and executives, Xenetic appears well-positioned to make a meaningful impact in the fight against hard-to-treat cancers.
The biopharmaceutical industry has seen a compound annual growth rate (CAGR) of around 7-10% over the past 5 years, driven by factors such as an aging population, growing prevalence of chronic diseases, and advancements in drug development and biologics. This favorable industry trend may provide tailwinds for Xenetic as it advances its pipeline.
It's worth noting that in June 2024, the company underwent significant leadership changes, entering into separation agreements with its former CEO, Jeffrey F. Eisenberg, and former Chief Scientific Officer, Curtis Lockshin. The company expensed approximately $0.80 million in accrued payroll and benefits related to these separation agreements. Such leadership transitions can introduce short-term uncertainties but may also bring fresh perspectives to drive the company's long-term strategy.
As Xenetic Biosciences continues to focus on its DNase platform while maintaining its PolyXen partnerships, the company's ability to manage its cash burn rate, advance its clinical programs, and potentially secure new collaborations will be critical factors in determining its future success in the competitive and rapidly evolving field of immuno-oncology.