Company Overview
XBiotech Inc. (XBIT) is a pre-market biopharmaceutical company at the forefront of developing True Human monoclonal antibodies for treating a variety of diseases. Incorporated in Canada in 2005, the company has established itself as a trailblazer in the industry, leveraging its proprietary technology to identify and clone naturally occurring antibodies from individuals with resistance to disease.
The company's core focus is on developing therapies that target a potent substance known as interleukin-1 alpha (IL-1α), which plays a crucial role in mediating tissue breakdown, angiogenesis, blood clot formation, and inflammation. XBiotech's pipeline includes both anti-infective and anti-inflammatory drug candidates derived from its innovative True Human antibody technology. The company's headquarters are located in Austin, Texas, where it has been advancing its proprietary technical know-how to translate natural human immunity into therapeutic product candidates since its inception.
Key Developments
In late 2019, XBiotech made a significant breakthrough when it sold a True Human antibody that blocked IL-1α activity for $750 million in cash, plus up to $600 million in potential milestone payments, in a transaction with Janssen. As part of this deal, XBiotech maintained the rights to develop new antibodies that target IL-1α for use in all areas of medicine except dermatology, positioning the company for continued growth and innovation. Additionally, Janssen agreed to assert all patents they acquired relating to IL-1α for the benefit of XBiotech to protect their future IL-1α-related therapies in all non-dermatological indications.
Since the Janssen transaction, XBiotech has remained committed to advancing its True Human antibody pipeline. The company has brought one such candidate, targeting IL-1α, into clinical studies in oncology and rheumatology, while also initiating a Phase I study for a unique anti-IL-1α antibody in the field of neurology. These developments underscore XBiotech's dedication to translating its technical expertise into tangible solutions that address unmet medical needs.
Financials
Despite the success of the Janssen transaction, XBiotech has continued to incur operating losses, reporting a net loss of $24.6 million for the year ended December 31, 2023. The company's research and development expenses have remained a significant portion of its total operating expenses, accounting for 87% and 89% of the total for the nine-month periods ended September 30, 2023 and 2024, respectively.
In the third quarter of 2024, XBiotech reported a net loss of $5.0 million, a decrease from the $7.4 million net loss recorded in the same period of the prior year. This improvement was driven by a decrease in research and development expenses, which fell from $7.5 million in Q3 2023 to $7.1 million in Q3 2024. However, the company's general and administrative expenses also declined, from $1.0 million in Q3 2023 to $0.8 million in Q3 2024.
For the nine months ended September 30, 2024, XBiotech reported a net loss of $28.0 million, compared to a net loss of $19.9 million in the same period of the prior year. The increase in net loss was primarily due to a rise in research and development expenses, which grew from $25.0 million in the first nine months of 2023 to $29.9 million in the corresponding period of 2024.
XBiotech has not reported any revenue in recent years as it remains in the clinical development stage for its pipeline of antibody therapies. The company's annual operating cash flow for 2023 was negative $18.7 million, while the annual free cash flow was negative $19.1 million. As of September 30, 2024, XBiotech's accumulated deficit stood at $80.3 million.
The company continues to invest heavily in research and development, with R&D expenses accounting for 89-90% of total operating expenses in recent quarters. This significant investment in R&D reflects XBiotech's commitment to advancing its pipeline of True Human antibody therapies.
Liquidity
As of September 30, 2024, XBiotech had cash and cash equivalents of $183.1 million, a decrease from the $200.0 million reported as of December 31, 2023. The company's management has stated that the existing cash and cash equivalents will enable it to achieve several major inflection points, including the potential initiation of new clinical studies with lead product candidates, and that the company expects to have sufficient cash through at least the next 12 months.
XBiotech's liquidity position appears strong, with a current ratio and quick ratio both at 11.57. The company's debt-to-equity ratio stands at 0.05, indicating a low level of debt relative to equity. However, it's important to note that XBiotech does not generate any revenue currently and continues to burn cash, reporting negative operating and free cash flow in recent periods.
In January 2024, XBiotech entered into a $10 million convertible loan agreement with its Founder, President, Chief Executive Officer, and Chairman, John Simard, to fund the construction of a new, state-of-the-art research and development facility at the company's property in Austin, Texas. This investment underscores the continued commitment and support from the company's leadership as it works to advance its pipeline and capitalize on the potential of its True Human antibody technology.
Product Pipeline and Business Overview
XBiotech's operations are focused on discovering and developing its pipeline of True Human monoclonal antibody drug candidates. The company does not report its financials by distinct product segments, as it is singularly focused on progressing its proprietary antibody discovery and development efforts.
Following the Janssen Transaction in 2019, XBiotech maintained the rights to develop new antibodies that block IL-1α for all non-dermatological indications. The company has already brought one anti-IL-1α antibody candidate into clinical studies for oncology and rheumatology indications, and another unique anti-IL-1α antibody into a Phase I study for a neurological indication. However, specific details on these drug candidates, their development progress, or anticipated timelines have not been disclosed.
XBiotech is a small-cap company that currently only operates in the United States. The company has not reported any major scandals, short seller reports, or CEO departures.
Outlook
Despite the challenges faced by the company, including the need to continue investing in research and development to drive its pipeline forward, XBiotech remains well-positioned to navigate the changing landscape of the biopharmaceutical industry. With its unique technological capabilities, a promising pipeline, and the support of its leadership, the company is poised to continue its pursuit of groundbreaking therapies that could improve the lives of patients suffering from a wide range of diseases.
However, XBiotech's long-term profitability will depend on the successful development and commercialization of its drug candidates. As a pre-revenue, clinical-stage biopharmaceutical company, XBiotech expects to continue incurring significant operating losses as it advances its research and development programs. The company's future success hinges on its ability to translate its innovative True Human antibody technology into approved and marketable therapies.