Quarterly report pursuant to Section 13 or 15(d)

1. The Company

1. The Company
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
The Company



Xenetic Biosciences, Inc. (“Xenetic” or the “Company)” incorporated in the state of Nevada and based in Lexington, Massachusetts, is a biopharmaceutical company focused on the discovery, research and development of next-generation biologic drugs and novel orphan oncology therapeutics. The Company’s 200+ patent portfolio covers next-generation biologic drugs and novel oncology therapeutics and provides protection for Xenetic’s current drug candidates and positions the Company well for strategic partnership and commercialization opportunities. The Company’s objective is to leverage its portfolio to maximize out-license opportunities that generate working capital to both build incremental stockholder value and provide us with the funding necessary to clinically develop its orphan oncology drug candidate pipeline from preclinical through market launch.


Xenetic incorporates its patented and proprietary technologies into a number of drug candidates currently under development either in-house or with biotechnology and pharmaceutical collaborators in order to create what it believes will be next-generation biologic drugs and therapeutics. While the Company primarily focuses on researching and developing orphan oncology drugs, it also has significant interests in drugs being developed by its collaborators to treat, among other conditions, hemophilia and anemia.


Xenetic’s lead drug candidate, XBIO-101 (formerly known as Virexxa™), is a small-molecule immunomodulator and interferon inducer, which has been shown to increase progesterone receptor (PrR) expression in endometrial tissue in preliminary studies. The Company has exclusive rights to develop and commercialize XBIO-101 worldwide, except for specified countries in the Commonwealth of Independent States, including Russia. XBIO-101 has been granted orphan drug designation by the U.S. Food and Drug Administration (“FDA”) for the potential treatment of progesterone receptor negative endometrial cancer in conjunction with progesterone therapy. Patient recruitment for the Phase 2 trial for XBIO-101 is expected to commence in the second quarter of 2017.


Xenetic’s lead proprietary technology is PolyXen™, an enabling platform technology designed for protein drug delivery. It uses the natural polymer polysialic acid (“PSA”) to prolong the drug's half-life and potentially improve the stability of therapeutic peptides and proteins. The Company believes this technology may be used in a variety of drug candidates to enhance the properties of the therapeutic, potentially providing advantages over competing products.


Xenetic is engaged in a strategic exclusive collaboration with Shire plc (“Shire”) with the primary objective of developing a novel series of polysialylated blood coagulation factors, including a next-generation factor VIII hemophilia A treatment. This collaboration relies on the Company’s proprietary PolyXen technology to conjugate PSA to therapeutic blood-clotting factors, with the goal of improving the pharmacokinetic profile and extending the active half-life of these biologic molecules. Xenetic granted Shire a worldwide, exclusive, royalty-bearing license to its proprietary PolyXen technology for use in combination with Shire’s proprietary molecules in the development of drug candidates designed for the treatment of blood and bleeding disorders. Shire is responsible for the costs and development of SHP656, an investigational, extended half-life factor VIII treatment being developed as a long-acting therapeutic for the treatment of hemophilia. Shire filed a Clinical Trial Application (“CTA”) for the program in the fourth quarter of 2015 and commenced human clinical trials during the first quarter of 2016. In December 2016, the Company earned a $3.0 million milestone payment from Shire related to the advancement of the Phase 1/2 clinical trial of SHP656. Under the terms of the collaboration, most recently amended in January 2014, Xenetic is eligible to receive additional regulatory and sales target payments for total potential milestone receipts of up to $100 million plus royalties on sales. Shire is one of the Company’s long-term stockholders, having invested $10 million in the Company in January 2014.


All of the Company’s drug candidates have arisen from its research activities or those of its collaborators, and are in the development stage. Xenetic commits significant resources to its research and development activities. None of its drug candidates have yet received regulatory approval for marketing in the U.S. by the FDA or by any applicable agencies in other countries. The Company is also developing a broad pipeline of clinical candidates for next-generation biologics and novel oncology therapeutics in a number of orphan disease indications. Though the Company holds a broad intellectual property (“IP”) portfolio, the current focus of its internal development efforts is XBIO-101 and PolyXen, in part due to capital constraints.


Xenetic directly, or indirectly through its wholly-owned subsidiaries, owns various U.S. federal trademark registrations and applications, and unregistered trademarks and service marks, including but not limited to Virexxa®, OncoHist™, PolyXen™, ErepoXen™, ImuXen™ and PulmoXen™. Altogether, the Company, directly or indirectly, holds more than 200 patents with 36 in the United States and in excess of 160 international patents, and has more than 68 pending patent applications worldwide.


Xenetic’s patent portfolio spans four core proprietary technologies including two platforms, small molecules and biologics as further described below:


PolyXen An enabling biological platform technology designed to extend the circulation in the human body of existing drug molecules, thereby creating potentially superior next-generation drug candidates. PolyXen is based on the concept of polysialylation and utilizes polysialic acid, or PSA, which is a biopolymer, comprising a chain of sialic acid molecules. PSA is a natural constituent of the human body, though the Company obtains its PSA from a bacterial source.
XBIO-101 A small molecule therapeutic with the potential to confer sensitivity to hormone therapeutics upon cancer cells that are otherwise insensitive to such treatments.  XBIO-101 (sodium cridanimod) belongs to a class of low-molecular weight synthetic interferon inducers. In addition to its immunomodulatory properties, XBIO-101 has been shown to increase levels of progesterone receptor, or PrR, expression in tumor tissue of patients who are PrR deficient, and thus may restore sensitivity of non-responsive endometrial cancers to hormonal (e.g., progestin) therapy. Based on preclinical observations, XBIO-101 may also be therapeutically relevant in other hormone-resistant cancers, such as triple-negative breast cancer. XBIO-101 has been granted an orphan drug designation by the FDA, for treatment of progesterone receptor negative endometrial cancer in conjunction with progestin therapy.
OncoHist A novel therapeutic platform technology that utilizes the properties of modified human histone H1.3 for targeted cell necrosis or apoptosis (programmed cell death), which may enable OncoHist to treat a broad range of cancer indications. OncoHist, unlike many competing oncology therapies, is based on a molecule occurring naturally in the human body, in the cell nucleus, and is therefore expected to be better tolerated and less immunogenic than other oncology therapies.
ImuXen A novel liposomal co-entrapment encapsulation technology designed to maximize both cell and immune system mediated responses. The technology is based on the co-entrapment of the nominated antigen(s) in a liposomal vesicle. The technology when applied may create new vaccines and improve the use and efficacy of certain existing human vaccines.


Though the Company holds a broad IP portfolio, the current focus of its internal development efforts is XBIO-101 and PolyXen, in part due to capital constraints.


The Company’s strategy is to develop drug candidates based on its proprietary technologies that are designed to address unmet needs, improve the performance of existing drugs, and create new patentable drug candidates. All of its drug candidates are in the development stage and none have yet received regulatory approval for marketing in the U.S. by the FDA or by any applicable agencies in other countries.


Going Concern and Management’s Plan


The Company incurred a net loss of approximately $2.9 million for the three months ended March 31, 2017, and had an accumulated deficit of $145.2 million as of March 31, 2017. The Company’s working capital was approximately $4.2 million as of March 31, 2017, and $6.5 million as of December 31, 2016. The Company expects to continue incurring losses for the foreseeable future and will need to raise additional capital in the near future to pursue its business plan and continue as a going concern.


The Company believes that it has access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, it has not secured any commitment for new financing at this time. The terms, timing and extent of any future financing will depend upon several factors including the achievement of progress in its clinical development programs, its ability to identify and enter into licensing or other strategic arrangements and factors related to financial, economic and market conditions, many of which are beyond its control.


While these condensed consolidated financial statements have been prepared on a going concern basis, if the Company does not successfully raise additional working capital, there can be no assurance that the Company will be able to continue its operations and these conditions raise substantial doubt about its ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.


Under such circumstances, the Company would have to further reduce the planned scale of, or possibly suspend some or all of its pre-clinical development initiatives and clinical trials performed by external service providers. In addition, the Company would have to reduce general and administrative expenses and delay or cease the purchase of clinical research services if and until the Company is able to obtain additional financing.