Xenetic Biosciences, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 11, 2023. Xenetic is a clinical-stage biopharmaceutical company focused on immune-oncology. Its main internal priority is developing its licensed DNase platform; it also has XCART and PolyXen technologies. No drug candidates have received regulatory approval.
Financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $605,844 | $388,993 |
| Research and development expense | $595,276 | $1,101,399 |
| General and administrative expense | $925,743 | $907,309 |
| Operating loss | $(915,175) | $(1,619,715) |
| Net loss | $(856,554) | $(1,593,611) |
| Basic and diluted loss per share | $(0.06) | $(0.12) |
| Net cash used in operating activities | $(1,102,438) | $(2,087,691) |
Revenue consisted of Takeda-related royalties under the PolyXen license. Gross margin is not separately presented. Cash was $11.99 million at quarter-end, down from $13.10 million at December 31, 2022. Current assets were $12.87 million and current liabilities $856,365, yielding working capital of approximately $12.0 million. Total liabilities were $856,365; the balance sheet reports no debt. Accumulated deficit was $190.0 million. No investing or financing cash flows were reported.
Changes versus Q1 2022
- Royalty revenue rose 55.7%, or about $217,000, primarily due to higher Takeda-related royalties.
- R&D expense fell 46.0%, largely because of lower XCART-related outside services and contract research costs; management said it suspended XCART development and redirected resources toward DNase.
- G&A increased 2.0%. Higher interest income contributed to the smaller net loss, which improved by approximately 46% year over year.
- Operating cash use declined by approximately $985,000 year over year. Cash decreased by approximately $1.10 million during Q1 2023.
Outlook, risks, and notable items
- Management expects continued near-term operating losses. It stated that existing resources should fund operations for at least 12 months from issuance of the statements, but also disclosed that accumulated losses and expected future losses raise substantial doubt about the company’s ability to continue as a going concern. Additional long-term capital may be needed; future financing availability and terms are uncertain.
- Nasdaq had granted an extension through May 29, 2023 to regain compliance with the $1.00 minimum bid-price requirement. The company stated it might use a reverse stock split if necessary. The filing does not report the subsequent outcome.
- The company had approximately $12.0 million in cash. After Silicon Valley Bank was closed in March 2023, the company regained access to its deposits and transferred its primary banking relationship; it reported that deposits were within federally insured limits at March 31.
- Under its Catalent manufacturing statement of work, estimated project costs may total up to approximately $5 million, excluding certain fees and alternatives. About $1.0 million had been paid through March 31, 2023; services were targeted for completion in the first half of 2024. The company can terminate with 30 days’ notice.
- A March 2023 Scripps Research agreement provides for up to $938,000 of research funding over 12 months and an option to obtain an exclusive license. No payments had been made by quarter-end; approximately $40,000 was accrued.
- A related-party Pharmsynthez loan receivable had a May 31, 2023 maturity and scheduled installments that had not all been paid when due. The company classified it as long-term and reported approximately $0.2 million in other assets at March 31; management considered company-stock collateral adequate to support repayment.
- Management identified development, clinical and regulatory, manufacturing, financing, Nasdaq-listing, collaboration, competitive, geopolitical, and public-health uncertainties. It reported no material change to previously disclosed risk factors, no material legal proceedings, and no subsequent events requiring disclosure.
Important facts for investors to verify
- Whether Xenetic regained Nasdaq bid-price compliance by May 29, 2023, and whether a reverse split or other capital action followed.
- Cash use, cash runway, and any financing or collaboration plans, given the going-concern disclosure and anticipated longer-term capital needs.
- Progress, spending, and clinical-development milestones for the DNase program, alongside the status of suspended XCART development.
- Takeda royalty trends and the collection status of the overdue Pharmsynthez loan installments.
- Future Catalent project costs and Scripps funding obligations relative to available cash.