Xenetic Biosciences, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. The company is a development-stage biopharmaceutical business focused primarily on preclinical development of its personalized XCART CAR-T platform for B-cell lymphomas. It also licenses its PolyXen drug-delivery technology and receives related royalties. XBIO-101 development is suspended, with no current plans to resume it.
Financial highlights
| Metric | Q2 2021 | Six months 2021 |
|---|---|---|
| Revenue, all royalty | $287,603 | $478,819 |
| Research and development expense | $524,550 | $1,154,279 |
| General and administrative expense | $890,704 | $1,821,282 |
| Operating loss | $1,127,651 | $2,496,742 |
| Net loss | $1,106,678 | $2,452,623 |
| Basic and diluted loss per share | $0.13 | $0.28 |
| Operating cash used | Not separately stated | $2,245,998 |
Q2 revenue was up 154.7% year over year, and six-month revenue increased 182.2%, reflecting higher Takeda sublicense royalties as the product continued its worldwide launch. Operating expenses rose 29.2% in Q2 and 24.9% for the half year; increased XCART preclinical and contract-research spending was the principal R&D driver. Net loss widened 16.1% in Q2 and 15.0% for the six months. No gross-margin figure is provided; revenue is royalty revenue rather than product sales.
Liquidity, capital, and obligations
- At June 30, cash was $9.28 million, versus $11.53 million at December 31, 2020. Current assets were $10.20 million and current liabilities $958,214; reported working capital was approximately $9.2 million.
- Total liabilities were $966,171, including $37,408 current and $7,957 non-current lease liabilities. The balance sheet reports no borrowings; it does include a related-party loan receivable from Pharmsynthez of approximately $0.5 million, classified in current assets.
- Operating cash outflow for the first half was $2.25 million, compared with $2.30 million in the prior-year period. There were no investing or financing cash flows in either half-year period. Cash at June 30, 2020 was $8.07 million.
- Management says losses are expected to continue and identifies substantial doubt about the company’s ability to continue as a going concern. It believes existing resources plus financing completed after quarter-end support going-concern status, while noting possible long-term additional capital needs.
Developments, outlook, and risks
- On July 28, 2021, the company completed a private placement with approximately $12.5 million gross proceeds and $11.4 million net proceeds. The transaction included common shares and warrants, including pre-funded warrants; proceeds exclude any warrant exercises. The filing gives no formal revenue, earnings, or cash-flow guidance.
- The company had paid Scripps Research $1.5 million through June 30 under a research funding and option agreement providing for up to $3.0 million over 27 months. XCART work is also being conducted with Pharmsynthez; the relevant work order is estimated at approximately $1.8 million and provides for milestone payments of up to $1.05 million or, at the company’s option, up to 1 million shares. Approximately $0.1 million of milestones had been paid by June 30.
- The Pharmsynthez related-party loan extension moved maturity to January 2022, with remaining principal scheduled for repayment in six monthly installments from August 2021 through January 2022. The filing reports approximately $0.5 million receivable at June 30.
- Management reported no material operating impact from COVID-19 through the period, but said future effects remain uncertain and could adversely affect operations, financial condition, results, and cash flows.
- Key risks include XCART preclinical and commercialization uncertainty, clinical safety and trial outcomes, financing needs, ability to secure manufacturing and strategic partnerships, and dependence on royalty and collaboration revenue. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- How long the June 30 cash balance and July financing proceeds are expected to fund operations, and whether further financing may be needed.
- Progress, costs, milestones, and timing for XCART preclinical development and the Scripps and Pharmsynthez programs.
- Takeda sublicense sales and the sustainability of royalty receipts, which are reported after the underlying sales period.
- Collection and repayment performance of the approximately $0.5 million Pharmsynthez loan receivable.
- The dilution and potential warrant exercises associated with the July private placement.