Xenetic Biosciences, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Xenetic is a preclinical biopharmaceutical company focused on its personalized XCART CAR-T platform for B-cell lymphomas, while also partnering around its PolyXen drug-delivery technology. No drug candidate had received marketing authorization.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $191,216 | $56,749; up 237%, primarily Takeda sublicense royalties |
| Research and development | $629,729 | $359,651; up 75.1%, mainly higher XCART research and contract services |
| General and administrative | $930,578 | $927,880; up 0.3% |
| Operating loss | $1,369,091 | $1,230,782 |
| Net loss | $1,345,945 | $1,179,429; loss increased 14.1% |
| Basic and diluted loss per share | $0.15 | $0.19; weighted-average shares increased from 6.23 million to 8.75 million |
| Net cash used in operating activities | $1,519,188 | $1,000,720 |
| Cash at period-end | $10,008,364 | $11,527,552 at Dec. 31, 2020 |
There is no meaningful gross-margin figure presented; revenue was royalty revenue and the filing does not report a gross-profit line. Total assets were $11.76 million and total liabilities were $815,759 at March 31, 2021. Current assets were $11.04 million and current liabilities $798,191, yielding working capital of approximately $10.2 million. The filing reports no investing or financing cash flows in Q1 and no material off-balance-sheet financing arrangements. It does not identify outstanding borrowings as a material balance-sheet item; lease liabilities are reported separately.
Changes and business developments
- Royalty revenue rose by $134,467 as the Takeda sublicensee continued worldwide product launch activity.
- R&D spending increased by $270,078, reflecting greater XCART preclinical investment; lower spending on the suspended XBIO-101 Phase 2 trial partly offset the increase.
- Operating cash use increased by about $518,000 year over year. Cash fell by about $1.52 million from year-end, while working capital declined about $1.2 million.
- Management’s focus was XCART preclinical development with Scripps Research and Pharmsynthez. The company has no current plan to resume XBIO-101 development; its Phase 2 trial enrollment had closed in 2019 and the trial was being wound down.
Outlook, risks, and notable items
- Management expects continuing operating losses. It states that substantial losses and expected future losses raise substantial doubt about the company’s ability to continue as a going concern.
- Management believes the December 2020 registered direct offering, which generated $5.4 million in net proceeds, together with existing resources, will fund operations through May 2022. Additional capital may be needed longer term; future financing availability and terms are uncertain.
- The May 2020 Scripps research agreement provides for up to $3.0 million of funding over 27 months; $1.2 million had been paid through March 31, 2021. The Pharmsynthez XCART work order was estimated at approximately $1.8 million, with milestone payments of up to $1.05 million or, at the company’s discretion, up to 1 million shares; approximately $0.1 million of milestones had been paid.
- A related-party Pharmsynthez loan was extended to January 2022 with revised repayment terms. Approximately $0.5 million was included in prepaid expenses and other assets at quarter-end; scheduled repayments and the collectability of this related-party asset merit attention.
- COVID-19 had not materially affected Q1 operations, but the company said future effects remained uncertain. Key risks include clinical and development outcomes, financing needs, manufacturing access, collaborator performance, and potential adverse safety results for CAR-T therapies.
- The company recorded a $9.2 million impairment of its OncoHist in-process research and development asset in Q3 2020 after deciding to delay development indefinitely; the asset had no carrying value at quarter-end. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether the stated cash runway through May 2022 remains supportable against actual XCART spending, milestone commitments, and operating cash burn.
- Progress, timing, costs, and scientific or regulatory milestones for XCART research with Scripps and Pharmsynthez, including the potential use of equity for milestone payments.
- Repayment status and recoverability of the approximately $0.5 million Pharmsynthez loan asset under its amended schedule.
- Takeda sublicense royalty trends and whether any future collaboration or licensing revenue becomes measurable and recurring.
- Future financing requirements and potential dilution; the filing reports 8,746,692 common shares outstanding as of May 7, 2021, in addition to outstanding warrants and equity awards.