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XBIO Well Capitalized Ultra Low Floater Owns Game Changing CART Technology And Has Rich Partnerships

|About: Xenetic Biosciences, Inc. (XBIO), Includes: TAK
Summary

The company owns the XCART platform technology that has the potential to offer cancer patients substantial benefits over the existing standard of care and approved CAR T therapies.

The Company ended 3Q 2019 with approximately $12.0M in cash and $11.2M of working capital. The market cap is only $8M and the public float is about 3.8M shares.

Company is focusing XCART on B-cell non-Hodgkin lymphomas which is potentially a $5B/year market opportunity while searching for partners to license the technology so that they can pursue other indications.

The company expects to be receiving non-dilutive royalty payments from its collaboration with Takeda on its PolyXen technology platform shortly. I expect an announcement any day now.

Discussion:

Xenetic Biosciences, Inc. (NASDAQ: XBIO) is a clinical-stage biopharmaceutical company focused on the discovery, research and development of next-generation biologic drugs and novel orphan oncology therapeutics. The Company recently announced its acquisition of the XCART platform, a novel CAR T technology engineered to target personalized, patient-specific tumor neoantigens. The Company plans to initially apply the XCART technology to develop cell-based therapeutics for the treatment of B-cell lymphomas.

Additionally, Xenetic's proprietary drug development platform PolyXen is designed to improve the half-life and other pharmacological properties of next-generation biologic drugs. The Company has ongoing business development activities to explore partnerships utilizing its PolyXen delivery platform besides the existing agreement with Takeda.

XCART Technology

On March 1, 2019, the Company entered into agreements to acquire the novel XCART platform technology, a proximity-based screening platform capable of identifying CAR constructs that can target patient-specific tumor neoantigens, with a demonstrated proof of mechanism in B-cell Non-Hodgkin lymphomas. The XCART platform acquisition was finalized in July 2019.

The XCART technology, is expected to significantly enhance the safety and efficacy of cell therapy for B-cell non-Hodgkin lymphomas by generating patient- and tumor-specific CAR T cellsthus preventing B-cell aplasia. B-cell aplasia occurs when anti-CD19 CAR T- cells kill normal B lymphocytes hat express CD19. These patients are typically are at high risk of developing infections, because of their hypogammaglobulinemia which prevents the immune system from making enough antibodies. 

Curtis Lockshin, Ph.D., Chief Scientific Officer of Xenetic, stated:

"We have been working with leading advisors in the U.S. and Europe to clearly map out the best pathway forward for our XCART technology, including our aim to secure an academic collaboration with a leading institution to further advance our program toward the clinic. Importantly, we believe this platform technology has the potential to offer cancer patients substantial benefits over the existing standard of care and approved CAR T therapies. We look forward to unlocking the full potential of the XCART platform and its differentiated approach to cancer therapy, with the initial focus on Non-Hodgkin lymphomas."

Jeffrey Eisenberg, Chief Executive Officer of Xenetic added:

“Upon closing of our recent transformative agreement to acquire XCART, our differentiated CAR T platform technology, Xenetic will be positioned at the forefront of innovation in the development of new oncology therapeutics where there remains significant unmet need.”

“Going forward, we plan to focus our R&D efforts initially on leveraging the XCART platform to develop cell-based therapeutics for the treatment of B-cell Non-Hodgkin lymphomas, an initial global market opportunity estimated to exceed $5 billion per year.1 I believe we are well positioned to build momentum and evolve Xenetic into a significant player in the oncology space, which will ultimately drive meaningful value for shareholders.”

In recent years the chimeric antigen receptor T-cell therapy (CAR T therapy) has been established, especially in the area of hematological malignancies. However there remains substantial unmet need in oncology treatments as existing therapies can be highly efficacious but not all patients respond, and they can often induce serious, even life-threatening side effects. 

CAR T therapy is an emerging cancer treatment modality in which the patients’ own immune cells are collected, genetically engineered to recognize a tumor-related target, expanded in vitro, and then reinfused to produce responses and prevent progression in a variety of malignancies (ie, adoptive cell transfer).Several types of adoptive cell transfer are under investigation, but CAR T-cell therapy is the first to enter clinical practice.

There are already two CART FDA-approved drugs and the race to find new therapies is growing exponentially as seen in the slide below (from December 2019 Corporate Presentation):

This has lead to numerous collaborations and partnerships to get an edge in this potentially very lucrative area of clinical research. Note that  some collaborations were inked in early clinical stages:

The company's XCART technology platform is expected to be highly coveted since it is designed to be a personalized treatment approach that only attacks cancerous cells thus minimizing collateral damage. Xenetic is the first company in the world tackling the XCART therapy angle and owns the intellectual property for this exciting area of research for over two decades. 

The XCART technology platform was designed by its originators to utilize an established screening technique to identify peptide ligands that bind specifically to the unique B-cell receptor ("BCR") on the surface of an individual patient's malignant tumor cells. The peptide is then inserted into the antigen-binding domain of a CAR, and a subsequent transduction/transfection process is used to engineer the patient's T cells into a CAR T format which redirects the patient's T cells to attack the tumor.

Essentially, the XCART screening platform is the inverse of a typical CAR T screening protocol wherein libraries of highly specific antibody domains are screened against a given target. In the case of XCART screening, the target is itself an antibody domain, and hence highly specific by its nature. The XCART technology creates the possibility of personalized treatment of lymphomas utilizing a CAR with an antigen-binding domain that should only recognize, and only be recognized by, the unique BCR of a patient’s B-cell lymphoma.

Preclinical testing showed that the company's XCART technology reduces off-tumor toxicities typically associated with CAR T lymphoma therapies, such as B-cell aplasia. B-cell aplasia occurs when anti-CD19 CAR T-cells kill normal B lymphocytes that express CD19. These patients are typically are at high risk of developing infections, because of their hypogammaglobulinemia which results in a lower antibody count, which impairs the immune system, increasing risk of infection. 

Xenetic's clinical development program will seek to confirm the early preclinical results, and to demonstrate a more attractive safety profile than existing therapies.

As the company CEO explains in this video, the XCART technology can be applied to a multitude of cancer types but that company will concentrate its efforts on B-cell non-Hodgkin lymphomas which is potentially a $5 billion/year market opportunity. CEO Eisenberg added that they will look for partners to license the technology so that they can pursue other indications.

Xenetic recently entered into a research agreement to begin the process of technology transfer of the XCART technology and enable advancement towards Xenetic's stated goal of establishing an academic collaboration for XCART development.

PolyXen Technology Platform

PolyXen is a patent-protected enabling platform technology designed for protein or peptide therapeutics. It uses the natural polymer polysialic acid (PSA) to prolong a drug's circulating half-life and potentially improve other pharmacological properties. This video shows how PSA works.

Preclinical proof-of-concept studies and multiple clinical studies in humans have shown that the key benefits of PolyXen for protein drug delivery may include:

  • Preservation of drug functionality on conjugation
  • Improved stability in vivo
  • Prolonged pharmacological action
  • Prolonged active life of the drug in the blood circulation
  • Reduced frequency and amount of dosage
  • Reduced immunogenicity and antigenicity

PolyXen has been demonstrated in human clinical trials to confer extended half-life to biotherapeutics such as recombinant human erythropoietin (rhEPO) and recombinant Factor VIII (rFVIII).

Xenetic is leveraging PolyXen by partnering with biotechnology and pharmaceutical companies.

Polysialic acid is a polymer chain comprised of sialic acids linked together. Sialic acid is found on the external membrane of a number of cell types in the body. In addition, it is a natural component expressed on the external membrane on a number of bacterial types. When used for therapeutic protein and peptide drug delivery, PSA provides a protective microenvironment following conjugation to the active drug. This increases the active half-life of the therapeutic drug in the body and allows it to exist largely undetected by the immune system.

Xenetic originally established an agreement with Baxalta US Inc. and Baxalta AB (wholly owned subsidiaries of Shire) to use the Plyxen platform covering the development of a novel series of polysialylated blood coagulation factors. Shire in turn was acquired by Takeda in January, 2019. Takeda has decided to honor the prior agreements between Shire/Baxalta and Xenetic. This collaboration relies on Xenetic's PolyXen technology platform to conjugate polysialic acid to therapeutic blood-clotting factors, with the goal of improving the pharmacokinetic profile and extending the active life of these biologic molecules.

Shire invested $10 million in Xenetic during 2014. Subsequently, Shire paid $7.5M to Xenetic offering additionally royalty payments by entering into an exclusive research, development and license agreement. The agreement grants Takeda (NYSE: TAK) a worldwide, exclusive, royalty-bearing license to Xenetic's PSA patented and proprietary technology in combination with Takeda's proprietary molecules designed for the treatment of blood and bleeding disorders.

Regarding non-dilutive royalty payments from Takeda, CEO Eisenberg commented in the company's 3Q corporate update that the royalty stream resulting from the Takeda sub-license is expected to commence by the end of 2019 or shortly thereafter.

Financials

On July 19, 2019, the Company completed its $15.0 million public offering, resulting in approximately $13.4 million of net proceeds to the Company. The Company ended the third quarter of 2019 with approximately $12.0 million in cash and $11.2 million of working capital.

The following slide shows the summary of key investment/financial highlights. The cash on hand will carry the XCART platform development through 1Q 2021 (excluding royalties from Takeda/PolyXen):

Conclusions:

  1. The company owns the XCART platform technology that has the potential to offer cancer patients substantial benefits over the existing standard of care and approved CAR T therapies.
  2. The Company ended 3Q 2019 with approximately $12.0M in cash and $11.2M of working capital. The market cap is only $8M and the public float is about 3.8M shares.
  3. XBIO is focusing XCART on B-cell non-Hodgkin lymphomas which is potentially a $5B/year market opportunity while searching for partners to license the technology so that they can pursue other indications.
  4. Regarding non-dilutive royalty payments from Takeda, CEO Eisenberg commented in the company's 3Q corporate update that the royalty stream resulting from the Takeda sub-license is expected to commence by the end of 2019 or shortly thereafter.
  5. Any investor interested in investing in XBIO shares should read the risks and uncertainties related to this investment in the most recent 10-Q and 10-K filings with the SEC. 

Disclosure: I am/we are long XBIO.