Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Commission File Number: 001-37937
XENETIC BIOSCIENCES, INC.
(Exact name of registrant as specified in its
charter)
945 Concord Street
Framingham, Massachusetts01701
(Address of principal executive offices and
zip code)
781-778-7720
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.001 par value per share XBIO The Nasdaq Capital Market
Purchase Warrants XBIOW The Nasdaq Capital Market
Securities registered pursuant to Section 12(g)
of the Act:
None
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☐ No ☒
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes ☐ No ☒
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes ☒ No ☐
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files): Yes ☒ No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared
or issued its audit report. ☐
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐[1]
Indicate by check mark
whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐[1]
Indicate
by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2):
Yes ☐ No ☒
The aggregate market
value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2022, the last business day of
the registrant’s most recently completely second fiscal quarter, based upon the closing price of the registrant’s common stock
on the Nasdaq Capital Market on that date of $0.80, was approximately $11,319,395. For purposes of this computation, all officers, directors,
and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that
such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.
As of March 10, 2023,
the number of outstanding shares of the registrant’s common stock was 15,166,596.
DOCUMENTS INCORPORATED BY REFERENCE
Information required in response to Part III of
Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference to portions of the registrant's definitive proxy statement,
information statement or an amendment to this Annual Report on Form 10-K for its 2023 Annual Meeting of Stockholders. The registrant intends
to file a definitive proxy statement, information statement or an amendment to this Annual Report on Form 10-K with the Securities and
Exchange Commission no later than 120 days after the end of the registrant's fiscal year ended December 31, 2022.
___________________________
[1] Per guidance from the
Securities and Exchange Commission, this blank checkbox is included on this cover page, but no disclosure with respect thereto shall
be made until the adoption and effectiveness of related stock exchange listing standards.
XENETIC BIOSCIENCES, INC.
2022 ANNUAL REPORT ON FORM 10-K
TABLE CONTENTS
PART I 1
Item 1 Business 1
Item 1A Risk Factors 23
Item 1B Unresolved Staff Comments 55
Item 2 Properties 56
Item 3 Legal Proceedings 56
Item 4 Mine Safety Disclosures 56
Item 6 [Reserved] 57
Item 7A Quantitative and Qualitative Disclosures About Market Risk 66
Item 8 Financial Statements and Supplementary Data 67
Item 9A Controls and Procedures 68
Item 9B Other Information 69
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 69
PART III 70
Item 10 Directors, Executive Officers and Corporate Governance 70
Item 11 Executive Compensation 70
Item 14 Principal Accounting Fees and Services 70
Item 15 Exhibits and Financial Statement Schedules 71
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on
Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. All statements contained
in this Annual Report other than statements of historical fact, including statements regarding our future results of operations and financial
position, our business strategy and plans, future revenues, projected costs, prospects and our objectives for future operations, are forward-looking
statements. These forward-looking statements include, but are not limited to, statements concerning: the lingering effects of the coronavirus,
or COVID-19, global pandemic and the responses thereto, including the pandemic’s impact on general economic and market conditions,
as well as on our business, results of operations and financial condition; anticipated effects of geopolitical events, including the conflict
between Russia and Ukraine and associated sanctions imposed by the United States (“U.S.”) and other countries in response;
our plans to develop our proposed drug candidates; our expectations regarding the nature, timing and extent of clinical trials and proposed
clinical trials; our expectations regarding the timing for proposed submissions of regulatory filings, including but not limited to, any
Investigational New Drug (“IND”) filing or any New Drug Application (“NDA”); the nature, timing and extent of
collaboration arrangements; the expected results pursuant to collaboration arrangements, including the receipts of future payments that
may arise pursuant to collaboration arrangements; the outcome of our plans to obtain regulatory approval of our drug candidates; the outcome
of our plans for the commercialization of our drug candidates; our plans to address certain markets, engage third party manufacturers,
and evaluate additional drug candidates for subsequent commercial development along with the likelihood and extent of competition to our
drug candidates; our plans to advance innovative immune-oncology technologies addressing hard to treat oncology indications; expectations
regarding our Deoxyribonuclease (“DNase”) platform, such as regarding the DNase platform being in development for the treatment
of solid tumors and being aimed at improving outcomes of existing treatments, including immunotherapies, by targeting Neutrophil Extracellular
Traps (“NETs”) and our expectations to prioritize our efforts and resources on this newly licensed technology; the development
of the XCARTTM Chimeric Antigen Receptor (“CAR”) T cell (“XCART”) technology and plans to develop
cell-based therapeutics by targeting the unique B cell receptor on the surface of an individual patient’s malignant tumor cells
for the treatment of B-cell lymphomas; and our expectations regarding our PolyXen® platform, including concerning our plans
to leverage the platform by partnering with biotechnology and pharmaceutical companies and its application to protein or peptide therapeutics
and its application to improve the half-life and other pharmaceutical properties of next-generation biologic drugs.
In some cases, these
statements may be identified by terminology such as “may,” “will,” “would,” “could,” “should,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “seek,”
“approximately,” “intend,” “predict,” “potential,” “projects,” or “continue,”
or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking
statements contained herein are reasonable, we cannot guarantee future results, the levels of activity, performance or achievements. These
statements involve known and unknown risks and uncertainties that may cause our or our industry's results, levels of activity, performance
or achievements to be materially different from those expressed or implied by forward-looking statements.
Some factors that could
cause actual results to differ materially include without limitation:
· our ability to implement our business strategy;
· our ability to finance our business;
ii
· our ability to secure and maintain a manufacturer for our technologies;
· the impact of new technologies on our drug candidates and our competition;
· changes in laws or regulations of governmental agencies;
· interruptions or cancellation of existing contracts;
· impact of competitive products and pricing;
· product demand and market acceptance and risks;
· the presence of competitors with greater financial resources;
· our ability to attract and retain key personnel;
· adverse publicity related to our products or the Company itself;
· adverse claims relating to our intellectual property;
· the adoption of new, or changes in, accounting principles;
· other new lines of business that the Company may enter in the future;
These factors are not
necessarily all of the important factors that could cause actual results to differ materially from those expressed in the forward-looking
statements in this Annual Report. Other unknown or unpredictable factors also could have material adverse effects on our future results,
including, but not limited to, those discussed in the section titled “Risk Factors.” The forward-looking statements in this
Annual Report are made only as of the date of this Annual Report, and we do not undertake any obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances. We intend that all forward-looking statements be subject to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
As used in this Annual
Report, unless otherwise indicated, all references herein to “Xenetic,” the “Company,” “we” or “us”
refer to Xenetic Biosciences, Inc. and its wholly-owned subsidiaries.
Our brand and product
names, including but not limited to, XCARTTM, OncoHistTM, PolyXen®, ErepoXenTM
and ImuXenTM contained in this Annual Report are trademarks, registered trademarks or service marks of Xenetic Biosciences,
Inc. and/or its subsidiaries in the United States of America (“USA” or “U.S.”) and certain other countries. All
other company and product names may be trademarks of the respective companies with which they are associated.
iii
Summary Risk Factors
Our business is subject to numerous risks. In
addition to the summary below, you should carefully review the “Risk Factors” section of this Annual Report on Form 10-K.
We may be subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial. These risks should
be read in conjunction with the other information in this Annual Report on Form 10-K. Some of the principal risks relating to our business
include:
iv
v
vi
PART I
ITEM 1 – BUSINESS
Overview
We are a biopharmaceutical company focused on
advancing innovative immune-oncology technologies addressing hard to treat cancers. Our proprietary DNase platform is designed to improve
outcomes of existing treatments, including immunotherapies, by targeting NETs, which have been implicated in cancer progression and resistance
to cancer treatments. We licensed the DNase oncology platform in April 2022 and we have directed our efforts and resources on the development
of this newly acquired technology.
The DNase platform is designed to target NETs, which are weblike structures
composed of extracellular chromatin coated with histones and other proteins. NETs are expelled by activated neutrophils, in response to
microbial or pro-inflammatory challenges. However, excessive production or reduced clearance of NETs can lead to aggravated inflammatory
and autoimmune pathologies, as well as creation of pro-tumorigenic niches in the case of cancer growth and metastasis.
We plan to advance toward a first-in-human, multicenter, dose escalation
and dose-expansion study of IV rhDNase I in subjects with locally advanced or metastatic solid tumors. Our systemic DNase program is initially
targeting multi-billion-dollar indications including pancreatic carcinoma. Pancreatic cancer has a low rate of early diagnosis, a high
mortality rate and a poor five-year survival prognosis. Symptoms are usually non-specific and as a result, pancreatic cancer is often
not diagnosed until it reaches an advanced stage. Once the disease has metastasized, or spread to other organs, it becomes especially
hard to treat. Each year, about 185,000 individuals globally are diagnosed with this condition; and in 2021, the Surveillance, Epidemiology
and End Results program, or SEER, of the National Cancer Institute estimated that in the United States there would be approximately 60,000
individuals diagnosed with pancreatic cancer. The overall five-year survival rate among pancreatic cancer patients is 7-8%, which constitutes
the highest mortality rate among solid tumor malignancies; among those diagnosed with metastatic disease, the overall five-year survival
rate is only 3%. Recent developments that have improved the survival in many cancer types have not been effective for pancreatic cancer
patients, highlighting the need for the development of new therapeutic options.
Furthermore, second-line patients that were diagnosed already with
metastatic disease have very few therapeutic options. The only approved regimen for second-line patients is Onivyde® in combination
with 5FU and LV. For these Stage IV at diagnosis patients reaching second-line therapy, median overall survival is only 4.7 months (Macarulla
et al, Pancreas 2020).
A substantial amount of scientific literature has implicated NETs in
the context of cancer pathogenesis and resistance to cancer therapies (including chemo, radio, and immunotherapies such as checkpoint
inhibitors and cell therapies). In published reports, elevated levels of NETs have been a biomarker associated with poor prognosis in
patients with a variety of cancers. In addition, resistance to existing therapeutic agents can involve the release of immunosuppressive
signaling factors from NETs, or physical barriers created by NETs, which can impede the infiltration, activity, and survival of cytotoxic
T cells in the tumor microenvironment. Published pre-clinical models have demonstrated the effectiveness of systemically administered
DNase, alone or in combination with other agents, for the elimination of NETs and prevention of tumor growth and metastasis. We are currently
focused on advancing our systemic DNase program into the clinic as an adjunctive therapy for pancreatic carcinoma and locally advanced
or metastatic solid tumors.
Adoptive transfer of CAR T cells has emerged as one of the most promising
advances in cancer immunotherapy. To successfully treat solid tumors, CAR T cells must be able to infiltrate, persist, and maintain anti-tumor
function in a hostile tumor microenvironment that is itself adept at immunosuppression and conducive to tumor cell survival. Recent approaches
to CAR T design include “armored” CAR-T cells, so named because they can express additional factors to resist immunosuppression
or degrade physical components of the tumor’s extracellular matrix, including NETs. We intend to conduct pre-clinical research with
the goal of demonstrating that armoring CAR T cells to secrete DNase can support depth and durability of response against solid tumor
indications. Engineered CAR T cells, designed to recognize cancer-associated antigens, are capable of sustained and selective killing
of tumor cells, with substantial reduction of tumor burden. CAR T therapies have exhibited remarkable clinical success against hematological
malignancies but thus far have failed to demonstrate success in the context of solid tumors. Published evidence suggests that in addition
to immunosuppressive factors, mechanical barriers formed by NETs can impede T-cell penetration and occlude T-cell contact with tumor cells.
Our collaboration with Belgian Volition SARL Limited (“Volition”)
is an early exploratory program to evaluate the potential combination of Volition’s Nu.Q® technology and Xenetic’s DNase-Armored
CAR T platform to develop proprietary adoptive cell therapies potentially targeting multiple types of solid cancers for which current
CAR T cell therapies have shown limited or no effect. Under the terms of the collaboration agreement, Volition will fund a research program
and the two parties will share proceeds from commercialization or licensing of any products arising from the collaboration. Epigenetically
modified nucleosomes are present on tumor cell surfaces and within the tumor microenvironment of multiple types of solid cancers, and
thus these nucleosomes may represent generalizable tumor antigens that are not limited to a single cancer type. Volition’s Nu.Q®
technology can specifically recognize and target epigenetically modified nucleosomes, while our DNase-Armored CAR T platform is designed
to enhance the function of CAR T cells within solid tumor microenvironments.
XCART is our personalized
CAR T platform technology engineered to target patient-specific tumor neoantigens, with a demonstrated proof of mechanism in B-cell Lymphomas.
The XCART technology platform was designed to utilize an established screening technique to identify polypeptide domains that selectively
bind to the unique B-cell receptor (“BCR”) on the surface of an individual lymphoma patient’s malignant B-cell clones.
This BCR-selective targeting domain is engineered into the antigen-binding domain of a CAR, creating the possibility of a CAR T treatment
that should only recognize a given patient’s malignant B-cell clones. We believe our personalized CAR T therapies have the potential
to offer cancer patients substantial benefits over the existing standard of care and currently approved CAR T therapies. We have suspended
development of the XCART platform as we prioritized the DNase platform and intend to focus our resources on development of the DNase programs.
Additionally, we have partnered with biotechnology
and pharmaceutical companies to develop our proprietary drug delivery platform, PolyXen, and receive royalty payments under an exclusive
license arrangement in the field of blood coagulation disorders. PolyXen is an enabling platform technology for protein and peptide drug
delivery. It uses the biological polymer polysialic acid (“PSA”) to prolong the drug's half-life and potentially improve the
stability of therapeutic peptides and proteins. Both the site of attachment and the length of the PSA chain can influence the properties
of the therapeutic by changing the apparent hydrodynamic radius of the molecule, which in turn, can enhance a number of the biological
characteristics of the therapeutic. It can also be used for small molecule drugs.
We incorporate our patented and proprietary technologies
into drug candidates currently under development with biotechnology and pharmaceutical industry collaborators to create what we believe
will be the next-generation biologic drugs with improved pharmacological properties over existing therapeutics. Our drug candidates have
resulted from our research activities or that of our collaborators and are in the development stage. As a result, we continue to commit
a significant amount of our resources to our research and development activities and anticipate continuing to do so for the near future.
To date, none of our drug candidates have received regulatory marketing authorization or approval in the U.S. by the Food and Drug Administration
(“FDA”) nor in any other countries or territories by any applicable agencies.
Although we hold a broad patent portfolio, the
focus of our internal efforts in 2022 was on the licensing and advancement of our DNase platform and on the development of our XCART platform
technology.
We were incorporated under the laws of the State
of Nevada in August 2011. We, directly or indirectly, through our wholly-owned subsidiaries, Hesperix S.A. (“Hesperix”) and
Xenetic Biosciences (U.K.) Limited (“Xenetic U.K.”), and the wholly-owned subsidiaries of Xenetic UK, Lipoxen Technologies
Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and SymbioTec, GmbH (“SymbioTec”), own various U.S. federal
trademark registrations and applications, along with unregistered trademarks and service marks, including but not limited to XCART, OncoHist,
PolyXen, ErepoXen and ImuXen.
Our Strategy
In April 2022 we licensed the DNase platform.
The DNase platform is designed to improve outcomes of existing treatments, including immunotherapies, by targeting NETs (see “Overview”
and “Our Technology and Drug Candidates” for a description of the technology). Our primary efforts are now aimed at advancing
the systemic DNase program into the clinic as an adjunctive therapy for pancreatic cancer and other locally advanced or metastatic solid
tumors. Our goal is to provide solutions in the treatment of solid tumors by improving response and overcoming resistance to checkpoint
inhibitors, chemotherapy, and other standard of care treatments. We also intend to pursue industry collaborations and potential licenses
to develop DNase for other uses and indications.
We intend to pursue orphan drug designations and
accelerated approval pathways for relevant oncology indications as appropriate in both the U.S. and Europe. If our orphan oncology drug
candidates are granted orphan drug designation, then we may benefit from certain key advantages of orphan status including certain market
exclusivities.
We intend to advance development of our DNase
platform primarily through the use of contract manufacturing and contract research organizations (“CROs”) in order to efficiently
manage our resources. Continuous pipeline growth and advancement of out-licensed drug candidates is dependent, in part, on our ability
to raise sufficient capital and to advance our existing co-development collaborations and strategic arrangements as well as enter into
new such arrangements.
Business Developments
Exclusive Sublicense Agreement
On April 26, 2022, we entered into an Exclusive
Sublicense Agreement (the “Sublicense Agreement”) with CLS pursuant to which we received an exclusive license, under certain
patent rights and know-how owned or controlled by CLS, to develop and commercialize pharmaceutical products and methods incorporating
DNase enzyme for use in treatment of cancer (the “Sublicensed Products”). Under the terms of the Sublicense Agreement, we
will have sole responsibility for, and shall use commercially reasonable efforts to, among other things, research, develop and obtain
marketing approval for the Sublicensed Products in the U.S. and certain European markets, and to commercialize such Sublicensed Products
in the relevant market once marketing approval is obtained.
In consideration for the license and other rights
granted to us under the Sublicense Agreement, we issued to CLS 375,000 shares of our common stock (the “Sublicense Agreement Shares”),
of which 250,000 Sublicense Agreement Shares were issued directly to OPKO Health, Inc. (“OPKO”) in lieu of transfer indirectly
from CLS to EirGen Pharma Ltd. (“EirGen”), a wholly owned subsidiary of OPKO, in satisfaction of certain third-party contractual
obligations between CLS and EirGen. Additionally, we are obligated to pay to CLS up to $13,000,000 in cash in potential milestone payments
for the achievement of certain clinical and regulatory milestones, as well as issue an additional 950,000 shares of our common stock to
CLS based on the achievement of certain regulatory milestones. In addition, we are obligated to pay tiered royalties ranging from the
mid-single to low-double digits on net sales of licensed products falling within the scope of the license during the Royalty Term (as
defined in the Sublicense Agreement), as well as pay a percentage share in the low-to-mid teens of certain consideration received by us
from any sublicensees.
Exclusive License Agreement
On April 26, 2022, we entered into an Exclusive
License Agreement (the “License Agreement”) with CLS, pursuant to which we received an exclusive license under certain patent
rights and know-how owned or controlled by CLS to develop and commercialize pharmaceutical products and methods incorporating DNase in
conjunction with CAR T therapies (the “Licensed Products”). Under the terms of the License Agreement, we will have sole responsibility
for, and shall use commercially reasonable efforts to, among other things, research, develop and obtain marketing approval for the Licensed
Products in the U.S. and certain European markets, and to commercialize such Licensed Products in the relevant market once marketing approval
is obtained.
In consideration for the license and other rights
granted to us under the License Agreement, we paid CLS a one-time fee of $500,000 in cash, issued to CLS 500,000 shares of our common
stock, and are obligated to pay up to $13,000,000 in cash in potential milestone payments for the achievement of certain clinical and
regulatory milestones for each Licensed Product. In addition, we are obligated to pay tiered royalties ranging from the mid-single to
low-double digits on net sales of licensed products falling within the scope of the license during the Royalty Term (as defined in the
License Agreement), as well as pay a percentage share in the mid-teens to low double digits of certain consideration we receive from any
sublicensees.
Patent Assignment and Volition Collaboration
On October 4, 2022, we completed a patent assignment
related to our collaboration with Volition and CLS. In connection with the patent assignment, we entered into a Subscription Agreement
with CLS Therapeutics, LLC, a Delaware limited liability company (“CLS LLC”), on October 12, 2022, pursuant to which we agreed
to issue to CLS LLC, and CLS LLC agreed to subscribe for, 850,000 shares of our common stock as consideration for the assignment by CLS
and its affiliates to us of certain patent rights owned by CLS and its affiliates.
On August
2, 2022, we announced a research and development collaboration with Volition to develop NETs-targeted adoptive cell therapies for
the treatment of cancer. The collaboration is an early exploratory program to evaluate the potential combination of Volition’s Nu.Q®
technology Test and our DNase-Armored CAR T platform to develop proprietary adoptive cell therapies potentially targeting multiple types
of solid cancers. Under the terms of the collaboration agreement, Volition will fund a research program and the two parties will share
proceeds from commercialization or licensing of any products arising from the collaboration.
Catalent
On June 30, 2022, we entered into a Statement
of Work (the “SOW”) with Catalent Pharma Solutions LLC (“Catalent”) to outline the general scope of work, timeline,
and pricing pursuant to which Catalent will provide certain services to us to perform cGMP manufacturing of our recombinant protein, Human
DNase I.
Scripps Research
On March 17, 2023, we
entered into a Research Funding and Option Agreement (the “Agreement”) with Scripps Research pursuant to which we have agreed
to provide Scripps Research an aggregate of up to $938,000 to fund research relating to advancing the pre-clinical development of the
Company’s DNase oncology platform technology. The research funding is payable by us to Scripps Research on a monthly basis in accordance
with a negotiated budget, which provides for an initial payment of approximately $78,000 on the date of the Agreement and subsequent monthly
payments of approximately $78,000 over a 12-month period. Under the Agreement, we have the option to acquire a worldwide exclusive license
to Scripps Research’s rights in the Technology or Patent Rights (as defined in the Agreement), as well as a non-exclusive, royalty-free,
non-transferrable license to make and use TSRI Technology (as defined in the Agreement) solely for our internal research purposes during
the performance of the research program contemplated by the Agreement.
Unless earlier terminated,
the term of the Agreement continues from the date of the Agreement for fifteen (15) months. The Agreement may be terminated by us with
30 days advance written notice to Scripps Research beginning six (6) months after the Effective Date (as defined in the Agreement) or
by Scripps Research if we fail to make timely payments due under the Agreement, subject to 30 days’ written notice to cure such
nonpayment. The Agreement may further be terminated by either party in the event of the other party’s uncured failure to perform
any obligations under the Agreement or the bankruptcy of the other party.
Our Technology and Drug Candidates
The Technologies
We incorporate our patented and proprietary technologies
into a number of drug candidates which are currently under development internally or with our biotechnology and pharmaceutical collaborators,
with the goal of creating what we believe will be the next generation of biologic drugs and therapeutics. While we primarily focus on
researching and developing oncology drugs, we also have ownership and other economic interests in drugs being developed by our collaborators
to treat other conditions.
During the year ended December 31, 2022, the focus
of our internal development efforts was on the licensing and advancement of our DNase oncology platform and the development of our XCART
technology. We have not been actively pursuing development efforts for PolyXen or any of our other technologies.
· Advancing toward first-in-human study start targeted for 2024-2025;
· DNase-armored CAR T program in early pre-clinical development.
Research, Outside Services and Collaborations
Through partner efforts, we are developing our
pipeline of next-generation bio-therapeutics and novel oncology drugs based on our DNase, XCART and PolyXen proprietary technologies.
In order to do this while efficiently managing our overhead, we rely on the services of contract manufacturers, CROs and our strategic
collaborations. We currently do not have in-house research facilities to pursue these initiatives. Accordingly, continuous pipeline growth
and advancement of our technologies and drug candidates is dependent on several important collaborations and strategic arrangements, including
our arrangements with:
Accordingly, in addition to pursuing our development
of the DNase technology, we also have significant interests in drug candidates being developed by our collaborators to treat other conditions.
We may collect some combination of milestone payments and royalties pursuant to these collaborations to the extent that these drugs are
successfully developed and marketed. However, other than royalty payments under a sublicense with Takeda and potential royalty payments
under our collaboration agreement with Pharmsynthez, we do not anticipate any milestone or royalty payments in the near term, if at all.
For further detail, please read the section titled “Significant Collaborations and Strategic Arrangements” below.
Our Drug Candidate Pipeline
Our product pipeline contains drug candidates
under development internally and with our biotechnology and pharmaceutical collaborators. The following table summarizes key information
regarding our current drug candidates:
ErepoXen
ErepoXen, or polysialylated erythropoietin (“PSA-EPO”),
uses our PolyXen platform technology for the treatment of anemia in chronic kidney disease (“CKD”) patients. It is designed
to reduce the dosing frequency by extending the circulating half-life of the therapeutic in the body. We are not pursuing clinical development
of ErepoXen but continue to entertain out-license opportunities for the drug candidate in our licensed territories.
We have collaboration agreements with Pharmsynthez
and Serum Institute to develop and launch ErepoXen in limited markets pursuant to which we will collect royalties if they are successful
in these efforts.
Pharmsynthez received regulatory approval to commence
a Phase II(b)/III human clinical trial of ErepoXen (also known as Epolong) in Russia with patient recruitment completed in 2020. In December
2020, Pharmsynthez reported positive data from this clinical trial and, in February 2021, reported in a press release that it had started
the registration phase of Epolong by filing a registration dossier to obtain approval in Russia. Pharmsynthez had reported in its press
release that it expected that the Russian stage of registration activities would be completed in 2021 and that it would be able to start
production of the product as early as the first quarter of 2022. Pharmsynthez has informed us that it had received a response letter indicating
certain deficiencies in the dossier and intends to refile the registration upon correction.
Serum Institute conducted Phase I and Phase II
clinical trials of ErepoXen in ninety-five human subjects. These safety trials, which had no significant drug-related adverse events,
provided us with the data to commence a Phase II, repeat dosing, International Conference on Harmonisation of Technical Requirements for
Pharmaceuticals for Human Use compliant clinical trial for ErepoXen in Australia, New Zealand and South Africa for CKD patients not on
dialysis. We completed three cohorts of this study and then terminated the study.
In addition, Serum Institute finished Phase I/II
clinical trials in India of ErepoXen for in-center-dialysis patients. Serum Institute may seek to leverage Pharmsynthez’s trial
data and potential Russian marketing authorization to request a waiver for a Phase III clinical trial in India, subject to local regulatory
authority approval.
Pipeline Expansion Opportunities
Operating under licenses from us within their
home markets, our collaborators can potentially generate preclinical and clinical data related to our technologies across a wide spectrum
of therapeutic areas. Under these agreements, we retain all rights for major markets and co-own the clinical data. We therefore have the
opportunity to utilize the data in our decision-making process regarding development and commercialization in major markets.
Significant Collaborations and Strategic Arrangements
Takeda
In October 2017, we granted to Takeda the right
to grant a non-exclusive sublicense to certain patents related to the Company’s PolyXen technology that were previously exclusively
licensed to Takeda in connection with products related to the treatment of blood and bleeding disorders. Pursuant to the agreement, Takeda
(i) paid us a one-time payment of seven million five hundred thousand dollars ($7,500,000) in November 2017 and (ii) agreed to pay us
single digit royalty payments based upon net sales of the covered products throughout the term. Royalty payments on net sales commenced
in late 2019. Royalty payments of approximately $1.7 million and $1.2 million were recorded as revenue by the Company during the years
ended December 31, 2022 and 2021, respectively, and are based on single digit royalties on net sales of certain covered products.
Catalent
On June 30, 2022, we entered into a SOW with Catalent
to outline the general scope of work, timeline, and pricing pursuant to which Catalent will provide certain services to us to perform
cGMP manufacturing of our recombinant protein, Human DNase I. The parties agreed to enter into a Master Services Agreement (“MSA”)
that will contain terms and conditions to govern the project contemplated by the SOW and that will supersede the addendum to the SOW containing
Catalent's standard terms and conditions. In addition, in the event of any conflict between the project-specific terms and conditions
set forth in the SOW and the MSA, the MSA terms and conditions shall govern. The estimated total cost of the project contemplated by the
SOW is expected to be up to approximately $5 million (exclusive of certain fees and potential alternatives) for the manufacturing services
over the course of the term of the project with each phase of the project invoiced separately in connection with the commencement of such
phase. Unless earlier amended or terminated, the manufacturing services contemplated by the SOW are currently targeted to be completed
by the first half of 2024. The SOW is terminable by the Company at any time with 30 days' prior written notice to Catalent. The SOW also
contains customary provisions related to, among other things, confidentiality, warranties, intellectual property and indemnification.
Scripps Research
On May 15, 2020, we entered into a Research Funding
and Option Agreement with Scripps Research (the “Scripps Agreement”), pursuant to which we agreed to provide Scripps Research
an aggregate of up to $3.0 million to fund research relating to advancing the pre-clinical development of XCART. The research funding
was payable by us to Scripps Research on a quarterly basis in accordance with a negotiated budget, which provides for an initial payment
of approximately $300,000 on the date of the Scripps Agreement and subsequent quarterly payments of approximately $300,000 over a 27-month
period. Under the Scripps Agreement, Scripps Research granted us a license within the Field (as defined in the Scripps Agreement) to any
Patent Rights or Technology (as defined in the Scripps Agreement) under the terms of that certain license agreement with Scripps Research,
dated February 25, 2019, assigned to us on March 1, 2019. Additionally, we have the option to acquire a worldwide exclusive license to
Scripps Research’s rights in the Technology or Patent Rights not already licensed to us, as well as a non-exclusive, royalty-free,
non-transferrable license to make and use Scripps Research Technology (as defined in the Scripps Agreement) solely for the Company’s
internal research purposes during the performance of the research program contemplated by the Scripps Agreement. During the second quarter
of 2022, the parties mutually agreed to terminate additional funding under the Scripps Agreement. As a result, Scripps Research agreed
to continue to perform work under the agreement until funding previously advanced was expended.
PJSC Pharmsynthez
In November 2009, we entered into a collaborative
research and development license agreement with Pharmsynthez (the “Pharmsynthez Arrangement”) pursuant to which we granted
an exclusive license to Pharmsynthez to develop, commercialize and market six product candidates based on our PolyXen and ImuXen technology
in certain territories. In exchange, Pharmsynthez granted us an exclusive license to use any preclinical and clinical data developed by
Pharmsynthez within the scope of the Pharmsynthez Arrangement and to engage in further research, development and commercialization of
drug candidates outside of certain territories at our own expense.
Pharmsynthez is wholly responsible for funding
and conducting its own research and clinical development activities in Russia. There are no milestones or other research related payments
provided for under the Pharmsynthez Arrangement other than royalties. The Pharmsynthez Arrangement shall continue until it is terminated
in accordance with the terms and conditions set forth therein.
In August 2011, we entered into a stock subscription
and collaborative development agreement with SynBio (the “Co-Development Agreement”), a wholly-owned subsidiary of Pharmsynthez,
pursuant to which we granted SynBio an exclusive license to develop, market and commercialize certain drug candidates utilizing molecules
based on SynBio’s technology and our PolyXen, OncoHist and ImuXen platform technologies in Russia and the CIS, collectively referred
to herein as the SynBio Market. In exchange for our granting to SynBio those certain license rights, SynBio granted an exclusive license
to us to use any preclinical and clinical data generated by SynBio and to engage in the development of commercial candidates that may
arise from the collaboration in any territory outside of the SynBio Market based upon the Co-Development Agreement.
SynBio is wholly responsible for funding and conducting
its own research and clinical development activities in Russia. There are no milestones or other research-related payments provided for
under the Co-Development Agreement other than fees for the supply of each party’s respective research supplies based on their technology,
which, when provided, are due to mutual convenience and not representative of an ongoing or recurring obligation to supply research supplies.
Upon successful commercialization of any resultant products, we are entitled to receive a 10% royalty on sales in certain territories
and pay royalties to SynBio for sales outside those certain territories subject to the terms of the Co-Development Agreement. For the
years ended December 31, 2022, and December 31, 2021, there were no supply service revenues in connection with the Co-Development
Agreement. The Co-Development Agreement continues until it is terminated in accordance with the terms and conditions set forth therein.
Effective December 20, 2021 SynBio assigned the Co-Development Agreement to its parent company, Pharmsynthez.
See Note 4 Significant Strategic Collaborations
for Pharmsynthez’ share ownership in us.
Serum Institute
In August 2011, we entered into a collaborative
research and development agreement with Serum Institute (the “Serum Agreement”) providing Serum Institute an exclusive license
to use our PolyXen technology to research and develop one potential commercial product, Polysialylated Erythropoietin (“PSA-EPO.”)
Serum Institute is responsible for conducting all preclinical and clinical trials required to achieve regulatory approvals within certain
predetermined territories at Serum Institute’s own expense. Royalty payments are payable by Serum Institute to us for net sales
to certain customers in the Serum Institute sales territory. Royalty payments are payable by us to Serum Institute for net sales received
by us over the term of the license. There are no milestone or other research-related payments due under the collaborative arrangement.
The Serum Agreement continues until it is terminated in accordance with the terms and conditions set forth therein. Through December 31,
2022, no commercial products were developed and no royalty revenue or expense was recognized by us related to this arrangement. Serum
Institute had a share ownership of less than 1% of our total outstanding common stock as of December 31, 2022.
Our Intellectual Property
We strive to protect and enhance the proprietary
technology, inventions and improvements that are commercially important to our business, including seeking, maintaining and defending
patent rights, whether developed internally or licensed from our collaborators or other third parties. Our policy is to seek to protect
our proprietary position by, among other methods, filing patent applications in the U.S. and in jurisdictions outside of the U.S. covering
our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of
our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing innovation
and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of oncology. We also plan to
rely on data exclusivity, market exclusivity and patent term extensions when available. Our commercial success will depend in part on
our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements; to preserve
the confidentiality of our trade secrets; to obtain and maintain licenses to use intellectual property owned by third parties; to defend
and enforce our proprietary rights, including any patents that we may own in the future; and to operate without infringing on the valid
and enforceable patents and other proprietary rights of third parties.
Our drug candidates are in various stages of development,
each protected by patent and pending patent applications in the U.S. with the U.S. Patent and Trademark Office (“USPTO”) and
in certain other developed countries. Our first issued patents began to expire in 2021 with the majority of the existing issued patents
for our PolyXen and OncoHist technology expiring between 2025 and 2030.
Our patent strategy is to file patent applications
on innovations and improvements in those jurisdictions that comprise the major pharmaceutical markets in the world or locations where
a pharmaceutical may be manufactured. These jurisdictions generally include for our key patent portfolios, but are not limited to, the
U.S., U.K., Australia, Japan, Canada, South Korea, China, India, Russia and certain other countries in the European Union (“E.U.”),
though we do not necessarily file a patent application in each of these jurisdictions for every patent family.
As of January 23, 2023, we directly or indirectly
own (e.g. through a license with CLS), through our wholly-owned subsidiaries, Hesperix and Xenetic U.K., and Xenetic U.K.’s wholly-owned
subsidiaries, Lipoxen, XTI and SymbioTec, more than 170 U.S. and international patents and pending patent applications that cover various
aspects of our technologies. This number includes patents and patent applications that we have acquired or filed covering various aspects
of our DNase and XCART platform technology, including all rights throughout the world in and to patents and patent applications related
to “Articles And Methods Directed To Personalized Therapy Of Cancer,” and our PolyXen platform technology covering polysialylation
and advanced polymer conjugate technologies, respectively, as well as our other product candidates. More specifically, our patents and
patent applications cover cancer treatments, method of use, polymer architecture, drug conjugates, formulations, methods of manufacturing
polymers and polymer conjugates along with methods of administering polymer conjugates.
We have received patent protection for certain
therapeutics that use our PolyXen technology linking the specific therapeutic to a PSA. These include, but are not limited to, PSA-EPO,
PSA-insulin and PSA-insulin like protein, a next generation Factor VIII protein product candidate SHP656 (PSA-rFVIII), PSA-DNase I and
PSA-granulocyte colony stimulating factor (PSA-GCSF). Further patents cover methods to prepare proteins that are linked to a PSA. These
method patents include those that link a PSA to a protein in a high pH solution as well as patents that use a process for producing an
aldehyde derivative of a sialic acid through the opening and oxidation of a sialic acid unit. For instance, we have patent protection
for a PSA linkage that can be at the N-terminus.
We have received patent protection for the production
of PSA and the removal of endotoxin during the purification process. The removal of endotoxin occurs through the addition of a high pH
solution to the PSA and a process to separate a polydisperse ionically charged polysaccharide, such as PSA, into fractions of different
average molecular weight. This is accomplished through the use of a column and elution buffers with different and constant ionic strength
and pH, resulting in a fractionated polysaccharide that has a molecular weight polydispersity of 1.1 or lower.
We have also received patent protection for our
DNase technology, which covers the use of DNase for the treatment of cancer and amelioration of the side effects associated with a cancer
treatment. The DNase can be administered alone or in combination with a cancer therapeutic. This portfolio and that of the XCART portfolio
also provide coverage for the use of certain types of CAR-T cells, with or without the addition of a DNase to treat a cancer. The portfolio
further covers the use of CAR-T cells with or without a DNase that are administered with an immune checkpoint inhibitor or modulator to
treat a cancer.
Issued patents can provide protection for varying
periods of time, depending upon the date of filing of the patent application, the date of patent issuance and the legal term of patents
in the countries in which they are obtained. In general, patents issued for applications filed in the U.S. can provide exclusionary rights
for twenty years from the earliest effective filing date. In addition, in certain instances, the term of an issued U.S. patent that covers
or claims an FDA approved product can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory
review period, which is called patent term extension. The restoration period cannot be longer than five years, and the total patent term,
including the restoration period, must not exceed fourteen years following FDA approval. The term of patents outside of the U.S. varies
in accordance with the laws of the foreign jurisdiction but is typically also twenty years from the earliest effective filing date. However,
the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors,
including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal
remedies in a particular country and the validity and enforceability of the patent.
In certain situations, where we work with drugs
covered by one or more patents, our ability to develop and commercialize our technologies may be affected by limitations of our access
to these proprietary drugs. Even if we believe we are free to work with a proprietary drug, we cannot guarantee that we will not be accused
of, or be determined to be, infringing on a third party’s rights and be prohibited from working with the drug or found liable for
damages. Any such restriction on access or liability for damages would have a material adverse effect on our business, results of operations
and financial condition.
The patent positions of pharmaceutical and biotechnology
companies, such as ours, are uncertain and involve complex legal and factual issues. There can be no assurance that patents that have
been issued will be held valid and enforceable in a court of law. Even for patents that are held valid and enforceable, the legal process
associated with obtaining such a judgment is time consuming and costly. Additionally, issued patents can be subject to opposition or other
proceedings that can result in the revocation of the patent or maintenance of the patent in amended form (and potentially in a form that
renders the patent without commercially relevant and/or broad coverage). Further, our competitors may be able to circumvent and otherwise
design around our patents. Even if a patent is issued and enforceable, because development and commercialization of pharmaceutical products
can be subject to substantial delays, patents may expire early and provide only a short period of protection, if any, following the commercialization
of products encompassed by our patent(s). We may have to participate in interference proceedings declared by the USPTO, which could result
in a loss of the patent and/or substantial cost to us. Further, we understand that if any of our pending patent applications do not issue,
or are deemed invalid following issuance, we may lose valuable IP protection.
U.S. and foreign patent rights and other proprietary
rights exist that are owned by third parties and relate to pharmaceutical compositions and reagents, medical devices and equipment and
methods for preparation, packaging and delivery of pharmaceutical compositions. We cannot predict with any certainty which, if any, of
these rights will be considered relevant to our technology by authorities in the various jurisdictions where such rights exist, nor can
we predict with certainty which, if any, of these rights will or may be asserted against us by third parties. We could incur substantial
costs in defending ourselves and our partners against any such claims. Furthermore, parties making such claims may be able to obtain injunctive
or other equitable relief, which could effectively block our ability to develop or commercialize some or all of our products in the U.S.
and in other countries and could result in the award of substantial damages. In the event of a claim of infringement, we or our partners
may be required to obtain one or more licenses from third parties. There can be no assurance that we can obtain a license to any technology
that we determine we require on reasonable terms, if at all, or that we could develop or otherwise obtain alternative technology. The
failure to obtain licenses, if required, may have a material adverse effect on our business, results of operations and financial condition.
Further, we may not be able to obtain IP licenses related to the development of our drug candidates on a commercially reasonable basis,
if at all.
It is our policy to require our employees and
consultants, outside scientific collaborators, sponsored researchers and other advisors who receive confidential information from us to
execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that
all confidential information developed or made known to the individual during the course of the individual’s relationship with us
is to be kept confidential and not disclosed to third parties except in specific circumstances. The agreements provide that all inventions
conceived by an employee shall be our property. There can be no assurance, however, that these agreements will provide meaningful protection
or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.
Manufacturing and Supply
We do not have the capability to manufacture our
own materials necessary to support our drug candidate development programs nor do we intend to acquire such capability as part of our
present business strategy. We currently have agreements in place with Catalent and Serum Institute whereby Catalent and Serum Institute
would produce clinical materials for use in the development of drug candidates involving our DNase and PolyXen technologies, respectively,
including candidates developed by our partners. We do not have any agreements in place to manufacture clinical materials for use in the
development of our XCART technology and would seek a third party manufacturer for our clinical supply needs, if necessary.
Government Regulation
General
Government authorities in the U.S. at the federal,
state and local level, and other countries, extensively regulate, among other things, the research, development, testing, manufacture,
quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and
import of products such as those we are developing. Generally, a new drug must be approved by the FDA through the NDA process and a new
biologic must be licensed by the FDA through the biologics license application (“BLA”) process before it may be legally marketed
in the U.S.
U.S. Regulation
Drug Development Process
In the U.S., the FDA regulates drugs under the
Federal Food, Drug, and Cosmetic Act (“FDCA”), and in the case of biologics, also under the Public Health Service Act (“PHSA”),
and their implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal,
state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply
with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject
an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications,
withdrawal of an approval, license revocation, a clinical hold, warning letters or untitled letters, product recalls, product seizures,
total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement
or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
The process required by the FDA before a drug or biologic may be marketed