XENETIC BIOSCIENCES, INC. 10-K
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. ☐
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). ☐
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, 2023, 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 $3.28, was approximately $5,026,928. 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 15, 2024,
the number of outstanding shares of the registrant’s common stock was 1,540,684.
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
for its 2024 Annual Meeting of Stockholders, information statement or an amendment to this Annual Report on Form 10-K. 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, 2023.
XENETIC BIOSCIENCES, INC.
2023 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 52
Item 1C Cybersecurity 52
Item 2 Properties 53
Item 3 Legal Proceedings 53
Item 4 Mine Safety Disclosures 53
Item 6 [Reserved] 54
Item 7A Quantitative and Qualitative Disclosures About Market Risk 62
Item 8 Financial Statements and Supplementary Data 63
Item 9A Controls and Procedures 64
Item 9B Other Information 65
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 65
PART III 66
Item 10 Directors, Executive Officers and Corporate Governance 66
Item 11 Executive Compensation 66
Item 14 Principal Accounting Fees and Services 66
Item 15 Exhibits and Financial Statement Schedules 67
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: anticipated effects of geopolitical
events, including the conflicts in the Ukraine and the Middle East 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; our expectations regarding our PolyXen® platform; and all statements under the heading “Opportunity
to Address Multiple Oncology Indications”.
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,” “upcoming”,
“opportunity”, “target” 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:
· uncertainty of the expected financial performance of the Company;
· our ability to implement our business strategy;
· our ability to finance our business;
· our ability to secure and maintain a manufacturer for our technologies;
ii
· 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, XDNASETM, 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.
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, hypercoagulability and autoimmune pathologies, as well as creation of pro-tumorigenic niches in the case of
cancer growth and metastasis.
We are focused on advancing the development
of our DNase platform 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 cancer (which includes pancreatic ductal adenocarcinoma (“PDAC”)), colorectal carcinoma
(“CRC”) and other gastrointestinal cancers. These are all cancer indications with significant unmet need, and with
opportunities for substantial improvement of the currently available therapeutic options. PDAC 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, PDAC 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 urgent need for the development of newer, more effective
therapeutic options. For those few patients that present with earlier stage PDAC, surgical resection followed by chemotherapy is
possible, but for the majority of PDAC patients which present at diagnosis with advanced disease, chemotherapy is the only option,
and has only very limited benefit. Second-line patients that were diagnosed already with metastatic disease have even fewer
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 ).
CRC is the second most common cause of cancer
death in the United States after lung cancer. CRC is the third most commonly diagnosed cancer in males and the second in females, globally,
according to the World Health Organization GLOBOCAN database. In the United States, CRC is the second most common cause of cancer death
after lung cancer. According to data from the NCI’s Surveillance, Epidemiology, and End Results (“SEER) Program, it is estimated
that in 2023 approximately 153,000 individuals in the U.S. will be diagnosed with colon cancer, and an estimated 53,000 will die of the
disease. CRC is in decline in older patients (>65 years) but that is offset by a steady increase in CRC diagnoses and deaths in individuals
younger than 55 years of age. Despite continued overall declines, CRC is rapidly shifting to diagnosis at a younger age, at a more advanced
stage, and in the left colon/rectum. If CRC is diagnosed at a localized stage, the 5-year survival rate is 91%. However, if the cancer
has spread to surrounding tissues or organs and/or the regional lymph nodes, the 5-year relative survival rate is 72%. There are numerous
treatment options for earlier stage CRC patients, but as they progress to advanced and metastatic disease (“mCRC”), those
options become limited. Approximately 22% of CRC cases have metastasis at presentation, and 19% will develop metastasis after primary
tumor removal. Unfortunately, if CRC has spread to distant parts of the body, the 5-year relative survival rate is 13%.
All major guidelines recommend patients with mCRC
undergo testing of DNA for high DNA microsatellite instability (MSI-H), a mutation found in approximately 10% of all CRC, and up to 5%
of mCRC. CRC patients that are MSI-H/MMRd (or “mismatch repair deficient”) are candidates for immunotherapy using immune checkpoint
inhibitors (“ICIs”); at present, there are three ICIs approved for MSI-H/MMRd CRC – Keytruda, Opdivo (anti-PD-1 antibodies)
and Yervoy (anti-CTLA-4 antibody). While the ICI response rates in this small subset of CRC are encouraging at around 50%, a significant
number of patients are resistant, or become refractory to ICI therapy. However, the vast majority of mCRC patients (>90%) are microsatellite
stable (“MSS”) and mismatch repair proficient (“MMRp”), where ICIs have not been shown to provide benefit. The
lack of ICI response in this subset is due to poor immunogenicity and immunosuppression. Again, this highlights the urgent need for the
development of newer, more effective therapeutic options.
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 and in particular, in gastrointestinal 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, including CRC.
Adoptive transfer of Chimeric Antigen Receptor
(“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. The conduct of several CAR T in vivo models has been a primary focus of
our Scripps collaboration.
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.
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. As noted above, we are receiving ongoing royalties
pursuant to a license of our PolyXen technology to an industry partner.
Although we hold a broad patent portfolio, the
focus of our internal efforts in 2023 was on the licensing and advancement of our DNase platform.
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
Our primary focus is 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, including CRC. 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, contract research organizations (“CROs”) and academic institutions
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
Volition Collaboration
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 the
Company’s 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. On July 10, 2023, we entered into the first Collaborator
Statement of Work as part of this collaboration with Volition.
Scripps Research Institute (“Scripps
Research”)
On March 17, 2023, the Company and Scripps Research,
entered into a Research Funding and Option Agreement (the “Agreement”), pursuant to which we agreed to provide Scripps Research
an aggregate of up to $938,000 to fund research relating to advancing the pre-clinical development of our 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.
University of Virginia (“UVA”)
On December 21, 2023, we entered into a Research
Funding and Material Transfer Agreement, as amended, with UVA (the “UVA Agreement”) to advance the development of our systemic
DNase program. Under the terms of the UVA Agreement, in
addition to advancing our existing intellectual property, we have an option to acquire an exclusive license to any new intellectual property
arising from the DNase research program. Allan Tsung, MD, a member of the Company’s Scientific Advisory Board and Chair of
the Department of Surgery at the UVA School of Medicine, will oversee the research conducted under
the UVA Agreement. As a surgical oncologist and scientist, Dr. Tsung is internationally recognized for leading substantial research on
the role of NETs in tumor growth, metastasis, and resistance to existing cancer therapies.
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, 2023, the focus
of our internal development efforts was on the advancement of our DNase oncology platform. We have not been actively pursuing development
efforts for XCART or PolyXen or any of our other technologies.
· Multiple value-driving milestones expected over the next 12 -24 months;
· 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 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 Pharmaceutical Co. Ltd. (together
with its wholly-owned subsidiaries, “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. In the first quarter of 2023, Pharmsynthez informed us that it had received
a response letter indicating certain deficiencies in the dossier and continues to develop a gap mitigation strategy with the intent of
refiling 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 our PolyXen technology that were previously exclusively licensed to
Takeda in connection with products related to the treatment of blood and bleeding disorders. Royalty payments of approximately $2.5 million
and $1.7 million were recorded as revenue by us during the years ended December 31, 2023 and 2022, respectively, and are based on single
digit royalties on net sales of certain covered products.
CLS
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 certain pharmaceutical products and methods incorporating
DNase enzyme for use in the treatment of cancer (the “Sublicensed Products”). Under the terms of the Sublicense Agreement,
we will have sole responsibility to, 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.
Concurrent with the Sublicense Agreement, 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 certain 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 to, 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.
Volition
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 and on July 10, 2023
we entered into the first Collaborator Statement of Work with Volition as part of this collaboration. For more information regarding such
collaboration with Volition, refer to the section titled “Business Developments” above.
Catalent
On June 30, 2022, we entered into a Statement
of Work (the “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 current Good Manufacturing Practices (“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.
Scripps Research
On March 17, 2023, the Company and Scripps Research
entered into the Agreement, 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 our DNase oncology platform technology. For more information regarding the Agreement,
refer to the section titled “Business Developments” above.
Other Agreements
We have also entered into various research, development,
license and supply agreements with Serum Institute of India (“Serum Institute”), Pharmsynthez and SynBio, a wholly owned subsidiary
of Pharmsynthez. We and our collaborative partners continued to engage in research and development activities with no resultant commercial
products through December 31, 2023. No amounts were recognized as revenue related to the Serum Institute, Pharmsynthez or SynBio agreements
during each of the years ended December 31, 2023 and 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 and supplemental patent certificate 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 technology expiring between 2025 and 2030. Our XCART and XDNASE patent families include patent applications that were
recently filed, with those most recently filed having an expiration date of 2042.
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 February 15, 2024, 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 XDNASE 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 as well
as covering PSA linkages. 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
XDNASE 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 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 in the United States and supplemental patent certificate in Europe and several other
countries. 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
in the U.S. generally involves the following:
· submission to the FDA of an NDA or BLA;
· FDA review and approval of the NDA or BLA.
The drug or biologic manufacturer may also be
subject to post-approval regulatory requirements. Once a pharmaceutical candidate is identified for development, it enters the preclinical
testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies.
An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA
as part of the IND. The sponsor will also include a protocol detailing, among other things, the objectives of the first phase of the clinical
trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, if the first phase lends itself
to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective
thirty days after receipt by the FDA, unless the FDA, within the thirty-day time period, places the clinical trial on a clinical hold.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds
may also be imposed by the FDA at any time before or during clinical trials due to safety concerns about ongoing or proposed clinical
trials or noncompliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that
the hold has been lifted.
All clinical trials must be conducted under the
supervision of one or more qualified investigators in accordance with GCP regulations. They must be conducted under protocols detailing
the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to
be evaluated. Each protocol must be submitted to the FDA as part of the IND, and timely safety reports must be submitted to the FDA if
any serious and unexpected adverse events occur. An institutional review board (“IRB”) at each institution participating in
the clinical trial (or in some cases an independent IRB) must review and approve each protocol before a clinical trial commences at that
institution. As part of its review, the IRB must also approve the information regarding the trial and the consent form that must be provided
to each trial subject or his or her legal representative, monitor the study until completion and otherwise comply with IRB regulations.
Human clinical trials are typically conducted in three sequential phases
that may overlap or be combined:
Post-approval trials, sometimes referred to as
Phase IV studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment
of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase IV clinical trials
as a condition of approval of an NDA or BLA.
The FDA or the sponsor may suspend a clinical
trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted
in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. In addition,
some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring
board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based
on access to certain data from the trial.
Concurrent with clinical trials, sponsors must
also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing
the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing
quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength,
quality and purity of the final drug. In addition, appropriate packaging must be selected and tested and stability studies must be conducted
to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
While the IND is active and before approval, progress