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Edited Transcript of XBIO earnings conference call or presentation 4-Apr-17 12:30pm GMT

Thomson Reuters StreetEvents

Full Year 2016 Xenetic Biosciences Inc Earnings Call

Apr 4, 2017 (Thomson StreetEvents) -- Edited Transcript of Xenetic Biosciences Inc earnings conference call or presentation Tuesday, April 4, 2017 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jenene Thomas

Jenene Thomas Communications - IR

* Scott Maguire

Xenetic Biosciences, Inc. - CEO

* Jim Parslow

Xenetic Biosciences, Inc. - CFO

* Jeff Eisenberg

Xenetic Biosciences, Inc. - COO

* Curt Lockshin

Xenetic Biosciences, Inc. - Chief Scientific Officer

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Conference Call Participants

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* Jay Colby

Ladenburg Thalmann - Analyst

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Presentation

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Operator [1]

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Greetings and welcome to the Xenetic Biosciences quarterly conference call and webcast. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Miss Jenene Thomas, investor relations. Thank you. Ms. Thomas, you may begin.

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Jenene Thomas, Jenene Thomas Communications - IR [2]

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Good morning, everyone, and thank you for joining Xenetic Biosciences' quarterly business update conference call and webcast. I would like to remind you that today's webcast will be accompanied by a slide presentation that can be found under the investors section of the Company's website, XeneticBio.com, under events and presentations.

At this time I would like to remind our listeners that remarks made during this call may state management's intentions, hopes, beliefs, expectations, or predictions of the future. These are forward-looking statements that involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provision of the federal securities laws.

These forward-looking statements are based on Xenetic Biosciences current expectations and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from those contemplated by such forward-looking statements are discussed in the periodic reports Xenetic Biosciences files with the Securities and Exchange Commission.

These documents are available in the investors section of the Company's website and on the Securities and Exchange Commission website. We encourage you to review these documents carefully.

Following the Company's prepared remarks, the call will be opened up for a question-and-answer session. Joining me on the call today are Scott Maguire, the Company's Chief Executive Officer; Jeff Eisenberg, Chief Operating Officer; and Dr. Curt Lockshin, Chief Scientific Officer. It is now my pleasure to turn this call over to Scott Maguire.

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Scott Maguire, Xenetic Biosciences, Inc. - CEO [3]

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Thank you, Jenene, and first of all, I would like to think everyone for taking time out of their day to listen to the Xenetic earnings call. I am pleased we are now in a routine to have these calls on a regular quarterly basis. It is this type of interaction and communication that gives the Company and the technologies the visibility they deserve.

Speaking of visibility, Xenetic rang the bell on NASDAQ last week on Thursday morning. It was a great event enjoyed by all of Xenetic's staff and advisers that played a critical role in getting Xenetic listed on NASDAQ. With that I would now like to go through the achievements since our last call.

As we announced the beginning of January, we received a $3 million milestone payment from Shire for hitting an inflection point in our license agreement. This is related to Shire's advancing SHP656 through the Phase 1/2A clinical study and it is a long-acting form of Factor VIII, a treatment for hemophilia A.

We also announced recently that we will be announcing, hopefully the end of next month, that we have achieved a FDA approval on the protocol that we filed recently under an existing IND for a biomarker study of XBIO-101 for the treatment of triple negative breast cancer. And we also expanded our patent portfolio quite significantly since the last time we announced our patents in November 2014. We have expanded those into the key geographic markets; we have strengthened our portfolio across the board covering our therapeutic technologies.

We also announced the appointment of Dr. Ed Benz, the former CEO of the Dana-Farber Cancer Institute, one of the world's leading cancer institutes; he has become a member of our Board. Ed, along with Roger Kornberg, bring global credibility and global recognition to Xenetic.

We also appointed Dr. Curt Lockshin as the Chief Scientific Officer. He is a very experienced R&D professional who has been a part of the Xenetic team for the past two years, but he has now become a full-time member at the position of Chief Scientific Officer.

Now just this morning we announced the expansion of our executive management team with the appointment of James F. Parslow, Jim as we call him, as the Chief Financial Officer. Jim has 25 years of financial and business leadership experience, both of which are important components to execute on shareholder value enhancement.

I would now like Jim to introduce himself to you all and give a reason or two for joining the Xenetic team.

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Jim Parslow, Xenetic Biosciences, Inc. - CFO [4]

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Thank you, Scott. It is great to be joining such a great team here at Xenetic at such an exciting time in the Company's evolution.

The business model is very compelling and I believe there is tremendous opportunity to unlock significant value. I also believe that my extensive background and approach to financial management will be complementary to the management team's expertise as we have opportunities in front of us to accelerate our business strategy.

Importantly, I am humbled to be part of a Company that could have a significant impact on people's lives as we advance XBIO-101 to provide solutions where there remain significant unmet need in treating cancers. I look forward to working with this impressive team and Board of Directors from both a strategic and financial perspective to execute our strategy and drive shareholder value.

With that I will turn it back to Scott.

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Scott Maguire, Xenetic Biosciences, Inc. - CEO [5]

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Thank you, Jim, and welcome aboard again. I would also like to thank Joe Frattaroli, who has been our contract CFO, for his hard work and dedication the last two years.

As of December 31, 2016, Xenetic had $4 million in cash and cash equivalents. This is excluding the Shire milestone payment, so we have capital to hit on our Q2 clinical and license inflection points, including the Phase 2A data readout from Shire.

Now the NASDAQ listing enables us access to a whole pool of capital that we did not have previously and this is from groups of investors called fundamental investors that are the real drivers of shareholder value in the biotech world. This is important since, in all likelihood, we will be seeking to access the capital markets over the course of this year.

Now the three-headed execution strategy on creating shareholder value is being opportunistic in evaluating strategic financing options, potential licensing revenue from existing shareholder relationships, and leverage the positive data to execute more PolyXen-like partnerships for our drug delivery platform technology.

Now the business model is, quite simply, leverage off of the platform technology to seek or leverage non-dilutive capital to execute further Serum Institute of India-like deals. So Shire and Serum Institute of India-like deals is what we seek further from our platform technology. And this is to find our proprietary oncology pursuits, our therapeutic developments, with the end goal of leading to a market launch on the oncology programs. So that is the main business strategy for the Company.

I would now like to hand over to our COO, Jeff Eisenberg, to provide an update on ErepoXen and Shire. Jeff?

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Jeff Eisenberg, Xenetic Biosciences, Inc. - COO [6]

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Thank you, Scott. To follow on Scott's point, we now have a business model and strategy that truly positions Xenetic for substantial growth. As part of our ongoing strategic review, our team engaged in a concerted effort late last year to refine our strategy, recognizing that applying our resources to only the highest value projects and focusing on execution would be beneficial internally and would be attractive to potential fundamental investors.

So now, especially for our long-term shareholders, I would like to provide an update on our polysialylated EPO project, ErepoXen, being developed for the treatment of anemia and chronic kidney disease.

After completing three patient cohorts of our Phase 2 clinical trial and following our November fundraise, we decided to focus our efforts where we believe we can best add value and that is on our lead internal candidate, XBIO-101, which will be reviewed later in this call and about which we are really excited. The ErepoXen project was always intended to be an out-license opportunity. And we feel we have sufficient data with our three completed cohorts to attract a partner, if there is a partner to be found.

We have shown that our technology works. We see a dose response that corrects hemoglobin levels with extended half-life in CKD patients, which is exactly what we set out to demonstrate. Meanwhile, our strategic partners and shareholders, Pharmsynthez and Serum Institute of India, continue to pursue development in their markets and if they are successful, we would earn royalties from their sales.

Now I will turn to PolyXen and our collaboration with Shire on SHP656, or polysialylated Factor VIII. Shire continues to advance this important project which is completing its Phase 1/2 study. We expect top-line data from Shire in Q2 of this year.

Scott and the Xenetic team have done an amazing job with this partnership which started with Baxter and then migrated to Baxalta and now Shire. One of the reasons we are all so excited about this opportunity is that we really believe we have the right product for the right market with the right partner at the right time.

Our agreement with Shire covers a series of novel polysialylated blood coagulation factors, including SHP656, that utilize our proprietary PolyXen delivery system. Shire is the market leader in the category with well over $3 billion in sales and the market is substantial. By the time SHP656 is launched the global hemophilia A market should exceed $10 billion.

In addition to being a great strategic partner, Shire is also a significant investor in Xenetic, having invested $13 million to date.

I already mentioned that Shire is completing a Phase 1/2 trial and that data readout is expected in Q2. If the trial is successful, we expect Shire to move into a Phase 3 trial this calendar year, at which point we believe there will be much more visibility into this project and its potential impact on Xenetic from our existing shareholders as well as prospective investors. And this is one of the main reasons that that this year could be transformational for Xenetic.

Shire's objective for SHP656 is to develop a once-weekly or even less frequently dosed Factor VIII product, and I will discuss the significance of that in a moment.

The terms of our deal are quite meaningful for a Company of our size: up to $100 million in milestones and approximately high single-digit royalties on sales. We received our first clinical milestone payment of $3 million earlier this year.

The data shown here will help explain our optimism about the prospects for a successful trial outcome. Presented here are preclinical data for Advate, Baxter's original Factor VIII molecule; Adynovate, the next-generation pegylated version; and SHP656. As you can see clearly there is a consistent, positive trend in mean residence time from the rodent to the primate model in all three products, with SHP656 being the longest, and a similarly positive trend in humans for Advate and Adynovate. If that trend continues in the pending trial, we think there is a good chance that we will have helped Shire achieve its objective of once-weekly dosing.

The next slide presents the competitive landscape in hemophilia A, the market targeted by SHP656. Shire believes that frequency of dosing is and will continue to be a key differentiator in this large global market. And a take away from this chart is that there is no product on the market for this indication that is labeled to be dosed once per week.

ACE-910 has the potential to dose weekly, but that product has faced some very well-publicized safety challenges in the clinic. So we feel that if our product works as intended, then Shire will be very well positioned to compete in this market and perhaps even grow its share over time.

Now I'd like to step back and talk more broadly about our PolyXen technology and our strategy to exploit it. In the four months since I joined the Xenetic management team I have grown increasingly enthusiastic about this platform. The PolyXen platform has significant potential across a wide range of biologics and the potential to create products that can make a real impact in their markets. In that sense, we expect PolyXen to be a significant growth driver for us for years to come and our plans include aggressive business development efforts to expand our collaboration pipeline.

In that regard, we believe that success of SHP656 would further validate our technology and help to accelerate our partnering efforts. Our goal is to enter into more early-stage collaborations, leading to demonstration of feasibility and, ultimately, to additional Shire-like license deals. We do have feasibility work ongoing and, even though these are not announceable events, they could lead to more announceable events and potential value drivers as we move forward.

For the reasons Scott covered earlier, we do feel that this technology has tremendous value with or without SHP656. We have compelling human data in a number of different compounds, including the ErepoXen data I described earlier. So we feel that we have the right pieces in place to effectively advance this technology and use it to drive growth and provide non-dilutive capital.

And with that I'm going to turn the call over to Dr. Curt Lockshin, our Chief Scientific Officer, to discuss XBIO-101.

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Curt Lockshin, Xenetic Biosciences, Inc. - Chief Scientific Officer [7]

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Thank you, Jeff. I am pleased today to provide an update on XBIO-101, Xenetic's lead internal product candidate.

Since we obtained the asset in 2015, our internal team has been working with outside advisers and key opinion leaders to execute on development plans which will give us the best chance for successful clinical outcomes in various oncology settings. Drugs that target hormone receptors can be an effective tool against certain cancers. Prime examples would be progestins that target the progesterone receptor or tamoxifen, which targets the estrogen receptor.

However, patients whose tumor tissues lack those relevant receptors are not candidates for hormone receptor-targeted therapy. Well-known examples would include progesterone receptor-negative endometrial tumors, which lack the progesterone receptor, and triple negative breast cancer tumors, which lack all three of the progesterone, estrogen, and HER2 receptors.

Our objective with XBIO-101 is to increase levels of hormone receptors and tumor tissues in order to render them sensitive to hormone therapies. XBIO-101 is currently the subject of a Phase 2 study in progesterone-resistant endometrial cancer and in addition, consistent with our guidance at the end of 2016, we recently filed a protocol for a biomarker study of XBIO-101 in triple negative breast cancer.

XBIO-101 is essentially a derisked repurposing opportunity. Its use outside the US has provided over 20 years of market history and surveillance from over 10 million doses sold in these territories, as well as safety and tolerability data from the supporting clinical trials. Given its known mechanism of action as an interferon inducer, its primary use has been for certain infectious diseases and other conditions where immunomodulation is indicated.

Importantly, however, in animal models XBIO-101 has been shown to increase levels of the progesterone receptor in receptor-negative endometrial tumors. This and other history is supported our US orphan designation in the treatment of PR-negative endometrial cancers, as well as of course our ongoing Phase 2 IND. Furthermore, we have preclinical evidence suggesting the utility of XBIO-101 in estrogen receptor-negative tumors, such as found in the case of triple negative breast cancer.

Endometrial cancer is the most invasive gynecological cancer in the United States with around 60,000 cases diagnosed annually. Early-stage tumors can often be treated successfully with surgery or radiotherapy, but late stage and recurrent disease, about 20% of the diagnosis, carries more negative prognosis, fewer treatment alternatives, and it represents a dire unmet medical need with no FDA approved therapies for these patients. We are, therefore, enthusiastic about the potential role for XBIO-101 in these settings where there remains significant shortcomings in treatment options.

The Venn diagram on the next slide shows the US prevalence of these various patient groups. Around 20%, or 130,000 patients, are late stage, recurrent, or metastatic. Our orphaned-designated population, around 65,000 receptor-negative patients, are predominantly found in this category.

Also within the late-stage population are nonresponders to progestin therapy, irrespective of receptor status, per se. In some cases, for example, this might be the result of desensitization by prior hormone therapy. If XBIO-101 is able to sensitize, or re-sensitize these patients as the case may be, to progestin therapy, they might potentially also be part of XBIO-101's addressable population, which we view as an exciting opportunity in and of itself.

Our Phase 2 endometrial cancer trial in the United States calls for enrollment of approximately 72 patients at up to 50 clinical sites with a one-year treatment period of XBIO-101 with progestin therapy, followed by a one-year surveillance period. It is designed to treat receptor-negative patients directly with an XBIO-101 progestin combination, as well as to identify other nonresponders who may then be entered into the combination regimen.

To summarize, we are in the process of activating our Phase 2 trial of XBIO-101 with progestin therapy in endometrial cancer and we're on track to commence patient dosing this quarter. We expect to report interim data before the end of 2018.

And as I have stated, we've also submitted a protocol to the US FDA for a biomarker study of XBIO-101 in triple negative breast cancer patients. This is designed to determine the effect of XBIO-101 on the levels of hormone receptors, in this case including the estrogen receptor.

We are excited to be advancing our internal XBIO-101 programs forward and believe 2017 will be filled with meaningful progress on the clinical development front. Thank you, I will now hand the conversation back over to Scott.

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Scott Maguire, Xenetic Biosciences, Inc. - CEO [8]

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Thank you, Curt, and also thank you, Jeff, both of you, for detailing these exciting programs.

Now the expected near-term milestones, which you may well agree could be transformational for any one of these as a standalone. However, we have three such near-term milestones coming up in Q2 only and that is the commencement of recruitment for our Phase 2 clinical study for XBIO-101 and the subsequent dosing relating to that study; the announcement of top-line data from Shire for their Phase 1/2A study in Q2 as well; and hopefully, receiving a milestone payment from Shire if the endpoints are achieved in the Phase 1/2A study. This would then move into a Phase 3 study the second half of this year. If the results are positive, we seek to leverage this relationship to execute more PolyXen partnerships that reflecting of the economics of the Shire license deal.

We believe we have a very compelling investment opportunity: PolyXen, which is the drug delivery technology, one of the most versatile drug delivery technologies known to man without the subsequent adverse events. We would expect to drive significant growth going forward. We currently have four molecules in clinical development, under license, utilizing this technology.

Of course, we have the Shire relationship, which could yield significant milestones and royalties in the near term in the biotech world. And our lead program, XBIO-101, in Phase 2 clinical studies for the treatment of endometrial cancer, as well as the pending FDA clearance of the clinical protocol for triple negative breast cancer.

Now we have additional technologies and programs that have already been clinically vetted through our shareholder partnerships. Seven molecules covering nine different therapeutic areas have reported some form of clinical results, whether that is Phase 1 or Phase 2, whereby Xenetic owns all rights in the large markets, Europe and the United States. And these are ready for advancements in Europe and the United States as clinically-vetted molecules as resources allow.

2017 has started to be a transformational year and we expect to continue this trend with significant positive pipeline advancements.

Now I would like to turn over to the operator, Michelle, for any questions that you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Kevin DeGeeter, Ladenburg Thalmann.

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Jay Colby, Ladenburg Thalmann - Analyst [2]

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Hi, this is Jay Colby on the line for Kevin. Thanks for the questions. I guess first, how should we think about the pace of enrollment for the endometrial studies of XBIO-101? And then when could we see potential data from the triple negative breast cancer biomarker trial?

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Scott Maguire, Xenetic Biosciences, Inc. - CEO [3]

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That is a good question, Jay, and I am going to hand that over to Dr. Curt Lockshin, who detailed the XBIO-101 program.

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Curt Lockshin, Xenetic Biosciences, Inc. - Chief Scientific Officer [4]

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Thanks for the question. The pace of enrollment will be determined in the early going, I believe. There are a lot of variables that play into that. The pace can obviously increase -- be increased by opening up more sites as needed, so we have the ability to dynamically do that as time goes on.

As I indicated, we expect to be able to report interim data towards the end of 2018, which means essentially that we would anticipate enrollment, full enrollment, taking on the order of one year.

As far as the triple negative work, the start of that is really dependent on current available resources. But (multiple speakers) the biomarker study, of course, would be a much shorter proposition since it requires a shorter period of dosing and a much more rapid read out and better recruitment of TNBC patients as compared to late-stage endometrial.

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Jay Colby, Ladenburg Thalmann - Analyst [5]

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Okay, great. So I guess for the interim analysis on endometrial that is from the full 72 patients, or is that from (multiple speakers)?

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Curt Lockshin, Xenetic Biosciences, Inc. - Chief Scientific Officer [6]

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Sorry to interrupt; no, that would be from approximately half of the patients.

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Jay Colby, Ladenburg Thalmann - Analyst [7]

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Okay, great. And then I guess lastly for me, with the appointment of -- with the announcement of Jim as the CFO today, is your senior management team fleshed out at this point or do you see more hires down the road?

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Scott Maguire, Xenetic Biosciences, Inc. - CEO [8]

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Well, we have now added three C-level positions in the last four months, so I think the Company is perfectly placed now with a corporate structure ready to execute on all the value initiatives, as outlined in our presentation today.

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Jay Colby, Ladenburg Thalmann - Analyst [9]

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All right, thank you. That is it for me.

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Operator [10]

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(Operator Instructions) There are no further questions at this time. I would like to turn the call back over to Mr. Scott Maguire for closing remarks.

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Scott Maguire, Xenetic Biosciences, Inc. - CEO [11]

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Thank you, Michelle, and thank you to the Xenetic team as well. This is -- as I said previously, this has started out to be a transformational year and we expect to continue this trend over the course of 2017. We look forward to communicating with you on a quarterly basis with these earnings calls. Now that we have this established as a firm routine with Jenene Thomas and her crew, we are looking forward to get more news coming up over Q2 which we have -- just to remind you, is the Shire data readout, the commencement of the endometrial cancer trial, and the triple negative breast cancer biomarker study moving to approval.

So thank you very much again for your time today and we look forward to updating you in another quarter.

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Operator [12]

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Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.