Nanocap stocks are inherently risky in the stock market, but can certainly pay off for speculators when they go up. Xenetic Biosciences Inc. (NASDAQ:XBIO) surged 28%, up twofold from the $2 level the stock has been stuck at over the last year. At a closing price of $4.08 on Monday, Aug. 13, XBIO stock is still well below the $8.95 intraday high set in late-June.
Why did the stock go up on an over sixfold increase in trading volume?
Xenetic Bio did not post any news that would explain the rally. Industry Chronicle mentioned the company in an article discussing bleeding disorders treatments. Obtaining the details of this market requires buying the report. As I mentioned at the beginning, nanocap stocks are risky because any individual investor buying or selling many shares at once could move the stock.
On Friday, Xenetic reported second-quarter results. The company said it had $3.3 billion in cash left, as operations cost $3.8 million for the first half of the year. Cash fell from $5.33 million last year. The company lost $2.03 million in the quarter, or 23 cents per share in the three months ended June 30, 2018. This is an improvement over last year’s loss of $3.85 million, or 44 cents per share. Losses fell because the company reduced its R&D spending by around $700,000. G&A (general and administrative) fell by half, from $2.19 million to $1.06 million.
What is Xenetic Biosciences?
Xenetic is “focused on the discovery, research and development of next-generation biologic drugs and novel oncology therapeutics,” per its SEC filing. XBIO-101 is its lead investigational drug, for the treatment of progestin-resistant endometrial cancer. The company’s drug uses a “PolyXen” proprietary technology, in which it manipulates protein or peptide to deliver the therapy. The company cites a long half-life and believes it may have a next-generation biologic that is superior to existing treatments.
The company has R&D, licensing and supply agreements with a number of companies, including Shire plc, Serum Institute of India and SynBio LLC. The collaborations have yet to result in a commercial product. As such, Xenetic did not report any revenue for the first six month of this year (or last year, for that matter).
Risks of XBIO Stock
Investing in XBIO stock is not without risks. The company lost nearly $3.8 million in the first half of the year and has an accumulated deficit of ~$150 million. The stock has a market cap of just $32.44 million. Due to expected incurring losses for the foreseeable future, Xenetic Biosciences will most certainly raise additional capital. A stock issuance will likely send the stock back to yearly lows in the $1.37-$2.00 range. With XBIO surging 28% in a single day and up 33.8% on the week, expect management to take advantage of the stock increase by selling shares.
June’s 100% Surge a One-Time Event
On June 25, when XBIO stock Rose to as high as $8.95, shares changed hands at 36 times the average. At the time, the company reported no new news. Markets could have caught on to the potential for XBIO-101. While results for its indication for Progesterone Resistant Endometrial cancer will be reported this year, the drug is also in the planning phase for biomarker study in triple negative breast cancer.
Source: Xenetic Biosciences
Chances are high that XBIO stock will not surge by 100% again. The Aug 5 rally will probably be the closest the stock gets in a one-day rally of that magnitude.
Takeaway on XBIO Stock
If history repeats itself, XBIO stock will slump again as speculators lock in profits. The company will need to raise cash again.
Still, a positive clinical report for XBIO-101 may give the stock a reason to rally but it is anyone’s guess when that will happen.
As of this writing Chris Lau did not hold a position in any of the aforementioned securities.
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