Xenetic Biosciences, Inc. (NASDAQ:XBIO) And Shire plc (NASDAQ:SHPG) March Forward In Hemophilia

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Xenetic Biosciences, Inc. (NASDAQ: XBIO), a clinical-stage biopharmaceutical company focused on the discovery, research & development of next-generation biologic drugs, announced that it received a $3 million milestone payment from Shire plc (LSE: SHP, NASDAQ:SHPG) related to Shire’s advancing the Phase 1/2a clinical study for the PSA-Recombinant SHP656 or Factor VIII (“FVIII”), being developed as a long-acting therapeutic for the treatment of hemophilia.  From the press release, the stated goal of Shire is to,

“… introduce an innovative FVIII protein that can significantly prolong the circulating half-life of the FVIII protein, with the objective of providing a once weekly treatment or reaching higher trough activity levels for greater efficacy.”

Friday’s corporate update is important, but specific to just one of many activities at the Company.  Readers are encouraged to visit Xenetic’s Website for information on the Company’s drugs for, among other things, endometrial cancer, breast cancer, anemia and leukemia, in various phases of pre-clinical & clinical trials.

Before delving into Friday’s news, a market backdrop might be useful.  Unlike broader markets, the biotech sector has failed to reach all-time highs.  Market pundits are mixed, at best, regarding the direction of the overall market in 2017.  In a potentially overbought market, it’s a good idea to buy the more reasonably priced sectors like, in this case, biotech.  Notably, as of January 6th, the iShares Biotech Index (NASDAQ: IBB) trailed the DJIA by nearly 30% year-over-year, and Shire plc trailed the DJIA by a like amount.  It’s unusual for a $50 billion company to trail by so much.  Needless to say, Shire plc and other large-pharma companies need to catch up to the broader indices, a lot is at stake in the sector.

However, even more than market sector dynamics is the fundamental importance of Xenetic to Shire plc.  By itself, the Phase 1/2a clinical study for the treatment of hemophilia is not a prospective blockbuster, but it’s particularly important for Shire plc to maintain its dominance in the $9 billion global hemophilia market.

Why?  Because as mentioned, this trial could pave the way for the potential introduction of a once weekly dosage treatment offering greater efficacy than the current regimen of several does per week.  One way or another, Shire needs a weekly delivery platform in this area to fend off competitors in its core business.  Therefore, it will continue to pursue this trial carefully and steadfastly, which is of course hugely beneficial for Xenetic.

“We are thrilled with the progress that Shire has made developing the SHP656 program, which is currently in Phase 1/2a clinical trials for the treatment of hemophilia,” said Scott Maguire, Xenetic’s CEO. “We look forward to the continued development of SHP656 utilizing our proprietary PolyXen™ platform technology with the goal of having a once weekly or less frequent dosing, thereby making it the longest acting hemophilia A factor replacement treatment in development in the $9.3 billion global hemophilia market.”

This article by David Rich hints at a more bullish read through on the news,

“The language [in the press release] is a bit vague due to the proprieties of the partnership between Xenetic and Shire, but it’s reasonable to assume here that the [$3 million milestone payment] means recruitment was completed, or that trial data is about to be reported, or possibly even that data is positive.  The trial is open label and scheduled for completion in March, so the data is not masked to either Xenetic or Shire, and it’s almost finished.

Achieving a milestone just a few months before a potentially transformative outcome in March should bode well for the share price in the weeks to come.

Xenetic shares were up 11% in the first week of January, a tiny fraction of the gain possible upon positive results in March.  Readers are reminded that, Xenetic is entitled to, “up to $100 million in development, regulatory, sales & deadline extension receipts.” depending on Shire’s success in achieving further milestones.  Presumably, $100 million would be just the tip of the iceberg if Shire puts Xenetic’s treatment into development.

This is a Company that should be on investor’s radar for further due diligence.  Xenetic shares are highly speculative, but Friday’smilestone payment suggests that a big payday for the Company remains in play, that Shire [Xenetic’s largest shareholder] is committed to advancing the trials and, as David Rich suggests, that there’s potentially positive news triggering the milestone payment.

Xenetic Biosciences, Inc. (NASDAQ: XBIO)

In addition to the Company’s trials through Shire plc, Xenetic’s proprietary drug development platforms include PolyXen™, which enables next generation biologic drugs by improving their half-life and other pharmacological properties.  Xenetic’s lead investigational product candidates include FDA orphan designated oncology therapeutic sodium cridanimod for the treatment of progesterone receptor negative endometrial cancer, and a polysialylated form of erythropoietin for the treatment of anemia in pre-dialysis patients with chronic kidney disease.

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