Jenene Thomas - IR Scott Maguire - CEO Jeff Eisenberg - COO Curt Lockshin - CSO Jim Parslow - CFO.

Kevin DeGeeter - Ladenburg Thalmann.

Greetings and welcome to the Xenetic Biosciences 2017 First Quarter Business Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Jenene Thomas, Investor Relations for Xenetic Biosciences. Thank you. You may begin..

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 & 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; Dr. Curt Lockshin, Chief Scientific Officer; and Jim Parslow, Chief Financial Officer. It is now my pleasure to turn the call over to Scott Maguire..

Thank you, Jenene and thank you all who have dialed in to listen to our quarterly update. Although, we have had a call only within the last six weeks, management would like to maintain an active communication strategy with our shareholders, especially now that our clinical activity levels are increasing.

As a reminder of what we have announced and achieved this year, we rang the NASDAQ opening bell on March 30. We appointed Jim Parslow as our CFO and appointed Dr. Curt Lockshin as our CSO. We received a $3 million milestone payment from Shire that related to Shire Advancing SHP 656.

We presented a case study of the PolyXen Technology at the Protein Engineering Summit in Boston. We filed a protocol under an existing IND for a biomarker study of XBIO-101 for the treatment of triple negative breast cancer.

And we expanded our patent portfolio geographically in the key markets including areas of Europe, Asia, and North America, and strengthened the patent portfolio in the U.S. providing robust protection for our platform technology.

As is evident, we continue to lay a strong foundation with new outstanding operational hires and provide the resources that our science deserves. We're now in a position for the science and our multiple technologies to prove their underlying hypotheses in the clinic this quarter and beyond.

Moving on to the financial snapshot and funding strategy slide, I would now like to introduce our CFO, Jim Parslow, to discuss our cash position and the 14C circular which we understand has presented many questions to our shareholders.

Jim?.

Thank you, Scott. We ended the quarter with $4.3 million of cash compared to $4 million at December 31, 2016. The increase represents the receipt of the $3 million Shire milestone payment offset by our operating loss for the quarter.

From an equity perspective, we recently mailed an informational statement to our shareholders regarding our Series B Preferred Stock. Back in November, we had a successful $10 million capital raise and NASDAQ uplift from the issuance of approximately 2.5 million shares of Series B Preferred.

The Series B Preferred can be converted into our common stock at a ratio of one to one. One of the contractual provisions of the Series B Preferred provides holders protection in the event we have a subsequent issuance of common stock or equivalent at a price less than $4.

This provision calls for the conversion price to adjust downward to the price of any new dilutive common stock offering. This clause only relates to the conversion ratio into common and only to new issuances of common stock or equivalent at a price lower than $4.

At March 31, we have approximately 2.2 million shares of Series B still outstanding, the majority of which are owned by our largest shareholders. With that, I'll turn it back to Scott.

Scott?.

Thank you, Jim. Clearly we have a need to bring in additional capital into the company this year. We're constantly evaluating capital initiatives and will move forward at the right time with a funding strategy that is in the best interest of our shareholders.

We have been spending some time this year positioning the company to access the capital markets with a target for a capital market initiative being the fundamental healthcare institutional investors.

Such high quality investors provide the needed credibility with a range of non-industry specific investors an important component to generating liquidity in our stock. We also intend to leverage the Shire data to execute more PolyXen partnerships and bring in non-dilutive funding to the company in a meaningful way.

As we have stated previously, we expect the Shire news this quarter. Our goal is to strengthen our capital resources to allow the science and technologies to continue to run through their clinical development with a goal of leading to a market launch for unmet needs and/or orphan diseases.

Now to summarize our strategy we intend on going along with our oncology therapeutics by taking them through to market launch ourselves.

Although such goals for a small company like Xenetic could be resource intensive, our oncology pursuits are focused on areas of unmet need and/or orphan designations where the cost and time to launch could be more manageable for a small company.

As part of our funding strategy to preserve shareholder value, we seek to establish more Shire alike relationships with cash milestones as a means of providing non-dilutive sources of capital. I would now like to hand over to Jeff Eisenberg to go through the PolyXen platform technology and more specifically provide a Shire update.

Jeff?.

Thanks, Scott. I'd like to start by taking up where Scott left off on our PolyXen technology platform which we expect to drive significant value for Xenetic. Today I'll focus on our collaboration with Shire on SHP656 or polysialylated Factor VIII which is potentially the most significant current application of our PolyXen Technology.

Shire continues to advance this important program which is completing its Phase 1/2 study and as Scott noted, we expect top-line data from Shire this quarter. So to be clear Xenetic has not had any access to this data, so we are waiting like everyone else.

When we do we will promptly announce the results and hopefully plan for Shire to proceed into a Phase 3 study this year. One thing I can't say is that we believe the Shire agreement can be a model for how we intend to build out our portfolio of programs leveraging the PolyXen platform.

Shire is a market leader in the hemophilia category with well over $3 billion in global sales and the market is sizable. In fact by the time SHP656 is launched, the global hemophilia market should exceed $10 billion.

So this is why, I say that the Shire collaboration is currently the most significant application of the PolyXen Technology and potentially a high value agreement for Xenetic. There are a number of criteria that must be met in the current trial for us to earn the next milestone and for Shire to make a decision to move into Phase 3.

A primary one is to leverage the PolyXen Technology to achieve Shire's goal of once weekly dosing. If those criteria are achieved, this deal has the potential to really change the trajectory of Xenetic.

The next slide shows preclinical and clinical data for Advate which is Shire's original Factor VIII product, Adynovate is next generation pegylated version and SHP656 which is polysialylated Factor VIII developed under license from Xenetic. These data are important to demonstrate our optimism for the SHP656 program.

Now again the goal is long acting and there is a consistent positive trend as you can see in mean residents time from the rodents to the primate model on all three products with SHP656 being the longest and a similarly positive trend in humans for Advate and Adynovate.

And what this means is if this trend continues we believe Shire has a good chance to achieve its objective of once weekly dosing and that may prove to be a clear differentiating feature in a competitive market.

Because the competitive landscape shows what we and Shire see as the unmet need in the treatment of hemophilia A, Shire believes that frequency of dosing is and will continue to be a key differentiator in this large global market given that there is no product currently labeled for once weekly dosing.

If our product works as intended then Shire will be very well positioned in this market. Now beyond Shire and SHP656, we have a growing body of data validating our technology platform and showcasing its broad utility. This is important because as I said we are counting on PolyXen to be a significant growth driver for us.

Right now we are focused on business development efforts to expand our collaboration pipeline especially leading into the bio-meeting next month. Our goal is to enter into more early stage collaborations with industry partners leading to demonstrating of feasibility and ultimately to additional Shire like license deals.

Given the compelling human data we have in a number of different compounds, we feel that we have the right pieces in place to effectively advance this technology and user to drive growth and provide non-dilutive capital. And now I would like to turn the call over to Curt Lockshin, our Chief Scientific Officer to discuss our lead internal program..

Thank you, Jeff. XBIO-101 our lead oncology candidate is currently the subject of a Phase 2 study in progesterone resistant endometrial cancer with recruitment on track to commence this quarter. In addition last quarter we filed a protocol for a biomarker study of XBIO-101 in triple negative breast cancer.

XBIO-101 to be characterized as a repurposing opportunity. It comes with over 20 years of market history and surveillance outside the United States based on over 10 million doses sold in these territories as well as safety and tolerability data from supporting registration trials.

Given its known mechanism of action as an Interferon inducer XBIO-101's principal indications have been for certain infectious disease and other conditions which call for immune-modulation. Importantly, however in animal models XBIO-101 has been shown to increased levels of the progesterone receptor and receptor negative endometrial tumors.

This another history has supported our ongoing Phase 2 IND as well as our U.S. orphan designation in the treatment of progesterone receptor negative endometrial cancers with XBIO-101 in conjunction with progesterone therapy.

Furthermore, we have pre-clinical 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 biological 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 diagnoses represents a dire unmet medical need with more negative prognosis and fewer treatment alternatives with no FDA approved therapies for these patients.

More details on the epidemiology of endometrial cancer are shown in the Venn diagram on the next slide. In the U.S. around 20% or 130,000 patients are late-stage recurrent or metastatic or orphan designated population around 65,000 progesterone receptor negative patients are predominantly found in this category.

Also within the late-stage population are non-responders to progesterone therapy. In some cases for example this might be the result of de-sensitization of the progesterone receptor by prior hormone therapy.

If XBIO-101 is able to sensitize or re-sensitize these patients as the case may be to progesterone therapy, they potentially might also be part of XBIO-101 to addressable population.

Our Phase 2 endometrial 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 progesterone therapy followed by a one-year surveillance period.

It's designed to treat receptor negative patients directly with an XBIO-101 progesterone combination as well as to identify other non-responders who may then be entered into the combination regimen.

To summarize, we're in the process of activating our Phase 2 trial of XBIO-101 with progesterone therapy and endometrial cancer and we're on track to commence patient recruitment this quarter. Based on forward-looking estimates of recruitment rate as provided to us by the clinical sites, we would expect to report interim data before the end of 2018.

As a number of sites begin to open and engage in patient screening, we will start to accumulate real world data on actual recruitment rates with which we can refine our estimates of the timeline to interim data.

In addition, we've also submitted a protocol to the USFDA for a biomarker study of XBIO-101 in triple negative breast cancer patients designed to determine the effect of XBIO-101 on the levels of hormone receptors in this case including the estrogen receptor.

We're enthusiastic about the potential role for XBIO-101 in these settings where they remain significant shortcomings in treatment options. We're excited to be advancing our internal XBIO-101 programs forward and believe 2017 will be filled with meaningful progress on the oncology front. Thank you. I will now hand the conversation back over to Scott..

Thank you, Curt. As we said in our last investor call, Q2 could be a landmark quarter for the company.

As a reminder, the Q2 value catalysts are commence patient recruitment for the Phase 2 clinical study for our lead program XBIO-101, announce top-line data from Shire for SHP656, receive a milestone payment for Shire if the end points are achieved, and leverage the Shire program to execute more PolyXen partnerships.

Now we believe XBIO is a very compelling investment opportunity. We currently have four molecules utilizing the PolyXen Technology that have generated some form of clinical data. SHP656 in the event that data is positive would be going into Phase 3 clinical trials the second half of this year.

Our lead proprietary program XBIO-101 is in Phase 2 clinical study for the treatment of late-stage endometrial cancer which is no FDA approved therapy. As we have over 100 issued patents, we have a large IP state for new drug candidates pursuits.

Add this to the fact that we have a number of programs in clinical development with our shareholders and strategic partners for their home territories whereby Xenetic owns all rights in the Western markets; Xenetic has a clinically validated pipeline that we can draw upon for Western market development.

So 2017 beginning with this quarter could be transformational with our clinical advancements. I want to thank you all for listening and I would like to turn the call over to the moderator for Q&A. Thank you..

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Kevin DeGeeter with Ladenburg Thalmann. Please proceed with your question..

Hey good morning guys. Thanks for taking my questions.

First off for Scott, with regard to the Shire update that should be forthcoming, can you characterize your expectations as to the scope of what we should look for in that update specifically do you anticipate there being clinical data included as part of that update or should we think it is principally an update that is a go no-go decision with regard to Phase 3 development? And secondarily should we look for that announcement to come from Shire or Xenetic or perhaps both?.

Good question and thanks Kevin. We would expect a release that reflects the terms of the contract meaning the achievement of the endpoints or not as the case may be. So the detailed clinical data would be in the hands of Shire and I would expect they would be presenting a poster at a conference at a Hematology Conference in the near future.

So in summary, the release would be reflective of the endpoints as outlined in our contract. Now the release as of today would be a joint release, a joint release Shire and Xenetic. That's the meeting of the mind at this point, now things could change but as of today it's a Shire-Xenetic joint release..

Great. And then on the different note, Jeff, you walked through and provided pretty strong case for the value of the PolyXen platform in terms of incremental partnering and you did call out the Shire agreement as a model in certain respects for how you think about future agreements.

One aspect specifically of the Shire structure, would you call out as being key elements if you'd like to incorporate into your future agreements, should we think the model as being principally in terms of the type of lifecycle management or clinical value or economics or I just want to kind of appreciate the underpinning of your thought process on using the Shire agreement as a template for future agreements?.

Sure. Thanks Kevin. So in a couple of different ways but primarily what I was referring to was economics. I would note though that the Shire milestone or Shire agreement as we've stated provides for up to $100 million in milestones that includes a combination of clinical development, regulatory, and sales milestones.

If we get positive Shire data and further publicly validate the technology, frankly, we would hope to be able to actually do better on those types of terms. So mostly what I'm talking about is economics.

But beyond that if you look at the Shire deal in terms of -- in terms of market size and partner that we have in that market that is part of what we mean also by a model having the right partner in the right market for really exploiting the technology..

Great. Then may be just a couple more to finish up for Curt on 101 because we think about the side where you highlight 50 sites for future enrolment of patients.

But more if we kind of think about that more granular terms and how many of those sites you anticipate being able to get on and begin to enroll patients in called the first wave in the second half of 2017 for enrolment, how many sites do you think you sort of fit that sort of early transition into active enrollers?.

Hi Kevin, thanks for your -- for calling in with your question. I think it's reasonable to expect maybe up to 20 sites.

So about half of the sites that we could use to be activated by the end of the year, may be 10 by late summer, and 20 by the end of the year, at which point we will have essentially a basket of different types of sites that meet different profiles, some are smaller that might recruit at a slower rate, some might be bigger with higher recruitment rates and things in between.

At that point, I think we would get a sense over let's say a period of three, four, five months what the typical real world recruitment rates are for those types of sites, at which point we could start activating more sites or not as the case may be..

And can you remind investors with regard to the interim data potentially for the end of 2018, you highlighted in your prepared comments the range of patients to anticipate being included in that initial interim analysis?.

Sure. So if you look at the actual flow chart of the study design, we have two types of patients that that enter into the trial. Those that are identified as progesterone receptor negative would go immediately into a combination therapy.

Those that are not PR negative, one would start on a progesterone therapy alone some may respond and some may stop responding, those that stop responding would then enter into the combination therapy.

So we would expect that about half of those -- half of the patients that are taken into the trial will meet the criteria for value ability on the combination therapy after six to 12 months of treatment.

So the interim data would consist of about 20 patients who have been on the combination therapy, that's another statistic that we won't know the actual value of until we start recruiting and identifying patients..

So in round numbers, the company would love to enroll more or less 40 patients by the end of 2017 to get to those 20 that will be valuable by the end of 2018, is that correct metric to think about?.

No more by about 40 patients by about the middle of 2018..

And that will --.

With the readout, I'm sorry would be about at the end of 2018, the readout would be two cycles of imaging. Those imaging cycles take place every 12 weeks after the start of treatment. So if a patient were to enter the trial and go right on the combination therapy they would have their second readout at the end of 2018..

Great. Thank you for taking the questions..

Thanks, Kevin..

Thank you..

Okay. I'm handing over to the moderator for additional questions. Thank you..

Thank you. Mr. Maguire, there are no further questions; I'll turn the floor back to you for any final remarks..

Okay, well again I want to thank all of you for tuning in today taking time out of your busy day to listen to Xenetic's value proposition and as we stated at the beginning of this call, we're going to be more in active communication with our shareholders especially now that the clinical activity levels are increasing and we look forward to having our next quarterly call and going through hopefully some very positive clinical news because this is a transformational quarter for the company.

Again thank you all for tuning in and listening to us..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..