Xenetic Biosciences, Inc. Stock

Hello, and welcome to Xenetic Biosciences and Santersus Update Conference Call and Webcast. [Operator Instructions] As a reminder, this webcast is being recorded, and a replay will be made available on each company's website following the event.

At this time, I'd like to remind our listeners that remarks made during this webcast may include forward-looking statements and will reflect Xenetic Biosciences and Santersus' management's intentions, beliefs, expectations, plans or future projections about the transaction and future business plans. These forward-looking statements include, but are not limited to, statements regarding the anticipated benefits and timing of the proposed transaction, the potential benefits for shareholders, clinical development time lines, regulatory submissions, potential market launch dates, market opportunity estimates and the combined company's future capital needs.

These are forward-looking statements and involve risks and uncertainties. These risks include but are not limited to the ability to close a transaction, achieve clinical milestones, maintain adequate funding and the conditions precedent to completion of the transaction, including the receipt of required stockholder approval. Our actual results may differ materially from expectations.

Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws and are based on Xenetic Biosciences and Santersus' 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 filled -- files with the Securities and Exchange Commission.

In addition, Xenetic intends to file a proxy statement with the SEC in connection with the proposed transaction, which will contain important information about Santersus, the combined company and additional risk factors related to the transaction. Investors are urged to review the proxy statement carefully when it becomes available. These documents will be available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully.

All forward-looking statements are made as of today's date. Except to the extent required by law, we do not undertake any obligation to update any forward-looking statements. We also caution you against placing undue reliance on any forward-looking statements. Additionally, this communication may be deemed to be solicitation material in respect of the proposed transaction. Information about participants in the solicitation and their interest will be set forth in the proxy statement when it is filed with the SEC.

Additionally, certain information contained in this webcast relates to or is based on studies, publications, surveys and other data obtained from third-party sources and the company's own estimates and research. While the company believes these third-party sources to be reliable as of the date of this presentation, it has not been independently verified. It makes no representation as to the accuracy, fairness, accuracy or completeness of or that any independent source has verified any information obtained from third-party sources.

Joining us on today's call from Xenetic Biosciences, Jim Parslow, Interim Chief Executive Officer and Chief Financial Officer; from Santersus, James Ladtkow, Chief Executive Officer. I would now like to turn the call over to Jim Parslow. Please proceed.

Thank you, operator, and thank you to everyone joining us today. As we previously announced, Xenetic launched a strategic review process intended to identify opportunities to maximize shareholder value and position the company for long-term growth. Following a comprehensive review, this morning, we issued a press release announcing a definitive share exchange agreement with Santersus AG. We believe the share exchange agreement with Santersus represents an exciting opportunity for Xenetic and our shareholders as it advances the company closer to the clinic with visibility to commercialization.

Santersus is a medical technology company developing NucleoCapture, a therapeutic blood purification device designed to selectively remove harmful neutrophil extracellular traps, or NETs, from the bloodstream. Like Xenetic, Santersus is focused on addressing the role NETs play in the progression of serious diseases. The strategic rationale for this combination is particularly compelling because, while both companies target NETs, each technology approaches them in distinct and complementary ways.

Santersus' NucleoCapture technology is designed to physically remove circulating NETs from the bloodstream. Xenetic's DNase technology is designed to break down NETs in the blood and within tissues, including the tumor microenvironment. Together, these platforms have the potential to address NET burden across both circulating and tissue-based compartments, creating a broader and more differentiated therapeutic portfolio spanning critical illness, autoimmune disease, transplantation and cancer. We believe this positions the combined company to become a global leader in NET-targeted therapeutics.

Turning to the transaction. Under the share exchange agreement, Santersus will become a wholly owned subsidiary of Xenetic and will continue as the operating business of the combined company, which is expected to trade on Nasdaq as Santersus Bio, Inc. under the ticker symbol SNTS, subject to Nasdaq approval.

At closing, each outstanding Santersus share will be exchanged for shares of Xenetic common stock and outstanding Santersus options will be assumed by Xenetic. Following the transaction, pre-transaction Santersus shareholders are expected to own approximately 85% of the combined company, while existing Xenetic shareholders are expected to own approximately 15%. These percentages are subject to adjustments based on the final exchange ratio. Subject to approval by Xenetic stockholders and other customary closing conditions, we currently expect the transaction to close in the fourth quarter of 2026.

With that, I will turn the call over to James Ladtkow, Chief Executive Officer, Santersus, to discuss the opportunity ahead and why we believe this combination is so compelling. James?

Thank you, Jim. Before I get into the opportunity, let me briefly introduce myself. I have spent more than 35 years developing medical devices and advancing them from concept through clinical development, regulatory approval and into clinical use. That experience includes the clinical development and approval of the Spectra Optia, which is now the gold standard and represents approximately 85% of the apheresis market. I am also the inventor on more than 26 medical device patents.

What excites me most about this transaction is how naturally these 2 companies fit together. Santersus and Xenetic are both focused on the same underlying target, but we approach it in different and highly complementary ways. At Santersus, we have developed NucleoCapture, a blood purification device used in conjunction with an apheresis device like Spectra Optia and designed to remove harmful NETs directly from circulation.

Xenetic's DNase platform is designed to break down NETs within the blood and tissues, including the tumor microenvironment. Each platform has significant potential on its own. Together, they create what I view as a force multiplier, giving the combined company 2 distinct ways to address harmful NETs across a broad range of serious diseases.

Importantly, this is not simply a theoretical opportunity. Between us, our patent-protected technologies have already shown highly promising effects in more than 80 patients across sepsis, autoimmune disease and cancer with no device-related adverse events reported to date. NucleoCapture has also received 2 FDA Breakthrough Device Designations and our lead program is targeting a potential European market launch in the second quarter of 2028. We have built an extensive IP portfolio extending through 2038, with the potential for additional protection as we pursue new indications.

I also want to point out that the potential of NucleoCapture was further demonstrated by the participation of Terumo, a $20 billion global medical device company, in our Series A financing. Together, the combined company will have 4 clinical stage programs targeting sepsis, systemic lupus erythematosus, liver transplantation and large B-cell lymphoma. These are substantial markets, but more importantly, they are areas where patients and physicians have very few good options for treatment.

That is why I'm so excited about this combination. We are bringing together complementary technologies, meaningful clinical and regulatory progress and a pipeline with the potential to create value across multiple programs.

To understand why these platforms have such broad potential, it is helpful to first understand what NETs are and why they matter. NETs, or neutrophil extracellular traps, are web-like structures released by neutrophils, which are a type of blood cell. They are part of the body's natural immune response and are designed to trap and neutralize pathogens. The problem begins when too many NETs are produced or when they are not properly cleared. Instead of protecting the body, they can accumulate in the blood and tissues and begin driving inflammation, tissue damage and immune dysregulation.

In many serious inflammatory conditions, the infection or underlying disease may initiate the process, but the body's uncontrolled response, including the accumulation of NETs, can contribute substantially to the resulting organ damage. NETs can damage blood vessels, obstruct the smallest blood vessels and perpetuate the immune response, creating a cycle that can lead to organ failure and death.

In cancer, NETs play a different but equally damaging role. One simple way to think about it is that NETs can form a protective shield around the tumor. That shield may prevent the patient's own immune system from reaching and attacking the cancer. It may also interfere with treatments such as CAR-T cell therapies and checkpoint inhibitors by making it more difficult for those therapies to reach and destroy tumor cells. That is what makes NETs such a compelling target.

The same underlying biology is implicated across critical illness, autoimmune disease, transplantation, cancer and several other serious disease areas. By removing or breaking down excessive NETs, we believe we may be able to intervene upstream in the disease process before they can continue driving damage or treatment resistance.

This brings us to the combined pipeline and how we intend to apply these 2 platforms across specific disease areas. We are initially advancing NucleoCapture in 3 clinical settings where removing circulating NETs may provide meaningful clinical benefits. In sepsis, NucleoCapture is designed to work with existing apheresis equipment, which circulates the patient's blood outside the body, passes it through the device to selectively remove NETs and then returns the blood to the patient.

By rapidly reducing the circulating NET burden, we aim to interrupt the destructive inflammatory cycle and limit further injury to vital organs. This could give standard treatments more time to address the underlying infection while providing the patient's body with a better opportunity to stabilize and recover.

We are applying the same approach to systemic lupus erythematosus, or SLE, where periods of increased NET accumulation contribute to disease activity. By removing NETs from circulation, NucleoCapture is intended to interrupt the self-reinforcing autoimmune response, reduce the burden and help bring inflammation under control. The device would be used alongside standard treatment as a first-in-class non-immunosuppressive approach with the potential to address both disease activity and associated type 2 symptoms.

In our liver graft perfusion program, NucleoCapture is designed to integrate with organ perfusion systems and remove NETs from the fluids circulating through a donor liver before transplantation. Reducing the NET burden during perfusion may help limit inflammation, protect the liver's microvasculature and reduce the risk of additional injury when blood flow is restored. This gives us an opportunity to treat the organ directly before it reaches the patient with the goal of improving organ survival, supporting better transplant outcomes and potentially making more donor livers suitable for transplantation.

The second branch of our pipeline is built around DNase, which is being evaluated in combination with CAR-T cell therapy for patients with advanced large B-cell lymphoma. In this setting, DNase is intended to break down the NET-based barriers surrounding the cancer, allowing CAR-T cells to more effectively reach and attack tumor cells. By reducing this physical and biological obstacle, the goal is to enhance the activity of CAR-T cell therapy and potentially improve outcomes for patients. Taken together, this is not a selection of unrelated programs. It is a unified and highly complementary pipeline built around one increasingly important biological target.

Our initial programs span 4 indications, representing more than an estimated $20 billion in combined market opportunities. Each program addresses a significant unmet need and each provides an independent opportunity to generate clinical, regulatory and commercial value. At the same time, progress across the pipeline strengthens the broader scientific and therapeutic rationale for targeting NETs. We believe this creates a differentiated platform with the potential to establish the combined company as a leader in the emerging field of NET-targeted therapeutics.

Of course, a pipeline with this much potential only matters if you have the right people to execute. What we have assembled is much more than a strong scientific team. We have brought together a full range of experience required to move complex medical technologies from an idea through clinical development, regulatory approval and ultimately into the hands of physicians. Collectively, this team brings hundreds of years of experience across medical device development, critical care medicine, NET biology, immuno-oncology, clinical operations, quality, regulatory affairs and finance.

This is an incredibly exciting time for the combined company. We have built a pipeline with multiple opportunities to create significant value. These programs are already moving forward. Patients are being treated, studies are progressing, and we have a defined path towards potential commercialization. Our lead program in sepsis is where we see the most immediate opportunity. Recruitment is underway with our first interim analysis of 100 patients expected in the fourth quarter of 2027. We expect that data to support a European regulatory submission that same quarter, followed by a targeted CE certification and a potential European market launch in the second quarter of 2028. That is a powerful opportunity.

We are advancing a pivotal stage program in an estimated $5.6 billion market with the potential to reach a European market in less than 2 years. At the same time, the study is designed to continue building the clinical evidence needed to pursue approval and commercialization in the biggest market, the United States.

And sepsis is only the beginning. Behind it, we are advancing NucleoCapture in SLE and liver transplantation, along with DNase in large B-cell lymphoma and solid tumors. Each program provides another opportunity to demonstrate the value of targeting NETs and unlock the broader potential of these platforms. Each company currently has limited cash resources. We expect that the combined company will need to raise additional capital following the closing of the transaction to fund its operations, advance its clinical programs and pursue commercialization.

The structure, timing and terms of any such financing have not yet been determined, and there can be no assurance that financing will be available on acceptable terms or at all. Any such financing may result in dilution to existing stockholders of both companies.

When you step back and look at what we are building, the opportunity is clear. We are targeting an increasingly recognized driver of disease across critical illness, autoimmune disease, transplantation and cancer. Our initial programs to address more than $20 billion in estimated combined market opportunities and a potential first European market launch targeted for 2028.

This transaction gives us the breadth, experience and momentum to establish a leadership position in NET-targeted therapeutics. 4 clinical stage programs, 2 complementary technologies, 1 shared therapeutic target and multiple opportunities to deliver meaningful results for patients and create significant value for shareholders. We are incredibly excited about the company we are building and the opportunity ahead to achieve even more together. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.