X T L Biopharmaceuticals Ltd (ADR) (NASDAQ:XTLB): A Strong Value Thesis

X T L Biopharmaceuticals Ltd (ADR) (NASDAQ:XTLB) is an interesting one. The company is a biotechnology entity based out of Israel but trading on the NASDAQ by way of the ADS system. It fell below minimum bid requirements for the final quarter of last year, and the exchange served up the standard 180-day warning. Instead of waiting for the period to expire (and in turn, triggering a second grace period), the company initiated the equivalent of a reverse split (an ADS ratio change) and boosted back above minimum bid. This came into effect a couple of weeks ago. It currently trades for around $2.3 a share, down off highs of $3.6, but well above threshold, and in our opinion, well worth a look.At its current market capitalization, and given the potential of its lead asset in a couple of focus indications, we think there's some real run room on offer for an exposure in and around current levels.Of course, at this end of the biotech market, catalysts are key. So, here's where we see them coming from.XTL is a young biotech with a focus on the development of treatments for automimmune conditions. Its lead asset, a drug called hCDR1, accounts for the vast majority of its valuation right now, and accordingly, will be the focus of this discussion. It’s a pretty complicated mechanism of action, so we won't go into it in too much detail here, but here's a simplified intro. In conditions like Systemic Lupus Erythematosus (SLE), which is the primary indication, the immune system attacks healthy cells by mistake. This causes the raft of symptoms and complications associated with the disease. Current standards of care are all rooted in immunosuppression – steroids, primarily. hCDR1 basically creates T cells that then go and attack (suppress) the T cells that the SLE causes to attack the healthy cells. It's basically a turning of one part of the immune system against another part, with the latter of these two parts being the one that has already turned against healthy cells. Think Schwarzenegger and Robert Patrick's T1000 in Terminator 2, with Sarah Connor as the healthy cells and Schwarzenegger as the T cells that hCDR1 brings to the party.The SLE indication, as mentioned, is the lead, and a phase II is about to kick off. XTL announced at the end of last year that its manufacturing run for the trial batch was pretty much complete, but that it would have to raise capital before trial initiation. The most recent announcement, which hit press at the end of last week, detailed a $2.5 million issue, and we expect that this is the last box ticked before the phase II gets under way.As such, that's the next major catalyst we are looking for – the initiation of said trial.There's also a follow up indication, a condition called Sjogren's syndrome. We'll forgive readers for not being familiar with this condition – it's a rare autoimmune condition with a similar (but different) underlying cause to SLE that manifests itself in similar ways as the latter. The company is gearing up to a second phase II in this indication, and recently expanded its clinical advisory board to support said trial.This, then gives us our second catalyst – the initiation of the second phase II in the SS target.Both trials should read out this year (albeit early stage data) and there's a potential pathway to pivotal early 2018.For a company worth a little over $6 million, two mid to late stage trials is a strong value thesis. Add to the equation that both trials are targeting autoimmune diseases (which opens up the potential for some premium pricing) and that the MOA is novel and unique, and there's plenty to go at here.As ever, cash isn’t great, even with the latest infusion, and dilution is something of an inevitability as the pipeline matures. If the catalyst come in as indicative of efficacy, however, the upside should far outweigh the pressure of the dilution.We will be updating our subscribers as soon as we know more. For the latest updates on XTLB, sign up below!Disclosure: We have no position in XTLB and have not been compensated for this article.