A recent thread at their forums has encouraging developments to report:
(...) the chances of us making Xenonauts 2 as our next game are better than even. The response to and feedback given on a potential sequel by the community has been remarkable and has gone a long way to convincing us that it would be a good idea.
Our biggest concern regarding Xenonauts 2 is whether we can create a workable 3D art style - this not only has to look good in 3D but ideally will also reference the 2D sprite style of Xenonauts 1.
(...) we're going to run some tests over the next few weeks on how we can try to make the art style look a bit more 2D and hand-painted.
We're working on redesigning the aliens from Xenonauts 1 to make them more interesting, both visually and in terms of the core mechanic for each race. We've got some new ideas for all of the races and we've got some concepts done for the updated Sebillian and Caesan designs that look quite a bit more "alien" than before.
We're playing with the idea of making the Caesans a hive consciousness, with weak drones (above) and more threatening officers. The officers get significant bonuses in combat for each nearby drone, and there is a single collective psionic power attack performed each turn. This might lose power as more Caesans are killed, or perhaps it just gets stronger each turn to encourage the player not to turtle when fighting Caesans (or possibly both).
The Sebillians might have their regeneration turned up to eleven to make them more interesting to play against. At the end of each alien turn, all Sebillians will return to full health ... but in exchange, every time they take damage their maximum health falls by, say, 25% of the damage sustained.
Xenonauts 2 is looking more likely than not and we're actively designing and prototyping it at the moment, but it'll probably take a month or two until we're ready to make a final decision.
Awesome news in our book!
If you want some more intel, an older thread has a few extra thoughts on the way the're looking to approach the new instalment, so check it out as well.
Our special thanks to Zombie at our forums for bringing this to our attention.