Fellow Shareholders:
First, everyone at XOMA hopes this letter finds you well. We collectively are experiencing a global event that few could have anticipated. It makes us remember what’s most important in life – our health, our families, our colleagues, and our friends. For our 10-person team, XOMA not only represents colleagues and friends, we also feel that XOMA is part of our family. We will survive the coronavirus crisis, and the economy will recover. We remain positive, and we will continue to play a role in improving human health.
Despite the extraordinary challenges in the overall financial markets that we’re all experiencing, we remain guardedly optimistic regarding our prospects, particularly given the strong financial position we’ve established. XOMA ended 2019 with $56.7 million in cash on the balance sheet. Between the $22 million rights offering we completed in December and the $15.8 million in payments we received from our partners over the course of last year, and our lean operating costs, we are well positioned for the volatile environment we’re facing. Since our business model is focused on acquiring the future potential milestone and royalty revenues associated with clinical-stage partnered assets, these challenging capital market dynamics can provide us with additional and more diverse opportunities, and we continue to be in active dialogue with companies who are considering financing options to advance their medical breakthroughs.
Looking back, 2019 was a tremendous year for XOMA. As we expand XOMA’s milestone and royalty portfolio, we will continue to look at opportunities to add royalty assets that meet our profile in 2020. In 2019, we kicked our royalty acquisition model into high gear. We completed four transactions that added 20 new potential milestone and royalty assets to our portfolio. Eleven of the new assets are clinical-stage candidates. Nine of the new assets came from XOMA’s legacy antibody platform, which over the years led to dozens of agreements with pharmaceutical and biotech companies. We acquired interests in two exciting new platform technologies that we believe will produce multiple clinical candidates in the future. As you know, a well-balanced portfolio offers diversification to reduce risk, as well as long-term growth potential. We take the same approach with our milestone and royalty-interest portfolio. We entered 2019 with a portfolio of 45 partner-funded assets, and by year-end, our efforts had grown the portfolio by over 40% to more than 65 partner-funded assets.
Some very exciting news for XOMA came from Novartis during its R&D Day in December 2019. Building on initial data presented in June1, Novartis highlighted the progress that has been made on iscalimab (CFZ533)2, a novel anti-CD40 antibody investigational compound that could generate up to low-teen percentage rate royalties for XOMA. If the early data is replicated in later-stage development, iscalimab could have a profound impact on the kidney transplant community and kidney preservation following transplant. These types of potential breakthroughs are why medical science and drug development are so exciting. And breakthroughs are what keep us committed to our mission – help improve human health by providing non-dilutive capital to companies that need it.
Another important development also came from Novartis when it launched its clinical program for gevokizumab (VPM087) (anti-IL1β allosteric modulator monoclonal antibody)3 with a study in patients with metastatic colorectal cancer, gastroesophageal cancer, and renal cell carcinoma. After having devoted so much of XOMA’s focus to gevokizumab over the years, it was an exciting moment when we learned the first patient had been dosed in this oncology study.
Another asset in the XOMA portfolio achieved a significant milestone in 2019. Sesen Bio reported positive top-line Phase 3 data and subsequently initiated its rolling Biologics License Application (BLA) filing for Vicinium® for the treatment of BCG-unresponsive non-muscle invasive bladder cancer (NMIBC)4. Sesen has stated it anticipates completing the BLA filing in the second half of 2020 with an FDA decision expected in the second half of 2021.
There were numerous advancements across our milestone and royalty interest portfolio during 2019 and into 2020. Early in 2020, Rezolute, Inc., announced it had launched a Phase 2b clinical trial for RZ3584 (formerly XOMA 358) in patients with congenital hyperinsulinism (CHI). Given the insight we gained into this terrible condition during our early development of this antibody and the extraordinary families we met, we are truly hopeful Rezolute succeeds in its development efforts for RZ358. And we are optimistic that there will continue to be clinical advances amongst the 65 assets in our royalty portfolio, although the coronavirus pandemic may slow progress for a time.
To keep our stockholders and other interested parties current on developments at XOMA and across our portfolio, we instituted an active social media presence on LinkedIn, which we invite you to join. Additionally, our website, www.xoma.com, has been completely redesigned to provide you with the latest information on our publicly disclosed assets.
Looking forward, our business model is to provide non-dilutive, non-recourse capital to biotech companies who need the resources to bridge to clinical data or another corporate event in exchange for future potential milestone and royalties associated with partner funded clinical assets. During the current COVID-19 crisis and these tough economic times, which have impacted both the debt and equity markets, XOMA might offer that bridge or lifeline to those biotech companies that have found their clinical trials delayed due to COVID-19. We will carefully balance our cash-on-hand targets with cash outflows into new acquisition transactions that further expand our portfolio.
Our small team has been set up from Day One of XOMA’s strategic pivot to be fully capable of working remotely from anywhere around the globe. For the past two years, it hasn’t been unusual for multiple team members to be working from a different continent on any given day while still being fully engaged in the activities taking place in California. I am pleased to say we have maintained business continuity during the government mandated shelter-in-place orders placed on the San Francisco Bay Area. I am proud of the team and every member’s dedication to our mission.
The desire to improve human health has never been stronger. The advances made in biotechnology over the last 20 years have impacted all of us. The advances that are being made as I write this letter will impact all of us for many tomorrows, and we’re proud to be an integral part of a biotech community that has invested in the scientific and clinical capabilities that can be rapidly deployed to address health threats such as the coronavirus.
I hope each and every one of our shareholders remains healthy and positive. Everyone at XOMA thanks you for your continued support.
Sincerely,
Jim Neal
Forward-Looking Statements/Explanatory Notes
Certain statements contained in this communication are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the potential of XOMA’s portfolio of partnered programs and licensed technologies generating substantial milestone and royalty proceeds over time, creating additional value for the stockholders, cash sufficiency forecast, economic outlook and potential impact of the COVID-19 pandemic. These statements are based on assumptions that may not prove accurate, and actual results could differ materially from those anticipated due to certain risks inherent in the biotechnology industry, including those related to the fact that our product candidates subject to out-license agreements are still being developed, and our licensees may require substantial funds to continue development which may not be available; we do not know whether there will be, or will continue to be, a viable market for the products in which we have an ownership or royalty interest; if the therapeutic product candidates to which we have a royalty interest do not receive regulatory approval, our third-party licensees will not be able to market them; and the impact to the global economy as a result of the COVID-19 pandemic. Other potential risks to XOMA meeting these expectations are described in more detail in XOMA’s most recent filing on Form 10-K and in other SEC filings. Consider such risks carefully when considering XOMA’s prospects. Any forward-looking statement in this press release represents XOMA’s views only as of the date of this press release and should not be relied upon as representing its views as of any subsequent date. XOMA disclaims any obligation to update any forward- looking statement, except as required by applicable law.
EXPLANATORY NOTE: Any references to “portfolio” in this press release refer strictly to milestone and/or royalty rights associated with a basket of drug products in development. Any references to “assets” in this press release refer strictly to milestone and/or royalty rights associated with individual drug products in development.
- Farkash E, et al. Cni-free Therapy With Iscalimab (anti-cd40 Mab) Preserves Allograft Histology Compared To Standard Of Care After Kidney Transplantation. Iscalimab is an investigational compound. Efficacy and safety have not been established. There is no guarantee that iscalimab will become commercially available. Presented at the American Transplant Congress, June 2019.
- Iscalimab is an investigational compound. Efficacy and safety have not been established. There is no guarantee that iscalimab will become commercially available.
- Gevokizumab is an investigational compound. Efficacy and safety have not been established. There is no guarantee that gevokizumab will become commercially available.
- This is an investigational compound, and there is no guarantee it will become commercially available.
