DEAR XOMA ROYALTY STOCKHOLDERS,
Through both good and bad markets, our goal at XOMA Royalty is to remain focused on generating value for shareholders through solid execution, wise capital deployment, and deal creativity. In 2024, we generated cash receipts in excess of our base operating expenses, replenished the pipeline through both single product acquisitions and platform-like deals, and enjoyed the fruits of portfolio advancements as two products in our pipeline received FDA approval: OJEMDA™ (tovorafenib) from Day One Biopharmaceuticals and MIPLYFFA™ (arimoclomol) from Zevra Therapeutics.
As we look to the remainder of 2025 and beyond, we believe we have established a solid foundation for future growth. We are combining sustainable cash flows with a positive terminal value, comprised of a growing commercial royalty base of recently launched products, early in e, 11 assets in Phase 3 development, with several key readouts over the next 12-24 months, and a burgeoning pipeline of 100+ earlier-stage programs. We feel the last of these items sets us apart from our competition and ultimately may prove to be key to our long-term sustainable value creation for our stockholders.
Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
Biotech’s journey over the past decade vividly mirrors this quote. The current cycle, with a downdraft stretching nearly five years, feels especially prolonged. The XBI (SPDR S&P Biotech ETF) is down roughly 50% since the height of the euphoria in 2021 and 20% from the start of 2020. As Howard Marks and Warren Buffett note, excess profits draw excessive investment, collapsing returns when sentiment swings — a pattern clear in the XBI’s poor performance in recent years.
We often cite the importance of a disciplined capital deployment approach grounded in a robust diligence process and, most importantly, a sound strategy for identifying deep value. The past and present action in the biotech equity markets is a great reminder to remain disciplined. Today’s environment, however, also creates opportunities and plays into one of XOMA Royalty’s principal strengths: uncovering and capturing value that others may fail to recognize.
The best way to predict the future is to create it.”
We believe we have line of sight on sustainable positive cashflows based on our existing commercial royalty portfolio alone, anchored by VABYSMO® (faricimab-svoa), OJEMDATM, and MIPLYFFA™. We expect our near-term growth, in large part, will be driven by the trajectory of these three assets. In addition, future milestones, while variable in magnitude and timing, will continue to bolster our cash position and aid in future business development.
We expect XOMA Royalty’s growth over the mid-term will be driven in large part by our growing late-stage portfolio. There are currently 11 assets in Phase 3 development, with several key data readouts in 2025, inclusive of ersodetug from Rezolute for congenital hyperinsulinism (cHI) and seralutinib from Gossamer Bio and Chiesi for pulmonary arterial hypertension (PAH). In addition, we expect to have a seventh royalty generating asset in 4Q25, as Daré Bioscience has announced its intention to make Sildenafil Cream, 3.6% available this year via prescription as a compounded drug under Section 503B of the FDCA while it pursues full FDA approval.
The other eight assets progressing through Phase 3 target critical unmet needs, from oncology to autoimmune diseases, with the potential to transform the standard of care and drive significant value for patients and shareholders alike.
Don’t put all your eggs in one basket, but don’t spread yourself so thin you can’t succeed. Be bold in your bets, but hedge your risks.”
Uncertainty from the new Administration — tariffs, FDA shifts, pricing — has shaken investors’ confidence further, potentially creating openings for XOMA Royalty’s tailored royalty capital solutions. In fact, in today’s market, we have observed that companies often prefer alternative forms of capital to traditional equity and debt financing. With a solid base from which to grow, we believe there will be opportunities to further cement the XOMA Royalty brand by being proactive and offering bespoke solutions to companies across all of biotech, big and small.
As I close this letter, I’d like to thank my colleagues for their hard work, commitment to innovation, and dedication, as well as our shareholders for the trust they place in us. While XOMA Royalty may be the smallest publicly traded royalty company by market cap today, we boast the largest portfolio and highest dividend yield (via our perpetual preferreds). I believe we can continue to build on these attributes, create value and make XOMA Royalty a key partner in biotech’s next chapter. Thank you for your continued support.
Forward-Looking Statements/Explanatory Notes
Certain statements contained in this letter are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the potential of XOMA Royalty’s portfolio of partnered programs and licensed technologies generating substantial and sustainable milestone and royalty proceeds over time, our partners’ development and commercialization plans and related timing estimates, our ability to identify and acquire assets that grow our business and/or create value for our stockholders, and our belief in the potential opportunities that the current and future market will present for XOMA Royalty. In some cases, you can identify such forward-looking statements by terminology such as “believe,” “expect,” “look forward,” “plan,” “potential,” “will” or similar expressions. These forward-looking statements are not a guarantee of XOMA Royalty’s performance, and you should not place undue reliance on such statements. 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 other potential risks described in more detail in XOMA Royalty’s most recent filing on Form 10-K and in other SEC filings. Consider such risks carefully when considering XOMA Royalty’s prospects. Any forward-looking statement in this letter represents XOMA Royalty’s beliefs and assumptions only as of the date of this letter and should not be relied upon as representing its views as of any subsequent date. XOMA Royalty disclaims any obligation to update any forward-looking statement, except as required by applicable law.
EXPLANATORY NOTE: Any references to “portfolio” in this letter 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.
As of the date of this letter, the commercial assets in XOMA Royalty’s milestone and royalty portfolio are VABYSMO® (faricimab-svoa), OJEMDA™ (tovorafenib), MIPLYFFA™ (arimoclomol), XACIATO™ (clindamycin phosphate) vaginal gel 2%, IXINITY® [coagulation factor IX (recombinant)], and DSUVIA® (sufentanil sublingual tablet). All other assets in the milestone and royalty portfolio are investigational compounds. Efficacy and safety have not been established. There is no guarantee that any of the investigational compounds will become commercially available.
