Dear Fellow Shareholders,
For many of us, 2020 was a tale of two halves. The first half of 2020, COVID-19 hit and brought significant uncertainty to every aspect of our lives. We had to adapt and change how we lived and worked, unclear of when this uncertainty would end and when we could go back about our lives and our routines.
In the second half of 2020, the biotech industry hit back. Suddenly our sector was critical in the global fight against COVID-19.
There are many adjectives one can use to describe 2020. For the life sciences industry, validating may be the best word to describe last year.
The pharmaceutical and biotech industry came together to tackle what seemed like an insurmountable challenge. In an industry where trade secrets and patents are currency, we put aside rivalries and validated our mission to treat and cure human diseases by quickly teaming up to collaborate and accelerate therapies and vaccines and clinical trials to hit back at COVID-19. It’s been validating to see over a hundred thousand people volunteer for COVID-19 clinical studies, because they wanted to do something to help prevent another person from dying and to bring an end the pandemic.
XOMA also had a year of two halves. We were uncertain what impact COVID-19 would have on clinical trial recruitment, and how long studies would be delayed. We were uncertain if our partners would be willing to start new clinical trials if patients were not comfortable seeking treatment. None of us knew how long this would last.
Like every other biotech company during the first half of 2020, our team was busy doing what we do best – identifying licenses to partner-funded biotech drug candidates in clinical development. We initiated conversations, built relationships, made some virtual friends. We weren’t alone, as we partnered with Zydus Cadila, a highly regarded global pharmaceutical company, with a novel idea to combine XOMA’s anti-IL-2 monoclonal antibody with Zydus’ IL-2 based immune-oncology drug candidate. And that allowed us to add a partner-funded program to our portfolio during the first half of 2020.
The second half of 2020, when biotech hit back and the uncertainty eased, we had one of the most validating periods in our history. As patients began to gain confidence in participating in clinical trials, our partners launched new studies, and we benefitted from their success. In a few short weeks, we earned over $29 million in milestone payments as the first patients were dosed in several new clinical programs.
And for the first time, we received a milestone payment when Merck launched Phase 2 development with an asset in which we acquired an economic interest. This demonstrates our unique focus on earlier-stage partnered assets can deliver a financial return prior to becoming a royalty-generating asset.
There were substantial advancements from Phase 1 to Phase 2 clinical development. Four assets in our portfolio entered this proof-of-concept phase, and each of these Phase 2 studies is aimed at addressing a disease that needs a more effective treatment option. Today, we have 19 portfolio assets in Phase 2 development. When we launched this strategy in 2017, we had 10. And today, we also have an economic interest in one asset that is awaiting FDA marketing approval.
While most people focus on the financial rewards, they aren’t our only focus. Each new study, each advance from one phase of development to the next is exciting, as it increases the intrinsic value of the XOMA portfolio. And each step forward is exciting for those patients who are waiting and hoping for the day they will have access to a more effective or novel therapy or a perhaps even a cure.
Growing our portfolio to deliver shareholder value over the next 10+ years is important. In the second half of 2020, we diversified our portfolio into an entirely new-to-us therapeutic modality, enzyme replacement. We believe many of the conversations we initiated in 2020 will result in additional opportunities to expand our portfolio, as evidenced by the monetization transaction we closed in March of 2021.
Also in 2020, two privately held large healthcare royalty aggregators went public, which brought new investor attention to the few players in the royalty aggregator space. On the heels of our portfolio successes, we added just over $24 million to our Balance Sheet from an offering of perpetual preferred shares paying an 8.625% annual dividend. We have one of the strongest financial positions, particularly when coupled with our very lean expense structure, in XOMA’s history.
I am very proud of our team and how they have operated in what has been a most unusual environment. We said goodbye to 2020 excited and energized for 2021 and XOMA’s future. We wish our partners continued success in their missions to positively impact patients’ lives.
And we thank you, our shareholders and our fans, for your ongoing support.
Sincerely,
Jim Neal