Dear Stockholders,
Dear Stockholders,
XOMA’s milestone and royalty aggregator business model began to demonstrate its potential in 2021 and the first few months of 2022.
There are two key value driving elements to our strategy. One is to let the assets advance in the hands of the development partners, and as they experience success, the asset value to XOMA increases. The second is to acquire assets to continue growing our portfolio of potential milestone and royalty economics and further mitigate the risk associated with any single asset. The value of both elements were on display in 2021 and continue to show their impact in early 2022.
The XOMA milestone and royalty portfolio has matured significantly over the past couple of years. In 2021, two assets entered Phase 3 development – NIS793 and cetrelimab. When the first patient was dosed in the NIS793 Phase 3 study, XOMA earned a $35 million milestone from Novartis. That milestone, coupled with several smaller milestones and our lean cost infrastructure, had a positive impact on our operating results in 2021.
2022 is off to an exciting start. In late January, the U.S. Food and Drug Administration (FDA) gave commercialization approval to faricimab, a novel bispecific antibody for the treatment of nAMD and DME. This is the first asset under our royalty aggregator model to receive commercialization approval. We acquired the rights to a 0.5% commercial payment on faricimab from Affitech SA for an upfront payment of $6 million in 2021 and additional $5 million payment upon the FDA approvals.
Also in January 2022, we learned the final patient in Rezolute’s Phase 2 congenital hyperinsulinism (CHI) study had been dosed with RZ358, which resulted in XOMA earning a $2 million milestone. CHI is a devastating pediatric condition that has no good treatment options for parents to consider. We look forward to seeing the Phase 2 clinical results when Rezolute presents them.
Every day, there is progress within our portfolio of milestone and royalty licenses, as our partners launch, enroll, conduct, and complete clinical studies. Some clinical results are shared publicly, some aren’t. We share with you what we can through our LinkedIn channel, our website, our monthly corporate presentation updates, and press releases.
As we build our milestone and royalty portfolio to deliver stockholder value for the next ten, fifteen, twenty years, we reinvest the milestones we receive to acquire additional economic interests in partner-funded development-stage compounds. We deployed approximately $27 million in 2021. These transactions included several very interesting assets – Day101, vidutolimod, two assets being developed by Affimed for blood cancers, and four lysosomal storage disorder enzymes being developed by Chiesi, among others. Three of our “Class of 2021” royalty asset acquisitions are in registrational studies with strong partners.
We ended 2021 with $95.4 million in cash and restricted cash without debt. The current state of the financial markets has resulted in a noticeable increase in the opportunities being presented to our business development team. We will continue to assess each opportunity and make prudent decisions on where to deploy our capital. As our CFO, Tom Burns, continues to tell us, “Do not overpay for an asset.”
The XOMA team has consistently demonstrated their ability to drive the Company’s future growth from royalty asset acquisitions. Late last year when my role was expanded to Chairman and CEO, I announced it was time to proactively identify my replacement. As one of XOMA’s largest shareholders and as Chairman, I plan to continue to shape the Company’s future and build shareholder value. Yet, the time is approaching for me to step back from operational responsibilities.
Family is incredibly important to me. My children blessed me with three grandchildren during COVID. Like many of you, I want to spend as much time as I can with my grandchildren while they are young.
Thank you for your support of the Company and the team. We look forward to sharing our news and our partners’ news with you in 2022 and beyond,
Jim Neal
Chairman & CEO
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’s portfolio of partnered programs and licensed technologies generating substantial milestone and royalty proceeds over time, and creating additional value for the stockholders. In some cases, you can identify such forward-looking statements by terminology such as “look forward,” “plan,” “potential,” “will,” or similar expressions. These forward-looking statements are not a guarantee of XOMA’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 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 letter represents XOMA’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 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 letter refer strictly to milestone and/or royalty rights associated with individual drug products in development.
As of the date of this letter, all assets, except faricimab, in XOMA’s milestone and royalty portfolio are investigational compounds. Efficacy and safety have not been established with any of these investigational assets, and there is no guarantee that any additional assets will become commercially available.