XOMA Reports Second Quarter 2002 Financial Results

Aug 15, 2002
XOMA Reports Second Quarter 2002 Financial Results

Berkeley, CA — August 15, 2002

XOMA Ltd. (Nasdaq: XOMA), a biopharmaceutical development company, today announced financial results for the three and six month periods ending June 30, 2002. The Company,s net loss for the six-month period ended June 30, 2002 was $16.1 million ($0.23 per share) compared with $14.2 million ($0.21 per share) in the prior year period. The net loss for the quarter ended June 30, 2002 was $10.1 million ($0.14 per share) compared with $6.6 million ($0.10 per share) for the quarter ended June 30, 2001.

Year-to-date revenues for 2002 increased 72% to $13.9 million compared to $8.1 million for the same period in 2001. The increase was due primarily to licensing revenues, including the agreement entered into with MorphoSys AG in February 2002. Revenues for the second quarter of 2002 decreased by 10% to $4.7 million compared to $5.2 million for the same period in 2001, due to lower contract revenue from Baxter Healthcare Corporation, partially offset by higher contract revenue from Onyx Pharmaceuticals, Inc.

Year-to-date operating expenses increased 36%, to $29.4 million in 2002 from $21.6 million in 2001. For the quarter ended June 30 2002, the increase was 26%, to $14.6 million from $11.6 million in the second quarter of 2001. Year-to-date research and development expenses increased 16%, reflecting ongoing development spending on Raptiva™ (efalizumab, formerly Xanelim™) for testing in psoriasis and rheumatoid arthritis, as well as on MLN01, CAB-2 and ONYX-015. Those increases were partially offset by savings on discontinued programs. Marketing, general and administrative expenses increased by 135% to $8.7 million for the six-month period ended June 30, 2002, compared to $3.7 million in 2001. The increase was primarily due to legal expenses related to the litigation against Biosite Incorporated and certain securities-related litigation. Current period expenses were also impacted by pre-launch marketing expenses for Raptiva™ and by expenses related to licensing activities.

"Our year-to-date financial results and full year outlook continue in line with our previous expectations and guidance," said Peter B. Davis, XOMA,s Vice President of Finance and Chief Financial Officer. "Our multiple collaborations and partner funding, combined with our licensing revenues, are enabling us to support our development programs on Raptiva™ and other promising products and indications."

As of June 30, 2002 XOMA held $49.5 million in cash, cash equivalents and short-term investments, compared with $67.6 million at December 31, 2001. Net cash used in operations for the six-months ended June 30, 2002 was $17.4 million, compared with $11.5 million for the same period of 2001.

"Besides our financial performance being in line with our expectations, we are pleased that Raptiva™ appears to be on track for filing later this year," said John L. Castello, XOMA,s Chairman, and President, Chief Executive Officer. "New positive extended treatment data for Raptiva™ in psoriasis patients were recently presented, and Genentech has announced Serono as a marketing partner for Europe and certain other non-US markets. We have also recently presented the first clinical data on ING-1 and our patented Human Engineering™ technology."

The Company continues to estimate that it will record a loss in the $0.46-0.48 range in 2002, and that it has sufficient cash resources to meet its currently anticipated operational cash needs through at least the middle of 2004. Financial results and cash flow may vary substantially depending upon the pace of product development work, which depends on a variety of factors including clinical trial progress, regulatory review and developments in licensing and other collaborative relationships.

Antibody Products
Raptiva™: At the American Academy of Dermatology meeting at the beginning of August, research physicians presented encouraging new Raptiva™ data from a 339 patient extended treatment psoriasis study using material produced by Genentech, Inc. The treatment phase of an additional 500 patient Phase III efficacy study testing Genentech material has now been completed. Genentech has announced that pending data from this additional efficacy study and discussions with the FDA, it anticipates filing a Biologics License Application (BLA) for Raptiva™ in psoriasis by end of 2002.

XOMA continues to enroll patients in a 240-patient Phase II study of Raptiva™ treatment in moderate-to-severe rheumatoid arthritis patients, and additional potential indications are under review


On August 8, Genentech and Serono S.A. announced that they had reached an agreement whereby Serono will receive an exclusive license to market Raptiva™ in Europe and certain other markets outside the United States.

ING-1: At the American Society of Clinical Oncology (ASCO) meeting in May, the first clinical data were presented on ING-1. This Phase I study provided useful pharmacokinetic and safety data and established a maximum tolerated dose for the intravenous route of administration. Based on knowledge gained from this study, the company has also developed a subcutaneous formulation of ING-1, which is currently in Phase I testing and is assessing development options for moving forward. Encouraging data were also presented on XOMA,s proprietary Human EngineeringTM technology, an alternative approach for reducing immunogenicity of monoclonal antibodies.

MLN01 and CAB-2: XOMA,s development collaboration with Millennium Pharmaceuticals, Inc. remains on track for initial clinical testing in 2003.

On June 3, 2002, XOMA announced that it filed an amended and supplemental complaint in its ongoing litigation against Biosite Incorporated alleging that Biosite's recently announced "new" antibody expression technology continues willfully to infringe XOMA's patents and that Biosite's statements regarding it are false and misleading. XOMA's complaint specifically alleges that Biosite's highly publicized BNP products were made in a manner that infringed XOMA's technology, Biosite wrongfully used and relied upon XOMA's patents in developing its announced "new" technology, Biosite's use of its "new" technology has induced others to infringe or contributed to the infringement by others of XOMA's patents, the public statements made by and on behalf of Biosite about its "new" technology are materially false and misleading and likely to deceive the public and Biosite continues, wrongfully, to hold itself out as licensed by XOMA.

On June 14, 2002, the parties executed a settlement agreement in the action that had been filed in the California Superior Court in San Diego County against XOMA, Genentech and certain unidentified "John Doe" defendants, and which had incorporated many of the allegations that were made in the federal class action lawsuits that were voluntarily dismissed without prejudice in March, 2002. Pursuant to the June 14, 2002 agreement, the plaintiff voluntarily dismissed the California state court action with prejudice on June 26, 2002.


XOMA has scheduled an investor conference call regarding this announcement to be held today, August 15, 2002 beginning at 4:00 PM Eastern Time (1:00 PM. Pacific). Individual investors are invited to listen to the conference call by phone or via the Internet. The domestic dial-in number for the live call is (877) 711-7453 and the conference ID number is 5051735. The international dial-in number is (706) 634-1542 and utilizes the domestic dial-in conference ID number. To listen to call via the Internet, please go to the conference call link a few minutes before the start of the call to register, download, and install the necessary audio software. The audiocast version of the call will be archived for 7 days and available for replay one hour after the conclusion of the conference call. A dial-in replay will be available until 12:00 AM Eastern (9:00 PM Pacific) August 22, 2002 at (800) 642-1687 for domestic callers and at (706) 645-9295 for international dialing. Enter conference ID number 5051735 to access the recording.

XOMA develops and manufactures antibody and other protein biopharmaceuticals for disease targets that include cancer, immunological and inflammatory disorders and infectious diseases. For more information About XOMA's pipeline and activities, please visit the Company web site at

Certain statements contained herein related to the relative size of the Company,s loss for 2002, the estimated levels of its expenses and revenues for the balance of 2002, the sufficiency of its cash resources and the BLA filing time frame, as well as other statements related to the progress and timing of product development and present or future licensing or collaborative arrangements, or that otherwise relate to future periods, 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. These statements are based on assumptions that may not prove accurate. Actual results could differ materially from those anticipated due to certain risks inherent in the biotechnology industry and for companies engaged in the development of new products in a regulated market. Among other things, the actual loss for 2002 could be higher depending on the size and timing of expenditures and whether there are unanticipated expenditures; the sufficiency of cash resources could be shortened if expenditures are made earlier or in larger amounts than anticipated or are unanticipated or if funds are not available; and the BLA filing could be delayed by unexpected safety or efficiency issues or additional time requirements for data analysis, BLA preparation, discussions with the FDA, enrollment in clinical studies, additional clinical studies or manufacturing process modifications. These and other risks, including those related to changes in the status of the existing collaborative relationships, availability of additional licensing or collaboration opportunities, the timing or results of pending and future clinical trials, the ability of collaborators and other partners to meet their obligations, market demand for products, actions by the Food and Drug Administration or the U.S. Patent and Trademark Office, uncertainties regarding the status of biotechnology patents, uncertainties as to the cost of protecting intellectual property and risks associated with counterclaims against XOMA, are described in more detail in the Company,s most recent annual report on Form 10K and in other SEC filings.


(in thousands)

June 30,
December 31,
(Note 1)
Current Assets:
Cash and cash equivalents
$ 49,148 $ 67,320
Short-term investments
320 320
Related party receivables
454 418
6,795 1,662
1,306 1,299
Prepaid expenses and other
709 249
------------ ------------
Total current assets 58,732 71,268
------------ ------------
Property and equipment, net
19,671 14,645
Deposits and other
206 194
------------ ------------
Total Assets $ 78,609 $ 86,107
============ ============
Liabilities and Shareholders, Equity
(Net Capital Deficiency)

Current Liabilities:
Accounts payable $ 5,866 $ 3,520
Accrued liabilities 5,586 4,422
Capital lease obligations -- current 908 673
Deferred revenue -- current 2,894 5,017
Convertible subordinated note -- current 5,066 5,013
------------ ------------
Total current liabilities 20,320 18,645
------------ ------------
Capital lease obligations -- long term 1,785 1,393
Deferred revenue -- long term 1,000 1,470
Convertible subordinated
notes -- long term
57,029 50,980
------------ ------------
Total liabilities 80,134 72,488
------------ ------------
Shareholders, equity
(net capital deficiency)
(1,525) 13,619
------------ ------------
Total Liabilities & Shareholder's
Equitiy (Net Capital Deficiency)
$ 78,609 $ 86,107
============ ============

Note 1: Amounts derived from the Company,s audited financial statements appearing in the Annual Report on Form 10-K for the year ended December 31, 2000 as filed with the Securities and Exchange Commission

(unaudited, in thousands except per share data)

Three Months Ended
June 30,
Six Months Ended
June 30,
2002 2001 2002 2001
License and collaborative fees $ 1,340 $ 1,051 $ 7,653 $ 2,066
Contract and other revenue 3,384 4,161 6,293 6,002
--------- --------- --------- ---------
Total revenues 4,724 5,212 13,946 8,068
--------- --------- --------- ---------
Operating Costs and Expenses:
Research and development 10,759 9,465 20,694 17,935
Marketing, General and administrative 3,849 2,095 8,698 3,705
--------- --------- --------- ---------
Total operating costs and expenses 14,608 11,560 29,392 21,640
--------- --------- --------- ---------
Loss from operations (9,884) (6,348) (15,446) (13,572)
--------- --------- --------- ---------
Other Income (Expense):
Investment and other income 232 580 504 979
Interest and other expense (493) (880) (1,142) (1,630)
--------- --------- --------- ---------
Net loss $ (10,145) $ (6,648) $ (16,084) $ (14,223)
--------- --------- --------- ---------
Basic and diluted net loss per Common Share $ (0.14) $ (0.10) $ (0.23) $ (0.21)
Shares used in computing basic
and diluted net loss per Common Share
70,309 66,280 70,269 66,227
=========== =========== =========== ===========