Investors

XOMA Reports 2009 Third Quarter Financial Results

Nov 09, 2009

BERKELEY, Calif., Nov 9, 2009 (GlobeNewswire via COMTEX News Network) -- XOMA Ltd. (Nasdaq:XOMA), a leader in the discovery and development of therapeutic antibodies, today announced its financial results for the third quarter and nine months ended September 30, 2009 and provided a general business update. XOMA has made significant progress in 2009 toward its objective of becoming a company focused on proprietary product development and has done so while generating revenues from its technology licensing collaborations, royalties and biodefense businesses in difficult circumstances that included the removal of royalty generating RAPTIVA(R) from the market and a particularly challenging economic environment. The following are XOMA's key accomplishments in 2009.



  *  Proprietary pipeline: The company has advanced XOMA 052,
     its anti-inflammatory antibody to interleukin-1 beta (IL-1
     beta), through the completion of successful Phase 1 trials
     and into Phase 2 development in Type 2 diabetes and
     cardiometabolic diseases. XOMA reported new preclinical
     results showing the benefit of XOMA 052 in reducing the
     buildup of plaque which can lead to hardening of the
     arteries and heart attack. Preclinical results with another
     IL-1 targeting agent have shown beneficial effects in
     cardiac remodeling which may reduce the risk of congestive
     heart failure following heart attack. These results provide
     direct evidence of the potential for IL-1 inhibition to
     beneficially impact major cardiovascular diseases. Based on
     these developments and its Phase 1 results, XOMA has expanded
     its XOMA 052 development strategy to cardiovascular diseases.
     XOMA has also advanced its XOMA 3AB anti-botulism antibody
     for biodefense into pre-IND studies and continues to develop
     its proprietary preclinical pipeline in inflammatory,
     cardiometabolic, infectious and oncologic diseases.
  *  Antibody collaboration revenues:  Collaboration, licensing
     and biodefense revenues totaled $48 million in the first
     nine months of 2009. With the signing of new agreements with
     Kaketsuken and the Cephalon subsidiary Arana Therapeutics,
     actual and anticipated non-royalty revenues now total $62
     million for the year thus far.
  *  Marketed product royalties:  Royalties for LUCENTIS(R),
     CIMZIA(R) and RAPTIVA(R), including a one-time prepayment of
     $25 million for future LUCENTIS royalties, generated revenues
     of $28.9 million through September 30, 2009.
  *  Total revenues: For the nine months ended September 30, 2009,
     XOMA recorded revenues of $76.8 million, compared with $31.1
     million for the same period of 2008.

Total revenues in the 2009 third quarter were $27.4 million, compared to $7.9 million in the 2008 third quarter. The company had net income $1.5 million or $0.01 per share in the 2009 third quarter, compared with a net loss of $20.4 million, or $0.15 per share, for the third quarter of 2008. The improvement was primarily due to increased revenues as a result of the sale of the LUCENTIS(r) royalty interest and decreased operating expenses.

Total operating expenses were $20.6 million in the 2009 third quarter, compared with $26.4 million for the third quarter of 2008. This decrease was primarily due to reduced expenses arising from the workforce reduction in January 2009, particularly in manufacturing and related areas and associated selling, general and administrative support, as well as multiple cost control initiatives.

At September 30, 2009, XOMA had unrestricted cash, cash equivalents and short-term investments of $27.7 million, compared with $10.8 million at December 31, 2008. In September 2009, the company fully repaid principal and accrued interest totaling $44.4 million on its loan with Goldman Sachs Specialty Lending Holdings, Inc. (Goldman Sachs).

"We are excited about the new cardiovascular results from preclinical and clinical studies with XOMA 052 and other IL-1 targeting agents and our expanded strategy for XOMA 052 in cardiovascular diseases. This adds substantial value to XOMA 052. We are also pleased to have exceeded expectations for generating revenues during the first three quarters of this year," said Steven B. Engle, XOMA's Chairman and Chief Executive Officer. "Based on our cash reserves, anticipated revenues from collaborations including a XOMA 052 corporate partnership, licensing transactions and biodefense contracts, we believe XOMA has sufficient cash resources to meet its anticipated net cash needs into 2011.

"We continue to make progress in our discussions with potential partners," Mr. Engle continued. "Importantly, new cardiovascular results combined with previous data greatly increase the value of XOMA 052. As a result, partners need additional time to review the new data. As might be expected, with our financial flexibility and depending on ongoing discussions, we may complete a partnership in the original time frame, or it may take some additional time for partners to fully value XOMA 052's potential beyond diabetes."

Recent Highlights



  *  XOMA 052 Phase 2 clinical development program initiated in
     Type 2 diabetes and cardiometabolic diseases: Based on
     positive results in two Phase 1 studies conducted in 98
     patients, XOMA  initiated its Phase 2a program with an
     extended safety and biological activity study in Type 2
     diabetes patients for which interim results may be available
     by the third quarter of 2010. XOMA also plans to conduct a
     Phase 2a cardiometabolic study intended to provide more
     details about beta cell and endothelial functions. XOMA
     anticipates initiating this trial in the first quarter of
     2010. These and other studies will more fully characterize
     the multiple biological activities of XOMA 052, collect
     additional safety data and provide results supporting design
     of pivotal Phase 3 trials.

  *  XOMA 052 demonstrates statistically significant reduction
     in the formation of plaque in preclinical studies:
     Preclinical results with XOMA 052 in an animal model of
     cardiovascular disease were presented in October at the 2009
     Annual Meeting of the Society for Leukocyte Biology,
     International Cytokine Society, & International Society for
     Interferon and Cytokine Research (Tri-Society). The
     presentation included results of studies in the apolipoprotein
     E (ApoE) "knockout" mouse model, a well-validated model of
     atherosclerosis that follows a similar pattern of progression
     to that in humans. The studies demonstrated that mice treated
     with a murine equivalent of XOMA 052 had a statistically
     significant reduction in the formation of plaque in the aorta,
     and trends toward improved lipid profiles, compared to mice
     receiving a control antibody.  These results demonstrate for
     the first time that XOMA 052 has a direct, beneficial effect
     on plaque build-up in an animal model of cardiovascular
     disease.

  *  XOMA expands XOMA 052 development strategy into cardiovascular
     disease indications:  New findings on the reduction of
     cholesterol, plaque damage to the heart after heart attack,
     biomarker results from the XOMA 052 Phase 1 trials and other
     studies of IL-1 targeting agents indicate that XOMA 052 is
     likely to have positive benefits in cardiovascular disease.
     The combination of these findings has led XOMA to expand the
     cardiovascular disease development strategy for XOMA 052 and
     greatly increases the potential value of XOMA 052.

  *  Results presented at international diabetes meeting
     demonstrate XOMA 052's unique regulatory mechanism of action
     in regulating IL-1 beta signaling: At the European Association
     for the Study of Diabetes annual meeting in September, XOMA
     reported results demonstrating that XOMA 052 regulates IL-1
     beta signaling, reducing pathologically high levels that
     cause disease while allowing normal and beneficial low levels.
     This regulatory mechanism of action for XOMA 052 differs from
     some antibodies to IL-1 which are designed to completely block
     all contact between target and receptor, and if shown in
     clinical studies, may confer safety advantages in chronic
     diseases including diabetes and cardiovascular diseases.

  *  New indication for XOMA 052 in Type 1 diabetes to be
     evaluated in Phase 2 clinical trial funded by Juvenile
     Diabetes Research Foundation: The study is designed to
     measure the effects of treatment with XOMA 052 over six
     months on beta cell function and insulin production in 24
     patients with well-controlled Type 1 diabetes who have had
     the disease for at least two years. It will test the novel
     hypothesis that inhibiting the activity of IL-1 beta may
     prevent ongoing beta cell death at later stages of disease,
     when most beta cells have been destroyed, and allow beta cell
     regeneration to prevail and repopulate the pancreas. It is
     complementary to ongoing trials with IL-1 and immune
     modulating agents at earlier disease stages. The Juvenile
     Diabetes Research Foundation International is the largest
     Type 1 diabetes patient advocacy organization in the world.

  *  New antibody technology collaborations provide $14 million:
     XOMA signed agreements with Cephalon's subsidiary, Arana
     Therapeutics, and Kaketsuken, a private research institute
     based in Japan, covering multiple proprietary XOMA antibody
     research and development technologies, including XOMA's new
     antibody phage display libraries, and suites of integrated
     information and data management systems. These are the second
     and third technology collaborations XOMA has initiated this
     year, the three of which together are expected to generate
     fee revenue totaling $43 million and potential future
     milestone and royalty payments.

  *  New contracts for federal government biodefense and public
     health programs to provide $3.9 million: XOMA was awarded
     two new subcontracts from the National Institutes of Allergy
     and Infectious Disease of the National Institutes of Health
     to develop and optimize novel antibody drugs against
     important biodefense and public health threats. One contract,
     for $2.2 million, is for the development of a novel antibody
     that has been shown by Dana-Farber Cancer Institute and
     Harvard Medical School researchers to neutralize group 1
     influenza A viruses, including the H1N1 and the H5N1 strains.
     The other contract provides $1.7 million for the development
     of an antibody to the virus that causes SARS, a highly
     contagious infectious disease that often leads to pneumonia
     and may be fatal.

  *  First European patent granted covering XOMA 052:  The patent,
     granted by the European Patent Office, provides protection
     through 2026 for XOMA 052 as well as nucleic acids, expression
     vectors and production cell lines for the manufacture of
     XOMA 052.

Additional Financial Results

XOMA's total revenues in the third quarter of 2009 included $22.3 million in royalty income, $3.7 million in contract and other revenue, and $1.4 million in license and collaborative fees. In the 2008 third quarter, revenues included $4.6 million in royalties, $2.0 million in contract and other revenue, and $1.3 million in license and collaborative fees. The increase in royalty revenue was primarily due to the sale to Genentech of XOMA's royalty interest in LUCENTIS(R).

XOMA receives royalties based on U.S. sales of CIMZIA(R), which is marketed by UCB SA for the treatment of moderate to severe rheumatoid arthritis, an estimated $10 billion overall market, and Crohn's disease. Royalties on sales of CIMZIA(R) in the third quarter of 2009 were $0.2 million, and are expected to increase as UCB continues the CIMZIA(R) launch in the U.S. rheumatoid arthritis market.

XOMA's research and development expense for the third quarter of 2009 was $13.4 million, compared with $19.7 million in the same period of 2008. This decrease was due to decreased personnel costs as a result of the January 2009 workforce reduction, and reduced spending resulting from multiple additional cost control initiatives. Selling, general and administrative expenses for the third quarter of 2009 were $7.2 million compared with $6.7 million for the same period last year.

Interest expense for the third quarter of 2009 was $1.3 million compared with $2.0 million for the same period of 2008. This decrease is primarily due to the repayment in full of the Goldman Sachs loan in September 2009 and a decrease in the outstanding principal balance of and interest rate on the Novartis note.

Loss on debt extinguishment for the third quarter of 2009 was $3.6 million related to the repayment of our Goldman Sachs loan. This loss includes a prepayment premium of $2.5 million and the recognition of unamortized debt issuance costs of $1.1 million.

Debt Obligations

In September 2009, XOMA fully repaid its term loan facility with Goldman Sachs, including the outstanding principal balance of $42.0 million and accrued interest of $2.4 million.

With this repayment, XOMA's sole debt obligation at the end of the third quarter is a $13.1 million long-term note due to Novartis. This note was established under a loan facility to facilitate XOMA's participation in its collaboration with Novartis including the development of HCD 122 which is in Phase 1a/2 clinical testing for lymphoma. The Novartis loan is secured by XOMA's interest in the collaboration and is due in 2015.

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments at September 30, 2009 was $27.7 million compared with $10.8 million at December 31, 2008. In September 2009, in addition to the repayment of the Goldman Sachs loan, the company completed two common share financings under its committed equity line of credit facility with Azimuth Opportunity Ltd. that provided approximately $26.4 million in gross proceeds to the company. Approximately $12.3 million of these proceeds were used, together with other funds, to repay the Goldman Sachs loan.

Cash provided by operating activities during the first nine months of 2009 was $11.5 million compared with cash used in operating activities of $35.8 million during the first nine months of 2008. This change is primarily due to license and collaborative fees and the sale of the LUCENTIS(r) royalty interest to Genentech.

In the third quarter of 2009, XOMA entered into an At Market Issuance Sales Agreement with Wm Smith & Co. under which XOMA may issue up to 25 million of its common shares from time to time through Wm Smith as agent by means of one or more "at the market" offerings or, with XOMA's approval, in negotiated transactions. The company's equity line of credit facility with Azimuth is no longer in effect and no additional shares can be issued under it.

A more detailed tabulation of XOMA's financial results appears below, and a more complete discussion is included in the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

Guidance

The company will not be providing guidance on revenues or cash receipts for 2009 so as to best manage its ongoing negotiations for XOMA 052 and technology licensing and in light of general economic and market conditions.

The company expects that cash used in operating activities for 2009 may range from $5 million to cash neutral or positive. This guidance is updated from its prior estimate that cash used in operating activities for 2009 may range from $15 million to cash neutral.

Investor Conference Call

XOMA will host a conference call and webcast to discuss its third quarter 2009 financial results today, November 9, 2009, at 9:00 a.m. ET. The webcast can be accessed via the Investors section of XOMA's website at http://investors.xoma.com/events.cfm and will be available for replay until close of business on January 8, 2010. Telephone numbers for the live audiocast are 888-677-8749 (U.S./Canada) and 913-312-1468 (international). A telephonic replay will be available beginning approximately two hours after the conclusion of the call until close of business on November 18, 2009. Telephone numbers for the replay are 888-203-1112 (U.S./Canada) and 719-457-0820 (international), passcode 1808574.

About XOMA

XOMA discovers, develops and manufactures novel antibody therapeutics for its own proprietary pipeline as well as through license and collaborative agreements with pharmaceutical and biotechnology companies, and under its contracts with the U.S. government. The company's proprietary product pipeline includes:



  *  XOMA 052, an anti-IL-1 beta antibody in Phase 2 development for
     Type 2 diabetes, Type 1 diabetes and cardiovascular disease, with
     potential for the treatment of a wide range of inflammatory diseases

  *  XOMA 3AB, an antibody candidate in pre-IND studies to neutralize
     the botulinum toxin, among the most deadly potential bioterror
     threats, under development through funding provided by the
     National Institutes of Allergy and Infectious Diseases of the
     National Institutes of Health

  *  A preclinical pipeline with candidates in development for
     inflammatory, inflammatory, cardiometabolic, infectious and
     oncologic diseases.

In addition to its proprietary pipeline, XOMA develops products with premier pharmaceutical companies including Novartis AG, Schering-Plough Research Institute and Takeda Pharmaceutical Company Limited. XOMA has multiple revenue streams resulting from the licensing of its antibody technologies, product royalties, development collaborations and biodefense contracts. XOMA's technologies have contributed to the success of marketed antibody products, including LUCENTIS(R) (ranibizumab injection) for wet age-related macular degeneration and CIMZIA(R) (certolizumab pegol) for rheumatoid arthritis and Crohn's disease.

The company has a premier antibody discovery and development platform that incorporates an unmatched collection of antibody phage display libraries and proprietary Human Engineering(TM), affinity maturation, Bacterial Cell Expression (BCE) and manufacturing technologies. BCE is a key breakthrough biotechnology for the discovery and manufacturing of antibodies and other proteins. As a result, more than 50 pharmaceutical and biotechnology companies have signed BCE licenses, and several licensed product candidates are in clinical development.

XOMA has a fully integrated product development infrastructure, extending from pre-clinical science to approval, and a team of about 200 employees at its Berkeley, California location. For more information, please visit http://www.xoma.com.

The XOMA Ltd. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5960

Forward-Looking Statements

Certain statements contained herein concerning the anticipated levels of cash inflows, cash utilization, cash expenditures and reductions in cash expenditures; sales of approved products; timing of initiation, completion or availability of results of clinical trials, effects of or possible dosing of XOMA 052; entry into a XOMA 052 development partnership; 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 anticipated levels of cash inflows, cash utilization, cash expenditures and reductions in cash expenditures may be other than as expected due to unanticipated changes in XOMA's research and development programs, unavailability of additional arrangements or higher than anticipated transaction costs; sales of approved products may be lower than anticipated as a result of actions or inaction by the third parties responsible for selling such products; the timing of initiation, completion or availability of results of clinical trials may be delayed or may never occur as a result of unavailability of resources, actions or inaction by our present or future collaboration partners, insufficient enrollment in such trials or unanticipated safety issues. The effects of XOMA 052 may differ in later preclinical or clinical data and dosing of XOMA 052 may be affected by later testing results; and a XOMA 052 partnership may not be entered into in the timeframes indicated or at all.

These and other risks, including those related to XOMA's inability to comply with NASDAQ's continued listing requirements; the declining and generally unstable nature of current economic conditions; the results of discovery and pre-clinical testing; the timing or results of pending and future clinical trials (including the design and progress of clinical trials; safety and efficacy of the products being tested; action, inaction or delay by the FDA, European or other regulators or their advisory bodies; and analysis or interpretation by, or submission to, these entities or others of scientific data); changes in the status of existing collaborative relationships; the ability of collaborators and other partners to meet their obligations; XOMA's ability to meet the demands of the United States government agency with which it has entered into its government contracts; competition; market demand for products; scale-up and marketing capabilities; availability of additional licensing or collaboration opportunities; international operations; share price volatility; XOMA's financing needs and opportunities; uncertainties regarding the status of biotechnology patents; uncertainties as to the costs of protecting intellectual property; and risks associated with XOMA's status as a Bermuda company, 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.



                               XOMA Ltd.
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (unaudited)
               (in thousands, except per share amounts)

                            Three months ended      Nine months ended
                               September 30,         September 30,
                           --------------------   --------------------
                             2009        2008       2009       2008
                           --------    --------   --------   ---------
 Revenues:
   License and
    collaborative
    fees                    $ 1,421     $ 1,286   $ 29,276     $ 1,466
   Contract and other
     revenue                  3,688       1,979     18,662      14,728
   Royalties                 22,314       4,629     28,895      14,873
                           --------    --------   --------   ---------
     Total revenues          27,423       7,894     76,833      31,067
                           --------    --------   --------   ---------
 Operating expenses:
   Research and
    development              13,444      19,714     43,472      62,444
   Selling, general and
    administrative            7,197       6,724     18,972      18,984
   Restructuring                  2          --      3,603          --
                           --------    --------   --------   ---------
     Total operating
      expenses               20,643      26,438     66,047      81,428
                           --------    --------   --------   ---------
     Income (loss) from
      operations              6,780     (18,544)    10,786     (50,361)
 Other income (expense):
   Investment and
    interest income               9         182         47         797
   Interest expense          (1,339)     (1,998)    (4,778)     (4,960)
   Loss on debt
    extinguishment           (3,645)         --     (3,645)       (652)
    Other income (expense)      103          (2)     1,240         (51)
                           --------    --------   --------   ---------
     Net income (loss)
      before taxes            1,908     (20,362)     3,650     (55,227)
 Provision for income
  tax expense                   370          --      6,083          --
                           --------    --------   --------   ---------
     Net income (loss)      $ 1,538    $(20,362)  $ (2,433)  $ (55,227)
                           ========    ========   ========   =========
 Basic and diluted net
  income (loss) per
  common   share             $ 0.01     $ (0.15)   $ (0.02)    $ (0.42)
                           ========    ========   ========   =========
 Shares used in computing
  basic net income (loss)
  per common share          167,254     132,364    153,170     132,270
                           ========    ========   ========   =========
 Shares used in computing
  diluted net income (loss)
  per common share          172,762     132,364    153,170     132,270
                           ========    ========   ========   =========





                              XOMA Ltd.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                           (in thousands)

                                           Sept. 30,        Dec. 31,
                                              2009            2008
                                           ---------        ---------
                                          (unaudited)
                            ASSETS

 Current assets:
   Cash and cash equivalents                $ 27,726        $  9,513
   Short-term investments                         --           1,299
   Restricted cash                                --           9,545
   Trade and other receivables, net            3,203          16,686
   Prepaid expenses and other
    current assets                             1,331           1,296
   Debt issuance costs                            --             365
                                            --------        --------
     Total current assets                     32,260          38,704
 Property and equipment, net                  21,794          26,843
 Debt issuance costs - long-term                  --           1,224
 Other assets                                    402             402
                                            --------        --------
     Total assets                           $ 54,456        $ 67,173
                                            ========        ========

                  LIABILITIES AND SHAREHOLDERS' EQUITY
                       (NET CAPITAL DEFICIENCY)
 Current liabilities:
   Accounts payable                         $  2,657        $  9,977
   Accrued liabilities                         8,539           4,438
   Accrued interest                              118           1,588
   Deferred revenue                            8,317           9,105
   Warrant liability                           5,321              --
   Other current liabilities                     475           1,884
                                            --------        --------
     Total current liabilities                25,427          26,992
 Deferred revenue - long-term                  4,716           8,108
 Interest bearing obligations
   - long-term                                13,129          63,274
 Other long-term liabilities                     408             200
                                            --------        --------
     Total liabilities                        43,680          98,574
                                            --------        --------
 Shareholders' equity (net capital
  deficiency)                                 10,776         (31,401)
                                            --------        --------
     Total liabilities and share-
      holders' equity (net capital
      deficiency)                           $ 54,456        $ 67,173
                                            ========        ========



This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: XOMA Ltd.

CONTACT: XOMA Ltd.
Company and Investor Contact:
Carol DeGuzman
510-204-7270
deguzman@xoma.com
Porter Novelli Life Sciences
Media Contact:
Carolyn Hawley
619-849-5375
chawley@pnlifesciences.com

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