Investors

XOMA Reports First Quarter 2002 Financial Results

May 08, 2002
XOMA Reports First Quarter 2002 Financial Results

Berkeley, CA — May 8, 2002

XOMA Ltd. (Nasdaq: XOMA), a biopharmaceutical development company, today announced financial results for the first quarter of 2002. The Company,s net loss for the quarter ended March 31, 2002 was $5.9 million ($0.08 per share) compared with $7.6 million ($0.11 per share) for the quarter ended March 31, 2001.

Revenues for the first quarter of 2002 increased to $9.2 million from $2.9 million in the first quarter of 2001. The increase reflected higher contract revenues primarily from our collaborative arrangement with Onyx, as well as higher license fees. The increase in license fees reflected an agreement entered into in February of this year granting MorphoSys AG a license to use XOMA,s antibody expression technology for developing antibodies using MorphoSys, phage-display based antibody library.

Operating expenses increased to $14.8 million in the first quarter of 2002 from $10.1 million in the first quarter of 2001. This increase reflected spending on Xanelim(TM), LDP01, CAB-2 and ONYX-015, as well as litigation expenses. These increases were partially offset by savings in our Mycoprex(TM) and Genimune(TM) development programs, which were discontinued during 2001.

XOMA ended the quarter with $58.5 million in cash, cash equivalents and short-term investments, compared with $67.6 million at December 31, 2001 and $32.3 million at the end of the first quarter of 2001. Net cash used in operations in the first quarter of 2002 was $6.4 million, compared with $4.8 million in the first quarter of 2001.

While earnings and cash flow may vary substantially depending upon the pace of product development work (which depends on a variety of factors including product efficacy, clinical trial progress, regulatory review and developments in licensing and other collaborative relationships), the Company currently estimates 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.

"We have faced a number of challenges thus far in 2002," said John L. Castello, XOMA's Chairman, President and Chief Executive Officer, "and we've made significant progress in dealing with them. We have now completed enrollment in a third Phase III efficacy study testing Xanelim in patients with moderate-to-severe psoriasis, and subject to the results of that trial and discussions with the FDA, are targeting a BLA filing by year-end. We have also initiated a Phase II study testing Xanelim in patients with moderate-to-severe rheumatoid arthritis. A group of securities lawsuits against the company were dismissed, and we entered into a licensing arrangement with MorphoSys to use our bacterial cell expression technology with their phage display discovery system."

"We are pleased with our first quarter financial results," said Peter B. Davis, XOMA,s Vice President of Finance and Chief Financial Officer. "We have begun to see incremental revenue from our expression technology licensing efforts in the phage display arena, and have now further broadened our pipeline indications by initiating testing of Xanelim in rheumatoid arthritis patients."

Antibody Products

  • Xanelim(TM) (Efalizumab):
    XOMA and Genentech announced in early April 2002 that a pharmacokinetic study comparing XOMA-produced material and Genentech-produced material did not achieve a pre-defined statistical definition for comparability. Enrollment in an additional 500-patient efficacy study designed to confirm clinical comparaBility of the XOMA and Genentech material is now complete. Subject to the successful conclusion of this study and agreement with the FDA, the companies anticipate filing for marketing approval by year-end 2002.

    XOMA also announced in early April 2002, the initiation of testing of Xanelim for moderate-to-severe rheumatoid arthritis. The study is a multicenter, randomized, double blind, placebo-controlled Phase II study that is designed to enroll 240 patients. We believe that this market continues to represent a large unmet medical need.

  • ING-1: XOMA has completed enrollment in one Phase I trial in advanced adenocarcinoma patients, and is currently enrolling patients in a second. The ING-1 monoclonal antibody incorporates XOMA,s patented Human Engineering(TM) technology, designed to reduce immunogenicity. Additional studies are in planning to further evaluate the safety, immunogenicity, pharmacodynamics and pharmacokinetics of ING-1 in cancer patients, and to document any observed anti-tumor activity.

BPI Protein Products

  • NEUPREX(R): Baxter is continuing to enroll patients in a Phase II study testing NEUPREX(R) in patients with Crohn,s disease, a systemic inflammatory condition associated with endotoxemia that primarily affects the gastrointestinal tract. Other indications for future testing are under review.

  • Retinal Disease: In April of 2001, researchers from the Joslin Diabetes Center at Harvard University presented data from in vitro and in vivo studies at the Association for Research in Vision and Ophthalmology (ARVO) meeting. The data shows that BPI-derived compounds inhibit abnormal growth of blood vessels in the retina without adversely affecting retinal pigment epithelium cells (RPEs) or retinal pericytes, which are essential for healthy functioning of the retina. Joslin is conducting further research in collaboration with XOMA.

    Expression Technology
    Bacterial cell expression is an enabling technology for the discovery and selection, as well as the development and manufacture, of recombinant protein pharmaceuticals, including diagnostic and therapeutic antibodies. XOMA has received nine U.S. patents to date relating to aspects of its bacterial cell expression system, including a family of six patents that broadly cover functional antibody secretion.

    Access to XOMA,s patent estate is necessary for the practice of antibody phage display and other antibody screening applications. The Company has entered into a cross-licensing arrangement with MorphoSys relating to bacterial cell expression and phage display and has initiated licensing discussions with a number of other companies that use such technologies in the discovery and development of commercially useful antibodies.

    XOMA,s patented technology also includes the araB promoter system, which allows efficient control of protein expression, and the pelB secretion system, which improves yields and reduces recovery and purification costs. The Company has previously licensed various aspects of its expression technology system to more than 20 pharmaceutical and biotechnology companies worldwide.

    Litigation
    In March 2002, a federal court dismissed each of the three federal securities class action lawsuits filed last year against the Company, Genentech and certain of their officers. After further investigating the issues, plaintiffs, counsel had filed with the Court a Stipulation and Proposed Order of Voluntary Dismissal in all three actions. Thereafter, the Court entered an order dismissing each of the lawsuits without prejudice. No consideration was exchanged, and neither plaintiffs nor their counsel received any compensation or reimbursement of expenses.

    XOMA has scheduled an investor conference call regarding this announcement to be held today 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 4016702. 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 XOMA web site at www.xoma.com a few minutes prior to the start of the call to register, download, and install the necessary audio software. The audiocast version of the call will be archived for 30 days and available for replay one hour after the conclusion of the conference call. A dial-in replay will be available until 6:00 PM Eastern (3:00 PM Pacific) May 15, 2002 at (800) 642-1687 for domestic callers and at (706) 645-9291 for international dialing. Enter conference ID number 4016702 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 www.xoma.com.

    The statements made in this news release related to the estimated size of the Company's loss for 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 efficacy issues or additional time requirements for data analysis, BLA preparation, discussions with the FDA, additional clinical studies or manufacturing process modifications. These and other risks, including those related to the availability of additional licensing or collaboration opportunities, changes in the status of existing collaborative relationships, market demand for products, the ability of collaborators and other partners to meet their obligations, actions by the Food and Drug Administration or the U.S. Patent and Trademark Office and uncertainties regarding the status of biotechnology patents, are discussed in the Company's most recent annual report on Form 10-K and in other SEC filings. Consider such risks carefully in evaluating XOMA's prospects.

    XOMA Ltd.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (in thousands)
      March 31,
    2002
    (Unaudited)
    December 31,
    2001
    (Note 1)
    Assets:   
    Cash and cash equivalents
    $ 58,183 $ 67,320
    Short-term Investments
    320 320
    Related party receivables
    423 418
    Receivables
    6,227 1,662
    Inventory
    1,306 1,299
    Prepaid expenses and other
    189 249
     ________________
    Total current assets66,64871,268
       
    Property and equipment, net
    17,123 14,645
    Deposits and other
    201 194
     ________________
     $ 83,972$ 86,107
       
    Liabilities and Shareholders Equity:  
    Accounts payable
    $ 6,340 $ 3,520
    Accrued liabilities
    4,759 4,422
    Capital lease obligations - current
    673 673
    Deferred reven - current
    4,084 5,017
    Convertible subordinated note  
       
    - current 5,041 5,013
     ________________
    Total current liabilities20,89718,645
       
    Capital lease obligations - long term
    1,232 1,393
    Deferred reven - long term
    1,100 1,470
    Convertible subordinated notes
      
    - long term 52,241 50,980
     ________________
    Total Liabilities 75,470 72,488
    Stockholders equity 8,502 13,619
     ________________
      $ 83,972 $ 86,107

    Note 1 - Amounts derived from the Company's audited financial statements

    appearing in the Annual Report Form 10-K for the year ended
    December 31, 2001 as filed with the Securities and Exchange
    Commission

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

      Three Months Ended
      March 31,
     2002 2001
    Revenues:  
    License and collaborative fees
    $ 6,313 $ 1,015
    License and collaborative fees
    2,909 1,841
     ________________
     9,2222,856
     ________________
    Operating Costs and Expenses:  
    Research and development
    9,9358,470
    Marketing, general and admin.
    4,8491,610
     ________________
     14,78410,080
     ________________
       
    Loss from operations(5,562)(7,224)
       
    Other Income (Expense):  
    Investment and other income
    272 459
    Interest and other expense
    (649)(810)
     ________________
    Net loss(5,939)(7,575)
     ________________
    Basic and diluted loss per share$ (0.08)$ (0.11)
       
    Shares used in computing basic
    and diluted net
    loss per share
    70,22966,134