XOMA Reports Third Quarter 2002 Financial Results Raptiva;#174; On Track For BLA Filing By Year-End
Berkeley, CA — November 14, 2002
XOMA Ltd. (Nasdaq: XOMA), a biopharmaceutical development company, today announced financial results for the three and nine month periods ending September 30, 2002. The Company's net loss for the third quarter of 2002 was $12.3 million ($0.17 per share) compared with $6.8 million ($0.10 per share) for the quarter ended September 30, 2001. The net loss for the nine-month period ended September 30, 2002 was $28.3 million ($0.40 per share) compared with $21.0 million ($0.31 per share) for the first nine months of 2001.
"Our financial results in 2002 are really demonstrating the value of our diverse collaborative and licensing arrangements," said Peter B. Davis, XOMA's vice president of finance and chief financial officer. "We expect to finish the year at or close to our previous earnings and liquidity guidance, in spite of previously announced delays in the BLA filing for Raptiva(TM) with our partner, Genentech Inc. and the resulting additional clinical trial expenses, significant litigation expenses, and a generally difficult business climate. This is largely due to R&D service and license revenues which are up by 60 percent year-to-date versus 2001, and to funding support from our development partners."
"We believe the two most significant risks to achieving our targeted 2002 earnings are, first, the need to successfully conclude certain ongoing negotiations with new licensees in 2002, and second, the contingencies associated with the license fee we are owed under our MorphoSys agreement, which are fully described in our Form 10-Q," continued Mr. Davis.
Revenues for the third quarter of 2002 increased by 27 percent to $4.2 million compared to $3.3 million for the third quarter of 2001, primarily due to higher contract revenues from Baxter Healthcare Corporation and Onyx Pharmaceuticals, Inc. for development services. Year-to-date revenues for 2002 increased 60 percent to $18.2 million compared to $11.4 million for the same period in 2001. This increase was due primarily to increased license fees including our agreement with MorphoSys AG signed in February 2002, the recognition of revenue for certain license fees and other payments received in current and prior periods from Baxter, Onyx and Genentech, and contract revenue from Baxter and Onyx.
Research and development expenses for the three months and nine months ended September 30, 2002 increased 18 percent to $9.7 million and 16 percent to $30.4 million, respectively, from $8.2 million and $26.1 million for the comparable periods of 2001. Spending in 2002 reflected increased development costs associated with Raptiva(TM) (Efalizumab, formerly Xanelim(TM)), MLN01, CAB-2 and ONYX-015. The increase was partially offset by savings from certain preclinical development programs that were discontinued during 2001.
Marketing, general and administrative expenses for the three months and nine months ended September 30, 2002 increased to $6.4 million and $15.1 million, respectively, from $2.0 million and $5.7 million for the comparable periods in 2001. The most significant component of this increase was litigation expenses related to litigation against Biosite Incorporated and certain shareholder litigation, which totaled approximately $3.3 million and $7.0 million in the respective three and nine month periods of 2002. The matters related to these expenses have been settled or otherwise resolved and the expenses incurred. The 2002 periods also include marketing expenses related to pre-launch activities for Raptiva(TM). These marketing expenses are expected to continue at similar or higher levels. As of September 30, 2002, XOMA held $36.2 million in cash, cash equivalents, and short-term investments, compared with $67.6 million at December 31, 2001. The Company estimates that it has sufficient cash resources to meet its currently anticipated operational cash needs through at least the middle of 2004.
"Raptiva(TM) is moving forward on schedule in two indications: psoriasis and rheumatoid arthritis, and following recent discussions with the FDA, we are on track for the filing of a BLA in psoriasis by year-end," said John L. Castello, XOMA's chairman, president, and chief executive officer. "Genentech has also partnered with Serono S.A. to sell Raptiva(TM) in Europe and certain other non-US markets. Serono has indicated it plans to file for regulatory approval for psoriasis in Europe in the first quarter of 2003."
"This is important to XOMA, because in addition to our profit sharing arrangement with Genentech in the U.S., we are entitled to a royalty on sales in other countries," Castello added.
Executive Management Developments
Business Development: In the third quarter, XOMA strengthened its business development capabilities with two new management appointments. Dr. Michel Bergh has joined the company as vice president of business development, managing licensing and collaboration initiatives.
Dr. Stephen Carroll has become vice president, scientific and product development, to provide important technical support and scientific expertise within the business development function.
Dr. Robert Gundel has also joined XOMA, assuming the role of vice president, preclinical research.
Board of Directors update:
XOMA has added experience and depth to its board of directors and audit committee with the appointment of Patrick J. Zenner, former president and chief executive officer of Hoffman-La Roche of North America.
Antibody Product Pipeline Update
- Raptiva(TM): In September, Genentech and XOMA announced successful initial results from a blinded, 556-patient, placebo-controlled Phase III trial in moderate-to-severe psoriasis patients using Genentech material. This trial met its primary endpoint and showed efficacy results consistent with the two earlier blinded Phase III studies.
Preliminary, one-year data from an open-label, long-term study were presented in August at the American Academy of Dermatology meeting. Patients in this study who responded to the initial 12 weeks of Raptiva(TM) therapy maintained or improved their initial responses after one-year of therapy. More than 1000 patients have now been treated with Genentech-produced material in this and other psoriasis studies. Additional safety and long-term treatment studies are ongoing.
Following recent discussions with the FDA, Raptiva(TM) remains on track for a year-end psoriasis BLA filing by Genentech.
In August, Genentech and Serono announced that they had reached an agreement whereby Serono receives an exclusive license to market Raptiva(TM) in Europe and certain other markets outside the United States.
The Raptiva(TM) rheumatoid arthritis Phase II efficacy trial is targeted to complete patient enrollment by the end of 2002. This indication represents another large, potential market opportunity.
- ING-1: The ING-1 anti-cancer monoclonal antibody clinical development program continues on schedule. Phase I studies are ongoing, exploring a variety of cancer applications for possible Phase II trials.
XOMA investigators will present additional preclinical data on ING-1 at an upcoming European Cancer conference at Frankfurt in November.
- MLN01 and CAB-2: XOMA's development collaboration with Millennium Pharmaceuticals, Inc. remains on track for initial clinical testing in 2003.
Additional Product Development Programs
- NEUPREX(R): Patient enrollment in the Crohn's disease study is complete. Baxter will determine further development plans in Crohn's disease based on analysis of data from this trial.
- ONYX-015: The process development and scale-up work for Onyx continues. XOMA is now producing the ONYX-015 product at 500-liter scale.
In September, XOMA and Biosite announced that they had resolved all outstanding disputes regarding patent and licensing issues; permitting each company the freedom to operate its business. The parties agreed to dismiss the pending legal proceedings between XOMA Ltd. and affiliates and Biosite.
In October, XOMA entered into a licensing agreement with Dyax Corp. This agreement is the third such relationship XOMA has initiated this year with a significant antibody library company, and additional discussions continue. In October, XOMA also expanded its licensing relationship with Diagnostic Products Corporation (DPC). Building on DPC's proven track record in its marketing of diagnostics, DPC now has exclusive worldwide rights to XOMA's Lipopolysaccharide Binding Protein (LBP) technology to develop both automated and point-of-care products.
XOMA has scheduled an investor conference call regarding this announcement to be held today, November 14, 2002 beginning at 4:00 PM EST (1:00 PM. PST). Investors are invited to listen to the conference call by phone or via XOMA's website, www.xoma.com. The domestic dial-in number (U.S./Canada) for the live call is 1-877-356-2902 and the conference ID number is 6597733. The international dial-in number is 1-706-643-3700 and utilizes the same dial-in conference I.D. number. To listen to the call via the internet, go to XOMA's website a few minutes before the start of the call to register, download, and install any necessary audio software. The audio relay of the call will be available beginning one hour following the conclusion of the webcast through 6:00 p.m. EST (3:00 p.m. PST) on November 19, 2002. Access numbers for the replay are 1-800-642-1687 (U.S./Canada) or 1-706-645-9291 (International); Conference I.D. 6597733.
XOMA develops and manufactures antibody and other protein-based 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.
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 revenues from licensees and collaborators, 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 XOMA's status as a Bermuda company, are described in more detail in the Company's most recent annual report on Form 10K and in other SEC filings.
CONDENSED CONSOLIDATED BALANCE SHEETS
|$ 35,861||$ 67,320||332||320||6,124||1,662||394||418||1,306||1,299||733||249|
|Total current assets||44,750||71,268|
|Total Assets||$ 67,017||$ 86,107|
|Liabilities and Shareholders, Equity|
(Net Capital Deficiency):
|$ 3,885||$ 3,520|
|Total current liabilities||19,751||18,645|
|Capital lease obligations -- long term||1,496||1,393|
|Deferred revenue -- long term||1,165||1,470|
|Convertible notes -- long term||58,305||50,980|
(Net Capital Deficiency)
|Total Liabilities and Shareholder's Equity||$ 67,017||$ 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, 2001 as filed with the Securities and Exchange Commission.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share data)
|Three Months Ended
|Nine Months Ended
|$ 1,423||$ 1,316||$ 9,076||$ 3,381|
|Operating Costs and Expenses:|
|Total operating costs and expenses||16,117||10,164||45,509||31,804|
|Loss from operations||(11,884)||(6,879)||(27,330)||(20,451)|
|Other Income (Expense):|
|Net loss||$ (12,262)||$ (6,819)||$ (28,346)||$ (21,042)|
|Basic and diluted net loss per share||$ (0.17)||$ (0.10)||$ (0.40)||$ (0.31)|
|Shares used in computing basic and diluted net loss per share||70,330||70,008||70,291||67,502|