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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________

Commission File No. 001-39801

XOMA Corporation

(Exact name of registrant as specified in its charter)

Delaware

   

52-2154066

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

 

2200 Powell Street, Suite 310

Emeryville, California

94608

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (510) 204-7200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading symbol(s):

Name of each exchange on which registered:

Common Stock, $0.0075 par value

XOMA

The Nasdaq Global Market

8.625% Series A Cumulative Perpetual Preferred Stock, par value $0.05

XOMAP

The Nasdaq Global Market

Depositary Shares (each representing 1/1000th interest in a share of 8.375% Series B Cumulative Perpetual Preferred Stock, par value $0.05)

XOMAO

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of November 2, 2023, the registrant had 11,487,808 shares of common stock, $0.0075 par value per share, outstanding.

Table of Contents

XOMA CORPORATION

FORM 10-Q

TABLE OF CONTENTS

    

    

Page

Glossary of Terms and Abbreviations

1

PART I

FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

4

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)

8

Notes to Condensed Consolidated Financial Statements (unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

40

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

PART II

OTHER INFORMATION

48

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

78

Item 3.

Defaults Upon Senior Securities

79

Item 4.

Mine Safety Disclosure

79

Item 5.

Other Information

79

Item 6.

Exhibits

80

Signatures

82

Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

Abbreviations

    

Definition

2010 Plan

the Company's 2010 Long Term Incentive and Stock Award Plan, as amended

2018 Common Stock ATM Agreement

At The Market Issuance Sales Agreement with HCW dated December 18, 2018

2021 Series B Preferred Stock ATM Agreement

At The Market Issuance Sales Agreement with B. Riley dated August 5, 2021

‘40 Act

Investment Company Act of 1940

AAA

Assignment and Assumption Agreement

ACA

The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010

Affimed

Affimed N.V.

Affitech

Affitech Research AS

Affitech CPPA

the Company's Commercial Payment Purchase Agreement with Affitech dated October 6, 2021

Agenus

Agenus, Inc. and certain affiliates

Agenus RPA

the Company's Royalty Purchase Agreement with Agenus dated September 20, 2018

Anti-TGFβ Antibody License Agreement

the Company's License Agreement with Novartis dated September 30, 2015

April 2022 Letter Agreement

the Letter Agreement to Officer Employment Agreement dated August 7, 2017, between XOMA Corporation and Thomas Burns dated April 1, 2022

Aptevo

Aptevo Therapeutics Inc.

Aptevo CPPA

the Company’s Payment Interest Purchase Agreement with Aptevo dated March 29, 2023, referred to herein as “Aptevo Commercial Payment Purchase Agreement” or “Aptevo CPPA”

Aronora

Aronora, Inc.

Aronora RPA

the Company's Royalty Purchase Agreement with Aronora dated April 7, 2019

AstraZeneca

AstraZeneca plc

ASC

Accounting Standards Codification

ASC 326

ASC Topic 326, Financial Instruments – Credit Losses

ASC 450

ASC Topic 450, Contingencies

ASC 606

ASC Topic 606, Revenue from Contracts with Customers

ASC 805

ASC Topic 805, Business Combinations

ASC 815

ASC Topic 815, Derivatives and Hedging

ASC 842

ASC Topic 842, Leases

ASU

Accounting Standards Update

Bayer

Bayer Pharma AG

Bioasis

Bioasis Technologies, Inc. and certain affiliates

Bioasis RPA

the Company's Royalty Purchase Agreement with Bioasis dated February 25, 2019

BLA

Biologic License Application

Black-Scholes Model

Black-Scholes Option Pricing Model

B. Riley

B. Riley Securities, Inc.

BVF

Biotechnology Value Fund, L.P.

CCPA

California Consumer Privacy Act of 2018, collectively the Act and its regulations

CARES

Coronavirus Aid, Relief, and Economic Security

cGMP

current Good Manufacturing Practice

Chiesi

Chiesi Farmaceutici S.p.A.

Company

XOMA Corporation, including subsidiaries

CPPA

Commercial Payment Purchase Agreement

1

Table of Contents

CPRA

California Privacy Rights Act

EC

European Commission

EMA

European Medicines Agency

ESPP

2015 Employee Stock Purchase Plan, as amended

EU

European Union

FCPA

U.S. Foreign Corrupt Practices Act of 1977, as amended

FDA

U.S. Food and Drug Administration

FDIC

Federal Deposit Insurance Corporation

GAAP

Generally accepted accounting principles

G&A

General and administrative

GDPR

General Data Protection Regulation

Gevokizumab License Agreement

the Company's License Agreement with Novartis dated August 24, 2017

HCRP

Healthcare Royalty Partners II, L.P.

HCW

H.C. Wainwright & Co., LLC

HIPAA

Federal Health Insurance Portability and Accountability Act of 1996

ICE®

Innate cell engager

ImmunityBio

ImmunityBio, Inc. (formerly NantCell, Inc.)

ImmunityBio License Agreement

Out-license agreement to ImmunityBio from LadRx dated July 27, 2017, related to the development and commercialization of Aldoxorubicin, as amended on September 27, 2018

IP

Intellectual Property

Janssen

Janssen Biotech, Inc.

Kuros

Kuros Biosciences AG, Kuros US LLC and Kuros Royalty Fund (US) LLC, collectively

Kuros RPA

the Company's Royalty Purchase Agreement with Kuros dated July 14, 2021

LadRx

LadRx Corporation (formerly CytRx Corporation)

LadRx Agreements

LadRx AAA and LadRx RPA

LadRx AAA

the Company’s Assignment and Assumption Agreement with LadRx dated June 21, 2023

LadRx RPA

the Company’s Royalty Purchase Agreement with LadRx dated June 21, 2023

Medexus

Medexus Pharmaceuticals, Inc.

Merck

Merck Sharp & Dohme Corp

Merck KGaA

Ares Trading SA

Merck KGaA License Agreement

In-license agreement from Merck KGaA to ObsEva related to ebopiprant dated June 10, 2015 and subsequently amended on July 8, 2016 (assumed by the Company as part of the ObsEva IP Acquisition Agreement)

NDA

New Drug Application

NIH

National Institutes of Health

NOL

net operating loss

Novartis

Novartis Pharma AG, Novartis International Pharmaceutical Ltd., Novartis Institutes for Biomedical Research, Inc. and/or Novartis Vaccines and Diagnostics, Inc.

November 2022 Letter Agreement

November 1, 2022 amendment to the April 2022 Letter Agreement

ObsEva

ObsEva SA

ObsEva IP Acquisition Agreement

Company's IP Acquisition Agreement with ObsEva dated November 21, 2022

Ology Bioservices

Ology Bioservices Inc. (formerly Nanotherapeutics Inc., now a wholly owned subsidiary of National Resilience, Inc.)

Organon

Organon International GmbH

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Organon License Agreement

Out-license agreement to Organon from ObsEva dated July 26, 2021, related to the development and commercialization of ebopiprant (assumed by the Company as part of the ObsEva IP Acquisition Agreement)

Palo

Palobiofarma, S.L.

Palo RPA

the Company's Royalty Purchase Agreement with Palo dated September 26, 2019

Pfizer

Pfizer, Inc.

PSU

Performance stock unit

R&D

Research and development

Regeneron

Regeneron Pharmaceuticals, Inc.

Amended Retention Plan

October 25, 2022 amendment to the Retention Plan

Retention Plan

Retention and Severance Plan dated March 31, 2022

Rezolute

Rezolute, Inc., formerly Antria Bio, Inc.

Rezolute License Agreement

the Company's License Agreement with Rezolute dated December 6, 2017, as amended in March 2018, January 2019 and March 2020

RPA

Royalty Purchase Agreement

Roche

F. Hoffmann-La Roche AG

SEC

U.S. Securities and Exchange Commission

Second Bioasis RPA

the Company's Royalty Purchase Agreement with Bioasis dated November 2, 2020

Series A Preferred Stock

the 8.625% Series A cumulative, perpetual preferred stock issued in December 2020

Series B Preferred Stock

the 8.375% Series B cumulative, perpetual preferred stock issued in April 2021

Series A and Series B Preferred Stock

Series A Preferred Stock and Series B Preferred Stock, collectively

Series B Depositary Shares

the depositary shares, each representing 1/1000th interest in a share of Series B Preferred Stock

Sonnet

Sonnet BioTherapeutics, Inc., formerly Oncobiologics, Inc.

Sonnet Collaboration Agreement

the Company's Collaboration Agreement with Sonnet dated July 23, 2012, as amended in May 2019

SOX

Sarbanes-Oxley Act of 2002

SVB

Silicon Valley Bank

Takeda

Takeda Pharmaceutical Company Limited

Takeda Collaboration Agreement

the Company's Collaboration Agreement with Takeda dated November 1, 2006, as amended in February 2007 and February 2009

TGFβ

transforming growth factor beta

VABYSMO®

faricimab-svoa

Viracta

Viracta Therapeutics, Inc.

Viracta RPA

the Company's Royalty Purchase Agreement with Viracta dated March 22, 2021

XOMA

XOMA Corporation, a Delaware corporation, including subsidiaries

Zevra

Zevra Therapeutics, Inc. (formerly KemPharm Denmark A/S)

Zevra APA

Asset Purchase Agreement dated May 13, 2011 between LadRx and Orphazyme ApS, and assigned to Zevra as of June 1, 2022, related to the sale of arimoclomol from LadRx to Zevra (assumed by the Company as part of LadRx AAA)

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PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

XOMA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

September 30, 

December 31, 

    

2023

    

2022

(unaudited)

(Note 1)

ASSETS

Current assets:

Cash and cash equivalents

$

33,472

$

57,826

Short-term equity securities

214

335

Trade and other receivables, net

 

43

 

1

Short-term royalty and commercial payment receivables

2,366

Prepaid expenses and other current assets

 

776

 

725

Total current assets

 

34,505

 

61,253

Property and equipment, net

 

5

 

7

Operating lease right-of-use assets

29

Long-term royalty and commercial payment receivables

 

74,696

 

63,683

Intangible assets, net

14,477

15,150

Other assets - long term

 

411

 

260

Total assets

$

124,094

$

140,382

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

728

$

524

Accrued and other liabilities

 

2,160

 

2,918

Contingent consideration under RPAs, AAAs and CPPAs

4,000

75

Operating lease liabilities

34

Unearned revenue recognized under units-of-revenue method

 

2,078

 

1,899

Preferred stock dividend accrual

1,368

1,368

Total current liabilities

 

10,334

 

6,818

Unearned revenue recognized under units-of-revenue method – long-term

 

7,796

 

9,550

Total liabilities

 

18,130

 

16,368

Commitments and Contingencies (Note 9)

Stockholders’ equity:

Preferred Stock, $0.05 par value, 1,000,000 shares authorized:

8.625% Series A cumulative, perpetual preferred stock, 984,000 shares issued and outstanding at September 30, 2023 and December 31, 2022

49

49

8.375% Series B cumulative, perpetual preferred stock, 1,600 shares issued and outstanding at September 30, 2023 and December 31, 2022

 

Convertible preferred stock, 5,003 shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

Common stock, $0.0075 par value, 277,333,332 shares authorized, 11,472,808 and 11,454,025 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

86

 

86

Additional paid-in capital

 

1,308,943

 

1,306,271

Accumulated deficit

 

(1,203,114)

 

(1,182,392)

Total stockholders’ equity

 

105,964

 

124,014

Total liabilities and stockholders’ equity

$

124,094

$

140,382

The accompanying notes are an integral part of these condensed consolidated financial statements.

(Note 1) The condensed consolidated balance sheet as of December 31, 2022, has been derived from the audited consolidated financial statements as of that date included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2023

    

2022

    

2023

    

2022

Revenues:

Revenue from contracts with customers

$

225

$

25

$

1,350

$

3,300

Revenue recognized under units-of-revenue method

 

605

 

426

 

1,575

 

1,241

Total revenues

 

830

 

451

 

2,925

 

4,541

Operating expenses:

 

 

 

 

Research and development

 

25

 

29

 

118

 

125

General and administrative

 

6,368

 

4,794

 

18,341

 

15,620

Royalty purchase agreement asset impairment

1,575

Arbitration settlement costs (Note 3)

 

 

 

4,132

 

Amortization of intangible assets

224

673

Total operating expenses

 

6,617

 

4,823

 

24,839

 

15,745

Loss from operations

 

(5,787)

 

(4,372)

 

(21,914)

 

(11,204)

Other income (expense), net

 

278

 

194

 

1,192

 

76

Net loss and comprehensive loss

$

(5,509)

$

(4,178)

$

(20,722)

$

(11,128)

Less: accumulated dividends on Series A and Series B preferred stock

(1,368)

(1,368)

(4,104)

(4,104)

Net loss and comprehensive loss attributable to common stockholders, basic and diluted

$

(6,877)

$

(5,546)

$

(24,826)

$

(15,232)

Basic and diluted net loss per share attributable to common stockholders

$

(0.60)

$

(0.48)

$

(2.17)

$

(1.34)

Weighted average shares used in computing basic and diluted net loss per share attributable to common stockholders

 

11,473

 

11,447

 

11,466

11,400

The accompanying notes are an integral part of these condensed consolidated financial statements.

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XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

Series A 

Series B

Convertible

Additional

Total

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Paid-In

Accumulated

Stockholders’

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

     

Shares

  

Amount

 

Capital

Deficit

  

Equity

Balance, December 31, 2022

984

$

49

2

$

5

$

 

11,454

$

86

$

1,306,271

(1,182,392)

$

124,014

Issuance of common stock related to 401(k) contribution

 

 

 

 

7

 

 

123

 

 

123

Stock-based compensation expense

 

 

 

 

 

 

1,570

 

 

1,570

Preferred stock dividends

 

 

 

 

 

 

(1,368)

 

 

(1,368)

Net loss and comprehensive loss

 

 

 

 

 

 

 

(9,813)

 

(9,813)

Balance, March 31, 2023

984

$

49

2

$

5

$

 

11,461

$

86

$

1,306,596

$

(1,192,205)

$

114,526

Exercise of stock options

 

 

8

153

153

Issuance of common stock related to ESPP

 

 

3

50

50

Stock-based compensation expense

 

 

2,163

2,163

Preferred stock dividends

 

 

(1,368)

(1,368)

Net loss and comprehensive loss

 

 

(5,400)

(5,400)

Balance, June 30, 2023

984

$

49

2

$

5

$

 

11,472

$

86

$

1,307,594

$

(1,197,605)

$

110,124

Stock-based compensation expense

 

 

2,717

2,717

Preferred stock dividends

(1,368)

(1,368)

Net loss and comprehensive loss

(5,509)

(5,509)

Balance, September 30, 2023

984

$

49

2

$

5

$

 

11,472

$

86

$

1,308,943

$

(1,203,114)

$

105,964

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Series A 

Series B

Convertible

Additional

Total

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Paid-In

Accumulated

Stockholders’

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

     

Shares

  

Amount

 

Capital

Deficit

  

Equity

Balance, December 31, 2021

984

$

49

2

$

5

$

 

11,315

$

85

$

1,307,030

$

(1,165,288)

$

141,876

Exercise of stock options

 

 

 

 

91

 

1

 

632

 

 

633

Issuance of common stock related to 401(k) contribution

 

 

 

 

4

 

 

85

 

 

85

Stock-based compensation expense

 

 

 

 

 

 

978

 

 

978

Preferred stock dividends

 

 

 

 

 

 

(1,368)

 

 

(1,368)

Net loss and comprehensive loss

 

 

 

 

 

 

 

(2,280)

 

(2,280)

Balance, March 31, 2022

984

$

49

2

$

5

$

 

11,410

$

86

$

1,307,357

$

(1,167,568)

$

139,924

Exercise of stock options

 

 

11

189

189

Issuance of common stock related to ESPP

 

 

3

45

45

Stock-based compensation expense

 

 

836

836

Preferred stock dividends

 

 

(1,368)

(1,368)

Net loss and comprehensive loss

 

 

(4,670)

(4,670)

Balance, June 30, 2022

984

$

49

2

$

5

$

 

11,424

$

86

$

1,307,059

$

(1,172,238)

$

134,956

Exercise of stock options

27

109

109

Stock-based compensation expense

 

 

806

806

Preferred stock dividends

(1,368)

(1,368)

Net loss and comprehensive loss

(4,178)

(4,178)

Balance, September 30, 2022

984

$

49

2

$

5

$

 

11,451

$

86

$

1,306,606

$

(1,176,416)

$

130,325

The accompanying notes are an integral part of these condensed consolidated financial statements.

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XOMA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine Months Ended September 30, 

    

2023

    

2022

Cash flows from operating activities:

Net loss

$

(20,722)

$

(11,128)

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

 

6,450

 

2,620

Royalty purchase agreement asset impairment

1,575

Change in fair value of contingent consideration under RPAs, AAAs, and CPPAs

(75)

Common stock contribution to 401(k)

 

123

 

85

Amortization of intangible assets

673

Depreciation

 

2

 

7

Non-cash lease expense

 

115

 

127

Change in fair value of equity securities

 

121

 

330

Changes in assets and liabilities: