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 June 30, 2024


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

For the transition period from __________to__________

Commission File Number: 001-39801

XOMA Royalty 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

Former name, former address and former fiscal year, if changed since last report: XOMA Corporation

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 1/1000^th 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 August 8, 2024, the registrant had 11,704,467 shares of common stock, $0.0075 par value per share, outstanding.

Table of Contents

XOMA ROYALTY CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page
Glossary of Terms and Abbreviations		3

PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	7

	Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	7

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	8

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	9

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	10

	Notes to Condensed Consolidated Financial Statements (unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60

Item 4.	Controls and Procedures	60

PART II	OTHER INFORMATION	60

Item 1.	Legal Proceedings	60

Item 1A.	Risk Factors	61

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

Item 3.	Defaults Upon Senior Securities	62

Item 4.	Mine Safety Disclosures	62

Item 5.	Other Information	62

Item 6.	Exhibits	63

Signatures		65

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
AAA		Assignment and Assumption Agreement
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
Alora		Alora Pharmaceuticals, LLC
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 the Company 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 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 825		ASC Topic 825, Financial Instruments
ASC 842		ASC Topic 842, Leases
ASU		Accounting Standards Update
Bayer		Bayer Pharma AG
Bayer License Agreement		Out-license agreement to Bayer HealthCare LLC from Daré dated January 10, 2020, related to the development and commercialization of OVAPRENE
Bioasis		Bioasis Technologies, Inc. and certain affiliates
Bioasis RPA		The Company's Royalty Purchase Agreement with Bioasis dated February 25, 2019
Black-Scholes Model		Black-Scholes Option Pricing Model
Blue Owl		Blue Owl Capital Corporation
Blue Owl Loan		Loan pursuant to the Blue Owl Loan Agreement
Blue Owl Loan Agreement		Loan agreement dated as of December 15, 2023, between XRL, the lenders from time to time party thereto and Blue Owl, as administrative agent
Board		The Company’s Board of Directors
B. Riley		B. Riley Securities, Inc.
Broadridge		Broadridge Corporate Issuer Solutions, LLC, rights agent under the Kinnate CVR Agreement
BVF		Biotechnology Value Fund, L.P.

Table of Contents

Company		XOMA Royalty Corporation (formerly, XOMA Corporation), including its subsidiaries
CMO		Contract manufacturing organization
CPPA		Commercial Payment Purchase Agreement
CVR		Contingent value right
CRO		Contract research organization
Daré		Daré Bioscience, Inc.
Daré RPAs		The Company's Traditional RPA and Synthetic RPA with Daré dated April 29, 2024
Daré Organon License Agreement		Out-license agreement to Organon from Daré dated March 31, 2022, related to the development and commercialization of XACIATO, as amended on July 4, 2023
Day One		Day One Biopharmaceuticals
DSUVIA®		sufentanil sublingual tablet (DZUVEO in European market)
DoD		U.S. Department of Defense
EMA		European Medicines Agency
ESPP		2015 Employee Stock Purchase Plan, as amended
Exchange Act		U.S. Securities Exchange Act of 1934
FDA		U.S. Food and Drug Administration
FDIC		Federal Deposit Insurance Corporation
Fortis		Fortis Advisors LLC, representative of the Kinnate CVR holders under the Kinnate CVR Agreement
GAAP		Generally accepted accounting principles
G&A		General and administrative
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
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, terminated on June 3, 2024
IRA		Inflation Reduction Act
IP		Intellectual Property
IPR&D		In-Process Research and Development
IXINITY®		coagulation factor IX (recombinant)
Janssen		Janssen Biotech, Inc.
Kinnate		Kinnate Biopharma Inc.
Kinnate CVR Agreement		The Contingent Value Rights Agreement by and between the Company, Broadridge, and Fortis dated April 3, 2024
Kinnate Merger Agreement		The Agreement and Plan of Merger by and among the Company, XRA, and Kinnate dated February 16, 2024
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

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LadRx RPA		The Company’s Royalty Purchase Agreement with LadRx dated June 21, 2023 and subsequently amended on June 3, 2024
Medexus		Medexus Pharmaceuticals, Inc.
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
Novartis		Novartis Pharma AG, Novartis International Pharmaceutical Ltd., Novartis Institutes for Biomedical Research, Inc. and/or Novartis Vaccines and Diagnostics, Inc.
ObsEva		ObsEva SA
ObsEva IP Acquisition Agreement		Company's IP Acquisition Agreement with ObsEva dated November 21, 2022
OJEMDA™		tovorafenib
Organon		Organon International GmbH
OVAPRENE®		An investigational hormone-free monthly intravaginal contraceptive
Palo		Palobiofarma, S.L.
Palo RPA		The Company's Royalty Purchase Agreement with Palo dated September 26, 2019
Pfizer		Pfizer, Inc.
Pierre Fabre		Pierre Fabre Médicament, SAS
PSU		Performance stock unit
R&D		Research and development
Regeneron		Regeneron Pharmaceuticals, Inc.
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
RSU		Restricted stock unit
SEC		U.S. Securities and Exchange Commission
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
Series X Preferred Stock		The Series X Convertible Preferred Stock
Sildenafil Cream		Sildenafil Cream, 3.6%
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
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
Talphera		Talphera, Inc. (formerly AcelRx Pharmaceuticals, Inc. or “AcelRx”)
Talphera APA		Asset Purchase Agreement dated March 12, 2023 between AcelRx (now Talphera) and Vertical related to the sale of DSUVIA from Talphera to Vertical

Table of Contents

Talphera CPPA		The Company’s Payment Interest Purchase Agreement with Talphera dated January 11, 2024, referred to herein as “Talphera Commercial Payment Purchase Agreement” or “Talphera CPPA”
Talphera Marketing Agreement		Marketing Agreement dated April 3, 2023 between AcelRx (now Talphera) and Vertical
TGFβ		transforming growth factor beta
U.S.		United States
VABYSMO®		faricimab-svoa
Vertical		Vertical Pharmaceuticals, LLC, a wholly-owned subsidiary of Alora
Viracta		Viracta Therapeutics, Inc.
Viracta RPA		The Company's Royalty Purchase Agreement with Viracta dated March 22, 2021, as amended March 4, 2024
XACIATO™		Clindamycin phosphate vaginal gel 2%
XOMA		XOMA Royalty Corporation (formerly, XOMA Corporation), a Delaware corporation, including subsidiaries
XRA		XRA 1 Corp. a wholly-owned subsidiary of the Company
XRL		XRL 1 LLC, a wholly-owned subsidiary of the Company
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)

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

XOMA ROYALTY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


	June 30,		December 31,
	2024		2023⁽¹⁾
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	143,904	$	153,290
Short-term restricted cash		—		160
Short-term equity securities		696		161
Trade and other receivables, net		526		1,004
Short-term royalty and commercial payment receivables		14,257		14,215
Prepaid expenses and other current assets		2,820		483
Total current assets		162,203		169,313

Long-term restricted cash		6,016		6,100
Property and equipment, net		37		25
Operating lease right-of-use assets		349		378
Long-term royalty and commercial payment receivables		69,731		57,952
Exarafenib milestone asset (Note 4)		2,922		—
Other assets - long term		2,022		533
Total assets	$	243,280	$	234,301

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	982	$	653
Accrued and other liabilities		4,869		2,768
Contingent consideration under RPAs, AAAs and CPPAs		3,000		7,000
Operating lease liabilities		421		54
Unearned revenue recognized under units-of-revenue method		2,259		2,113
Preferred stock dividend accrual		1,368		1,368
Current portion of long-term debt		5,716		5,543
Total current liabilities		18,615		19,499
Unearned revenue recognized under units-of-revenue method – long-term		5,963		7,228
Exarafenib milestone contingent consideration (Note 4)		2,922		—
Long-term operating lease liabilities		710		335
Long-term debt		115,077		118,518
Total liabilities		143,287		145,580

Commitments and Contingencies (Note 10)

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 as of June 30, 2024 and December 31, 2023		49		49
8.375% Series B cumulative, perpetual preferred stock, 1,600 shares issued and outstanding as of June 30, 2024 and December 31, 2023		—		—
Convertible preferred stock, 5,003 shares issued and outstanding as of June 30, 2024 and December 31, 2023		—		—
Common stock, $0.0075 par value, 277,333,332 shares authorized, 11,658,383 and 11,495,492 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		87		86
Additional paid-in capital		1,315,703		1,311,809
Accumulated deficit		(1,215,846)		(1,223,223)
Total stockholders’ equity		99,993		88,721
Total liabilities and stockholders’ equity	$	243,280	$	234,301

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

⁽¹⁾The condensed consolidated balance sheet as of December 31, 2023 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, 2023.

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XOMA ROYALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Income and revenues:
Income from purchased receivables	$	5,432	$	—	$	5,432	$	—
Revenue from contracts with customers		5,025		1,125		6,025		1,125
Revenue recognized under units-of-revenue method		629		533		1,119		970
Total income and revenues		11,086		1,658		12,576		2,095

Operating expenses:
Research and development		1,161		39		1,194		93
General and administrative		11,004		5,777		19,465		11,973
Royalty purchase agreement asset impairment		9,000		1,575		9,000		1,575
Arbitration settlement costs		—		—		—		4,132
Amortization of intangible assets		—		224		—		449
Total operating expenses		21,165		7,615		29,659		18,222

Loss from operations		(10,079)		(5,957)		(17,083)		(16,127)

Other income (expense):
Gain on the acquisition of Kinnate		19,316		—		19,316		—
Change in fair value of embedded derivative related to RPA		8,100		—		8,100		—
Interest expense		(3,402)		—		(6,953)		—
Other income (expense), net		2,050		557		4,010		914
Net income (loss) and comprehensive income (loss)	$	15,985	$	(5,400)	$	7,390	$	(15,213)

Net income (loss) available to (attributable to) common stockholders (Note 3):
Basic	$	10,224	$	(6,768)	$	3,253	$	(17,949)
Diluted	$	14,617	$	(6,768)	$	4,654	$	(17,949)

Net income (loss) per share available to (attributable to) common stockholders:
Basic	$	0.88	$	(0.59)	$	0.28	$	(1.57)
Diluted	$	0.84	$	(0.59)	$	0.27	$	(1.57)

Weighted-average shares used in computing net income (loss) per share available to (attributable to) common stockholders:
Basic		11,643		11,466		11,611		11,463
Diluted		17,321		11,466		17,263		11,463

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

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XOMA ROYALTY 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, 2023	984	$	49	2	$	—	5	$	—	11,495	$	86	$	1,311,809	$	(1,223,223)	$	88,721
Exercise of stock options	—		—	—		—	—		—	135		1		621		—		622
Issuance of common stock related to 401(k) contribution	—		—	—		—	—		—	7		—		118		—		118
Stock-based compensation expense	—		—	—		—	—		—	—		—		2,856		—		2,856
Preferred stock dividends	—		—	—		—	—		—	—		—		(1,368)		—		(1,368)
Repurchase of common stock	—		—	—		—	—		—	(1)		—		—		(13)		(13)
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(8,595)		(8,595)
Balance, March 31, 2024	984	$	49	2	$	—	5	$	—	11,636	$	87	$	1,314,036	$	(1,231,831)	$	82,341
Exercise of stock options	—		—	—		—	—		—	15		—		250		—		250
Issuance of common stock related to ESPP	—		—	—		—	—		—	7		—		95		—		95
Stock-based compensation expense	—		—	—		—	—		—	—		—		2,690		—		2,690
Preferred stock dividends	—		—	—		—	—		—	—		—		(1,368)		—		(1,368)
Net income and comprehensive income	—		—	—		—	—		—	—		—		—		15,985		15,985
Balance, June 30, 2024	984	$	49	2	$	—	5	$	—	11,658	$	87	$	1,315,703	$	(1,215,846)	$	99,993


	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

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

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XOMA ROYALTY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Six Months Ended June 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities: