6. Restructuring Charges

On July 22, 2015, the Company announced the Phase 3 EYEGUARD-B study of gevokizumab in patients with Behçet’s disease uveitis, run by Servier, did not meet the primary endpoint of time to first acute ocular exacerbation.  In August 2015, XOMA announced its intention to end the EYEGUARD global Phase 3 program.  On August 21, 2015, the Company, in connection with its efforts to lower operating expenses and preserve capital while continuing to focus on its endocrine product pipeline, implemented a restructuring plan (the “2015 Restructuring”) that included a workforce reduction resulting in the elimination of 58 positions throughout all areas of the Company (of which, 38 were employee terminations and 20 were open positions).  On September 29, 2015, the Company terminated an additional five employees who were notified on that date.  The identified persons will cease to be employees of the Company upon completion of the 60-day notification period required by the California Worker Adjustment and Retraining Notification Act.

During the three months ended September 30, 2015, the Company recorded charges of $2.2 million related to severance, other termination benefits and outplacement services in connection with the workforce reduction. The Company expects to incur an additional $0.3 million restructuring charge in the fourth quarter of 2015 related to severance, other termination benefits and outplacement services related to notified employees who will continue to perform services to the Company during the fourth quarter of 2015. Finally, the Company recognized an additional restructuring charge of $0.4 million in contract termination costs, which primarily include costs in connection with the discontinuation of the EYEGUARD studies. For the nine months ended September 30, 2014, the Company recorded charges of $84,000 for final facility costs related to restructuring activities initiated in 2012.

Of the $2.9 million total expenses associated with the restructuring activities in the third quarter of 2015, the Company expects to pay approximately $2.7 million by December 31, 2015, with the remaining amount to be paid by May 2016. The Company may also incur other material charges not currently contemplated due to events that may occur as a result of, or associated with, the restructuring. In addition, these charges do not reflect changes expected to occur as a result of the Company’s strategic actions related to XOMA’s manufacturing and biodefense operations (see Note 10).  

The outstanding restructuring liabilities are included in accrued and other liabilities on the condensed consolidated balance sheet. As of September 30, 2015, the components of these liabilities are shown below (in thousands):