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What changed in XOMA Royalty Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of XOMA Royalty Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+219 added−621 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-09)

Top changes in XOMA Royalty Corp's 2023 10-K

219 paragraphs added · 621 removed · 134 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

80 edited+22 added−440 removed17 unchanged
Biggest changeBelow is a list of representative patents and patent applications related to our licensed programs: ​ ​ ​ ​ ​ ​ Licensee Program Representative Patents/Applications Subject matter Expected last expiration in family Novartis Anti-IL-1 b US 7,531,166 US 7,582,742 EP 1 899 378 Gevokizumab (VPM087) and other antibodies and antibody fragments with similar binding properties for IL-1β 2027 ​ ​ ​ ​ ​ ​ ​ US 7,695,718 US 8,101,166 US 8,586,036 US 9,163,082 Methods of treating Type 2 diabetes or Type 2 diabetes-induced diseases or conditions with high affinity antibodies and antibody fragments that bind to IL-1β 2027 ​ ​ ​ ​ ​ ​ ​ US 8,637,029 Methods of treating gout with certain doses of IL-1β binding antibodies or binding fragments 2028 ​ ​ ​ ​ ​ ​ ​ JP 5763625 US 10,611,832 Pharmaceutical compositions comprising anti-IL-1β binding antibodies or fragments for reducing acute coronary syndrome in a subject with a history of myocardial infarction. 2030 ​ ​ ​ ​ ​ Novartis Anti-TGF b US 8,569,462 US 9,145,458 US 9,714,285 US 10,358,486 EP 2714735 EP 21186327 JP 6363948 TGFβ antibodies and methods of use thereof 2032 ​ ​ ​ ​ ​ ​ ​ US 10,167,334 EP 3 277 716 JP 6901400 Combination therapy using an inhibitor of TGF b and an inhibitor of PD-1 for treating or preventing recurrence of cancer 2036 Rezolute Anti-INSR US 9,944,698 EP 2 480 254 JP 5849050 Insulin receptor-modulating antibodies having the functional properties of RZ358 2030 ​ ​ ​ ​ ​ ​ ​ US 10,711,067 EP 3 265 491A1 Methods of treating or preventing post-prandial hypoglycemia after gastric bypass surgery using a negative modulator antibody to the insulin receptor 2036 ​ ​ ​ ​ ​ Ology Bioservices Anti-BoNT US 8,821,879 EP 2 473 191 Coformulations of anti- botulinum neurotoxin antibodies 2030 ​ ​ ​ ​ ​ Various Phage display libraries US 8,546,307 EP 2 344 686 XOMA phage display library components 2032 ​ ​ ​ 16 Table of Contents ​ ​ ​ ​ ​ Licensee Program Representative Patents/Applications Subject matter Expected last expiration in family Seeking out license Anti-IL2 US 10,858,428* EP 3 518 969A2* Interleukin-2 Antibodies and Uses Thereof 2037 Seeking out license Anti-PTH1R US 10,519,250 EP 3 490 600A1 Parathyroid Hormone Receptor 1 Antibodies and Uses Thereof 2037 Organon Ebopiprant US 8,451,480*** EP1 487 442*** ​ 9,447,055*** 9,834,528*** 10,259,795*** EP 3 400 217*** ​ ​ 10,555,934**** 11,524,003 **** EP 3 397 622**** ​ ​ 11,534,428**** Generically covers ebopiprant Ebopiprant; prodrug valine ester; method of synthesizing ebopiprant, method of treating or preventing preterm labor by administering ebopiprant Treating pre-term labor or delaying onset of labor with Ebopiprant or prodrug valine ester plus an additional agent such as nifedipine or atosiban Delaying onset of delivery by administering ebopiprant and about 20mg of nifedipine ​ 2024 ​ 2036 2037 2039 ​ ​ ​ ​ ​ ​ * Jointly owned with Medical University of South Carolina Foundation for Research Development ** Jointly owned with Novartis Vaccines and Diagnostics, Inc. ***Owned by Merck Serono S.A. ****Owned by XOMA (US) LLC ​ If certain patents issued to others are upheld or if certain patent applications filed by others are issued and upheld, our partners and licensees may require certain licenses from others to develop and commercialize certain potential products incorporating our technology.
Biggest changeBelow is a list of representative patents and patent applications related to our licensed programs: ​ ​ ​ ​ ​ ​ Licensee Program Representative Patents/Applications Subject Matter Expected Last Expiration in Patent Family Rezolute Anti-INSR US 9,944,698 EP 2 480 254 JP 5849050 Insulin receptor-modulating antibodies having the functional properties of RZ358 2030 ​ ​ ​ ​ ​ 17 Table of Contents ​ ​ ​ ​ ​ Licensee Program Representative Patents/Applications Subject Matter Expected Last Expiration in Patent Family ​ ​ US 10,711,067 EP 3 265 491A1 ​ ​ ​ ​ WO2023225657A2* Methods of treating or preventing post-prandial hypoglycemia after gastric bypass surgery using a negative modulator antibody to the insulin receptor ​ RZ358 formulations 2036 ​ ​ ​ ​ ​ 2043 ​ ​ ​ ​ ​ Ology Bioservices Anti-BoNT US 8,821,879 EP 2 473 191 Coformulations of anti- botulinum neurotoxin antibodies 2030 ​ ​ ​ ​ ​ Various Phage display libraries US 8,546,307 EP 2 344 686 XOMA phage display library components 2032 ​ ​ ​ AVEO Anti-HGF US 7,649,083** Human-Engineered anti-HGF antibodies and uses thereof 2028 Amolyt Anti-PTH1R US 10,519,250 EP 3 490 600A1 Parathyroid Hormone Receptor 1 Antibodies and Uses Thereof 2037 Seeking out-license Ebopiprant US 8,451,480*** EP1 487 442*** ​ 9,447,055*** 9,834,528*** 10,259,795*** EP 3 400 217*** ​ ​ 10,555,934 11,524,003 EP 3 397 622 ​ ​ 11,534,428 ​ Generically covers ebopiprant Ebopiprant; prodrug valine ester; method of synthesizing ebopiprant, method of treating or preventing preterm labor by administering ebopiprant Treating pre-term labor or delaying onset of labor with Ebopiprant or prodrug valine ester plus an additional agent such as nifedipine or atosiban Delaying onset of delivery by administering ebopiprant and about 20mg of nifedipine 2024 ​ 2036 2037 2039 ​ ​ ​ ​ ​ ​ ​ * Jointly owned with Rezolute, Inc. ** Jointly owned with AVEO Pharmaceuticals, Inc. ***Owned by Merck Serono S.A. ​ If certain patents issued to others are upheld or if certain patent applications filed by others are issued and upheld, our partners and licensees may require certain licenses from others to develop and commercialize certain potential product candidates incorporating our technology.
Our right to milestone payments expires on the later of the receipt of payment from Takeda of the last amount to be paid under the agreement or the cessation by Takeda of all research and development activities with respect to all program antibodies, collaboration targets or collaboration products.
Our right to milestone payments expires on the later of the receipt of payment from Takeda of the last amount to be paid under the agreement or the cessation by Takeda of all research and development activities with respect to all program antibodies, collaboration targets or collaboration products.
We believe there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we currently do not anticipate material capital expenditures arising from environmental regulation.
We believe there are no significant compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we currently do not anticipate material capital expenditures arising from environmental regulation.
Our right to royalties expires on the later of 13.5 years from the first commercial sale of each royalty-bearing discovery product or the expiration of the last-to-expire licensed patent (or 12 years from first commercial sale if there is significant generic competition post patent-expiration).
Our right to receive royalties expires on the later of 13.5 years from the first commercial sale of each royalty-bearing discovery product or the expiration of the last-to-expire licensed patent (or 12 years from first commercial sale if there is significant generic competition post patent-expiration).
In addition, we purchased from Aronora the right to receive low single-digit percentage of net sales of the non-Bayer Products and 10% of all future payments, including upfront payments, option payments and developmental, regulatory and sales milestone payments on potential future sales of the non-Bayer Products.
In addition, we purchased from Aronora the right to receive a low single-digit percentage of net sales of the non-Bayer Products and 10% of all future payments, including upfront payments, option payments and developmental, regulatory and sales milestone payments on potential future sales of the non-Bayer Products.
Further, various state and federal healthcare laws, including the federal Anti-Kickback Statute, the federal False Claims Act and state and federal data privacy and security law, may also apply. There are similar regulations in other countries as well.
Further, various other state and federal healthcare laws and regulations, including the federal Anti-Kickback Statute, the federal False Claims Act and state and federal data privacy and security laws and regulations, may also apply. There are similar regulations in other countries as well.
As a result of the advancement, Agenus earned a $10.0 million clinical development milestone pursuant to its license agreement with Merck, of which we received $1.0 million.
As a result of the advancement, Agenus earned a $10.0 million clinical development milestone payments pursuant to its license agreement with Merck, of which we received $1.0 million.
The first candidate, DAY101 (pan-RAF kinase inhibitor), is being developed by Day One Biopharmaceuticals, and the second candidate, vosaroxin (topoisomerase II inhibitor), is being developed by Denovo Biopharma.
The first candidate, DAY101 (a pan-RAF kinase inhibitor), is being developed by Day One Biopharmaceuticals, and the second candidate, vosaroxin (a topoisomerase II inhibitor), is being developed by Denovo Biopharma.
Pursuant to the terms of the license agreement as amended, we received a total of $6.0 million upon Rezolute’s achievement of financing activities and $8.5 million in installment payments through October 2020. We also received 161,861 shares of common stock of Rezolute (on an as-adjusted post reverse-split basis).
Pursuant to the terms of the license agreement, as amended, we received a total of $6.0 million upon Rezolute’s equity financing activities and $8.5 million in installment payments through October 2020. We also received 161,861 shares of common stock of Rezolute (on an as-adjusted post reverse-split basis).
Under the terms of the license agreement, Rezolute is responsible for all development, regulatory, manufacturing and commercialization activities associated with RZ358 and is required to make certain development, regulatory and commercial milestone payments to us of up to $232.0 million in the aggregate based on the achievement of pre-specified criteria.
Under the terms of the license agreement, Rezolute is responsible for all development, regulatory, manufacturing and commercialization activities associated with RZ358 and is required to make certain development, regulatory and commercial milestone payments to us of up to an aggregate of $232.0 million based on the achievement of pre-specified criteria.
Bioasis Royalty Purchase Agreement In February 2019, we entered into the Bioasis RPA, pursuant to which we acquired future milestone, royalty and option fee payment rights from Bioasis for product candidates that are being developed pursuant to a License Agreement between Bioasis and Prothena Biosciences Limited.
Bioasis Royalty Purchase Agreement In February 2019, we entered into the Bioasis RPA, pursuant to which we acquired future milestone, royalty and option fee payment rights from Bioasis for product candidates that were being developed pursuant to a license agreement between Bioasis and Prothena Biosciences Limited.
Pursuant to the license agreement, we are eligible to receive a low single-digit royalty on sales of Rezolute’s other non-RZ358 products from its current programs, including RZ402 which is in Phase 1 clinical testing.
Pursuant to the license agreement, we are eligible to receive a low single-digit royalty on sales of Rezolute’s other non-RZ358 products from its current programs, including RZ402 which is in Phase 1 clinical study.
Rezolute’s obligation to pay royalties with respect to a particular Rezolute product and country will continue for the longer of twelve years from the date of the first commercial sale of the product in that country or for so long as Rezolute or its licensee is selling such product in such country, provided that any such licensee royalty will terminate upon the termination of the licensee’s obligation to make payments to Rezolute based on sales of such product in such country.
Rezolute’s obligation to pay royalties with respect to a particular Rezolute product and country will continue for the longer of 12 years from the date of the first commercial sale of the product in each country or for so long as Rezolute or its licensee is selling such product in any country, provided that any such licensee royalty will terminate upon the termination of the licensee’s obligation to make payments to Rezolute based on sales of such product in each country.
Aronora Royalty Purchase Agreement In April 2019, we entered into the Aronora RPA, pursuant to which we acquired the rights to potential royalties and a portion of upfront, milestone, and option payments associated with five anti-thrombotic hematology drug products in development: three candidates subject to Aronora’s collaboration Bayer (the “Bayer Products”) and two additional early-stage candidates (the “non-Bayer Products”).
Aronora Royalty Purchase Agreement In April 2019, we entered into the Aronora RPA, pursuant to which we acquired the rights to potential royalties and a portion of upfront, milestone, and option payments associated with five anti-thrombotic hematology product candidates in development: three candidates subject to Aronora’s collaboration with Bayer (the “Bayer Products”) and two additional early-stage candidates (the “non-Bayer Products”).
Further, many countries outside the United States, including the EU member states, have established complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions. If any pricing-related regulation impacts products in our portfolio, it would result in lower royalties received by us.
Further, many countries outside the U.S., including the EU member states, have established complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions. If any pricing-related regulation impacts products in our portfolio, it would result in lower royalties received by us.
Under the terms of the Aronora RPA, we made a $6.0 million upfront payment to Aronora when the transaction closed on June 26, 2019, and in September 2019 we made an additional $3.0 million payment for the three Bayer Products that were active as of September 1, 2019.
Under the terms of the Aronora RPA, we made a $6.0 million upfront payment to Aronora when the transaction closed in June 2019, and in September 2019 we made an additional $3.0 million payment for the three Bayer Products that were active as of September 2019.
These competitive companies, funds and other investment vehicles may have a lower target rate of return, a lower cost of capital or access to greater amounts of capital and thereby may be able to acquire assets that we are also targeting for acquisitions.
These competitor companies, funds and other investment vehicles may have a lower target rate of return, a lower cost of capital or access to greater amounts of capital and thereby may be able to successfully acquire assets that we are also targeting for acquisitions.
In the United States, the volume of drug pricing-related legislation has dramatically increased in recent years. For example, Congress has enacted laws requiring manufacturers to refund the Centers for Medicare & Medicaid Services, or CMS, for certain discarded amounts of drugs from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024.
In the U.S., the volume of drug pricing-related legislation has dramatically increased in recent years. For example, Congress has enacted laws requiring manufacturers to refund the Centers for Medicare & Medicaid Services, or CMS, for certain discarded amounts of drugs from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024.
In addition, changes in existing regulations could have a material adverse effect on us or our partners. In the United States, the EU and other significant or potentially significant markets for our portfolio and product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services.
In addition, changes in existing regulations could have a material adverse effect on us or our partners. In the U.S., the EU and other significant or potentially significant markets for our portfolio and product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services.
Agenus Royalty Purchase Agreement In September 2018, we entered into the Agenus RPA, pursuant to which we acquired the right to receive 33% of the future royalties due to Agenus from Incyte (net of certain royalties payable by Agenus to a third party) and 10% of all future developmental, regulatory and sales milestones on sales of six Incyte immuno-oncology assets.
Agenus Royalty Purchase Agreement In September 2018, we entered into the Agenus RPA, pursuant to which we acquired the right to receive 33% of the future royalties due to Agenus from Incyte (net of certain royalties payable by Agenus to a third party) and 10% of all future developmental, regulatory and sales milestone payments on sales of certain Incyte immuno-oncology assets.
For both currently marketed and products in development, failure to comply with applicable regulatory requirements can, among other things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. Development stage products in our portfolio require approval by the FDA before we will recognize any royalties from sales.
For both currently marketed products and product candidates in development, failure to comply with applicable regulatory requirements can, among other things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. Development-stage product candidates in our portfolio require approval by the FDA before we 16 Table of Contents will recognize any royalties from sales.
No consideration was exchanged upon execution of the arrangement. In consideration for receiving the license for RZ358, Rezolute agreed to issue shares of its common stock and pay cash to us upon the occurrence of Rezolute’s financing activities. The license agreement was subsequently amended in 2018, 2019 and 2020.
No consideration was exchanged upon execution of the arrangement. In consideration for receiving the license for RZ358, Rezolute agreed to issue shares of its common stock and pay cash to us upon the occurrence of any future equity financing activities. The license agreement was subsequently amended in 2018, 2019 and 2020.
Pursuant to the Aronora RPA, if we receive $250.0 million in cumulative royalties on net sales per product, we will be required to pay associated tiered milestones payments to Aronora in an aggregate amount of up to $85.0 million per product.
Pursuant to the Aronora RPA, if we receive at least $25.0 million in cumulative royalties on net sales per product, we will be required to pay associated tiered milestones payments to Aronora in an aggregate amount of up to $85.0 million per product.
We hold and have filed applications for a number of patents in the United States and internationally to protect our products and technology. We also have obtained or have the right to obtain licenses to, or income streams based on, certain patents and applications filed by others.
We hold and have filed applications for a number of patents in the U.S. and internationally to protect our products and technology. We also have obtained or have the right to obtain licenses to, or income streams based on, certain patents and applications filed by others.
Accordingly, no assurance can be given that our, or our partners 15 Table of Contents or licensees’ patents will afford protection against competitors with similar products or that others will not obtain patents claiming aspects similar to those covered by our, or our partners’ or licensees’ patent applications.
Accordingly, no assurance can be given that our, or our partners or licensees’ patents will afford protection against competitors with similar products or that others will not obtain patents claiming aspects similar to those covered by our, or our partners’ or licensees’ patent applications.
We acquired the right to receive (i) up to $54.0 million in potential milestones, potential royalties on sales, if approved, and other payments related to DAY101, excluding up to $20.0 million consideration retained by Viracta, and (ii) up to $57.0 million in potential regulatory and commercial milestones and high single-digit royalties on sales related to vosaroxin, if approved.
We acquired the right to receive (i) up to $54.0 million in potential milestone payments, potential royalties on sales, if approved, and other payments related to DAY101, excluding up to $5.0 million retained by Viracta, and (ii) up to $57.0 million in potential regulatory and commercial milestone payments and high single-digit royalties on sales related to vosaroxin, if approved.
In both the United States and elsewhere, sales of medical products and treatments are dependent, in part, on the availability of coverage and adequate reimbursement from third-party payors, such as government and private insurance plans.
In both the U.S. and elsewhere, sales of medical products and treatments are dependent, in part, on the availability of coverage and adequate reimbursement from third-party payors, such as government and private insurance plans.
We may pay additional sales-based milestones to Kuros of up to $142.5 million representing a portion of the future royalties on commercial sales. In May 2022, Regeneron completed its acquisition of Checkmate Pharmaceuticals resulting in a $5.0 million milestone payment to Kuros.
We may pay additional sales-based milestone payments to Kuros of up to $142.5 million, representing a portion of the future royalties on commercial sales. 11 Table of Contents In May 2022, Regeneron completed its acquisition of Checkmate Pharmaceuticals resulting in a $5.0 million milestone payment to Kuros.
We are eligible to receive remaining milestones up to a total of $16.0 million under the Takeda Collaboration Agreement. In August 2021, Molecular Templates, Inc., assumed full rights to TAK-169 from Takeda, including full control of TAK-169 clinical development, per the terms of its terminated collaboration agreement with Takeda.
We are eligible to receive remaining milestone payments of up to a total of $16.0 million under the Takeda Collaboration Agreement. 14 Table of Contents In August 2021, Molecular Templates, Inc. assumed full rights to TAK-169 from Takeda, including full control of TAK-169 clinical development per the terms of its terminated collaboration agreement with Takeda.
As part of the restructuring, Novartis, the successor to Chiron, was granted, among other things, control over the ongoing product development collaborations remaining thereunder, including iscalimab. In September 2015, the parties agreed to reduce the royalty-style payments that XOMA is eligible to receive on sales of Novartis’ clinical-stage anti-CD40 antibodies (such as iscalimab).
As part of the restructuring, Novartis, as successor to Chiron, was granted, among other things, control over the product development collaborations remaining thereunder, including iscalimab. In September 2015, we and Novartis agreed to reduce the royalty-style payments that we were eligible to receive on sales of Novartis’ clinical-stage anti-CD40 antibodies (such as iscalimab).
We expect that most of our future revenue will be based on payments we may receive for milestones and royalties related to these programs. Our strategy is to expand our portfolio by acquiring additional potential milestone and royalty revenue streams on drug product candidates from third parties.
We expect most of our future revenue to be based on payments we may receive for milestones and royalties associated with these programs. Our strategy is to expand our portfolio by acquiring additional potential milestone and royalty revenue streams from product candidates from third parties.
We paid ObsEva a $15.0 million upfront payment at closing and will pay potential earn-out payments of up to $97.5 million for development, regulatory and sales-based milestones, representing a portion of what we will receive pursuant to the Organon License Agreement.
We paid ObsEva a $15.0 million upfront payment at closing and would have paid potential earn-out payments of up to $97.5 million for development, regulatory and sales-based milestones, representing a portion of what we would have received pursuant to the Organon License Agreement.
We will receive, on average, low single-digit royalties on future sales of the Bayer Products and 10% of all future developmental, regulatory and sales milestones related to the Bayer Products.
We are also entitled to receive, on average, low single-digit royalties on future sales of the Bayer Products and 10% of all future developmental, regulatory and sales milestones related to the Bayer Products.
Rezolute’s obligation to pay royalties with respect to a particular RZ358 product and country will continue for the longer of the date of expiration of the last valid patent claim covering the product in that country, or twelve years from the date of the first commercial sale of the product in that country.
Rezolute’s obligation to pay royalties with respect to a particular RZ358 product and country will continue for the later of the date of expiration of the last valid patent claim covering the product in each country, or 12 years from the date of the first commercial sale of the product in each country.
The Chiron Collaboration Agreement was a risk-sharing arrangement whereby Chiron and XOMA shared expenses and revenues on a 70-30 basis, with XOMA’s share being 30%.
The Chiron Collaboration Agreement was a risk-sharing arrangement whereby Chiron and we shared expenses and revenues on a 70-30 basis, with our share being 30%.
In addition, we acquired the right to receive 33% of the future royalties due to Agenus from Merck and 10% of all future developmental, regulatory and sales milestones on sales of MK-4830, an immuno-oncology product currently in clinical development.
In addition, we acquired the right to receive 33% of the future royalties due to Agenus from Merck and 10% of all future developmental, regulatory and sales milestone payments on sales of MK-4830, an immuno-oncology product.
For a discussion of the risks associated with government regulations, see below under “Item 1A. Risk Factors.” Intellectual Property Intellectual property is important to our business and our future income streams will depend in part on our partners and licensees’, ability to obtain issued patents and to operate without infringing on the proprietary rights of others.
For a discussion of the risks associated with our compliance with government regulations, see Part 1, Item 1A, “Risk Factors.” Intellectual Property Intellectual property is important to our business and our future income streams will depend in part on our partners and licensees’ ability to obtain patents and to operate without infringing on the proprietary rights of others.
Pursuant to the Agenus Royalty Purchase Agreement, our share in future potential development, regulatory and commercial milestones is up to $59.5 million, and the royalties have no limit. Under the terms of the Agenus Royalty Purchase Agreement, we paid Agenus $15.0 million. In November 2020, MK-4830 advanced to Phase 2 development stage.
Pursuant to the Agenus RPA, our share in future potential development, regulatory and commercial milestones is up to $59.5 million, and the royalties have no limit. Under the terms of the Agenus RPA, we paid Agenus an upfront payment of $15.0 million. In November 2020, MK-4830 advanced into Phase 2 development.
Rezolute’s future royalty obligations in the United States will be reduced by 20% if the manufacture, use or sale of a licensed product is not covered by a valid XOMA patent claim, until such a claim is issued.
Rezolute’s future royalty obligations in the U.S. will be reduced by 20% if the manufacture, use or sale of a licensed product is not covered by a valid patent claim, until such a claim is granted.
Effective December 31, 2011, we changed our jurisdiction of incorporation from Bermuda to Delaware and changed our name from XOMA Ltd. to XOMA Corporation.
Effective December 31, 2011, we redomiciled from Bermuda to Delaware and changed our name from XOMA Ltd. to XOMA Corporation.
Pursuant to the Kuros RPA, we were entitled to 50% of the milestone payment, which we received in July 2022. Viracta Royalty Purchase Agreement In March 2021, we entered into the Viracta RPA, pursuant to which we acquired the right to receive future royalties, milestones, and other payments related to two clinical-stage drug candidates for $13.5 million.
Viracta Royalty Purchase Agreement In March 2021, we entered into the Viracta RPA, pursuant to which we acquired the right to receive future royalties, milestone payments, and other payments related to two clinical-stage drug candidates for an upfront payment of $13.5 million.
In January 2022, we earned a development milestone of $0.8 million pursuant to the Takeda Collaboration Agreement. 12 Table of Contents Rezolute In December 2017, we entered into a license agreement with Rezolute pursuant to which we granted an exclusive global license to Rezolute to develop and commercialize X358 (now “RZ358”) products for all indications.
In January 2022, we earned a development milestone of $0.8 million pursuant to the Takeda Collaboration Agreement. Rezolute In December 2017, we entered into a license agreement with Rezolute pursuant to which we granted an exclusive global license to Rezolute to develop and commercialize RZ358 (previously known as “X358”) products for all indications.
We and Rezolute also entered into a common stock purchase agreement pursuant to which Rezolute agreed to issue to us, as consideration for receiving the license for RZ358, a certain number of its common stock related to its future financing activities.
In addition, we entered into a common stock purchase agreement with Rezolute pursuant to which Rezolute agreed to issue to us, as consideration for receiving the license for RZ358, a certain number of its common stock in connection with any future equity financing activities.
We also assumed ObsEva’s ongoing obligations under the Organon License Agreement and the Merck KGaA License Agreement. Pursuant to the Organon License Agreement, XOMA is eligible to receive up to $475.0 million in payments for ebopiprant development, commercialization and sales-based milestones.
We also assumed ObsEva’s ongoing obligations under the Organon License Agreement and the Merck KGaA License Agreement. Pursuant to the Organon License Agreement, we were eligible to receive up to $475.0 million in payments for ebopiprant development, commercialization and sales-based milestones, and royalties that range from low to mid-teens from Organon.
Palobiofarma Royalty Purchase Agreement In September 2019, we entered into the Palo RPA, pursuant to which we acquired the rights to potential royalty payments in low single-digit percentages of aggregate net sales associated with six drug candidates in various clinical development stages, targeting the adenosine pathway with potential applications in solid tumors, non-Hodgkin’s lymphoma, asthma/chronic obstructive pulmonary disease, ulcerative colitis, idiopathic pulmonary fibrosis, lung cancer, psoriasis, nonalcoholic steatohepatitis and other indications (the “Palo Licensed Products”) that are being developed by Palo.
In July 2020, Bayer elected to not exercise its option on the third Bayer Product and that product is now subject to the same economic terms as the non-Bayer Products. 12 Table of Contents Palobiofarma Royalty Purchase Agreement In September 2019, we entered into the Palo RPA, pursuant to which we acquired the rights to potential royalty payments in low single-digit percentages of aggregate net sales associated with six product candidates in various clinical development stages, targeting the adenosine pathway with potential applications in solid tumors, non-Hodgkin’s lymphoma, asthma/chronic obstructive pulmonary disease, ulcerative colitis, idiopathic pulmonary fibrosis, lung cancer, psoriasis, nonalcoholic steatohepatitis and other indications (the “Palo Licensed Products”) that are being developed by Palo.
This transaction closed in 2006 at which time Novartis acquired Chiron’s interest in the Chiron Collaboration Agreement. In July of 2008, Novartis and XOMA restructured the Chiron Collaboration Agreement, which involved six development programs including iscalimab, a fully human anti-CD40 antagonist antibody intended as a treatment for B-cell mediated diseases, including malignancies and autoimmune diseases.
In July 2008, Novartis and we restructured the Chiron Collaboration Agreement, which involved six development programs including iscalimab, a fully human anti-CD40 antagonist antibody intended as a treatment for B-cell mediated diseases, including malignancies and autoimmune diseases.
There can be no assurance that such licenses, if required, will be available on acceptable terms. If such licenses are obtained, our partners and licensees may be able to deduct some or all of the costs from the royalties they owe to us. We protect our proprietary information, in part, by confidentiality agreements with our employees, consultants and partners.
There can be no assurance that such licenses, if required, will be available on acceptable terms, if at all. If such licenses are obtained, our partners and licensees may be able to deduct some or all of the costs from the royalties they owe to us.
Under the terms of the Bioasis RPA, we paid Bioasis an upfront cash payment of $0.3 million and will be required to make contingent future cash payments of up to $0.2 million to Bioasis if and when the licensed product candidates reach certain development milestones. As of December 31, 2021, none of the development milestones had been achieved.
Under the terms of the Bioasis RPA, we paid Bioasis an upfront cash payment of $0.3 million and would have been required to make contingent future cash payments of up to $0.2 million to Bioasis if and when the licensed product candidates reached certain development milestones.
Under the Takeda Collaboration Agreement, we may receive additional milestone payments aggregating up to $19.0 million relating to TAK-079 (mezagitamab) and a 4% royalty on future sales of all products subject to this license, including TAK-169, which entered a phase 1 study in February 2020.
Under the Takeda Collaboration Agreement, we may receive additional milestone payments of an aggregate of up to $19.0 million relating to TAK-079 (mezagitamab) and a 4% royalty on future sales of all products subject to this license.
These royalty-style payments are tiered based on sales levels and now have percentage rates ranging from mid-single-digit to low teens. In September 2021, Novartis announced its decision to discontinue its study of CFZ533 (iscalimab) in kidney transplant. In September 2022, after an interim analysis of data, Novartis also decided to discontinue its study of CFZ533 in liver transplant.
These royalty-style payments were previously tiered based on sales levels, and were amended to have percentage rates ranging from mid-single-digit to low teens. In September 2021, Novartis announced its decision to discontinue its study of CFZ533 (iscalimab) in kidney transplant.
In January 2022, Rezolute dosed the last patient in its Phase 2b clinical trial for RZ358, which triggered a $2.0 million milestone payment due to XOMA pursuant to our Rezolute License Agreement. Janssen We and Janssen were parties to a license agreement which was terminated in 2017.
In January 2022, Rezolute dosed the last patient in its Phase 2b clinical trial for RZ358, which triggered a $2.0 million milestone payment due to us pursuant to the Rezolute License Agreement, as amended.
Additionally, for each drug candidate, we are entitled to receive milestone payments of up to $3.0 million upon Janssen’s achievement of certain clinical development and regulatory approval events. Additional milestones may be due for drug candidates, which are the subject of multiple clinical trials. Upon commercialization, we are eligible to receive a 0.75% royalty on net sales of each product.
Under the agreement, Janssen made a one-time payment of $2.5 million to us. Additionally, for each product candidate, we are entitled to receive milestone payments of up to $3.0 million upon Janssen’s achievement of certain clinical development and regulatory approval milestones. Additional milestone payments may be due for product candidates which are the subject of multiple clinical trials.
The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of pharmaceutical products and there are often comparable regulations that apply at the state level.
The Federal Food, Drug and Cosmetic Act and, for biological products, the Public Health Service Act, govern the testing, manufacture, safety, efficacy, purity, potency, labeling, storage, recordkeeping, approval, reporting, tracking and tracing, importing and exporting, and advertising, marketing and promotion of pharmaceutical and biological products, and there are other comparable laws and regulations that apply at the state level.
Our 6 Table of Contents portfolio was built through acquisitions of rights to future milestones and royalties that we have made since our royalty aggregator business model was implemented in 2017 combined with outlicensing our proprietary products and platforms from our legacy discovery and development business.
Our portfolio was built through the acquisition of rights to future milestones, royalties and commercial payments since our royalty aggregator business model was implemented in 2017 combined with out-licensing our proprietary products and platforms from our legacy discovery and development business.
Competition The biotechnology and pharmaceutical industries are subject to continuous and substantial technological change. Some of the drugs our licensees or milestone and royalty partners are developing may compete with existing therapies or other drugs in development by other companies.
Some of the drugs our licensees or milestone and royalty partners are developing may compete with existing therapies or other product candidates in development by other companies.
Novartis – Anti-CD40 Antibody In February 2004, we entered into an exclusive, worldwide, multi-product collaboration agreement with Chiron to research, develop and commercialize multiple antibody products for the treatment of cancer, and such agreement was replaced with the Chiron Collaboration Agreement entered in May of 2005.
Selected Programs Underlying Our Portfolio The following is a summary of significant licenses and collaboration agreements related to our legacy product candidates and technologies. 13 Table of Contents Novartis – Anti-CD40 Antibody In February 2004, we entered into an exclusive, worldwide, multi-product collaboration agreement with Chiron to research, develop and commercialize multiple antibody product candidates for the treatment of cancer, and such agreement was replaced with the Chiron Collaboration Agreement entered into in May 2005.
Novartis is continuing iscalimab studies in other indications such as Sjögren’s Syndrome, Lupus Nephritis and Hidradenitis Suppurativa. Our right to royalty-style payments expires on the later of the expiration of any licensed patent covering each product or 10 years from the first commercial sale of each product in each country.
Our right to royalty-style payments expires on the later of the expiration of any licensed patent covering each product or 10 years from the first commercial sale of each product in each country.
Many of these companies also have extensive experience in preclinical testing and human clinical trials, obtaining FDA and other regulatory approvals and manufacturing and marketing pharmaceutical products. For a discussion of the risks associated with competition, see below under “Item 1A.
Many of these companies also have extensive experience in preclinical studies and human clinical trials, obtaining FDA and other regulatory approvals and manufacturing and marketing pharmaceutical products.
Our principal executive offices are located at 2200 Powell Street, Suite 310, Emeryville, California 94608. Our telephone number at our principal executive offices is (510) 204-7200. Our website address is www.xoma.com . The information found on our website is not part of this or any other report filed with or furnished to the SEC.
Our telephone number at our principal executive offices is (510) 204-7200. Our website address is www.xoma.com . The information found on our website is not part of this or any other report filed with or furnished to the SEC. Employees We rely on a small number of skilled, experienced, and innovative employees to conduct the operations of our Company.
We are eligible to receive commercial payments from Roche consisting of 0.50% of future net sales of faricimab for a ten-year period following the first commercial sales in each applicable jurisdiction.
We are eligible to receive commercial payments from Roche consisting of 0.5% of future net sales of faricimab for a ten-year period following the first commercial sales in each applicable jurisdiction. In 2022, VABYSMO was approved by the FDA and the EMA for the treatment of wet, or neovascular, age-related macular degeneration and diabetic macular edema.
Novartis is a development partner on NIR178, one of the Palo Licensed Products, and NIR178 is being developed pursuant to a license agreement between Palo and Novartis. Under the terms of the Palo RPA, we paid Palo $10.0 million for the rights to potential royalty payments on future sales of the Palo Licensed Products.
Under the terms of the Palo RPA, we paid Palo an upfront payment of $10.0 million for the rights to potential royalty payments on future potential sales of the Palo Licensed Products.
Janssen’s obligation to pay royalties with respect to a particular product and country will continue until the eighth-year-and-sixth-month anniversary of the first commercial sale of the product in such country.
Upon commercialization, we are eligible to receive a 0.75% royalty on net sales of each product. Janssen’s obligation to pay royalties with respect to a particular product and country will continue until the eighth-year-and-sixth-month anniversary of the first commercial sale of the product in such country. The agreement will remain in effect unless terminated by mutual written agreement.
In addition, we were granted an option to purchase a 1% royalty right on the next two license agreements entered into between Bioasis and third-party licensees subject to certain payments and conditions as well as a right of first negotiation on the purchase of royalty rights on subsequent Bioasis license agreements with third parties. 9 Table of Contents In November 2020, we entered into the Second Bioasis RPA, pursuant to which we acquired potential future milestone and other payments, and royalty rights from Bioasis for product candidates that are being developed pursuant to a research collaboration and license agreement between Bioasis and Chiesi.
In November 2020, we entered into the Second Bioasis RPA, pursuant to which we acquired potential future milestone and other payments, and royalty rights from Bioasis for product candidates that were being developed pursuant to a research collaboration and license agreement between Bioasis and Chiesi.
For example, in September 2021, Novartis announced its decision to discontinue its study of CFZ533 (iscalimab) in kidney transplant. In September 2022, after an interim analysis of data, Novartis also decided to discontinue its study of CFZ533 in liver transplant.
In September 2022, after an interim analysis of data, Novartis also decided to discontinue its study of CFZ533 in liver transplant. Novartis is continuing iscalimab studies in other indications, such as Sjögren’s Syndrome.
These parties may breach these agreements, and we may not have adequate remedies for any breach. To the extent that we or our consultants or partners use intellectual property owned by others, we may have disputes with our consultants or partners or other third parties, as to the rights in related or resulting know-how and inventions.
To the extent that we or our consultants or partners use intellectual property owned by others, we may have disputes with our consultants or partners or other third parties, as to the rights in related or resulting know-how and inventions. 18 Table of Contents Concentration of Risk Our business model is dependent on third parties achieving specified development milestones and product sales.
COMPANY ASSET NAME TARGET ROYALTY RATE Affimed AFM13 CD30/CD16A Confidential Affimed AFM24 EGRF/CD16A Confidential Aronora AB002 (proCase/E-WE thrombin) Protein kinase C Low single-digit Aronora AB023 (xisomab, 3G3) Factor XI Low single-digit Aronora AB054 Factor XII Low single-digit AstraZeneca AZD2936 TIGIT/PD-1 Low single-digit AVEO Oncology AV-299 (ficlatuzumab) HGF Low single-digit Bayer (Aronora RPA) BAY1213790 (osocimab) Factor XIa Low single-digit Regeneron CMP-001 (vidutolimod) TLR9 High single-digit to double-digit Chiesi (Bioasis RPA) Lysosomal Storage Disorders Enzymes Enzyme replacement therapy Low single-digit Compugen COM902 TIGIT Low single-digit Day One DAY101 (tovorafenib) Pan-RAF Mid-single-digit Denovo Biopharma vosaroxin Topoisomerase II High single-digit Incyte (Agenus RPA) INCAGN1876 GITR Mid-single-digit Incyte (Agenus RPA) INCAGN1949 OX-40 Mid-single-digit Incyte (Agenus RPA) INCAGN02390 TIM-3 Low to mid-single-digit Incyte (Agenus RPA) INCAGN2385 LAG-3 Low to mid-single-digit Janssen Biotech JNJ-63723283 (cetrelimab) PD-1 0.75% Merck (Agenus RPA) MK-4830 ILT-4 Low single-digit Molecular Templates MT-0169 CD-38 4% Novartis CFZ533 (iscalimab) CD-40 Mid-single-digit to low-teens Novartis VPM087 (gevokizumab) IL-1ß High single-digit to mid-teens Novartis NIS793 TGFß Mid-single-digit to low teens Novartis (Palobiofarma RPA) NIR178 Adenosine A2a receptor Low single-digit 7 Table of Contents Ology Bioservices G03-52-01 Botulinum neurotoxins 15% Organon (ObsEva IP Acquisition Agreement) ebopiprant Prostaglandin F2α (PGF2α) receptor Low- to mid-teens Palo PBF-680 Adenosine A1 receptor Low single-digit Palo PBF-677 Adenosine A3 receptor Low single-digit Palo PBF-999 Adenosine A2a receptor/ Phosphodiesterase 10 (PDE-10) Low single-digit Palo PBF-1129 Adenosine A2b receptor Low single-digit Palo PBF-1650 Adenosine A3 receptor Low single-digit Rezolute RZ358 INSR High single-digit to mid-teens Rezolute RZ402 Plasma kallikrein Low single-digit Roche faricimab (faricimab-svoa) Angiopoietin-2 and VEGF-A 0.5% Takeda TAK-079 (mezagitamab) CD-38 4% ​ Acquisitions ObsEva Intellectual Property Acquisition Agreement In November 2022, we entered into the ObsEva IP Acquisition Agreement pursuant to which we acquired all of ObsEva’s intellectual property (patents and know-how) and license agreement rights related to ebopiprant, an investigational compound previously licensed by ObsEva from Merck KGaA.
Key Portfolio Assets COMPANY ASSET NAME TARGET ROYALTY RATE Alora DSUVIA ® (sufentanil sublingual tablet) m receptors 15% (Commercial) 37.5-75% (DoD) Day One DAY101 (tovorafenib) Pan-RAF Mid-single-digit Janssen Biotech JNJ-63723283 (cetrelimab) PD-1 0.75% Medexus IXINITY ® [coagulation factor IX (recombinant)] Factor IX Mid-single-digit Rezolute RZ358 INSR High single-digit to mid-teens Roche VABYSMO ® (faricimab-svoa) Angiopoietin-2 and VEGF-A 0.5% Takeda TAK-079 (mezagitamab) CD-38 4% Zevra arimoclomol Heat-shock protein 70 Mid-single-digit ​ Large pharma assets COMPANY ASSET NAME TARGET ROYALTY RATE AstraZeneca AZD2936 TIGIT/PD-1 Confidential Bayer BAY-1213790 (osocimab) Factor XIa Low single-digit LG Chem (AVEO Oncology) AV-299 (ficlatuzumab) HGF Low single-digit Novartis CFZ533 (iscalimab) CD-40 Mid-single-digit to low-teens Regeneron CMP-001 (vidutolimod) TLR9 High single-digit to double-digit ​ 9 Table of Contents Biotech assets COMPANY ASSET NAME TARGET ROYALTY RATE Affimed AFM13 (acimtamig) CD30/CD16A Confidential Affimed AFM24 EGRF/CD16A Confidential Aronora AB023 (gruticibart) Factor XI Low single-digit Aronora AB002 (E-WE thrombin) E-WE thrombin Low single-digit Aronora AB054 Factor XII Low single-digit AVEO Oncology AV-299 (ficlatuzumab) HGF Low single-digit Compugen COM902 TIGIT Confidential Denovo Biopharma vosaroxin topoisomerase II High single-digit ImmunityBio aldoxorubicin Albumin-linked formulation of doxorubicin Mid-single-digits to mid-teens Incyte INCAGN2385 LAG-3 Low to mid-single-digit Incyte INCAGN02390 TIM-3 Low to mid-single-digit Monopar Therapeutics MNPR-101 uPAR None Palobiofarma PBF-680 Adenosine A1 receptor Low single-digit Palobiofarma PBF-677 Adenosine A3 receptor Low single-digit Palobiofarma PBF-999 Adenosine A2a receptor/ Phosphodiesterase 10 (PDE-10) Low single-digit Palobiofarma PBF-1129 Adenosine A2b receptor Low single-digit Palobiofarma PBF-1650 Adenosine A3 receptor Low single-digit National Resilience G03-52-01 Botulinum neurotoxins 15% Rezolute RZ402 Plasma kallikrein Low single-digit ​ Acquisitions – Commercial Programs Affitech Commercial Payment Purchase Agreement In October 2021, we entered into the Affitech CPPA, pursuant to which we purchased a future stream of commercial payment rights to Roche’s VABYSMO ® (faricimab-svoa) from Affitech for an upfront payment of $6.0 million.
Portfolio Highlights ​ The following table highlights key assets included in our portfolio of potential future milestone and royalty streams. This table does not include all assets because certain assets are subject to confidentiality agreements.
We believe that expanding our portfolio through these acquisitions allows for further diversification across therapeutic areas and development stages. Royalty Portfolio ​ The following tables highlight key assets included in our portfolio of potential future milestone and royalty payment streams. These tables do not include all assets because certain assets are subject to confidentiality agreements.
As of March 6, 2023, we employed 12 full-time employees and one part-time employee primarily engaged in executive, business development, legal, finance and administrative positions. We also utilize independent contractors and consultants to supplement our workforce. Item 1A. Risk Factors The following risk factors and other information included in this Annual Report should be carefully considered.
As of March 4, 2024, we employed 13 full-time employees who were primarily engaged in executive, business development, legal, finance and administrative positions. We also utilize independent contractors and consultants to supplement our workforce.
Financial terms included a loan facility from Chiron to XOMA, secured by XOMA’s 30% ownership interest in the collaboration, of up to $50.0 million to fund up to 75% of our share of expenses beginning in 2005. 11 Table of Contents In October 2005, Chiron announced it had entered into a definitive merger agreement with Novartis under which Novartis acquired all of the shares of Chiron that it did not already own.
It included a loan facility from Chiron to us, secured by our 30% ownership interest in the collaboration, of up to $50.0 million to fund up to 75% of our share of expenses beginning in 2005.
A large percentage of the calculated net present value of our portfolio is represented by a limited number of products. The failure of any one of these products to move forward in clinical development or commercialization may have a material adverse effect on our financial condition and results of operation.
The failure of any one of these products to move forward in clinical development or commercialization may have a material adverse effect on our financial condition and results of operations. Corporate Information We were incorporated in Delaware in 1981 and redomiciled as a Bermuda-exempted company in December 1998.
When referring to a time or period before December 31, 1998, or after December 31, 2011, the terms “Company” and “XOMA” refer to XOMA Corporation, a Delaware corporation; when referring to a time or period between December 31, 1998, and December 31, 2011, such terms refer to XOMA Ltd., a Bermuda company.
References to the “Company” and “XOMA” before December 31, 1998 or after December 31, 2011, refer to XOMA Corporation, a Delaware corporation; references to the “Company” and “XOMA” between December 31, 1998 and December 31, 2011 refer to XOMA Ltd., a Bermuda company. Our principal executive offices are located at 2200 Powell Street, Suite 310, Emeryville, California 94608.
In the United States, pharmaceuticals are subject to regulation by both federal and various state authorities, including the FDA.
We and our partners and licensees, depending on specific activities performed, are subject to these regulations. In the U.S., pharmaceuticals and biological products are subject to regulation by both federal and various state authorities, including the FDA.
We paid Bioasis $1.2 million upon closing of the Second Bioasis RPA for the purchased rights.
We paid Bioasis $1.2 million upon the closing of the Second Bioasis RPA for the purchased rights. In June 2023, Bioasis announced the suspension of all of its operations and the termination of the research collaboration and license agreement between Bioasis and Chiesi.
If ebopiprant is successfully commercialized, we will be entitled to receive royalties that range from low to mid-teens from Organon and will be required to make mid-single-digit royalty payments to Merck KGaA.
If ebopiprant was successfully commercialized, we would have been required to make mid-single-digit royalty payments to Merck KGaA.
Some of our agreements, or those of our partners or licensees, contain “step-down” provisions where the royalty rate is reduced following patent expiration or revocation.
Some of our agreements, or those of our partners or licensees, contain “step-down” provisions where the royalty rate is reduced following patent expiration or revocation. Furthermore, there can be no assurance that our royalties will expire when expected. Any reductions in the duration of royalties relative to our estimates may adversely affect our financial condition and results of operations.
Risk Factors.” 14 Table of Contents Government Regulation and Environmental Matters The research and development, manufacturing and marketing of pharmaceutical products are subject to regulation by numerous governmental authorities in the United States and other countries. We and our partners and licensees, depending on specific activities performed, are subject to these regulations.
For a discussion of the risks associated with our competitive environment, refer to Part I, Item 1A, “Risk Factors.” Government Regulation and Environmental Matters The research and development, manufacturing and marketing of pharmaceutical and biological products are subject to regulation by numerous governmental authorities in the U.S. and other countries.
In August 2019, we and Janssen entered into a new agreement pursuant to which we granted a non-exclusive license to Janssen to develop and commercialize certain drug candidates under our patents and know-how. Under the new agreement, Janssen made a one-time payment of $2.5 million to us.
In December 2023, Rezolute announced it had initiated a Phase 3 clinical study for RZ358 in congenital hyperinsulinism. 15 Table of Contents Janssen In August 2019, we entered into an agreement with Janssen pursuant to which we granted a non-exclusive license to Janssen to develop and commercialize certain product candidates, including our patents and know-how.
In January 2022, Genentech, a member of the Roche group, received approval from the FDA to commercialize VABYSMO (faricimab-svoa) for the treatment of wet, or neovascular, age-related macular degeneration and diabetic macular edema. Pursuant to the Affitech CPPA, we paid Affitech a $5.0 million milestone tied to these U.S. marketing approvals.
In 2022, pursuant to the Affitech CPPA, we paid Affitech $8.0 million in milestone payments tied to these marketing approvals. In October 2023, the FDA approved VABYSMO for the treatment of retinal vein occlusion. Pursuant to the Affitech CPPA, we received commercial payments totaling $7.3 million and $0.5 million in 2023 and 2022, respectively.
Concentration of Risk Our business model is dependent on third parties achieving specified development milestones and product sales. Our portfolio currently includes over 70 fully funded programs from which we could potentially receive royalties or other payments if the programs achieve marketability. Novartis is developing several of the programs in our portfolio.
Our portfolio currently includes partner funded programs from which we could potentially receive royalties or other payments if the programs achieve marketability. A large percentage of the calculated net present value of our portfolio is represented by a limited number of products.
The new agreement will remain in effect unless terminated by mutual written agreement of the parties. 13 Table of Contents In May 2021, we announced we earned a $0.5 million milestone from Janssen, upon dosing of the first patient in a Phase 3 clinical trial evaluating one of Janssen’s biologic assets.
In 2023, we earned a total of $1.5 million in milestone payments from Janssen, which included five milestone payments for IND filings and one milestone payment upon dosing of the first patient in a Phase 3 clinical trial evaluating one of Janssen’s biologic assets. Competition The biotechnology and pharmaceutical industries are subject to significant technological change.

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Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties We currently lease space in one building that houses our corporate headquarters in Emeryville, California. The lease was originally scheduled to expire in February 2023 and in January 2023, we extended the lease through July 2023.
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Item 2. PROPERTIES We lease space for our corporate headquarters in Emeryville, California. As of December 31, 2023, we expect to incur incremental undiscounted costs of $0.5 million associated with our building lease until it expires in April 2029. We believe our facilities are adequate to meet our current requirements.
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We believe our facilities are adequate to meet our requirements for the near term and we are currently evaluating our future office space needs. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe may, however, be involved in material legal proceedings in the future, and the potential impact on us of any on-going proceeding could change.
Biggest changeHowever, from time to time, we may become involved in litigation, arbitration or other proceedings relating to claims arising from the ordinary course of business. 55 Table of Contents We may become involved in material legal proceedings in the future, and the potential impact on us of any on-going proceeding which we do not currently believe to be material could become material.
Such matters are subject to significant uncertainties, and there can be no assurance that any legal proceedings in which we are or may become involved will not have a material adverse effect on our business, results of operations, financial position or cash flows. ​ Item 4. Mine Safety Disclosures Not applicable. ​ ​ 47 Table of Contents PART II
Such matters are subject to significant uncertainties, and there can be no assurance that any legal proceedings in which we are or may become involved will not have a material adverse effect on our business, results of operations, financial position or cash flows. Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II
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Item 3. Legal Proceedings From time to time, we are involved in litigation, arbitration or other proceedings relating to claims arising out of our operations. ​ We are not currently involved in any legal proceedings that we believe to be material.
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Item 3. LEGAL PROCEEDINGS We are not currently engaged in any legal proceedings that, in the opinion of our management, if determined adversely to us, would individually or taken together, have a material adverse effect on our business, results of operations, financial position or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe do not anticipate paying cash dividends on our common stock in the foreseeable future. Recent Sales of Unregistered Securities None. ​ Item 6. Reserved ​ ​ 48 Table of Contents ​
Biggest changeDividend Policy We have not paid dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future.
Holders of our Series B Preferred Stock are entitled to receive, when and as declared by our Board of Directors, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.375% of the $25,000 liquidation preference per year of Series B Preferred Stock ($25.00 per depositary share) per year (equivalent to $2,093.75 per year per share or $2.09375 per year per depositary share).
Holders of our Series B Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.375% of the $25,000 liquidation preference per year of Series B Preferred Stock ($25.00 per depositary share) per year (equivalent to $2,093.75 per year per share of Series B Preferred Stock or $2.09375 per year per depositary share).
Holders of shares of our Series A Preferred Stock are entitled to receive, when and as declared by our Board of Directors, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per year per share) per year.
Holders of shares of our Series A Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per year per share) per year.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Registrant’s Common Equity Our common stock trades on The Nasdaq Global Market tier of the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “XOMA.” On March 6, 2023, there were 192 stockholders of record of our common stock, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant’s Common Equity Our common stock trades on The Nasdaq Global Market (“Nasdaq”) under the symbol “XOMA.” On March 4, 2024, there were 188 stockholders of record of our common stock, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).
All of the shares of our common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and are therefore considered to be held of record by Cede & Co. as one stockholder. Dividend Policy We have not paid dividends on our common stock.
Shares of our common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and are therefore considered to be held of record by Cede & Co., and we are unable to estimate the total number of stockholders represented by these record holders.
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Recent Sales of Unregistered Securities None. ​ Issuer Purchases of Equity Securities None. ​ Item 6. RESERVED ​ ​ 56 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLiquidity and Capital Resources The following table summarizes our unrestricted cash, our working capital and our cash flow activities as of and for each of the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ ​ 2022 2021 Change Cash and cash equivalents ​ $ 57,826 ​ $ 93,328 ​ $ (35,502) Working capital ​ $ 54,435 ​ $ 84,006 ​ $ (29,571) ​ 54 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2022 2021 Change Net cash (used in) provided by operating activities ​ $ (12,879) ​ $ 22,678 ​ $ (35,557) Net cash used in investing activities ​ (20,221) ​ ​ (26,500) ​ 6,279 Net cash (used in) provided by financing activities ​ (4,451) ​ 12,835 ​ (17,286) Net (decrease) increase in cash, cash equivalents and restricted cash ​ $ (37,551) ​ $ 9,013 ​ $ (46,564) ​ Net cash used in operating activities for 2022 was primarily due to our operating expenses of $23.4 million, excluding non-cash expenses of $4.4 million including stock-based compensation of $3.6 million, partially offset by a $2.0 million milestone payment received from Rezolute, a $0.8 million milestone payment received from Takeda and a $0.8 million milestone payment received from Compugen.
Biggest changeLiquidity and Capital Resources The following table summarizes our unrestricted cash and cash equivalents, our working capital and our cash flow activities as of and for each of the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 Change Unrestricted cash and cash equivalents ​ $ 153,290 ​ $ 57,826 ​ $ 95,464 Working capital ​ $ 149,814 ​ $ 54,435 ​ $ 95,379 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 Change Net cash used in operating activities ​ $ (18,158) ​ $ (12,879) ​ $ (5,279) Net cash used in investing activities ​ (711) ​ ​ (20,221) ​ 19,510 Net provided by (used in) financing activities ​ 120,593 ​ (4,451) ​ 125,044 Net increase (decrease) in cash, cash equivalents and restricted cash ​ $ 101,724 ​ $ (37,551) ​ $ 139,275 ​ Net cash used in operating activities for the year ended December 31, 2023 was $18.2 million and primarily included our operating expenses of $46.6 million partially offset by non-cash expenses of $26.2 million, which primarily 63 Table of Contents included stock-based compensation of $9.1 million and impairment charges of $15.8 million, a $1.5 million milestone payment received from Janssen and a $1.0 million milestone payment received from an undisclosed licensee.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview XOMA is a biotech royalty aggregator. We have a sizable portfolio of economic rights to future potential milestone and royalty payments associated with partnered pre-commercial therapeutic candidates.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview XOMA is a biotech royalty aggregator. We have a sizable portfolio of economic rights to future potential milestone and royalty payments associated with partnered commercial and pre-commercial therapeutic candidates.
Dividends : Holders of our Series A Preferred Stock are entitled to receive, when and as declared by our Board of Directors, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per share of Series A Preferred Stock per year).
Dividends : Holders of our Series A Preferred Stock are entitled to receive, when and as declared by our Board, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per share of Series A Preferred Stock per year).
Because it is uncertain if and when these milestones will be achieved, such contingencies, aggregating up to $6.3 million (assuming one product per contract meets all milestone events) have not been recorded on our consolidated balance sheet as of December 31, 2022.
Because it is uncertain if and when these milestones will be achieved, such contingencies, aggregating up to $6.3 million (assuming one product per contract meets all milestone events) have not been recorded on our consolidated balance sheet as of December 31, 2023.
All of these milestones and royalty payments represent a portion of the funds we may receive in the future pursuant to these agreements, and therefore will be fully funded by the related royalty or commercial payment receipts.
All of these milestones and royalty payments represent a portion of the funds we may receive in the future pursuant to these agreements, and therefore we expect these payments to be fully funded by the related royalty or commercial payment receipts.
Holders of Series B Depositary Shares are entitled to receive, when and as declared by our Board of Directors, cumulative cash dividends at the rate of 8.375% of the $25,000 liquidation 56 Table of Contents preference per share of Series B Preferred Stock ($25.00 per depositary share) per year, which is equivalent to $2,093.75 per year per share of Series B Preferred Stock ($2.09375 per year per depositary share).
Holders of Series B Depositary Shares are entitled to receive, when and as declared by our Board, cumulative cash dividends at the rate of 8.375% of the $25,000 liquidation preference per share of Series B Preferred Stock ($25.00 per depositary share) per year, which is equivalent to $2,093.75 per year per share of 65 Table of Contents Series B Preferred Stock ($2.09375 per year per depositary share).
To the extent volatility in our stock price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing stock-based compensation cost recognized in future periods.
To the extent volatility in our stock price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing stock-based compensation expense recognized in future periods.
To establish an estimate of expected term, we consider the vesting period and contractual period of the award and our historical experience of stock option exercises, post-vesting cancellations and volatility. The risk-free rate is based on the yield available on United States Treasury zero-coupon issues. Forfeitures are recognized as they occur.
To establish an estimate of expected term, we consider the vesting period and contractual period of the award and our historical experience of stock option exercises, post-vesting cancellations and volatility. The risk-free rate is based on the yield available on U.S. Treasury zero-coupon issues. Forfeitures are recognized as they occur.
Net cash used in financing activities for the year ended December 31, 2022, of $4.5 million was primarily due to the payment of dividends on our Series A and Series B Preferred Stock of $5.5 million, partially offset by the receipt of net cash provided from the exercise of stock options after related tax payments of $1.0 million.
Net cash used in financing activities for the year ended December 31, 2022 was $4.5 million and primarily included dividends on our Series A and Series B Preferred Stock of $5.5 million, partially offset by the receipt of net cash provided from the exercise of stock options after related tax payments of $1.0 million.
Net cash used in investing activities for the year ended December 31, 2022 of $ 20.2 million was primarily due to the $15.2 million paid for the IP acquired pursuant to the ObsEva IP Acquisition Agreement in November 2022 and the $5.0 million and $3.0 million payments for regulatory milestones pursuant to the Affitech CPPA, partially offset by the $2.5 million milestone payment received from Kuros in July 2022 and the $0.5 million commercial payment received from Roche in August 2022 .
Net cash used in investing activities for the year ended December 31, 2022 was $20.2 million, and primarily included $15.2 million paid for the IP acquired pursuant to the ObsEva IP Acquisition Agreement in November 2022 and $8.0 million of regulatory milestone payments pursuant to the Affitech CPPA, partially offset by a $2.5 million milestone payment received from Kuros in July 2022 and a $0.5 million commercial payment received from Roche in August 2022.
Collaborative Agreements, Royalties and Milestone Payments : We have committed to make potential future milestone payments and legal fees to third parties as part of licensing and development programs. Payments under these agreements become due and payable only upon the achievement of certain developmental, regulatory and commercial milestones by our licensees.
Collaborative Agreements, Royalties and Milestone Payments : We may need to make potential future milestone payments and pay legal fees to third parties as part of our licensing and development programs. Payments under these agreements become due and payable only upon the achievement of certain developmental, regulatory and commercial milestones by our licensees.
Hughes will receive an annual base salary of $125,000 and will be eligible to receive an annual discretionary cash bonus with a target amount equal to 55% of his annual base salary upon the achievement of annual performance milestones to be established by the Board.
Hughes will receive an annual base salary of $575,000 and will be eligible to receive an annual discretionary cash bonus with a target amount equal to 60% of his annual base salary upon the achievement of annual performance milestones to be established by the Board.
Our ability to raise additional capital in the equity and debt markets, should we choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for our common and preferred stock, which are subject to a number of development and business risks and uncertainties, our creditworthiness and the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us.
Our ability to raise additional capital in the equity and debt markets, should we choose to do so, is dependent on a number of factors, including, but not limited to, the market demand for our common and preferred stock, which are subject to a number of development and business risks and uncertainties, our creditworthiness and whether were are able to raise such additional capital at a price or on terms that are favorable to us, if at all.
We review our valuation assumptions quarterly and, as a result, we likely will update our valuation assumptions used to value stock-based awards granted in future periods utilizing current data. In the future, as additional empirical evidence regarding these input estimates becomes available, we may change or refine our approach of deriving these input estimates.
We review our valuation assumptions quarterly and update our valuation assumptions used to value stock-based awards granted in future periods utilizing then-current data. In future periods, as additional empirical evidence regarding input estimates becomes available, we may change or refine our approach of deriving these input estimates.
We may seek additional capital through use of our 2018 Common Stock ATM Agreement or 2021 Series B Preferred Stock ATM Agreement (see Note 11 of the Consolidated Financial Statements), or through other public or private debt or equity transactions.
We may seek additional capital through our 2018 Common Stock ATM Agreement or our 2021 Series B Preferred Stock ATM Agreement (see Note 12 to the consolidated financial statements), or through other public or private debt or equity transactions.
All payments due will be funded by a portion of the related milestone or royalty revenue we receive or will be reimbursed by our licensees.
We expect all payments due to be funded by a portion of the related milestone or royalty revenue we receive or we expect these payments to be reimbursed by our licensees.
Our portfolio was built through licensing our proprietary products and platforms from our legacy discovery and development business, combined with the acquisition of rights to future milestones and royalties that we have made since our royalty aggregator business model was implemented in 2017.
Our portfolio was built through the acquisition of rights to future milestones, royalties and commercial payments, since our royalty aggregator business model was implemented in 2017, combined with out-licensing our proprietary products and platforms from our legacy discovery and development business.
Based on our current cash balance and our ability to control discretionary spending, such as royalty acquisitions, we have evaluated and concluded our financial condition is sufficient to fund our planned operations, commitments, and contractual obligations for a period of at least one year following the filing date of this report. ​ We have primarily financed our operations and acquisitions through the issuance of our common stock, Series A and Series B Preferred Stock, and amounts received as milestone payments under our license agreements.
Based on our current cash balance and our planned discretionary spending, such as royalty acquisitions, we believe that our current financial resources are sufficient to fund our planned operations, commitments, and contractual obligations for a period of at least one year following the filing date of this report. ​ We have primarily financed our operations and acquisitions through debt facilities, the issuance of our common stock, Series A and Series B Preferred Stock, and amounts received as milestone payments under our license agreements.
Capital Resources ​ We have incurred significant operating losses since our inception and as of December 31, 2022, we had an accumulated deficit of $1.2 billion. As of December 31, 2022, we had $57.8 million in cash and cash equivalents.
Capital Resources ​ We have incurred significant operating losses since our inception and as of December 31, 2023, we had an accumulated deficit of $1.2 billion. As of December 31, 2023, we had $153.3 million in unrestricted cash and cash equivalents and $6.3 in restricted cash.
Results of Operations Revenues Total revenues for the years ended December 31, 2022 and 2021, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ ​ ​ 2022 2021 Change Revenue from contracts with customers ​ $ 4,150 ​ $ 36,518 ​ $ (32,368) Revenue recognized under units-of-revenue method ​ 1,877 ​ 1,642 ​ ​ 235 Total revenues ​ $ 6,027 ​ $ 38,160 ​ $ (32,133) ​ Revenue from Contracts with Customers Revenue from contracts with customers includes upfront fees, annual license fees and milestone payments related to the out-licensing of our legacy product candidates and technologies.
Results of Operations Revenues Total revenues for the years ended December 31, 2023 and 2022, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 Change Revenue from contracts with customers ​ $ 2,650 ​ $ 4,150 ​ $ (1,500) Revenue recognized under units-of-revenue method ​ 2,108 ​ 1,877 ​ ​ 231 Total revenues ​ $ 4,758 ​ $ 6,027 ​ $ (1,269) ​ Revenue from Contracts with Customers Revenue from contracts with customers includes upfront fees, annual license fees and milestone payments related to the out-licensing of our legacy product candidates and technologies.
We continue to maintain a full valuation allowance against our remaining net deferred tax assets. We had a total of $5.9 million of gross unrecognized tax benefits, none of which would impact our effective tax rate to the extent that we continue to maintain a full valuation allowance against our deferred tax assets.
We had a total of $5.9 million of gross unrecognized tax benefits, none of which would impact our effective tax rate to the extent that we continue to maintain a full valuation allowance against our deferred tax assets. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.
Revenue recognized under units-of-revenue method Revenues recognized under the units-of-revenue method include the amortization of unearned revenue from the sale of royalty interests to HCRP in 2016. The increase in 2022 compared with 2021 was due to increased sales of products underlying the agreements with HCRP.
Revenue Recognized under Units-of-Revenue Method Revenue recognized under the units-of-revenue method includes the amortization of unearned revenue from the sale of royalty interests to HCRP in 2016. The increase for the year ended December 31, 2023 compared with the year ended December 31, 2022 was due to increased sales of products underlying the agreements with HCRP.
We expect to continue deploying capital toward these acquisitions in the near and long term. ​ We also have potential contingent consideration of $0.1 million recorded on our consolidated balance sheets as of December 31, 2022, for development milestones due under our agreement with Bioasis.
We expect to continue deploying capital toward these acquisitions in the near and long term. ​ We have potential contingent consideration of $7.0 million recorded on our consolidated balance sheets as of December 31, 2023, which consists of $6.0 million for sales milestones due under our agreement with Affitech and $1.0 million for a milestone payment due under our agreement with LadRx.
No impairment has been recorded as of December 31, 2022. 52 Table of Contents Stock-Based Compensation Stock-based compensation expense for stock options and other stock awards is estimated at the grant date based on the award’s fair value-based measurement. The valuation of stock-based compensation awards is determined at the date of grant using the Black-Scholes Model.
Stock-Based Compensation Stock-based compensation expense for stock options and other stock awards is estimated at the grant date based on the award’s fair value-based measurement. The valuation of stock-based compensation awards is determined on the date of grant using the Black-Scholes Model.
Our drug royalty aggregator business is focused on early to mid-stage clinical assets, primarily in Phase 1 and 2, with significant commercial sales potential that are licensed to large-cap partners. We expect that most of our future revenue will be based on payments we may receive for milestones and royalties related to these programs.
Our royalty aggregator business is primarily focused on early to mid-stage clinical assets, primarily in Phase 1 and 2, with significant commercial sales potential that are licensed to large-cap partners.
If we are unable to raise additional funds when we need them, our business and operations may be adversely affected. ​ 55 Table of Contents Material Cash Requirements ​ Our material cash requirements in the short and long term consist of the following expenditures: ​ Operating expenditures: Our primary uses of cash and operating expenses relate to employee and related costs, consultants to support our administrative and business development efforts, legal and accounting services, insurance, investor relations and IT services.
Material Cash Requirements ​ Our material cash requirements in the short and long term consist of the following: ​ Operating expenditures: Our primary uses of cash and our operating expenses include employee and related costs, consultant fees to support our administrative and business development efforts, legal and accounting fees, insurance 64 Table of Contents costs and costs associated with our investor relations and IT services.
The generation of future revenues related to licenses, milestones, and royalties is dependent on the achievement of milestones or product sales by our existing licensees.
We expect most of our future revenue to be based on payments we may receive for milestones and royalties associated with these programs. The generation of future revenues related to licenses, milestone payments, and royalties is dependent on the achievement of milestones or product sales by our existing licensees.
A hearing before a panel of arbitrators was held on this matter in November 2022, and the parties have submitted post-hearing briefs. 51 Table of Contents Critical Accounting Estimates The preparation of financial statements in accordance with generally accepted accounting principles, or GAAP, requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.
Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of 59 Table of Contents contingent assets and liabilities. We routinely evaluate our estimates.
Purchase of Rights to Future Milestones, Royalties and Commercial Payments We have purchased rights to receive a portion of certain future developmental, regulatory and commercial sales milestones, and royalties on sales of products currently in clinical development. We acquired such rights from various entities and recorded the amount paid for these rights as long-term royalty receivables.
Purchase of Rights to Future Milestones, Royalties and Commercial Payments We have purchased rights to receive a portion of certain future developmental, regulatory and commercial sales milestone payments, royalties and option fees on sales of products currently in clinical development or recently commercialized.
Under the terms of the Affitech CPPA, we are eligible to receive a 0.5% commercial payment stream on net sales of VABYSMO in each of certain regions where it is approved, for a ten-year period following its first commercial sale in such region.
Affitech Commercial Payment Purchase Agreement Pursuant to our Affitech CPPA, we are eligible to receive commercial payments from Roche consisting of 0.5% of net sales of VABYSMO for a ten-year period following the first commercial sale in each applicable jurisdiction.
Other Income (Expense), Net The following table shows the activity in other income (expense), net for the years ended December 31, 2022 and 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ ​ 2022 2021 ​ Change Other income (expense), net ​ ​ ​ ​ ​ ​ ​ ​ Investment income ​ $ 694 ​ $ 35 ​ $ 659 Change in fair value of equity securities ​ ​ (439) ​ ​ (919) ​ ​ 480 Other ​ 40 ​ 5 ​ 35 Total other income (expense), net ​ $ 295 ​ $ (879) ​ $ 1,174 ​ The change in fair value of equity securities is due to the change in market price of equity securities we own in shares of Rezolute’s common stock.
Other Income (Expense), Net The following table shows our activity in other income (expense), net for the years ended December 31, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ ​ ​ 2023 2022 ​ Change Other income (expense), net ​ ​ ​ ​ ​ ​ ​ ​ Investment income ​ $ 1,685 ​ $ 694 ​ $ 991 Change in fair value of equity securities ​ ​ (174) ​ ​ (439) ​ ​ 265 Change in fair value of contingent consideration ​ ​ 75 ​ ​ — ​ ​ 75 Other ​ — ​ 40 ​ (40) Total other income (expense), net ​ $ 1,586 ​ $ 295 ​ $ 1,291 ​ Investment income increased by $1.0 million for the year ended December 31, 2023 compared with the year ended December 31, 2022 due to higher market interest rates.
Net cash provided by financing activities for the year ended December 31, 2021 of $12.8 million was primarily due to the receipt of net cash proceeds of $37.1 million from our public offering of Series B Preferred Stock, $1.1 million net cash provided from the exercise of stock options after related tax payments, partially offset by $4.3 million cash used in the principal payments of debt, $17.1 million cash used to extinguish outstanding loans and $3.5 million payment of dividends on our Series A Preferred Stock and Series B Preferred Stock.
Net cash provided by financing activities for the year ended December 31, 2023 was $120.6 million and primarily included net proceeds of $125.7 million after the payment of $4.3 million of debt issuance costs and fees paid related to the Blue Owl Loan, partially offset by a payment of dividends of $5.5 million on our Series A and Series B Preferred Stock.
The primary components of revenue from contracts with customers in 2022 were due to milestones earned of $2.0 million pursuant to our Rezolute License Agreement, $0.8 million pursuant to the Takeda Collaboration Agreement, $0.8 million pursuant to our license agreement with Compugen and $0.5 million pursuant to our Sonnet Collaboration Agreement.
Revenue from contracts with customers for the 61 Table of Contents year ended December 31, 2022 primarily included milestone payments of $2.0 million pursuant to our Rezolute License Agreement, $0.8 million pursuant to the Takeda Collaboration Agreement, $0.8 million pursuant to our license agreement with an undisclosed licensee and $0.5 million pursuant to our Sonnet Collaboration Agreement.
Although we generated net income of $15.8 million and positive cash flows from operations of $22.7 million for the year ended December 31, 2021, we generated net loss of $17.1 million and negative cash flows from operations of $12.9 million for the year ended December 31, 2022 and we had an accumulated deficit of $1.2 billion as of December 31, 2022.
We generated a net loss of $40.8 million and net cash used in operating activities was $18.2 million for the year ended December 31, 2023, and we had an accumulated deficit of $1.2 billion as of December 31, 2023.
Contingent Payments We may be obligated to make contingent payments related to certain product development and regulatory approval milestones and sales-based milestones. If the contingent payments fall within the scope of ASC 815, the contingent payments are measured at fair value at the inception of the arrangement, subject to remeasurement to fair value at the end of each reporting period.
If the contingent payments fall within the scope of ASC 815, the contingent payments are measured at fair value at the inception of the arrangement, and subject to remeasurement to fair value during each reporting period. Any changes in the estimated fair value are recorded in the consolidated statements of operations and comprehensive loss.
We have accounted for the purchased rights as a financial asset in accordance with ASC 310. Receivables We account for milestone and royalty rights related to developmental pipeline products on a non-accrual basis using the cost recovery method.
Receivables We account for milestone and royalty rights related to developmental pipeline or recently commercialized products on a non-accrual basis using the cost recovery method. Except for VABYSMO and IXINITY, our other developmental pipeline products are non-commercialized, non-approved products that require FDA or other regulatory approval, and thus have uncertain cash flows.
Net cash used in investing activities for the year ended December 31, 2021, of $26.5 million was due to our acquisitions under RPAs and a CPPA, including a $13.5 million payment pursuant to the Viracta RPA, a $7.0 million payment pursuant to the Kuros RPA and a $6.0 million payment pursuant to the Affitech CPPA.
Net cash used in investing activities for the year ended December 31, 2023 was $0.7 million, and primarily included a $9.6 million payment to Aptevo for the acquisition of payment rights pursuant to the Aptevo CPPA in March 2023 and a $5.0 million payment to LadRx for the acquisition of payment rights pursuant to the LadRx Agreements in June 2023, partially offset by $7.3 million in commercial payments from sales of VABYSMO, $1.7 million in commercial payments from sales attributable to IXINITY and $5.0 million in milestone payments pursuant to the Viracta RPA.
Any changes in the estimated fair value are recorded in the consolidated statement of operations and comprehensive (loss) income. Impairment Assessment We review these balances for impairment on a quarterly basis using updates from our partners, press releases and public information on clinical trials.
Allowance for Current Expected Credit Losses We review our allowance for current expected credit losses for impairment on a quarterly basis based on updates from our partners, press releases and public information on clinical trials.
Our primary source of cash provided by operating activities in 2021 was the $35.0 million milestone payment received from Novartis, partially offset by our operating expenses of $20.6 million excluding non-cash expenses including stock-based compensation of $6.2 million.
Net cash used in operating activities for the year ended December 31, 2022 was $12.9 million and primarily included our operating expenses of $23.4 million, partially offset by non-cash expenses of $4.4 million, which primarily included stock-based compensation of $3.6 million, partially offset by a $2.0 million milestone payment received from Rezolute, a $0.8 million milestone payment received from Takeda and a $0.8 million milestone payment received from an undisclosed licensee.
We expect our operating expenses to increase as a result of this Retention Plan. ​ To support our royalty aggregator business model, we engage third parties to assist in our evaluation of potential acquisitions of milestone and royalty streams.
Our planned spending includes increased personnel-related costs associated with the appointment of Mr. Hughes to Chief Executive Officer in a full-time capacity. ​ To support our royalty aggregator business model, we engage third parties to assist in the evaluation of potential acquisitions of milestone payments and royalty streams.
Sonnet Collaboration Agreement In April 2022, Sonnet dosed the first patient in its Phase 1 clinical trial for SON-1010, and we earned a development-related milestone payment of $0.5 million from Sonnet pursuant to our Sonnet Collaboration Agreement.
Portfolio Updates - License and Collaboration Agreements In April 2023, we earned a $0.5 million milestone payment from Janssen, upon dosing of the first patient in a Phase 3 clinical trial evaluating one of Janssen’s biologic assets.
The generation of future revenues related to licenses, milestones, and royalties is dependent on the achievement of milestones or product sales by our existing licensees. Milestone payments earned in 2021 and 2022 are not indicative of anticipated milestones in future periods.
We intend to use the net cash received from the Blue Owl Loan, together with our existing capital resources, to fund our ongoing company operations, to repurchase common stock and for working capital and other general corporate purposes. ​ The generation of future revenues related to licenses, milestone payments, and royalties is dependent on the achievement of milestones or product sales by our existing licensees.
We have evaluated and concluded our existing capital resources are adequate to meet those needs. ​ We also have potential sales-based milestones that may become due under our agreements with Aronora, Kuros and Affitech as well as non-sales-based milestones, sales-based milestones and sales-based royalty payments that may become due under our agreement with ObsEva.
We have up to an additional $6.0 million and $5.0 million in milestone payments that may become due under the Affitech CPPA and LadRx Agreement, respectively. ​ In addition, we have potential sales-based milestone payments that may become due under our agreements with Aronora and Kuros.
VABYSMO received FDA approval in January 2022, was approved by Japan’s Ministry of Health, Labour, and Welfare in March 2022 , and was approved by the EU’s EC in September 2022 and we do not yet have a foundation upon which to estimate receipts expected to be collected in the near term; therefore, they remain classified as noncurrent until such time an estimate can be made.
VABYSMO received FDA approval in January 2022, was approved by Japan’s Ministry of Health, Labour, and Welfare in March 2022, and was approved by the EU’s EC in September 2022. In October 2023, the FDA approved VABYSMO for the treatment of retinal vein occlusion.
Neal’s continuity incentive of $1.2 million in operating expenses in the consolidated statement of operations and comprehensive loss during the year ended December 31, 2022. On December 30, 2022, the Board appointed Owen Hughes as our Executive Chairman of the Board and Interim Chief Executive Officer (principal executive officer), effective as of January 1, 2023. Mr.
Wyszomierski as Chairman of the Board. Mr. Hughes previously served as our Executive Chairman and Interim Chief Executive Officer beginning on January 1, 2023. In connection with his appointment, Mr.
The increases in salaries and related expenses, consulting and legal costs were partially offset by a $2.6 million reduction in stock-based compensation expense for stock options. Other Income (Expense) Interest Expense The $0.5 million interest expense reported for the year ended December 31, 2021 was related to our SVB Loan that was repaid in June 2021.
The increase of $2.4 million was primarily due to a $5.5 million increase in stock-based compensation, partially offset by a $2.1 million decrease in consulting and legal expenses and a $0.9 million decrease in salaries and related expenses. We expect G&A expenses to increase in 2024 due to the appointment of Mr.
As of December 31, 2022, we expect to pay $0.8 million in 2023 related to employee retention bonuses under the Amended Retention Plan, of which $0.1 million was accrued in operating expenses in the consolidated statement of operations and comprehensive loss during the year ended December 31, 2022. James R.
R&D Expenses R&D expense was $0.1 million for the year ended December 31, 2023, which was consistent with $0.2 million for the year ended December 31, 2022. We expect our R&D expenses to increase in 2024 related to our acquisition of Kinnate. G&A Expenses G&A expenses include salaries and related personnel costs, professional fees, and facilities costs.
Removed
The payment we received from Novartis pursuant to our Anti-TGFβ Antibody License Agreement in 2021 was a one-time milestone payment that does not represent recurring revenue.
Added
We also acquire milestone and royalty revenue streams on late-stage clinical assets and commercial assets that are designed to address unmet markets or have a therapeutic advantage, have long duration of market exclusivity, and are expected to deliver a financial return to us in a short timeframe.
Removed
Significant Developments Purchase of IP ObsEva Intellectual Property Acquisition Agreement In November 2022, we entered into the ObsEva IP Acquisition Agreement pursuant to which we acquired all of ObsEva’s intellectual property (patents and know-how) and license agreement rights related to ebopiprant, an investigational compound previously licensed by ObsEva from Merck KGaA.
Added
We generated a net loss of $17.1 million and net cash used in operating activities was $12.9 million for the year ended December 31, 2022.
Removed
We also assumed ObsEva’s ongoing obligations under the Organon License Agreement and the Merck KGaA License Agreement. Pursuant to the Organon License Agreement, XOMA is eligible to receive up to $475.0 million in payments for ebopiprant development, commercialization and sales-based milestones.
Added
Significant Business Developments Kinnate Acquisition On February 16, 2024, we entered into an agreement to acquire Kinnate for a base cash purchase price of $2.3352 per share and an additional cash payment amount of up to $0.2527 per share upon the closing of the merger plus a non-transferable contingent value right per share, representing the right to receive 85% of the net proceeds, if any, from any out license or sale of the Kinnate programs effected within one year of closing of the merger and 100% of the net proceeds, if any, from any out license or sale of certain Kinnate programs entered into prior to the closing of the merger.
Removed
If ebopiprant is successfully commercialized, we will be entitled to receive royalties that range from low to mid-teens from Organon and will be required to make mid-single-digit royalty payments to Merck KGaA.
Added
We expect this acquisition to provide additional cash to our balance sheet and potentially add several programs to our portfolio. This merger is expected to close in April 2024. Blue Owl Loan Agreement On December 15, 2023, our wholly owned subsidiary, XRL, entered into the Blue Owl Loan Agreement, pursuant to which we borrowed $130.0 million.
Removed
We paid ObsEva a $15.0 million upfront payment at closing and will pay potential earn-out payments of up to $97.5 million for development, regulatory and sales-based milestones, representing a portion of what we will receive pursuant to the Organon License Agreement.
Added
We received a net cash amount of $119.6 million after the payment of $4.1 million in fees and lender expenses and $6.3 million that was deposited into reserve accounts to pay interest, administrative fees and XRL’s operating expenses. We also incurred $0.6 million in direct issuance costs related to the Blue Owl Loan Agreement.
Removed
Royalty and Commercial Payment Purchase Agreements Commercial Payment Purchase Agreement with Affitech In January 2022, Genentech, a member of the Roche group, received approval from the FDA to commercialize VABYSMO (faricimab-svoa) for the treatment of wet, or neovascular, age-related macular degeneration and diabetic macular edema.
Added
The Blue Owl Loan is secured by, and is expected to be repaid based upon, commercial payments from Roche’s VABYSMO, pursuant to the Affitech CPPA (see Note 8 to the consolidated financial statements). The carrying value of the short and long-term portion of the initial term loan was $5.5 million and $118.5 million, respectively as of December 31, 2023.
Removed
Pursuant to the Affitech CPPA, we paid Affitech a $5.0 million regulatory approval milestone tied to these U.S. marketing approvals.
Added
In connection with the Blue Owl Loan Agreement, we issued warrants to certain funds associated with Blue Owl to purchase (i) up to 40,000 shares of our common stock at an exercise price of $35.00 per share; (ii) up to 40,000 shares of our common stock at an exercise price of $42.50 per share; and (iii) up to 40,000 shares of our common stock at an exercise price of $50.00 per share (collectively, the “Blue Owl Warrants”) (see Note 12 to the consolidated financial statements). 57 Table of Contents Owen Hughes Appointed as Chief Executive Officer On January 7, 2024, the Board appointed Owen Hughes as our Chief Executive Officer (principal executive officer) and Jack L.
Removed
In September 2022, in connection with Roche receiving approval from the EC to commercialize VABYSMO for the treatment of neovascular or ‘wet’ age-related macular degeneration and visual impairment due to diabetic macular edema, we made a $3.0 million milestone payment to Affitech pursuant to the terms of the Affitech CPPA.
Added
Stock Repurchase Program In January 2024, our Board authorized our first stock repurchase program, which permits us to purchase up to $50.0 million of our common stock through January 2027.
Removed
As a result of 49 Table of Contents the EC approvals, we will be eligible to receive a 0.5% commercial payment stream for ten years from the first commercial sale of VABYSMO in Europe. VABYSMO was previously approved by the FDA in January 2022 and by Japan’s Ministry of Health, Labour, and Welfare in March 2022.
Added
Under the program, we have discretion in determining the conditions under which shares may be purchased from time to time, including through transactions in the open market, in privately negotiated transactions, under plans compliant with Rule 10b5-1 under the Exchange Act, as part of accelerated share repurchases or by other means in accordance with applicable laws.
Removed
In August 2022, we received $0.5 million from Roche representing the first commercial payment for sales of VABYSMO during the first six months of 2022, and in February 2023 we received $2.4 million for sales of VABYSMO during the second half of 2022. Kuros Royalty Purchase Agreement In July 2022, we received $2.5 million pursuant to our Kuros RPA.
Added
The manner, number, price, structure, and timing of the repurchases, if any, will be determined at our sole discretion and repurchases, if any, depend on a variety of factors, including legal requirements, price and economic and market conditions, royalty and milestone acquisition opportunities, and other factors.
Removed
This payment represents 50% of a milestone earned by Kuros upon the closing of Regeneron’s acquisition of Checkmate Pharmaceuticals on May 31, 2022. License and Collaboration Agreements Compugen In November 2022, we earned a $0.8 million milestone payment under our license agreement with Compugen.
Added
The repurchase authorization does not obligate us to acquire any particular amount of our common stock. The Board may suspend, modify, or terminate the stock repurchase program at any time without prior notice. As of March 4, 2024, we have purchased 660 shares of common stock pursuant to this stock repurchase program.
Removed
Novartis – VPM087 In March 2023, Novartis notified us that based upon a strategic review of the development program, Novartis will not initiate further studies of gevokizumab in gastrointestinal cancers.
Added
Portfolio Updates – Royalty and Commercial Payment Purchase Agreements Talphera Commercial Payment Purchase Agreement In January 2024, we acquired an economic interest in DSUVIA from Talphera, for $8.0 million. DSUVIA was approved in 2018 by the FDA for use in adults in certified medically supervised healthcare settings.
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Novartis’ study to evaluate treatment with gevokizumab with standard of care anti-cancer therapies in patients with metastatic colorectal, gastroesophageal, and renal cancers will continue to primary analysis, which is anticipated later this year. Novartis – Anti-CD40 Antibody In September 2021, Novartis announced its decision to discontinue its study of CFZ533 (iscalimab) in kidney transplant.
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In April 2023, Talphera divested DSUVIA to Alora Pharmaceuticals for an upfront payment, a 15% royalty on commercial net sales, a 75% royalty on net sales to the DoD, and up to $116.5 million in milestone payments.
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In September 2022, after an interim analysis of data, Novartis also decided to discontinue its study of CFZ533 in liver transplant. Novartis is continuing iscalimab studies in other indications such as Sjögren’s Syndrome, Lupus Nephritis and Hidradenitis Suppurativa.
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Under the terms of the agreement, we are entitled to receive 100% of all royalties and milestones related to DSUVIA sales until we receive $20.0 million. Once we receive $20.0 million, the 75% royalties generated from DoD purchases and the remaining $116.5 million in potential milestone payments due from Alora will be shared equally between us and Talphera.
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Rezolute – RZ358 Antibody In January 2022, Rezolute dosed the last patient in its Phase 2b clinical trial for RZ358, we earned a $2.0 million milestone payment pursuant to our Rezolute License Agreement. Modification of Equity Awards ​ In November 2022, we entered into the November 2022 Letter Agreement with Thomas Burns.
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We will fully retain the 15% royalty associated with DSUVIA commercial sales. LadRx Agreements In June 2023, we entered into the LadRx AAA pursuant to the which we acquired from LadRx all of its rights, title and interests related to arimoclomol under the Zevra RPA.
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Pursuant to the November 2022 Letter Agreement, in the event Mr. Burns remains employed by us for a twelve-month period beginning on November 1, 2022, he will be deemed “retirement eligible” for purposes of his equity awards under the terms of his equity award agreements. All other terms of his amended and restated employment agreement remain the same.
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We also entered into the LadRx RPA, pursuant to which we acquired the right to receive all of the future royalties, regulatory and commercial milestone payments as well as other related payments due to LadRx from ImmunityBio related to aldoxorubicin under the ImmunityBio License Agreement.
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Conditioned on his execution of a release in favor of us, Mr. Burns will also receive this benefit upon any involuntary termination for reasons other than cause. This modification resulted in an acceleration of the expense recognized related to Mr. Burns’ stock options.

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