Revenue Streams and Milestones - XOMA's portfolio is built through acquisitions of rights to future milestones and royalties since 2017, with expectations that most future revenue will come from these payments [27]. - The company has a potential to receive up to $475 million in payments for the development, commercialization, and sales-based milestones related to ebopiprant, with royalties ranging from low to mid-teens [32]. - XOMA acquired rights to 100% of potential future royalties from Checkmate Pharmaceuticals' vidutolimod, with tiered royalties from high single-digit to low double-digits and up to $25.5 million in pre-commercial milestone payments [38]. - The company is eligible to receive a 0.5% commercial payment stream for ten years from Roche for faricimab, with an upfront payment of $6 million for the rights [33]. - XOMA's acquisition of Agenus rights includes 33% of future royalties from Incyte and Merck, with potential development, regulatory, and commercial milestones up to $59.5 million [41]. - The company received $2.4 million from Roche for sales of VABYSMO during the second half of 2022, marking its first commercial payment for this product [37]. - The company received a $37.0 million upfront fee from Novartis under the Anti-TGFβ Antibody License Agreement, with potential total milestones of up to $480.0 million [50]. - A $25.0 million milestone was earned upon the dosing of the first patient in Novartis' first NIS793 Phase 2 clinical trial [52]. - The company is eligible to receive up to $438.0 million in milestones under the Anti-IL-1β Antibody License Agreement with Novartis [56]. - The company is eligible for a 4% royalty on future sales of products under the Takeda Collaboration Agreement, with additional milestone payments of up to $19.0 million [64]. - The company received a $2.0 million milestone payment from Takeda after the first patient was dosed in the Phase 2 study of mezagitamab [66]. - Rezolute is required to make milestone payments of up to $232.0 million based on pre-specified criteria for the development of RZ358 [69]. - A $2.0 million milestone payment was triggered when Rezolute dosed the last patient in its Phase 2b clinical trial for RZ358 [74]. - Janssen made a one-time payment of $2.5 million and milestone payments of up to $3.0 million for each drug candidate, along with a 0.75% royalty on net sales upon commercialization [75]. - In May 2021, the company earned a $0.5 million milestone from Janssen for the first patient dosing in a Phase 3 clinical trial [77]. - The company entered into a new agreement with Affimed in April 2021, eligible for milestone payments upon marketing approval of product candidates [78]. - A $0.5 million milestone payment was earned from Compugen in September 2021 for the first patient dosing in a Phase 1/2 study [79]. - The Sonnet Collaboration Agreement allows for milestone payments up to $3.75 million and low single-digit royalties on future commercial sales [80]. - In April 2022, the company earned a $0.5 million development milestone from Sonnet for initiating a Phase 1 clinical trial [81]. Financial Condition and Risks - A significant portion of the calculated net present value of XOMA's portfolio is dependent on a limited number of products, indicating high risk if any fail to progress [26]. - XOMA's reliance on license and collaboration relationships means that disputes or terminations could adversely affect its financial condition and future prospects [26]. - The company has ongoing obligations to pay quarterly dividends to holders of Series A and Series B Preferred Stock, which may limit its ability to borrow additional funds [26]. - The company incurred significant operating losses and negative cash flows from operations since inception, and its future net losses will depend on the rate of future expenditures and its partners' ability to generate revenues [133]. - The company may need to raise additional funds to acquire milestone and royalty interests, and if funds are not available at an acceptable cost of capital, it may be unsuccessful in sustaining the business in the future [135]. - The company has a continuing obligation to pay quarterly dividends to holders of Series A and Series B Preferred Stock, which may limit its ability to borrow additional funds [137]. - The company may experience credit risk due to potential defaults or bankruptcies of licensors or licensees [105]. - Significant reductions in potential milestone or royalty payments could adversely affect the company's financial condition and results of operation [146]. - A large percentage of the net present value of the company's portfolio is dependent on a limited number of products, and failure in clinical development of any of these could materially impact financial results [147]. - The company’s future income is dependent on numerous assumptions regarding potential product sales, and inaccuracies in these assumptions may lead to lower-than-expected returns [145]. - The company may suffer losses due to the illiquidity of its acquired milestone and royalty rights, making it difficult to dispose of them at favorable prices [127]. - The company faces risks related to the volatility of the biotechnology sector, which can indirectly affect its ability to realize value from its partners [131]. - The company relies on licensees for determining royalty and milestone payments, which may lead to disputes and require legal remedies [124]. - The impact of COVID-19 on the company's operations and financial condition remains uncertain, with potential for significant adverse effects [119]. - The ongoing COVID-19 pandemic has caused delays in clinical trials, potentially impacting revenue from milestones and royalties [98]. Competition and Market Risks - The biotechnology and pharmaceutical industries face substantial competition, with potential obsolescence of products due to technological advancements [82]. - The company’s royalty aggregator model faces competition from other investment vehicles with potentially lower costs of capital [83]. - The company may not be able to effectively compete with larger pharmaceutical firms that have greater financial resources and R&D capabilities [170]. - New developments in biotechnology could render the company's product candidates obsolete or uncompetitive, impacting future revenue potential [163]. - The company faces uncertainty regarding the market viability for its product candidates, which may not be accepted even if approved [171]. - There is a risk that government guidelines could adversely affect product usage, potentially recommending competitive products over those in which the company has an interest [172]. - Approved products are subject to market risks, including the introduction of generic versions that could alter market acceptance [173]. - Pricing and reimbursement challenges from third-party payors could hinder the profitability of products and negatively impact the royalties received [167]. - Legislative and regulatory proposals aimed at controlling pharmaceutical pricing could affect the company's business and revenue streams [169]. Regulatory and Compliance Risks - Regulatory changes in the U.S. and EU could impact drug pricing and result in lower royalties received by the company [86]. - The approval process for new drugs can take several years and is expensive, with no guarantee of success, impacting the company's revenue potential [154]. - Even after FDA approval, products may face additional testing or marketing restrictions, and approval can be withdrawn based on ongoing regulatory oversight [222]. - The FDA, EMA, or other regulatory agencies may impose significant restrictions on product labeling, advertising, and production, affecting marketability [223]. - Marketing approval can be withdrawn due to safety concerns, leading to potential civil or criminal sanctions for non-compliance with regulatory requirements [224]. - Legislative changes, such as the ACA enacted in March 2010, have significantly altered healthcare financing, impacting the profitability of products sold by potential royalty providers [225]. Intellectual Property and Legal Risks - Intellectual property protection is critical, and failure to secure adequate patent protection could harm the company's competitive position and profit potential [175]. - The company holds numerous patents in the U.S. and abroad, but the validity and enforceability of these patents are not guaranteed [179]. - Ongoing litigation regarding intellectual property could result in significant costs and adversely affect the company's ability to compete [187]. - The company initiated arbitration against a licensee for breach of contract, seeking milestone and royalty payments estimated in the mid-single-digit millions [188]. - Termination of license or collaboration agreements could adversely affect future royalty payments and sales of products [192]. - Disputes regarding contract interpretation in license agreements may lead to reduced financial resources and hinder the company's revenue potential [194]. - The company may face significant losses if expected payments from licensees and collaborators do not materialize due to defaults or disagreements [197]. - Current collaborations may be terminated at will by partners, potentially delaying or terminating product development [198]. - Inadequate performance by third-party service providers could delay the development programs of potential milestone and royalty providers [199]. - Changes in estimated payments by licensees can lead to material adjustments in previously reported revenue [202]. - Failure to meet Good Manufacturing Practices standards by contract manufacturers may cause delays in regulatory approval and penalties [203]. Workforce and Operational Risks - As of March 6, 2023, the company employed 12 full-time and 1 part-time employee, relying on a small, skilled workforce [99]. - The high cost of living in the San Francisco Bay Area may impair the company's ability to attract and retain qualified personnel [209]. - The company relies on outsourcing for financial reporting and human resources, which may limit control over these critical functions [210]. - Compliance with data privacy laws like CCPA and CPRA may increase operational costs and potential liabilities [219]. - Cybersecurity threats could lead to significant business disruptions and financial losses if sensitive data is compromised [213].
XOMA(XOMAO) - 2022 Q4 - Annual Report