XOMA Reports First Quarter 2006 Results
Wednesday May 10, 5:24 pm ET
BERKELEY, Calif.--(BUSINESS WIRE)--May 10, 2006--XOMA Ltd. (NASDAQ:XOMA - News), a leader in the discovery and development of antibody therapeutics for cancer and immunological disorders, today announced its results for the first quarter ended March 31, 2006.
First Quarter Results
XOMA recorded total revenues for the first quarter of $5.6 million, an increase of $2.6 million over the first quarter of 2005. Growth in revenues was due primarily to higher contract development and manufacturing revenues and growth in royalties from Genentech, Inc. (NYSE: DNA - News) RAPTIVA®.
The operating loss for the first quarter was $11.6 million in 2006 compared to $10.8 million in 2005, reflecting the higher revenue in 2006, offset by the one-time debt exchange offering expenses, stock compensation expense and contract service costs. The net loss for the first quarter of 2006 was $20.6 million or ($0.23) per share, compared with net income of $30.1 million or $0.28 per share, on a fully diluted basis, for the quarter ended March 31, 2005. Non-cash charges related to the debt exchange accounting and conversions were $8.0 million in Q1 2006. The profit earned in the 2005 quarter was primarily a result of the 2005 extinguishment of XOMA's $40.9 million development loan from Genentech. A more detailed discussion of XOMA's first quarter financials is provided below, in XOMA's 10-Q filing, and in a question and answer format on XOMA's website at xoma.com
First Quarter 2006 Highlights
* In February 2006, XOMA completed an exchange offer for all $60.0 million of its 6.5% convertible senior notes for $60.0 million of 6.5% convertible SNAPs(SM) and issued an additional $12.0 million of 6.5% Convertible SNAPs(SM)("New Notes") to the public for cash. Due to investor demand, the size of the offering was increased from $10.0 million to $12.0 million and the public offering price was set at 104% of principal. XOMA ended the first quarter of 2006 with $38.5 million in cash, cash equivalents and short- and long-term investments compared to $43.5 million at the end of 2005.
* $12.5 million of convertible notes were voluntarily converted to equity by the holders.
* Business development initiatives in Q1 led to the signing of XOMA's first license agreement for its humanizing technology, Human Engineered(TM) in early April.
* NEUPREX® clinical development progressed with the initiation of the trial for patients with severe burns and the filing of the IND by XOMA for the trial in hematopoietic stem cell transplant ("HSCT").
* XOMA 052 preclinical testing progressed towards the initiation of clinical trials planned in the first half of 2007.
* Multiple collaboration projects progressed in the preclinical stage.
"During the first quarter, we continued to make progress on multiple fronts to move forward products in XOMA's pipeline and reduce our financial and development risk," said John L. Castello, President, Chairman and CEO of XOMA. "We continue to focus on new technology licenses, new drug discovery collaborations and new contracts for antibody development and manufacturing. In April, our efforts in the first quarter matured into the announcement of a new line of business for XOMA, the licensing and related development work using our Human Engineering(TM) technology for Aveo Pharmaceuticals, Inc."
Financial Discussion
Revenues
Total revenues for the quarter were $5.6 million, compared with $3.0 million in 2005's first quarter. License and collaborative fee revenues were $0.7 million for the quarter compared with $0.5 million for the same period in 2005. Contract revenues totaled $3.1 million for the three months ended March 31, 2006, compared with $1.3 million for the same period of 2005, reflecting an increase in contract manufacturing services performed under our contract with the National Institute of Allergy and Infectious Diseases ("NIAID") for process development and production of three anti-botulinum neurotoxin antibodies, offset by a reduction in clinical trial services performed for Genentech, Inc. (NYSE: DNA - News) in the 2005 quarter. Royalties were $1.9 million for the first quarter of 2006 compared with $1.2 million in the year-ago quarter, reflecting increases in royalty revenues from the sale of Genentech's RAPTIVA®.
Expenses
XOMA's research and development expense for the first quarter totaled $12.2 million, compared with $10.0 million in the same period of 2005. The $2.2 million increase primarily reflects increases in spending on XOMA's contract with NIAID, our development of XOMA 052 and NEUPREX®, and our collaboration with Lexicon Genetics Incorporated, partially offset by decreased spending on our collaboration agreements with Chiron Corporation ("Chiron"), RAPTIVA®, and MLN2222.
General and administrative expense for the three months ended March 31, 2006, was $5.1 million compared with $3.8 million for 2005 quarter. The increase of $1.3 million resulted primarily from expenses relating to XOMA's February debt exchange and issuance.
Interest expense for the three months ended March 31, 2006, was $9.4 million, compared with $0.7 million for the same period of 2005. Interest expense in the 2006 quarter consisted primarily of $8.0 million from the revaluation of the embedded derivative on XOMA's convertible debt, $2.5 million of which resulted from the conversion of $12.5 million principal amount of the debt, and $1.0 million from interest payable on the outstanding principal. XOMA's first quarter 2005 interest expense consisted primarily of interest on its outstanding convertible notes.
Liquidity and Capital Resources
Cash, cash equivalents and short- and long-term investments at March 31, 2006, totaled $38.5 million compared with $43.5 million at December 31, 2005. The $5.0 million decrease primarily reflects cash used in operations of $13.7 million and cash used in investing activities of $4.4 million partially offset by cash provided by financing activities of $12.0 million, primarily from the $12.5 million from New Notes sold during XOMA's convertible debt exchange in February 2006, and cash transferred to long-term investments of $1.1 million. Cash used in operations during the first quarter of 2005 was $18.8 million.
Based on current spending levels, anticipated revenues, collaborator funding, proceeds from our convertible note offerings in February of 2005 and February of 2006 and other sources of funding we believe to be available, we estimate that we have sufficient cash resources to meet our anticipated net cash needs through at least 2008. Any significant revenue shortfalls, increases in planned spending on development programs or more rapid progress of development programs than anticipated, as well as the unavailability of anticipated sources of funding, could shorten this period. Progress or setbacks by potentially competing products may also affect our ability to raise new funding on acceptable terms.
Long-term Debt
At March 31, 2006, XOMA's balance sheet showed $65.5 million, including the embedded derivative of $10.3 million, of 6.5% convertible senior notes due in 2012 and $12.4 million of long-term debt to Chiron / Novartis. The long-term debt to Chiron (now Novartis AG ("Novartis")) represents XOMA's draw down against a $50.0 million loan facility established to facilitate XOMA's participation in its oncology collaboration with Novartis.
Product Highlights
RAPTIVA® (Efalizumab): Collaboration with Genentech
Worldwide sales of RAPTIVA® in the first quarter of 2006 were $35.0 million, with $21.4 million coming from Genentech's sales in the U.S. and $13.6 million from Serono SA's sales internationally. Worldwide sales in the first quarter of 2005 were $21.1 million.
Genentech management has informed XOMA that it has decided not to pursue the previously announced Phase II clinical trial for RAPTIVA® in atopic dermatitis.
Oncology Therapeutic Antibodies Program: Collaboration with Novartis
In 2005, XOMA and Chiron initiated separate Phase I clinical trials in advanced chronic lymphocytic leukemia ("CLL") and multiple myeloma ("MM") with the CHIR-12.12 molecule, the first product candidate selected under the collaboration. Both of these studies are ongoing and XOMA hopes to announce preliminary results from them by the end of 2006.
BPI Program: NEUPREX®
NEUPREX® is an injectible formulation of rBPI21, a modified recombinant fragment of human bactericidal/permeability-increasing protein ("BPI"). BPI is a human host-defense protein made by a type of white blood cell that is involved in the body's defenses against microbial infection.
In March 2006, we began an Investigator Sponsored Trial ("IST") of NEUPREX® at the Southwestern Medical Center in Dallas for patients with severe burns. This investigator sponsored trial joins with another trial initiated in October of 2003 for pediatric open heart surgery patients. Later in 2006, we anticipate that a third IST will begin in allogeneic HSCT. The HSCT studies may provide proofs of concept for acute radiation syndrome for possible biodefense application.
In January 2006, we submitted an application to the European Medicines Agency ("EMEA") for orphan drug designation in meningococcal disease.
XOMA 052
XOMA 052, formerly referred to by XOMA as XMA005.2, is a high-affinity, Human Engineered(TM) monoclonal antibody with potent inhibitory activity against its inflammatory target. XOMA developed this antibody entirely in-house and continues to own all rights to it. We are currently evaluating XOMA 052 in preclinical studies. Possible indications include osteoarthritis and rheumatoid arthritis. Pre-clinical studies continued during the first quarter of 2006. We plan to start clinical testing for XOMA 052 in the first half of 2007.
Subsequent Event
In April of 2006, Chiron announced that its shareholders had approved the amended merger agreement under which Novartis would acquire all Chiron shares it did not already own and the acquisition was consummated. Although XOMA is currently evaluating the impact of the acquisition, it does not yet know what effect, if any, this transaction will have on its collaboration with Chiron.
Investor Conference Call
XOMA has scheduled an investor conference call and webcast to discuss its first quarter 2006 results for tomorrow, May 11, 2006, beginning at 4:00 PM EST (1:00 P.M. PST). The webcast can be accessed via XOMA's website at xoma.com and will be archived on the site and available for replay until close of business on August 11, 2006. To obtain phone access to the live conference call in the U.S. and Canada, dial 1-877-407-9205. International callers should dial 1-201-689-8054. No conference ID is necessary. An audio replay will be available beginning two hours following the conclusion of the call through 11:59 pm Eastern (8:59 pm Pacific) on May 25, 2006. Access numbers for the replay are 1-877-660-6853 (U.S./Canada) or 1-201-612-7415 (International). Two access numbers are required for the replay: account number 286 and conference ID # 201562.
About XOMA
XOMA is a leader in the discovery, development and manufacture of therapeutic antibodies, with a therapeutic focus that includes cancer and immune diseases. XOMA has a royalty interest in RAPTIVA® (efalizumab), a monoclonal antibody product marketed to treat moderate-to-severe plaque psoriasis. XOMA's discovery and development capabilities include antibody phage display, bacterial cell expression, and Human Engineering(TM) technologies. The company pipeline also includes proprietary and collaborative programs in preclinical and clinical development. |
