CORPORATE PRESENTATION A ROYALTY AGGREGATION COMPANY SEPTEMBER 2019 NASDAQ: XOMA 1
DISCLAIMERS Certain statements in this presentation are forward-looking Potential risks to XOMA meeting these expectations are statements within the meaning of Section 27A of the Securities described in more detail in XOMA's most recent filing on Form Act of 1933 and Section 21E of the Securities Exchange Act of 10-K and in other SEC filings. Consider such risks carefully when 1934, including statements regarding: future potential considering XOMA's prospects. Any forward-looking statements monetization opportunities, active transactions with significant represent XOMA’s views only as of the date of this presentation financial implications, collaborations poised for significant and should not be relied upon as representing its views as of any financial contribution, our library of potentially value-generating subsequent date. XOMA disclaims any obligation to update any assets, future potential for milestone and royalty payments, the forward-looking statement, except as required by law. potential of our antibody discovery engine, potential out-licensing of our internal compounds and products, the ability of our NOTE: All references to “portfolio” in this presentation are to partners and their licensees to successfully develop their pipeline milestone and/or royalty rights associated with a basket of drug programs, the productivity of acquired assets, our revenue products in development. All references to “assets” in this forecasts, upcoming internal milestones and value catalysts, our presentation are to milestone and/or royalty rights associated with individual drug product candidates in development . future cash needs, our strategy for value creation, and other statements that relate to future periods. These statements are not guarantees of future performance and undue reliance should not be placed on them. They are based on assumptions that may not prove accurate, and actual results could differ materially from those anticipated due to certain risks inherent in the biotechnology industry and for companies engaged in the development of new products in a regulated market. 2
XOMA SNAPSHOT ▪ Monetizing and aggregating pre-commercial drug royalties ₋ Use portfolio approach to expand number of royalty positions ₋ Differentiate by focusing on development-stage assets with blockbuster potential licensed to large-cap partners ▪ Providing exposure, through royalties, to the upside potential of biotech ₋ Capital-efficient model where R&D costs are borne by partners ₋ Cash inflows from interim milestone payments ₋ Exposure risk mitigated through portfolio effects ▪ Expected value appreciation driven by: ₋ Assets advancing in hands of partners ₋ Acquiring additional assets to expand revenue potential and further mitigate risk ▪ Portfolio of 60+ assets today and growing 3
XOMA VS. TRADITIONAL BIOTECH INDUSTRY Biotech HIGH LONG LOW Industry CAPITAL PRODUCT PROBABILITY Characteristics REQUIREMENTS OF SUCCESS LIFE CYCLES Hold royalty Development Large diversified XOMA interests for the costs borne by portfolio mitigates Royalty long-term partners single asset risk Aggregator Strategy
OPPORTUNITIES TOTAL ABOUND FOR ROYALTY 1,988 LICENSING MONETIZATION DEALS ’14 - ’18 236 PHASE 3 LICENSING DEALS: Biotech & Pharma License Transactions consist of: 343 PHASE 2 LICENSING DEALS: • Milestone payments • Royalty obligations 194 Companies’ funding PHASE 1 LICENSING DEALS: needs increase over time 1,215 PRECLINICAL/OTHER LICENSING DEALS: 5 Bloomberg data
XOMA IS POSITIONED TO MONETIZE ROYALTIES ON MID- TO EARLY-STAGE CLINICAL ASSETS Capital per transaction > $100M Royalty Pharma Ligand $25M – $100M HCRP < $25M 6 P R E C L I N I C A L P H A S E 1 P H A S E 2 P H A S E 3 A P P R O V A L C O M M E R C I A L
XOMA’S COMPETITIVE ADVANTAGE Typical Small/ Mid-Cap Biotech 60+ assets PORTFOLIO SIZE 1 - 3 assets Diversified PORTFOLIO FOCUS Narrow High PROBABILITY OF AN APPROVAL Low Low : Mid / High RISK : RETURN High : High Provider CAPITAL User 7
MEASURING XOMA’S INTRINSIC VALUE TODAY XOMA PORTFOLIO PROFILE ‒ 60+ assets and growing FULLY FUNDED PROGRAMS ‒ > 60% of assets in clinical-stage development 60+ ‒ Many with blockbuster revenue potential 45 TYPICAL XOMA ECONOMICS 30 ‒ Development & Sales milestones 25 ‒ Royalty rate: ~3% ‒ Royalty term: 8 – 12 years post commercialization YE 2016 YE 2017 YE 2018 YTD 2019 8
XOMA’S MODEL: HOLD & BUY MORE HOLD LEGACY ASSETS 48 ASSETS Allow current portfolio of assets to TOTAL: advance, fully-funded by Partners; hold milestone & royalty payment rights 60+ BUY MORE & HOLD 12 ASSETS ASSETS Acquire rights to additional potential milestone & royalty assets 9
XOMA’S MODEL : HOLD & BUY MORE HOLD ALLOW PORTFOLIO OF ASSETS TO ADVANCE, FULLY FUNDED BY PARTNERS; HOLD MILESTONE & ROYALTY PAYMENT RIGHTS BUY MORE & HOLD ACQUIRE MILESTONE AND ROYALTY RIGHTS TO ADDITIONAL FULLY FUNDED ASSETS 10
HOLD STRATEGY COMPONENT REQUIRES 2 THINGS XOMA Spend ($M) 1. PATIENCE TO PROVIDE TIME $120 FOR UNDERLYING DRUG SG&A $100 ASSETS TO ADVANCE R&D THROUGH THE YEARS OF $80 DISCOVERY, DEVELOPMENT $60 AND APPROVAL $40 $20 2. A LEAN INFRASTRUCTURE TO MINIMIZE COSTS $0 2014 2015 2016 2017 2018 11
XOMA’S PORTFOLIO: 60+ PARTNERED PROGRAMS PRECLINICAL PHASE 1 PHASE 1/2 PHASE 2 PHASE 3 NDA FILING 1 1 12 Total Future 6 Development Expenses by XOMA: 17 $ 0 10 41 Assets with 10+ Large-Cap Partners 12
DIVERSIFICATION: 60+ ASSETS ACROSS 11+ THERAPEUTIC Oncology Dermatology CATEGORIES Ophthalmology Endocrinology Cardiovascular Infectious Diseases Inflammation Diabetes Hematology Other Immunology 13
XOMA’S PORTFOLIO KEY HIGHLIGHTS Does not include certain assets subject to confidentiality agreements 14 > $1 billion in potential milestones
NOVARTIS’ EXPANSIVE DEVELOPMENT OF ANTI-CD40 INDICATION PHASE STATUS STUDY SIZE START DATE Lupus Nephritis 2 Recruiting 60 8/18 Systemic Lupus Erythematosus 2 Recruiting 120 9/18 Kidney Transplant 2 Recruiting 325 9/18 Liver Transplant 2 Not yet recruiting 128 12/18 Hidradenitis Suppurativa 2 Recruiting 90 2/19 Sjogren’s Syndrome 2b Not yet recruiting 260 9/19 Primary Sjogren's Syndrome 2 Completed 66 Graves' Disease 2 Completed 15 Moderate to Severe Myasthenia Gravis 2 Completed 44 de Novo Renal Transplantation 1/2 Completed 59 Advanced to Phase 2 (see above) Rheumatoid Arthritis 1 Completed 75 15
2 XOMA ASSETS HIGHLIGHTED AS POTENTIAL BLOCKBUSTERS BY NOVARTIS (JANUARY 30, 2019) XOMA Royalty Rate: Mid-single digits to low teens 16 16
ISCALIMAB (CFZ533) PROGRESS Novartis presents first- of-its-kind histology data with iscalimab (CFZ533) suggesting extended survival of transplanted organs may be possible 17 17
SIGNIFICANT ROYALTY REVENUE POTENTIAL ASSETS BY PROJECTED PEAK SALES POTENTIAL Royalty Rate at < $500M $500M - $1B ≥ $1B Projected Peak Sales (14+ assets) (15 assets) (22 assets) 14+ 14 11 < 2.5% 4 3 8 2.5% - 7.5% 1 1 3 7.5% - 15% 9 of 19+ 12 of 19 18 of 22 with large-cap partners with large-cap partners with large-cap partners Example: If a partnered product were to achieve $1B in annual sales, and XOMA held a 3% royalty on that product, XOMA would receive $30M annual royalty revenue plus any interim revenue from development & regulatory milestones 18
XOMA’S MODEL : HOLD & BUY MORE HOLD ALLOW PORTFOLIO OF ASSETS TO ADVANCE, FULLY FUNDED BY PARTNERS; HOLD MILESTONE & ROYALTY PAYMENT RIGHTS BUY MORE & HOLD ACQUIRE MILESTONE AND ROYALTY RIGHTS TO ADDITIONAL FULLY FUNDED ASSETS 19
XOMA ACQUISITION STRATEGY IS DISTINCT THE BENEFITS TO Acquire milestone and royalty licenses ▪ ASSET SELLERS: to high-potential, fully funded assets Recognize value of non-dilutive, Focus on mid-clinical stage assets ▪ non-recourse financing Partner companies pay development ▪ Few options to monetize license costs agreements associated with partnered mid-stage clinical assets Ever-increasing pipeline of ▪ potential targets Immediate cash infusion to advance high-priority internal programs to Team focused on ▪ improve human health acquiring new royalty assets 20
KEY ATTRIBUTES OF XOMA TARGET ASSETS PRE-COMMERCIAL THERAPEUTIC ASSETS R x Phase 1, 2, or 3 LONG DURATION OF MARKET EXCLUSIVITY Patent expiration or regulatory exclusivity HIGH REVENUE POTENTIAL High unmet need or clear clinical benefit over alternatives STRONG DEVELOPER/MARKETER Assets partnered with high-quality pharma / biopharma companies 21 21
XOMA’S FIRST ROYALTY MONETIZATION TRANSACTION: AGENUS 7 33 % 10 % 100 % Assets with Large- of Agenus’ of Future Immuno- Cap Partners Royalty Interest Milestones Oncology Focus Total XOMA Investment: $ 15 M 22
XOMA’S LATEST ROYALTY MONETIZATION TRANSACTION: ARONORA 2 OF 5 100 % 10 % 100 % Assets with Large- of Aronora’s of Future Anti-Thrombotic Cap Partner Royalty Interest Milestones Focus Total XOMA Investment: Up to $ 9 M 23
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