XOMA Raises up to $140 Million in Non-Dilutive, Non-Recourse Financing from Funds Managed by Blue Owl Capital Backed by VABYSMO® Royalties

Rhea-AI Summary

XOMA Corporation (Nasdaq: XOMA) secures $140 million non-dilutive, non-recourse, royalty-backed loan from Blue Owl Capital Inc. (NYSE: OWL) to fund stock repurchases and additional royalty and milestone acquisitions. The loan is repayable over a 15-year period at a fixed interest rate of 9.875% per year, with the option to draw an additional $10 million based on VABYSMO® (faricimab) sales. XOMA has also issued warrants to purchase up to 120,000 shares of its common stock to Blue Owl at implied premiums of 122%, 170%, and 217% to the closing stock price.

Insights

Financial Analyst

The strategic financial maneuver by XOMA Corporation to secure a royalty-backed loan from Blue Owl Capital underscores a proactive approach to capital management. By drawing on $130 million, with the option for an additional $10 million, XOMA is reinforcing its liquidity without diluting shareholder equity—a move often well-received in the market. The fixed interest rate of 9.875% is noteworthy; it is higher than average corporate debt, reflecting the inherent risk associated with royalty financing tied to pharmaceutical sales, which can be volatile.

Investors should consider the implications of the warrants issued to Blue Owl, which could result in future dilution if exercised. However, the strike prices are set at significant premiums to the current share price, indicating a long-term confidence in XOMA's stock performance. The use of proceeds for stock repurchases could signal management's belief that the shares are undervalued, providing a potential upside for investors.

From a broader perspective, the deal reflects a trend in the biotech industry where companies leverage their royalty streams to fund operations and strategic initiatives, without resorting to equity markets which can be dilutive and less favorable during market downturns. The royalty-backed financing structure is particularly of interest to emerging biotech firms that have valuable intellectual property but require capital to realize their business objectives.

Biotech Industry Consultant

XOMA’s acquisition of royalties from VABYSMO® (faricimab) and the subsequent financing deal with Blue Owl Capital represent a significant strategic pivot in the biotech funding landscape. This transaction enables XOMA to expand its royalty and milestone acquisition strategy, which is critical for a company positioning itself as a capital provider to emerging biotech ventures. The non-dilutive nature of the financing preserves shareholder value while providing the company with the necessary resources to potentially acquire additional assets.

For stakeholders in the biotech sector, XOMA's approach may serve as a case study in alternative financing strategies that balance growth with financial prudence. The company's focus on building a balanced portfolio of royalty-generating assets could offer a more predictable revenue stream compared to traditional biotech models that are heavily reliant on successful drug development outcomes.

However, the reliance on royalty income from products such as VABYSMO® introduces a degree of risk, as the commercial success of these drugs is subject to market adoption, competition and regulatory factors. Stakeholders should monitor the performance of these drugs in the market to assess the long-term viability of XOMA's financial strategy.

Pharmaceutical Financial Advisor

The decision by XOMA to utilize low-cost financing for strategic initiatives such as stock repurchases and the acquisition of additional royalties is a calculated move that could yield significant returns if the underlying assets perform well. The terms of the loan indicate a substantial commitment to the success of VABYSMO®, with repayment contingent on the drug's sales performance.

An important aspect for investors to consider is the semi-annual interest payments and the 15-year repayment period, which suggest a long-term investment horizon. This long-term commitment can be beneficial if VABYSMO® and other assets in XOMA's portfolio meet sales expectations, but it also ties up capital that could have been used for other opportunities.

Furthermore, the terms of the warrants issued to Blue Owl could potentially provide a windfall to Blue Owl if XOMA's share price appreciates significantly, albeit with a substantial premium. This scenario would also benefit XOMA's shareholders, as it would reflect positively on the company's valuation and market confidence.

Overall, the deal between XOMA and Blue Owl demonstrates the intricate balance between risk and opportunity in pharmaceutical financing, with implications that will unfold over the long term as the market responds to both XOMA's strategic initiatives and the performance of its royalty assets.

Low-cost financing capitalizes on XOMA’s $14 million acquisition of VABYSMO® (faricimab) royalties in 2021

Proceeds expected to be used for stock repurchases and additional royalty and milestone acquisitions

Financing from Blue Owl extends XOMA’s capabilities as a leading provider of capital to emerging biotech companies

EMERYVILLE, Calif., Dec. 19, 2023 (GLOBE NEWSWIRE) -- XOMA Corporation (Nasdaq: XOMA), the biotech royalty aggregator, today announced it entered into a non-dilutive, non-recourse, royalty-backed loan for up to $140 million of capital with certain funds managed by the credit platform of Blue Owl Capital Inc. (NYSE: OWL).

“The Blue Owl financing provides us with significant non-dilutive capital to drive shareholder value through stock repurchases and additional royalty and milestone acquisitions,” stated Brad Sitko, Chief Investment Officer of XOMA.  “This capital infusion comes at an opportune time given the existing state of the biotech funding market, providing us with an opportunity to accelerate the growth of our royalty and milestones portfolio, which currently consists of two marketed products, two programs in or near registration, five assets in Phase 3 development, and over 60 assets in earlier stages of development.”

“Blue Owl’s Life Science efforts are focused on credit, royalty, and equity investments in innovative healthcare and life sciences companies and products.  We recognize the value embedded in XOMA’s differentiated royalty and milestone aggregation business strategy.  Our long-established relationship with XOMA’s management team gives us confidence that they can continue building a balanced portfolio of current and future royalty-generating assets.  This financing establishes a long-term partnership with XOMA, as we help broaden their access to capital for royalty and milestone monetization opportunities,” said Sandip Agarwala, Managing Director at Blue Owl Capital.

Terms of the Agreement
XOMA has drawn down $130 million in principal from Blue Owl and has the option to draw another $10 million should the royalties received from VABYSMO® (faricimab) sales on or prior to March 15, 2026, exceed a predetermined amount.  XOMA is obligated to make semi-annual interest payments at a fixed rate of 9.875% per year until the royalty-backed loan is repaid, at which time VABYSMO® royalty payments will revert back to XOMA.  The loan is repayable over a 15-year period, although XOMA may repay it in full at any time during that period, subject to the terms of the loan. Additionally, XOMA has issued to Blue Owl warrants to purchase an aggregate of up to 120,000 shares of XOMA’s common stock in three equal tranches with strike prices of $35.00, $42.50, and $50.00 per share, respectively, resulting in implied premiums of 122%, 170%, and 217% to the price of XOMA’s common stock at closing, respectively.

Advisors
Gibson, Dunn & Crutcher LLP served as XOMA’s legal advisor while Blue Owl was advised by Cooley LLP.

About XOMA Corporation
XOMA is a biotechnology royalty aggregator playing a distinctive role in helping biotech companies achieve their goal of improving human health.  XOMA acquires the potential future economics associated with pre-commercial and commercial therapeutic candidates that have been licensed to pharmaceutical or biotechnology companies.  When XOMA acquires the future economics, the seller receives non-dilutive, non-recourse funding they can use to advance their internal drug candidate(s) or for general corporate purposes.  The Company has an extensive and growing portfolio with more than 70 assets (asset defined as the right to receive potential future economics associated with the advancement of an underlying therapeutic candidate).  For more information about the Company and its portfolio, please visit www.xoma.com.

About Blue Owl Capital Inc.
Blue Owl (NYSE: OWL) is a leading asset manager that is redefining alternatives.  With $157 billion in assets under management¹, we invest across three multi-strategy platforms:  Credit, GP Strategic Capital, and Real Estate. Anchored by a strong permanent capital base, we provide businesses with private capital solutions to drive long-term growth and offer institutional and individual investors differentiated alternative investment opportunities that aim to deliver strong performance, risk-adjusted returns, and capital preservation.  Together with over 650 experienced professionals in more than 10 offices globally, Blue Owl brings the vision and discipline to create the exceptional.  To learn more, visit www.blueowl.com.

¹ As of September 30, 2023

Forward-Looking Statements/Explanatory Notes
Certain statements contained in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding XOMA driving shareholder value through stock repurchases and royalty acquisitions; the timing and amount of potential commercial payments to XOMA and other developments related to VABYSMO® (faricimab); the anticipated timings of regulatory filings and approvals related to assets in XOMA’s portfolio; and the ability of XOMA to continue building a balanced portfolio of current and future royalty generating assets. In some cases, you can identify such forward-looking statements by terminology such as “anticipate,” “intend,” “believe,” “estimate,” “plan,” “seek,” “project,” “expect,” “may,” “will”, “would,” “could” or “should,” the negative of these terms or similar expressions.  These forward-looking statements are not a guarantee of XOMA’s performance, and you should not place undue reliance on such statements.  These statements 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, including those related to the fact that our product candidates subject to out-license agreements are still being developed, and our licensees may require substantial funds to continue development which may not be available; we do not know whether there will be, or will continue to be, a viable market for the products in which we have an ownership or royalty interest; if the therapeutic product candidates to which we have a royalty interest do not receive regulatory approval, our third-party licensees will not be able to market them; and the impact to the global economy as a result of the COVID-19 pandemic.  Other potential risks to XOMA meeting these expectations are described in more detail in XOMA's most recent filing on Form 10-Q and in other filings with the Securities and Exchange Commission.  Consider such risks carefully when considering XOMA's prospects.  Any forward-looking statement in this press release represents XOMA's beliefs and assumptions only as of the date of this press release and should not be relied upon as representing its views as of any subsequent date.  XOMA disclaims any obligation to update any forward-looking statement, except as required by applicable law.

EXPLANATORY NOTE: Any references to “portfolio” in this press release refer strictly to milestone and/or royalty rights associated with a basket of drug products in development.  Any references to XOMA’s “assets” in this press release refer strictly to milestone and/or royalty rights associated with individual drug products in development.

As of the date of this press release, all assets in XOMA’s milestone and royalty portfolio, except VABYSMO® (faricimab) and IXINITY® [coagulation factor IX (recombinant)], are investigational compounds. Efficacy and safety have not been established. There is no guarantee that any of the investigational compounds will become commercially available.

Investor contact:		Media contact:
Juliane Snowden		Kathy Vincent
XOMA		KV Consulting & Management
+1-646-438-9754		+1-310-403-8951
juliane.snowden@xoma.com		kathy@kathyvincent.com

FAQ

What is the latest financing news for XOMA Corporation (Nasdaq: XOMA)?

XOMA Corporation secured a $140 million non-dilutive, non-recourse, royalty-backed loan from Blue Owl Capital Inc. to fund stock repurchases and additional royalty and milestone acquisitions.

What are the terms of the royalty-backed loan secured by XOMA Corporation (Nasdaq: XOMA)?

The loan is repayable over a 15-year period at a fixed interest rate of 9.875% per year. XOMA has the option to draw an additional $10 million based on VABYSMO® (faricimab) sales, and has issued warrants to purchase up to 120,000 shares of its common stock to Blue Owl at implied premiums of 122%, 170%, and 217% to the closing stock price.

Who provided the financing to XOMA Corporation (Nasdaq: XOMA)?

Blue Owl Capital Inc. provided a non-dilutive, non-recourse, royalty-backed loan of $140 million to XOMA Corporation.

What are the potential uses of the financing secured by XOMA Corporation (Nasdaq: XOMA)?

The financing is expected to be used for stock repurchases and additional royalty and milestone acquisitions.

What are the implications of the financing for XOMA Corporation (Nasdaq: XOMA) shareholders?

The financing provides significant non-dilutive capital to drive shareholder value through stock repurchases and additional royalty and milestone acquisitions.