XOMA Royalty Corporation’s Quarterly Financial Update: Steady Growth and Promising Outlook

XOMA Royalty Corporation, a biotech royalty aggregator, has released its financial results for the first quarter of 2025. The company’s performance showcases steady growth, strategic acquisitions, and a promising outlook for the future.

Overview XOMA is a unique biotech company that focuses on acquiring the rights to future milestone and royalty payments associated with promising therapeutic candidates developed by its partners. Rather than developing drugs itself, XOMA builds a portfolio of these revenue streams, which it expects will generate most of its future income.

The company’s business model has proven successful, as it reported net income of $2.4 million for the first quarter of 2025, a significant turnaround from the $8.6 million net loss in the same period last year. XOMA also generated $2.2 million in net cash from operations, a positive sign for the company’s financial health.

Portfolio Updates: Kinnate Acquisition and Castle Creek Royalty Deal One of the key highlights of the quarter was XOMA’s completion of the sale of all five pipeline assets acquired in the Kinnate Biopharma acquisition in 2024. The company is now eligible to receive up to $270 million in upfront and milestone payments, as well as future royalties ranging from low single digits to mid-teens on commercial sales. This transaction demonstrates XOMA’s ability to identify and capitalize on promising assets, while also providing a potential windfall for the former Kinnate shareholders through the Contingent Value Rights (CVRs) agreement.

In addition, XOMA made a $5 million investment in a royalty financing transaction led by Ligand, acquiring a royalty interest in D-Fi, a Phase 3 asset being developed by Castle Creek Biosciences for the treatment of a rare skin disorder called dystrophic epidermolysis bullosa (DEB). This type of strategic acquisition aligns with XOMA’s focus on early- to mid-stage clinical assets with significant commercial potential.

Financial Performance: Steady Growth in Income and Revenues XOMA’s total income and revenues for the first quarter of 2025 were $15.9 million, a significant increase from the $1.5 million reported in the same period last year. This growth was driven by several key factors:

1. Income from Purchased Receivables under the EIR Method: XOMA reported $6.1 million in income from purchased receivables, primarily related to sales of VABYSMO and IXINITY. This represents a new revenue stream for the company as it begins to see returns on its past acquisitions.

2. Income from Purchased Receivables under the Cost Recovery Method: The company recognized $5.5 million in income, including a $4 million milestone payment related to DayOne’s marketing authorization application filing with the European Medicines Agency (EMA) and $1.5 million in estimated royalties from OJEMDA.

3. Revenue from Contracts with Customers: XOMA reported $4 million in revenue, including a $3 million milestone payment from its collaboration agreement with Takeda and $1 million in other revenue.

These results demonstrate XOMA’s ability to generate a diverse range of income streams from its growing portfolio of assets, which is a key strength of its business model.

Expenses and Outlook Research and development (R&D) expenses for the quarter increased to $1.3 million, primarily due to $1 million in pass-through licensing fees related to the Phase 3 milestone achieved by Takeda under the companies’ collaboration agreement, as well as clinical trial costs for the KIN-3248 program. XOMA expects R&D costs to normalize during the remainder of 2025 following the sale of the Kinnate pipeline assets.

General and administrative (G&A) expenses decreased slightly to $8.1 million, mainly due to a reduction in stock compensation costs, partially offset by an increase in consulting expenses related to the Kinnate acquisition.

Looking ahead, XOMA’s management remains optimistic about the company’s future prospects. The successful sale of the Kinnate assets and the ongoing revenue streams from its growing portfolio of royalty and milestone payments are expected to drive continued growth and profitability.

Liquidity and Capital Resources: Solid Financial Position As of March 31, 2025, XOMA had $90.3 million in unrestricted cash and cash equivalents, as well as $4.8 million in restricted cash. The company’s working capital stood at $92.8 million, providing a solid foundation to support its operations and future acquisitions.

During the quarter, XOMA generated $2.2 million in net cash from operating activities, a significant improvement from the $4.9 million in net cash used in the same period last year. This positive cash flow was primarily driven by the company’s cash receipts, including royalties and commercial payments from products like VABYSMO, OJEMDA, and IXINITY, as well as other receipts from purchased receivables and contracts with customers.

The company’s net cash used in investing activities was $6.7 million, primarily due to the Castle Creek royalty financing transaction. Net cash used in financing activities was $6.9 million, mainly for principal repayments on the Blue Owl Loan and dividend payments on the Series A and Series B Preferred Stock.

XOMA’s management believes the company’s current financial resources are sufficient to fund its planned operations, commitments, and contractual obligations for at least the next year. However, the company may seek additional capital through its existing common stock and preferred stock at-the-market (ATM) programs, or through other public or private debt or equity transactions, to support future growth and acquisitions.

Risks and Uncertainties As with any biotech company, XOMA faces a range of risks and uncertainties that could impact its future performance. These include the potential failure of its partners’ product candidates to receive regulatory approval, the risk of products becoming noncompetitive or obsolete, and the possibility of macroeconomic and business conditions, such as inflation, economic slowdown, or geopolitical instability, affecting the commercialization of its partners’ products.

Additionally, XOMA’s future revenue and income are dependent on the achievement of milestones or product sales by its existing partners and licensees. Any delays or setbacks in their development and commercialization efforts could directly impact XOMA’s financial results.

Conclusion XOMA Royalty Corporation’s first-quarter 2025 financial results demonstrate the company’s ability to execute its unique business model as a biotech royalty aggregator. The steady growth in income and revenues, strategic acquisitions, and solid financial position position XOMA for continued success in the years ahead. While challenges and uncertainties remain, the company’s management team appears well-equipped to navigate the complexities of the biotech industry and deliver value for its shareholders.