Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________
Commission File Number: 001-39801
XOMA Royalty Corporation
(Exact name of Registrant as specified in its charter)
Nevada
52-2154066
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
2200 Powell Street, Suite 310
Emeryville, California
94608
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (510) 204-7200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol(s):
Name of each exchange on which registered:
Common Stock, $0.0075 par value
XOMA
The Nasdaq Global Market
8.625% Series A Cumulative Perpetual Preferred Stock, par value $0.05
XOMAP
Depositary Shares (each representing 1/1000th interest in a share of 8.375% Series B Cumulative Perpetual Preferred Stock, par value $0.05)
XOMAO
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 8, 2025, the registrant had 12,087,719 shares of common stock, $0.0075 par value per share, outstanding.
XOMA ROYALTY CORPORATION
TABLE OF CONTENTS
9
Page
Glossary of Terms and Abbreviations
3
PART I
FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements
7
Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (unaudited)
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited)
8
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited)
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited)
10
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (unaudited)
11
Notes to Condensed Consolidated Financial Statements (unaudited)
12
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
50
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
59
Item 4.
Controls and Procedures
PART II
OTHER INFORMATION
61
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
62
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
63
Signatures
65
2
GLOSSARY OF TERMS AND ABBREVIATIONS
Abbreviations
Definition
2010 Plan
The Company's 2010 Long Term Incentive and Stock Award Plan, as amended
2018 Common Stock ATM Agreement
At The Market Issuance Sales Agreement with HCW dated December 18, 2018
2021 Series B Preferred Stock ATM Agreement
At The Market Issuance Sales Agreement with B. Riley dated August 5, 2021
AAA
Assignment and Assumption Agreement
Affitech
Affitech Research AS
Affitech CPPA
The Company's Commercial Payment Purchase Agreement with Affitech dated October 6, 2021
Aptevo
Aptevo Therapeutics Inc.
Aptevo CPPA
The Company’s Payment Interest Purchase Agreement with Aptevo dated March 29, 2023, referred to herein as “Aptevo Commercial Payment Purchase Agreement” or “Aptevo CPPA”
Alexion
Alexion Pharmaceuticals
Alexion License Agreement
Exclusive License Agreement between the Company and Alexion (formerly Amolyt Pharma SAS, “Amolyt”) dated December 19, 2024
ASC
Accounting Standards Codification
ASC 250
ASC Topic 250, Accounting Changes and Error Corrections
ASC 310
ASC Topic 310, Receivables
ASC 450
ASC Topic 450, Contingencies
ASC 606
ASC Topic 606, Revenue from Contracts with Customers
ASC 805
ASC Topic 805, Business Combinations
ASC 815
ASC Topic 815, Derivatives and Hedging
ASC 835-30
ASC Subtopic 835-30, Interest – Imputation of Interest
ASC 842
ASC Topic 842, Leases
ASU
Accounting Standards Update
Bayer License Agreement
Out-license agreement to Bayer HealthCare LLC from Daré dated January 10, 2020, related to the development and commercialization of OVAPRENE
BioInvent
BioInvent International AB
BioInvent License Agreement
Cross-Licensing Agreement between the Company and BioInvent dated November 21, 2003, as amended on September 14, 2004, November 13, 2009, and September 6, 2018
BioInvent Agreement
Royalty Purchase Agreement between Meza Royalty 1 LLC (a wholly-owned subsidiary of the Company) and BioInvent dated May 27, 2025, related to the acquisition of BioInvent’s remaining rights to milestone payments and royalties under the BioInvent License Agreement
Black-Scholes Model
Black-Scholes Option Pricing Model
Blue Owl
Blue Owl Capital Corporation
Blue Owl Loan
Loan pursuant to the Blue Owl Loan Agreement
Blue Owl Loan Agreement
Loan agreement dated as of December 15, 2023, between XRL, the lenders from time to time party thereto and Blue Owl, as administrative agent
Board
The Company’s Board of Directors
B. Riley
B. Riley Securities, Inc.
Broadridge
Broadridge Corporate Issuer Solutions, LLC, rights agent under the Kinnate CVR Agreement
BVF
Biotechnology Value Fund, L.P.
Castle Creek
Castle Creek Biosciences, Inc. and Castle Creek Biosciences, LLC, collectively
Castle Creek PRV Interest
The Company’s right to receive 6.7% of the procees from a potential PRV sale
Company
XOMA Royalty Corporation, including its subsidiaries
CPPA
Commercial Payment Purchase Agreement
CVR
Contingent value right
Daré
Daré Bioscience, Inc.
Daré RPAs
The Company's Traditional RPA and Synthetic RPA with Daré dated April 29, 2024
Daré Organon License Agreement
Out-license agreement to Organon from Daré dated March 31, 2022, related to the development and commercialization of XACIATO, as amended on July 4, 2023
Day One
Day One Biopharmaceuticals
Day One License Agreement
License Agreement for RAF between Viracta and Day One dated December 16, 2019, as amended on March 4, 2024 (assumed by the Company as part of Viracta Assignment Agreements)
EIR
Effective interest rate
EMA
European Medicines Agency
ESPP
2015 Employee Stock Purchase Plan, as amended
ESSA
ESSA Pharma Inc.
ESSA Acquisition Agreement
Business Combination Agreement between Xeno and ESSA dated July, 13, 2025, related to the acquisition of the issued and outstanding securities of ESSA by XenoTherapeutics.
Exchange Act
U.S. Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
FDA
U.S. Food and Drug Administration
FDIC
Federal Deposit Insurance Corporation
Fortis
Fortis Advisors LLC, representative of the Kinnate CVR holders under the Kinnate CVR Agreement
GAAP
Generally accepted accounting principles
G&A
General and administrative
HCRP
Healthcare Royalty Partners II, L.P.
HCW
H.C. Wainwright & Co., LLC
HilleVax
HilleVax, Inc.
ImmunityBio
ImmunityBio, Inc. (formerly NantCell, Inc.)
ImmunityBio License Agreement
Out-license agreement to ImmunityBio from LadRx dated July 27, 2017, related to the development and commercialization of Aldoxorubicin, as amended on September 27, 2018, terminated on June 3, 2024
IRA
Inflation Reduction Act
IP
Intellectual Property
IPR&D
In-Process Research and Development
IXINITY®
coagulation factor IX (recombinant)
Janssen
Janssen Biotech, Inc.
Janssen License Agreement
The Company’s License Agreement with Janssen dated August 5, 2019
Kinnate
Kinnate Biopharma Inc.
Kinnate CVR Agreement
The Contingent Value Rights Agreement by and between the Company, Broadridge, and Fortis dated April 3, 2024
Kinnate Merger Agreement
The Agreement and Plan of Merger by and among the Company, XRA, and Kinnate dated February 16, 2024
Kuros
Kuros Biosciences AG, Kuros US LLC, and Kuros Royalty Fund (US) LLC, collectively
Kuros RPA
The Company's Royalty Purchase Agreement with Kuros dated July 14, 2021
4
LadRx
LadRx Corporation (formerly CytRx Corporation)
LadRx Agreements
LadRx AAA and LadRx RPA
LadRx AAA
The Company’s Assignment and Assumption Agreement with LadRx dated June 21, 2023
LadRx RPA
The Company’s Royalty Purchase Agreement with LadRx dated June 21, 2023 and subsequently amended on June 3, 2024
LAVA
LAVA Therapeutics N.V.
LAVA Purchase Agreement
Share Purchase Agreement between the Company and LAVA dated August 3, 2025, related to the acquisition of the issued and outstanding ordinary shares of LAVA.
Ligand
Ligand Pharmaceuticals Incorporated
MAA
Marketing Authorization Application
Medexus
Medexus Pharmaceuticals, Inc.
Mezagitamab
TAK-079, a fully human monoclonal antibody targeting CD38 being developed by Takeda for the treatment of IgA nephropathy and other indications
MIPLYFFA™
arimoclomol
OJEMDA™
tovorafenib
Organon
Organon International GmbH
OVAPRENE®
An investigational hormone-free monthly intravaginal contraceptive
Palo
Palobiofarma, S.L.
Palo RPA
The Company's Royalty Purchase Agreement with Palo dated September 26, 2019
Pfizer
Pfizer, Inc.
Pierre Fabre
Pierre Fabre Médicament, SAS
Priority Review Voucher, or PRV
A voucher that may be granted by the FDA to Castle Creek if D-Fi is approved as a treatment for a rare pediatric disease, which could be sold to a third party
PSU
Performance stock unit
Pulmokine
Pulmokine, Inc.
Pulmokine Merger Agreement
The Agreement and Plan of Merger by and among the Company, XRA 2 Corp., Pulmokine, Shareholder Representative Services LLC, Each Management Stockholder dated November 26, 2024
R&D
Research and development
Regeneron
Regeneron Pharmaceuticals, Inc.
Rezolute
Rezolute, Inc. (formerly Antria Bio, Inc.)
Rezolute License Agreement
The Company's License Agreement with Rezolute dated December 6, 2017, as amended in March 2018, January 2019, and March 2020
RPA
Royalty Purchase Agreement
Roche
F. Hoffmann-La Roche AG
RSU
Restricted stock unit
SEC
U.S. Securities and Exchange Commission
Securities Act
U.S. Securities Act of 1933, as amended
Series A Preferred Stock
The 8.625% Series A cumulative, perpetual preferred stock issued in December 2020
Series B Preferred Stock
The 8.375% Series B cumulative, perpetual preferred stock issued in April 2021
Series A and Series B Preferred Stock
Series A Preferred Stock and Series B Preferred Stock, collectively
Series B Depositary Shares
The depositary shares, each representing 1/1000th interest in a share of Series B Preferred Stock
Series X Preferred Stock, or Convertible Preferred Stock
The Series X Convertible Preferred Stock
Sildenafil Cream
Sildenafil Cream, 3.6%
5
SAB No. 99
Staff Accounting Bulletin No. 99
Takeda
Takeda Pharmaceutical Company Limited
Takeda Collaboration Agreement
The Company's Collaboration Agreement with Takeda dated November 1, 2006, as amended in February 2007 and February 2009
Turnstone
Turnstone Biologics Corp.
Twist
Twist Bioscience Corporation
Twist RPA
The Company’s Royalty Purchase Agreement with Twist dated October 21, 2024
U.S.
United States
VABYSMO®
faricimab-svoa
Viracta
Viracta Therapeutics, Inc.
Viracta Assignment Agreements
Assignment and Novation Agreement by and among Viracta, the Company, and Day One dated December 3, 2024 and Intellectual Property Assignment between Viracta and the Company dated December 3, 2024
Viracta RPA
The Company's Royalty Purchase Agreement with Viracta dated March 22, 2021, as amended March 4, 2024
XACIATO™
Clindamycin phosphate vaginal gel 2%
XenoTherapeutics, or Xeno
XenoTherapeutics, Inc. and Xeno Acquisition Corp.
XenoTherapeutics Arranger Letter Agreement
The Company’s Arranger Letter Agreement with XenoTherapeutics, dated July 14, 2025
XRA
XRA 1 Corp. a wholly-owned subsidiary of the Company
XRA 3
XRA 3 Corp. a wholly-owned subsidiary of the Company
XRA 4
XRA 4 Corp. a wholly-owned subsidiary of the Company
XRL
XRL 1 LLC, a wholly-owned subsidiary of the Company
Zevra
Zevra Therapeutics, Inc. (formerly KemPharm Denmark A/S)
Zevra APA
Asset Purchase Agreement dated May 13, 2011 between LadRx and Orphazyme ApS, and assigned to Zevra as of June 1, 2022, related to the sale of arimoclomol from LadRx to Zevra (assumed by the Company as part of LadRx AAA)
6
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share amounts)
June 30,
December 31,
2025
2024
ASSETS
Current assets:
Cash and cash equivalents
$
75,060
101,654
Short-term restricted cash
80
1,330
Investment in equity securities
8,801
3,529
Trade and other receivables, net
1,817
1,839
Short-term royalty and commercial payment receivables under the EIR method
17,960
14,763
Short-term royalty and commercial payment receivables under the cost recovery method
700
413
Prepaid expenses and other current assets
507
2,076
Total current assets
104,925
125,604
Long-term restricted cash
3,345
3,432
Property and equipment, net
26
32
Operating lease right-of-use assets
288
319
Long-term royalty and commercial payment receivables under the EIR method
4,775
4,970
Long-term royalty and commercial payment receivables under the cost recovery method
58,937
55,936
Exarafenib milestone asset
3,402
3,214
Investment in warrants
609
—
Intangible assets, net
45,434
25,909
Other assets - long term
1,715
1,861
Total assets
223,456
221,277
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
1,138
1,053
Accrued and other liabilities
5,411
5,752
Contingent consideration under RPAs, AAAs, and CPPAs
3,000
Operating lease liabilities
472
446
Unearned revenue recognized under units-of-revenue method
1,434
1,361
Preferred stock dividend accrual
1,368
Current portion of long-term debt
11,672
11,394
Total current liabilities
21,495
24,374
Unearned revenue recognized under units-of-revenue method – long-term
3,666
4,410
Exarafenib milestone contingent consideration (Note 4)
Long-term operating lease liabilities
238
483
Long-term debt
102,201
106,875
Total liabilities
131,002
139,356
Commitments and Contingencies (Note 10)
Convertible preferred stock, $0.05 par value, 5,003 shares authorized, issued and outstanding as of June 30, 2025 and December 31, 2024
20,019
Stockholders’ equity:
8.625% Series A cumulative, perpetual preferred stock, $0.05 par value, 984,000 shares authorized, issued and outstanding as of June 30, 2025 and December 31, 2024
49
8.375% Series B cumulative, perpetual preferred stock, $0.05 par value, 3,600 shares authorized, 1,600 shares issued and outstanding as of June 30, 2025 and December 31, 2024
Common stock, $0.0075 par value, 277,333,332 shares authorized, 12,062,466 and 11,952,377 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively
90
Additional paid-in capital
1,300,066
1,298,747
Accumulated other comprehensive income
122
73
Accumulated deficit
(1,227,892)
(1,237,057)
Total stockholders’ equity
72,435
61,902
Total liabilities, convertible preferred stock and stockholders’ equity
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
Six Months Ended
Income and revenues:
Income from purchased receivables under the EIR method
6,007
4,562
12,077
Income from purchased receivables under the cost recovery method
1,743
870
7,268
Revenue from contracts with customers
5,025
9,025
6,025
Revenue recognized under units-of-revenue method
354
629
671
1,119
Total income and revenues
13,129
11,086
29,041
12,576
Operating expenses:
69
1,161
1,362
1,194
7,802
11,004
15,948
19,465
Credit losses on purchased receivables
9,000
Amortization of intangible assets
655
1,199
Total operating expenses
8,526
21,165
18,509
29,659
Income (loss) from operations
4,603
(10,079)
10,532
(17,083)
Other (expense) income, net:
Gain on the acquisition of Kinnate
19,316
Change in fair value of embedded derivative related to RPA
8,100
Interest expense
(3,236)
(3,402)
(6,703)
(6,953)
Other income, net
7,824
2,050
7,729
4,010
Net income
9,191
15,985
11,558
7,390
Net income available to common stockholders (Note 3):
Basic
5,522
10,224
6,225
3,253
Diluted
7,823
14,617
8,822
4,654
Net income per share available to common stockholders:
0.46
0.88
0.52
0.28
0.44
0.84
0.50
0.27
Weighted-average shares used in computing net income per share available to common stockholders:
12,007
11,643
11,988
11,611
17,761
17,321
17,777
17,263
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net unrealized gain on available-for-sale debt securities
Comprehensive income
9,195
11,607
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
Convertible
Series A
Series B
Additional
Accumulated
Total
Preferred Stock
Common Stock
Paid-In
Other Comprehensive
Stockholders’
Shares
Amount
Capital
Income
Deficit
Equity
Balance, December 31, 2024
984
11,952
Exercise of stock options
21
85
Issuance of common stock related to 401(k) contribution
141
Stock-based compensation expense
1,983
Preferred stock dividends
(1,368)
Repurchase of common stock
(25)
(545)
45
2,367
Balance, March 31, 2025
11,953
1,299,588
118
(1,235,235)
64,610
30
123
Issuance of common stock related to ESPP
119
Issuance of common stock related to RSUs
15
Issuance of common stock related to PSUs
136
1
(1)
1,605
(82)
(1,848)
(1,849)
Balance, June 30, 2025
12,062
Balance, December 31, 2023
11,495
86
1,291,790
(1,223,223)
68,702
135
621
622
2,856
(13)
Net loss
(8,595)
Balance, March 31, 2024
11,636
87
1,294,017
(1,231,831)
62,322
250
95
2,690
Balance, June 30, 2024
11,658
1,295,684
(1,215,846)
79,974
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustment for income from EIR method purchased receivables
(3,935)
(4,562)
3,588
5,546
(19,316)
Common stock contribution to 401(k)
Depreciation
Accretion of long-term debt discount and debt issuance costs
749
508
Non-cash lease expense
31
29
Change in fair value of equity securities
(5,173)
(535)
Change in fair value of available-for-sale debt securities classified as cash equivalents
Change in fair value of derivatives
(5)
Changes in assets and liabilities:
22
478
Prepaid expenses and other assets
(603)
Accounts payable and accrued liabilities
(387)
921
(219)
(671)
(1,117)
Net cash provided by (used in) operating activities
8,668
(2,220)
Cash flows from investing activities:
Net cash acquired in Kinnate acquisition
18,926
Payments of consideration under RPAs, AAAs, and CPPAs
(8,000)
(37,000)
Receipts under RPAs, AAAs, and CPPAs
2,039
16,741
Payment for BioInvent contract-based intangible asset
(20,614)
Purchase of property and equipment
(17)
Purchase of equity securities
(99)
Net cash used in investing activities
(26,674)
(1,350)
Cash flows from financing activities:
Principal payments – debt
(5,065)
(3,616)
Debt issuance costs and loan fees paid in connection with long-term debt
(80)
(661)
Payment of preferred stock dividends
(2,736)
Repurchases of common stock
(2,370)
Proceeds from exercise of options and other share-based compensation
896
2,353
Taxes paid related to net share settlement of equity awards
(570)
(1,387)
Net cash used in financing activities
(9,925)
(6,060)
Net decrease in cash, cash equivalents, and restricted cash
(27,931)
(9,630)
Cash, cash equivalents, and restricted cash as of the beginning of the period
106,416
159,550
Cash, cash equivalents, and restricted cash as of the end of the period
78,485
149,920
Supplemental cash flow Information:
Cash paid for interest
6,078
3,780
Cash paid for taxes
277
Non-cash investing and financing activities:
Estimated fair value of the Exarafenib milestone asset
2,922
Estimated fair value of the Exarafenib milestone contingent consideration
Right-of-use assets obtained in exchange for operating lease liabilities in Kinnate acquisition
824
Relative fair value basis reduction of rights-of-use assets in Kinnate acquisition
(824)
Accrual of contingent consideration under the Affitech CPPA
Excise tax accrual due to stock repurchases
24
Transaction costs in connection with BioInvent IP acquisition included in accounts payable
111
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
XOMA Royalty Corporation, a Nevada corporation, is a biotech royalty aggregator with a sizable portfolio of economic rights to future potential milestone and royalty payments associated with partnered commercial and pre-commercial therapeutic candidates. The Company was reincorporated from Delaware to Nevada in May 2025. The Company’s portfolio was built through the acquisition of rights to future milestone payments, royalties, and commercial payments, since its royalty aggregator business model was implemented in 2017. These acquisitions build upon out-licensing agreements for proprietary products and platforms held within the Company’s portfolio. The Company’s drug royalty aggregator business is primarily focused on early to mid-stage clinical assets in Phase 1 and 2 development, which the Company believes have significant commercial sales potential and that are licensed to well-funded partners with established expertise in developing and commercializing drugs. The Company also acquires milestone and royalty revenue streams on late-stage or commercial assets that are designed to address unmet markets or have a therapeutic advantage over other treatment options, and have long duration of market exclusivity. The Company expects most of its future income and revenue to be based on payments the Company may receive for milestones and royalties associated with these assets as well as the periodic recognition of income under the EIR method.
Liquidity and Financial Condition
The Company has incurred significant operating losses and negative cash flows from operations since its inception. As of June 30, 2025, the Company had cash, cash equivalents, and restricted cash of $78.5 million.
Based on the Company’s current cash balance and its planned spending, such as on royalties and other acquisitions, the Company has evaluated and concluded its financial condition is sufficient to fund its planned operations, commitments, and contractual obligations for a period of at least one year following the date that these unaudited condensed consolidated financial statements are issued.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions among consolidated entities were eliminated upon consolidation. The unaudited condensed consolidated financial statements were prepared in accordance with U.S. GAAP for financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial reporting. As permitted under those rules, certain footnotes or other financial information can be condensed or omitted. These unaudited condensed consolidated financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited consolidated financial statements for the preceding fiscal year. Accordingly, these statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 17, 2025.
These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal and recurring adjustments that are necessary for a fair statement of the Company’s consolidated financial information. The interim results of operations are not necessarily indicative of the results that may be expected for the full year, or for any other future annual or interim period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, revenue and expenses, and related disclosures. Management routinely evaluates its estimates including, but not limited to, those related to projected cash flows associated with income from purchased receivables under the EIR method, income from purchased receivables under the cost recovery method, revenue from contracts with customers, revenue recognized under the units-of-revenue method, royalty and commercial payment receivables, the Exarafenib milestone asset and contingent consideration, contingent consideration for purchased receivables, amortization of the Blue Owl Loan, accrued expenses, stock-based compensation, and warrants to purchase shares of third party stock. The Company bases its estimates on historical experience and on various other market-specific and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ significantly from these estimates, including estimates such as the Company’s income from purchased receivables under the EIR method, income from purchased receivables under the cost recovery method, and amortization of the deferred revenue from the HCRP arrangement and amortization of the Blue Owl Loan. Estimates related to income from purchased receivables under the EIR method are from commercial products that the Company has assessed to have reliably estimable cash flows based on the best information available from its partners or other third parties and from changes in expected cash flows for royalty and commercial receivables. Estimates related to income from purchased receivables under the cost recovery method may be based on the best information available to the Company from its partners or other third parties. Any changes to the estimated payments made by partners can result in a material adjustment to income reported. Under the contracts with HCRP, the amortization for the reporting period is calculated based on the payments expected to be made by the licensees to HCRP over the term of the arrangement. Any changes to the estimated payments by the licensees to HCRP can result in a material adjustment to revenue previously reported. The Company’s amortization of the Blue Owl Loan is calculated based on the commercial payments expected to be received from Roche for VABYSMO under the Affitech CPPA. Any changes to the estimated commercial payments from Roche can result in a material adjustment to the interest expense and term loan balance reported.
Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated statements of cash flows (in thousands):
Unrestricted cash
6,992
8,983
Unrestricted cash equivalents
68,068
92,671
Total unrestricted cash and cash equivalents
Total restricted cash
3,425
4,762
Total unrestricted and restricted cash and cash equivalents
Cash and Cash Equivalents
Cash consists of bank deposits held in business checking and interest-bearing deposit accounts. Cash equivalent balances are defined as highly liquid financial instruments with an original maturity of three months or less that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Cash equivalents held by the Company are in money market funds and U.S. treasury bills, and are classified as available-for-sale.
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Allowance for credit losses are recorded for available-for-sale debt securities with unrealized losses. The amount of credit losses that can be recognized for available-for-sale debt securities is limited to the amount by which carrying value exceeds fair value, and previously recognized credit losses are reversed if the fair value increases.
As of June 30, 2025, all investments in debt securities were held in U.S. treasury bills and classified as available-for-sale. There was no allowance for credit losses on investments in debt securities as of June 30, 2025. The Company redeemed upon maturity $46.3 million of available-for-sale debt securities during the six months ended June 30, 2025. During the three and six months ended June 30, 2025, the Company realized gains of $0.3 million and $0.5 million, respectively, from those redemptions. There were no sales or realized gains of available-for-sale debt securities during the three and six months ended June 30, 2024.
Cash equivalents classified as available-for-sale debt securities consisted of the following (in thousands):
June 30, 2025
Amortized
Unrealized
Estimated Fair
Cost Basis
Gains
Losses
Value
U.S. treasury bills
25,812
25,934
Total debt securities
December 31, 2024
20,294
20,367
Restricted Cash
Cash accounts with any type of restriction are classified as restricted cash. If restrictions are expected to be lifted or to be used to pay a third party in the next twelve months, the restricted cash account is classified as current.
The restricted cash balance may only be used to pay interest expense, administrative fees, and other allowable expenses pursuant to the Blue Owl Loan. Payments of interest under the Blue Owl Loan Agreement are made semi-annually using commercial payments received since the immediately preceding interest payment date under the Affitech CPPA. On each interest payment date, if the commercial payments received are less than the total interest due for the respective quarter, XRL is expected to cover the shortfall in interest payment due from the reserve account.
Payments of administrative fees under the Blue Owl Loan Agreement are made semi-annually on January 1 and July 1 of each year from the reserve account. XOMA will be required to fund an additional $0.8 million into the administrative fee escrow account on July 1, 2027.
Concentration of Risk
Cash, cash equivalents, restricted cash, and receivables are financial instruments which potentially subject the Company to concentrations of credit risk, as well as liquidity risk.
The Company maintains cash balances at commercial banks. Balances commonly exceed the amount insured by the FDIC. The Company has not experienced any losses in such accounts.
The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business but does not generally require collateral on receivables.
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For the three months ended June 30, 2025, three partners represented 44%, 38%, and 13% of total income and revenues, respectively. For the six months ended June 30, 2025, four partners represented 40%, 25%, 17%, and 14% of total income and revenues, respectively. For the three months ended June 30, 2024, two partners represented 45% and 41% of total income and revenues, respectively. For the six months ended June 30, 2024, two partners represented 40% and 36% of total income and revenues, respectively. One partner represented 94% of trade and other receivables, net balance as of June 30, 2025. Two partners represented 70% and 27% of the trade and other receivables, net balance, respectively, as of December 31, 2024.
Purchase of Rights to Future Milestones, Royalties, and Commercial Payments
The Company has purchased rights to receive a portion of certain future developmental, regulatory and commercial sales milestones, royalties, and option fees on sales of products currently in clinical development or recently commercialized. Agreements to purchase such rights do not have contractual terms typical of loans (such as contractual principal and interest amounts). As U.S. GAAP does not provide specific authoritative guidance covering such agreements, the Company has analogized and accounted for the amounts paid for these rights as a financial asset that is akin to a loan in accordance with ASC 310 as the Company believes they most closely resemble that of loans under royalty and commercial payment receivables (see Note 5). In addition, the Company may be obligated to make contingent payments related to certain product development milestones and sales-based milestones.
Under the EIR method, the amount and timing of contingent payments are included in the forecasted expected cash flows used to estimate royalty and commercial payment receivables and income from purchased receivables.
Under the cost recovery method, the contingent payments are evaluated to determine if they are subject to the provisions of ASC 815. Contingent payments subject to the scope of ASC 815 are measured at fair value at the inception of the arrangement, and subject to remeasurement to fair value during each reporting period. Any changes in the estimated fair value are recorded in the condensed consolidated statements of operations. Contingent consideration payments that do not fall within the scope of ASC 815 are recognized when the amounts are probable and reasonably estimable according to ASC 450.
Effective Interest Rate Method
The Company accounts for rights to future milestones, royalties, and commercial payments related to commercial products with future cash flows that can be reliably estimated at amortized cost under the prospective EIR method in accordance with ASC 835-30. The EIR is calculated by forecasting the expected cash flows to be received and paid over the life of the asset relative to the receivable’s carrying amount at the time when the Company determines that there are reliable cash flows. The carrying amount of a receivable is made up of the opening balance, which is increased by accrued income and expected cash payments and decreased by cash receipts in the period to arrive at the ending balance. The EIR is recalculated at each reporting period as differences between expected cash flows and actual cash flows are realized and as there are changes to the expected future cash flows. If the EIR for the current period is lower than the prior period and if the gross cash flows have declined (expected and collected), the Company may record an allowance for the change in expected cash flows. Receivables related to income from purchased receivables under the EIR method totaled $22.7 million and $19.8 million as of June 30, 2025 and December 31, 2024, respectively.
For income from purchased receivables under the EIR method, the accretable yield is recognized as income at the effective rate of return over the expected life of the royalty and commercial payment receivable. The amounts and duration of forecasted expected future cash flows used to calculate and measure income are largely impacted by research analyst coverage, commercial performance of the product, and contract or patent duration.
The prospective application of the EIR method to measure royalty and commercial payment receivables requires judgment in forecasting future expected cash flows and reliance on third-party information. The Company forecasts expected sales based on sales projections of the underlying commercial products that are published in research analyst reports over the periods that the Company is entitled to rights to cash flows from royalties or milestones. Market research is generally based on analysis of factors such as commercial product growth in global economies, industry trends, and product life cycles. The Company considers commercial performance updates on regulatory approval for new indications
or geographic areas or discontinuation of certain indications or geographic areas in the forecasting of future expected cash flows. The Company also considers royalty duration of the commercial products, which may be based on factors including but not limited to regulatory and marketing approval dates, patent expiration dates, first commercial sale, and generic sales. Loss of regulatory exclusivity, patent protection, or other additional factors that may be communicated to the Company by its partners or through third-party information may impact the royalty duration that the Company uses in forecasting future expected cash flows.
Cost Recovery Method
When the purchase of rights to future milestones, royalties, and commercial payments involves future cash flows which cannot be reliably estimated, the Company accounts for such rights on a non-accrual basis using the cost recovery method. The Company’s assessment of whether cash flows can be reliably estimated depends on a number of factors. For example, the Company has generally determined that rights related to programs in preclinical or clinical stages of development or that have had a very short commercialization period during which payments have not yet been received, generally have cash flows that cannot be reliably estimated and therefore are accounted for under the cost recovery method. The related royalty and commercial payment receivable balance is classified as noncurrent or current based on whether payments are probable and reasonably expected to be received in the next twelve months. Under the cost recovery method, any milestone, royalty, or commercial payment received is recorded as a direct reduction of the recorded receivable balance. Under the cost recovery method, the Company does not recognize any income in accordance with ASC 835-30 and does not have any deferred fees or costs.
When the recorded royalty and commercial payment receivables balance have been fully collected, any additional amounts collected are recognized as income from purchased receivables under the cost recovery method. Receivables from such income from purchased receivables are included in trade and other receivables, net on the condensed consolidated balance sheet and totaled $1.7 million and $1.3 million as of June 30, 2025 and December 31, 2024, respectively.
Income from purchased receivables under the cost recovery method includes income from milestone and royalty payments related to royalty and commercial payment transactions for which the cost has been fully recovered or impaired. The excess milestone and royalty payment received over a remaining receivable balance is recognized as income. If the information upon which such income amounts are derived is provided to the Company from partners or other third parties in arrears, the Company estimates the income earned during the period based upon the best information available such that the income recognized is not probable to be subsequently reversed in future periods.
Allowance for Current Expected Credit Losses
The Company evaluates the royalty and commercial payment receivables on a collective (i.e., pool) basis if they share similar risk characteristics. The Company evaluates a royalty and commercial payment receivable individually if its risk characteristics are not similar to other royalty and commercial payment receivables. The Company regularly reviews public information on clinical trials, press releases, and updates from its partners to identify any indicators that challenge the expected recovery of the royalty and commercial payment receivables.
At each reporting date, the Company evaluates royalty and commercial payment receivables under the EIR method by comparing the EIR at each reporting date to that of the prior period. If the EIR for the current period is lower than the prior period and if the gross cash flows have declined (expected and collected), the Company may record an allowance for the change in expected cash flows. The allowance is measured as the difference between the royalty and commercial payment receivables’ amortized cost basis and the net present value of the expected future cash flows, calculated based on the prior period’s EIR. The amount is recognized as credit losses on purchased receivables expense that increases the royalty and commercial payment receivable asset’s cumulative allowance, which reduces the net carrying value of the royalty and commercial payment receivable asset.
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At each reporting date, for royalty and commercial payment receivables under the cost recovery method, if the Company determines expected future cash flows discounted to the current period are less than the carrying value of the asset, the Company will record a credit loss charge. The credit loss charge will be recognized as credit losses on purchased receivables expense that increases the royalty and commercial payment receivable asset’s cumulative allowance, which reduces the net carrying value of the royalty and commercial payment receivable asset. In a subsequent period, if there is an increase in expected future cash flows, or if the actual cash flows are greater than previously expected, the Company will reduce the previously established cumulative allowance. Amounts not expected to be collected are written off against the allowance at the time that such a determination is made.
Revenue from Contracts with Customers
The Company recognizes revenue from all contracts with customers according to ASC 606, except for contracts that are within the scope of other standards, such as leases and financial instruments. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract on whether each promised good or service is distinct to determine those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation based on relative fair values, when (or as) the performance obligation is satisfied.
The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
The Company recognizes revenue from its license arrangements. The terms of the arrangements generally include payment to the Company of one or more of the following: non-refundable, upfront license fees, development, regulatory and commercial milestone payments, and royalties on net sales of licensed products.
License of Intellectual Property
If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, such as transfer of related materials, process, and know-how, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. Under the Company’s license agreements, the nature of the combined performance obligation is the granting of licenses to the customers as the other promises are not separately identifiable in the context of the arrangement. Since the Company grants the license to a customer as it exists at the point of transfer and is not involved in any future development or commercialization of the products related to the license, the nature of the license is a right to use the Company’s intellectual property as transferred. As such, the Company recognizes revenue related to the combined performance obligation upon completion of the delivery of the related materials, process, and know-how (i.e., at a point in time).
Deferred revenue is recorded when upfront payments and fees are received prior to the satisfaction of performance obligations. Trade and other receivables, net is recorded when the Company has an unconditional right to consideration.
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Milestone Payments
At the inception of each arrangement that includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. ASC 606 suggests two alternatives to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. The Company uses the most likely amount method for development and regulatory milestone payments.
If it is probable that a significant cumulative revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis. The Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and earnings in the period of adjustment.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Revenue Recognized under Units-of-Revenue Method
The Company has sold its rights to receive certain milestones and royalties on product sales. In the circumstance where the Company has sold its rights to future milestones and royalties under a license agreement and also maintains limited continuing involvement in the arrangement (but not significant continuing involvement in the generation of the cash flows that are due to the purchaser), the Company defers recognition of the proceeds it receives for the sale of milestone or royalty streams and recognizes such unearned revenue as revenue under the units-of-revenue method over the life of the underlying license agreement. Under the units-of-revenue method, amortization for a reporting period is calculated by computing a ratio of the proceeds received from the purchaser to the total payments expected to be made to the purchaser over the term of the agreement, and then applying that ratio to the period’s cash payment.
Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjective estimates and assumptions. Changes to the Company’s estimate of the payments expected to be made to the purchaser over the term of such arrangements could have a material effect on the amount of revenues recognized in any particular period.
Stock-Based Compensation
The Company recognizes compensation expense for all stock-based payment awards made to the Company’s employees, consultants, and directors that are expected to vest based on estimated fair values. The valuation of stock option awards without performance conditions is determined at the date of grant using the Black-Scholes Model. The Black-Scholes Model requires inputs such as the expected term of the option, expected volatility, and risk-free interest rate. To establish an estimate of the expected term, the Company considers the vesting period and contractual period of the award and its historical experience of stock option exercises, post-vesting cancellations, and volatility. The estimate of expected volatility is based on the Company’s historical volatility. The risk-free rate is based on the yield available on U.S. Treasury zero-coupon issues corresponding to the expected term of the award. The Company records forfeitures when they occur.
The valuation of RSUs is determined at the date of grant using the Company’s closing stock price.
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The Company records compensation expense for service-based awards on a straight-line basis over the requisite service period, which is generally the vesting period of the award, or to the date on which retirement eligibility is achieved, if shorter.
The grant date fair value of PSUs with market conditions is determined using the Monte Carlo valuation model. The Company records compensation expenses for PSUs based on graded expense attribution over the requisite service periods.
Equity Securities
The Company holds equity securities in publicly traded companies. Equity investments in publicly traded companies are classified in the condensed consolidated balance sheets as investment in equity securities. Equity securities are measured at fair value, with changes in fair value recorded in the other income, net line item of the condensed consolidated statement of operations at each reporting period. The Company remeasures its equity investments at each reporting period until such time that the investment is sold or disposed of. If the Company sells an investment, any realized gains and losses on the sale of the securities will be recognized in the condensed consolidated statement of operations in the period of sale.
Investments – Warrant Assets
The Company may obtain warrants pursuant to which it has the right to acquire stock in companies. The warrants are accounted for as derivatives when they contain net settlement terms and other qualifying criteria under ASC 815. In general, the warrants entitle the Company to buy a specific number of shares of stock at a specific price within a specific time period.
Investment warrants are recorded at fair value and are revalued at each reporting period. The Company values warrants using the Black-Scholes Model. Any changes in fair value from the grant date fair value of warrants will be recognized as increases or decreases to investments on the condensed consolidated balance sheets and as a component of other income, net on the condensed consolidated statements of operations.
Asset Acquisitions
As a first step, for each acquisition, the Company determines if it is an acquisition of a business or an asset acquisition under ASC 805. The guidance requires an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If the screen test is not met, the Company then further evaluates whether the assets or group of assets includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. Acquisitions of assets or a group of assets that do not meet the definition of a business are accounted for as asset acquisitions under ASC 805-50, using the cost accumulation method whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. If the fair value of net assets acquired, after allocating the excess of the fair value of net assets acquired to certain qualifying assets, exceeds the total cost of the acquisition, a bargain purchase gain is recognized in other income, net in the condensed consolidated statements of operations.
Contingent payments in asset acquisitions are evaluated whether they are freestanding instruments or embedded derivatives. If the contingent payments fall within the scope of ASC 815, the contingent payments are measured at fair value at the acquisition date and are subject to remeasurement to fair value each reporting period. The estimated fair value at the acquisition date is included in the cost of the acquired assets. Any subsequent changes in the estimated fair value are recorded in the condensed consolidated statements of operations. Contingent consideration payments that are related to IPR&D assets are expensed as incurred until the underlying licensed products receive FDA approval. Contingent consideration payments that do not fall within the scope of ASC 815 are recognized when the amount is probable and estimable according to ASC 450.
Cash payments related to acquired assets are reflected as an investing cash flow in the Company’s condensed consolidated statements of cash flows.
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Intangible Assets
Intangible assets are amortized based on the Company’s best estimate of the distribution of the economic value of the respective intangible assets. Intangible assets are carried at cost less accumulated amortization. Amortization is included in amortization of intangible assets in the condensed consolidated statements of operations.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount of an asset group to the future net undiscounted cash flows that the assets are expected to generate. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized. Any impairment charge should not reduce the carrying amount of an individual intangible asset below its fair value.
Leases
The Company leases its headquarters in Emeryville, California and acquired a lease from the Kinnate acquisition. The Company determines the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter if modified. The lease term includes any renewal options and termination options that the Company is reasonably certain to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment. The Company estimated its incremental borrowing rate by adjusting the interest rate on its fully collateralized debt for the lease term length.
Rent expense for the operating lease is recognized on a straight-line basis over the reasonably assured lease term based on total lease payments and is included in G&A expenses in the condensed consolidated statements of operations.
The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance, which varies based on future outcomes, and thus are recognized in rent expense when incurred.
The Company has also elected not to record on the condensed consolidated balance sheets a lease for which the term is 12 months or less and does not include a purchase option that the Company is reasonably certain to exercise.
Long-Term Debt
Long-term debt represents the Company’s term loan under the Blue Owl Loan Agreement, which the Company has accounted for as a debt financing arrangement. Interest expense is accrued using the EIR method over the estimated period the loan will be repaid. The allocated debt discount and debt issuance costs have been recorded as a direct deduction from the carrying amount of the related debt in the condensed consolidated balance sheets and are being amortized and recorded as interest expense throughout the expected life of the Blue Owl Loan using the EIR method. The Company considered whether there were any embedded features in the Blue Owl Loan Agreement that require bifurcation and separate accounting as derivative financial instruments pursuant to ASC 815. See Note 8.
Warrants Issued
The Company has issued warrants to purchase shares of its common stock in connection with its financing activities. The Company classified these warrants as equity and recorded the warrants at fair value as of the date of issuance on the Company’s condensed consolidated balance sheet with no subsequent remeasurement. The issuance date fair value of the outstanding warrants was estimated using the Black-Scholes Model. The Black-Scholes Model required inputs such as the expected term of the warrants, expected volatility, and risk-free interest rate. These inputs were subjective and required significant analysis and judgment. For the estimate of the expected term, the Company used the full remaining contractual term of the warrant. The estimate of expected volatility assumption is based on the historical price volatility
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observed on the Company’s common stock. The risk-free rate is based on the yield available on U.S. Treasury zero-coupon issues corresponding to the expected term of the warrants.
Income Taxes
The Company accounts for income taxes using the liability method under which deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount which is more likely than not to be realizable.
The recognition, derecognition, and measurement of a tax position is based on management’s best judgment given the facts, circumstances, and information available at each reporting date. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.
Net Income (Loss) per Share Available to (Attributable to) Common Stockholders
The Company calculates basic and diluted net income (loss) per share available to (attributable to) common stockholders using the two-class method. The Company’s convertible Series X Preferred Stock participate in any dividends declared by the Company on its common stock and are therefore considered to be participating securities. The Company’s Series A and Series B Preferred Stock do not participate in any dividends or distribution by the Company on its common stock and are therefore not considered to be participating securities.
Under the two-class method, net income, as adjusted for any accumulated dividends on Series A and Series B Preferred Stock for the period, is allocated to each class of common stock and participating security as if all of the net income for the period had been distributed. Undistributed earnings allocated to participating securities are subtracted from net income in determining net income available to common stockholders. During periods of loss, the Company allocates no loss to participating securities because they have no contractual obligation to share in the losses of the Company. Basic net income (loss) per share available to (attributable to) common stockholders is then calculated by dividing the net income (loss) available to (attributable to) common stockholders by the weighted-average number of shares of common stock outstanding during the period. All participating securities are excluded from the basic weighted-average number of shares of common stock outstanding.
Diluted net income (loss) per share available to (attributable to) common stockholders is based on the weighted-average number of shares outstanding during the period, adjusted to include the assumed vesting of RSUs and PSUs, as well as the assumed exercise of certain stock options and warrants for common stock using the treasury method, if dilutive. The calculation assumes that any proceeds that could be obtained upon exercise of options and warrants would be used to purchase common stock at the average market price during the period. Adjustments to the denominator are required to reflect the related dilutive shares. The Company’s Series A and Series B Preferred Stock become convertible upon the occurrence of specific events other than a change in the Company’s share price and, therefore, are not included in the diluted shares until the contingency is resolved.
Share Repurchases
The Company has a stock repurchase program that is executed through purchases made from time to time, including in the open market. The Company retires repurchased shares of common stock, reducing common stock with any excess of cost over par value recorded to accumulated deficit. Issued and outstanding shares of common stock are reduced by the number of shares repurchased. No treasury stock is recognized in the condensed consolidated financial statements. In August 2022, the IRA enacted a 1% excise tax on net share repurchases after December 31, 2022. The tax applies if the aggregate fair market value of repurchased stock during the taxable year exceeds $1.0 million. Any excise tax incurred on share repurchases is recognized as part of the cost basis of the shares acquired.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of two components: net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that are recorded as an element of stockholders’ equity but are excluded from net income (loss) under U.S. GAAP.
Convertible Preferred Stock
The Company records Series X Convertible Preferred Stock at its relative fair value, net of issuance costs on the date of issuance, which represents the carrying value. Convertible preferred stock is classified outside of stockholders’ equity on the accompanying condensed consolidated balance sheets as the shares are redeemable for cash or other assets upon the occurrence of certain event that is not solely within control of the Company.
Reclassifications
Certain “Income from purchased receivables” and “Royalty purchase agreement asset impairment” amounts in the condensed consolidated statements of operations for the three and six months ended June 30, 2024 have been reclassified to conform to the current period presentation. The reclassifications had no effect on the Company's financial position, net income, cash flows or stockholders' equity as of and for the periods ended June 30, 2024.
Immaterial Restatement of Previously Issued Consolidated Financial Statements
During the second quarter of 2025, the Company determined that its Series X Convertible Preferred Stock, originally issued in 2017 and valued at $20.0 million, should be presented as temporary equity, or mezzanine equity, rather than as permanent equity.
In accordance with SAB No. 99, Topic 1.M, Materiality, SAB No. 99, Topic 1.N, Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial Statements, and ASC 250, Accounting Changes and Error Corrections, the Company assessed the materiality of this misstatement to its previously issued consolidated financial statements. Based upon the Company’s evaluation of both quantitative and qualitative factors, the Company concluded this misstatement was immaterial to the Company’s previously issued consolidated financial statements.
As a result, the accompanying unaudited condensed consolidated balance sheet as of December 31, 2024 as well as the statement of stockholders’ equity for the three and six months ended June 30, 2024 and for the three months ended March 31, 2025 have been restated to reflect this mezzanine equity presentation of the Series X Convertible Preferred Stock. The change has resulted in a reduction to additional paid-in-capital and total stockholder’s equity and an increase to convertible preferred stock of $20.0 million compared to amounts previously reported. The Company will restate the comparative prior periods included in consolidated financial statements in future filings.
Accounting Pronouncements Recently Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company adopted annual requirements under ASU 2023-07 during the annual period ended December 31, 2024 and adopted the interim requirements under ASU 2023-07 during the interim period ended March 31, 2025 (Note 14).
Recent Accounting Pronouncements Not Yet Adopted
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission’s Disclosure Update and Simplification Initiative. ASU 2023-06 incorporates 14 of the 27 disclosure requirements published in SEC Release No. 33-10532: Disclosure Update and
Simplification into various topics within the ASC. ASU 2023-06's amendments represent clarifications to, or technical corrections of, current requirements. For SEC registrants, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. Early adoption is prohibited. The Company does not expect the standard to have a material impact on its consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024. Early adoption is permitted and should be applied either prospectively or retrospectively. The Company expects to adopt annual requirements under ASU 2023-09 within the annual report for the year ending December 31, 2025. The Company does not expect the standard to have a material impact on its consolidated financial statements and disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public companies to disclose in the notes to the financial statements specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company is currently evaluating the impact that the standard will have on its financial statement disclosures.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 changes how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new guidance requires companies to consider the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU 2025-03 is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
In May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. ASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in ASC 606 does not apply to share-based consideration payable to customers. The new guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting conditions and ensuring alignment with ASC 606 and ASC 718. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
3. Condensed Consolidated Financial Statements Details
As of June 30, 2025 and December 31, 2024, investment in equity securities was $8.8 million and $3.5 million, respectively. For the three and six months ended June 30, 2025, the Company recognized gains of $6.3 million and $5.2 million, respectively, due to the change in fair value of its investment in equity securities in the other income, net line item of the condensed consolidated statements of operations. For the three and six months ended June 30, 2024, the Company recognized gains of $0.3 million and $0.5 million, respectively, due to the change in fair value of its investment in Rezolute.
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Intangible Assets, Net
The following table summarizes the cost, accumulated amortization, and net carrying value of the Company’s intangible assets as of June 30, 2025 (in thousands):
Net Carrying
Cost
Amortization
As of June 30, 2025
Pulmokine - Seralutinib IP (Note 4)
26,115
1,294
24,821
BioInvent - Contract-based Intangible Asset (Note 4)
20,724
20,613
Total intangible assets
46,839
1,405
The following table summarizes the cost, accumulated amortization, impairment charge, and net carrying value of the Company’s intangible assets as of December 31, 2024 (in thousands):
As of December 31, 2024
206
The estimated remaining life of the intangible assets ranges from 11.4 years to 15.4 years. The following table presents the projected future amortization expense (in thousands):
Intangible Asset
2025 (excluding the six months ended June 30, 2025)
1,757
2026
3,513
2027
2028
2029
Thereafter
29,625
Net Income Per Share Available to Common Stockholders
The following table includes the computation of basic and diluted net income per share available to common stockholders (in thousands, except per share amounts):
Three Months Ended June 30,
Numerator
Less: Series A accumulated dividends
(530)
(1,061)
Less: Series B accumulated dividends
(838)
(1,675)
Less: Allocation of undistributed earnings to participating securities
(2,301)
(4,393)
(2,597)
(1,401)
Net income available to common stockholders, basic
Add: Adjustments to undistributed earnings allocated to participating securities
2,301
4,393
2,597
1,401
Net income available to common stockholders, diluted
Denominator
Weighted-average shares used in computing net income per share available to common stockholders, basic
Effect of dilutive Series X preferred stock
5,003
Effect of dilutive warrants for common stock
Effect of dilutive PSUs
208
241
Effect of dilutive RSUs
Effect of dilutive common stock options
518
673
524
647
Weighted-average shares used in computing net income per share available to common stockholders, diluted
Net income per share available to common stockholders, basic
Net income per share available to common stockholders, diluted
Potentially dilutive securities are excluded from the calculation of diluted net income per share available to common stockholders if their inclusion is anti-dilutive.
The following table shows the shares from outstanding securities considered anti-dilutive and therefore excluded from the computation of diluted net income per share available to common stockholders (in thousands):
Common stock options
779
1,107
785
1,311
Warrants for common stock
120
899
1,227
905
1,431
For PSUs with market conditions, if the market conditions have not been satisfied by the end of the reporting period, the number of shares that would be issuable is based on the market price at the end of the reporting period. This approach treats the end of the reporting period as if it were the end of the contingency period for calculating diluted earnings per share. For market conditions that have not yet been satisfied, no shares would be issuable based on the market price of $25.20 per share as of June 30, 2025.
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For PSUs that have satisfied the market conditions but have not satisfied service conditions by the end of the reporting period, the number of shares issuable is included in the calculation of diluted earnings per share if the effect is dilutive. This includes PSUs that achieved the $30.00 price target in November 2024, but still have remaining time-based vesting requirements.
Accrued and Other Liabilities
Accrued and other liabilities consisted of the following (in thousands):
Accrued short-term interest payable
2,914
3,039
Accrued incentive compensation
790
1,555
Accrued legal and accounting fees
719
251
Accrued termination benefits
281
Accrued payroll and benefits
131
170
Accrued clinical liabilities
306
Income taxes payable in connection with Pulmokine acquisition
280
Other accrued liabilities
576
151
Other Income, Net
Other income, net for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):
Investment income
843
1,682
1,771
3,390
6,320
283
5,173
535
Sublease income
103
67
205
Other income
558
580
Total other income, net
4. Acquisitions, Licensing, and Other Arrangements
In 2006, the Company entered into the Takeda Collaboration Agreement to discover and optimize therapeutic antibodies against multiple targets. Under this agreement, the Company may receive milestone payments and royalties on future product sales.
The Company has received $3.0 million of milestone payments since the inception of the agreement and is eligible to receive additional milestone payments of up to $16.0 million under the Takeda Collaboration Agreement.
As of June 30, 2025 and December 31, 2024, there were no contract assets or contract liabilities related to this agreement and none of the costs to obtain or fulfill the contract were capitalized. The Company recognized $4.0 million in revenue related to this agreement during the six months ended June 30, 2025. The Company did not recognize any revenue related to this arrangement during the three months ended June 30, 2025, the three months ended June 30, 2024, or the six months ended June 30, 2024.
Refer to Note 4 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, for additional information related to this agreement.
In December 2017, the Company entered into the Rezolute License Agreement for the development and commercialization of ersodetug (RZ358), which was subsequently amended in 2018, 2019, and 2020. Under the license agreement, the Company may receive development and commercial milestone payments of up to an aggregate of $232.0 million based on achievement of pre-specified criteria and royalties ranging from the high single-digits to the mid-teens based on annual net sales.
The Company has earned three milestone payments under this agreement: (i) $2.0 million in January 2022 when Rezolute dosed the last patient in its Phase 2b clinical trial for ersodetug (RZ358), (ii) $5.0 million in April 2024 when Rezolute dosed the first patient in its Phase 3 clinical trial of ersodetug (RZ358), and (iii) $5.0 million in May 2025 when Rezolute dosed the last patient in its Phase 3 trial of ersodetug (RZ358).
As of June 30, 2025 and December 31, 2024, there were no contract assets or contract liabilities related to this agreement. None of the costs to obtain or fulfill the contract were capitalized. The Company recognized $5.0 million in revenue related to this agreement for each of the three and six months ended June 30, 2025 and June 30, 2024.
In August 2019, the Company entered into the Janssen License Agreement granting a non-exclusive license to develop and commercialize certain product candidates including the Company’s patents and know-how. Under the agreement, the Company is entitled to receive milestone payments of up to $3.0 million upon the achievement of certain clinical development and regulatory approval milestones and a 0.75% royalty on net sales of each product upon commercialization.
As of June 30, 2025 and December 31, 2024, there were no contract assets or contract liabilities related to this agreement. None of the costs to obtain or fulfill the contract were capitalized. The Company did not recognize any revenue related to this agreement during the three and six months ended June 30, 2025 and 2024.
In December 2024 following its acquisition of Amolyt, Alexion exercised an option to continue developing anti-PTH1R monoclonal antibodies that originated from the Company's discovery efforts as potential treatments for primary hyperparathyroidism and humoral hypercalcemia of malignancy. The Company will be eligible to receive up to $10.5 million in milestone payments and royalties ranging from low single to low double-digits on net commercial sales. Upon Alexion’s exercise of the option, the Company earned a $0.5 million payment.
As of June 30, 2025 and December 31, 2024, there were no contract assets or contract liabilities related to this agreement and none of the costs to obtain or fulfill the contract were capitalized. The Company did not recognize any revenue related to this agreement for the three and six months ended June 30, 2025.
In 2003, BioInvent granted the Company a non-exclusive license to BioInvent's product patents and know-how in exchange for future milestones and royalty payments from the Company under the BioInvent License Agreement. In
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2006, the Company and Takeda collaborated to discover and develop antibodies, leading to the joint development of mezagitamab (TAK-079), which leveraged BioInvent’s patents and know-how under the BioInvent License Agreement.
In May 2025, the Company, through its newly established wholly-owned subsidiary Meza Royalty 1 LLC, entered into the BioInvent Agreement to acquire all of BioInvent’s remaining rights to milestone payments and royalties owed by the Company under the BioInvent License Agreement. The Company paid BioInvent $20.0 million at closing and is obligated to make an additional $10.0 million contingent payment upon FDA approval of mezagitamab.
The Company assessed the transaction and determined that it represented a modification of the existing BioInvent License Agreement. As the Company and BioInvent are no longer actively involved in the development of mezagitamab, the $20.0 million upfront payment and direct and incremental transaction costs of $0.7 million were capitalized as a contract-based intangible asset that amortizes over 15.5 years. The $10.0 million contingent payment will be capitalized if FDA approval of mezagitamab becomes probable.
The Company recognized $0.1 million of amortization expense for the three and six months ended June 30, 2025. No impairment indicators were identified, and no impairment was recorded during the three and six months ended June 30, 2025.
Kinnate Acquisition
In April 2024, the Company completed the acquisition of Kinnate through a tender offer for $2.5879 per share plus CVRs, for a total purchase consideration of $126.4 million. As part of the merger, the Company acquired an IPR&D asset related to KIN-3248 (a Phase 1 clinical trial candidate) as well as several pre-clinical assets.
Under the Kinnate CVR Agreement, Kinnate CVR holders are entitled to 100% of the net proceeds of the $30.5 million potential milestone related to the sale of exarafenib to Pierre Fabre in February 2024. The Exarafenib milestone contingent consideration is accounted for as a derivative under ASC 815. As of June 30, 2025, the fair value of the Exarafenib milestone contingent consideration was $3.4 million, which had an estimated fair value of $3.2 million as of December 31, 2024.
The Company accounts for potential contingent consideration related to KIN-3248, KIN-8741, KIN-7136, and KIN-2524 as period expenses when incurred. During the six months ended June 30, 2025, the Company sold KIN-3248, KIN-8741 and KIN-7136 to third parties, and recognized $0.6 million in contingent consideration due to Kinnate CVR holders. As of June 30, 2025, no contingent consideration had been paid to Kinnate CVR holders, and the entire balance was included in the accrued and other liabilities on the condensed consolidated balance sheets with offset to other income, net on the condensed consolidated statements of operations.
Refer to Note 4 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, for additional information related to this acquisition.
Pulmokine Acquisition
In November 2024, the Company acquired Pulmokine for $20.5 million to obtain an economic interest in seralutinib, a Phase 3 asset being studied in pulmonary arterial hypertension. The acquisition included an intangible asset related to seralutinib with an estimated useful life of 12 years. The Company recognized $0.5 million and $1.1 million of amortization expense for the three and six months ended June 30, 2025, respectively. No impairment indicators were identified and no impairment was recorded during the three and six months ended June 30, 2025.
Contingent consideration related to the seralutinib asset could be payable subject to certain development and commercial milestones. As of June 30, 2025, there were no contract assets or contract liabilities related to this agreement and no revenue was recognized during the three and six months ended June 30, 2025.
Refer to Note 4 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for additional information related to this acquisition.
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Sale of Future Revenue Streams
In December 2016, the Company entered into two royalty interest sale agreements (together, the “Royalty Sale Agreements”) with HCRP. Under the first Royalty Sale Agreement, the Company sold its right to receive milestone payments and royalties on future sales of products subject to a License Agreement, dated August 18, 2005, between XOMA and Wyeth Pharmaceuticals (subsequently acquired by Pfizer) for an upfront cash payment of $6.5 million, plus potential additional payments totaling $4.0 million in the event three specified net sales milestones were met in 2017, 2018, and 2019. Based on actual sales, 2017, 2018, and 2019 sales milestones were not achieved. Under the second Royalty Sale Agreement entered into in December 2016, the Company sold its right to receive certain royalties under an Amended and Restated License Agreement dated October 27, 2006 between XOMA and Dyax Corp. for a cash payment of $11.5 million. The Company recorded the total proceeds of $18.0 million as unearned revenue recognized under the units-of-revenue method as the Royalty Sale Agreements were structured as a non-cancellable sale, in which the Company does not have significant continuing involvement in the generation of the cash flows due to HCRP and there are no guaranteed rates of return to HCRP.
The Company allocated the total proceeds between the two Royalty Sale Agreements based on the relative fair value of expected payments to be made to HCRP under the license agreements. Under the units-of-revenue method, amortization for a reporting period is calculated by computing a ratio of the allocated proceeds received from HCRP to the payments expected to be made by the licensees to HCRP over the term of the Royalty Sale Agreements, and then applying that ratio to the period’s cash payment. During the third quarter of 2018, the Shire product underlying the Dyax Corp. license agreement was approved, and the Company began recognizing revenue under the units-of-revenue method due to sales of the approved product.
The Company recognized $0.4 million and $0.7 million in revenue under the units-of-revenue method under these agreements during the three and six months ended June 30, 2025, respectively. The Company recognized $0.6 million and $1.1 million in revenue under the units-of-revenue method under these arrangements during the three and six months ended June 30, 2024, respectively. As of June 30, 2025, the current and non-current portions of the remaining unearned revenue recognized under the units-of-revenue method were $1.4 million and $3.7 million, respectively. As of December 31, 2024, the Company classified $1.4 million and $4.4 million as current and non-current unearned revenue recognized under the units-of-revenue method, respectively.
5. Royalty and Commercial Payment Purchase Agreements
The Company recognizes receivables from RPAs under two methods, the cost recovery method and the EIR method.
The following table summarizes the royalty and commercial payment receivable activities under the cost recovery method during the six months ended June 30, 2025 (in thousands):
Acquisition of Royalty
Receipt of Royalty
Balance as of
and Commercial
January 1, 2025
Payment Receivables
Payments
15,000
Daré (XACIATO)
21,999
(3)
21,996
LadRx (MIPLYFFA)
4,850
(1,104)
3,746
Palobiofarma
10,000
4,500
4,395
56,349
(1,107)
59,637
The following table summarizes the royalty and commercial payment receivable activities under the EIR method during the six months ended June 30, 2025 (in thousands):
Income from
Purchased
Receipt of
Receivables
Royalty and
Payment of
Under the
Commercial
Sales-Based
EIR Method
Milestone
Affitech (VABYSMO)
13,105
11,575
(11,145)
16,535
Aptevo (IXINITY)
6,628
502
(930)
6,200
19,733
(12,075)
22,735
The following table summarizes income recognized from purchased receivables under the EIR method and cost recovery method during the three and six months ended June 30, 2025 and 2024 (in thousands):
5,758
249
Total income from purchased receivables under the EIR method
Viracta (OJEMDA)
7,240
Talphera
Total income from purchased receivables under the cost recovery method
Fully Recovered Royalty and Commercial Payment Purchase Agreements Under the Cost Recovery Method
Viracta Royalty Purchase Agreement
In March 2021, the Company entered into the Viracta RPA, as amended in March 2024, pursuant to which the Company acquired the right to receive future royalties, milestone payments, and other payments related to two clinical-stage drug candidates for an upfront payment of $13.5 million. The first candidate, tovorafenib (DAY101) (a pan-RAF kinase inhibitor now marketed as OJEMDA), is being developed by Day One, and the second candidate, vosaroxin (a topoisomerase II inhibitor), is being developed by Denovo Biopharma LLC. The Company acquired the right to receive (i) up to $54.0 million in potential milestone payments, potential royalties on sales, if approved, and a portion of potential other payments related to tovorafenib (DAY101), excluding up to $5.0 million retained by Viracta, and (ii) up to $57.0 million in potential regulatory and commercial milestones and high single-digit royalties on sales related to vosaroxin, if approved. In December 2024, the Company entered into the Viracta Assignment Agreements with Viracta through which the Company became the patent holder of the IP and know-how related to OJEMDA that was out-licensed to Day One and where Viracta assigned to the Company all its rights, title, and interest in the Day One License Agreement. The Company did not acquire new rights to additional milestone and royalty payments as a result of the execution of the Viracta Assignment Agreements that were not acquired under the Viracta RPA.
At the inception of the Viracta RPA, the Company recorded $13.5 million as long-term royalty receivables in its consolidated balance sheet. As of June 30, 2024, the Company had fully collected the purchase price recorded in long-term royalty and commercial payment receivables under the cost recovery method related to the Viracta RPA in its condensed consolidated balance sheet and, as such, subsequent milestones and royalties received are recorded as income from purchased receivables under the cost recovery method.
As of June 30, 2025 and December 31, 2024, there was $1.7 million and $1.3 million in trade and other receivables, net related to this agreement, respectively. The Company recognized $1.7 million and $7.2 million in income from purchased receivables under the cost recovery method related to this agreement during the three and six months ended June 30, 2025, respectively. The Company recognized $0.9 million in income from purchased receivables under the cost recovery method related to this arrangement during the three and six months ended June 30, 2024.
Royalty and Commercial Payment Purchase Agreements Under the EIR Method
Short-term royalty and commercial payment receivables under the EIR method were $18.0 million and $14.8 million as of June 30, 2025 and December 31, 2024, respectively. Long-term royalty and commercial payment receivables under the EIR method were $4.8 million and $5.0 million as of June 30, 2025 and December 31, 2024, respectively.
Affitech Commercial Payment Purchase Agreement
In October 2021, the Company entered into the Affitech CPPA, pursuant to which, the Company purchased a future stream of commercial payment rights to Roche’s faricimab from Affitech for an upfront payment of $6.0 million. The Company is eligible to receive 0.5% of future net sales of faricimab for a ten-year period following the first commercial sales in each applicable jurisdiction.
At the inception of the Affitech CPPA, the Company recorded $14.0 million as long-term royalty and commercial payment receivables under the cost recovery method which included the $6.0 million upfront payment and $8.0 million in regulatory milestone payments in its consolidated balance sheet. The Company concluded the regulatory milestone payments of $8.0 million met the criteria for recognition as a derivative under ASC 815 and should be accounted for at fair value and recorded as a current liability at the inception of the transaction. Therefore, the regulatory milestone payments were recorded as contingent liabilities in its consolidated balance sheet. The Company concluded the sales-based milestone payments of up to $12.0 million did not meet the definition of a derivative under ASC 815 and a liability would be recognized when probable and reasonably estimable.
In January 2022, Roche received approval from the FDA to commercialize VABYSMO (faricimab-svoa) for the treatment of wet, or neovascular, age-related macular degeneration and diabetic macular edema. In September 2022, Roche received approval from the European Commission to commercialize VABYSMO for the treatment of wet, or neovascular, age-related macular degeneration and visual impairment due to diabetic macular edema. Commercial payments are due from Roche to the Company within 60 days of December 31 and June 30 of each year.
During the first quarter of 2024, a third sales milestone of $3.0 million related to VABYSMO pursuant to the Affitech CPPA was assessed to be probable under ASC 450. As such, under the cost recovery method, a $3.0 million liability was recorded as contingent consideration under RPAs, AAAs, and CPPAs and a corresponding $3.0 million asset was recorded under short-term royalty and commercial payment receivables under the cost recovery method on the consolidated balance sheet. The fourth and last remaining sales milestone of $3.0 million related to VABYSMO pursuant to the Affitech CPPA is included in the estimation of expected future cash flows under the EIR method to determine the carrying amount of the short-term royalty and commercial payment receivables under the EIR method. In March 2025, the Company paid $6.0 million to Affitech, which included $3.0 million for the third sales milestone liability that was recorded in the first quarter of 2024 and an additional $3.0 million for the fourth sales milestone. With this payment, all milestone payments to Affitech under the Affitech CPPA have been fully paid.
Historically, the Company had been unable to reliably estimate its commercial payment stream from future net sales and the related commercial payments to be received under the Affitech CPPA. However, during the second quarter of 2024, Roche’s periodically reported VABYSMO sales data, available third-party sales projections, and the Company’s history of receipts of commercial payments related to VABYSMO provided the Company with a greater ability to estimate future net sales and the commercial payments to be received under the Affitech CPPA.
As of April 1, 2024, when the Company assessed it was able to reliably estimate cash flows, the Company reclassified $7.8 million of royalty and commercial payment receivables under the cost recovery method to royalty and commercial payment receivables under the EIR method. The Company recognized $5.8 million and $11.6 million in income from purchased receivables under the EIR method during the three and six months ended June 30, 2025, respectively. The Company recognized $4.5 million in income from purchased receivables under the EIR method during the three and six months ended June 30, 2024.
During the six months ended June 30, 2025, the Company received commercial payments pursuant to the Affitech CPPA of $11.1 million.
No allowance for credit losses was recorded as of June 30, 2025 and December 31, 2024.
Aptevo Commercial Payment Purchase Agreement
In March 2023, the Company entered into the Aptevo CPPA, pursuant to which the Company acquired from Aptevo a portion of its milestone and commercial payment rights under a sale agreement dated February 28, 2020 between Aptevo and Medexus, related to IXINITY, which is marketed by Medexus for the control and prevention of bleeding episodes and postoperative management in people with Hemophilia B.
The Company is eligible to receive a mid-single digit percentage of all IXINITY quarterly net sales from January 1, 2023 until the first quarter of 2035, and will be entitled to milestone payments of up to $5.3 million.
At the inception of the Aptevo CPPA, the Company recorded $9.7 million as long-term royalty receivables in its consolidated balance sheet which included a $9.6 million upfront payment and a $50,000 one-time payment which would be due if XOMA received more than $0.5 million in receipts for first quarter 2023 sales of IXINITY. At inception of the agreement, the Company concluded the one-time payment of $50,000 was probable and reasonably estimable. Therefore, the payment was recorded as a contingent liability under ASC 450 in the consolidated balance sheet at inception. The Company paid the one-time payment of $50,000 in June 2023 when related receipts exceeded $0.5 million.
Historically, the Company had been unable to reliably estimate its commercial payment stream from future net sales and the related commercial payments to be received under the Aptevo CPPA. However, during the fourth quarter of 2024, Medexus’ periodically reported IXINITY sales data, available third-party sales projections, and the Company’s history of receipts of commercial payments related to IXINITY provided the Company with a greater ability to estimate future net sales and the commercial payments to be received under the Aptevo CPPA.
As of October 1, 2024, when the Company assessed it was able to reliably estimate cash flows, the Company reclassified $7.2 million of royalty and commercial payment receivables under the cost recovery method to royalty and commercial payment receivables under the EIR method. The Company recognized $0.2 million and $0.5 million in income from purchased receivable under the EIR method during the three and six months ended June 30, 2025, respectively.
During the six months ended June 30, 2025, the Company received commercial payments pursuant to the Aptevo CPPA of $0.9 million.
Royalty and Commercial Payment Purchase Agreements Under the Cost Recovery Method
Short-term royalty and commercial payment receivables under the cost recovery method were $0.7 million and $0.4 million as of June 30, 2025 and December 31, 2024, respectively. Long-term royalty and commercial payment receivables under the cost recovery method were $58.9 million and $55.9 million as of June 30, 2025 and December 31, 2024, respectively.
Castle Creek Royalty Financing
In February 2025, the Company entered into a royalty financing transaction with Castle Creek, pursuant to which the Company acquired the rights to receive (a) 6.7% of the greater of (i) 8.75% of net sales in the United States or (ii) 8.00% of worldwide net sales of D-Fi (dabocemagene autoficel, also known as FCX-007), and (b) 6.7% of 20% of proceeds from a potential Priority Review Voucher if Castle Creek obtains and sells a PRV. The Company also received warrants to purchase 10,464 shares of Castle Creek's Series D-1 Preferred Stock at an exercise price of $215.03 per share, exercisable for a ten-year period expiring on February 24, 2035.
Upon the closing of the transaction, the Company paid Castle Creek an upfront payment of $5.0 million and recorded $4.4 million as long-term royalty and commercial payment receivables in its condensed consolidated balance sheet. The Company concluded that the Castle Creek PRV Interest met the definition of a derivative under ASC 815 and
should be accounted for at fair value and recorded as a current liability at the inception of the transaction. The fair value of the Castle Creek PRV Interest was determined to have nominal value prior to FDA approval of D-Fi. The Company also concluded that the warrants met the definition of a derivative under ASC 815 and should be accounted for at fair value. As of June 30, 2025, the fair value of the warrants was estimated to be $0.6 million using a Black-Scholes model with a volatility of 135% and risk-free rate of 3.7%. The warrants have an expected term of 2.75 years and an underlying share price of $215.03.
As of June 30, 2025, no payments were probable to be received under the Castle Creek royalty financing in the near term. Under the cost recovery method, the Company does not expect to recognize any income related to royalties, milestone payments, and other payments until the purchase price has been fully collected. No allowance for credit losses was recorded as of June 30, 2025.
In June 2023, the Company entered into the LadRx AAA pursuant to which the Company acquired from LadRx all of its rights, title, and interest related to arimoclomol under the Zevra APA between Zevra and LadRx. The Company also entered into the LadRx RPA, pursuant to which the Company acquired the right to receive all of the future royalties, regulatory, and commercial milestone payments as well as other related payments due to LadRx from ImmunityBio related to aldoxorubicin under the ImmunityBio License Agreement between ImmunityBio and LadRx.
In June 2024, the ImmunityBio License Agreement was terminated and the Company entered into an amendment to the LadRx RPA. Under the LadRx RPA, as amended, the Company is eligible to receive potential low single-digit percentage royalty payments on aggregate net sales of aldoxorubicin. Additionally, the amendment removed the remaining $4.0 million regulatory milestone payment under the original agreement that had been contingent upon the achievement of a specified regulatory milestone for the product candidate related to aldoxorubicin, which initially and as of the amendment date had a fair value of zero. If LadRx licenses aldoxorubicin to an applicable third party, the Company is eligible to receive potential high single-digit percentage royalty payments on aggregate net sales of aldoxorubicin and a portion of any potential future milestone payments.
Upon the initial closing of the LadRx Agreements, the Company paid LadRx an upfront payment of $5.0 million and could have been required to pay up to an additional $6.0 million in regulatory and commercial sales milestone payments which included $5.0 million related to regulatory milestone payments and $1.0 million related to commercial sales milestone payments. The Company concluded that the regulatory milestone payments of $5.0 million met the definition of a derivative under ASC 815 and should be accounted for at fair value and recorded as a current liability at the inception of the transaction. The fair value of the regulatory milestone payments was estimated to be $1.0 million. The Company concluded the commercial milestone payment of $1.0 million did not meet the definition of a derivative under ASC 815 and a liability will be recognized when probable and estimable.
At the inception of the LadRx Agreements, the Company recorded $6.0 million as long-term royalty receivables related to the aggregate of the arimoclomol and aldoxorubicin payment rights acquired, which included the $5.0 million upfront payment and $1.0 million for the estimated fair value of the regulatory milestone payments.
Pursuant to the LadRx Agreements, as of December 31, 2024, the Company paid LadRx $1.0 million in regulatory milestone payments and $1.0 million in sales milestone payments. All milestone payments to LadRx under the LadRx Agreements have been fully paid.
During the six months ended June 30, 2025, the Company received commercial payments pursuant to the LadRx Agreements of $1.1 million. In accordance with the cost recovery method, the cash received was recorded as a direct reduction of the long-term royalty and commercial payment receivables under the cost recovery method balance.
As of June 30, 2025, $0.7 million was probable and reasonably expected to be received in the next twelve months and was reflected as short-term royalty and commercial payment receivable under the cost recovery method.
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Under the cost recovery method, the Company does not expect to recognize any income related to royalties, milestone payments and other payments until the purchase price has been fully collected. No allowance for credit losses was recorded as of June 30, 2025 and December 31, 2024.
Palobiofarma Royalty Purchase Agreement
In September 2019, the Company entered into the Palo RPA, pursuant to which the Company acquired the rights to potential royalty payments in low single-digit percentages of aggregate net sales associated with six product candidates in various clinical development stages, targeting the adenosine pathway with potential applications in solid tumors, non-Hodgkin’s lymphoma, asthma/chronic obstructive pulmonary disease, ulcerative colitis, idiopathic pulmonary fibrosis, lung cancer, psoriasis, and nonalcoholic steatohepatitis and other indications that are being developed by Palo.
Under the terms of the Palo RPA, the Company paid Palo an upfront payment of $10.0 million payment at the close of the transaction, which occurred simultaneously upon parties’ entry into the Palo RPA in September 2019. At the inception of the agreement, the Company recorded $10.0 million as long-term royalty receivables in its consolidated balance sheet.
As of June 30, 2025, no payments were probable to be received under the Palo RPA in the near term. Under the cost recovery method, the Company does not expect to recognize any income related to royalties received until the purchase price has been fully collected. No allowance for credit losses was recorded as of June 30, 2025 and December 31, 2024.
Kuros Royalty Purchase Agreement
In July 2021, the Company entered into the Kuros RPA, pursuant to which the Company acquired the rights to 100% of the potential future royalties from commercial sales, which are tiered from high single-digit to low double-digits, and up to $25.5 million in pre-commercial milestone payments associated with an existing license agreement related to Checkmate Pharmaceuticals, Inc.’s vidutolimod (CMP-001), a Toll-like receptor 9 agonist, packaged in a virus-like particle, for an upfront payment of $7.0 million. The Company may pay up to an additional $142.5 million to Kuros in sales-based milestone payments.
At the inception of the Kuros RPA, the Company recorded $7.0 million as long-term royalty receivables in its consolidated balance sheet.
In May 2022, Regeneron completed its acquisition of Checkmate Pharmaceuticals, Inc. resulting in a $5.0 million milestone payment to Kuros. Pursuant to the Kuros RPA, the Company is entitled to 50% of the milestone payment, which was received by XOMA in July 2022. In accordance with the cost recovery method, the $2.5 million milestone received was recorded as a direct reduction of the recorded long-term royalty receivables balance.
As of June 30, 2025, no payments were probable to be received under the Kuros RPA in the near term. Under the cost recovery method, the Company does not expect to recognize any income related to royalties, milestone payments, and other payments until the purchase price has been fully collected. No allowance for credit losses was recorded as of June 30, 2025 and December 31, 2024.
Daré Royalty Purchase Agreements
In April 2024, the Company entered into the Daré RPAs. Pursuant to the terms of the Daré RPAs, the Company paid $22.0 million in cash to Daré in consideration for the sale of (a) 100% of all remaining royalties related to XACIATO not already subject to the royalty-backed financing agreement Daré entered into in December 2023 and net of payments owed by Daré to upstream licensors, which equates to royalties ranging from low to high single digits, and of all potential commercial milestones related to XACIATO that are payable to Daré under the Daré Organon License Agreement; (b) a 4% synthetic royalty on net sales of OVAPRENE and a 2% synthetic royalty on net sales of Sildenafil Cream, which will decrease to 2.5% and 1.25%, respectively, upon the Company achieving a pre-specified return threshold; and (c) a portion of Daré’s right to a certain milestone payment that may become payable to Daré under the Bayer License Agreement. The
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Daré RPAs also provide for milestone payments to Daré of $11.0 million for each successive $22.0 million received by the Company under the Daré RPAs after achievement of a return threshold of $88.0 million.
Upon closing of the transaction, the Company paid Daré an upfront payment of $22.0 million which was recorded as long-term royalty and commercial payment receivables in the condensed consolidated balance sheet. The Company concluded that the milestone payments to Daré did not meet the definition of a derivative under ASC 815 and expects to recognize the milestone payments as liabilities when probable and estimable.
Given the limited available information, the Company was unable to reliably estimate future net sales and the commercial payments to be received over the twelve-month period following the condensed consolidated balance sheet date of June 30, 2025 and, as such, no amounts were reflected as short-term royalty and commercial payment receivables as of June 30, 2025.
During the six months ended June 30, 2025, the Company received de minimis commercial payments pursuant to the Daré RPAs. In accordance with the cost recovery method, the cash received was recorded as a direct reduction of the long-term royalty and commercial payment receivables balance.
Under the cost recovery method, the Company does not expect to recognize any income related to milestones and commercial payments received until the purchase price has been fully collected. No allowance for credit losses was recorded as of June 30, 2025 and December 31, 2024.
Twist Bioscience Royalty Purchase Agreement
In October 2024, the Company entered into the Twist RPA. Under the terms of the Twist RPA, the Company acquired 50% of certain contingent payments (including royalties, milestone payments, sublicense income, and option exercise payments) related to Twist’s 60-plus early-stage programs across over 30 partners for a $15.0 million upfront payment. The Company is eligible to receive up to $0.5 billion in milestone payments and a 50% share of up to low-single-digit royalties on future commercial sales.
Upon closing of the transaction, the Company paid Twist an upfront payment of $15.0 million which was recorded as long-term royalty and commercial payment receivables under the cost recovery method in its consolidated balance sheet.
Given the limited available information and early stage of the programs, the Company was unable to reasonably estimate future milestone payments or net sales and the royalty payments to be received over the twelve-month period following the condensed consolidated balance sheet date of June 30, 2025 and, as such, no amounts were reflected as short-term royalty and commercial payment receivables under the cost recovery method as of June 30, 2025.
As of June 30, 2025, no payments were probable to be received under Twist RPA in the near term. Under the cost recovery method, the Company does not expect to recognize any income related to royalties, milestone payments and other payments until the purchase price has been fully collected. No allowance for credit losses was recorded as of June 30, 2025 and December 31, 2024.
6. Fair Value Measurements
The Company records its financial assets and liabilities at fair value. The carrying amounts of certain of the Company’s financial instruments, including cash, trade and other receivables, net, and accounts payable, approximate their fair value due to their short maturities. Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting guidance for fair value establishes a framework for measuring fair value and a fair value hierarchy that prioritizes the inputs used in valuation techniques. The accounting standard describes a fair value hierarchy based on three
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levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:
Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs, either directly or indirectly, other than quoted prices in active markets for identical assets or liabilities, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities; therefore, requiring an entity to develop its own valuation techniques and assumptions.
An entity may choose to measure many financial instruments and certain other items at fair value at specified election dates. The Company’s Exarafenib milestone asset (Note 4) was carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above. Any subsequent changes in the estimated fair value of the Exarafenib milestone asset are recorded in the condensed consolidated statements of operations.
The following tables set forth the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as follows (in thousands):
Fair Value Measurements as of June 30, 2025 using:
Quoted Prices in
Significant Other
Significant
Active Markets for
Observable
Unobservable
Identical Assets
Inputs
(Level 1)
(Level 2)
(Level 3)
Assets:
Cash equivalents:
Money market funds
42,134
Total cash equivalents
Castle Creek PRV Interest (Note 5)
Castle Creek warrants (Note 5)
Total financial assets
76,869
4,011
80,880
Liabilities:
Total financial liabilities
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Fair Value Measurements as of December 31, 2024 using:
72,304
Exarafenib milestone asset (Note 4)
96,200
99,414
Exarafenib Milestone Asset and Exarafenib Milestone Contingent Consideration
The Exarafenib milestone asset and Exarafenib milestone contingent consideration represent the Company’s potential receipt of a future milestone payment and a future consideration payable to Kinnate CVR holders that are contingent upon the achievement of a certain specified milestone related to the Exarafenib sale. As of June 30, 2025, the estimated fair value of each of the Exarafenib milestone asset and Exarafenib milestone contingent consideration was $3.4 million. The fair value measurement was based on a probability-weighted discounted cash flow model using significant Level 3 inputs, such as anticipated timelines and the probability of achieving the development milestone. Both the Exarafenib milestone asset and Exarafenib milestone contingent consideration are remeasured at fair value at each reporting period with changes in fair value recorded in the other income, net line item of the condensed consolidated statement of operations until settlement.
During the six months ended June 30, 2025, the estimated fair value of both the Exarafenib milestone asset and Exarafenib milestone contingent consideration increased by $0.2 million. The increase in estimated fair value had no offsetting net impact on the condensed consolidated statements of operations for the six months ended June 30, 2025.
Castle Creek PRV Interest and Warrants
The Castle Creek PRV Interest and warrants represent the Company's right to receive 6.7% of the proceeds from a potential Priority Review Voucher sale and warrants to purchase Castle Creek's Series D-1 Preferred Stock, acquired as part of the Castle Creek royalty financing transaction on February 24, 2025. As of June 30, 2025, the estimated fair value of the Castle Creek PRV Interest was nominal, and the estimated fair value of the Castle Creek warrants was $0.6 million. The fair value measurement for the Castle Creek PRV Interest was based on a probability-weighted discounted cash flow model, while the warrants were valued using a Black-Scholes option pricing model. Both valuations used significant Level 3 inputs, including expected timing of FDA approval, probability of PRV issuance and sale, expected volatility, risk-free interest rates, and discount rates reflecting the risk associated with Castle Creek's development program. Both the Castle Creek PRV Interest and warrants are remeasured at fair value at each reporting period with changes in fair value recorded in the change in fair value of embedded derivative related to RPA and other income, net line items of the condensed consolidated statement of operations.
The equity securities consisted of investments in publicly traded companies’ common stock that are classified on the condensed consolidated balance sheets as current assets as of June 30, 2025 and December 31, 2024. The equity securities are revalued each reporting period with changes in fair value recorded in the other income, net line item of the condensed consolidated statements of operations. The inputs that were used to calculate the fair value of the equity securities were observable prices in active markets and therefore were classified as a Level 1 fair value measurement.
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7. Lease Agreements
XOMA Royalty Office Lease
The Company leases a facility in Emeryville, California under an operating lease, which commenced on November 10, 2023 and has a term of 65 months. The Company recognized an operating lease right-of-use assets of $0.4 million and operating lease liabilities of $0.4 million on November 10, 2023, the commencement date of the lease.
Kinnate Lease
As part of the Kinnate acquisition, the Company acquired a lease agreement that was assigned to an assignee and expires on June 30, 2026. In accordance with ASC 842, the Company accounted for the lease as if it had commenced on the acquisition date. The Company recognized operating lease liabilities of $0.8 million as of April 3, 2024. No operating lease right-of-use assets were recorded due to the allocation of the excess of fair value of net assets acquired to certain qualifying assets under ASC 805.
Kinnate Sublease
As part of the Kinnate acquisition, the Company acquired a lease assignment agreement with an assignee that expires on June 30, 2026. In accordance with ASC 842, the Company accounted for the lease assignment as a sublease over its term. Under the terms of the lease assignment agreement, the assignee will make direct payments to the head lessor over the lease term. For the three and six months ended June 30, 2025, the Company recognized sublease income of $0.1 million and $0.2 million, respectively, in the other income, net line item in the condensed consolidated statement of operations. For the three and six months ended June 30, 2024, the Company recognized sublease income of $67,000 in the other income, net line item in the condensed consolidated statement of operations.
The following table summarizes the maturity of the Company’s operating lease liabilities as of June 30, 2025 (in thousands):
Year
Rent Payments
300
91
102
Total undiscounted lease payments
778
Present value adjustment
(68)
Total net lease liability for operating leases
710
As of June 30, 2025 and December 31, 2024, the total net lease liability was $0.7 million and $0.9 million, respectively.
As of June 30, 2025, the Company’s current and non-current operating lease liabilities were $0.5 million and $0.2 million, respectively.
As of December 31, 2024, the Company’s current and non-current operating lease liabilities were $0.4 million and $0.5 million, respectively.
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The following table summarizes the cost components of the Company’s operating leases included in G&A in the condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):
Lease costs:
Operating lease cost
64
60
Variable lease cost (1)
Total lease costs
58
78
The following table presents supplemental disclosure for the condensed consolidated statements of cash flows related to operating leases (in thousands):
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows under operating leases
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The assumptions used in calculating the present value of the lease payments for the Company’s operating leases as of June 30, 2025 and December 31, 2024 were as follows:
Weighted-average remaining lease term
2.20 years
2.52 years
Weighted-average discount rate
8.00
%
8. Long-Term Debt
On December 15, 2023, XOMA transferred to XRL, a newly formed wholly-owned subsidiary, all its rights, title, and interest in the commercial payments from Roche’s VABYSMO under the Affitech CPPA and related assets (the “Commercial Payments”).
Simultaneously, XRL entered into the Blue Owl Loan Agreement with Blue Owl and lenders, pursuant to which XRL was extended certain senior secured credit facilities in an aggregate principal amount of up to $140.0 million. The principal and interest of the loan are to be paid from the Commercial Payments. XRL is obligated to make semi-annual interest payments, starting in March 2024, at a fixed rate of 9.875% per annum until the commercial payment-backed loan is repaid, at which time the Commercial Payments will revert back to XOMA. On each interest payment date, any shortfall in interest payment will be paid from the interest reserve, any uncured shortfall in interest payment that exceeds the interest reserve will increase the outstanding principal amount of the loan, and any Commercial Payment in excess of accrued interest on the loan will be used to repay the principal of the loan until the balance is fully repaid.
The loan matures on December 15, 2038, provided that XRL may repay it in full at any time prior to December 15, 2038, subject to the terms of the Blue Owl Loan Agreement. The Blue Owl Loan includes (i) an initial term loan in an aggregate principal amount equal to $130.0 million and (ii) a delayed draw term loan in an aggregate principal amount of
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$10.0 million to be funded at the option of the XRL upon receipt by the lenders of payments of principal and interest from the proceeds of Commercial Payments in excess of an agreed upon amount on or prior to March 15, 2026.
The payment obligations under the Blue Owl Loan Agreement are limited to XRL and Blue Owl has no recourse under the Blue Owl Loan Agreement against XOMA or any assets other than the VABYSMO-related assets, rights transferred to XRL, and XOMA’s equity interest in XRL. In connection with the Blue Owl Loan Agreement, (i) XRL granted Blue Owl a first-priority perfected lien on, and security interest in, (a) the Commercial Payments and the proceeds thereof, in each case under the Affitech CPPA and (b) all other assets of XRL and (ii) XOMA granted Blue Owl a first-priority perfected lien on, and security interest in, 100% of the equity of XRL. The Blue Owl Loan Agreement contains other customary terms and conditions, including representations and warranties, as well as indemnification obligations in favor of Blue Owl.
On December 15, 2023, the Company borrowed the initial term loan of $130.0 million and received $119.6 million, net of $4.1 million in fees and lender expenses and $6.3 million that was deposited into reserve accounts to pay interest, administrative fees and XRL’s operating expenses (see Note 2). The Company also incurred $0.6 million of direct issuance costs related to the Blue Owl Loan Agreement.
In connection with the Blue Owl Loan Agreement, XOMA issued to Blue Owl and certain funds affiliated with Blue Owl warrants to purchase: (i) up to 40,000 shares of XOMA’s common stock at an exercise price of $35.00 per share; (ii) up to 40,000 shares of XOMA’s common stock at an exercise price of $42.50 per share; and (iii) up to 40,000 shares of XOMA’s common stock at an exercise price of $50.00 per share (collectively, the “Blue Owl Warrants”). The fair value of the Blue Owl Warrants was determined using the Black-Scholes Model (see Note 2) and was estimated to be $1.5 million. As of June 30, 2025, all Blue Owl Warrants were outstanding.
The initial term loan of $130.0 million is carried at amortized cost. Amortization of the initial term loan is applied under the expected-effective-yield approach using the retrospective interest method. As of December 31, 2023, the EIR was determined to be 11.01%. The Company recorded a debt discount of $5.3 million, which included $3.8 million in allocated fees and lender expenses and $1.5 million for the fair value of the Blue Owl Warrants. The Company also recorded $0.6 million in direct debt issuance costs allocated to the initial term loan. The Company will accrete both the debt discount of $5.3 million and $0.6 million of direct debt issuance costs over the expected term of the initial term loan.
As of the closing date of December 15, 2023, the Company recorded the $0.3 million allocated costs for the delayed draw term loan commitment as a non-current asset in other assets - long term in the consolidated balance sheet and will reclassify the amount as a debt discount when the delayed draw term loan is drawn. As of June 30, 2025, no amount had been drawn from the delayed draw term loan.
The carrying value of the short and long-term portion of the initial term loan was $11.4 million and $106.9 million, respectively, as of December 31, 2024.
In March 2025, XRL made a semi-annual payment of $11.1 million which included an interest payment of $6.1 million and principal repayment of $5.1 million. The carrying value of the short-term and long-term portion of the initial term loan was $11.7 million and $102.2 million, respectively, as of June 30, 2025. As of June 30, 2025, the EIR was determined to be 11.14%. The Company recorded $3.2 million and $6.7 million in interest expense during the three and six months ended June 30, 2025, respectively. The Company recorded $3.4 million and $7.0 million in interest expense during the three and six months ended June 30, 2024, respectively. As of June 30, 2025, the Company had a debt discount of $3.6 million and direct issuance costs of $0.4 million to be accreted over the expected remaining term of the initial term loan.
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The following table summarizes the impact of the initial term loan on the Company’s condensed consolidated balance sheet as of June 30, 2025 (in thousands):
Gross principal
130,000
Principal repayments
(11,969)
Debt discount and debt issuance costs
(4,158)
Total carrying value net of principal repayments, debt discount, and debt issuance costs
113,873
Less: current portion of long-term debt
(11,672)
Long-term debt on the Company’s condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024 includes only the carrying value of the Blue Owl Loan.
Aggregate projected future principal payments of the initial term loan as of June 30, 2025, are as follows (in thousands):
Year Ending December 31,
5,424
18,021
24,335
30,418
36,367
3,466
Total payments
118,031
Accretion of debt discounts and issuance costs are included in interest expense. Interest expense in the condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 relates to the initial term loan (in thousands):
Accrued interest expense
3,120
5,954
6,365
Accretion of debt discount and debt issuance costs
322
282
588
Total interest expense
3,236
6,703
6,953
9. Common Stock Warrants
As of June 30, 2025 and December 31, 2024, the following common stock warrants were outstanding:
Exercise Price
Issuance Date
Expiration Date
Balance Sheet Classification
per Share
May 2018
May 2028
Stockholders’ equity
23.69
6,332
March 2019
March 2029
14.71
4,845
December 2023
December 2033
35.00
40,000
42.50
50.00
131,177
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10. Commitments and Contingencies
Collaborative Agreements, Royalties, and Milestone Payments
The Company has committed to make potential future milestone payments and legal fees to third parties as part of licensing and development programs. Payments under these agreements become due and payable only upon the achievement of certain developmental, regulatory, and commercial milestones by the Company’s licensees. Because it is uncertain if and when these milestones will be achieved, such contingencies, aggregating up to $12.1 million (assuming one product per contract meets all milestone events), including the $10.0 million BioInvent contingent consideration, have not been recorded on the accompanying condensed consolidated balance sheets. The Company is unable to determine precisely when and if payment obligations under the agreements will become due as these obligations are based on milestone events, the achievement of which is subject to a significant number of risks and uncertainties.
Contingent Consideration
Pursuant to the Company’s agreements with Kuros and Daré under the Kinnate CVR Agreement and the Pulmokine Merger Agreement, the Company has committed to pay the Kuros sales milestones, the Daré milestones, the Exarafenib milestone contingent consideration, and the Pulmokine contingent consideration, which are recognized upon milestone achievement.
As of June 30, 2025, the Company recorded $3.4 million for the Exarafenib milestone contingent consideration which represented the estimated fair value of potential future payments upon the achievement of a certain specified milestone related to exarafenib payable to Kinnate CVR holders upon the closing of the Kinnate acquisition under the Kinnate CVR Agreement. The Exarafenib milestone contingent consideration is measured at fair value at each reporting period with changes in fair value recorded in other income, net.
The liability for future Kuros sales milestones, the Daré milestones, and the Pulmokine contingent consideration will be recorded when the amounts by product are probable and reasonably estimable.
As of June 30, 2025, none of the Kuros sales milestones, Daré milestones, and the Pulmokine contingent consideration were assessed to be probable and as such, no liability was recorded on the condensed consolidated balance sheet.
11. Stock-Based Compensation
The Company may grant qualified and non-qualified stock options, common stock, PSUs, RSUs, and other stock-based awards under various plans to directors, officers, employees, and other individuals. Stock options are granted at exercise prices of not less than the fair market value of the Company’s common stock on the date of grant. Additionally, the Company has an ESPP that allows employees to purchase Company shares at a purchase price equal to 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the purchase period or on the last day of the purchase period. The ESPP includes a rollover mechanism for the purchase price if the fair market value of the Company’s common stock on the purchase date is less than the fair market value of the Company’s common stock on the first trading day of the purchase period.
Stock Options and Other Benefit Plans
Stock Options
Stock options issued under the 2010 Plan generally vest monthly over three years for employees and one year for directors. Stock options held by employees who qualify for retirement age (defined as employees that are a minimum of 55 years of age and the sum of their age plus years of full-time employment with the Company exceeds 70 years) vest on the earlier of scheduled vest date or the date of retirement. In addition to stock options issued under the 2010 Plan, the Company also granted inducement stock options to the Company’s CEO and CIO in January 2023.
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The activity for all stock options for the six months ended June 30, 2025 was as follows:
Weighted
Average
Aggregate
Exercise
Contractual
Intrinsic
Number of
Price
Remaining Term
shares
Per Share
(in years)
Outstanding as of January 1, 2025
2,426,929
20.83
5.77
18,644
Granted
9,936
25.12
Exercised
(51,497)
4.03
Forfeited, expired or cancelled
(37,013)
75.20
Outstanding as of June 30, 2025
2,348,355
20.36
5.47
15,715
Exercisable as of June 30, 2025
2,089,804
19.91
5.20
14,839
The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2025 and 2024 was $1.0 million and $2.6 million, respectively. The intrinsic value is the difference between the fair value of the Company’s common stock at the time of exercise and the exercise price of the stock option.
The Company recorded $0.7 million and $1.6 million in stock-based compensation expense related to stock options during the three and six months ended June 30, 2025, respectively. As of June 30, 2025, $3.2 million of total unrecognized compensation expense related to stock options was expected to be recognized over a weighted-average period of 1.4 years.
Performance Stock Unit Awards
Since May 2023, the Company has granted employees 733,600 PSUs under the 2010 Plan.
The PSUs are subject to market-based vesting conditions and the number of PSUs vested will be based on the stock price of the Company’s common stock as compared to four stock price hurdles over a three-year period from the initial May 2023 grant date (the “performance period”). A stock price hurdle is considered attained when, at any time during the performance period, the Company’s volume-weighted-average stock price equals or exceeds the hurdle stock price value for 30 consecutive calendar days. Upon attainment of a stock price hurdle, one-third of the earned PSUs will vest immediately upon achievement, one-third will vest upon the two-year anniversary of May 18, 2023 and one-third will vest on the three-year anniversary of May 18, 2023. If no stock price hurdle is attained during the performance period, then no PSUs will vest.
In connection with Mr. Hughes’ appointment to full-time Chief Executive Officer in January 2024, the Company granted Mr. Hughes 275,000 PSUs under the 2010 Plan with generally the same terms as the May 2023 PSU grants. In April 2024, the Company granted certain employees an aggregate of 10,000 PSUs under the 2010 Plan with generally the same terms as the May 2023 PSU grants. There were no PSUs granted in the three or six months ended June 30, 2025.
Fair Value Assumptions of Performance Stock Unit Awards
The fair value of the PSUs granted was estimated based on a Monte Carlo valuation model which incorporates into the valuation the possibility that the stock price hurdles may not be satisfied.
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The grant date fair values of the PSUs granted in January 2024 and April 2024 were estimated as follows:
Derived
Hurdle Price
Fair Value
Service Period
Per PSU
PSUs
30.00
165,900
18.42-19.71
0.46-0.74
55,290
17.24-17.67
0.66-0.96
40.00
34,029
15.85-16.14
0.82-1.15
45.00
29,781
14.20-15.13
0.95-1.31
285,000
The Company estimates that it will recognize total stock-based compensation expense of approximately $11.9 million in aggregate for the PSUs granted since May 2023 using the graded expense attribution method over the requisite service period of each tranche. If the stock price hurdles are met sooner than the requisite service period, the stock-based compensation expense for the respective stock price hurdle will be accelerated. Stock-based compensation expense will be recognized over the requisite service period if the grantees continue to provide service to the Company regardless of whether the PSU stock price hurdles are achieved.
The activity for all PSUs for the six months ended June 30, 2025 was as follows:
Grant Date
Unvested PSUs
Unvested balance as of January 1, 2025
597,117
16.03
Vested
(136,480)
17.23
Forfeited
Unvested balance as of June 30, 2025
460,637
15.68
The Company recorded $0.7 million and $1.7 million in stock-based compensation expense related to the PSUs during the three and six months ended June 30, 2025, respectively. As of June 30, 2025, there was $1.3 million unrecognized stock-based compensation expense related to outstanding PSUs granted to employees with a weighted-average remaining recognition period of 0.9 years.
Restricted Stock Unit Awards
In May 2025, the Company granted the non-employee directors of the Board an aggregate of 29,855 RSUs under the 2010 Plan. RSUs are equity awards that entitle the holder to receive freely tradeable shares of the Company’s common stock upon vesting. The RSUs vest in full on the one-year anniversary of the grant date. The fair value of the RSUs is equal to the closing price of the Company’s common stock on the grant date.
Unvested RSUs
15,175
24.71
29,855
(15,175)
The Company recorded $0.1 million and $0.2 million in stock-based compensation expense related to the RSUs during the three and six months ended June 30, 2025, respectively. As of June 30, 2025, there was $0.7 million
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unrecognized stock-based compensation expense related to the outstanding RSUs granted to non-employee directors with a weighted-average remaining recognition period of 0.9 years.
Stock-based Compensation Expense
All stock-based compensation expense is recorded in G&A expenses. The following table shows total stock-based compensation expense for stock options, PSUs, RSUs, and ESPP in the condensed consolidated statements of operations (in thousands):
Total stock-based compensation expense
12. Capital Stock
Series X Convertible Preferred Stock
Classification— The Company evaluated the convertible preferred stock for liability or equity classification under the applicable accounting guidance and determined that equity treatment was appropriate. Specifically, the shares of Series X Convertible Preferred Stock are not mandatorily redeemable and do not embody an unconditional obligation to deliver a variable number of shares. The Company determined that the convertible preferred stock would be recorded as temporary equity, given that they are redeemable for cash or other assets upon the occurrence of certain event that is not solely within control of the Company. The Company has also evaluated the embedded conversion and contingent redemption features within the Series X Convertible Preferred Stock in accordance with the accounting guidance for derivatives and determined that bifurcation is not required for any embedded feature.
Dividends
During the six months ended June 30, 2025, the Board declared and paid cash dividends on the Company’s Series A Preferred Stock and Series B Depositary shares as follows:
Series B Depositary Share
Cash Dividend Declared
Dividend Declaration Date
($ per share)
Dividend Payment Date
October 23, 2024
0.53906
0.52344
January 15, 2025
February 26, 2025
April 15, 2025
May 21, 2025
July 15, 2025
BVF Ownership
As of June 30, 2025, BVF owned approximately 21.5% of the Company’s total outstanding shares of common stock, and if all the shares of Series X Preferred Stock were converted (without taking into account beneficial ownership limitations), BVF would own 44.5% of the Company’s total outstanding shares of common stock. The Company’s Series A Preferred Stock becomes convertible upon the occurrence of specific events and as of June 30, 2025, the contingency was not met, therefore the Series A Preferred Stock owned by BVF is not included in the as-converted ownership calculation. Due to its significant equity ownership, BVF is considered a related party of the Company.
On December 18, 2018, the Company entered into the 2018 Common Stock ATM Agreement with HCW, under which the Company may offer and sell from time to time at its sole discretion shares of its common stock through HCW as its sales agent, in an aggregate amount not to exceed $30.0 million. HCW may sell the shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act and will use its commercially
reasonable efforts consistent with its normal trading and sales practices to sell the shares up to the amount specified. The Company will pay HCW a commission of up to 3% of the gross proceeds of any shares of common stock sold under the 2018 Common Stock ATM Agreement. On March 10, 2021, the Company amended the 2018 Common Stock ATM Agreement with HCW to increase the aggregate amount of shares of its common stock that it could sell through HCW as its sales agent to $50.0 million. No shares have been sold under the 2018 Common Stock ATM Agreement since the agreement was executed.
On August 5, 2021, the Company entered into the 2021 Series B Preferred Stock ATM Agreement with B. Riley, under which the Company may offer and sell from time to time, at its sole discretion, through or to B. Riley, as agent or principal an aggregate amount not to exceed $50.0 million of its Series B Depositary Shares. B. Riley may sell the shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act and will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares up to the amount specified. The Company will pay B. Riley a commission of up to 3% of the gross proceeds of any Series B Depositary Shares sold under the 2021 Series B Preferred Stock ATM Agreement. No shares have been sold under the 2021 Series B Preferred Stock ATM Agreement since the agreement was executed.
Stock Repurchase Program
On January 2, 2024, the Board authorized the Company’s stock repurchase program, which permits the Company to purchase up to $50.0 million of its common stock through January 2027. Under the program, the Company has discretion in determining the conditions under which shares may be purchased from time to time, including through transactions in the open market, in privately negotiated transactions, under plans compliant with Rule 10b5-1 under the Exchange Act, or by other means in accordance with applicable laws. The manner, number, price, structure, and timing of the repurchases, if any, will be determined at the Company’s sole discretion and repurchases, if any, depend on a variety of factors, including legal requirements, price and economic and market conditions, royalty and milestone acquisition opportunities, and other factors. The repurchase authorization does not obligate the Company to acquire any particular amount of its common stock. The Board may suspend, modify, or terminate the stock repurchase program at any time without prior notice. During the six months ended June 30, 2025, the Company purchased a total of 107,510 shares of its common stock for $2.4 million. During the three months ended June 30, 2025, the Company repurchased and retired shares of its common stock with an aggregate fair market value of approximately $1.8 million under its stock repurchase program. Pursuant to Section 4501 of the Internal Revenue Code, a 1% excise tax is imposed on the aggregate fair market value of stock repurchases during the taxable year, provided the total value of repurchases exceeds a $1.0 million de minimis threshold. As cumulative repurchases exceeded this threshold during the second quarter, the Company recorded an excise tax liability of $24,000, which is reflected as a reduction to stockholders’ equity in the condensed consolidated balance sheet as of June 30, 2025. From the inception of the stock repurchase program through June 30, 2025, the Company purchased a total of 108,170 shares of its common stock pursuant to the stock repurchase program for $2.4 million.
13. Income Taxes
The Company recorded no income taxes during the six months ended June 30, 2025 and 2024. As of June 30, 2025, the Company maintained a full valuation allowance against its remaining net deferred tax assets.
The Company had a total of $5.9 million of gross unrecognized tax benefits as of June 30, 2025, none of which would affect the effective tax rate upon realization, as it had a full valuation allowance against its net deferred tax assets. The reversal of related deferred tax assets will be offset by a valuation allowance, should any of these uncertain tax positions be favorably settled in the future.
The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of June 30, 2025, the Company had not accrued interest or penalties related to uncertain tax positions.
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14. Segment and Geographic Information
Segment Information
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The Company has determined that it operates in one operating segment and the CODM regularly reviews information and business activities on a consolidated basis to allocate resources and assess performance. Segment income and revenues consist of income from purchased receivables through RPAs, AAAs, and CPPAs, revenue from the licenses of intellectual property and related milestone and royalties, and revenue from the sale of future revenue streams. The Company derives income and revenues primarily from the U.S., Europe, and the Asia Pacific. The CODM uses net income (loss) reported in the condensed consolidated statements of operations to evaluate income (loss) generated from segment assets (return on assets) in deciding whether to invest into the Company’s consolidated operations, such as to broaden its royalty portfolios or to repurchase its common stock. The measure of segment assets is reported on the balance sheet as total consolidated assets. Consolidated net income (loss) is used to monitor budget versus actual results. The Company does not have intra-entity sales or transfers (other than as was necessary to secure the VABYSMO royalty backed loan from Blue Owl).
The table below presents segment information for the three and six months ended June 30, 2025 and 2024 (in thousands):
Income and revenues
Business development and deal related costs
(1,817)
(741)
(2,873)
(1,418)
Other segment items:
Research and development expenses
(69)
(1,161)
(1,362)
(1,194)
Depreciation of property and equipment
(6)
Other general and administrative expenses(1)
(5,982)
(10,260)
(13,069)
(18,042)
(9,000)
(655)
(1,199)
Change in fair value of derivatives related to Castle Creek
7,819
7,724
Segment and consolidated net income
Geographic Information
Income and revenue attributed to the following geographic regions based on the location of the partners and licensees was as follows (in thousands):
7,371
6,523
13,466
8,013
Switzerland
Europe
4,563
Asia Pacific
4,000
The Company’s property and equipment is held in the U.S.
15. Subsequent Events
Turnstone Acquisition
On June 26, 2025, the Company entered into an Agreement and Plan of Merger with Turnstone and XRA 3, a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to which the Company plans to acquire Turnstone through a tender offer for (i) $0.34 in cash per share of Turnstone common stock, plus (ii) one non-transferable CVR per share. The merger closed on August 11, 2025.
New Tax Law enacted July 4, 2025
On July 4, 2025, H.R.1 - One Big Beautiful Bill Act was enacted in the U.S., which introduced significant changes to U.S. income tax law, including provisions affecting the deductibility and capitalization of research and development expenditures, business interest deductions, and the international tax framework. The legislation has multiple effective dates, with certain provisions deemed effective as of January 1, 2025 and others effective through 2027. The Company is currently evaluating the potential impact of the new legislation, including implications for deferred tax assets and related disclosures.
ESSA Acquisition and XenoTherapeutics Arranger Letter
On July 13, 2025, the ESSA Acquisition Agreement was executed, pursuant to which the Company agreed to facilitate the acquisition of ESSA’s issued and outstanding common shares by Xeno. As part of the ESSA Acquisition Agreement, the Company has agreed to provide bridge financing to Xeno and to act as administrator of the related CVR to the extent Xeno does not fulfill its obligations.
On July 14, 2025, the Company entered into the XenoTherapeutics Arranger Letter Agreement, pursuant to which the Company agreed to provide short-term funding to XenoTherapeutics to facilitate the acquisition. The Company agreed to extend a short-term senior unsecured term loan facility upon election by XenoTherapeutics in an aggregate amount sufficient for Xeno to fulfill its obligation under the ESSA Acquisition Agreement. The Company agreed to fund each borrowing request within three to five days such notice is delivered to the Company. Additionally, Xeno agreed to pay the Company an arranger fee of $3.0 million following the closing of the ESSA acquisition for the services rendered by the Company.
The ESSA acquisition has not closed as of the date of the issuance of these condensed consolidated financial statements.
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LAVA Acquisition
On August 3, 2025, the Company entered into the LAVA Purchase Agreement, pursuant to which the Company plans to acquire LAVA through a tender offer for (i) a base price of $1.16 in cash per LAVA ordinary share, (ii) up to an additional $0.08 in cash per share, and (iii) one non-transferable CVR per share. The acquisition has not closed as of the date of the issuance of these condensed consolidated financial statements. Upon the closing of the acquisition, the Company expects to own 100% of the outstanding ordinary shares of LAVA.
HilleVax Acquisition
On August 4, 2025, the Company entered into an Agreement and Plan of Merger with HilleVax and XRA 4, a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to which the Company plans to acquire HilleVax through a tender offer for (i) $1.95 in cash per share of HilleVax common stock, plus (ii) one non-transferable CVR per share. The merger has not closed as of the date of the issuance of these condensed consolidated financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on current expectations, estimates and forecasts, as well as our management’s beliefs and assumptions and on information currently available to them, and are subject to risks and uncertainties that are difficult to predict. In some cases you can identify forward-looking statements by words such as “may,” “will,” “should,” “might,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “targets,” “forecasts,” “potential,” “intend” “goal,” “guidance,” “strategy,” “continue,” “design,” and similar words, expressions or the negative of such terms. Examples of forward-looking statements include, but are not limited to, statements regarding: trend analyses and statements regarding future events, future financial performance, including future income related to VABYSMO and OJEMDA, anticipated growth, and industry prospects, our future operating expenses, our future losses, the success of our strategy as a royalty aggregator, the assumptions underlying our business model, the extent to which issued and pending patents may protect the products and processes in which we have an ownership or royalty interest and prevent the use of the covered subject matter by third parties, the potential of our existing product candidates to lead to the development of commercial products, our ability to receive potential milestone or royalty payments under license and collaboration agreements and the amount and timing of receipt of those payments, our ability to locate suitable assets to acquire, our ability to complete (on a timely basis or at all) and realize the benefits from acquisitions, uncertainties related to the acquisition of interest in development-stage and clinical-stage product candidates, fluctuations in and our ability to predict our operating results and cash flows, and the sufficiency of our capital resources. Forward-looking statements are based on assumptions that may not prove accurate. Actual results and outcomes, or the timing of actual results and outcomes, could differ materially from those anticipated due to certain risks, including risks inherent in the biotechnology industry and for our licensees engaged in the development of new products in a regulated market. Among other things: there can be no assurance that our revenues, income or expenses will meet any expectations or follow any trend(s); we may be unable to retain our key employees; litigation, arbitration or other disputes with third parties may have a material adverse effect on us; our product candidates subject to our out-license agreements are still being developed, and our licensees’ may require substantial funds to continue development which may not be available; we may not be successful in entering into out-license agreements for our product candidates; if our therapeutic product candidates do not receive regulatory approval, our third-party licensees will not be able to manufacture and market them; products or technologies of other companies may render some or all of our product candidates noncompetitive or obsolete; 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; even once approved, a product may be subject to additional testing or significant marketing restrictions, its approval may be withdrawn or it may be voluntarily taken off the market; we and our licensees are subject to various state and federal healthcare related laws and regulations that may impact the commercialization of our or our third-party licensee’s product candidates and could subject us or them to significant fines and penalties, and could be impacted by changes or disruptions at the FDA and other government agencies; we and our third-party licensees may be impacted by general macroeconomic and business conditions in key regions of the world, including inflationary pressures, general economic slowdown or a recession, high interest rates, changes in monetary policy, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, instability in financial institutions and geopolitical instability. These and other risks and uncertainties are described in more detail in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.
Forward-looking statements are inherently uncertain and you should not place undue reliance on these statements, which speak only as of the date that they were made. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue in the future. Except as required by law, we do not undertake any obligation to revise or update publicly any forward-looking statements after completion of the filing of this Quarterly Report on Form 10-Q to reflect later events or circumstances or to reflect the occurrence of unanticipated events, or otherwise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that we have a reasonable basis for these statements, our information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
All references to “portfolio” in this Quarterly Report on Form 10-Q are to milestone and/or royalty rights associated with a basket of product candidates in development.
We use our trademarks, trade names, and services marks in this report as well as trademarks, trade names, and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and trade names.
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2024.
Overview
XOMA Royalty Corporation is a biotech royalty aggregator. We have a sizable portfolio of economic rights to future potential milestone and royalty payments associated with partnered commercial and pre-commercial therapeutic candidates. Our portfolio was built through the acquisition of rights to future milestones, royalties, and commercial payments since our royalty aggregator business model was implemented in 2017. These acquisitions build upon out-licensing agreements for proprietary products and platforms held within our portfolio. Our royalty aggregator business is primarily focused on early to mid-stage clinical assets, primarily in Phase 1 and 2 development, which we believe have significant commercial sales potential and that are licensed to well-funded partners with established expertise in developing and commercializing drugs. We also acquire milestone and royalty revenue streams on late-stage clinical assets and commercial assets that are designed to address unmet markets or have a therapeutic advantage over other treatment options, and have long duration of market exclusivity. We expect most of our future revenue and income to be based on payments we may receive for milestones and royalties associated with these assets as well as the periodic recognition of income under the EIR method.
The generation of future revenues and income related to licenses, milestone payments, and royalties is dependent on the achievement of milestones or product sales by our existing partners and licensees. We generated net income of $9.2 million and $11.6 million for the three and six months ended June 30, 2025, respectively, net cash provided by operating activities was $8.7 million for the six months ended June 30, 2025, and we had an accumulated deficit of $1.2 billion as of June 30, 2025. We generated a net loss of $13.8 million, net cash used in operating activities was $13.7 million, and we had an accumulated deficit of $1.2 billion for the year ended December 31, 2024.
Recent Business Developments
On June 26, 2025, we entered into an Agreement and Plan of Merger with Turnstone and XRA 3, a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to which we plan to acquire Turnstone through a tender offer for (i) $0.34 in cash per share of Turnstone common stock, plus (ii) one non-transferable CVR per share. The merger closed on August 11, 2025.
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On July 13, 2025, the ESSA Acquisition Agreement was executed, pursuant to which we agreed to facilitate the acquisition of ESSA’s issued and outstanding common shares by Xeno. As part of the ESSA Acquisition Agreement, we have agreed to provide bridge financing to Xeno and to act as administrator of the related CVR to the extent Xeno does not fulfill its obligations.
On July 14, 2025, we entered into the XenoTherapeutics Arranger Letter Agreement, pursuant to which we agreed to provide short-term funding to XenoTherapeutics to facilitate the acquisition. We agreed to extend a short-term senior unsecured term loan facility upon election by XenoTherapeutics in an aggregate amount sufficient for Xeno to fulfill its obligation under the ESSA Acquisition Agreement. We agreed to fund each borrowing request within three to five days such notice is delivered to us. Additionally, Xeno agreed to pay us an arranger fee of $3.0 million following the closing of the ESSA acquisition for the services rendered by us.
The ESSA acquisition has not closed as of the date of the issuance of the condensed consolidated financial statements.
On August 3, 2025, we entered into the LAVA Purchase Agreement, pursuant to which we plan to acquire LAVA through a tender offer for (i) a base price of $1.16 in cash per LAVA ordinary share, (ii) up to an additional $0.08 in cash per share, and (iii) one non-transferable CVR per share. The acquisition has not closed as of the date of the issuance of the condensed consolidated financial statements. Upon the closing of the acquisition, we expect to own 100% of the outstanding ordinary shares of LAVA.
On August 4, 2025, we entered into an Agreement and Plan of Merger with HilleVax and XRA 4, a Delaware corporation and a wholly-owned subsidiary of the Company, pursuant to which we plan to acquire HilleVax through a tender offer for (i) $1.95 in cash per share of HilleVax common stock, plus (ii) one non-transferable CVR per share. The merger has not closed as of the date of the issuance of the condensed consolidated financial statements.
Portfolio Updates
In May 2025, Rezolute dosed the last patient in its first Phase 3 trial of ersodetug (RZ358), and we earned a $5.0 million milestone payment pursuant to our Rezolute License Agreement.
In 2003, BioInvent granted us a non-exclusive license to BioInvent's product patents and know-how in exchange for future milestones and royalty payments from us under the BioInvent License Agreement. In 2006, we collaborated with Takeda to discover and develop antibodies, leading to the joint development of mezagitamab (TAK-079), which leveraged BioInvent's patents and know-how under the BioInvent License Agreement.
In May 2025, we entered into the BioInvent Agreement to acquire all of BioInvent's remaining rights to milestone payments and royalties owed by us under the BioInvent License Agreement. We paid BioInvent $20.0 million at closing and are obligated to make an additional $10.0 million contingent payment upon FDA approval of mezagitamab.
We assessed the transaction and determined that it represented a modification of our existing BioInvent License Agreement. As we are no longer actively involved in the development of mezagitamab, the $20.0 million upfront payment was capitalized as a contract-based intangible asset subject to amortization over 15.5 years. The $10.0 million contingent payment will be capitalized if FDA approval of mezagitamab becomes probable.
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As of April 2, 2025, we completed the sale of all five pipeline assets that were acquired in the acquisition of Kinnate Biopharma Inc. in April 2024. We are eligible to receive up to $270 million in upfront and milestone payments, as well as future royalty payments at rates ranging from the low single digits to mid-teens on commercial sales. Pursuant to the terms of Kinnate Merger Agreement, holders of the Kinnate CVRs will receive 85% of the net proceeds of such payments received by us prior to April 2, 2029. Funds related to modest upfront payments were distributed to Kinnate CVR holders in July 2025.
In March 2025, Takeda dosed the first patient in its Phase 3 clinical trial of mezagitamab (TAK-079) and we earned a $3.0 million milestone payment pursuant to the Takeda Collaboration Agreement.
Castle Creek Royalty Purchase Agreement
In February 2025, we contributed $5.0 million to Castle Creek’s $75.0 million syndicated royalty financing transaction led by Ligand. Through this transaction, we acquired a royalty interest in D-Fi (FCX-007), a Phase 3 asset being developed by Castle Creek. D-Fi is being studied in dystrophic epidermolysis bullosa (“DEB”), a rare progressive and debilitating skin disorder. D-Fi has been granted Orphan Drug Designation for the treatment of DEB, as well as Rare Pediatric Disease, Fast Track, and Regenerative Medicine Advanced Therapy designations by the FDA.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenues, income and expenses, and related disclosures of contingent assets and liabilities. We routinely evaluate our estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues, income and expenses that are not readily apparent from other sources. Actual results may differ from those estimates under different assumptions and conditions.
Critical accounting estimates are those estimates that involve a significant level of judgment and/or estimation uncertainty and could have or are reasonably likely to have a material impact on our financial condition or results of operations.
There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2025, as compared with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 17, 2025.
Our significant accounting policies are included in “Note 2 – Basis of Presentation and Significant Accounting Policies” in our condensed consolidated financial statements.
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Results of Operations
Income and Revenues
Total income and revenues for the three and six months ended June 30, 2025 and 2024, were as follows (in thousands):
Change
1,445
7,515
873
6,398
(275)
(448)
2,043
16,465
Income from Purchased Receivables under the EIR Method and Cost Recovery Method
We expect income related to VABYSMO to increase in future periods based on projected sales estimates; however, the increase in income may not be at the same rate as the increase from the 2024 to 2025 periods.
Income recognized for OJEMDA during the three months ended June 30, 2025 was due to $1.7 million in estimated royalties earned during the period. The income recognized for OJEMDA during the six months ended June 30, 2025 included a one-time $4.0 million milestone related to DayOne’s MAA filing with the EMA and $3.2 million in royalties. OJEMDA was launched in the second quarter of 2024, and we expect income from related royalties to increase in future periods based on projections reported by DayOne.
Revenue from contracts with customers includes upfront fees, annual license fees, and milestone payments related to the out-licensing of our legacy product candidates and technologies. Revenue from contracts with customers for the three months ended June 30, 2025 included a milestone payment of $5.0 million pursuant to our Rezolute License Agreement. Revenue from contracts with customers for the six months ended June 30, 2025 also included a $4.0 million payment pursuant to the Takeda Collaboration Agreement, including $3.0 million from a milestone payment and $1.0 million in other revenue.
Revenue from contracts with customers for the three months ended June 30, 2024 included a milestone payment of $5.0 million pursuant to our Rezolute License Agreement. Revenue from contracts with customers for the six months ended June 30, 2024 also included milestone payments of $1.0 million pursuant to our license agreement with AVEO.
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Revenue recognized under the units-of-revenue method includes the amortization of unearned revenue from the sale of royalty interests to HCRP in 2016. Changes in revenues recognized in each period presented are related to the changes in estimated royalties received by HCRP.
R&D Expenses
Total research and development expenses for the three and six months ended June 30, 2025 and 2024, were as follows (in thousands):
(1,092)
168
R&D costs were primarily due to clinical trial costs related to KIN-3248 and the associated wind-down activities subsequent to our acquisition of Kinnate in April 2024. We do not expect to incur significant Kinnate-related R&D costs in future periods. However, we may incur increased R&D costs associated with our contemplated acquisitions.
G&A Expenses
Total general and administrative expenses for the three and six months ended June 30, 2025 and 2024, were as follows (in thousands):
(3,202)
(3,517)
G&A expenses include salaries and related personnel costs, professional fees, and facilities costs. The decrease of $3.2 million for the three months ended June 30, 2025, as compared to the same period in 2024, was primarily due to $3.6 million in costs related to exit packages for Kinnate senior leadership in the second quarter of 2024 and a decrease in stock-based compensation expense of $1.1 million, partially offset by an increase in business development and deal-related costs of $1.1 million. The decrease of $3.5 million for the six months ended June 30, 2025, as compared to the same period in 2024, was primarily due to $3.6 million in costs related to exit packages for Kinnate senior leadership in the second quarter of 2024 and a decrease in stock-based compensation expense of $2.0 million, partially offset by an increase in business development and deal-related costs of $1.5 million and an increase in salaries and related costs of $0.5 million.
Other (Expense) Income, Net
Interest Expense
Interest expense includes the accretion of debt discount and debt issuance costs. Interest expense for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):
(206)
(411)
161
(166)
(250)
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Interest expense incurred for the three and six months ended June 30, 2025 and 2024, was related to our Blue Owl Loan. Decreases for the periods presented were due to decreases in the principal balance.
(839)
(1,619)
6,037
4,638
138
540
562
5,774
3,719
The decreases in investment income for the three and six months ended June 30, 2025 and 2024 were primarily due to decreased cash balances.
For the three and six months ended June 30, 2025 and 2024, the change in fair value of equity securities was due to the change in market price for our investments in two publicly traded companies’ equity securities.
For the three and six months ended June 30, 2025, the increases in other income were primarily due to $1.1 million in upfront fees, net of $0.6 million of related payments accrued, recognized in connection with the sale of the legacy Kinnate assets in the second quarter of 2025.
Provision for Income Taxes
We recorded no provision for federal income tax during the three and six months ended June 30, 2025 and 2024. We maintained a full valuation allowance against our remaining net deferred tax assets. We had a total of $5.9 million of gross unrecognized tax benefits, none of which would impact our effective tax rate to the extent that we continue to maintain a full valuation allowance against our deferred tax assets. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.
Liquidity and Capital Resources
Our cash and cash equivalents, working capital, and cash flow activities as of and for each of the periods presented were as follows (in thousands):
(26,594)
Working capital
83,430
101,230
(17,800)
10,888
(25,324)
(3,865)
(18,301)
56
Net cash provided by operating activities of $8.7 million for the six months ended June 30, 2025 was primarily driven by cash receipts during the period (see further details in the Capital Resources section below).
Net cash used in investing activities of $26.7 million for the six months ended June 30, 2025 was primarily driven by payments related to the Castle Creek royalty financing of $5.0 million and the payment for the BioInvent contract-based intangible asset of $20.6 million.
Net cash used in financing activities of $9.9 million for the six months ended June 30, 2025 was primarily due to principal repayments on our Blue Owl Loan of $5.1 million, payments of dividends on our Series A and Series B Preferred Stock of $2.7 million, repurchases of common stock of $2.4 million, and taxes paid related to the net share settlement of equity awards of $0.6 million, partially offset by proceeds from the exercise of options and other share-based compensation of $0.9 million.
Capital Resources
We have historically financed our operations and acquisitions through debt facilities, the issuance of our common stock, Series A and Series B Preferred Stock, and amounts received as milestone payments under our license agreements. Cash received from commercial payments related to sales of VABYSMO will be used to pay down the principal amount and interest due on our Blue Owl Loan until the loan is repaid in full. We also receive cash payments from our purchased receivables and these receipts have been increasing in recent years as our portfolio matures. Below is a summary of the cash received from our purchased receivables and contracts with customers for the three and six months ended June 30, 2025 and 2024 (in thousands):
Royalties and commercial payments
VABYSMO
11,145
7,396
OJEMDA
1,540
2,828
MIPLYFFA
691
1,104
IXINITY
369
444
930
794
OTHER
Total royalties and commercial payments
2,629
470
16,037
8,241
Other receipts from purchased receivables
17,100
Receipts from contracts with customers
9,575
7,025
Total cash receipts
11,654
22,595
29,612
32,366
We have incurred significant operating losses since our inception and as of June 30, 2025, we had an accumulated deficit of $1.2 billion. As of June 30, 2025, we had $75.1 million in unrestricted cash and cash equivalents and $3.4 million in restricted cash. Based on our current cash balance and our planned discretionary spending, such as royalty or other acquisitions, we believe that our current financial resources are sufficient to fund our planned operations, commitments, and contractual obligations for a period of at least one year following the filing date of this Quarterly Report.
The generation of future income and revenue related to licenses, milestone payments, and royalties is dependent on the achievement of milestones or product sales by our existing partners. Milestone payments earned in prior periods are not indicative of anticipated milestone payments in future periods. We may seek additional capital through our 2018 Common Stock ATM Agreement or our 2021 Series B Preferred Stock ATM Agreement (see Note 12 to the condensed consolidated financial statements), or through other public or private debt or equity transactions. Our ability to raise additional capital in the equity and debt markets, should we choose to do so, is dependent on a number of factors including, but not limited to, the market demand for our common and preferred stock, which are subject to a number of development and business risks and uncertainties, our creditworthiness and whether were are able to raise such additional capital at a
57
price or on terms that are favorable to us, if at all. If we are unable to raise additional funds when we need them, our business and operations may be adversely affected.
Material Cash Requirements
Our material cash requirements in the short and long term consist of the following:
Operating Expenditures: Our primary uses of cash and our operating expenses include employee and related costs, consultant fees to support our administrative and business development efforts, legal and accounting fees, insurance costs, and costs associated with our investor relations and IT services.
To support our royalty aggregator business model, we engage third parties to assist in the evaluation of potential acquisitions of milestone payments and royalty streams. Additional operating expenses, including consulting and legal costs, may increase during the remainder of 2025 in response to an anticipated increase in the volume of royalty or acquisition targets evaluated or completed.
In June 2023 we entered into a lease for our headquarters in Emeryville, California. The lease commenced in November 2023 and has a term of 65 months. As of June 30, 2025, we expect to incur incremental undiscounted costs of $0.3 million associated with our building lease.
We will be required to make future expenditures related to the obligations and liabilities we assumed in the Kinnate acquisition. We expect these costs to be funded in full by the cash we received upon the closing of the merger.
Stock Repurchase Program: On January 2, 2024, our Board authorized our stock repurchase program which permits us to purchase up to $50.0 million of our common stock through January 2027. During the quarter ended June 30, 2025, we repurchased and retired approximately $1.8 million of our common stock under our stock repurchase program. These repurchases exceeded the $1.0 million de minimus threshold established by Internal Revenue Code Section 4501, resulting in a 1% excise tax of $24,000. The excise tax was recorded as a non-cash reduction to stockholders’ equity and did not impact our net income or operating cash flows. As of June 30, 2025, we purchased a total of 108,170 shares of common stock pursuant to the stock repurchase program for $2.4 million.
Long-Term Debt: Under the Blue Owl Loan Agreement, the outstanding principal balance bears interest at an annual rate of 9.875%. XRL began making payments of interest under the Blue Owl Loan Agreement semi-annually, in March 2024 using the royalties received on worldwide net sales of VABYSMO, pursuant to the Affitech CPPA. On each interest payment date, any shortfall in interest payment will be paid from the interest reserve, any uncured shortfall in interest payment that exceeds the interest reserve will increase the outstanding principal amount of the loan, and any royalty payments in excess of accrued interest on the loan will be used to repay the principal of the loan until the balance is fully repaid. As of June 30, 2025, XRL held restricted cash of $3.4 million in reserve accounts that may only be used to pay interest and administrative fees and XRL’s operating expenses pursuant to the Blue Owl Loan Agreement. As of June 30, 2025, the current and non-current portion of the initial term loan was $11.7 million and $102.2 million, respectively, and $3.3 million of the restricted cash was classified as non-current.
Exarafenib Milestone Contingent Consideration: Under the Kinnate CVR Agreement, Kinnate CVR holders are entitled to 100% of net proceeds of the $30.5 million milestone related to the sale of exarafenib to Pierre Fabre in February 2024. We expect these payments to be fully funded by the receipt of the Exarafenib milestone asset.
RPAs, AAAs, and CPPAs: A significant component of our business model is to acquire rights to potential future milestone payments and royalty payment streams. We expect to continue deploying capital toward these acquisitions in the near and long term.
We will be obligated to pay an additional $11.0 million for each successive $22.0 million received by us under the Daré RPAs after achievement of a return threshold of $88.0 million.
In addition, we have potential sales-based milestone payments that may become due under our agreement with Kuros. All of these milestones and royalty payments represent a portion of the funds we may receive in the future pursuant to these agreements, and therefore we expect these payments to be fully funded by the related royalty or commercial payment receipts.
Collaborative Agreements, Royalties, and Milestone Payments: We may need to make potential future milestone payments and pay legal fees to third parties as part of our licensing and development programs. Payments under these agreements become due and payable only upon the achievement of certain developmental, regulatory, and commercial milestones by our licensees. Because it is uncertain if and when these milestones will be achieved, such contingencies, aggregating up to $12.1 million (assuming one product per contract meets all milestone events) have not been recorded on our condensed consolidated balance sheet as of June 30, 2025, including the $10.0 million BioInvent contingent consideration. We are unable to determine precisely when and if our payment obligations under the agreements will become due as these obligations are based on milestone events, the achievement of which is subject to a significant number of risks and uncertainties. We expect all payments due to be funded by a portion of the related milestone or royalty revenue we receive or we expect these payments to be reimbursed by our licensees.
Dividends: Holders of our Series A Preferred Stock are entitled to receive, when and as declared by our Board, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per share of Series A Preferred Stock per year). Holders of Series B Depositary Shares are entitled to receive, when and as declared by our Board, cumulative cash dividends at the rate of 8.375% of the $25,000 liquidation preference per share of Series B Preferred Stock ($25.00 per depositary share) per year, which is equivalent to $2,093.75 per year per share of Series B Preferred Stock ($2.09375 per year per depositary share). Dividends on the Series A and Series B Preferred Stock are payable in arrears on or about the 15th day of January, April, July, and October of each year. Since original issuance, all dividends have been paid as scheduled. We expect to continue making these dividend payments as scheduled using our existing capital resources.
Changes in Commitments and Contingencies
Our commitments and contingencies were reported in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. Except as described below, there have been no material changes during the six months ended June 30, 2025 from the commitments and contingencies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
In March 2025, we paid the final $6.0 million in milestones due to Affitech.
On May 27, 2025, we entered into the BioInvent Agreement pursuant to which we acquired all of BioInvent's remaining rights to milestone payments and royalties related to mezagitamab under the BioInvent License Agreement. We are obligated to pay BioInvent $10.0 million upon FDA approval of mezagitamab for the treatment of IgA nephropathy in the U.S.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (our Principal Executive Officer) and our Senior Vice President, Finance and Chief Financial Officer (our Principal Financial and Accounting Officer), we conducted an evaluation of our disclosure controls and procedures, as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Our disclosure controls and procedures are intended to help ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Senior Vice President, Finance and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Based on this evaluation, our Chief Executive Officer and our Senior Vice President, Finance and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently engaged in any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial position or cash flows. However, from time to time, we may become involved in litigation, arbitration or other proceedings relating to claims arising from the ordinary course of business.
We may become involved in material legal proceedings in the future, and the potential impact on us of any on-going proceeding which we do not currently believe to be material could become material. Such matters are subject to significant uncertainties, and there can be no assurance that any legal proceedings in which we are or may become involved will not have a material adverse effect on our business, results of operations, financial position or cash flows.
ITEM 1A. RISK FACTORS
Except as discussed in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025, there have been no material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. For a detailed description of our risk factors, refer to Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
On January 2, 2024, the Board authorized our stock repurchase program, which permits us to purchase up to $50.0 million of our common stock through January 2027. Under the program, we have discretion in determining the conditions under which shares may be purchased from time to time, including through transactions in the open market, in privately negotiated transactions, under plans compliant with Rule 10b5-1 under the Exchange Act, or by other means in accordance with applicable laws. The manner, number, price, structure, and timing of the repurchases, if any, will be determined at our sole discretion and repurchases, if any, depend on a variety of factors, including legal requirements, price and economic and market conditions, royalty and milestone acquisition opportunities, and other factors. The repurchase authorization does not obligate us to acquire any particular amount of our common stock. The Board may suspend, modify, or terminate the stock repurchase program at any time without prior notice. All common stock
repurchased by us during the three months ended June 30, 2025 were subsequently retired. Our repurchases of our common stock during the three months ended June 30, 2025 were as follows:
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share (2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 – April 30, 2025
56,489
21.48
48,228,821
May 1 – May 31, 2025
14,230
24.16
47,884,957
June 1 – June 30, 2025
10,963
24.45
47,616,819
81,682
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(c) Trading Plans
During the fiscal quarter ended June 30, 2025, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).
ITEM 6. EXHIBITS
Incorporation By Reference
ExhibitNumber
Exhibit Description
Form
SEC File No.
Exhibit
Filing Date
2.1
Agreement and Plan of Merger between the Company, Kinnate and Merger Sub, dated February 16, 2024
8-K
001-39801
02/16/2024
2.2
Contingent Value Rights Agreement, dated April 3, 2024, by and between the Company, XRA 1 Corp., Broadridge Corporate Issuer Solutions, LLC and Fortis Advisors LLC.
04/03/2024
2.3
Plan of Conversion of the Company
05/30/2025
3.1
Articles of Incorporation of the Company
3.2+
Certificate of Designation of Series X Convertible Preferred Stock
3.3+
Certificate of Designation of 8.625% Series A Cumulative Perpetual Preferred Stock
3.4+
Certificate of Designation of 8.375% Series B Cumulative Perpetual Preferred Stock
3.5
Bylaws of the Company
3.2
4.1
Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, and 3.5
4.2
Deposit Agreement, dated effective April 9, 2021, by and among the Company, American Stock Transfer & Trust Company, LLC, as depositary, and the holders of the depositary receipts issued thereunder
04/08/2021
4.3
Form of Warrants (May 2018 Warrants)
10-Q
000-14710
4.6
08/07/2018
4.4
Form of Warrants (March 2019 Warrants)
4.7
05/06/2019
4.5
Form of Warrant (December 2023) ($35.00 Exercise Price)
12/19/2023
Form of Warrant (December 2023) ($42.50 Exercise Price)
Form of Warrant (December 2023) ($50.00 Exercise Price)
4.8
Form of Indenture
S-3
333-277794
03/08/2024
10.1
Amended and Restated 2010 Long Term Incentive and Stock Award Plan
10.2+
Form of Indemnity Agreement for Directors and Officers
31.1+
Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2+
Certification of Chief Financial Officer, as required by Rule 13a 14(a) or Rule 15d 14(a) of the Securities Exchange Act of 1934
32.1(1)
Certifications of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. §1350
101.INS+
Inline XBRL Instance Document
101.SCH+
Inline XBRL Schema Document
101.CAL+
Inline XBRL Calculation Linkbase Document
101.DEF+
Inline XBRL Definition Linkbase Document
101.LAB+
Inline XBRL Labels Linkbase Document
101.PRE+
Inline XBRL Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+
Filed herewith.
Furnished herewith. These certifications are not deemed filed with the SEC and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Form 10-Q), irrespective of any general incorporation language contained in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 13, 2025
By:
/s/ OWEN HUGHES
Owen Hughes
Chief Executive Officer (Principal Executive Officer)
/s/ THOMAS BURNS
Thomas Burns
Senior Vice President, Finance and Chief Financial Officer (Principal Financial and Principal Accounting Officer)