XOMA Royalty (NASDAQ: XOMA) grows 2025 royalty cash flow and expands deals
XOMA Royalty Corporation reports on its 2025 performance as a diversified biotech royalty aggregator. The company now holds economic interests in over 120 assets, including seven commercial products and 14 late-stage programs, and focuses on non-dilutive funding of drug developers.
In 2025, XOMA received $33.6 million in commercial payments and $16.9 million from milestones and other fees, for total cash receipts of $50.5 million. Key commercial contributors included VABYSMO, OJEMDA, MIPLYFFA and IXINITY. DSUVIA revenue was minimal after Alora discontinued commercial sales and later withdrew the product due to manufacturing constraints.
The company expanded its portfolio through transactions such as the Takeda Revenue Share Agreement, Castle Creek’s D‑Fi royalty financing, and acquisitions of Pulmokine and LAVA, adding rights to multiple late‑stage and partnered programs. It also executed a stock repurchase program, buying 648,708 shares for $16.1 million by year-end, and operated with a lean team of 14 employees.
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Insights
Diversified royalties grow, but several key assets face development risk.
XOMA operates as a royalty aggregator, collecting milestone and royalty streams while avoiding direct R&D costs. In 2025 it generated total cash receipts of
The company broadened exposure via the Takeda Revenue Share Agreement, Pulmokine’s seralutinib interest, Castle Creek’s D‑Fi, the Twist portfolio and multiple CVR‑linked acquisitions. This increases potential upside but also ties value to counterparties’ execution and regulatory outcomes across many programs.
Some setbacks emerged, including Rezolute’s Phase 3 miss for ersodetug and Gossamer’s PROSERA trial for seralutinib not meeting its primary endpoint, as well as DSUVIA’s market withdrawal. A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
OR
FOR THE TRANSITION PERIOD FROM TO
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
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.
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the Registrant included in the filing reflect the correction of an error to previously issued financial statements.
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on the Nasdaq Global Market on June 30, 2025, was $
The number of shares of Registrant’s Common Stock outstanding as of March 11, 2026 was
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to the Company’s 2026 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report.
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XOMA Royalty Corporation
2025 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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Glossary of Terms and Abbreviations | | 2 | |
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PART I | | | |
Item 1. | Business | | 13 |
Item 1A. | Risk Factors | | 28 |
Item 1B. | Unresolved Staff Comments | | 68 |
Item 1C. | Cybersecurity | | 68 |
Item 2. | Properties | | 69 |
Item 3. | Legal Proceedings | | 69 |
Item 4. | Mine Safety Disclosures | | 69 |
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PART II | | | |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | | 70 |
Item 6. | Reserved | | 71 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 71 |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | | 84 |
Item 8. | Financial Statements and Supplementary Data | | 84 |
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | | 84 |
Item 9A. | Controls and Procedures | | 84 |
Item 9B. | Other Information | | 85 |
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | | 85 |
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PART III | | | |
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Item 10. | Directors, Executive Officers, and Corporate Governance | | 85 |
Item 11. | Executive Compensation | | 86 |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | | 86 |
Item 13. | Certain Relationships and Related Transactions, and Director Independence | | 86 |
Item 14. | Principal Accountant Fees and Services | | 86 |
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PART IV | | | |
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Item 15. | Exhibits and Financial Statement Schedules | | 86 |
Item 16. | Form 10‑K Summary | | 93 |
SIGNATURES | | 94 | |
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GLOSSARY OF TERMS AND ABBREVIATIONS
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Abbreviations | | Definition |
General: | | |
2010 Plan | | The Company's 2010 Long Term Incentive and Stock Award Plan, as amended |
2015 ESPP | | 2015 Employee Stock Purchase 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 |
2025 Common Stock ATM Agreement | | At the Market Issuance Sales Agreement with Leerink dated October 3, 2025 |
2025 ESPP | | 2025 Employee Stock Purchase Plan |
2025 Series B Preferred Stock ATM Agreement | | At The Market Issuance Sales Agreement with HCW dated October 3, 2025 |
‘40 Act | | Investment Company Act of 1940 |
ACA | | The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 |
ASC | | Accounting Standards Codification |
ASC 250 | | ASC Topic 250, Accounting Changes and Error Corrections |
ASC 260 | | ASC Topic 260, Earnings Per Share |
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 |
BLA | | Biologic License Application |
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 |
BVF | | Biotechnology Value Fund, L.P. |
Cash-Out Agreement | | Cash-Out Agreement between the Company and Thomas M. Burns dated October 22, 2025 |
cGMP | | current Good Manufacturing Practice |
Company | | XOMA Royalty Corporation (formerly XOMA Corporation), including its subsidiaries |
DoD | | U.S. Department of Defense |
EIR | | Effective interest rate |
EMA | | European Medicines Agency |
ESPP | | Employee Stock Purchase Plan |
EU | | European Union |
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Exchange Act | | U.S. Securities Exchange Act of 1934, as amended |
FASB | | Financial Accounting Standards Board |
FCPA | | U.S. Foreign Corrupt Practices Act of 1977, as amended |
FDA | | U.S. Food and Drug Administration |
FDCA | | The Federal Food, Drug, and Cosmetic Act, as amended |
FDIC | | Federal Deposit Insurance Corporation |
GAAP | | Generally accepted accounting principles |
G&A | | General and administrative |
HCRP | | Healthcare Royalty Partners II, L.P. |
HCW | | H.C. Wainwright & Co., LLC |
IP | | Intellectual Property |
IPR&D | | In-Process Research and Development |
IRA | | Inflation Reduction Act |
Leerink | | Leerink Partners LLC |
MAA | | Marketing Authorization Application |
NDA | | New Drug Application |
NOL | | Net operating loss |
PSU | | Performance stock unit |
R&D | | Research and development |
Regeneron | | Regeneron Pharmaceuticals, Inc. |
Amended Retention Plan | | October 25, 2022 amendment to the Retention Plan |
Retention Plan | | Retention and Severance Plan dated March 31, 2022 |
RSU | | Restricted stock unit |
SAB No. 99, Topic 1.M | | Staff Accounting Bulletin No. 99 Topic 1.M., Materiality |
SAB No.108, Topic 1.N | | Staff Accounting Bulletin No. 108, Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial Statements |
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 |
SOX | | Sarbanes-Oxley Act of 2002 |
SVB | | Silicon Valley Bank |
U.S. | | United States |
XOMA | | XOMA Royalty Corporation (formerly XOMA Corporation), a Nevada corporation, including its subsidiaries |
XRL | | XRL 1 LLC, a wholly-owned subsidiary of the Company |
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Royalty and Commercial Payment Purchase Agreements: | | |
AAA | | Assignment and Assumption Agreement |
Affitech | | Affitech Research AS |
Affitech CPPA | | The Company's Commercial Payment Purchase Agreement with Affitech dated October 6, 2021 |
Agenus | | Agenus, Inc. and certain affiliates |
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Agenus RPA | | The Company's Royalty Purchase Agreement with Agenus dated September 20, 2018 |
Alora | | Alora Pharmaceuticals |
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” |
Aronora | | Aronora, Inc. |
Aronora RPA | | The Company's Royalty Purchase Agreement with Aronora dated April 7, 2019 |
Bioasis | | Bioasis Technologies, Inc. and certain affiliates |
Bioasis RPA | | The Company's Royalty Purchase Agreement with Bioasis dated February 25, 2019 |
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 proceeds from a potential PRV sale |
Castle Creek Royalty Purchase Agreement | | The Company’s Royalty Purchase Agreement with Castle Creek dated February 24, 2025 |
Checkmate Pharmaceuticals | | Checkmate Pharmaceuticals, Inc. |
Chiesi | | Chiesi Farmaceutici S.p.A. |
CPPA | | Commercial Payment Purchase Agreement |
Daré | | Daré Bioscience, Inc. |
Daré Organon License Agreement | | Exclusive License Agreement between Daré and Organon, dated March 31, 2022, as amended July 4, 2023 |
Daré RPAs | | The Company’s Traditional Royalty Purchase Agreement and Synthetic Royalty Purchase Agreement, both with Daré dated April 29, 2024 |
Day One | | Day One Biopharmaceuticals, Inc. (successor in interest to DOT Therapeutics-1, Inc.) |
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) |
DSUVIA® | | sufentanil sublingual tablet |
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 |
IXINITY® | | coagulation factor IX (recombinant) |
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 |
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 |
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Ligand | | Ligand Pharmaceuticals Incorporated |
Medexus | | Medexus Pharmaceuticals, Inc. |
MIPLYFFA™ | | arimoclomol |
OJEMDA™ | | tovorafenib |
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 |
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 |
Roche | | F. Hoffmann-La Roche AG |
RPA | | Royalty Purchase Agreement |
Second Bioasis RPA | | The Company's Royalty Purchase Agreement with Bioasis dated November 2, 2020 |
Servier | | Servier Pharmaceuticals LLC |
Sildenafil Cream | | Sildenafil Cream, 3.6% |
Talphera | | Talphera, Inc. (formerly AcelRx Pharmaceuticals, Inc. or “AcelRx”) |
Talphera APA | | Asset Purchase Agreement dated March 12, 2023 between AcelRx (now Talphera) and Vertical related to the sale of DSUVIA from Talphera to Vertical |
Talphera CPPA | | The Company’s Payment Interest Purchase Agreement with Talphera dated January 11, 2024, referred to herein as “Talphera Commercial Payment Purchase Agreement” or “Talphera CPPA” |
Talphera Marketing Agreement | | Marketing Agreement dated April 3, 2023 between AcelRx (now Talphera) and Vertical |
Twist | | Twist Bioscience Corporation |
Twist RPA | | The Company’s Royalty Purchase Agreement with Twist dated October 21, 2024 |
VABYSMO® | | faricimab-svoa |
Vertical | | Vertical Pharmaceuticals, LLC, a wholly-owned subsidiary of Alora |
Viracta | | Viracta Therapeutics, Inc. (successor-in-interest to Sunesis Pharmaceuticals, 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% |
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) |
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License, Collaboration, and Other Arrangements: | | |
Alexion | | Alexion Pharmaceuticals |
Alexion License Agreement | | Exclusive License Agreement between the Company and Alexion (formerly Amolyt Pharma SAS, “Amolyt”) dated December 19, 2024 |
Arana | | Arana Therapeutics Limited |
AVEO | | AVEO Oncology, an LG Chem Company Merck/Schering-Plough/AVEO Pharmaceuticals, Inc. |
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 |
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 |
Janssen | | Janssen Biotech, Inc. |
Janssen License Agreement | | The Company’s License Agreement with Janssen dated August 5, 2019 |
LG Chem | | LG Chem, Ltd |
Mezagitamab | | TAK-079, a fully human monoclonal antibody targeting CD38 being developed by Takeda for the treatment of IgA nephropathy and other indications |
Novartis | | Novartis Pharma AG, Novartis International Pharmaceutical Ltd., Novartis Institutes for Biomedical Research, Inc. and/or Novartis Vaccines and Diagnostics, Inc. |
Oak Hill Bio | | Oak Hill Bio Ltd |
ObsEva | | ObsEva SA |
ObsEva IP Acquisition Agreement | | Company's IP Acquisition Agreement with ObsEva dated November 21, 2022 |
Ology Bioservices | | Ology Bioservices Inc. (formerly Nanotherapeutics Inc., now a wholly owned subsidiary of National Resilience, Inc.) |
Organon | | Organon International GmbH |
Organon License Agreement | | Out-license agreement to Organon from ObsEva dated July 26, 2021, related to the development and commercialization of ebopiprant (assumed by the Company as part of the ObsEva IP Acquisition Agreement) |
Repare | | Repare Therapeutics, Inc. |
Repare Acquisition Agreement | | The Arrangement Agreement by and among the Company, Repare and Xeno dated November 14, 2025 |
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 |
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Takeda | | Takeda Pharmaceutical Company Limited |
Takeda Collaboration Agreement | | The Company's Collaboration Agreement by and between XOMA (US) LLC and Takeda dated November 1, 2006, as amended in February 2007, February 2009 and December 2025 |
Takeda Revenue Share Agreement | | Revenue Share Agreement by and between XOMA (US) LLC and Takeda dated December 29, 2025 |
XenoTherapeutics, Inc., or Xeno | | XenoTherapeutics, Inc. and Xeno Acquisition Corp. |
XenoTherapeutics Arranger Letter Agreement | | The Company’s Arranger Letter Agreement with XenoTherapeutics, dated July 14, 2025 |
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Acquisitions and Related Arrangements: | | |
Boston Lease | | The Lease Agreement between HilleVax and Harrison dated March 14, 2022 |
CVR | | Contingent value right |
Fortis | | Fortis Advisors LLC, representative of the Kinnate CVR holders under the Kinnate CVR Agreement |
Generation Bio | | Generation Bio Co. |
Generation Bio Merger Agreement | | The Agreement and Plan of Merger by and among the Company, XRA 7 and Generation Bio dated December 15, 2025. |
Gossamer Bio | | Gossamer Bio, Inc. |
Harrison | | B9 LS Harrison & Washington LLC |
HilleVax | | HilleVax, Inc. |
HilleVax CVR Agreement | | The Contingent Value Rights Agreement by and among the Company, Broadridge, and Dr. Robert Hershberg dated September 17, 2025 |
HilleVax Merger Agreement | | The Agreement and Plan of Merger by and among the Company, XRA 4, and HilleVax dated August 4, 2025 |
HilleVax Merger Closing Date | | September 17, 2025 |
J&J | | Johnson & Johnson, formerly Janssen |
J&J Collaboration and License Agreement | | Research collaboration and license agreement between LAVA and J&J dated May 13, 2020, related to the development and commercialization of JNJ-89853413, (assumed by the Company as part of the LAVA Purchase Agreement) |
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 |
LAVA | | LAVA Therapeutics N.V. |
LAVA CVR Agreement | | The Contingent Value Rights Agreement by and among the Company, Broadridge, and Fortis dated November 17, 2025 |
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. |
Mural | | Mural Oncology PLC |
Mural Transaction Agreement | | The Transaction Agreement by and among the Company, XRA 5, and Mural dated August 20, 2025 |
Pfizer | | Pfizer, Inc. |
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Pfizer License Agreement | | Out-license agreement to Pfizer from LAVA dated September 23, 2022, related to the development and commercialization of PF-08046052 (assumed by the Company as part of the LAVA Purchase Agreement) |
Pierre Fabre | | Pierre Fabre Médicament, SAS |
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 |
Swiss Lease | | The Lease Agreement between HilleVax and Anlagestiftung der Migros-Pensionskasse dated August 17, 2021 |
Turnstone | | Turnstone Biologics Corp. |
Turnstone CVR Agreement | | The Contingent Value Rights Agreement by and between the Company, Broadridge, and WT dated August 11, 2025 |
Turnstone Merger Agreement | | The Agreement and Plan of Merger by and among the Company, XRA 3, and Turnstone dated June 26, 2025 |
WT | | WT Representative LLC, representative of the Turnstone CVR holders under the Turnstone CVR Agreement |
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 |
XRA 5 | | XRA 5 Corp., a wholly-owned subsidiary of the Company |
XRA 7 | | XRA 7 Corp., a wholly-owned subsidiary of the Company |
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PART I
This Annual Report on Form 10-K 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 not be resolved in our favor and 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, government shutdowns, instability in financial institutions and geopolitical instability. These and other risks and uncertainties may cause our actual results or outcomes, or the timing of our results or outcomes, to differ materially and adversely from those expressed in our forward-looking statements, including those related to current economic and financial market conditions, are identified below in Item 1, Business; Item 1A, Risk Factors; Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations; and other sections of this Annual Report on Form 10-K.
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 Annual Report on Form 10-K to reflect later events or circumstances, the occurrence of unanticipated events, or otherwise.
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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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 Annual 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.
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Risk Factors Summary
Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factors summary, as well as other risks and uncertainties that we face, can be found under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K as part of your evaluation of the risks associated with an investment in our securities.
| ● | Our acquisitions of potential future royalty or milestone payments may not produce anticipated revenues or income. |
| ● | We may not successfully complete or realize the expected business or financial benefits of our acquisitions or investments in companies that hold royalty assets. |
| ● | Many of our potential royalty acquisitions may be associated with product candidates that are in clinical development and have not yet been commercialized. If our potential royalty providers’ therapeutic product candidates do not receive regulatory approval, our potential royalty providers will be unable to market them. |
| ● | Actual or threatened epidemics, pandemics, outbreaks of disease, or other public health crises, natural disasters, political crises and other catastrophic events, and unstable market and macroeconomic conditions have and may in the future, adversely affect us, our licensees or royalty-agreement counterparties or their licensees. |
| ● | Biopharmaceutical products are subject to sales risks and substantial competition and the volatility of the biotechnology industry may affect us indirectly as well as directly. |
| ● | We depend on our third parties for the determination of royalty and milestone payments. |
| ● | The lack of liquidity of our acquisitions of future potential milestones and royalties may adversely affect us. |
| ● | Our royalty aggregator strategy may require that we register with the SEC as an “investment company” in accordance with the Investment Company Act of 1940. |
| ● | We have sustained losses in the past, and we may sustain losses in the future. |
| ● | Our royalty aggregator strategy may require us to raise additional funds. |
| ● | We have an obligation to pay quarterly dividends to holders of our Series A Preferred Stock and Series B Preferred Stock, and these stockholders have rights senior to those of our common stockholders. |
| ● | Information available to us about the intellectual property or biopharmaceutical products underlying the potential royalties we buy may be limited and our future income is dependent on numerous potential milestone and royalty-specific assumptions that may prove inaccurate. |
| ● | A large percentage of the calculated net present value of our portfolio is represented by a limited number of products, and the royalties that we acquire may fall outside the biopharmaceutical industry. |
| ● | We may not be able to successfully identify and acquire potential milestone and royalty streams, and we may not be able to successfully manage the risks associated with integration. |
| ● | Our royalty providers pursuing Rare Pediatric Disease designations may not qualify for a priority review voucher upon approval, obtain a faster development or regulatory review process, or increase the likelihood that their product candidates will receive marketing approval, and our royalty providers who receive priority review vouchers may not be successful in transferring them at all or at a favorable price. |
| ● | Biological products and product candidates of our potential milestone and royalty providers may face more intense competition or competition sooner than anticipated. |
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| ● | Our potential royalty providers may be unable to price our products effectively or obtain coverage and adequate reimbursement for sales of our products. |
| ● | We do not know whether there will be, or will continue to be, a viable market for the product candidates in which we have an ownership, milestone, or royalty interest. |
| ● | Product liability claims may diminish the returns on biopharmaceutical products. |
| ● | We and our potential royalty providers may be unable to protect our or their intellectual property, and litigation regarding intellectual property can be costly. |
| ● | We and our partners rely heavily on license and collaboration relationships and our potential milestone and royalty providers may rely on other third parties to provide services. |
| ● | The marketers of biopharmaceutical products are substantially responsible for the ongoing regulatory approval, commercialization, manufacturing and marketing of products. |
| ● | Certain of our technologies are in-licensed from third parties, so our and our licensees’ use of them may be restricted and subject to additional risks. |
| ● | We may not be able to attract and retain qualified personnel, and our employees may engage in misconduct or other improper activities. |
| ● | Our information technology systems or data or those of our partners or contractors could be compromised, and our actual or perceived failure to comply with any data privacy or security obligations could lead to regulatory investigations or actions; litigation; fines and penalties; a disruption of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences. |
| ● | Even after FDA approval, a product may be subject to additional testing or significant marketing restrictions, its approval may be withdrawn, or it may be removed voluntarily from the market. |
| ● | Healthcare reform measures and other statutory or regulatory changes, including disruptions at the FDA and other government agencies, could adversely affect our business. |
| ● | We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, and as we or our potential milestone and royalty providers do more business internationally, we expect to become subject to additional political, economic and regulatory uncertainties. |
| ● | Our share price may be volatile, which may subject us to litigation. |
| ● | Our results of operations and liquidity needs could be materially negatively affected by market fluctuations or an economic downturn. |
| ● | We may issue additional equity securities from time to time, and we may sell additional debt securities. |
| ● | Our organizational documents contain provisions that may prevent transactions that could be beneficial to our stockholders and may insulate our management from removal. |
| ● | We can provide no assurance that we will, at all times, in the future be able to report that our disclosure controls and internal controls over financial reporting are effective. |
| ● | Stockholder and private lawsuits, and potential similar or related lawsuits, could result in substantial damages, divert management’s time and attention from our business, and have an adverse effect on us. |
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Item 1. BUSINESS
Overview
XOMA is a royalty aggregator that plays a distinctive role in helping biotech companies achieve their goal of improving human health. We do this by providing capital in exchange for the economic rights to future milestone and royalty payments associated with clinical candidates and approved products. In return the drug developer or marketer receives non-dilutive, non-recourse funding. We seek to generate stockholder value by maintaining a diversified portfolio to mitigate single-asset, binary risk and by operating under a capital efficient and low corporate cost structure.
We have a sizable portfolio of economic rights to future potential milestone and royalty payments associated with over 120 commercial products and pre-commercial therapeutic candidates. In 2017, we transformed our business model to become a royalty aggregator. We subsequently advanced our portfolio by building upon our existing out-licensing agreements for proprietary products and platforms through the acquisition of rights to future milestones, royalties and commercial payments. Currently, our portfolio is anchored by royalty streams and milestone payments derived from seven commercial-stage assets. In 2025, we received $33.6 million in commercial payments and $16.9 million from milestone payments and other fees, for total cash receipts of $50.5 million.
Strategy
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 sponsors or developers 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.
Our strategy is to expand our portfolio by acquiring additional milestone and royalty revenue streams associated with product candidates from third parties. We believe expanding our portfolio through these acquisitions allows for further diversification across therapeutic areas and development stages, thereby mitigating single-asset binary exposure. We operate under a capital-efficient structure: substantially all R&D and commercialization costs are borne by the assets’ sponsors, and we maintain a lean infrastructure. We also utilize a range of structures to aggregate assets. Beginning with the acquisition of Kinnate in 2024, we have acquired or served as the structuring agent for nine acquisitions of publicly traded and private biotech companies, which added a combination of cash and cash equivalents, therapeutic candidates, or economic interests in programs being developed by other pharmaceutical companies. Since the beginning of 2025, we have closed seven of these transactions that cumulatively added approximately $11.7 million of cash and cash equivalents, net of transaction costs, and economic interests in six programs. Many of these acquisitions have unpartnered assets and intellectual property that we seek to sell or out-license. In 2025, we sold five of the unpartnered Kinnate assets.
Royalty Portfolio
We have economic interests in over 120 assets in active development. Our portfolio includes seven commercial-stage assets and 14 therapeutic candidates in late-stage development. We also hold economic interests in over 100 earlier-stage assets. Since the beginning of 2025, we have added 22 milestone and royalty interests to our portfolio.
The following tables highlight our commercial and late-stage assets, and the assets that were added to our portfolio in 2025 and prior to March 10, 2026. These tables do not include all assets because certain assets are subject to confidentiality agreements.
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Commercial assets
ASSET NAME | MARKETER | DESCRIPTION | THERAPEUTIC AREA | 2025 ROYALTIES & COMMERCIAL PAYMENTS TO XOMA ROYALTY | ROYALTY RATE |
VABYSMO® (faricimab-svoa) | Roche | Angiopoietin-2 and VEGF-A bispecific antibody | Retinal diseases | $22.5 | 0.5% |
OJEMDATM (tovorafenib) | Day One | Pan-RAF inhibitor | Pediatric oncology | $6.4 | Mid-single digit |
MIPLYFFATM (arimoclomol) | Zevra | Heat-shock protein modulator | Rare disease | $2.9 | Mid-single digit |
IXINITY® | Medexus | Recombinant Factor IX | Bleeding disorder | $1.7 | Mid-single digit |
DSUVIA® (sufentanil sublingual tablet) | Talphera | Acute pain treatment | Pain | <$0.5 | 37.5-75% (DoD) |
XACIATO TM (clindamycin phosphate) | Organon | Bioadhesive antibiotic gel | Women’s health | <$0.5 | Low to high-single digit |
DARE to PLAY™ (sildenafil cream) via Section 503B of FDCA | Daré | PDE5 inhibitor | Women’s health | $0 | Low single digit |
| Total Royalties & Commercial Payments in 2025 | $33.6 | | ||
| Cash Receipts from Milestones and Fees in 2025 (related to both commercial and development-stage assets) | $16.9 | | ||
| Total Cash Receipts from Portfolio in 2025 | $50.5 | | ||
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Late-Stage assets
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ASSET NAME | DEVELOPER | DESCRIPTION | THERAPEUTIC AREA | ESTIMATED POTENTIAL | ROYALTY | ||||||
Cetrelimab (JNJ-63723283) | Johnson & Johnson | PD-1 antibody | Oncology | Not disclosed | 0.75% | ||||||
D-Fi (FCX-007) | Castle Creek | Gene therapy | Rare disease | Not disclosed | <1.0% | ||||||
Ersodetug (RZ358) | Rezolute | INSR antibody | Rare disease | $210 Total | High single digit to mid-teens | ||||||
Ficlatuzumab (AV-299) | AVEO/LG Chem | HGF antibody | Oncology | $4.5 | Low single digit | ||||||
OHB-607 | Oak Hill Bio | Recombinant human IGF-1/IGFBP-3 | Neonatology | $223.1 | Low to mid-single digit | ||||||
Ovaprene® | Daré | Hormone-free contraceptive | Women’s health | None | Low single digit | ||||||
REC-4881 | Recursion Pharmaceuticals | MEK1/2 inhibitors | Rare disease | Not disclosed | Low to mid-single digit | ||||||
Rilvegostomig (AZD2936) | AstraZeneca | TIGITI/PD-1 bispecific antibody | Oncology | Not disclosed | Confidential | ||||||
Seralutinib | Gossamer Bio & Chiesi | Inhaled PDGFR, CSF1R, c-KIT inhibitor | Cardiopulmonary | $26.5 | Low to mid-single digit, net | ||||||
Sildenafil Cream, 3.6% | Daré | PDE5 Inhibitor | Women’s health | $0 | Low single digit | ||||||
Takeda Revenue Share Assets – Late Stage (Mezagitamab (TAK-079), Osavampator and Volixibat) | CD-38 antibody, AMPA positive allosteric modulator, IBAT inhibitor and other targets | Autoimmune diseases, neurology, psychiatry, hepatic diseases | $101 (aggregate milestones) | Low to mid-single digit | |||||||
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Undisclosed | Undisclosed | TL1-A | Autoimmune | $1 | Low single digit | ||||||
ASSETS ADDED OR MODIFIED Since the Beginning of 2025
ASSET NAME | DEVELOPER | DESCRIPTION | ESTIMATED POTENTIAL MILESTONES | ROYALTY RATE |
D-Fi (FCX-007) | Castle Creek | Gene therapy | None | XOMA Royalty Share <1.0% |
Cell-targeted lipid nanoparticle platform | Formerly Generation Bio; Now available for license | Cell-targeted lipid nanoparticle delivery system | None | None |
HIL-216 | Available for license | Hexavalent VLP vaccine for norovirus | | |
JNJ-89853413 | Johnson & Johnson | CD33 and Vd2 T cells Gammabody engager | $187.5 | Low to mid-single digit |
KIN-3248 | Khora | FGFR | Not disclosed | None |
KIN-7136 | Mosaica Therapeutics | MEK | $21.5 | Not disclosed |
KIN-8741 | Celyn Therapeutics | c-MET | Not disclosed | Not disclosed |
LAVA-1266 | Available for license | CD123 | ||
OHB-607 | Oak Hill Bio | Recombinant human IGF-1/IGFBP-3 | $223.1 | Low to mid-single digit |
PF-08046052 | Pfizer | EGFR-expressing solid tumors monotherapy | $651 | High single to mid-teens |
REC-4881 | Recursion Pharmaceuticals | Allosteric MEK1/2 inhibitors | Not disclosed | Low to mid-single digit |
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Takeda Revenue Share Assets – Late Stage (Mezagitamab (TAK-079), Osavampator and Volixibat) | CD-38 antibody, AMPA positive allosteric modulator, IBAT inhibitor and other targets | $101 (aggregate milestones) | Low to mid-single digit | |
5 early-stage assets | Oak Hill Bio | Multiple targets | $510 (aggregate milestones) | Mid-single digit |
Undisclosed | Moderna | T-Cell | $25 | Mid-single digit |
Undisclosed | Khora | CDK4 | Not disclosed | None |
Undisclosed | Khora | CDK2/4 | Not disclosed | None |
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Commercial Programs
VABYSMO - Affitech Commercial Payment Purchase Agreement
In October 2021, we entered into the Affitech CPPA, pursuant to which we purchased a future stream of commercial payment rights to Roche’s VABYSMO® (faricimab-svoa) from Affitech for an upfront payment of $6.0 million. We are eligible to receive commercial payments from Roche consisting of 0.5% of future net sales of VABYSMO for a ten-year period following the first commercial sales in each applicable jurisdiction. Commercial payments are due from Roche to us within 60 days of December 31 and June 30 of each year. VABYSMO is approved by the FDA and the EMA for the treatment of wet, or neovascular, age-related macular degeneration and diabetic macular edema. It is also approved by the FDA and the EMA for the treatment of retinal vein occlusion.
Pursuant to the Affitech CPPA, we received commercial payments totaling $22.5 million in 2025 and $16.9 million in 2024. Based on net sales of VABYSMO in 2023, we paid Affitech milestones totaling $6.0 million in March 2024. Based on net sales of VABYSMO in 2024, we paid Affitech an additional $6.0 million in March 2025, representing the final milestones due to Affitech. In February 2026, we received a commercial payment of $11.9 million based on sales of VABYSMO during the second half of 2025.
OJEMDA - Viracta Royalty Purchase Agreement
In March 2021, we entered into the Viracta RPA, pursuant to which we acquired the right to receive future royalties, milestone payments, and other payments related to Day One’s OJEMDA (tovorafenib) and Denovo’s vosaroxin. We made an upfront payment of $13.5 million and acquired the right to receive (i) up to $54.0 million in potential milestone payments, royalties on sales, and other payments related to OJEMDA, excluding up to $5.0 million in certain payments retained by Viracta, and (ii) up to $57.0 million in potential regulatory and commercial milestone payments and high single-digit royalties on sales related to vosaroxin, if approved.
In April 2024, the FDA approved OJEMDA and we earned a $9.0 million milestone payment. In May 2024, Day One sold its priority review voucher for $108.0 million and we received a payment of $8.1 million. In February 2025, we earned a $4.0 million milestone payment related to Day One’s MAA filing with the EMA. In November 2025, we earned a $2.0 million milestone payment related to Day One’s NDA filing in Japan.
We are also eligible to receive mid-single-digit royalties on sales of OJEMDA, and in 2025, we earned $7.7 million in royalties.
On March 6, 2026, Day One announced it had entered into an agreement to be acquired by Servier.
MIPLYFFA - LadRx Agreements
In June 2023, we entered into the LadRx AAA pursuant to which we acquired from LadRx all of its rights, title and interests related to MIPLYFFA (arimoclomol) under the Zevra RPA. The purchased rights related to MIPLYFFA included potential regulatory and commercial milestone payments of up to $52.5 million (net of certain payment obligations of up to $9.5 million based on a portion of the regulatory and commercial milestone payments) and potential royalty payments in low single-digit percentages of aggregate net sales associated with arimoclomol.
We also entered into the LadRx RPA, pursuant to which we 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. The purchased payments related to aldoxorubicin included potential regulatory and commercial milestone payments of up to $342.7 million and royalty payments on aggregate net sales of aldoxorubicin in the low to mid-teens for sales of orphan indications and mid to high-single-digit percentages for sales of other licensed products. In June 2024, the ImmunityBio License Agreement was terminated, and we entered into an amendment to the LadRx RPA. Under the LadRx RPA, as amended, we are eligible to receive potential low single-digit percentage royalty payments on aggregate net sales of aldoxorubicin if LadRx or any of its affiliates commercializes aldoxorubicin. Additionally, the amendment removed the $4.0 million regulatory milestone payment payable to LadRx
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under the original agreement that had been contingent upon the achievement of a specified regulatory milestone for the product candidate related to aldoxorubicin. If LadRx licenses aldoxorubicin to an applicable third party, we are 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 closing of the LadRx Agreements, we paid LadRx an upfront payment of $5.0 million. In January 2024, Zevra announced the FDA accepted its NDA resubmission for arimoclomol, and pursuant to the LadRx AAA, we paid LadRx a $1.0 million milestone payment. In September 2024, the FDA approved MIPLYFFA for use in combination with miglustat for the treatment of neurological manifestations of Niemann-Pick Disease Type C in adult and pediatric patients two years of age and older. Upon notice of the first commercial sale in November 2024, we paid LadRx an additional $1.0 million milestone payment. We earned a net milestone payment of $2.2 million in 2024 upon FDA approval of MIPLYFFA, and we are eligible to receive mid-single-digit royalties on sales of MIPLYFFA.
IXINITY - Aptevo Commercial Payment Purchase Agreement
In March 2023, we entered into the Aptevo CPPA, pursuant to which we acquired the full commercial payment stream and a portion of the milestone rights to IXINITY [a coagulation factor IX (recombinant)], which is marketed by Medexus for the control and prevention of bleeding episodes and postoperative management in people with Hemophilia B. We are eligible to receive a mid-single-digit percentage payment stream on all IXINITY sales from January 1, 2023, until the first quarter of 2035 and may receive milestone payments. Under the terms of the Aptevo CPPA, in 2023 we paid Aptevo a $9.6 million upfront payment plus a $50,000 one-time payment when the first commercial payment exceeded $0.5 million.
Pursuant to the Aptevo CPPA, we received commercial payments totaling $1.7 million in 2025 and $1.6 million in 2024.
XACIATO - Daré Royalty Purchase Agreements
In April 2024, we entered into the Daré RPAs pursuant to which we paid $22.0 million in cash to Daré in consideration for (i) 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 and (ii) 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 us achieving a pre-specified return threshold. The Daré RPAs also provide for milestone payments to Daré of $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.
Receipts pursuant to the Daré RPAs were negligible in 2025.
DSUVIA - Talphera Commercial Payment Purchase Agreement
In January 2024, we acquired an economic interest in DSUVIA (sufentanil sublingual tablet) from Talphera for $8.0 million. DSUVIA was approved in 2018 by the FDA for use in adults in certified medically supervised healthcare settings. In April 2023, Talphera divested DSUVIA to Alora for an upfront payment, a 15% royalty on commercial net sales, a 75% royalty on net sales to the DoD, and up to $116.5 million in milestone payments. Under the terms of the agreement, we are entitled to receive 100% of all royalties and milestones related to DSUVIA sales until we receive $20.0 million. Once we receive $20.0 million, the 75% royalties generated from DoD purchases and the remaining $116.5 million in potential milestone payments due from Alora will be shared equally between us and Talphera. We will fully retain the 15% royalty associated with DSUVIA commercial sales. In November 2024, Alora discontinued commercial sales of DSUVIA. We remain eligible for payments from sales to the DoD.
Based on updates received in November 2024, we evaluated the status of the program for potential credit losses in the fourth quarter of 2024 and determined no payments were probable to be received under the Talphera CPPA as of
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December 31, 2024. Accordingly, we recorded credit losses on purchased receivables of $7.9 million representing the full remaining carrying value of this transaction in 2024.
Pursuant to the Talphera CPPA, we received commercial payments totaling $28,000 in 2025 and $0.1 million in 2024. During the first quarter of 2025, Alora withdrew DSUVIA from the commercial market due to unresolvable manufacturing constraints.
Other Acquired Programs
Takeda Revenue Share Agreement
In December 2025, we amended the Takeda Collaboration Agreement to reduce the milestones, reimbursements and royalties relating to TAK-079 (mezagitamab) that we are entitled to, and concurrently entered into the Takeda Revenue Share Agreement to receive future milestone, royalty, and other contingent payments that Takeda may receive from a diversified basket of nine development-stage assets pursuant to various underlying license and asset transfer agreements with third parties. We did not make or receive any upfront payment in connection with the Takeda Revenue Share Agreement or the amendment to the Takeda Collaboration Agreement. Under the Takeda Revenue Share Agreement, we are entitled to certain portions of payments Takeda may receive on the following assets:
Neurocrine Biosciences is developing osavampator, a potential first-in-class, investigational alpha-amino-3-hydroxy-5-methyl-4-isoxazole propionic acid (AMPA) positive allosteric modulator for patients who have inadequate response to treatment for major depressive disorder.
Mirum Pharmaceuticals is developing volixibat, a minimally absorbed, orally administered investigational therapy designed to selectively inhibit ileal bile acid transporter, for primary sclerosing cholangitis and primary biliary cholangitis.
Oak Hill Bio Ltd and its partner are developing OHB-607, a recombinant human IGF-1/IGFBP-3 for the prevention of bronchopulmonary dysplasia in extremely premature infants, and Oak Hill Bio Ltd is developing early-stage assets that have the potential to address other high unmet need or rare disease areas. We will be entitled to a low to mid-single-digit royalty on each of the six Oak Hill Bio assets and commercial milestone payments of up to $733.1 million across the six Oak Hill Bio assets.
Recursion Pharmaceuticals is developing REC-4881, an investigational MEK1/2 inhibitor for familial adenomatous polyposis, a rare tumor predisposition syndrome affecting approximately 50,000 people in the U.S., France, Germany, Italy, Spain, and the UK. We will be entitled to low to mid-single-digit royalties.
Castle Creek
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,
Lava Acquisition
In November 2025, we acquired LAVA through a tender offer for $1.04 in cash per LAVA ordinary share and one non-transferable CVR per share. As a part of the acquisition, we acquired IP assets related to LAVA’s existing partnered programs with J&J (JNJ-89853413) and Pfizer (PF-08046052 or EGFRd2), as well as LAVA-1266, a clinical program for acute myeloid leukemia and myelodysplastic syndrome. We have no plans to develop LAVA-1266, which is instead targeted for divestiture through sale or licensing. We are entitled to 25% of the net proceeds related to sales or licenses of these programs.
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Under the LAVA CVR Agreement, CVR holders are entitled to 75% of the net proceeds from ongoing and future collaborations related to the partnered programs over a 10-year period, 75% of the net proceeds from the disposition of LAVA-1266, 100% of the amount by which LAVA’s closing net cash exceeds the amount of closing net cash as determined by the LAVA Merger Agreement, minus any permitted deductions, as well as 100% of the tax reserve in the amount of approximately $6.3 million minus any permitted tax reserve matter expenses. Under the LAVA CVR Agreement, we are responsible for the collection and disbursement to Broadridge, the LAVA CVR holders’ rights agent, of any proceeds to which LAVA CVR holders could be entitled.
Pulmokine Acquisition
In November 2024, we acquired Pulmokine to obtain an economic interest in seralutinib, a Phase 3 asset being studied in pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD). We acquired all outstanding shares of Pulmokine for a $20.0 million cash payment at closing. In addition, we will pay success-based consideration contingent on future development and commercial performance to Pulmokine stockholders. In 2017, Pulmokine licensed seralutinib to Gossamer Bio, Inc., and in 2024, Gossamer Bio signed a global collaboration and license agreement with Chiesi Farmaceutici S.p.A. Subject to the terms of those agreements, we are eligible to receive net royalties ranging from the low to mid-single digits on commercial sales, and we will retain a portion of milestone payments.
In February 2026, Gossamer Bio announced topline results from the Phase 3 PROSERA clinical trial evaluating seralutinib for the treatment of PAH. Although the study demonstrated numerical improvements on the primary endpoint and certain secondary and subgroup measures, the trial did not meet its prespecified primary endpoint. Gossamer Bio plans to engage with regulatory authorities to discuss potential next steps for the seralutinib program. We are evaluating the impact of this development on our seralutinib‑related assets.
Kinnate Acquisition
In April 2024, we acquired Kinnate through a tender offer for $2.5879 in cash and one non-transferable contractual CVR per share of Kinnate common stock. Following the merger, Kinnate continued as our wholly-owned subsidiary.
As part of the Kinnate Merger Agreement, we acquired an IPR&D asset related to KIN-3248, a Fibroblast Growth Factor Receptors inhibitor designed for the treatment of patients with intrahepatic cholangiocarcinoma and urothelial carcinoma as well as certain other solid tumors; the molecule is currently in a Phase 1 clinical study. Additionally, we acquired pre-clinical intangible assets related to IP for the following: (i) KIN-8741, a highly selective c-MET inhibitor with broad mutational coverage, including acquired resistance mutations, in certain solid tumors driven by exon 14-altered and/or amplified c-MET; (ii) KIN-7136, a brain-penetrant MEK inhibitor; and (iii) CDK4, a potential brain-penetrant selective CDK4 inhibitor (collectively, the “Kinnate Pre-Clinical Assets”).
Each Kinnate CVR represents the right to receive potential payments pursuant to the terms and subject to the conditions of the Kinnate CVR Agreement. Kinnate CVR holders are eligible to receive 100% of the net proceeds received within five years of the closing date resulting from the license of exarafenib to Pierre Fabre, which was executed prior to the merger closing date. In addition, they are eligible to receive 85% of net proceeds, if any, from any license or other disposition of any Kinnate Pre-Clinical Asset that occurs within one year of the merger closing date. We sold the Kinnate Pre-Clinical Assets in the first half of 2025 and paid the Kinnate CVR holders in the third quarter of 2025. Under the Kinnate CVR Agreement, we are responsible for the collection and disbursement to Broadridge, the Kinnate CVR holders’ rights agent, of any proceeds to which Kinnate CVR holders could be entitled.
Twist Bioscience Royalty Purchase Agreement
In October 2024, we entered into the Twist RPA. Under the terms of the agreement, we 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. We are eligible to
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receive up to $0.5 billion in milestone payments and a 50% share of up to low single-digit royalties on future commercial sales.
Kuros Royalty Purchase Agreement
In July 2021, we entered into the Kuros RPA, pursuant to which we 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’ vidutolimod (CMP-001), a Toll-like receptor 9 agonist packaged in a virus-like particle, for an upfront payment of $7.0 million. We may pay additional sales-based milestone payments to Kuros of up to $142.5 million, representing a portion of the future royalties on commercial sales.
In May 2022, Regeneron completed its acquisition of Checkmate Pharmaceuticals resulting in a $5.0 million milestone payment to Kuros. Pursuant to the Kuros RPA, we were entitled to 50% of the milestone payment, which we received in July 2022.
Palobiofarma Royalty Purchase Agreement
In September 2019, we entered into the Palo RPA, pursuant to which we 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, nonalcoholic steatohepatitis and other indications (the “Palo Licensed Products”) that are being developed by Palo. Under the terms of the Palo RPA, we paid Palo an upfront payment of $10.0 million for the rights to potential royalty payments on future potential sales of the Palo Licensed Products.
Selected Legacy Programs Underlying Our Portfolio
The following is a summary of significant licenses and collaboration agreements related to our legacy product candidates and technologies.
Takeda
In November 2006, we entered into the Takeda Collaboration Agreement with Takeda under which we agreed to discover and optimize therapeutic antibodies against multiple targets selected by Takeda.
Under the Takeda Collaboration Agreement, we were eligible to receive milestone payments of up to $20.8 million relating to TAK-079 (mezagitamab) and a 4% royalty on future sales of all products subject to this license. Our right to milestone payments expires on the later of the receipt of payment from Takeda of the last amount to be paid under the agreement or the cessation by Takeda of all research and development activities with respect to all program antibodies, collaboration targets or collaboration products. Our right to receive royalties expires on the later of 13.5 years from the first commercial sale of each royalty-bearing discovery product or the expiration of the last-to-expire licensed patent (or 12 years from first commercial sale if there is significant generic competition post patent-expiration).
In February 2009, we expanded our existing collaboration to provide Takeda with access to multiple antibody technologies, including a suite of research and development technologies and integrated information and data management systems. We may receive milestones of up to $3.3 million per discovery product candidate and low single-digit royalties on future sales of all antibody products subject to this license. Our right to milestone payments expires on the later of the receipt of payment from Takeda of the last amount to be paid under the agreement or the cessation by Takeda of all research and development activities with respect to all program antibodies, collaboration targets or collaboration products. Our right to royalties expires on the later of 10 years from the first commercial sale of such royalty-bearing discovery product or the expiration of the last-to-expire licensed patent.
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The Company has received $7.8 million of milestone payments since the inception of the agreement. In December 2025, we amended the Takeda Collaboration Agreement in connection with the Takeda Revenue Share Agreement transaction. We are eligible to receive milestone payments of up to a total of $13.0 million, a 2% royalty on future sales relating to TAK-079 (mezagitamab) for the first ten years following first commercial sale, and a 0.5% royalty thereafter for the remainder of the royalty term under the Takeda Collaboration Agreement as amended.
Rezolute
In December 2017, we 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, we 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.
We have earned three milestone payments under the Rezolute License 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).
In December 2025, Rezolute announced that the Phase 3 clinical study of ersodetug for the treatment of congenital hyperinsulinism (“HI”) did not meet its primary and key secondary endpoints. The study demonstrated reductions from baseline in hypoglycemia events by self-monitored blood glucose at both ersodetug dose levels, but the reductions were not statistically significant compared to placebo, due to a pronounced study effect. Rezolute is currently undertaking extensive analysis of the data results and other endpoints. Rezolute expects to meet with the FDA prior to the end of the first quarter of 2026 under its Breakthrough Therapy Designation to determine next steps for the program.
Separately, Rezolute is evaluating ersodetug in a Phase 3, single-arm, open label study in up to 16 hospitalized participants for the treatment of tumor HI. Topline results of this study are anticipated in the second half of 2026.
Janssen
In August 2019, we entered into an agreement with Janssen pursuant to which we granted a non-exclusive license to Janssen to develop and commercialize certain product candidates, including our patents and know-how. Under the agreement, Janssen made a one-time payment of $2.5 million to us. Additionally, for each product candidate, we are entitled to receive milestone payments of up to $3.0 million upon Janssen’s achievement of certain clinical development and regulatory approval milestones. Additional milestone payments may be due for product candidates which are the subject of multiple clinical trials. Upon commercialization, we are eligible to receive a 0.75% royalty on net sales of each product. Janssen’s obligation to pay royalties with respect to a particular product and country will continue until the eighth-year-and-sixth-month anniversary of the first commercial sale of the product in such country. The agreement will remain in effect unless terminated by mutual written agreement.
In 2023, we earned a total of $1.5 million in milestone payments from Janssen, which included five milestone payments for IND filings and one milestone payment upon dosing of the first patient in a Phase 3 clinical trial evaluating one of Janssen’s biologic assets. There were no milestone payments earned pursuant to this agreement in 2024 or 2025.
Arana, now Teva Pharmaceutical Industries
In September 2009, we entered into an antibody discovery collaboration with Arana, a wholly owned subsidiary of Teva Pharmaceutical Industries Ltd., involving multiple proprietary XOMA antibody research and development technologies, including a new antibody phage display library and a suite of integrated information and data management systems. Arana agreed to pay us a fee of $6.0 million. We may be entitled to future milestone payments, aggregating up to $3.0 million per product, and low single-digit royalties on product sales. Our right to milestone payments expires on the later of the receipt of payment from Arana of the last amount to be paid under the agreement, the cessation by Arana of the use of all research and development technologies or the cessation by Arana of the exercise of the patent rights granted to them. Our right to royalties expires five years from the first commercial sale of each royalty-bearing product.
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AVEO
In April 2006, we entered into an agreement with AVEO to utilize our HE™ technology to humanize AV-299, AVEO’s novel anti-HGF antibody, under which AVEO paid us an up-front license fee and development milestones. In addition, we will receive royalties on sales of products resulting from the agreement. Under the agreement, we created AV-299 production cell lines, conducted process and assay development, and performed Good Manufacturing Practices manufacturing activities. AVEO retains all development and commercialization rights to AV-299 and may be required to pay us annual maintenance fees, additional development milestone payments aggregating up to $4.5 million and low single-digit royalties on product sales in the future. Our right to milestone payments expires upon full satisfaction of all financial obligations of AVEO pursuant to the agreement. Our right to royalties expires on the later of 15 years from the first commercial sale of each royalty-bearing product or the expiration of the last-to-expire licensed patent.
In January 2023, AVEO was acquired by LG Chem. In January 2024, AVEO launched a Phase 3 clinical trial investigating ficlatuzumab plus cetuximab in patients with recurrent/metastatic HPV-negative head and neck cancer. In February 2026, AVEO announced the completion of the first interim analysis in this global Phase 3 study, which expects to enroll 410 to 500 patients, and expects to proceed with the 20mg/kg dose for the combination arm of the study.
In January 2026, AVEO announced that the first patient had been dosed in a Phase 1b/2 clinical trial evaluating ficlatuzumab in combination with azacitidine and venetoclax in patients that are 60 years of age or older with untreated acute myeloid leukemia (AML) through a Master Clinical Trial Collaboration Agreement with Blood Cancer United®, formerly the Leukemia & Lymphoma Society.
Novartis – Anti-CD40 Antibody
In February 2004, we entered into an exclusive, worldwide, multi-product collaboration agreement with Chiron to research, develop and commercialize multiple antibody product candidates for the treatment of cancer, and such agreement was replaced with the Chiron Collaboration Agreement entered into in May 2005. In 2006, Novartis closed its acquisition of Chiron at which time Novartis acquired Chiron’s interest in the Chiron Collaboration Agreement, which was subsequently restructured in July 2008 and amended in April 2010, September 2015, and February 2018. The agreement was terminated in January 2025.
Stock Repurchase Program
In January 2024, the Board authorized our first 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.
As of December 31, 2025, we had purchased a total of 648,708 shares of our common stock pursuant to the stock repurchase plan for $16.1 million.
Competition
The biotechnology and pharmaceutical industries are subject to significant technological change. Some of the drugs our licensees or milestone and royalty partners are developing may compete with existing therapies or other product candidates in development by other companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish collaborative arrangements with our licensees’ or royalty partners’ competitors. There
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can be no assurance that developments by others, including, without limitation, the development of generics or biosimilars, will not render our licensees’ or royalty partners’ products or technologies obsolete or uncompetitive.
Additionally, our royalty aggregator model faces competition on at least two fronts. First, there are other companies, funds and other investment vehicles seeking to aggregate royalties or provide alternative financing to development-stage biotechnology and pharmaceutical companies. These competitor companies, funds and other investment vehicles may have a lower target rate of return, a lower cost of capital or access to greater amounts of capital and thereby may be able to successfully acquire assets that we are also targeting for acquisitions. Second, existing or potential competitors to our partners and licensees’ products, particularly large pharmaceutical companies, may have greater financial, technical and human resources than our licensees. Accordingly, these competitors may be better equipped to develop, manufacture and market products. Many of these companies also have extensive experience in preclinical studies and human clinical trials, obtaining FDA and other regulatory approvals and manufacturing and marketing pharmaceutical products.
For a discussion of the risks associated with our competitive environment, refer to Part I, Item 1A, “Risk Factors.”
Government Regulation and Environmental Matters
The research and development, manufacturing and marketing of pharmaceutical and biological products are subject to regulation by numerous governmental authorities in the U.S. and other countries. We and our partners and licensees, depending on specific activities performed, are subject to these regulations. In the U.S., pharmaceuticals and biological products are subject to regulation by both federal and various state authorities, including the FDA. The Federal Food, Drug and Cosmetic Act and, for biological products, the Public Health Service Act, govern the testing, manufacture, safety, efficacy, purity, potency, labeling, storage, recordkeeping, approval, reporting, tracking and tracing, importing and exporting, and advertising, marketing and promotion of pharmaceutical and biological products, and there are other comparable laws and regulations that apply at the state level. Further, various other state and federal healthcare laws and regulations, including the federal Anti-Kickback Statute, the federal False Claims Act and state and federal data privacy and security laws and regulations, may also apply. There are similar regulations in other countries as well. For both currently marketed products and product candidates in development, failure to comply with applicable regulatory requirements can, among other things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. Development-stage product candidates in our portfolio require approval by the FDA before we will recognize any royalties from sales. In addition, changes in existing regulations could have a material adverse effect on us or our partners.
In the U.S., the EU and other significant or potentially significant markets for our portfolio and product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services. In the U.S., the volume of drug pricing-related legislation has dramatically increased in recent years. For example, Congress has enacted laws requiring manufacturers to refund the Centers for Medicare & Medicaid Services, or CMS, for certain discarded amounts of drugs from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024. Also, in August 2022 Congress enacted the IRA, which, among other things, requires the Department of Health and Human Services to negotiate Medicare prices for certain drugs, imposes an inflation-based rebate on Medicare Part B and D utilization, restructures the Medicare Part D benefit and increases manufacturer contributions in some or all of the Medicare Part D benefit phases. Moreover, since the start of the second Trump administration, the executive branch has sought to lower drug prices, including via an Executive Order that seeks to bring drug prices for U.S. patients in line with comparably developed nations. In addition, many state legislatures are considering, or have already passed into law, legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as requiring manufacturers to publicly report proprietary pricing information, creating review boards for prices to state agencies, and encouraging the use of generic drugs. In both the U.S. and elsewhere, sales of medical products and treatments are dependent, in part, on the availability of coverage and adequate reimbursement from third-party payors, such as government and private insurance plans. Further, many countries outside the U.S., including the EU member states, have established complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions. If any pricing-related regulation impacts products in our portfolio, it would result in lower royalties received by us.
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We believe there are no significant compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we currently do not anticipate material capital expenditures arising from environmental regulation. We believe climate change could present risks to our business. Some of the potential impacts of climate change to our business include increased operating costs due to additional regulatory requirements and the risk of disruptions to our business. We do not believe these risks are material to our business at this time.
For a discussion of the risks associated with our compliance with government regulations, see Part 1, Item 1A, “Risk Factors.”
Intellectual Property
Intellectual property is important to our business and our future income streams will depend in part on our partners and licensees’ ability to obtain patents and to operate without infringing on the proprietary rights of others. We hold and have filed applications for a number of patents in the U.S. and internationally to protect our products and technology. We also have obtained or have the right to obtain licenses to, or income streams based on, certain patents and applications filed by others. However, the patent position of biotechnology companies generally is highly uncertain and consistent policy regarding the breadth of allowed claims has not emerged from the actions of the U.S. Patent and Trademark Office with respect to biotechnology patents. Accordingly, no assurance can be given that our, or our partners’ or licensees’ patents will afford protection against competitors with similar products or that others will not obtain patents claiming aspects similar to those covered by our, or our partners’ or licensees’ patent applications. Some of our agreements, or those of our partners or licensees, contain “step-down” provisions where the royalty rate is reduced following patent expiration or revocation. Furthermore, there can be no assurance that our royalties will expire when expected. Any reductions in the duration of royalties relative to our estimates may adversely affect our financial condition and results of operations. Below is a list of representative patents and patent applications related to our licensed programs:
| | | | |
|---|---|---|---|---|
Licensee | Program | Representative | Subject Matter | Expected Last Expiration in Patent Family |
Rezolute | Anti-INSR | US 9,944,698 EP 2 480 254 US 10,711,067 EP 3 265 491 WO2023225657* | Insulin receptor-modulating antibodies having the functional properties of RZ358 Methods of treating or preventing post-prandial hypoglycemia after gastric bypass surgery using a negative modulator antibody to the insulin receptor RZ358 formulations | 2030 2036 2043 |
Ology Bioservices | Anti-BoNT | US 8,821,879 | Coformulations of anti- botulinum neurotoxin antibodies | 2030 |
Various | Phage display libraries | US 8,546,307 | XOMA phage display library components | 2032 |
AVEO | Anti-HGF | US 7,649,083** | Human-Engineered anti-HGF antibodies and uses thereof | 2028 |
Alexion | Anti-PTH1R | US 10,519,250 EP 3 490 600 | Parathyroid Hormone Receptor 1 Antibodies and Uses Thereof | 2037 |
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| | | | |
|---|---|---|---|---|
Licensee | Program | Representative | Subject Matter | Expected Last Expiration in Patent Family |
Day One | OJEMDA | US 8,293,752*** US 8,802,657*** US 9,556,177*** US 9,920,048*** EP3231798*** EP2167489*** | Compositions of matter and methods of use of tovorafenib | 2031 |
Janssen | JNJ-89853413 | US 10,501,540# US 11,384,145# EP 3 129 404# WO2021052995# | Immunoglobulins binding human Vγ9 Vδ2 T cell receptors Treatment of cancer comprising administration of vgamma9vdelta2 t cell receptor binding antibodies | 2034 2039 |
Pfizer | PF-08046052 | WO2022122973# WO2023242320# | Antibodies that bind gamma-delta t cell receptors Compositions comprising antibodies that bind gamma-delta t cell receptors | |
Moderna | Lipid nanoparticles | | | |
* Jointly owned with Rezolute, Inc.
** Jointly owned with AVEO Pharmaceuticals, Inc.
*** Jointly owned with Day One Biopharmaceuticals, Inc.
# Owned by LAVA Therapeutics New TopCo B.C
If certain patents issued to others are upheld or if certain patent applications filed by others are issued and upheld, our partners and licensees may require certain licenses from others to develop and commercialize certain potential product candidates incorporating our technology. There can be no assurance that such licenses, if required, will be available on acceptable terms, if at all. If such licenses are obtained, our partners and licensees may be able to deduct some or all of the costs from the royalties they owe to us.
We seek to protect our proprietary information, in part, by confidentiality agreements with our employees, consultants and partners. These parties may breach these agreements, and we may not have adequate remedies for any breach. To the extent that we or our consultants or partners use intellectual property owned by others, we may have disputes with our consultants or partners or other third parties as to the rights in related or resulting know-how and inventions.
Concentration of Risk
Our business model is dependent on third parties achieving specified development milestones and product sales. Our portfolio currently includes partner funded programs from which we could potentially receive royalties or other payments if the programs achieve marketability. A large percentage of the calculated net present value of our portfolio is represented by a limited number of products. The failure of any one of these products to move forward in clinical development or commercialization may have a material adverse effect on our financial condition and results of operations.
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Corporate Information
We were incorporated in Delaware in 1981 and redomiciled as a Bermuda-exempted company in December 1998. Effective December 2011, we redomiciled from Bermuda to Delaware and changed our name from XOMA Ltd. to XOMA Corporation. Effective July 2024, the name XOMA Corporation was changed to XOMA Royalty Corporation. The Company was reincorporated from Delaware to Nevada in May 2025.
Our principal executive offices are located at 2200 Powell Street, Suite 310, Emeryville, California 94608. Our telephone number at our principal executive offices is (510) 204-7200. Our website address is www.xoma.com. The information found on our website is not part of this or any other report filed with or furnished to the SEC.
Employees
We rely on a small number of skilled, experienced, and innovative employees to conduct our operations. As of March 11, 2026, we employed 14 full-time employees who were primarily engaged in executive, business development, legal, finance and administrative positions. We also utilize independent contractors and consultants to supplement our workforce.
Item 1A. RISK FACTORS
In evaluating our business, you should carefully consider the following discussion of material risks, events and uncertainties that make an investment in us speculative or risky in addition to the other information included in this Annual Report. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may not be able to accurately predict, materially and adversely affect our business and operations, growth, reputation, prospects, operating and financial results, financial condition, cash flows, liquidity and stock price. Some of the factors, events and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future. The risks and uncertainties described below are not the only ones we face. Our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our business. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.
Risks Related to our Royalty Aggregator Strategy
Our acquisitions of potential future royalty and/or milestone payments may not produce anticipated revenues or income and/or may be negatively affected by a default or bankruptcy of the licensor(s) or licensee(s) under the applicable license agreement(s) covering such potential royalties and/or milestones, and if such transactions are secured by collateral, we may be, or may become, under-secured by the collateral or such collateral may lose value and we will not be able to recuperate our capital expenditures associated with the acquisition.
We routinely review opportunities to acquire future royalties, milestone payments and other payments related to drug development and sales as part of our royalty aggregator strategy or to acquire companies that hold royalty assets. Generally, at any time, we seek acquisition opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, and technical, financial and other confidential information and assist with the submission of indications of interest and involvement as a bidder in competitive auctions. Many potential acquisition targets do not meet our criteria, and for those that do, we may face significant competition for these acquisitions from other royalty buyers and enterprises. These unsuccessful attempts to acquire new royalties could result in significant costs to us, could hurt our reputation and divert management and financial resources. Competition for future asset acquisition opportunities in our markets could increase the price we pay for such assets and could reduce the number of potential acquisition targets. The success of our acquisitions is based on our ability to make accurate assumptions regarding the valuation, probability, timing and amount of potential future royalty and milestone payments, as well as the viability of the underlying technology and intellectual property. The failure of any of these acquisitions to produce anticipated revenues may materially and adversely affect our financial condition and results of operations.
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Some of these acquisitions may expose us to credit risk in the event of a default by or bankruptcy of the licensor(s) or licensee(s) that are parties to the applicable license agreement(s) covering the potential milestone and royalty streams being acquired. In addition, recent volatility in the capital markets, including financial institution instability, may limit our licensees or royalty-agreement counterparties’ (or their licensees’) ability to access additional funding. While we generally try to structure our receipt of potential milestone and royalty payments to minimize the risk associated with such a default or bankruptcy, there can be no assurance that any such default or bankruptcy will not adversely affect our ability to receive future potential royalty and/or milestone payments. To mitigate this risk, on occasion we may obtain a security interest as collateral in such royalty, milestone and other payments. Our credit risk in respect of such counterparty may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount we are due pursuant to the terms of the agreements covering the particular assets. This could occur in circumstances where the original collateral was not sufficient to cover a complete loss (e.g., our interests were only partially secured) or may result from the deterioration in value of the collateral, so that, in either such case, we are unable to recuperate our full capital outlay. Any such losses resulting therefrom could materially and adversely affect our financial condition and results of operations.
As we acquire and invest in companies that hold royalty assets, we may not realize the expected business or financial benefits and the acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the market value of our common stock.
Additionally, we may not be able to complete or realize the expected business or financial benefits from our potential acquisitions or investments in companies that hold royalty assets, including our acquisitions of Kinnate, Pulmokine, HilleVax, and LAVA. Acquisitions and other similar transactions, arrangements and investments involve numerous risks and could create unforeseen operating difficulties and expenditures, including:
| ● | the possibility that competing offers will be made; |
| ● | potential failure to successfully complete the acquisition or transaction in a timely manner, or at all, which may in turn, adversely affect us or our target’s business and the price of us or their respective common stock; |
| ● | potential failure to achieve the expected benefits on a timely basis or at all; |
| ● | our ability to integrate the acquired assets into our business; |
| ● | brand or reputational harm associated with our strategic investments or acquired companies; |
| ● | challenges converting the acquired company’s revenue recognition policies and forecasting the related revenues; |
| ● | division of financial and managerial resources from existing operations; |
| ● | challenges entering into new markets in which we have little or no experience or where competitors may have stronger market positions; |
| ● | difficulties and strain on resources in integrating acquired operations, technologies, assets and personnel; |
| ● | regulatory challenges from antitrust or other regulatory authorities that may block, delay or impose conditions (such as divestitures, ownership or operational restrictions or other structural or behavioral remedies) on the completion of transactions or the integration of acquired operations; |
| ● | failure to fully assimilate, integrate or retrain acquired employees, which may lead to retention risk with respect to both key acquired employees and our existing key employees or disruption to existing teams; |
| ● | inability to generate sufficient revenue or income to offset acquisition or investment costs; |
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| ● | challenges with the acquired company’s customers, partners, and licensees, including the inability to maintain such relationships and changes to perception of the acquired business as a result of the acquisition; |
| ● | potential for acquired products to impact the profitability of existing products; |
| ● | unanticipated expenses related to acquired assets or its integration into our business; |
| ● | known and potential unknown liabilities associated with the acquired businesses, including due to litigation; |
| ● | difficulties in and financial costs of addressing acquired compensation structures inconsistent with our compensation structure; |
| ● | additional stock-based compensation issued or assumed in connection with the acquisition, including the impact on stockholder dilution and our results of operations; |
| ● | ineffective or inadequate controls, procedures and policies at the acquired company; and |
| ● | the tax effects of any such acquisitions including related integration and business operation changes, and assessment of the impact on the realizability of our future tax assets or liabilities. |
Any of these risks could harm our business or negatively impact our results of operations. In addition, to facilitate acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock. For example, if we finance acquisitions by issuing equity or convertible or other debt securities or loans, our existing stockholders may be diluted, or we could face constraints related to the terms of, and repayment obligation related to, the incurrence of indebtedness that could affect the market price of our common stock.
We may seek to expand our market opportunity by acquiring securities issued by other companies, including biopharmaceutical companies. The value of these securities may fluctuate and may depreciate. Additionally, in many cases, we will not control the companies in which we acquire securities, and as a result, we may have limited ability to determine management, operational decisions or policies. These transactions may face risks, uncertainties and liabilities that our due diligence may fail to discover, that are not disclosed to us, or that we inadequately assess. In addition, as a result of our activities, we may receive material non-public information about other companies, and we may be delayed or prevented from selling securities of those companies when we would otherwise choose to do so, and such delay or prohibition may result in a loss or reduced gain on such securities.
Many of our potential royalty acquisitions may be associated with product candidates that are in clinical development and have not yet been commercialized. To the extent that such products are not successfully developed and commercialized, our financial condition and results of operations may be negatively impacted. Acquisitions of potential royalties associated with development stage biopharmaceutical product candidates are subject to a number of additional uncertainties.
As part of our royalty aggregator strategy, we may continue to purchase future potential milestone and royalty streams associated with product candidates which are in clinical development and have not yet received marketing approval by any regulatory authority or been commercialized. There can be no assurance that the FDA, the EMA or other regulatory authorities will approve such products or that such products can be brought to market on a timely basis or at all, or that the market will be receptive to such products. To the extent that any such product candidates are not successfully developed and subsequently commercialized, the value of our acquired potential milestone and royalty streams may be negatively affected. The ultimate success of our royalty aggregator strategy depends on our ability to properly identify and acquire high quality products and the ability of the applicable counterparty to innovate, develop and commercialize their products in increasingly competitive and highly regulated markets. Their inability to do so may negatively affect potential royalty and/or milestone payments. In addition, we are dependent, to a large extent, on third parties to enforce certain
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rights for our benefit, such as prosecution, maintenance and protection of a patent estate, adequate reporting and other protections, and their failure to do so could negatively impact our financial condition and results of operations.
If the FDA, the EMA or other regulatory authority approves a development-stage product candidate that generates our royalty, the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the product, and could include withdrawal of the product from the market, which could negatively impact potential royalty and/or milestone payments.
In addition, the developers of these development-stage product candidates may not be able to raise additional capital to continue their discovery, development and commercialization activities, which may cause them to delay, reduce the scope of, or eliminate one or more of their clinical trials or research and development programs, if such programs are continued at all. If other product developers introduce and market products that are more effective, safer, less invasive or less expensive than the relevant products that generate our royalties, or if such developers introduce their products prior to the competing products underlying our royalties, such products may not achieve commercial success and thereby result in reduced royalties or losses.
Further, the developers of such products may not have sales, marketing or distribution capabilities. If no sales, marketing or distribution arrangements can be made on acceptable terms or at all, the affected product may not be able to be successfully commercialized, which may result in a loss for us. Losses from such assets could have a material adverse effect on our business, financial condition and results of operations.
We intend to continue to pursue, and may expand, this strategy of acquiring development-stage product candidates. While we believe that we can reasonably evaluate the likelihood of a development-stage product candidate’s achievement of regulatory approval and potential sales, there can be no assurance that our assumptions, estimates, forecasts and expectations will prove correct. We may have limited information concerning the intellectual property or products generating the royalties we are evaluating for acquisition and therefore, there may be material information that relates to such intellectual property products that we do not have. In addition, market data that we obtain may also prove to be incomplete or incorrect. In addition, there can be no assurance that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market on a timely basis or at all, or that such products will achieve commercial success. Any of these factors could have a material effect on our business, financial condition and results of operations.
Actual or threatened epidemics, pandemics, outbreaks of disease, or other public health crises have in the past, and may in the future, adversely affect us and our licensees or royalty-agreement counterparties or their licensees, which could cause delays or elimination of our receipts of potential milestones and royalties under our licensing or royalty and milestone acquisition arrangements.
Actual or threatened epidemics, pandemics, outbreaks of disease, or other public health crises have in the past and may in the future adversely impact us, our licensees or royalty-agreement counterparties or their licensees, which have in the past and could in the future, cause delays, suspensions or cancellations of their drug development efforts including, without limitation, their clinical trials, which would correspondingly delay, suspend or negate the timing of our potential receipts of milestones and royalties under our out-licensing or royalty acquisition agreements. These disruptions to our licensees or RPA counterparties or their licensees could include, without limitation:
| ● | delays or difficulties in recruiting and enrolling new patients in their clinical trials; |
| ● | delays or difficulties in clinical site initiation; |
| ● | diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as their clinical trial sites and hospital staff supporting the conduct of their clinical trials; |
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| ● | interruption of key clinical trial activities, such as clinical trial site monitoring patient dosing and data analysis; |
| ● | limitations in employee resources that would otherwise be focused on the conduct of their clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; |
| ● | interruption in global shipping that may affect the transport of clinical trial supplies and materials; |
| ● | potential refusal by the FDA to accept data, including from clinical trials in affected geographies or failure to comply with updated FDA guidance and expectations related to the conduct of clinical trials during pandemics; |
| ● | other delays in the development of product candidates underlying our biopharmaceutical assets; |
| ● | delays in receiving approval from the FDA, the EMA and other U.S. and foreign federal, state and local regulatory authorities to initiate their planned clinical trials or to market their products; and |
| ● | difficulty accessing capital or credit markets on favorable terms, if at all, which could affect our ability to fund our business operations. |
Risks Related to our Industry
Biopharmaceutical products are subject to sales risks.
Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, including lack of acceptance by healthcare programs or insurance plans, changes in our licensees’ or royalty-agreement counterparties’ strategic priorities, obsolescence, loss of patent protection, government regulations or other factors, and development-stage product candidates may fail to reach the market. Unexpected side effects, safety or efficacy concerns can arise with respect to a product, leading to product recalls, withdrawals, declining sales or litigation. As a result, payments of our future potential milestones and/or royalties may be reduced or cease. In addition, these potential payments may be delayed, causing our near-term financial performance to be weaker than expected.
Biopharmaceutical products are subject to substantial competition.
The biopharmaceutical industry is a highly competitive and rapidly evolving industry. The length of any product’s commercial life cannot be predicted with certainty. There can be no assurance that one or more products on which we are entitled to a potential milestone or royalty will not be rendered obsolete or non-competitive by new or alternate products or improvements made to existing products on which we are not entitled to a potential milestone or royalty, either by the current marketer of such products or by another marketer. Current marketers of products may undertake these development efforts in order to improve their products or to avoid paying our royalty. Adverse competition, obsolescence or governmental and regulatory action or healthcare policy changes could significantly affect the revenues, including royalty-related revenues, of the products which generate our potential milestones and royalties.
Competitive factors affecting the market position and success of each product may include:
| ● | effectiveness; |
| ● | safety and side effect profile; |
| ● | price, including third-party insurance reimbursement policies; |
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| ● | timing and introduction of the product; |
| ● | effectiveness of marketing and commercialization strategy and execution; |
| ● | market acceptance; |
| ● | manufacturing, supply and distribution; |
| ● | intellectual property protections; |
| ● | governmental regulation, including price caps; |
| ● | availability of lower-cost generics and/or biosimilars; |
| ● | treatment innovations that eliminate or minimize the need for a product; and |
| ● | product liability claims. |
Biopharmaceutical products that have the potential to generate future milestones and royalties for us may be rendered obsolete or non-competitive by new or alternative products, including generics and/or biosimilars, improvements on existing products, more effective marketing or commercialization, or governmental or regulatory action. In addition, biopharmaceutical companies increasingly devote significant resources to innovate next-generation products and therapies using gene editing and new curative modalities, such as cell and gene therapy, which may cause products on which we have a milestone or royalty rights to become obsolete. These developments could have a material adverse effect on the sales of the biopharmaceutical products that have potential to generate our milestones and royalties, and consequently could materially adversely affect our business, financial condition and results of operations.
We depend on our licensees and royalty-agreement counterparties (and their licensees) for the determination of royalty and milestone payments. While we typically have primary or back-up rights to audit our licensees and royalty-agreement counterparties (and their licensees), our independent auditors may have difficulty determining the correct royalty calculation, we may not be able to detect errors and payment calculations may call for retroactive adjustments. We may have to exercise legal remedies, if available, to resolve any disputes resulting from any such audit.
The royalty, milestone and other payments we may receive are dependent on our licensees and royalty agreement counterparties and their licensees’ achievement of regulatory and developmental milestones and product sales. Each licensee’s calculation of the royalty payments is subject to and dependent upon the adequacy and accuracy of its sales and accounting functions, and errors may occur from time to time in the calculations made by a licensee and/or a licensee may fail to report the achievement of royalties or milestones in whole or in part. Our license and royalty agreements typically provide us the primary or back-up right to audit the calculations and sales data for the associated royalty payments; however, such audits may occur many months following our recognition of the royalty revenue or income, may require us to adjust our royalty revenues or income in later periods and may require expense on our part. Further, our licensees and royalty-agreement counterparties (and their licensees) may be uncooperative or have insufficient records, which may complicate and delay the audit process.
Although we intend to exercise our royalty audit rights as necessary and to the extent available, we rely in the first instance on our licensees and royalty-agreement counterparties (and their licensees) to accurately report the achievement of milestones and royalty sales and calculate and pay applicable milestones and royalties and, upon exercise of such royalty and other audit rights, we rely on licensees’ and royalty-agreement counterparties’ (and their licensees’) cooperation in performing such audits. In the absence of such cooperation, we may be forced to incur expenses to exercise legal remedies, if available, to enforce our agreements.
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The lack of liquidity of our acquisitions of future potential milestones and royalties may adversely affect our business and, if we need to sell any of our acquired assets, we may not be able to do so at a favorable price, if at all. As a result, we may suffer losses.
We generally acquire milestone and royalty rights that have limited secondary resale markets and may be subject to transfer restrictions. The illiquidity of most of our milestone and royalty receivable assets may make it difficult for us to dispose of them at a favorable price if at all and, as a result, we may suffer losses if we are required to dispose of any or all such assets in a forced liquidation or otherwise. In addition, if we liquidate all or a portion of our potential future milestone and/or purchased royalty stream interests more quickly than planned or in connection with a forced liquidation, we may realize significantly less than the value we anticipate or at which we had previously recorded these interests.
Our royalty aggregator strategy may require that we register with the SEC as an “investment company” in accordance with the Investment Company Act of 1940.
The rules and interpretations of the SEC and the courts relating to the definition of “investment company” are very complex. We do not believe we are an “investment company” under applicable SEC rules, and we currently intend to conduct our operations so as not to be considered an “investment company.” In particular, on an unconsolidated basis, we believe that less than 40% of our total assets (less any cash items or holdings in U.S. government securities) currently consist of holdings in “investment securities.” This conclusion is largely dependent on our analysis that XOMA (US) LLC, our primary subsidiary, is not an investment company in reliance on the exclusion from the definition of an investment company provided in Section 3(c)(5)(A) of the ’40 Act, as interpreted by the staff of the SEC in a no-action letter issued to Royalty Pharma plc on August 13, 2010. Nevertheless, we can provide no assurance that the SEC will not take the position that we are required to register under the ’40 Act and comply with the ’40 Act’s registration and reporting requirements, capital structure requirements, affiliate transaction restrictions, conflict of interest rules, requirements for disinterested directors, and other substantive provisions. We intend to continue to monitor our assets and income for compliance under the ’40 Act and seek to conduct our business activities in a manner such that we do not fall within its definitions of “investment company” or such that we qualify under one of the exemptions or exclusions provided by the ’40 Act and related SEC regulations. However, if we were to be considered an “investment company” and become subject to the restrictions of the ’40 Act, those restrictions likely would require significant changes in the way we do business and add significant administrative costs and burdens to our operations. Additionally, we may need to take various actions which we might otherwise not pursue in order to not come within scope of the ’40 Act. These actions may include, among others, restructuring the Company and/or modifying our mixture of assets and income or a liquidation of certain of our assets.
Our licensees or royalty-agreement counterparties or their licensees could be subject to natural disasters, public health crises, political crises and other catastrophic events that could hinder or disrupt development efforts.
We depend on our licensees and royalty-agreement counterparties and their licensees to successfully develop and commercialize product candidates for which we may receive milestone, royalty and other payments in the future. Our licensees and royalty-agreement counterparties and their licensees operate research and development efforts in various locations in the U.S. and internationally. If any of their facilities or operations are affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, floods, monsoons or wild fires; public health crises, such as pandemics and epidemics; geopolitical instability; changes in trade policies, including tariffs or other trade restrictions or the threat of such actions; crises such as terrorism, war, or political instability; labor disputes or strikes; other conflict, including the ongoing conflict in Ukraine, conflict in the Middle East and surrounding areas and rising tensions between China and Taiwan; or other events outside of their control, their research and development efforts could be disrupted, which could result in the delay or discontinuation of development of one or more of the product candidates in which we have rights to future milestone and/or royalty payments which could have a material adverse effect on our business, results of operations and prospects.
In addition, the current U.S. Presidential administration has pursued changes to various regulatory policies from prior administrations. As a result, there is uncertainty as to how these and other potential legal and regulatory changes may impact the business of our licensees or royalty-agreement counterparties or their licensees. For example, President Trump has pledged to impose tariffs on pharmaceuticals and other products, some of which have already started to be implemented.
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These tariffs and retaliatory measures taken by other nations in response may adversely impact the business of our licensees or royalty-agreement counterparties or their licensees.
Because many of the companies with which we do business also are in the biotechnology industry, the volatility of that industry can affect us indirectly as well as directly.
The same factors that affect us directly also can adversely affect us indirectly by affecting the ability of our partners and others with whom we do business to meet their obligations to us and reduce our ability to realize the value of the consideration provided to us by these other companies in connection with their licensing of our products.
Risks Related to our Financial Results and Capital Requirements
We have sustained losses in the past, and we may sustain losses in the future.
We generated net income of $31.7 million and cash flows from operations of $2.9 million for the year ended December 31, 2025; however, we have historically incurred significant operating losses and negative cash flows from operations since our inception. As of December 31, 2025, we had an accumulated deficit of $1.2 billion. We do not know whether we will achieve sustained profitability or whether cash flows from future operations will be sufficient to meet our needs.
To date, we have financed our operations primarily through the sale of equity securities and debt and royalty interests, and payments received under our collaboration and licensing arrangements. Our results of operations depend, in part, on the rate of our future expenditures and our and our partners’ ability to generate revenues. If our partners’ product candidates are not successfully developed or commercialized, or if revenues are insufficient following regulatory approval, we may not achieve sustained profitability and our business may fail. Our ability to achieve sustained profitability is dependent in large part on the success of our and our partners’ ability to license product candidates, and the success of our partners’ development programs, both of which are uncertain. Our success is also dependent on our partners’ obtaining regulatory approval to market product candidates which may not materialize or prove to be successful.
Unstable market and macroeconomic conditions, including adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, may have adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have experienced and may continue to experience volatility, including as a result of market and macroeconomic conditions, international disputes, significant natural disasters (including as a result of climate change), changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, changes to fiscal and monetary policy or government budget dynamics (particularly in the pharmaceutical and biotechnology industries), tighter credit, high interest rates, and economic inflation, which may impact liquidity and credit availability, consumer confidence, economic growth or recession, high inflation, uncertainty about economic stability and unemployment rates. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of geopolitical instability, including military conflict, acts of terrorism or other geopolitical events. Sanctions imposed by the U.S. and other countries in response to such conflicts, including the one in Ukraine and the Middle East, may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could heighten market and economic instability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our royalty aggregator strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. Failure to secure any necessary financing in a timely manner could have a material adverse effect on our growth strategy, financial performance and stock price.
In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, in March 2023, Silicon Valley Bank, Signature Bank and Silvergate Capital Corp. were each swept into receivership.
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Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships but could also include factors involving financial markets or the financial services industry generally. Our cash held in non-interest-bearing and interest-bearing accounts exceeds the FDIC insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. For example, while the FDIC announced after it took control of Silicon Valley Bank on March 10, 2023 that account holders would be made whole, the FDIC may not make all account holders whole in the event of future bank failures. In addition, even if account holders are ultimately made whole with respect to a future bank failure, account holders’ access to their accounts and assets held in their accounts may be substantially delayed. Any material loss that we may experience in the future or inability for a material time period to access our cash and cash equivalents could have an adverse effect on our ability to pay our operational expenses or make other payments, which could adversely affect our business.
Our royalty aggregator strategy may require us to raise additional funds to acquire milestone and royalty interests; we cannot be certain that funds will be available or available at an acceptable cost of capital, and if they are not available, we may be unsuccessful in acquiring milestone and royalty interests to sustain the business in the future.
We may need to commit substantial additional funds to continue our business, and we may not be able to obtain sufficient funds on acceptable terms, if at all. If the current equity and credit markets deteriorate, it may make any additional debt or equity financing more difficult and more costly. Any additional debt financing or additional equity that we raise may contain terms that are not favorable to us and/or result in dilution to our stockholders, including pursuant to our 2025 Common Stock ATM Agreement, and to our 2025 Series B Preferred Stock ATM Agreement. If we raise additional funds through licensing arrangements with third parties, we may be required to relinquish some rights to our technologies or our product candidates, grant licenses on terms that are not favorable to us or enter into a license arrangement for a product candidate at an earlier stage of development or for a lesser amount than we might otherwise choose. If we raise additional funds through borrowings, we have in the past and may in the future repay the principal and interest of the loan from certain of our royalty payments and/or use our royalties as collateral for such borrowings. For example, on December 15, 2023, we, through XRL, a newly formed, wholly-owned subsidiary, entered into a non-dilutive, non-recourse, royalty-backed loan for up to $140.0 million of capital with certain funds managed by the credit platform of Blue Owl Capital Inc. In the event of a default under such secured borrowings, one or more of our creditors or their assignees could obtain control of certain of our royalties and, in the event of a distressed sale, these creditors could dispose of these royalties for significantly less value than we could realize for them.
If adequate funds are not available on a timely basis, we may:
| ● | reduce or eliminate royalty aggregation efforts; |
| ● | further reduce our capital or operating expenditures; |
| ● | curtail our spending on protecting our intellectual property; or |
| ● | take other actions which may adversely affect our financial condition or results of operations. |
Changes in the potential royalty acquisition market, including its structure, participants, growth rate, level of competition or financing methods, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire potential milestones and royalties, fewer potential milestones and royalties (or potential milestones or royalties of significant scale) being available, or increased competition for potential royalties. Even if we continue to acquire potential royalties and they become actual royalties, they may not generate a meaningful return for a period of several years, if at all, due to the price we pay for such royalties or other factors, such as the underlying products, or intellectual property, other competitive products, market conditions, or the structure of the transaction. As a result, we may not be able to continue to acquire potential milestones and royalties as we have in the past, or at all.
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We have an obligation to pay quarterly dividends to holders of our Series A Preferred Stock and Series B Preferred Stock, which we expect to be an on-going expenditure for us and may limit our ability to borrow additional funds.
Holders of our Series A Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per year). Dividends on the Series A Preferred Stock accumulate and are cumulative from, and including, the date of original issuance by us of the Series A Preferred Stock. Dividends are payable in arrears on or about the 15th day of January, April, July and October. In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of shares of Series A Preferred Stock are entitled to be paid out of our assets legally available for distribution to our stockholders a liquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends up to the date of payment (whether or not declared), before any distribution or payment may be made to holders of shares of common stock or any other class or series of our equity stock ranking, as to liquidation rights, junior to the Series A Preferred Stock. As of December 31, 2025, shares of Series A Preferred Stock were redeemable at our option, in whole or in part, at redemption prices ranging from $25.25 per share to $25.00 per share, plus any accrued and unpaid dividends, depending on the date of redemption.
Holders of depositary shares representing interests in our Series B Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, 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 (equivalent to $2,093.75 per year per share of Series B Preferred Stock or $2.09375 per year per depositary share). Dividends on the Series B Preferred Stock accumulate and are cumulative from, and including, the date of original issuance by us of the Series B Preferred Stock. Dividends are payable in arrears on or about the 15th day of January, April, July and October. As of December 31, 2025, shares of Series B Preferred Stock were redeemable at our option, in whole or in part, at redemption prices ranging from $25,500.00 per share ($25.50 per depositary share) to $25,000.00 per share ($25.00 per depositary share), plus any accrued and unpaid dividends, depending on the date of redemption.
The payment of cash dividends and share repurchases is subject to limitations under applicable laws and the discretion of our Board after considering current conditions, including earnings, other operating results and capital requirements. Further, our continued obligation to pay dividends to the holders of our Series A Preferred Stock and depositary shares representing interests in Series B Preferred Stock could restrict us from additional borrowings or make them more costly.
The holders of preferred stock have rights that are senior to those of our common stockholders.
As of December 31, 2025, we had 984,000 shares of Series A Preferred Stock issued and outstanding with a liquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends up to the date of payment (whether or not declared). Additionally, as of December 31, 2025, we had 1,760,500 depositary shares issued and outstanding, each representing a 1/1000th fractional interest in a share of our Series B Preferred Stock with a liquidation preference of $25,000 per share of Series B Preferred Stock ($25.00 per depositary share), plus an amount equal to any accumulated and unpaid dividends up to the date of payment (whether or not declared). Our preferred stock is senior to our shares of common stock in right of payment of dividends and other distributions. In the event of our bankruptcy, dissolution or liquidation, the holders of our preferred stock must be satisfied before any distributions can be made to our common stockholders.
Information available to us about the intellectual property or biopharmaceutical products underlying the potential royalties we buy may be limited and therefore our ability to analyze each product and its potential future cash flow may be similarly limited.
We may have limited information concerning the intellectual property or products generating the future potential milestones and royalties we are evaluating for acquisition. The information we have regarding intellectual property or products underlying a potential milestone or royalty may be limited to the information that is available in the public domain. Therefore, there may be material information that relates to such intellectual property or products that we would like to know but do not have and may not be able to obtain. For example, we do not always know the results of studies conducted by sponsors of the products or others or the nature or number of any complaints from doctors or users of such products or
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the nature or number of adverse effects of such products. In addition, the market data that we obtain independently may also prove to be incomplete or incorrect. Due to these and other factors, the actual cash flow from a potential royalty may be significantly lower than our estimates.
Our future income is dependent upon numerous potential milestone and royalty-specific assumptions and, if these assumptions prove to be inaccurate, we may not achieve our expected rates of returns.
Our business model is based on multiple-year internal and external forecasts regarding potential product sales and numerous product-specific assumptions in connection with each potential milestone and royalty acquisition, including in circumstances where we have limited information regarding the product. There can be no assurance that the assumptions underlying our financial models, including those regarding potential product sales or competition, patent expirations, exclusivity terms or license terms or terminations for the products underlying our portfolio, are accurate. These assumptions involve a significant element of subjective judgment and may be and in the past have been adversely affected by post-acquisition changes in market conditions and other factors affecting the underlying product, such as uncertainties around the patent estate and the terms of the license agreement, as well as the development, labeling, regulatory approval, commercialization, manufacturing and supply of product candidates. Our assumptions regarding the financial stability or operational or marketing capabilities of the partner obligated to pay us potential royalties may also prove to be incorrect. Due to these and other factors, the assets in our current portfolio or future assets may not generate our projected returns or in the time periods we expect. This could negatively impact our business, financial condition, or results of operations for a given period.
Reductions or declines in income from potential milestones and royalties, or significant reductions in potential milestone or royalty payments compared to expectations, or impairments in the value of potential milestones and royalties acquired, could have a material adverse effect on our financial condition and results of operations.
The amount and duration of a royalty varies on a country-by-country basis and depends on a number of factors, such as payments to third party licensors, whether the product is sold singly or in combination, patent expiration dates, regulatory exclusivity, years from first commercial sale of the applicable product candidate, the entry of competing generic or biosimilar products, or other terms set out in the contracts governing the royalty. It is common for royalty durations to expire earlier or later than anticipated due to unforeseen positive or negative developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, claims of patent misuse, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing of the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations. If an unexpected reduction in a royalty amount or shortening of a potential royalty term were to occur, it could result in a reduction in potential income from milestones and royalties, a significant reduction in potential milestones and royalty payments compared to expectations, or a permanent impairment of such potential milestones and royalty payments.
A large percentage of the calculated net present value of our portfolio is represented by a limited number of products. The failure of any one of these products to move forward in clinical development or commercialization may have a material adverse effect on our financial condition and results of operations.
Our asset portfolio is not fully diversified by product, therapeutic area, geographic region or other criteria. Any significant deterioration in the amount or likelihood of receipt of potential cash flows from the top products in our asset portfolio could have a material adverse effect on our business, financial condition and results of operations. For example, after a series of discontinued studies of iscalimab since September 2021, we and Novartis terminated the iscalimab license agreement. Further in July 2023, Novartis announced that it would discontinue its Phase 3 trial investigating NIS793 in first-line metastatic pancreatic ductal adenocarcinoma and in August 2023, Novartis communicated to us that it would discontinue development activities related to NIS793 and would cease enrolling patients in the remaining active clinical studies. This, and any future deterioration in cash flows from the top products in our asset portfolio, could adversely affect our business and financial conditions.
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In addition, should the payor of any future potential milestones or royalties decline to pay such potential milestones and royalties for any reason, such failure may result in a material adverse effect on our financial condition and results of operations.
The royalties that we acquire may fall outside the biopharmaceutical industry, and any such assets, and the cash flows therefrom, may not resemble the assets in our current portfolio.
We have discretion as to the types of assets that we may acquire. While we expect to acquire assets that primarily fall within the biopharmaceutical industry, we are not obligated to do so and may acquire other types of assets that are peripheral to or outside of the biopharmaceutical industry. Consequently, our asset acquisitions in the future, and the cash flows from such assets, may not resemble those of the assets in our current portfolio. There can be no assurance that assets acquired in the future will have returns or risk profiles similar to the returns or risk profiles expected of the assets in our current portfolio or be profitable at all.
Risks Related to Our Milestone and Royalty Streams
We may not be able to successfully identify and acquire potential milestone and royalty streams on other products, product candidates, programs, or other companies to grow and diversify our business, and, even if we are able to do so, we may not be able to successfully manage the risks associated with integrating any such products, product candidates, programs or companies into our business or we may otherwise fail to realize the anticipated benefits of these acquisitions.
To grow and diversify our business, we plan to continue our business development efforts to identify and seek to acquire potential milestone and royalty streams or companies and/or to in-license rights to potential products, product candidates, and programs. Future growth through acquisition or in-licensing will depend upon the availability of suitable products, product candidates, programs or companies for acquisition or in-licensing on acceptable prices, terms and conditions. Even if appropriate opportunities are available, we may not be able to acquire rights to them on acceptable terms, or at all. The competition to acquire or in-license rights to promising products, product candidates, programs and companies is fierce, and many of our competitors are large, multinational pharmaceutical and biotechnology companies with considerably more financial, development and commercialization resources, personnel, and experience than we have. In order to compete successfully in the current business climate, we may have to pay higher prices for assets than may have been paid historically, which may make it more difficult for us to realize an adequate return on any acquisition.
Even if we are able to successfully identify and acquire or in-license new products, product candidates, programs or companies, we may not be able to successfully manage the risks associated with integrating any products, product candidates, programs or companies into our business or the risks arising from anticipated and unanticipated problems in connection with such acquisition or in-licensing. Further, while we seek to mitigate risks and liabilities of potential acquisitions through, among other things, due diligence, indemnification and risk allocation, there may be risks and liabilities that such due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess or are otherwise unable to mitigate or prevent. Any failure in identifying and managing these risks and uncertainties could have a material adverse effect on our business. In any event, we may not be able to realize the anticipated benefits of any acquisition or in-licensing for a variety of reasons, including the possibility that a product candidate fails to advance to clinical development, proves not to be safe or effective in clinical trials, or that a product fails to reach its forecasted commercial potential or that the integration of a product, product candidate, program or company gives rise to unforeseen difficulties and expenditures. Any failure in identifying and managing these risks and uncertainties could have a material adverse effect on our business.
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If our potential royalty providers’ therapeutic product candidates do not receive regulatory approval, our potential royalty providers will be unable to market them.
Our potential royalty providers’ product candidates cannot be manufactured and marketed in the U.S. or any other country without required regulatory approvals. The U.S. government and governments of other countries extensively regulate many aspects of our partners’ product candidates, including:
| ● | clinical development and testing; |
| ● | manufacturing; |
| ● | labeling; |
| ● | storage; |
| ● | record keeping; |
| ● | promotion and marketing; and |
| ● | importing and exporting. |
In the U.S., the FDA regulates pharmaceutical products under the FDCA and other laws, including, in the case of biologics, the Public Health Service Act.
Initiation of clinical trials requires approval by health authorities. Clinical trials involve the administration of the investigational new drug to healthy volunteers or to patients under the supervision of a qualified principal investigator. Clinical trials must be conducted in accordance with the requirements of the FDA and International Conference on Harmonization Good Clinical Practices and the European Clinical Trials Directive, as applicable, under protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Other national, foreign and local regulations also may apply. The developer of the drug must provide information relating to the characterization and controls of the product before administration to the patients participating in the clinical trials. This may require developing authorized assays of the product to test before administration to the patient and during the conduct of the trial. In addition, developers of pharmaceutical products must provide periodic data regarding clinical trials to the FDA and other health authorities, and these health authorities may issue a clinical hold upon a trial if they do not believe, or cannot confirm, that the trial can be conducted without unreasonable risk to the trial participants.
The results of the preclinical studies and clinical testing, together with chemistry, manufacturing and controls information, are submitted to the FDA in the form of an NDA for a drug, and in the form of a BLA for a biological product, and similar submissions to other foreign health authorities, requesting approval to commence commercial sales. In responding to an NDA or BLA or similar submission, the FDA or foreign health authorities may grant marketing approvals determining that the product is safe and effective, or in the case of a biologic, safe, pure, and potent, for its intended use, request additional information or further research, or deny the application if they determine the application does not satisfy regulatory approval criteria. Regulatory approval of an NDA, BLA, or supplement, or a similar submission to other foreign health authorities, is never guaranteed. The approval process can take several years, is extremely expensive and can vary substantially based upon the type, complexity, and novelty of the products involved, as well as the target indications. Our potential royalty providers ultimately may not be able to obtain approval in a timely fashion or at all.
The FDA and foreign health authorities have substantial discretion in the drug and biologics approval processes. Despite the time and expense incurred, failure can occur at any stage, and our potential development partners could encounter problems that cause abandonment of clinical trials or cause them to repeat or perform additional preclinical, clinical or manufacturing-related studies.
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Changes in the regulatory approval policy during the development period, changes in, or the enactment of additional regulations or statutes, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application.
The FDA and other regulatory agencies have substantial discretion in both the product approval process and manufacturing facility approval process, and as a result of this discretion and uncertainties about outcomes of testing, we cannot predict at what point, or whether, the FDA or other regulatory agencies will be satisfied with our licensees’ submissions or whether the FDA or other regulatory agencies will raise questions that may be material and delay or preclude product approval or manufacturing facility approval. In light of this discretion and the complexities of the scientific, medical and regulatory environment, our or our potential royalty providers’ interpretation or understanding of the FDA’s or other regulatory agencies’ requirements, guidelines or expectations may prove incorrect, which also could delay further or increase the cost of the approval process.
Our potential milestone and royalty providers face uncertain results of clinical trials of product candidates.
Drug development has inherent risk, and our potential milestone and royalty providers are required to demonstrate through adequate and well-controlled clinical trials that product candidates are effective, with a favorable benefit-risk profile for use in their target profiles before they can seek regulatory approvals for commercial use. It is possible our potential royalty providers may never receive regulatory approval for any licensed product candidates. Even if a product candidate receives regulatory approval, the resulting product may not gain market acceptance among physicians, patients, healthcare payors and the medical community.
Our potential milestone and royalty providers’ product candidates require significant research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any commercial sales. This process is lengthy and expensive, often taking a number of years. As clinical results frequently are susceptible to varying interpretations that may delay, limit or prevent regulatory approvals, the length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly. As a result, it is uncertain whether:
| ● | our potential milestone and royalty providers’ future filings will be delayed; |
| ● | our potential milestone and royalty providers’ preclinical studies will be successful; |
| ● | our potential milestone and royalty providers will be successful in generating viable product candidates; |
| ● | we will be successful in finding collaboration and licensing partners to advance our product candidates on our behalf; |
| ● | our potential milestone and royalty providers will be able to provide necessary data; |
| ● | results of future clinical trials by our potential milestone and royalty providers will justify further development; or |
| ● | our potential milestone and royalty providers ultimately will achieve regulatory approval for product candidates in which we have an interest. |
The timing of the commencement, continuation and completion of clinical trials by our potential milestone and royalty providers may be subject to significant delays relating to various causes, including failure to complete preclinical testing and earlier-stage clinical trials in a timely manner, inability to engage contract research organizations and other service providers, scheduling conflicts with participating clinicians and clinical institutions, changes in key personnel at clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria and shortages of available drug supply. In addition, since we and our royalty agreement counterparties license our product candidates to others to fund and conduct clinical trials, we, and they, have limited control over how quickly and efficiently such licensees
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advance those trials. Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the concentration of patients in specialist centers, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments. Regardless of the initial size or relative complexity of a clinical trial, the costs of such trial may be higher than expected due to increases in duration or size of the trial, changes in the protocol under which the trial is being conducted, additional or special requirements of one or more of the healthcare centers where the trial is being conducted, or changes in the regulatory requirements applicable to the trial or in the standards or guidelines for approval of the product candidate being tested or for other unforeseen reasons.
In addition, our potential milestone and royalty providers may conduct clinical trials in foreign countries, which may subject them to further delays and expenses as a result of increased drug shipment costs, additional regulatory requirements and the engagement of foreign clinical research organizations, and may expose our potential milestone and royalty providers to risks associated with foreign currency transactions to make contract payments denominated in the foreign currency where the trial is being conducted.
Our potential milestone and royalty providers may seek to obtain orphan drug designation for certain future product candidates, but they may be unable to ultimately obtain such designations or to maintain the benefits associated with orphan drug designation, including market exclusivity, which may cause our milestone or royalty revenue or income, if any, to be reduced.
Some of our potential milestone or royalty providers may obtain orphan drug designation for their product candidates. Under the Orphan Drug Act, the FDA may designate a drug or biological product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the U.S., or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the U.S. Orphan drug designation must be requested before submitting a BLA. In the European Union, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.
In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and application fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA.
In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity for the orphan patient population. Exclusive marketing rights in the U.S. may also be unavailable if our royalty providers seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective. In the European Union, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following drug or biological product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Even with an orphan drug designation for its current and potential future product candidates, our royalty providers may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if a royalty provider obtains orphan drug exclusivity for an existing or future product candidate, that exclusivity may not effectively protect the product from competition because
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different drugs with different active moieties still can be approved for the same condition even with an orphan drug designation. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior in that it is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug or biologic nor gives the drug or biologic any advantage in the regulatory review or approval process.
The FDA’s interpretation of the scope of orphan drug exclusivity may change. The FDA’s longstanding interpretation of the Orphan Drug Act is that exclusivity is specific to the orphan indication for which the drug was actually approved. As a result, the scope of exclusivity has been narrow and protected only against competition from the same “use or indication” rather than the broader “disease or condition.” In the September 2021 case Catalyst Pharmaceuticals, Inc. v. FDA, a federal circuit court set aside the FDA’s narrow interpretation and ruled that orphan drug exclusivity covers the full scope of the orphan-designated disease or condition regardless of whether the drug obtains approval only for a narrower use. The decision concerned amifampridine, a drug used to treat Lambert-Eaton myasthenic syndrome (LEMS). Depending on how the FDA applies the decision beyond this case, it may limit the drugs that can receive exclusivity.
In January 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst, the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order—that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved. In view of the overturn of the Chevron doctrine in Loper Bright Enterprises v. Raimondo, this landmark Supreme Court decision may invite various stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies, including regulatory exclusivities, which could lead to uncertainties in the industry. Further, changes in the leadership of the FDA and other federal agencies under the Trump administration may lead to new policies and changes in the regulations and operations of the FDA. We do not know if, when, or how the FDA, Congress, or future judicial challenges may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our royalty providers’ and our business.
The ability of our potential milestone and royalty providers to obtain and maintain orphan drug designation and the benefits thereof, including orphan drug exclusivity, may materially impact the potential milestones and royalties we receive.
Our royalty providers may pursue Rare Pediatric Disease designations that may entitle them to receive priority review vouchers from the FDA. However, obtaining such designations for any of their product candidates does not guarantee that product will qualify for a priority review voucher upon approval, and may not lead to a faster development or regulatory review process, or increase the likelihood that their product candidates will receive marketing approval. In addition, our royalty providers who receive priority review vouchers may not be successful in transferring them at all or at a favorable price, which could materially affect any royalties or milestone payments to which we may be entitled.
Our royalty providers may pursue designations that may entitle them to receive priority review vouchers from the FDA. Priority review vouchers may also be transferred or sold to other entities. For example, Day One received a Rare Pediatric Disease Priority Review Voucher in connection with the approval of the April 2024 approval of its NDA for OJEMDA. In May 2024, Day One sold its priority review voucher for $108.0 million and we received a payment of $8.1 million.
Under the Rare Pediatric Disease Priority Review Voucher program, upon the approval of a qualifying NDA or BLA for the treatment of a rare pediatric disease, the sponsor of such an application would be eligible for a rare pediatric disease priority review voucher that can be used to obtain priority review for a subsequent BLA or NDA. Under the FDCA, as amended, the FDA incentivizes the development of drugs and biologics intended to treat conditions that meet the definition of a “rare pediatric disease,” defined to mean a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years and the disease affects fewer than 200,000 individuals in the U.S. or affects more than 200,000 in the U.S. and for which there is no reasonable expectation that the cost of developing and making in the U.S. a drug for such disease or condition will be received from sales in the U.S. of such drug. The sponsor of a product candidate for a rare pediatric disease may be eligible for a Priority Review
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Voucher that can be used to obtain a priority review for a subsequent human drug or biologic application after the date of approval of the rare pediatric disease drug product, which may be redeemed to shorten the review clock for an application from 10 months to 6 months. A sponsor may request a rare pediatric disease designation from the FDA prior to the submission of its NDA or BLA. A rare pediatric disease designation does not guarantee that a sponsor will receive a Rare Pediatric Disease Priority Review Voucher upon approval of its NDA or BLA. Moreover, a sponsor who chooses not to submit a rare pediatric disease designation request may nonetheless receive a Rare Pediatric Disease Priority Review Voucher upon approval of their marketing application if they request such a voucher in their original marketing application and meet all of the eligibility criteria. If a product candidate is designated before December 20, 2024, it is eligible to receive a voucher if it is approved before September 30, 2026. If a Rare Pediatric Disease Priority Review Voucher is received, it may be sold or transferred an unlimited number of times.
If designation or approval are not received within the statutory timelines, the sponsor would not be in a position to obtain a priority review voucher, unless Congress further reauthorizes the program beyond the current sunset date of December 2024 for designation or September 2026 for approval. Additionally, designation of a biological product for a rare pediatric disease does not guarantee that an NDA or BLA will meet the eligibility criteria for a rare pediatric disease priority review voucher at the time the application is approved. Finally, a Rare Pediatric Disease designation does not lead to faster development or regulatory review of the product or increase the likelihood that it will receive marketing approval.
Our royalty and milestone payments may be materially affected if our royalty providers seek, but are unable to obtain, Rare Pediatric Disease Priority Review Vouchers, or seek to, but are unable to, transfer such Vouchers at all or at a favorable price.
Biological products and product candidates of our potential milestone and royalty providers may face competition sooner than anticipated, which may materially impact the potential milestones and royalties we receive.
The ACA includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a highly similar or “biosimilar” product may not be submitted to the FDA until four years following the date that the reference product was first approved by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first approved. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.
The biological products and, if approved, product candidates of our royalty providers could be considered reference products entitled to 12-year exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider a product candidate to be a reference product for competing products, potentially creating the opportunity for competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. The law is complex and continues to evolve through ongoing FDA implementation and judicial interpretation. As a result, its ultimate impact, implementation and meaning are subject to uncertainty. Modification of the BPCIA, or changes to the interpretation or implementation of the BPCIA, could have a material adverse effect on the future commercial prospects for our royalty providers’ biological products and product candidates. Any of these events may materially impact the potential milestones and royalties we receive.
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If the FDA approves generic versions of any of the products or product candidates of our potential milestone or royalty providers that receive marketing approval under NDAs, or does not grant their product candidates appropriate periods of data or market exclusivity before approving generic versions of our product candidates, the sales of their product candidates could be adversely affected, which may materially affect the potential milestones and royalties we receive.
Once an NDA is approved, the drug covered thereby becomes a “reference-listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations.” Manufacturers may seek marketing approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications (“ANDAs”) in the U.S. In support of an ANDA, a generic manufacturer need not conduct clinical trials demonstrating safety and efficacy. Rather, the applicant generally must show that its drug is pharmaceutically equivalent to the reference listed drug, in that it has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference-listed drug, and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic drugs may be significantly less costly to bring to market than the reference-listed drug and companies that produce generic drugs are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference-listed drug is typically lost to the generic drug.
The FDA may not approve an ANDA for a generic drug until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The FDCA provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company for another version of such product candidate where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing product candidate. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for product candidates containing the original active agent for other conditions of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Manufacturers may seek to launch these generic drugs following the expiration of the marketing exclusivity period, even if our potential milestone or royalty providers still have patent protection for our drug competition, and their products may therefore face from generic versions of their products and, if approved, their product candidates. This could materially and adversely impact their future revenue, profitability and cash flows and substantially limit their ability to obtain a return on the investments we have made in those products and, if approved, product candidates. Their future revenues, profitability and cash flows could also be materially and adversely affected and our ability to obtain a return on their investments in those product candidates may be substantially limited if their products are not afforded the appropriate periods of non-patent exclusivity. Any of these events may materially impact the potential milestones and royalties we receive.
New products and technologies of other companies may render some or all of our potential milestone and royalty providers’ product candidates noncompetitive or obsolete.
New developments by others may render our potential milestone and royalty providers’ product candidates or technologies obsolete or uncompetitive. Technologies developed and utilized by the biotechnology and pharmaceutical industries are changing and evolving. For example, competition in antibody-based technologies is intense and is expected to increase in the future as a number of established biotechnology firms and large chemical and pharmaceutical companies advance in these fields. In addition, biopharmaceutical companies increasingly devote significant resources to innovate next-generation products and therapies using gene editing and new curative modalities, such as cell and gene therapy, which may cause products on which we have a milestone or royalty rights to become obsolete. Many of these competitors may be able to develop products and processes competitive with or superior to our potential milestone and royalty providers for many reasons, including that they may have:
| ● | significantly greater financial resources; |
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| ● | larger research and development staff; |
| ● | entered into arrangements with, or acquired, biotechnology companies to enhance their capabilities; or |
| ● | extensive experience in preclinical testing and human clinical trials. |
These and other factors may enable others to develop products and processes competitive with or superior to our own or those of our potential milestone and royalty providers. In addition, a significant amount of research in biotechnology is being carried out in universities and other non-profit research organizations. These entities are becoming increasingly interested in the commercial value of their work and may become more aggressive in seeking patent protection and licensing arrangements. Furthermore, many companies and universities tend not to announce or disclose important discoveries or development programs until their patent position is secure or, for other reasons, later. As a result, we and our potential milestone and royalty providers may not be able to track development of competitive products, particularly at the early stages.
Positive developments in connection with a potentially competing product may have an adverse impact on our future potential for receiving revenue derived from development milestones and royalties. For example, if another product is perceived to have a competitive advantage, or another product’s failure is perceived to increase the likelihood that our licensed product will fail, our potential milestone and royalty providers may halt development of product candidates in which we have an interest.
Our potential royalty providers may be unable to price our products effectively or obtain coverage and adequate reimbursement for sales of our products, which would prevent our potential royalty providers’ products from becoming profitable and negatively affect the royalties we may receive.
If our current or potential royalty providers succeed in bringing product candidates to the market, they may not be considered cost effective, and reimbursement to the patient may not be available or may not be sufficient to allow our potential royalty providers to sell the products on a competitive basis. In both the U.S. and elsewhere, sales of medical products and treatments are dependent, in part, on the availability of coverage and adequate reimbursement from third-party payors, such as government and private insurance plans. Significant uncertainty exists as to the coverage and reimbursement status of any products for which our potential royalty providers may obtain regulatory approval. Even if coverage is available, the associated reimbursement rate may not be adequate for our potential royalty providers to cover related marketing costs. Additionally, coverage and reimbursement policies for pharmaceutical products can differ significantly from payor to payor as there is no uniform policy of coverage and reimbursement for pharmaceutical products among third-party payors in the U.S. Therefore, the process of obtaining coverage and reimbursement is often time consuming and costly. Thus, even if our partners’ product candidates are approved by the FDA, our royalty partners may not be able to price the products effectively or obtain coverage and adequate reimbursement for their products, which could adversely affect the royalties we receive.
Third-party payors are increasingly challenging the prices charged for pharmaceutical products and services. Our business is affected by the efforts of government and third-party payors to contain or reduce the cost of healthcare through various means. In the U.S., there have been, and we expect, will continue to be a number of federal and state proposals to implement government controls on pricing.
In addition, the emphasis on managed care in the U.S. has increased and, we expect to continue to increase the pressure on the pricing of pharmaceutical products. We cannot predict whether any legislative or regulatory proposals will be adopted or the effect these proposals or managed care efforts may have on our or our potential milestone and royalty providers’ businesses.
We do not know whether there will be, or will continue to be, a viable market for the product candidates in which we have an ownership or royalty interest.
Even if product candidates in which we have an interest receive approval in the future, they may not be accepted in the marketplace. In addition, our potential royalty providers may experience difficulties in launching new products,
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many of which are novel and based on technologies that are unfamiliar to the healthcare community. Our potential royalty providers may not have sales, marketing or distribution capabilities or may not be able to develop these capabilities in an effective manner, or at all. We have no assurance healthcare providers and patients will accept such products, if developed. Similarly, physicians may not accept a product if they believe other products to be more effective or more cost effective or are more comfortable prescribing other products.
Furthermore, government agencies, as well as private organizations involved in healthcare, from time to time publish guidelines or recommendations to healthcare providers and patients. Such guidelines or recommendations can be very influential and may adversely affect product usage directly (for example, by recommending a decreased dosage of a product in conjunction with a concomitant therapy) or indirectly (for example, by recommending a competitive product over a product in which we have an ownership or royalty interest). Consequently, we do not know if physicians or patients will adopt or use products in which we have an ownership or royalty interest for their approved indications.
Even approved and marketed products are subject to risks relating to changes in the market for such products. Introduction or increased availability of generic or biosimilar versions of products can alter the market acceptance of branded products. In addition, unforeseen safety issues may arise at any time, regardless of the length of time a product has been on the market which may lead to litigation, increased costs and delays or removal of the product from the market.
Product liability claims may diminish the returns on biopharmaceutical products.
The developer, manufacturer or marketer of a product could become subject to product liability claims. A product liability claim, regardless of its merits, could adversely affect the sales of the product and the amount of any related royalty payments, and consequently, could adversely affect the ability of a payor to make payments with respect to a royalty.
Although we believe we should not bear responsibility in the event of a product liability claim against the developer, manufacturer, marketer or other seller of a product that generates our royalty, such claims could adversely affect our business, financial condition and results of operations due to the lower than expected cash flows from the royalty.
If we and/or our potential royalty providers are unable to protect our and/or their intellectual property, in particular patent protection for principal products, product candidates and processes in which we have an ownership or royalty interest, or fail to prevent the use of the covered subject matter by third parties, our potential royalty providers’ ability to compete in the market will be harmed, and we may not realize our profit potential.
We and our potential royalty providers rely on patent protection, as well as a combination of copyright, trade secret, and trademark laws to protect our proprietary technology and deter others from duplicating our or their products or product candidates. However, these means may afford only limited protection and may not:
| ● | prevent our competitors from duplicating our products and those of our potential royalty providers; |
| ● | prevent our competitors from using technologies or solutions similar to those incorporated into our products or product candidates, or those of our potential royalty providers in jurisdictions where we have not obtained patent protection and, further, exporting infringing products to territories where we have patent protection but where our enforcement efforts may be inadequate and protection in general of patented technology may be less robust than it is in the U.S.; |
| ● | prevent our competitors from gaining access to our proprietary information and technology and that of our potential royalty providers; or |
| ● | permit us or our potential royalty providers to gain or maintain a competitive advantage. |
Because of the length of time and the expense associated with bringing new products to the marketplace, we and our potential royalty providers hold and are in the process of applying for a number of patents in the U.S. and abroad to protect product candidates and important processes and also have obtained or have the right to obtain exclusive licenses
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to certain patents and applications filed by others. However, the mere issuance of a patent is not conclusive as to its validity or its enforceability.
The U.S. Federal Courts, the U.S. Patent & Trademark Office or equivalent national courts or patent offices elsewhere may invalidate our patents or the patents of our royalty providers or find them unenforceable. The America Invents Act introduced post-grant review procedures subjecting U.S. patents to post-grant review procedures similar to European oppositions. U.S. patents owned or licensed by us or our licensees may therefore be subject to post-grant review procedures, as well as other forms of review and re-examination. A decision in such proceedings adverse to our interests could result in the loss of valuable patent rights, which would have a material adverse effect on our business. In addition, the laws of foreign countries may not protect our intellectual property rights effectively or to the same extent as the laws of the U.S.
If our, and our potential royalty providers intellectual property rights are not protected adequately, our potential royalty providers or our licensees may not be able to commercialize technologies or products in which we have an ownership or royalty interest, and their competitors could commercialize such technologies or products, which could result in a decrease in our potential royalty providers’ or our licensees’ sales and market share that would harm our business and operating results. Specifically, the patent position of biotechnology companies generally is highly uncertain and involves complex legal and factual questions. The legal standards governing the validity of biotechnology patents are in transition, and current defenses as to issued biotechnology patents may not be adequate or available in the future. Accordingly, there is uncertainty as to:
| ● | whether any pending or future patent applications held by us or our potential royalty providers will result in an issued patent, or whether issued patents will provide meaningful protection against competitors or competitive technologies; |
| ● | whether competitors will be able to design around our or our potential royalty providers’ patents or develop and obtain patent protection for technologies, designs or methods that are more effective than those covered by our or our potential royalty providers’ patents and patent applications; or |
| ● | the extent to which our or our potential royalty providers’ product candidates could infringe on the intellectual property rights of others, which may lead to costly litigation, result in the payment of substantial damages or royalties, reduce the royalties due to us, and prevent our potential royalty providers from using our technology or product candidates. |
If certain patents issued to others are upheld or if certain patent applications filed by others are issued and upheld, our potential royalty providers may require licenses from others to develop and commercialize certain potential products in which we have an ownership or royalty interest. These licenses, if required, may not be available on acceptable terms, or may trigger contractual royalty offset clauses in our license agreements, or those of our royalty-agreement counterparties. We may become involved in litigation to determine the proprietary rights of others, and any such litigation will presumably be costly, time consuming, may not be adequately covered by insurance and may have other adverse effects on our business, such as inhibiting our potential royalty providers’ ability to compete in the marketplace and absorbing significant management time.
Due to the uncertainties regarding biotechnology patents, we also have relied and will continue to rely upon trade secrets, know-how and continuing technological advancement to develop and maintain our competitive position. Our employees and contractors are typically required to sign confidentiality agreements under which they agree not to use or disclose any of our proprietary information. Research and development contracts and relationships between us and our scientific consultants and potential licensees provide access to aspects of our know-how that are protected generally under confidentiality agreements. These confidentiality agreements may be breached or may not be enforced by a court. To the extent proprietary information is divulged to competitors or to the public generally, such disclosure may adversely affect our licensees’ ability to develop or commercialize our products by giving others a competitive advantage or by undermining our patent position.
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In addition, periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and or applications will be due to the U.S. and various foreign patent offices at various points over the lifetime of our and our licensees’ patents and/or applications. We have systems in place to remind us to pay these fees, and we rely on our outside patent annuity service to pay these fees when due. Additionally, the U.S. and various foreign patent offices require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to the particular jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain foreign countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us or our royalty providers to stop the infringement of our or their patents or the marketing of competing products in violation of our or their proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and could divert our efforts and attention from other aspects of our business.
Furthermore, in some instances, we have no ability to control the prosecution, maintenance, enforcement or defense of patent rights of our royalty providers. In such instances, there can be no assurance that they will vigorously prosecute, maintain, enforce or defend such rights, or that they will be successful in doing so. Any infringement of their intellectual property may adversely affect our royalty interest and consequently adversely affect our business, financial condition and results of operations.
No assurance can be given that our, or our partners or licensees’ patents will be extended upon expiration, which may have an effect on our financial condition and results of operation.
We hold and have filed applications for a number of patents in the U.S. and internationally to protect our products and technology and have the right to obtain licenses to, or income streams based on, certain patents and applications filed by others. However, the life of a patent, and thus the protection it affords, is limited. Patent terms may be inadequate to protect our competitive position for an adequate amount of time. Significant patents in our portfolio are expected to expire in the coming years and while various extensions may be available, on a jurisdiction-by-jurisdiction basis, continuous patent protection is not guaranteed. While we expect to seek, and expect our partners to seek, extensions of patent terms for issued patents where available and when necessary, failure to secure patent extensions may have an effect on our financial condition and results of operations. Furthermore, there can be no assurance that our partners will seek extensions of their patent terms.
Litigation regarding intellectual property and/or the enforcement of our contractual rights against licensees and third parties can be costly and expose us to risks of counterclaims against us.
From time to time, we are required to engage in litigation, arbitration or other proceedings to protect our intellectual property and/or enforce our contractual rights against former or current licensees or third parties, including third-party collaborators of such licensees or royalty agreement counterparties. The cost to us of complex proceedings of this type, even if resolved in our favor, can be substantial, and the parties opposing us in such proceedings may be able to sustain the cost of such proceedings more effectively than we can if they have substantially greater resources than we have. Any such proceedings and any negotiations leading up to them also may be time-consuming and can divert management’s attention and resources. If a proceeding of this type is resolved against us, we may lose the value associated with contract rights contained in our arrangements with licensees and third parties, the patents that are the subject of such proceeding may be declared invalid, we could be exposed to counterclaims against us, and we could be held liable for significant damages, fees and/or costs. While it is our current plan to continue to review and pursue, on a selective basis, potential material contractual breaches against licensees and third parties (including third-party collaborators of licensees and royalty agreement counterparties) and/or infringement of our intellectual property rights or technology, there can be no assurance that any such enforcement actions will be successful, or if successful, the timing of such success or that we will have sufficient capital to prosecute any such actions to a successful conclusion.
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For example, in June 2021, we initiated a binding arbitration proceeding with one of our licensees (the “Licensee”) at the American Arbitration Association/International Centre for Dispute Resolution, seeking milestone and royalty payments under our license agreement. A hearing before a panel of arbitrators was held in November 2022, and the parties submitted post-hearing briefs. On March 21, 2023, we received an adverse decision in this arbitration proceeding. The panel of arbitrators declined to award us damages and ruled that the license agreement had expired. The panel ruled that we were responsible for the Licensee’s costs as well as arbitrators’ and administrative fees previously incurred by the Licensee of $4.1 million, which we paid in April 2023.
In addition, we may be subject to claims that we, or our licensees or our royalty agreement counterparties’ licensees, are infringing other parties’ patents. If such claims are resolved against us, we or our licensees or our royalty agreement counterparties’ licensees may be enjoined from developing, manufacturing, selling or importing products, processes or services unless we or our licensees or our royalty agreement counterparties’ licensees obtain a license from the other party. Such a license may not be available on reasonable terms or at all, thus preventing us, or our licensees or our royalty agreement counterparties’ licensees, from using or licensing these products, processes or services and adversely affecting our potential future revenue or income.
Uncertainties resulting from our participation in litigation, arbitration or other proceedings involving intellectual property and/or contractual rights could have a material adverse effect on our or our partners’ ability to compete in the marketplace. There could also be public announcements of the results of hearings, motions or interim proceedings or developments. If securities analysts or investors perceive these results to be negative, the perceived value of the product candidates as to which we hold potential milestone or royalty interests, or intellectual property or contractual rights could be diminished. Accordingly, the market price of our common stock may decline. Uncertainties resulting from the initiation and continuation of litigation, arbitration or other proceedings involving intellectual property and/or contractual rights could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Reliance on Third Parties
We and our partners rely heavily on license and collaboration relationships, and any disputes or litigation with our partners or termination or breach of any of the related agreements could reduce the financial resources available to us, including our ability to receive milestone payments and future potential royalty and other revenues. License or collaboration agreements relating to products may, in some instances, be unilaterally terminated or disputes may arise which may affect our potential milestones, royalties and other payments.
License or collaboration agreements relating to the products generating our future potential milestones and royalties and other payment rights have in the past been and may in the future be terminated, which may adversely affect sales of such products and therefore the potential payments we may receive. For example, under certain license or collaboration agreements, marketers may retain the right to unilaterally terminate the agreements. When the last patent covering a product expires or is otherwise invalidated in a country, a marketer may be economically motivated to terminate the applicable license or collaboration agreement, either in whole or with respect to such country, in order to terminate its payment and other obligations. In the event of such a termination, a licensor (which may be us in the case of our out-licensed products) or collaborator may no longer receive all of the payments it expected to receive from the applicable licensee or collaborator and may also be unable to find another company to continue developing and commercializing the product on the same or similar terms as those under the license or collaboration agreement that has been terminated.
For example, in October 2023, Organon notified us of its intent to terminate the Organon License Agreement, which we assumed pursuant to the ObsEva IP Acquisition Agreement. The termination was effective in January 2024, and we are not entitled to any milestone payments with respect to any milestone achieved by Organon following the notice of termination. We evaluated the related intangible asset balance for impairment and recorded an impairment charge of $14.2 million as of December 31, 2023. In addition, in January 2025, we and Novartis terminated the iscalimab license agreement.
In addition, license or collaboration agreements may fail to provide significant protection for the applicable licensor (which may be us in the case of our out-licensed products) or collaborator in case of the applicable licensee’s or collaborator’s failure to perform or in the event of disputes. License and collaboration agreements which relate to the products underlying our potential future milestones, royalties and other payment rights are complex and certain provisions
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in such agreements may be susceptible to multiple interpretations. Disputes may arise regarding intellectual property, royalty terms, payment rights or other contractual terms subject to a license or collaboration agreement, including:
| ● | the scope or duration of rights granted under the license or collaboration agreement and other interpretative issues; |
| ● | the amounts, timing or duration of royalties, milestones or other payments due under the license or collaboration agreement; |
| ● | the sublicensing of patent or other rights under our license or collaboration relationships; |
| ● | the diligence obligations under the license or collaboration agreement and what activities satisfy such diligence obligations: |
| ● | the inventorship and ownership of inventions and know-how resulting from the creation or use of intellectual property by us or our partners; and |
| ● | the priority of invention of patented technology. |
The resolution of any contract interpretation disagreement that may arise could narrow what the licensor (which may be us in the case of our out-licensed products) or collaborator believes to be the scope of its rights to the relevant intellectual property or technology, or decrease the licensee’s or collaborator’s financial or other obligations under the relevant agreement, any of which could in turn impact the value of our potential royalties, milestone payments and other payments and have a material adverse effect on our business, financial condition, results of operations and prospects. If a marketer were to default on its obligations under a license or collaboration agreement, the licensor’s or collaborator’s remedy may be limited either to terminating certain licenses or collaborations related to certain countries or to generally terminate the license or collaboration agreement with respect to such country. In such cases, we may not have the right to seek to enforce the rights of the licensor or collaborator (if not us) and we may be required to rely on the resources and willingness of the licensor or collaborator (if not us) to enforce its rights against the applicable licensee or collaborator. In any of these situations, if the expected upfront, milestone, royalty or other payments under the license or collaboration agreements do not materialize, this could result in a significant loss to us and materially adversely affect our business, financial condition and results of operations. We are from time to time engaged in discussions with our licensees or collaborators regarding the interpretation of the scope of the licenses or the payment and other provisions relating to products as to which we have milestones and potential royalty or other payment rights. Should any such discussions result in a disagreement regarding a particular product that cannot be resolved satisfactorily to us, we may be paid less than anticipated on such product should it successfully progress through clinical development and be approved for commercialization. Should our milestone and future potential royalty or other payment interests be reduced or eliminated as a result of any such disagreement, it could have an adverse effect on our business, financial condition, results of operations and prospects.
In addition, we may initiate litigation against a licensee or collaborator to enforce our intellectual property and contractual rights. For example, in August 2025, we initiated litigation against Janssen asserting claims for breach of contract and unjust enrichment arising from Janssen's unauthorized use of our intellectual property in the commercialization of TREMFYA (guselkumab) and this litigation is ongoing. Litigation is inherently uncertain and expensive, and there can be no assurance regarding the potential outcome of the matter or the timing or amount of any potential recovery.
Our existing collaborations may not continue or be successful, and we may be unable to enter into future arrangements to develop and commercialize our unpartnered assets. For example, in June 2023, Bioasis announced the suspension of all its operations and the termination of the research collaboration and license agreement between Bioasis and Chiesi. As a result, we will not receive any milestone, royalty or other payments under the Biosis RPA or Second Bioasis RPA.
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Generally, our current licensees have the right to terminate their collaborations at will or under specified circumstances. If any of our collaborative partners breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully (for example, by not making required payments when due, or at all or failing to engage in commercially reasonable efforts to develop products if required), our product development under these agreements will be delayed or terminated.
In addition, we could face significant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Our ability to reach a definitive collaborative agreement with any such new party will depend, among other factors, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction.
Our potential milestone and royalty providers may rely on third parties to provide services in connection with their product candidate development and manufacturing programs. The inadequate performance by or loss of any of these service providers could affect our potential milestone and royalty providers’ product candidate development.
Third parties provide services in connection with preclinical and clinical development programs, including in vitro and in vivo studies, assay and reagent development, immunohistochemistry, toxicology, pharmacokinetics, clinical trial support, manufacturing and other outsourced activities. If these service providers do not adequately perform the services for which our potential milestone and royalty providers have contracted, or cease to continue operations, and our potential milestone and royalty partners are not able to find a replacement provider quickly or lose information or items associated with their product candidates, our potential milestone and royalty providers’ development programs and receipt of any potential resulting income may be delayed. For example, Alora withdrew DSUVIA from the commercial market due to unresolvable manufacturing constraints.
In addition, our potential milestone or royalty providers may currently or in the future rely on foreign contract research organizations (“CROs”), contract development and manufacturing organizations (“CDMOs”) and contract manufacturing organizations (“CMOs”). Such foreign CROs, CDMOs, or CMOs may be subject to U.S. legislation, including the BIOSECURE Act (to the extent enacted into law), changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to our potential milestone or royalty providers, delay the procurement or supply of such material, have an adverse effect on their ability to secure significant commitments from governments to purchase potential products or disrupt the supply chain. If our potential milestone or royalty providers are not able to secure supply of their products or product candidates as a result of the BIOSECURE Act, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, or other applicable legislation and fail to maintain timely progress on their clinical development programs, regulatory submissions or commercialization activities, they may be unable to deliver milestone or royalty payments to us in a timely manner or at all, and this could adversely affect our business, financial condition, results of operations and cash flows.
For example, the biopharmaceutical industry in China is strictly regulated by the Chinese government. Changes to Chinese regulations or government policies affecting biopharmaceutical companies are unpredictable and may have a material adverse effect on the collaborators of our potential milestone or royalty providers that operate in China, which, in turn, could have an adverse effect on such milestone or royalty providers and, in turn, our business, financial condition, results of operations and prospects. Evolving changes in China’s public health, economic, political, and social conditions and the uncertainty around China’s relationship with other governments, such as the United States and the U.K., could also negatively impact our potential milestone or royalty providers, including impacting their ability to manufacture products or product candidates, their ability to secure government funding or contracts, or their ability to maintain timely progress on their clinical development programs, regulatory submissions or commercialization activities.
The marketers of biopharmaceutical products are, in certain instances, substantially responsible for the ongoing regulatory approval, commercialization, manufacturing and marketing of products.
In certain instances, the holders of royalties on products have granted regulatory approval, commercialization, manufacturing and marketing rights to the licensees of such products. Such licensees have substantial control over those
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efforts and discretion to determine the extent and priority of the resources they will commit to their program for a product. Accordingly, the successful commercialization of a product depends on the licensee’s efforts and is beyond our control. If a licensee does not devote adequate resources to the ongoing regulatory approval, commercialization and manufacture of a product, or if a licensee engages in illegal or otherwise unauthorized practices, the product’s sales may not generate sufficient royalties, or the product’s sales may be suspended, and consequently, could adversely affect our business. In addition, if licensees of biopharmaceutical products decide to discontinue product programs or we believe the commercial prospects of assets have been reduced, we may recognize material non-cash impairment charges related to the financial royalty asset associated with those programs or assets.
Agreements with other third parties expose us to numerous risks and have caused us to incur additional liabilities.
Because our licensees, suppliers and contractors are independent third parties, they may be subject to different risks than we are and have significant discretion in, and different criteria for, determining the efforts and resources they apply related to activities relevant to their agreements with us. If these licensees, suppliers and contractors do not successfully perform the functions for which they are responsible, we may not have the capabilities, resources or rights to do so on our own or otherwise compel them to perform.
We do not know whether we or our licensees will be able to successfully develop and market any of the products that are or may become the subject of any of our licensing arrangements. In addition, third-party arrangements such as ours also increase uncertainties in the related decision-making processes and resulting progress under the arrangements, as we and our licensees may reach different conclusions, or support different paths forward, based on the same information, particularly when large amounts of technical data are involved.
In addition, 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.
Failure of our potential milestone and royalty providers’ product candidates to meet current Good Manufacturing Practice standards may cause delays in regulatory approval and penalties for noncompliance.
Our potential milestone and royalty providers may rely on third party manufacturers and such contract manufacturers are required to produce clinical product candidates under cGMP to meet acceptable standards for use in clinical trials and for commercial sale, as applicable. If such standards change, the ability of contract manufacturers to produce our potential milestone and royalty providers’ product candidates on the schedule required for clinical trials or to meet commercial requirements may be affected. In addition, contract manufacturers may not perform their obligations under their agreements with our potential milestone and royalty providers or may discontinue their business before the time required by us to successfully produce clinical and commercial supplies of our potential milestone and royalty providers’ product candidates.
Contract manufacturers are subject to pre-approval inspections and periodic unannounced inspections by the FDA and corresponding state and foreign authorities for compliance with cGMP and other applicable government regulations and corresponding foreign standards. We do not have control over a third-party manufacturer’s compliance with these regulations and standards. Any difficulties or delays in contractors’ manufacturing and supply of our potential milestone and royalty providers’ product candidates or any failure of our potential milestone and royalty providers’ contractors to maintain compliance with the applicable regulations and standards could increase costs, reduce revenue, cause our licensees to postpone or cancel clinical trials, prevent or delay regulatory approval by the FDA and corresponding state and foreign authorities, prevent the import and/or export of our potential milestone and royalty providers’ product candidates, or cause any of our potential milestone and royalty providers’ products that may be approved for commercial sale to be recalled or withdrawn.
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Certain of our technologies are in-licensed from third parties, so our and our licensees’ use of them may be restricted and subject to additional risks.
We have licensed technologies from third parties. These technologies include phage display technologies licensed to us in connection with our bacterial cell expression technology licensing program and antibody products. However, our and our licensees’ and collaborators’ use of these technologies is limited by certain contractual provisions in the licenses relating to them, and although we have obtained numerous licenses, intellectual property rights in the area of phage display are particularly complex. If we are unable to maintain our licenses, patents or other intellectual property, we could lose important protections that are material to continuing our operations and for future prospects. Our licensors also may seek to terminate our license(s), which could cause us and our licensees to lose the right to use the licensed intellectual property and adversely affect our and our licensees’ ability to commercialize our technologies, products or services.
Risks Related to Employees, Location, Data Integrity, and Litigation
The loss of or changes in any of our key personnel could delay or prevent achieving our objectives.
Our business efforts could be adversely affected by the loss of one or more key members of our staff. We currently do not have key person insurance on any of our employees. Changes in management, including due to potential acquisitions, may cause disruptions in our business, strategy and employee relationships, which may delay or prevent the achievement of our business objectives. During the transition periods, there may be uncertainty among investors, employees and others concerning our future direction and performance.
Because we are a small biotech royalty aggregator with limited resources, we may not be able to attract and retain qualified personnel.
We had 14 full-time employees as of March 11, 2026. We may require additional experienced executive, accounting, legal, administrative and other personnel from time to time in the future. We are highly dependent on principal members of our executive team, the loss of whose services may adversely impact the achievement of our objectives. There is intense competition for the services of these personnel.
If we do not succeed in attracting new personnel and retaining and motivating existing personnel, our business may suffer, and we may be unable to implement our current initiatives or grow effectively.
We rely and will continue to rely on outsourcing arrangements for many of our activities, including financial reporting and accounting and human resources.
Due to our small number of employees, we rely, and expect to continue to rely, on outsourcing arrangements for a significant portion of our activities, including financial reporting and accounting and human resources, as well as for certain of our functions as a public company. We may have limited control over these third parties, and we cannot guarantee that they will perform their obligations in an effective and timely manner.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with applicable regulations, provide accurate information to regulatory authorities, comply with federal and state fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, the health care industry is subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions
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or lawsuits stemming from a failure to be in compliance with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
If our information technology systems or data or those of our partners or contractors are compromised, our business could experience adverse consequences, including regulatory investigations or actions; litigation; fines and penalties; a disruption of our business operations; reputational harm; and loss of revenue, income, or profits.
Our business is increasingly dependent on critical, complex and interdependent information technology systems, including cloud-based systems, to support business processes as well as internal and external communications. In the ordinary course of our business, we maintain sensitive data on our networks, including personal information of our employees, legacy clinical trial patients, vendors and others, our intellectual property and proprietary or confidential business information relating to our business and that of our business partners. The secure maintenance and protection of this information is critical to our business and reputation.
Cybersecurity vulnerabilities, threats, and attacks have generally increased in sophistication, scale, and frequency in recent years. While we have implemented security measures that are intended to protect our data and information technology systems, our computer systems, and those of the third parties on which we rely, are still vulnerable to damage from data breaches, security incidents or other unauthorized intrusions or access, including cyberattacks or computer viruses, or from natural disasters, terrorism, war and telecommunication and electrical failures. Moreover, the prevalence of remote work on mobile devices that access confidential and sensitive information increases the risk of such an event occurring. Threats to our systems and personal, confidential and proprietary information can come from a variety of sources, ranging in sophistication. Such threats may be intentional or accidental. It is often difficult to anticipate or immediately identify these threats and the damage they might cause.
Data breaches, security incidents and other unauthorized intrusions or access to our data or systems, or those of the third parties on which we rely, could result in system disruptions, downtime or the compromise of personal information, our intellectual property and sensitive business information, all of which may interrupt our normal business operations and require substantial expenditure of financial and administrative resources to remedy. Such events could have a material adverse effect on our business, financial condition and results of operations. Theft of proprietary information could be used to compete against us and could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources. Furthermore, to the extent that any disruption, security breach, or other event were to result in a loss of, or damage to, our data or applications, or inappropriate access to or disclosure of personal, confidential or proprietary information, we may be required to comply with notification requirements, be subject to litigation (including class actions) or regulatory action (including fines), or otherwise be subject to liability under applicable laws. These risks would expose us to significant expense and cause significant harm to our reputation and business.
While we have insurance coverage, we cannot be sure that our policy will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay for future claims.
Compliance with the stringent and changing obligations related to data privacy and security is an onerous and resource-intensive process. Our actual or perceived failure to comply with any data privacy or security obligations could lead to regulatory investigations or actions; litigation; fines and penalties; a disruption of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
Federal, state, local and foreign legislators and/or regulators are increasingly regulating data privacy and security and may impose significant penalties for failure to comply with these requirements. For example, in the U.S., the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology and Clinical Health Act (“HITECH”), and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of protected heath information. At the state level, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CCPA”), establishes a privacy framework for covered businesses, which applies to a broad range of personal information (but not protected health information subject to HIPAA)
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and entities who conduct business in California and imposes data protection obligations on covered businesses. The CCPA gives California residents certain rights related to their personal information, including the rights to request the correction of, access to and deletion of their personal information, and the right to opt out of the sharing of their personal information for cross-context behavioral advertising, as well as the sale of their personal information. If we, or the third parties on which we rely, fail to comply with the CCPA, we may face significant fines, penalties and regulatory enforcement costs that could adversely affect our reputation, business, financial condition and results of operations. The CCPA provides for civil penalties of up to $2,500 per violation, and $7,500 per intentional violation, following investigation by the state Attorney General and/or California Privacy Protection Agency and allows private litigants affected by certain data breaches to recover significant statutory damages. Similar comprehensive state privacy laws are now in effect, have passed, or are being considered in numerous other states. Like the CCPA, such laws typically do not govern protected health information subject to HIPAA, and some exempt covered entities and business associates subject to HIPAA altogether. In addition, state health information privacy laws, such as California’s Confidentiality of Medical Information Act, Washington’s My Health My Data Act and the Nevada Consumer Health Data Privacy Law, govern the privacy and security of health-related information, specifically, may apply even when HIPAA/HITECH does not, and impose additional requirements.
Compliance with laws, regulations, rules, guidance, industry standards, and contractual obligations concerning data privacy, security, governance and protection is an onerous and resource-intensive process, that may require us to put in place additional mechanisms and incur substantial expenditure. Achieving compliance could also require us to change our business practices in a manner that does not align with our business objectives. Furthermore, the regulatory landscape continues to evolve, making it difficult to maintain compliance. Failure to comply with such requirements could result in regulatory investigations or actions, litigation (including class actions), fines and penalties, a disruption of our business operations, reputational harm, loss of revenue or profits and other adverse business consequences.
Further, as noted in the above risk factor, in the event that we, or one of the third parties on which we rely, is subject to a data breach, security incident, or other unauthorized intrusion or access that leads to the unauthorized access to or disclosure or modification of, or prevents access to, patient information, including personally identifiable information or protected health information, or personal information, we may be required to comply with notification requirements, be subject to litigation (including class actions) or regulatory action (including fines), or otherwise be subject to liability under applicable laws, which could result in increased costs or loss of revenue, and harm to our reputation. In particular, we may be required to take remediation measures to respond to the event and prevent similar events from occurring in the future, take mandatory corrective actions and/or verify the correctness of database contents.
In addition, cyber incidents can be difficult to detect, and any delay in identifying them may lead to increased harm as described above. While we have implemented security measures designed to protect our data and information technology systems, such measures may not prevent such events. We also cannot guarantee that we are in compliance with all applicable data privacy, security and protection laws and regulations as they are enforced now or as they evolve.
Our potential acquisitions of other companies could increase our exposure to litigation risk.
Our exposure to risks associated with various claims, including claims related to the use of intellectual property, labor or employment related claims, product liability claims or securities and related stockholder derivative claims, may be increased as a result of our acquisitions of other companies, including our acquisitions of Kinnate, Pulmokine, HilleVax, and LAVA, and we may ultimately be subject to liability or settlement costs. Additionally, we may have a lower level of visibility into the development process with respect to intellectual property or the care taken to safeguard against infringement risks with respect to acquired companies or assets. In addition, third parties may make claims in connection with our acquisitions, and they may also make infringement and similar or related claims after we have acquired assets that had not been asserted prior to our acquisition.
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Risks Related to Government Regulation
Even after FDA approval, a product may be subject to additional testing or significant marketing restrictions, its approval may be withdrawn, or it may be removed voluntarily from the market.
Even if our potential royalty providers receive regulatory approval for our product candidates, they will be subject to ongoing regulatory oversight and review by the FDA and other regulatory entities. The FDA, the EMA, or another regulatory agency may impose, as a condition of the approval, ongoing requirements for post-approval studies or post-approval obligations, including additional research and development and clinical trials, and the FDA, EMA or other regulatory agency subsequently may withdraw approval based on these additional trials or obligations.
Even for approved products, the FDA, EMA or other regulatory agency may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and production of such product. In addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping for such products are subject to extensive regulatory requirements.
Furthermore, marketing approval of a product may be withdrawn by the FDA, the EMA or another regulatory agency or such product may be withdrawn voluntarily by our potential royalty providers based, for example, on subsequently arising safety concerns. The FDA, EMA and other agencies also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our royalty providers’ drug candidates, or change their continuing compliance obligations.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our royalty providers’ drug candidates, or change their continuing compliance obligations. If they are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if they are not able to maintain regulatory compliance, they may lose any marketing approval that they may have obtained or be subject to enforcement actions, which may materially impact the royalty and milestone payments we receive. We and our royalty providers also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.
Healthcare reform measures and other statutory or regulatory changes could adversely affect our business.
The U.S. and some foreign jurisdictions have enacted or are considering a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our potential royalty providers’ ability to sell products in which we have ownership or and royalty interests, if approved, profitably. Among policy makers and payors in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which, among other things, substantially changed the way healthcare is financed by both governmental and private payors.
There have been judicial, Congressional and executive branch challenges to the ACA. As a result, there have been delays in the implementation of, and action taken to repeal or replace, certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. In addition, there were a number of health reform initiatives by the Biden administration that have impacted the ACA. On August 16, 2022, President Biden signed the IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-
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pocket cost and through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how other such challenges, and the healthcare reform measures of the new administration will impact the ACA and our business.
Also, there has been heightened governmental scrutiny recently in the U.S. over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. In addition, the IRA, among other things, (i) directs the Secretary of HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare Part B and Medicare Part D, and subjects drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law, and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs are implemented. These provisions took effect progressively starting in fiscal year 2023. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges. It is currently unclear how the IRA will be implemented but it is likely to have a significant impact on the pharmaceutical industry. Further, in response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future. In addition, beginning in 2023, Centers for Medicare & Medicaid Services, or CMS, requires manufacturers to refund CMS for certain discarded amounts of single-dose container and single-use package drugs. Moreover, in May 2025, the Trump administration renewed the idea of international reference pricing through an executive order entitled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients”, which, among other things, directs the HHS and other agencies to communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for U.S. patients in line with comparably developed nations and to facilitate direct-to-consumer purchasing programs. The HHS subsequently issued guidance indicating the most-favored-nation target price will be the lowest price paid in an Organisation for Economic Co-operation and Development country with a gross domestic product, or GDP, per capita of at least 60% of the U.S. GDP per capital. In addition, in December 2025, CMS proposed new drug payment models to lower drug prices for Medicare beneficiaries; under the models, CMS would explore potential adjustments to Medicare drug inflation rebate calculations by comparison to international drug pricing information. It is currently unclear whether and to what extent these measures will be implemented and what impact any such implementation would have on our business. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, and restrictions on certain product access. In some cases, such legislation and regulations have been designed to encourage importation from other countries and bulk purchasing.
An expansion in the government’s role in the U.S. healthcare industry may cause general downward pressure on the prices of prescription pharmaceutical products, lower reimbursements for providers, and reduced product utilization, any of which could adversely affect our business and results of operations. We expect that additional healthcare reform measures will be adopted in the future. We cannot know what form any such new legislation may take or the market’s perception of how such legislation would affect us. Any reduction in reimbursement from government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent our potential royalty providers from being able to generate revenue, attain profitability, develop, or commercialize our current product candidates in which we have an ownership or royalty interest.
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We and our potential milestone and royalty providers are subject to various state and federal healthcare-related laws and regulations that if violated may impact the commercialization of our product candidates for which we possess milestone or royalty rights or could subject us to significant fines and penalties.
Our operations may be directly or indirectly subject to various state and federal healthcare laws, including the federal Anti-Kickback Statute, the federal False Claims Act, state analogues of those laws, and various state and federal data privacy and security laws. These laws may impact, among other things, the commercial operations for any of our product candidates that may be approved for commercial sale.
The federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the furnishing or arranging for the purchase, lease, or order of a good or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs. The ACA modified the federal Anti-Kickback Statute’s intent requirement so that a person or entity no longer needs to have actual knowledge of the statute or the specific intent to violate it to have committed a violation. In addition, several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been implicated. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. There are a number of statutory exceptions and regulatory safe harbors protecting some common commercial activities from Anti-Kickback Statute prosecution, but they are drawn narrowly, and qualifying for a statutory exception or regulatory safe harbor requires satisfying all of the criteria for the exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute, but it does increase the risk of regulatory scrutiny.
The federal False Claims Act prohibits, among other things, persons and entities from knowingly presenting, or causing to be presented, a false or fraudulent claim to the government, as well as the knowing use of false statements material to false or fraudulent claims. Certain suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individual, commonly known as a “whistleblower,” or “relator” may share in any amounts paid by the entity to the government in fines or settlement. The filing of qui tam actions has caused a number of pharmaceutical, medical device and other healthcare companies to have to defend and/or settle a False Claims Act action.
HIPAA created new federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program, including a private payor, or falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of, or payment for, health care benefits, items or services.
HIPAA, as amended by HITECH, and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information by entities subject to the law, such as certain healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates and their subcontractors that perform certain functions or activities that involve the use or disclosure of protected health information on their behalf.
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Many states also have adopted laws similar to each of the federal laws described above, some of which apply to healthcare items or services reimbursed by any source, not only federal healthcare programs, such as the Medicare and Medicaid programs. In addition, some states have laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government. Additionally, certain state and local laws require the registration of pharmaceutical sales representatives, restrict payments that may be made to healthcare providers and other potential referral sources, and require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers. Further, some states have laws governing the privacy and security of health information in certain circumstances, many of which are not preempted by HIPAA and differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Because of the breadth of these laws, and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our or our potential milestone and royalty providers’ business activities could be subject to challenge under one or more of such laws.
If we or our potential milestone and royalty providers are found to be in violation of any of the laws and regulations described above or other applicable state and federal healthcare laws, we or our potential milestone and royalty providers may be subject to penalties, including significant civil, criminal, and administrative penalties, damages, fines, disgorgement, imprisonment, integrity oversight and reporting obligations, reputational harm, exclusion from government healthcare reimbursement programs and the curtailment or restructuring of our or our potential milestone and royalty providers’ operations, any of which could have a material adverse effect on our business and results of operations. In addition, we and our licensees may be subject to certain analogous foreign laws and violations of such laws could result in significant penalties.
We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.
We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations. Our operations are subject to anti-corruption laws including the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and other anti-corruption laws that apply in countries where we do business. The FCPA and these other laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage. We and the royalty agreement counterparties and licensees who generate our royalties operate in a number of jurisdictions that pose a high risk of potential FCPA violations, and we participate in collaborations and relationships with third parties whose activities could potentially subject us to liability under the FCPA or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the U.S. and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the FCPA and other anticorruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by the U.S. or other authorities could also have an adverse impact on our reputation, our business, financial condition and results of operations.
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Efforts to confirm that our business arrangements with third parties comply with applicable healthcare laws and regulations may involve substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities or our business arrangements with third parties could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude that our business practices or the business practices of the royalty agreement counterparties and licensees who generate our royalties may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations or the operations of the royalty agreement counterparties and licensees who generate our royalties are found to be in violation of any of these laws or any other governmental regulations, we or the royalty agreement counterparties and licensees who generate our royalties may be subject to significant criminal, civil and administrative sanctions, including monetary penalties, damages, fines, disgorgement, individual imprisonment and exclusion from participation in government-funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we or the royalty agreement counterparties and licensees who generate our royalties become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we or marketers of products that generate our royalties may be required to curtail or restructure operations, any of which could adversely affect our ability to operate our business and our results of operations. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting enforcement landscape and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.
As we or our potential milestone and royalty providers do more business internationally, we expect to become subject to additional political, economic and regulatory uncertainties.
We or our potential milestone and royalty providers may not be able to operate successfully in any foreign market. We believe that because the pharmaceutical industry is global in nature, international activities are expected to become a significant part of future business activities and when and if we or our potential milestone and royalty providers are able to generate income, a substantial portion of that income will be derived from product sales and other activities outside the U.S. Foreign regulatory agencies often establish standards different from those in the U.S., and an inability to obtain foreign regulatory approvals on a timely basis, if at all, could put us at a competitive disadvantage or make it uneconomical to proceed with a product or product candidate’s development. International sales may be limited or disrupted by many factors, including without limitation:
| ● | imposition of government controls; |
| ● | export license requirements; |
| ● | political or economic instability or conflict; |
| ● | international disputes; |
| ● | changes in trade policies, including tariffs or other trade restrictions or the threat of such actions; |
| ● | restrictions on repatriating profits; |
| ● | exchange rate fluctuations; |
| ● | evolving government regulations, including those related to healthcare reimbursement and data privacy and security; and |
| ● | withholding and other taxation. |
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Disruptions at the FDA and other government agencies could negatively affect the review of our licensees’ or royalty-agreement counterparties’ regulatory submissions, which could negatively impact our business.
The ability of the FDA to review and approve regulatory submissions can be affected by a variety of factors, including statutory, regulatory and policy changes, inadequate government budget funding levels or a reduction in the FDA’s workforce and its ability to hire and retain key personnel, disruptions caused by government shutdowns, public health crises, the FDA’s ability to accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. There have been mass layoffs of federal employees since the start of the current presidential administration in January 2025, the full impact of which is unclear at this time. Such disruptions, including disruptions arising from the ongoing shutdown of the U.S. federal government that commenced in October 2025, could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our licensees’ or royalty-agreement counterparties’ regulatory submissions, which could have a material adverse effect on our business. In addition, the presidential administration has made and is expected to continue to make changes in the leadership of various U.S. federal regulatory agencies and changes to U.S. federal government policy that have led to, in some cases, legal challenges and uncertainty around the funding, functioning and policy priorities of the U.S. federal regulatory agencies, including the FDA.
Further, under the new leadership at HHS under the current administration, agency reorganization, mass layoffs due to the reduction in force initiative and other measures may impact the normal operations of the FDA as well as other federal agencies. FDA may lack adequate staff and resources to meet current review, approval, and inspection schedules, which could delay our royalty providers’ anticipated timelines. In January 2025, an executive order entitled “Unleashing Prosperity Through Deregulation”, was issued which calls for at least 10 existing regulations to be repealed whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation. Recent developments at the FDA include announcement of a plan to phase out animal testing for monoclonal antibodies and certain other drugs, the proposed rare disease evidence principles (RDEP) program to facilitate approval of drugs to treat rare diseases with very small patient populations with significant unmet medical need and with a known genetic defect that is the major driver of the pathophysiology, and the announcement of a new Commissioner’s National Priority Voucher program for companies supporting certain U.S. national health priorities and interests. To the extent our royalty providers’ competitors are selected for this new voucher pilot program, or are otherwise able to participate in any of these initiatives intended to accelerate drug development and application review, and obtain faster approval than our royalty providers, their competitive position may be harmed, which could have a material adverse effect on their and our business. FDA has also increased its scrutiny of foreign drug manufacturing facilities and other contractors based in China, especially with respect to the transfer of biological materials, genetic data, and other sensitive data of American patients to parties located in China. It is unclear how the industry and clinical programs of our royalty providers will be impacted by policies and regulations implemented under the current administration and FDA leadership, or other executive orders.
We are unable to predict the extent to which the presidential administration may impose or seek to impose leadership or policy changes at the FDA or changes to rules and policies impacting our business and operations or the business and operations of our royalty providers. It is unclear how these executive actions or other potential actions by the federal government will impact the FDA or other regulatory authorities. Government proposals to reduce or eliminate budgetary deficits may include reduced allocations to the FDA and other related government agencies. These budgetary pressures may reduce the FDA’s ability to perform its responsibilities, which could result in delays in our royalty providers’ clinical trial timelines. If a significant reduction in the FDA’s workforce occurs, the FDA’s budget is significantly reduced or the current government shutdown is prolonged, it could significantly impact the ability of the FDA to timely review and process our royalty providers’ regulatory submissions or take other actions critical to the development or approval of our licensees’ or royalty-agreement counterparties’ product candidates, which could have a material adverse effect on their and our business.
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General Risk Factors
If securities or industry analysts do not publish research reports about our business or if they make adverse recommendations regarding an investment in our stock, our stock price and trading volume may decline.
The trading market for our common stock can be influenced by the research and reports that industry or securities analysts publish about our business. Currently, coverage of our Company by industry and securities analysts is limited. Investors have many investment opportunities and may limit their investments to companies that receive greater coverage from analysts. If additional industry or securities analysts do not commence coverage of us, the trading price of our stock could be negatively impacted. If one or more of the analysts downgrade our stock or comment negatively on our prospects, our stock price may decline. If one or more of these analysts cease to cover our industry or us or fail to publish reports about us regularly, our common stock could lose visibility in the financial markets, which could also cause our stock price or trading volume to decline. Further, incorrect judgments, estimates or assumptions made by research analysts may adversely affect our stock price, particularly if subsequent performance falls below the levels that were projected by the research analyst(s), even if we did not set or endorse such expectations. Any of these events could cause further volatility in our stock price and could result in substantial declines in the value of our stock.
Our share price may be volatile, which may subject us to litigation, and there may not be an active trading market for our common stock, Series A Preferred Stock or our Series B Preferred Stock.
There can be no assurance that the market price of our common stock will not decline below its present market price. Additionally, there may not be an active trading market for our common stock, Series A Preferred Stock or depositary shares representing interests in our Series B Preferred Stock. The market prices of biotechnology companies have been and are likely to continue to be highly volatile, and are affected by a number of factors, including:
| ● | fluctuations in our operating results; |
| ● | general market and macroeconomic conditions, including market conditions in our industry and the industries of our collaborators; |
| ● | the coverage of our common stock by the financial media, including television, radio and press reports and blogs; |
| ● | recruitment or departure of key personnel; |
| ● | our ability to realize benefits from strategic partnerships, acquisitions or investments; |
| ● | trading activity or positions by a limited number of stockholders who together beneficially own a significant portion of our outstanding common stock; |
| ● | the issuance of shares of common stock by us, including as consideration in or in conjunction with acquisitions; |
| ● | the inability to execute on our share repurchase program as planned, including failure to meet internal or external expectations around the timing or price of share repurchases, and any reductions or discontinuances of repurchases thereunder; |
| ● | issuance of debt or other convertible securities, including as consideration in or in conjunction with acquisitions; |
| ● | the inability to conclude that our internal controls over financial reporting are effective; |
| ● | changes to our credit ratings; and |
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| ● | market perception or investment sentiment regarding us or our business strategy. |
We have experienced significant volatility in the price of our common stock in the past. From January 1, 2025, through March 11, 2026, the share price of our common stock has ranged from a high of $39.92 to a low of $18.35. From January 1, 2025, through March 11, 2026, the share price of our Series A Preferred Stock has ranged from a high of $30.00 to a low of $24.96. From January 1, 2025, through March 11, 2026, the share price of our Series B Preferred Stock has ranged from a high of $25.76 to a low of $23.32. Additionally, we currently have three significant holders of our common stock that could affect the liquidity of our stock and have a significant negative impact on our stock price if those holders were to sell their ownership positions.
Our results of operations and liquidity needs could be materially negatively affected by market fluctuations or an economic downturn, including as a result of tariff policies.
Our results of operations could be materially and adversely affected by macroeconomic conditions generally, both in the U.S. and elsewhere around the world. Concerns over inflation, slower growth or recession, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, changes in fiscal and monetary policy or government budget dynamics, interest rates, high unemployment, labor availability constraints, currency fluctuations, epidemics and other public health crises (such as the COVID-19 pandemic), significant natural disasters (including as a result of climate change), rising energy costs, geopolitical conflict, such as the ongoing conflict in Ukraine, the Middle East and surrounding areas and the rising tensions between China and Taiwan, the availability and cost of credit, and the volatility in U.S. financial markets have in the past contributed to, and may continue in the future contribute to, increased volatility and diminished expectations for the economy and the U.S. and global markets. Domestic and international equity markets periodically experience heightened volatility and turmoil.
In recent months, the United States has announced tariffs on imports from most countries, including significant tariffs on imports from Canada, Mexico and China. Historically, tariffs have led to increased trade and political tensions. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets. In addition, in September 2025, the United States announced plans to impose up to 100% tariffs on imported branded or patented pharmaceuticals, subject to certain exceptions. There is substantial uncertainty as to when such tariffs may go into effect and whether such tariffs would apply to the importation of active pharmaceutical ingredients or bulk drug products that are intended for use in clinical trials, and, more generally, about the duration of existing tariffs, tariff levels, implementation of announced tariffs, litigation challenging tariffs and whether additional tariffs or other retaliatory actions may be imposed, modified or suspended.
These events may have an adverse effect on us, our licensees or royalty-agreement counterparties or their licensees. In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may decline.
We have issued equity securities and may issue additional equity securities from time to time, that materially and adversely affect the price of our common stock, including our Series X Preferred Stock, Series A Preferred Stock and depositary shares representing interests in our Series B Preferred Stock.
We expect significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in such a manner as we determine from time to time, including pursuant to our 2025 Common Stock ATM Agreement and 2025 Series B Preferred Stock ATM Agreement. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders. If we issue additional equity securities, the price of our existing securities may be materially and adversely affected.
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As of December 31, 2025, there were 5,003 shares of Series X Preferred Stock issued and outstanding. Each share of Series X Preferred Stock is convertible into 1,000 shares of registered common stock. The total number of shares of common stock issuable upon conversion of all issued Series X Preferred Stock would be 5,003,000 shares. Each share is convertible at the option of the holder at any time, provided that the holder is prohibited from converting into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares above a conversion blocker, which was initially set at 19.99% of our total common stock then issued and outstanding immediately following the conversion of such shares. A holder of Series X Preferred Stock may elect to increase or decrease the conversion blocker above or below 19.99% on 61 days’ notice, provided the conversion blocker does not exceed the limits under Nasdaq Listing Rule 5635(b), to the extent then applicable. If holders of our Series X Preferred Stock elect to convert their preferred shares into common stock such conversion would dilute our currently outstanding common stock both in number and in earnings per share. As of December 31, 2025, BVF owned approximately 21.8% of the Company’s total outstanding shares of common stock, and if all the shares of Series X Convertible Preferred Stock were converted (without taking into account beneficial ownership limitations), BVF would have owned 45.0% of the Company’s total outstanding shares of common stock. Additionally, as of March 11, 2026, we had issued and outstanding 984,000 shares of Series A Preferred Stock and 1,760,500 depositary shares, each representing a 1/1000th fractional interest in a share of our Series B Preferred Stock.
In addition, funding from collaboration partners and others has in the past and may in the future involve issuance by us of our common stock. We cannot be certain how the purchase price of such shares, the relevant market price or premium, if any, will be determined or when such determinations will be made.
Any issuance by us of equity securities, whether through an underwritten public offering, an at the market offering, a private placement, in connection with a collaboration or otherwise could result in dilution in the value of our issued and outstanding shares, and a decrease in the trading price of our securities.
We may sell additional equity or debt securities to fund our operations, which may result in dilution to our stockholders and impose restrictions on our business.
In order to raise additional funds to support our operations, we may sell additional equity or convertible debt securities, which would result in dilution to our stockholders and/or debt securities which may impose restrictive covenants that would adversely impact our business. The sale of additional equity or convertible debt securities could result in additional dilution or result in other rights or obligations that adversely affect our stockholders. For example, holders of shares of our Series A Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per year). Additionally, holders of depositary shares representing interests in our Series B Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, 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 (equivalent to $2,093.75 per year per share or $2.09375 per year per depositary share). The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
Our organizational documents contain provisions that may prevent transactions that could be beneficial to our stockholders and may insulate our management from removal.
Our charter and bylaws:
| ● | require certain procedures to be followed and time periods to be met for any stockholder to propose matters to be considered at annual meetings of stockholders, including nominating directors for election at those meetings; and |
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| ● | authorize our Board to issue up to 1,000,000 shares of preferred stock without stockholder approval and to set the rights, preferences and other designations, including voting rights, of those shares as the Board may determine. |
In addition, we are subject to the provisions of certain Nevada statutes that could have the effect of prohibiting or limiting certain transactions with our stockholders or discouraging acquisitions of our capital stock.
Nevada’s “combinations with interested stockholders” statutes (Sections 78.411 through 78.444, inclusive, of the Nevada Revised Statutes (“NRS”)) provide that specified types of business “combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” of the corporation are prohibited for two years after such person first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination (or the transaction by which such person becomes an “interested stockholder”) in advance, or unless the combination is approved by the board of directors and 60% of the corporation’s voting power not beneficially owned by the interested stockholder, its affiliates and associates. Furthermore, in the absence of prior approval certain restrictions may apply even after such two-year period. For purposes of these statutes, an “interested stockholder” is any person who is (1) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant transactions between a corporation and an “interested stockholder.” These statutes generally apply to Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws. We have not made such an opt-out election in our articles of incorporation.
Nevada’s “acquisition of controlling interest” statutes (NRS 78.378 to 78.3793) prohibit an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Generally, once an acquirer crosses one of the thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with Nevada’s dissenter’s rights statutes. A corporation may elect to not be governed by the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of the control share statutes in our articles of incorporation or bylaws.
These provisions of our organizational documents and the NRS, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of common stock, could limit the ability of stockholders to approve transactions that they may deem to be in their best interests, and could make it considerably more difficult for a potential acquirer to replace management.
As a public company in the U.S., we are subject to the Sarbanes-Oxley Act. We have determined our disclosure controls and procedures and our internal control over financial reporting are effective. We can provide no assurance that we will, at all times, in the future be able to report that our disclosure controls and internal controls over financial reporting are effective.
Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the SOX. Section 404 requires management to establish and maintain a system of internal control over financial reporting, and annual reports on Form 10-K filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must contain a report from management assessing the effectiveness of our internal control over financial reporting. Ensuring we have adequate internal financial and accounting controls and procedures in place to produce accurate financial statements
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on a timely basis is a time-consuming effort that needs to be re-evaluated frequently. Failure on our part to have effective internal financial and accounting controls would cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, and financial condition, and could cause the trading price of our common stock to fall.
Our ability to use our NOL carryforwards and certain other tax attributes to offset taxable income or taxes may be limited.
Our net operating loss, or NOL, carryforwards could expire unused and/or be unavailable to offset future income tax liabilities. As of December 31, 2025, we had U.S. federal NOL carryforwards of $198.4 million, of which $13.6 million will begin to expire in 2036. Under the federal income tax law, $142.9 million federal NOLs incurred in taxable years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of current year taxable income. It is uncertain if and to what extent various states will conform to the federal tax law. In addition, Section 382 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, generally limit the ability of a corporation that undergoes an “ownership change” to utilize its NOL carryforwards and certain other tax attributes against any taxable income in taxable periods after the ownership change. An “ownership change” is generally defined as a greater than 50% change, by value, in a corporation’s equity ownership over a three-year period.
Based on an analysis under Section 382 of Code, we experienced an ownership change in February 2017, that significantly limits the availability of our tax attributes to offset future income. To the extent that we do not utilize our carry forwards within the applicable statutory carryforward periods, either because of Section 382 limitations or the lack of sufficient taxable income, the carryforwards will also expire unused. As of December 31, 2025, we had $198.4 million in federal NOL carryforwards, of which $55.4 million is subject to an annual limitation of $0.9 million. Of this amount, $13.6 million will begin to expire in 2036, if not utilized.
Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, cash flow, financial condition, or results of operations.
New tax laws, statutes, rules, regulations, or ordinances could be enacted at any time. For instance, the IRA imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases. In addition, the One Big Beautiful Bill Act was signed into law on July 4, 2025, and made significant changes to U.S. federal tax law. Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time. Any such enactment, interpretation, change, repeal, or modification could adversely affect us, possibly with retroactive effect. In particular, changes in corporate tax rates, the realization of our net deferred tax assets, the taxation of foreign earnings, and the deductibility of expenses under the Internal Revenue Code, as amended by any future tax reform legislation, could have a material impact on the value of our deferred tax assets, result in significant one-time charges, and increase our future tax expenses.
If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements prove inaccurate, our actual results may vary from those reflected in our accruals.
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, income, and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure you, however, that our estimates, or the assumptions underlying them, will be correct.
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Stockholder and private lawsuits, and potential similar or related lawsuits, could result in substantial damages, divert management’s time and attention from our business, and have a material adverse effect on our business, financial condition and results of operations.
Securities-related class action and stockholder derivative litigation has often been brought against companies, including many biotechnology companies, which experience volatility in the market price of their securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies often experience significant stock price volatility in connection with their product development programs, and could be increased as a result of our acquisitions of other companies, including our acquisitions of Kinnate, Pulmokine, HilleVax, and LAVA.
It is possible that suits will be filed, or allegations received from stockholders, naming us and/or our officers and directors as defendants. These potential lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The outcome of any such lawsuits is uncertain. We could be forced to expend significant time and resources in the defense of these suits, and we may not prevail. In addition, we may incur substantial legal fees and costs in connection with these lawsuits. Although we carry insurance to protect us from such claims, our insurance may not provide adequate coverage. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on these actions could result in the payment of substantial damages or fines, increased insurance costs, and could have a material adverse effect on our cash flow, results of operations and financial position.
Monitoring, initiating and defending against legal actions, including any currently pending litigation, are time-consuming for our management, are likely to be expensive and may detract from our ability to fully focus our internal resources on our business activities. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business. In addition, the inherent uncertainty of any future litigation could lead to increased volatility in our stock price and a decrease in the value of an investment in our common stock.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 1C. CYBERSECURITY
We evaluate our cybersecurity strategy annually, including our processes designed to assess, identify, and manage risks from potential unauthorized occurrences on or through our information technology systems that may result in adverse effects on the confidentiality, integrity, and availability of these systems and the data residing therein, within our overall enterprise risk management framework.
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Additional information on cybersecurity risks we face is discussed in Part I, Item 1A, “Risk Factors,” under the headings “If our information technology systems or data or those of our partners or contractors are compromised, our business could experience adverse consequences, including regulatory investigations or actions; litigation; fines and penalties; a disruption of our business operations; reputational harm; and loss of revenue, income, or profits” and “Compliance with the stringent and changing obligations related to data privacy and security is an onerous and resource-intensive process. Our actual or perceived failure to comply with any data privacy or security obligations could lead to regulatory investigations or actions; litigation; fines and penalties; a disruption of our business operations; reputational harm; loss of revenue, income, or profits; loss of customers or sales; and other adverse business consequences.”
We also maintain an Incident Response Plan that sets forth a protocol in the event we are exposed to a cyber-attack or breach. The Incident Response Plan provides a framework for our response, including the appropriate communication and escalation channels.
The Board, as a whole and at the committee level, has oversight for the most significant risks facing us and for our processes to identify, prioritize, assess, manage, and mitigate those risks.
Item 2. PROPERTIES
We lease 1,620 rentable square feet of space for our corporate headquarters in Emeryville, California, which expires in April 2029. We believe our facilities are adequate to meet our current requirements.
Item 3. LEGAL PROCEEDINGS
We are not currently engaged in any material legal proceedings. However, from time to time, we are 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 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Registrant’s Common Equity
Our common stock trades on The Nasdaq Global Market (“Nasdaq”) under the symbol “XOMA.” On March 11, 2026, there were 173 stockholders of record of our common stock, one of which was Cede & Co., a nominee for the Depository Trust Company (“DTC”). Shares of our common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are deposited into participant accounts at DTC and are therefore considered to be held of record by Cede & Co., and we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have not paid dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. Holders of shares of our Series A Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.625% of the $25.00 liquidation preference per year (equivalent to $2.15625 per year per share). Holders of our Series B Preferred Stock are entitled to receive, when and as declared by our Board, out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 8.375% of the $25,000 liquidation preference per year of Series B Preferred Stock ($25.00 per depositary share, equivalent to $2,093.75 per year per share of Series B Preferred Stock or $2.09375 per year per depositary share).
Recent Sales of Unregistered 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 December 31, 2025, were subsequently retired. Repurchases of our common stock during the three months ended December 31, 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 | ||||
October 1 – October 31, 2025 | | | — | | $ | — | | | — | | $ | 47,591,985 |
November 1 – November 30, 2025 |
| | — |
| $ | — | | | — | | $ | 47,591,985 |
December 1 – December 31, 2025 | | | 539,538 | | $ | 25.30 | | | 539,538 | | $ | 33,943,958 |
Total |
| | 539,538 |
| | | | | 539,538 | | $ | 33,943,958 |
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Item 6. RESERVED
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
XOMA is a royalty aggregator. We have a sizable portfolio of economic rights to future potential milestone and royalty payments associated with over 120 commercial and pre-commercial therapeutic candidates. In 2017, we transformed our business model to become a royalty aggregator. We subsequently advanced our portfolio by building upon our existing out-licensing agreements for proprietary products and platforms through the acquisition of rights to future milestones, royalties and commercial payments. Currently, our portfolio is anchored royalty streams and milestone payments derived from seven commercial-stage assets. In 2025, we received $33.6 million in commercial payments and $16.9 million from milestone payments and other fees, for total cash receipts of $50.5 million. 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 sponsors or developers 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 the sponsors, marketers, and licensees. We generated a net income of $31.7 million and net cash provided by operating activities was $2.9 million for the year ended December 31, 2025. We generated a net loss of $13.8 million and net cash used in operating activities was $13.7 million for the year ended December 31, 2024. We had an accumulated deficit of $1.2 billion as of December 31, 2025.
Recent Business Developments
Completed Acquisitions
Mural Acquisition
In December 2025, we acquired Mural for $2.035 per ordinary share and RSU, for a total purchase price of approximately $37.6 million. The transaction included the acquisition of short-term financial assets, such as cash and prepaid expenses. Because the fair value of these net assets exceeded the purchase price, we recognized a $3.2 million bargain purchase gain in other income (expense), net for the year ended December 31, 2025.
LAVA Acquisition
In November 2025, we acquired LAVA through a tender offer for $1.04 in cash per LAVA ordinary share and one non-transferable CVR per share, resulting in total purchase consideration of $39.0 million. As a part of the acquisition, we acquired IP assets related to LAVA’s existing partnered programs with J&J and Pfizer, as well as LAVA-1266, a clinical program for acute myeloid leukemia and myelodysplastic syndrome. We have no plans to develop LAVA-1266, which is instead targeted for divestiture through sale or licensing. The value of the acquired IP assets was reduced by the excess of the fair value of the net assets acquired over the initial consideration based on the relative fair value of each IP. We are entitled to 25% of the net proceeds related to sales or licenses of these programs.
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Under the LAVA CVR Agreement, CVR holders are entitled to 75% of the net proceeds from ongoing and future collaborations related to the partnered programs over a 10-year period, 75% of the net proceeds from the disposition of LAVA-1266, 100% of the amount by which LAVA’s closing net cash exceeds the amount of closing net cash as determined by the LAVA Merger Agreement, minus any permitted deductions, as well as 100% of the tax reserve in the amount of approximately $6.3 million minus any permitted tax reserve matter expenses. In March 2026, we distributed $2.1 million to the LAVA CVR holders representing the excess net cash received in the transaction.
HilleVax Acquisition
In September 2025, we acquired HilleVax through a tender offer for $1.95 in cash per share of HilleVax common stock, plus one non-transferable CVR per share of HilleVax common stock, totaling approximately $105.3 million in purchase consideration. As part of the merger, we acquired IP assets related to HIL-216, a pre-clinical vaccine candidate, and assumed existing lease and sublease agreements. We have no plans to develop HIL-216, which is instead targeted for divestiture through sale or licensing. Under the HilleVax CVR Agreement, CVR holders are entitled to 90% of the net proceeds from the disposition of HIL-216 if sold within two years of the merger, 100% of the remaining unused funds in the related expense fund at the end of the two-year period, any adjustment of HilleVax’s closing net cash, 100% of security deposit receipts associated with the Boston Lease, and 100% of lease payment obligations saved or the amount received from any subtenant associated with the Boston Lease if subleased within twelve months and 90% if subleased after twelve months. As a result of the acquisition, we recognized a $17.9 million bargain purchase gain included in other income (expense), net for the year ended December 31, 2025.
Turnstone Acquisition
In August 2025, we acquired Turnstone through a tender offer for $0.34 in cash per share of Turnstone common stock and one non-transferable CVR per share of Turnstone common stock, resulting in total purchase consideration of approximately $9.6 million. As part of the merger, we acquired certain short-term financial assets, primarily consisting of cash, receivables, prepaid expenses, and other current assets. Under the Turnstone CVR Agreement, CVR holders are entitled to 100% of the net proceeds from specified Turnstone tax receivables and a lease security deposit. As a result of the acquisition, we recognized a $1.8 million bargain purchase gain included in other income (expense), net for the year ended December 31, 2025.
Other Business Developments
Generation Bio Acquisition
In February 2026, we acquired Generation Bio through a tender offer for a base price of $4.2913 in cash per Generation Bio’s ordinary share and one non-transferrable CVR per share.
Repare Acquisition and XenoTherapeutics Arranger Letter
In November 2025, the Repare Acquisition Agreement was executed, pursuant to which we acted as structuring agent in connection with the acquisition of Repare’s issued and outstanding common shares by Xeno. Xeno agreed to pay us an arranger fee of $3.0 million following the closing of the Repare acquisition for the services we rendered, which fee was received in January 2026. BVF, a related party of the Company, owned approximately 24.0% of Repare before its acquisition by Xeno. The Repare acquisition closed on January 28, 2026.
ESSA Acquisition and XenoTherapeutics Arranger Letter
In October 2025, we acted as structuring agent in connection with the acquisition of ESSA’s issued and outstanding common shares by Xeno. As part of the ESSA Acquisition Agreement, we agreed, among other things, to provide bridge financing to Xeno. To facilitate the closing of the acquisition, we extended a short-term loan of $5.9 million to Xeno, which was repaid in October 2025. Additionally, Xeno paid us an arranger fee of $3.0 million following the closing of the ESSA acquisition for the services we rendered in October 2025, which fee was received in October 2025. BVF, a related party of the Company, owned approximately 24.7% of ESSA before its acquisition by Xeno.
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2025 Common Stock ATM Agreement
On October 3, 2025, we entered into a new ATM Agreement with Leerink under which we may offer and sell from time to time at our sole discretion shares of our common stock through Leerink as our sales agent, in an aggregate amount not to exceed $75.0 million. Leerink 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. We will pay Leerink a commission of up to 3% of the gross proceeds of any shares of common stock sold under the 2025 Common Stock ATM Agreement. From October 3, 2025 through December 31, 2025, we sold 8,966 shares of our common stock under the 2025 Common Stock ATM Agreement for net proceeds of approximately $0.3 million, and paid approximately $10,000 in commissions.
2025 Series B Preferred Stock ATM Agreement
On October 3, 2025, we also entered into a new ATM agreement with HCW under which we may offer and sell from time to time at our sole discretion depositary shares, each representing 1/1000th of a share of our Series B Preferred Stock, through HCW as our sales agent, in an aggregate amount not to exceed $50.0 million. HCW may sell the depositary 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 depositary shares up to the amount specified. We will pay HCW a commission of up to 3% of the gross proceeds of any depositary shares sold under the 2025 Series B Preferred Stock ATM Agreement. From October 3, 2025 through December 31, 2025, we sold 160,500 shares of our Series B Depository Shares under the 2025 Series B Preferred Stock ATM Agreement for net proceeds of approximately $4.0 million, and paid approximately $0.1 million in commissions with $0.1 million of fees waived.
Common Stock Buyback
In December 2025, we repurchased 539,131 shares of our common stock from one of our stockholders, for aggregate consideration of $13.6 million.
Portfolio Updates
Rezolute License Agreement
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 December 2025, Rezolute announced the Phase 3 clinical study for ersodetug did not meet its primary and key secondary endpoints. In February 2026, Rezolute announced that it is undertaking extensive analysis of the trial results and other endpoints. Rezolute expects to meet with the FDA prior to the end of the first quarter of 2026 under its Breakthrough Therapy Designation to determine next steps for the program.
BioInvent 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 will be obligated to make an additional $10.0 million contingent payment upon FDA approval of mezagitamab.
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Kinnate Acquisition
As of April 2, 2025, we completed the sale of all five pipeline assets that were acquired in the acquisition of Kinnate in April 2024. We are eligible to receive up to $270.0 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.
Takeda Collaboration Agreement and Takeda Revenue Share Agreement
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.
In December 2025, we entered into the Takeda Revenue Share Agreement and amended the Takeda Collaboration Agreement to exchange a portion of our rights to future royalties and certain expense reimbursement on mezagitamab under the Takeda Collaboration Agreement for development and commercial milestone payments and royalties from a basket of nine development-stage assets that are held within Takeda’s portfolio.
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 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. We believe the following critical accounting policies and estimates describe the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Purchase of Rights to Future Milestones, Royalties and Commercial Payments
We have purchased rights to receive a portion of certain future developmental, regulatory and commercial sales milestone payments, royalties and option fees on sales of products currently in clinical development or recently commercialized. We acquire such rights from various entities and record the amount paid for these rights as long-term royalty receivables. 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, we have analogized and accounted for the purchased rights as a financial asset in accordance with ASC 310 as we believe our contractual rights to cash flows most closely resemble that of loans (see Note 4 to the consolidated financial statements).
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Royalty and Commercial Payment Receivables (Cost Recovery Method)
We account for milestone and royalty rights related to developmental pipeline or recently commercialized products on a non-accrual basis using the cost recovery method for products where we are not able to reliably estimate the timing and amount of future cash flows. Our developmental pipeline products are non-commercial, non-approved products that require FDA or other regulatory approval and, thus, have uncertain cash flows. As of December 31, 2025, the Company is unable to reliably estimate the timing and/or amount of future cash flows associated with certain commercial product receivables and thus accounts for them under the cost recovery method. The carrying values of receivables for commercial and non-commercial products are classified as current receivables based on whether payments to be received in the near term are presumed to become probable and reasonably estimable. Under the cost recovery method, any milestone, royalty, or other payment received is recorded as a direct reduction of the recorded purchased receivable balance. When the recorded purchased receivable balance has been fully collected, any additional amounts collected will be recognized as income from purchased receivables under the cost recovery method.
We rely on third-party information to calculate the income recognized during the period. If the information upon which such income amounts are derived is provided to us from partners or other third parties in arrears, the amount of income recognized is the amount that is not expected to be subsequently reversed in future periods. Any difference between the estimated and actual income amounts will be recognized in subsequent periods.
Royalty and Commercial Payment Receivables (Effective Interest Rate Method)
We account for milestone and royalty rights related to commercial products that have reliably estimable cash flows at amortized cost under the prospective effective interest rate method. Under the effective interest rate method, we calculate the effective interest rate by forecasting the expected cash flows to be received and paid over the life of the asset. The effective interest rate is recalculated at each reporting period as differences between expected cash flows and actual cash flows are realized and as there are changes to expected future cash flows. We estimate the expected cash flows based on information available to us from partners or other third parties. However, a shortened royalty term could result in a reduction in the effective interest rate, a decline in the carrying value of the receivable balance, or reductions in milestone or royalty payments compared to expectations.
We estimate the income recognized by multiplying the carrying value of the respective receivable under the effective interest rate method by the periodic interest rate. Variables affecting the recognition of income from purchased receivables under the effective interest rate method include any one of the following: (1) changes in expected cash flows of the underlying products, (2) regulatory approval of additional indications which leads to new cash flow streams, (3) changes to the estimated duration of the cash flows (e.g., patent expiration date) and (4) changes in amounts and timing of projected cash receipts and milestone payments. Any changes in the variables affecting the recognition of income from purchased receivables under the effective interest method is applied prospectively. The recognition of income from purchased receivables requires us to make estimates and assumptions around many factors, including those impacting the variables noted above.
Our prospective application of the effective interest rate method to measure royalty and commercial payment receivables requires our judgment in forecasting future expected cash flows and reliance on third-party information. We forecast expected sales based on sales projections of the underlying commercial products that are published in research analyst reports over the periods that we are 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. We consider commercial performance updates on regulatory approval for new indications or geographic areas or discontinuation of certain indications or geographic areas in our forecasting of future expected cash flows. We also consider 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 us by our partners or through third-party information may impact the royalty duration we use in forecasting future expected cash flows.
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Contingent Payments
We may be obligated to make contingent payments related to certain product development milestones and sales-based milestones.
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 consolidated statements of operations. 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.
Under the effective interest rate 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.
Allowance for Current Expected Credit Losses
We review our allowance for current expected credit losses on a quarterly basis based on updates from our partners, press releases and other publicly disclosed information on the status of clinical trials. Our current expected credit losses are based on an estimate of discounted future cash flows for our purchased receivables, which relies on assumptions including probability of technical success and discount rate. Changes to these assumptions could have a material impact on our financial statements.
Intangible Assets
Our intangible assets consist of IP from the acquisition of Pulmokine, the contract-based BioInvent intangible asset, and IP from the acquisition of LAVA. Intangible assets are amortized based on our best estimate of the distribution of the economic value of the respective intangible assets, which is generally the expected regulatory exclusivity. We review our intangible assets 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 in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
Stock-Based Compensation
Stock-based compensation expense for stock options and other stock awards is estimated at the grant date based on the award’s fair value-based measurement. The valuation of stock-based compensation awards is determined on the date of grant using the Black-Scholes Model. This model requires highly complex and subjective inputs, such as the expected term of the option and expected volatility. These inputs are subjective and generally require significant analysis and judgment to develop. Our current estimate of volatility is based on the historical volatility of our stock price. To the extent volatility in our stock price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing stock-based compensation expense recognized in future periods. To establish an estimate of expected term, we consider the vesting period and contractual period of the award and our historical experience of stock option exercises, post-vesting cancellations and volatility. The risk-free rate is based on the yield available on U.S. Treasury zero-coupon issues. Forfeitures are recognized as they occur.
The grant date fair values of PSUs with market conditions are determined using the Monte Carlo valuation model. This model requires highly complex and subjective inputs, such as probability estimates. We record compensation expense for PSUs based on graded expense attribution over the requisite service periods.
We review our valuation assumptions quarterly and update our valuation assumptions used to value stock-based awards granted in future periods utilizing then-current data. In future periods, as additional empirical evidence regarding input estimates becomes available, we may change or refine our approach of deriving these input estimates. These changes
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could impact our fair value-based measurement of stock options granted in the future. Changes in the fair value-based measurement of stock awards could materially impact our operating results.
Results of Operations
Income and Revenues
Total income and revenues for the years ended December 31, 2025 and 2024, were as follows (in thousands):
| | | | | | | | | |
| | Year Ended | | | |||||
| | December 31, | | | |||||
| | 2025 | | 2024 | | Change | |||
Income from purchased receivables under the EIR method | | $ | 26,745 | | $ | 15,066 | | $ | 11,679 |
Income from purchased receivables under the cost recovery method | | | 13,744 | | | 3,201 | | | 10,543 |
Revenue from contracts with customers | | | 10,350 | | | 6,650 | | | 3,700 |
Revenue recognized under units-of-revenue method | |
| 1,310 | |
| 3,570 | | | (2,260) |
Total income and revenues | | $ | 52,149 | | $ | 28,487 | | $ | 23,662 |
Income from Purchased Receivables under the EIR Method and Cost Recovery Method
The following table summarizes income recognized from purchased receivables under the EIR method and cost recovery method during the years ended December 31, 2025 and 2024 (in thousands):
| | | | | | | | | |
| | Year Ended December 31, | | | | ||||
| | 2025 | | 2024 | | Change | |||
Affitech (VABYSMO) | | $ | 23,957 | | $ | 14,800 | | $ | 9,157 |
Aptevo (IXINITY) | | | 989 | | | 266 | | | 723 |
LadRx (MIPLYFFA) | | | 1,799 | | | — | | | 1,799 |
Total income from purchased receivables under the EIR method | | $ | 26,745 | | $ | 15,066 | | $ | 11,679 |
| | | | | | | | | |
Viracta (OJEMDA) | | $ | 13,716 | | $ | 3,201 | | $ | 10,515 |
Talphera (DSUVIA) | | | 28 | | | — | | | 28 |
Total income from purchased receivables under the cost recovery method | | $ | 13,744 | | $ | 3,201 | | $ | 10,543 |
Income from purchased receivables under the EIR method for the year ended December 31, 2025, included estimated income under the EIR method related to sales of VABYSMO of $24.0 million, sales of MIPLYFFA of $1.8 million, and sales of IXINITY of $1.0 million. Income from purchased receivables under the EIR method for the year ended December 31, 2024, included estimated income under the EIR method related to sales of VABYSMO of $14.8 million and sales of IXINITY of $0.3 million. 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 2024 to 2025. We expected income related to MIPLYFFA to increase in future periods based on projected sales estimates.
Income from purchased receivables under the cost recovery method for the year ended December 31, 2025, included $13.7 million for OJEMDA, including a one-time $4.0 million milestone payment related to Day One’s MAA filing with the EMA, a $2.0 million milestone payment related to Day One’s NDA filing in Japan, and $7.7 million in royalties. Income from purchased receivables under the cost recovery method for the year ended December 31, 2024, included $2.7 million in estimated income under the cost recovery method related to sales of OJEMDA and $0.5 million related to a milestone payment under the Viracta RPA. 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 Day One.
Revenue from Contracts with Customers
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 year ended December 31, 2025, primarily included a milestone payment of $5.0 million pursuant to our Rezolute License
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Agreement, $4.1 million pursuant to the Takeda Collaboration Agreement, including $3.0 million from a milestone payment and $1.1 million in other revenue, and $1.3 million in other milestone payments. Revenue from contracts with customers for the year ended December 31, 2024, primarily included a milestone payment of $5.0 million pursuant to our license agreement with Rezolute, a $0.5 million option fee under our license agreement with Alexion, and a milestone payment of $1.0 million pursuant to a license agreement with an undisclosed licensee.
Revenue Recognized under Units-of-Revenue Method
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 year presented are related to the changes in estimated royalties received by HCRP.
R&D Expenses
Total research and development expenses for the years ended December 31, 2025 and 2024, were as follows (in thousands):
| | | | | | | | | |
| | Year Ended | | | |||||
| | December 31, | | | |||||
| | 2025 | | 2024 | | Change | |||
Research and development | | $ | 1,712 | | $ | 2,875 | | $ | (1,163) |
R&D expense was $1.7 million for the year ended December 31, 2025, compared with $2.9 million for the year ended December 31, 2024. The decrease of $1.2 million was primarily due to a decrease of $2.4 million in clinical trial costs related to the wind-down activities of KIN-3248 subsequent to our acquisition of Kinnate in April 2024, partially offset by increases of $1.0 million in pass-through license fees reimbursed through a license agreement and $0.3 million related to our wind-down activities of HilleVax. We may incur increased R&D costs associated with our contemplated acquisitions.
G&A Expenses
Total general and administrative expenses for the years ended December 31, 2025 and 2024, were as follows (in thousands):
| | | | | | | | | |
| | Year Ended | | | |||||
| | December 31, | | | |||||
| | 2025 | | 2024 | | Change | |||
General and administrative | | $ | 36,092 | | $ | 34,478 | | $ | 1,614 |
G&A expenses include salaries and related personnel costs, professional fees, and facilities costs. For the year ended December 31, 2025, G&A expenses were $36.1 million, compared with $34.5 million for the year ended December 31, 2024. The increase of $1.6 million was primarily due to an increase in business development and deal-related costs of $3.7 million, an increase in lease costs of $1.0 million primarily related to the HilleVax acquisition, partially offset by $3.6 million in costs related to exit packages for Kinnate senior leadership in 2024 and a decrease of $1.0 million in share-based compensation.
G&A expenses for the year ended December 31, 2025 also include an increase of approximately $1.1 million associated with ongoing litigation initiated by us against Janssen asserting claims for breach of contract and unjust enrichment arising from Janssen's unauthorized use of our intellectual property in the commercialization of TREMFYA (guselkumab). We expect to continue to incur legal fees and other professional service costs associated with pursuing this litigation. Litigation is inherently uncertain, and there can be no assurance regarding the outcome of the matter or the timing or amount of any potential recovery.
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G&A expenses included non-cash share-based compensation expenses of $9.3 million and $10.3 million for the years ended December 31, 2025 and 2024, respectively.
Credit Losses on Purchased Receivables
There were no credit losses on purchased receivables for the year ended December 31, 2025.
Credit losses on purchased receivables were $30.9 million for the year ended December 31, 2024, and consisted of $9.0 million related to our Aronora RPA in the second quarter of 2024, $14.0 million related to our Agenus RPA in the third quarter of 2024, and $7.9 million related to our Talphera CPPA in the fourth quarter of 2024.
Other Income (Expense), Net
Interest Expense
Interest expense includes the accretion of debt discount and debt issuance costs. Interest expense for the years ended December 31, 2025 and 2024, was as follows (in thousands):
| | | | | | | | | |
| | Year Ended | | | |||||
| | December 31, | | | |||||
| | 2025 | | 2024 | | Change | |||
Accrued interest expense | | $ | 11,644 | | $ | 12,490 | | $ | (846) |
Accretion of debt discount and debt issuance costs | |
| 1,387 | |
| 1,350 |
| | 37 |
Total interest expense | | $ | 13,031 | | $ | 13,840 | | $ | (809) |
Interest expense incurred for the years ended December 31, 2025 and 2024, was related to our Blue Owl Loan. The decrease for the year ended December 31, 2025, was due to a decrease in the principal balance.
Gains on Acquisitions
During the year ended December 31, 2025, we recognized a gain on acquisition of HilleVax of $17.9 million, a gain on acquisition of Turnstone of $1.8 million, a gain on acquisition of Mural of $3.2 million, and a reduction to the gains on acquisitions of $1.7 million to remove a previously recognized prepaid asset for the Kinnate acquisition that occurred in the quarter ended June 30, 2024.
Change in Fair Value of Embedded Derivative Related to RPA
Throughout the year ended December 31, 2025, the estimated fair value of embedded derivatives related to RPA remained negligible. During the year ended December 31, 2024, we recognized an $8.1 million change in fair value of an embedded derivative related to RPA associated with a payment of $8.1 million for the sale of a priority review voucher by Day One, which we earned pursuant to the Viracta RPA.
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Other Income, Net
Other income, net for the years ended December 31, 2025 and 2024, was as follows (in thousands):
| | | | | | | | | |
| | Year Ended | | | |||||
| | December 31, | | | |||||
| | 2025 | | 2024 | | Change | |||
Other income, net | | | | | | | | | |
Gain on sale of equity securities | | $ | 3,663 | | $ | — | | $ | 3,663 |
Investment income | | | 3,470 | | | 6,493 | | | (3,023) |
Arranger fee from ESSA transaction | | | 3,000 | | | — | | | 3,000 |
Sublease income | | | 840 | | | 272 | | | 568 |
Unrealized gain from change in fair value of equity securities | | | 90 | | | 131 | | | (41) |
Other miscellaneous income, net | | | 1,175 | | | 25 | | | 1,150 |
Total other income, net | | $ | 12,238 | | $ | 6,921 | | $ | 5,317 |
During the year ended December 31, 2025, we recognized a gain of $3.7 million from the sale of equity securities.
The decrease of $3.0 million in investment income for the year ended December 31, 2025, as compared to 2024 was due to lower cash balances.
For the year ended December 31, 2025, the increase in other miscellaneous income, net was primarily due to $0.7 million from the HilleVax final net cash reconciliation and $0.5 million in upfront fees in connection with the sale of the legacy Kinnate assets in the second quarter of 2025, net of $0.6 million of related distributions to Kinnate CVR holders.
Income Taxes Benefit (Expense)
We recorded income tax expense of approximately $0.1 million for the year ended December 31, 2025, primarily related to the recognition of a deferred tax liability associated with the acquisitions of HilleVax and LAVA, reflecting expected withholding taxes on the anticipated repatriation of earnings from the Company’s Swiss and Australian subsidiaries. This compares to an income tax benefit of $5.7 million for the year ended December 31, 2024, primarily related to the release of valuation allowance resulting from the deferred tax liability recorded on intangible assets acquired in the Pulmokine acquisition. We continue to maintain a full valuation allowance against our net deferred tax assets. We had a total of $5.9 million of gross unrecognized tax benefits as of December 31, 2025, 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, restricted cash, and cash flow activities as of and for each of the years presented were as follows (in thousands):
| | | | | | | | | |
| | December 31, | | December 31, | | | | ||
| | 2025 | | 2024 | | Change | |||
Cash and cash equivalents | | $ | 82,908 | | $ | 101,654 | | $ | (18,746) |
Short-term restricted cash | | $ | 5,441 | | $ | 1,330 | | $ | 4,111 |
Long-term restricted cash | | $ | 45,361 | | $ | 3,432 | | $ | 41,929 |
Net increase in cash, cash equivalents, and restricted cash | | | | | | | | $ | 27,294 |
The decrease in cash and cash equivalents of $18.7 million from December 31, 2024 to December 31, 2025 was primarily driven by $50.5 million of cash received from our purchased receivables and contracts with customers offset by $22.5 million in principal and interest payments for the Blue Owl Loan, $20.7 million purchase of BioInvent intangible asset, $16.0 million repurchase of common stock, and $8.0 million in payments related to RPAs. The increase of $46.0
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million in restricted cash from December 31, 2024 to December 31, 2025 was primarily due to additions of $51.4 million of restricted cash acquired from the various acquisitions during the year, net of restricted cash changes related to the Blue Owl Loan and payments on the Boston Lease.
| | | | | | | | | |
| | Year Ended | | | |||||
| | December 31, | | | | ||||
| | 2025 | | 2024 | | Change | |||
Net cash provided by (used in) operating activities | | $ | 2,871 | | $ | (13,748) | | $ | 16,619 |
Net cash provided by (used in) investing activities | |
| 50,886 | | | (28,259) | |
| 79,145 |
Net cash used in financing activities | |
| (26,463) | |
| (11,127) | |
| (15,336) |
Net increase (decrease) in cash, cash equivalents, and restricted cash | | $ | 27,294 | | $ | (53,134) | | $ | 80,428 |
Net cash provided by operating activities was $2.9 million for the year ended December 31, 2025, compared with net cash used in operating activities of 13.7 million for the year ended December 31, 2024. The change was primarily driven by cash receipts during the year (see further details in the Capital Resources section below).
Net cash provided by investing activities was $50.9 million for the year ended December 31, 2025, compared with net cash used in investing activities of $28.3 million for the year ended December 31, 2024. The difference was primarily driven by the net cash acquired in the HilleVax acquisition of $46.4 million, net cash acquired in the LAVA acquisition of $15.3 million, the sale of equity securities for $7.0 million, net cash acquired in the Mural acquisition of $4.5 million, cash receipts from royalty and commercial payments of $3.3 million, and net cash acquired in the Turnstone acquisition of $3.9 million, partially offset by the payment for the BioInvent contract-based intangible asset of $20.7 million, payments related to the Castle Creek royalty financing of $5.0 million, and payments of contingent consideration under RPAs, CPPAs, and PIPAs of $3.0 million.
Net cash used in financing activities for the year ended December 31, 2025 was $26.5 million, compared with $11.1 million for the year ended December 31, 2024. The difference was primarily due to repurchases of common stock of $16.0 million, principal repayments on our Blue Owl Loan of $10.6 million (compared with $6.9 million in principal repayments in the year ended December 31, 2024), partially offset by net proceeds from issuances of Series B Preferred Stock of $4.0 million.
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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 years ended December 31, 2025 and 2024 (in thousands):
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Royalties and commercial payments | | | | | | |
VABYSMO | | $ | 22,507 | | $ | 16,888 |
OJEMDA | | | 6,404 | | | 1,413 |
MIPLYFFA | | | 2,884 | | | — |
IXINITY | | | 1,724 | | | 1,613 |
OTHER | | | 32 | | | 97 |
Total royalties and commercial payments | | | 33,551 | | | 20,011 |
Other receipts from purchased receivables | | | 6,000 | | | 19,250 |
Receipts from contracts with customers | | | 10,900 | | | 7,100 |
Total cash receipts | | $ | 50,451 | | $ | 46,361 |
We have historically incurred significant operating losses and as of December 31, 2025, we had an accumulated deficit of $1.2 billion. As of December 31, 2025, we had $82.9 million in unrestricted cash and cash equivalents and $50.8 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 Annual Report.
The generation of future income and revenue related to royalties and milestone payments is dependent on the achievement of product sales or milestones 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 2025 Common Stock ATM Agreement or our 2025 Series B Preferred Stock ATM Agreement (see Note 14 to the 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 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 for 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 continue to increase in 2026 in response to an anticipated increase in the volume of royalty or acquisition targets evaluated or completed.
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We have an operating lease for our headquarters in Emeryville, California that expires in April 2029. As of December 31, 2025, we expect to incur incremental undiscounted costs of $0.3 million associated with our building lease.
In September 2025, as part of the HilleVax acquisition, we acquired the Boston Lease that expires on December 31, 2032. Of the total cash we received in the HilleVax acquisition, a corresponding $40.7 million was reserved as of December 31, 2025, to pay the future Boston Lease obligations. As of December 31, 2025, undiscounted lease payments of $28.7 million were reserved as part of the restricted cash held for Boston Lease payments. If the Boston Lease is terminated, assigned, or subleased within twelve months of the HilleVax Merger Closing Date, 100% of the amount received from any subtenant will be distributed to CVR holders. If the Boston Lease is terminated, assigned, or subleased after twelve months of the HilleVax Merger Closing Date, 90% of the applicable receipts will be distributed to CVR holders.
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 year ended December 31, 2025, we repurchased a total of 648,048 shares of common stock pursuant to the stock repurchase program for $16.0 million. Our repurchases exceeded the $1.0 million annual de minimis threshold established by Internal Revenue Code Section 4501, resulting in a 1% excise tax of $68,000 for the year ended December 31, 2025, related to stock repurchases. 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 December 31, 2025, we repurchased a total of 648,708 shares of common stock pursuant to the stock repurchase program for $16.1 million.
Cash-Out Arrangement: On October 13, 2025, the compensation committee of the Board approved a cash-out arrangement for certain stock options held by Thomas Burns, our former Chief Financial Officer. In January 2026, we announced Mr. Burns’ resignation, following which the Cash-Out Agreement was terminated and no cash was disbursed.
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 December 31, 2025, XRL held restricted cash of $2.2 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 December 31, 2025, the current and non-current portion of the initial term loan was $12.5 million and $96.5 million, respectively, and $2.0 million of the restricted cash was classified as non-current.
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 this agreement, 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 consolidated balance sheet as of December 31, 2025, including the $10.0 million BioInvent
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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.
Recent Accounting Pronouncements
See Note 2 to the consolidated financial statements for information regarding new accounting pronouncements.
Item 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant, related notes and report of independent registered public accounting firm are set forth beginning on page F-1 of this Annual Report.
| | |
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) | | F-1 |
Consolidated Balance Sheets | | F-4 |
Consolidated Statements of Operations | | F-5 |
Consolidated Statements of Comprehensive Income (Loss) | | F-6 |
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity | | F-7 |
Consolidated Statements of Cash Flows | | F-8 |
Notes to the Consolidated Financial Statements | | F-10 |
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
Item 9A. 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 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 Annual 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 Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Based on this
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evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Management’s Report on Internal Control Over Financial Reporting
Management, including our Chief Executive Officer and our Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). The Company’s internal control system is designed to provide reasonable assurance to our management and Board regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the U.S.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of December 31, 2025, our internal control over financial reporting was effective.
This Annual Report does not include an attestation report from our registered public accounting firm regarding our internal control over financial reporting due to an exemption for “non-accelerated filers.”
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 the fiscal quarter ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
(b) Trading Plans
During the fiscal quarter ended December 31, 2025, no director or Section 16 officer
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this Item will be included in our proxy statement for the 2026 Annual Meeting of Stockholders (“2026 Proxy Statement”), under the sections labeled “Election of Directors,” “Information about our Executive Officers,” “Board Matters,” “
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Code of Ethics
The Company has adopted a Code of Ethics that applies to all of our employees, officers and directors including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial and principal accounting officer), or persons performing similar functions. Our Code of Ethics is posted on the Company’s website at https://investors.xoma.com/corporate-governance. We intend to satisfy the applicable disclosure requirements regarding amendments to certain provisions of the Code of Ethics, or waivers of the Code of Ethics granted to executive officers and directors, by posting such information on our website within four business days following the date of the amendment or waiver.
Item 11. EXECUTIVE COMPENSATION
Information required by this Item will be included in our 2026 Proxy Statement under the sections labeled “Compensation of Executive Officers,” “Compensation of Directors,” and “Compensation Committee Interlocks” and is incorporated by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this Item will be included in our 2026 Proxy Statement under the sections labeled “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under Equity Compensation Plans” and is incorporated by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item will be included in our 2026 Proxy Statement under the sections labeled “Board Matters” and “Transactions with Related Persons” and is incorporated by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item will be included in our 2026 Proxy Statement under the section labeled “Ratification of the Selection of the Independent Registered Public Accounting Firm” and is incorporated by reference.
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | The following documents are included as part of this Annual Report on Form 10-K: |
| (1) | Financial Statements: |
All financial statements of the Registrant referred to in Item 8 of this Annual Report on Form 10-K.
| (2) | Financial Statement Schedules: |
All financial statements schedules have been omitted because the required information is included in the consolidated financial statements or the notes thereto or is not applicable or required.
| (3) | Exhibits: |
The exhibits listed in the accompanying index to exhibits are filed, furnished, or incorporated by reference as part of this Annual Report on Form 10-K.
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| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporation By Reference | ||||||
Exhibit | | | | | | | | | | |
Number | | 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 | | 2.1 | | 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 | | 8-K | | 001-39801 | | 2.2 | | 04/03/2024 |
| | | | | | | | | | |
2.3 | | Plan of Conversion of the Company | | 8-K | | 001-39801 | | 2.1 | | 05/30/2025 |
| | | | | | | | | | |
2.4 | | Agreement and Plan of Merger, dated June 26, 2025, by and among the Company, Turnstone Biologics Corp. and XRA 3 Corp. | | 8-K | | 001-39801 | | 2.1 | | 08/15/2025 |
| | | | | | | | | | |
2.5 | | Contingent Value Rights Agreement, dated August 11, 2025, by and among the Company, Broadridge Corporate Issuer Solutions, LLC and WT Representative LLC | | 8-K | | 001-39801 | | 2.2 | | 08/15/2025 |
| | | | | | | | | | |
2.6 | | Agreement and Plan of Merger, dated August 4, 2025, by and among the Company, HilleVax, Inc. and XRA 4 Corp. | | 8-K | | 001-39801 | | 2.1 | | 09/23/2025 |
| | | | | | | | | | |
2.7 | | Contingent Value Rights Agreement, dated September 17, 2025, by and among the Company, XRA 4 Corp., Broadridge Corporate Issuer Solutions, LLC and Dr. Robert Hershberg, solely in his capacity as the initial representative, agent and attorney-in-fact of the Holders | | 8-K | | 001-39801 | | 2.2 | | 09/23/2025 |
| | | | | | | | | | |
2.8 | | Share Purchase Agreement, by and among the Company and LAVA Therapeutics N.V., dated August 3, 2025 | | 8-K | | 001-39801 | | 2.1 | | 11/21/2025 |
| | | | | | | | | | |
2.9 | | Amendment to Share Purchase Agreement, by and among the Company and LAVA Therapeutics N.V., dated October 17, 2025 | | 8-K | | 001-39801 | | 2.2 | | 11/21/2025 |
| | | | | | | | | | |
2.10 | | Form of Contingent Value Rights Agreement | | 8-K | | 001-39801 | | 2.3 | | 11/21/2025 |
| | | | | | | | | | |
2.11 | | Transaction Agreement, by and among the Company, XRA 5 Corp. and Mural Oncology plc, dated August 20, 2025 | | 8-K | | 001-39801 | | 2.1 | | 12/05/2025 |
| | | | | | | | | | |
2.12 | | Agreement and Plan of Merger, dated December 15, 2025, by and among the Company, Generation Bio Co. and XRA 7 Corp. | | 8-K | | 001-39801 | | 2.1 | | 02/09/2026 |
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|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporation By Reference | ||||||
Exhibit | | | | | | | | | | |
Number | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| | | | | | | | | | |
2.13 | | Contingent Value Rights Agreement, dated February 9, 2026, by and among the Company, XRA 7 Corp., and Broadridge Corporate Issuer Solutions, LLC. | | 8-K | | 001-39801 | | 2.2 | | 02/09/2026 |
| | | | | | | | | | |
3.1 | | Articles of Incorporation of the Company | | 8-K | | 001-39801 | | 3.1 | | 05/30/2025 |
| | | | | | | | | | |
3.2 | | Certificate of Designation of Series X Convertible Preferred Stock | | 10-Q | | 001-39801 | | 3.2 | | 08/13/2025 |
| | | | | | | | | | |
3.3 | | Certificate of Designation of 8.625% Series A Cumulative Perpetual Preferred Stock | | 10-Q | | 001-39801 | | 3.3 | | 08/13/2025 |
| | | | | | | | | | |
3.4 | | Certificate of Designation of 8.375% Series B Cumulative Perpetual Preferred Stock | | 10-Q | | 001-39801 | | 3.4 | | 08/13/2025 |
| | | | | | | | | | |
3.5 | | Certificate of Correction, dated September 23, 2025, to the Certificate of Designation of 8.375% Series B Cumulative Perpetual Preferred Stock | | 8-K | | 001-39801 | | 3.1 | | 09/26/2025 |
| | | | | | | | | | |
3.6 | | Bylaws of the Company | | 8-K | | 001-39801 | | 3.2 | | 05/30/2025 |
| | | | | | | | | | |
4.1 | | Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, and 3.6 | | | | | | | | |
| | | | | | | | | | |
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 | | 8-K | | 001-39801 | | 4.1 | | 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) | | 10-Q | | 000-14710 | | 4.7 | | 05/06/2019 |
| | | | | | | | | | |
4.5 | | Form of Warrant (December 2023) ($35.00 Exercise Price) | | 8-K | | 001-39801 | | 4.1 | | 12/19/2023 |
| | | | | | | | | | |
4.6 | | Form of Warrant (December 2023) ($42.50 Exercise Price) | | 8-K | | 001-39801 | | 4.2 | | 12/19/2023 |
| | | | | | | | | | |
4.7 | | Form of Warrant (December 2023) ($50.00 Exercise Price) | | 8-K | | 001-39801 | | 4.3 | | 12/19/2023 |
| | | | | | | | | | |
4.8 | | Form of Indenture | | S-3 | | 333-277794 | | 4.6 | | 03/08/2024 |
| | | | | | | | | | |
4.9+ | | Description of Registrant’s Securities | | | | | | | | |
| | | | | | | | | | |
10.1* | | Amended and Restated 2010 Long Term Incentive and Stock Award Plan | | 8-K | | 001-39801 | | 10.1 | | 05/30/2025 |
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| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporation By Reference | ||||||
Exhibit | | | | | | | | | | |
Number | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| | | | | | | | | | |
| | | | | | | | | | |
10.2* | | Form of Stock Option Agreement for Amended and Restated 2010 Long Term Incentive and Stock Award Plan | | 10-K | | 000-14710 | | 10.6A | | 03/14/2012 |
| | | | | | | | | | |
10.3* | | Form of Performance Stock Unit Agreement under the Amended and Restated 2010 Long Term Incentive and Stock Award Plan | | 8-K | | 001-39801 | | 10.1 | | 05/18/2023 |
| | | | | | | | | | |
10.4* | | 2016 Non-Equity Incentive Compensation Plan | | 10-Q | | 000-14710 | | 10.1 | | 05/04/2016 |
| | | | | | | | | | |
10.5* | | Amended 2015 Employee Share Purchase Plan | | 8-K | | 000-14710 | | 10.2 | | 05/24/2017 |
| | | | | | | | | | |
10.6* | | Form of Subscription Agreement and Authorization of Deduction under the 2015 Employee Stock Purchase Plan | | S-8 | | 333-204367 | | 99.2 | | 05/21/2015 |
| | | | | | | | | | |
10.7* | | Officer Employment Agreement, dated August 7, 2017, between the Company and Thomas Burns | | 10-Q | | 000-14710 | | 10.8 | | 11/06/2017 |
| | | | | | | | | | |
10.8#* | | Letter Amendment to Officer Employment Agreement dated April 1, 2022, between the Company and Thomas Burns | | 10-Q | | 001-39801 | | 10.2 | | 05/05/2022 |
| | | | | | | | | | |
10.9#* | | Letter Amendment to Officer Employment Agreement dated November 1, 2022, between the Company and Thomas Burns | | 10-K | | 001-39801 | | 10.10 | | 03/09/2023 |
| | | | | | | | | | |
10.10+* | | Separation and Consulting Agreement, dated January 15, 2026, between the Company and Thomas Burns | | | | | | | | |
| | | | | | | | | | |
10.11* | | Form of Indemnity Agreement for Directors and Officers | | 10-Q | | 001-39801 | | 10.2 | | 08/13/2025 |
| | | | | | | | | | |
10.12#* | | The Retention and Severance Plan, dated March 31, 2022 | | 10-Q | | 001-39801 | | 10.1 | | 05/05/2022 |
| | | | | | | | | | |
10.13#* | | The Amended Retention and Severance Plan, dated October 25, 2022 | | 10-K | | 001-39801 | | 10.14 | | 03/09/2023 |
| | | | | | | | | | |
10.14* | | Officer Employment Agreement, dated January 3, 2023, between the Company and Owen Hughes | | 10-K | | 001-39801 | | 10.15 | | 03/09/2023 |
| | | | | | | | | | |
10.15* | | Amended and Restated Officer Employment Agreement, dated January 8, 2024, between the Company and Owen Hughes | | 10-K | | 001-39801 | | 10.16 | | 3/8/2024 |
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| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporation By Reference | ||||||
Exhibit | | | | | | | | | | |
Number | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| | | | | | | | | | |
10.16* | | Officer Employment Agreement, dated January 3, 2023, between the Company and Bradley Sitko | | 10-K | | 001-39801 | | 10.16 | | 03/09/2023 |
| | | | | | | | | | |
10.17+* | | Officer Employment Agreement, dated January 12, 2026, between the Company and Jeffrey Trigilio | | | | | | | | |
| | | | | | | | | | |
10.18* | | Inducement Stock Option Agreement, by and between the Company and Owen Hughes | | S-8 | | 333-269459 | | 99.2 | | 01/30/2023 |
| | | | | | | | | | |
10.19* | | Inducement Stock Option Agreement, by and between the Company and Owen Hughes | | S-8 | | 333-269459 | | 99.3 | | 01/30/2023 |
| | | | | | | | | | |
10.20* | | Inducement Stock Option Agreement, by and between the Company and Bradley Sitko | | S-8 | | 333-269459 | | 99.4 | | 01/30/2023 |
| | | | | | | | | | |
10.21* | | Inducement Stock Option Agreement, by and between the Company and Bradley Sitko | | S-8 | | 333-269459 | | 99.5 | | 01/30/2023 |
| | | | | | | | | | |
10.22† | | License Agreement, dated December 6, 2017, between XOMA (US) LLC and Rezolute, Inc. (formerly AntriaBio) | | 10-K | | 000-14710 | | 10.66 | | 03/07/2018 |
| | | | | | | | | | |
10.23† | | Amendment No. 1, dated March 30, 2018, to the License Agreement, dated December 6, 2017, between XOMA (US) LLC and Rezolute, Inc. (formerly AntriaBio, Inc.) | | 10-Q | | 000-14710 | | 10.1 | | 05/09/2018 |
| | | | | | | | | | |
10.24† | | Amendment No. 2, dated January 7, 2019, to the License Agreement, dated December 6, 2017, between XOMA (US) LLC and Rezolute, Inc. (formerly AntriaBio) | | 10-K | | 000-14710 | | 10.71 | | 03/07/2019 |
| | | | | | | | | | |
10.25 | | Amendment No. 3, dated March 31, 2020, to the License Agreement, dated December 6, 2017, between XOMA (US) LLC and Rezolute, Inc. (formerly AntriaBio) | | 10-Q | | 000-14710 | | 10.2 | | 05/05/2020 |
| | | | | | | | | | |
10.26# | | Commercial Payment Purchase Agreement, dated October 6, 2021, by and among XOMA (US) LLC and Affitech Research AS | | 10-K | | 001-39801 | | 10.48 | | 03/08/2021 |
| | | | | | | | | | |
10.27# | | Royalty Purchase Agreement dated March 22, 2021 between XOMA (US) LLC and Viracta Therapeutics, Inc. | | 10-Q | | 001-39801 | | 10.1 | | 05/06/2021 |
| | | | | | | | | | |
10.28 | | Amendment No. 1, dated March 4, 2024, to the Royalty Purchase Agreement dated March 22, 2021 between XOMA (US) LLC and Viracta Therapeutics, Inc. | | 10-K | | 001-39801 | | 10.30 | | 03/17/2025 |
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| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporation By Reference | ||||||
Exhibit | | | | | | | | | | |
Number | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| | | | | | | | | | |
| | | | | | | | | | |
10.29# | | Assignment and Assumption Agreement, dated as of June 21, 2023, by and between XOMA (US) LLC and LadRx Corporation | | 10-Q | | 001-39801 | | 10.3 | | 08/08/2023 |
| | | | | | | | | | |
10.30# | | Royalty Purchase Agreement, dated as of June 21, 2023, by and between XOMA (US) LLC and LadRx Corporation | | 10-Q | | 001-39801 | | 10.4 | | 08/08/2023 |
| | | | | | | | | | |
10.31 | | Amendment No. 1, dated June 3, 2024, to the Royalty Purchase Agreement, dated as of June 21, 2023, by and between XOMA (US) LLC and LadRx Corporation | | 10-K | | 001-39801 | | 10.34 | | 03/17/2025 |
| | | | | | | | | | |
10.32# | | Loan Agreement dated December 15, 2023, between XRL 1 LLC, the lenders from time to time party thereto and Blue Owl Capital Corporation | | 10-K | | 001-39801 | | 10.63 | | 03/08/2024 |
| | | | | | | | | | |
10.33# | | Sale, Contribution and Servicing Agreement dated as of December 15, 2023 by and among XOMA (US) LLC, as Seller, and solely for purposes of Section 2.03 and Section 4.03(b)(ii) therein, the Company, as Parent, on the one hand and XRL 1 LLC, as Purchaser, on the other hand | | 10-K | | 001-39801 | | 10.64 | | 03/08/2024 |
| | | | | | | | | | |
10.34# | | Office Lease dated June 27, 2023 between KBSIII Towers at Emeryville, LLC and XOMA (US) LLC | | 10-K | | 001-39801 | | 10.65 | | 03/08/2024 |
| | | | | | | | | | |
10.35# | | Net Office Lease dated August 5, 2021 between Presidio Trust and Kinnate Biopharma Inc. | | 10-Q | | 001-39801 | | 10.1 | | 08/13/2024 |
| | | | | | | | | | |
10.36# | | Letter Agreement dated August 26, 2021 between Presidio Trust and Kinnate Biopharma Inc. | | 10-Q | | 001-39801 | | 10.2 | | 08/13/2024 |
| | | | | | | | | | |
10.37# | | Landlord Consent to Assignment and Assumption of Lease dated February 1, 2024 by and among Presidio Trust, Kinnate Biopharma Inc., and Eventbrite, Inc. | | 10-Q | | 001-39801 | | 10.3 | | 08/13/2024 |
| | | | | | | | | | |
10.38 | | Sales Agreement, dated October 3, 2025, by and between the Company and Leerink Partners LLC | | 8-K | | 001-39801 | | 1.1 | | 10/03/2025 |
| | | | | | | | | | |
10.39 | | Sales Agreement, dated October 3, 2025, by and between the Company and H.C. Wainwright & Co., LLC | | 8-K | | 001-39801 | | 1.2 | | 10/03/2025 |
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| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporation By Reference | ||||||
Exhibit | | | | | | | | | | |
Number | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date |
| | | | | | | | | | |
19.1 | | Insider Trading Policy | | 10-K | | 001-39801 | | 19.1 | | 03/17/2025 |
| | | | | | | | | | |
21.1+ | | Subsidiaries of the Company | | | | | | | | |
| | | | | | | | | | |
23.1+ | | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm | | | | | | | | |
| | | | | | | | | | |
24.1+ | | Power of Attorney (included on the signature page of this report) | | | | | | | | |
| | | | | | | | | | |
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 | | | | | | | | |
| | | | | | | | | | |
97 | | Incentive Compensation Clawback Policy | | 10-K | | 001-39801 | | 97 | | 03/08/2024 |
| | | | | | | | | | |
101.INS+ | | Inline XBRL Instance Document | | | | | | | | |
| | | | | | | | | | |
101.SCH+ | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | |
| | | | | | | | | | |
101.CAL+ | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | |
| | | | | | | | | | |
101.DEF+ | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | |
| | | | | | | | | | |
101.LAB+ | | Inline XBRL Taxonomy Extension Labels Linkbase Document | | | | | | | | |
| | | | | | | | | | |
101.PRE+ | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | |
| | | | | | | | | | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | |
† Confidential treatment has been granted with respect to certain portions of this exhibit. This exhibit omits the information subject to this confidentiality request. Omitted portions have been filed separately with the SEC.
* Indicates a management contract or compensation plan or arrangement.
+ Filed herewith.
# Portions of this exhibit have been omitted as the Registrant has determined that (i) the omitted information is not material and (ii) the omitted material is of the type that the Registrant treats as private or confidential.
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| (1) | Furnished herewith. The certifications that accompany this Annual Report on Form 10-K 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 Annual Report on Form 10-K), irrespective of any general incorporation language contained in such filing. |
Item 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on this 18th day of March 2026.
| | |
| XOMA Royalty Corporation | |
| | |
| By: | /s/ OWEN HUGHES |
| | Owen Hughes |
| | Chief Executive Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Owen Hughes and Jeffrey Trigilio, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | |
Signature | | Title | | Date |
| | | | |
/s/ Owen Hughes | | Chief Executive Officer and Director (Principal Executive Officer) | | March 18, 2026 |
(Owen Hughes) | | | | |
| | | | |
/s/ Jeffrey Trigilio | | Chief Financial Officer | | March 18, 2026 |
(Jeffrey Trigilio) | | (Principal Financial and Principal Accounting Officer) | | |
| | | | |
/s/ Jack L. Wyszomierski | | Chairman of the Board | | March 18, 2026 |
(Jack L. Wyszomierski) | | | | |
| | | | |
/s/ Heather L. Franklin | | Director | | March 18, 2026 |
(Heather L. Franklin) | | | | |
| | | | |
/s/ Natasha Hernday | | Director | | March 18, 2026 |
(Natasha Hernday) | | | | |
| | | | |
/s/ Barbara Kosacz | | Director | | March 18, 2026 |
(Barbara Kosacz) | | | | |
| | | | |
/s/ Joseph M. Limber | | Director | | March 18, 2026 |
(Joseph M. Limber) | | | | |
| | | | |
/s/ Matthew Perry | | Director | | March 18, 2026 |
(Matthew Perry) | | | | |
| | | | |
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Index to Consolidated Financial Statements
| | |
Report of Independent Registered Public Accounting Firm (PCAOB ID No. | | F-1 |
Consolidated Balance Sheets | | F-4 |
Consolidated Statements of Operations | | F-5 |
Consolidated Statements of Comprehensive Income (Loss) | | F-6 |
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity | | F-7 |
Consolidated Statements of Cash Flows | | F-8 |
Notes to the Consolidated Financial Statements | | F-10 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of XOMA Royalty Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of XOMA Royalty Corporation and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), convertible preferred stock and stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
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we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Royalty and commercial payment receivables and Income from purchased receivables under the effective interest rate (“EIR”) method — Refer to Notes 2 and 4 to the financial statements
Critical Audit Matter Description
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 (“royalty and commercial payment receivables”) currently in clinical development or recently commercialized. The carrying value of the total royalty and commercial payment receivables is $83.1 million as of December 31, 2025. For the year ended December 31, 2025, the Company recognized income from purchased receivables under the EIR method of $26.7 million. As explained in Note 2 to the consolidated financial statements, the Company accounts for royalty and commercial payment receivables either on a non-accrual basis using the cost recovery method or at amortized cost under the prospective EIR 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 under the prospective EIR method. Additionally, management assesses all royalty and commercial payment receivables for current expected credit losses at each reporting date.
We identified the decision to account for a specific royalty and commercial payment receivable prospectively under the EIR method, the estimated cash flows used within the EIR method and the evaluation of expected credit losses as a critical audit matter. This determination was due to the judgments and assumptions used by management to estimate the future cash flows of each royalty and commercial payment receivable. Auditing the estimated future cash flows of the royalty and commercial payment receivables and related income recognized under the EIR method involved complex auditor judgment, because the assumptions used by management to estimate the expected cash flows from the underlying royalty and commercial payment receivable are affected by changes in market conditions such as commercial product growth in global economies, industry trends, product life cycles, regulatory approval in geographical areas, discontinuation of certain indications or geographic areas, and royalty duration.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of assumptions used in the Company’s estimated cash flows used for those royalty and commercial payment receivables accounted for under the EIR method, as well as the evaluation of assumptions used in the Company’s credit loss assessment of the royalty and commercial payment receivables under both the EIR and cost recovery methods, included the following, among others:
· We evaluated the methodology and completeness and accuracy of the key assumptions used by management to forecast the expected cash flows of the Company’s royalty and commercial payment receivables to assess whether those expected cash flows were reliably estimable. Our procedures included comparing past forecasts to actual results, where applicable, and comparing the expected cash flows to information from partners, third-party analyst reports or other published sales information. We compared the royalty duration utilized within the expected cash flows to the original
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purchase agreements and confirmed the terms of those original purchase agreements, and any subsequent amendments, with the counterparty.
· We recalculated the effective interest rate and associated income from purchase receivables under the EIR method.
· We evaluated the Company’s assessment of expected credit losses by developing an independent expectation of expected credit losses through research of third-party disclosures and clinical trial news for programs associated with the milestone and royalty rights and comparing such expectation to those included in the Company’s analysis.
· We inspected the Company’s documentation of inquiries and written correspondence to obtain program updates from the selling parties of the milestone and royalty rights throughout the year and through the Company’s reporting date and confirmed with the selling parties of the milestone and royalty rights that complete information known to the selling party regarding the associated research programs was provided timely, completely, and accurately to the Company.
/s/
March 18, 2026
We have served as the Company's auditor since 2018.
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XOMA ROYALTY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| | | | | | |
| | December 31, | | December 31, | ||
| | 2025 | | 2024 | ||
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
Short-term restricted cash | | | | | | |
Investment in equity securities | | | | | | |
Trade and other receivables, net | |
| | |
| |
Short-term royalty and commercial payment receivables under the EIR method | | | | | | |
Short-term royalty and commercial payment receivables under the cost recovery method | | | — | | | |
Prepaid expenses and other current assets | |
| | |
| |
Total current assets | |
| | |
| |
| | | | | | |
Long-term restricted cash | | | | |
| |
Property and equipment, net | |
| | |
| |
Operating lease right-of-use assets | | | | | | |
Long-term royalty and commercial payment receivables under the EIR method | |
| | |
| |
Long-term royalty and commercial payment receivables under the cost recovery method | | | | | | |
Exarafenib milestone asset (Note 6) | |
| | |
| |
Investment in warrants | | | | | | — |
Intangible assets, net | | | | | | |
Other assets - long term | |
| | |
| |
Total assets | | $ | | | $ | |
| | | | | | |
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | | | $ | |
Accrued and other current liabilities | |
| | |
| |
Contingent consideration under RPAs, AAAs, and CPPAs | | | — | | | |
Operating lease liabilities | | | | | | |
Unearned revenue recognized under units-of-revenue method | |
| | |
| |
Preferred stock dividend accrual | | | | | | |
Current portion of long-term debt | | | | | | |
Contingent value rights liabilities - current portion | | | | | | — |
Total current liabilities | |
| | |
| |
Unearned revenue recognized under units-of-revenue method – long-term | |
| | |
| |
Exarafenib milestone contingent consideration (Note 6) | | | | | | |
Long-term operating lease liabilities | | | | | | |
Long-term debt | | | | | | |
Contingent value rights liabilities – long-term | | | | | | — |
Deferred tax liability | | | | | | — |
Total liabilities | |
| | |
| |
| | | | | | |
Commitments and Contingencies (Note 11) | | | | | | |
| | | | | | |
Convertible preferred stock, $ | |
| | |
| |
| | | | | | |
Stockholders’ equity: | | | | | | |
| | | | | | |
| | — | |
| — | |
Common stock, $ | |
| | |
| |
Additional paid-in capital | |
| | |
| |
Accumulated other comprehensive income | | | | | | |
Accumulated deficit | |
| ( | |
| ( |
Total stockholders’ equity | |
| | |
| |
Total liabilities, convertible preferred stock and stockholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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XOMA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Income and revenues: | | | | | | |
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 units-of-revenue method | |
| | |
| |
Total income and revenues | |
| | |
| |
| | | | | | |
Operating expenses: | |
| | |
| |
Research and development | |
| | |
| |
General and administrative | |
| | |
| |
Credit losses on purchased receivables | | | — | | | |
Amortization of intangible assets | | | | | | |
Total operating expenses | |
| | |
| |
| | | | | | |
Income (loss) from operations | |
| | |
| ( |
| | | | | | |
Other income (expense), net: | |
| | |
| |
Gains on acquisitions | | | | | | |
Change in fair value of embedded derivative related to RPA | | | — | | | |
Interest expense | |
| ( | |
| ( |
Other income, net | |
| | |
| |
Net income (loss) before tax | | | | | | ( |
Income tax (expense) benefit | | | ( | | | |
Net income (loss) | | $ | | | $ | ( |
| | | | | | |
Net income (loss) available to (attributable to) common stockholders (Note 13): | | | | | | |
Basic | | $ | | | $ | ( |
Diluted | | $ | | | $ | ( |
| | | | | | |
Net income (loss) per share available to (attributable to) common stockholders: | | | | | | |
Basic | | $ | | | $ | ( |
Diluted | | $ | | | $ | ( |
| | | | | | |
Weighted-average shares used in computing net income (loss) per share available to (attributable to) common stockholders: | | | | | | |
Basic | | | | | | |
Diluted | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
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XOMA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Net income (loss) | | $ | | | $ | ( |
Net unrealized (loss) gain on available-for-sale debt securities | | | ( | | | |
Comprehensive income (loss) | | $ | | | $ | ( |
The accompanying notes are an integral part of these consolidated financial statements
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XOMA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Convertible | | | Series A | | Series B | | | | Additional | | Accumulated | | | | Total | ||||||||||||||||
| Preferred Stock | | | Preferred Stock | | Preferred Stock | | Common Stock | | Paid-In | | Other Comprehensive | | Accumulated | | Stockholders’ | ||||||||||||||||
| Shares | | Amount | | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| Capital | | Income | | Deficit | | Equity | ||||||||
Balance, December 31, 2024 | | | $ | | | | | | $ | | | | | $ | — |
| | | $ | | | $ | | | $ | | | $ | ( | | $ | |
Exercise of stock options | — | | | — | | | — | | | — | | — | | | — | | | | | | | | | | | — | | | — | | | |
Stock-based compensation expense — equity-classified | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
Issuance of common stock related to 401(k) contribution and ESPP | — | | | — | | | — | | | — | | — | | | — | | | | | — | | | | | | — | | | — | | | |
Issuance of common stock related to RSUs | — | | | — | | | — | | | — | | — | | | — | | | | | — | | | — | | | — | | | — | | | — |
Issuance of common stock related to PSUs | — | | | — | | | — | | | — | | — | | | — | | | | | | | | ( | | | — | | | — | | | — |
Repurchase of common stock | — | | | — | | | — | | | — | | — | | | — | | ( | | | ( | | | — | | | — | | | ( | | | ( |
Issuance of common stock under ATM, net of financing costs of $ | — | | | — | | | — | | | — | | — | | | — | | | | | — | | | — | | | — | | | — | | | — |
Reclassification of equity classified awards to liability classified awards | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | ( | | | — | | | — | | | ( |
Issuance of Series B Preferred Stock under ATM, net of financing costs of $ | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
Preferred stock dividends | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | ( | | | — | | | — | | | ( |
Net unrealized loss on available-for-sale debt securities | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | — | | | ( | | | — | | | ( |
Net income | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | | | | |
Balance, December 31, 2025 | | | $ | | | | | | $ | | | | | $ | — |
| | | $ | | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Convertible | | | Series A | | Series B | | | | Additional | | Accumulated | | | | Total | ||||||||||||||||
| Preferred Stock | | | Preferred Stock | | Preferred Stock | | Common Stock | | Paid-In | | Other Comprehensive | | Accumulated | | Stockholders’ | ||||||||||||||||
| Shares | | Amount | | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| Capital | | Income | | Deficit | | Equity | ||||||||
Balance, December 31, 2023 | | | $ | | | | | | $ | | | | | $ | — |
| | | $ | | | $ | | | $ | — | | $ | ( | | $ | |
Exercise of stock options | — | |
| — | | | — | |
| — | | — | |
| — |
| | | | | |
| | |
| — | |
| — | |
| |
Stock-based compensation expense — equity-classified | — | |
| — | | | — | |
| — | | — | |
| — |
| — | | | — | |
| | |
| — | |
| — | |
| |
Issuance of common stock related to 401(k) contribution and ESPP | — | |
| — | | | — | |
| — | | — | |
| — |
| | | | | |
| | |
| — | |
| — | |
| |
Issuance of common stock related to PSUs | — | | | — | | | — | | | — | | — | | | — | | | | | | | | — | | | — | | | — | | | |
Repurchase of common stock | — | | | — | | | — | | | — | | — | | | — | | ( | | | — | | | — | | | — | | | ( | | | ( |
Preferred stock dividends | — | |
| — | | | — | |
| — | | — | |
| — |
| — | | | — | |
| ( | |
| — | |
| — | |
| ( |
Net unrealized gain on available-for-sale debt securities | — | | | — | | | — | | | — | | — | | | — | | — | | | — | | | — | | | | | | — | | | |
Net loss | — | |
| — | | | — | |
| — | | — | |
| — |
| — | | | — | |
| — | |
| — | |
| ( | |
| ( |
Balance, December 31, 2024 | | | $ | | | | | | $ | | | | | $ | — |
| | | $ | | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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XOMA ROYALTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Cash flows from operating activities: | | | | | | |
Net income (loss) | | $ | | | $ | ( |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | |
Adjustment for income from EIR method purchased receivables | | | ( | | | ( |
Stock-based compensation expense | |
| | |
| |
Gains on acquisitions | | | ( | | | ( |
Credit losses on purchased receivables | | | — | | | |
Gain on sale of equity securities | | | ( | | | — |
Income tax expense (benefit) | | | | | | ( |
Common stock contribution to 401(k) | | | | | | |
Amortization of intangible assets | | | | | | |
Depreciation | |
| | |
| |
Accretion of long-term debt discount and debt issuance costs | | | | | | |
Non-cash lease expense | |
| | |
| |
Change in fair value of equity securities | |
| ( | |
| ( |
Change in fair value of available-for-sale debt securities classified as cash equivalents | | | ( | | | |
Change in fair value of derivatives | | | ( | | | — |
CVR liability working capital adjustment | | | ( | | | — |
Changes in assets and liabilities: | |
| | | | |
Trade and other receivables, net | |
| ( | |
| ( |
Prepaid expenses and other assets | | | | | | |
Accounts payable and accrued liabilities | |
| ( | |
| |
Operating lease liabilities | | | ( | | | ( |
Unearned revenue recognized under units-of-revenue method | |
| ( | |
| ( |
Net cash provided by (used in) operating activities | |
| | |
| ( |
| | | | | | |
Cash flows from investing activities: | | | | | | |
Net cash acquired in Kinnate acquisition | | | — | | | |
Net cash acquired in Turnstone acquisition | | | | | | — |
Net cash and restricted cash acquired in HilleVax acquisition | | | | | | — |
Net cash, cash equivalents, and restricted cash acquired in LAVA acquisition | | | | | | — |
Net cash and cash equivalents acquired in Mural acquisition | | | | | | — |
Payments of consideration under RPAs, AAAs, and CPPAs | | | ( | | | ( |
Receipts under RPAs, AAAs, and CPPAs | | | | | | |
Net payment for IP acquired under the Pulmokine Acquisition | | | — | | | ( |
Payment for BioInvent contract-based intangible asset | | | ( | | | — |
Payment of contingent consideration related to Kinnate IP asset | | | ( | | | — |
Purchase of property and equipment | | | — | | | ( |
Purchase of equity securities | | | ( | | | ( |
Sale of equity securities | | | | | | — |
Payment to issue short-term loan to Xeno | | | ( | | | — |
Receipt from short-term loan repayment by Xeno | | | | | | — |
Net cash provided by (used in) investing activities | |
| | |
| ( |
| | | | | | |
Cash flows from financing activities: | | | | | | |
Proceeds from issuance of common stock | | | | | | — |
Proceeds from issuance of preferred stock | | | | | | — |
Payments of preferred and common stock issuance and financing costs | | | ( | | | — |
Principal payments – debt | | | ( | | | ( |
Debt issuance costs and loan fees paid in connection with long-term debt | | | ( | | | ( |
Payment of preferred stock dividends | | | ( | | | ( |
Repurchases of common stock | |
| ( | |
| ( |
Proceeds from exercise of options and other share-based compensation | | | | | | |
Taxes paid related to net share settlement of equity awards | |
| ( | |
| ( |
Net cash used in financing activities | |
| ( | |
| ( |
| | | | | | |
Net increase (decrease) in cash, cash equivalents, and restricted cash | |
| | |
| ( |
Cash, cash equivalents, and restricted cash as of the beginning of the period | |
| | |
| |
Cash, cash equivalents, and restricted cash as of the end of the period | | $ | | | $ | |
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| | | | | | |
Supplemental cash flow information: | | | | | | |
Cash paid for interest | | $ | | | $ | |
Cash paid for taxes | | $ | | | $ | — |
| | | | | | |
Non-cash investing and financing activities: | | | | | | |
Accrual of contingent value rights liability in the Turnstone acquisition | | $ | | | $ | — |
Accrual of contingent value rights liability in the HilleVax acquisition | | $ | | | $ | — |
Accrual of contingent value rights liability in the LAVA acquisition | | $ | | | $ | — |
Right-of-use assets obtained in exchange for operating lease liabilities in the HilleVax acquisition | | $ | | | $ | — |
Relative fair value basis reduction of right-of-use assets in the HilleVax acquisition | | $ | ( | | $ | — |
Transaction costs in connection with Mural acquisition included in accrued expenses | | $ | | | $ | — |
Excise tax accrual due to stock repurchases | | $ | | | $ | — |
Reclassification of equity classified awards to liabilities | | $ | ( | | $ | — |
Reclassification of deferred issuance cost to equity | | $ | | | $ | — |
Preferred stock dividend accrual | | $ | | | $ | |
Estimated fair value of the Exarafenib milestone asset | | $ | — | | $ | |
Estimated fair value of the Exarafenib milestone contingent consideration | | $ | — | | $ | ( |
Right-of-use assets obtained in exchange for operating lease liabilities in the Kinnate acquisition | | $ | — | | $ | |
Relative fair value basis reduction of rights-of-use assets in the Kinnate acquisition | | $ | — | | $ | ( |
Accrual of contingent consideration under the Affitech CPPA | | $ | — | | $ | |
Accrual of contingent consideration under the LadRx AAA | | $ | — | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
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XOMA Royalty Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
XOMA Royalty Corporation, a Nevada corporation, is a royalty aggregator with a sizable portfolio of economic rights to future potential milestone and royalty payments associated with 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 acquisition of 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 December 31, 2025, the Company had cash, cash equivalents, and restricted cash of $
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
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying 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 accompanying consolidated financial statements were prepared in accordance with U.S. GAAP for financial information and with the instructions to Form 10-K and Article 10 of Regulation S-X.
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, fair value and useful life of intangible assets acquired in asset acquisitions, contingent consideration for asset acquisitions, the Exarafenib milestone asset and contingent consideration, contingent consideration for purchased receivables, fair value and amortization of the Blue Owl Loan, accrued expenses, stock-based compensation, share-based liability, 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.
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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 recognized under the units-of-revenue method, 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 or third parties 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 consolidated statements of cash flows (in thousands):
| | | | | | |
| | December 31, | | December 31, | ||
| | 2025 | | 2024 | ||
Unrestricted cash | | $ | | | $ | |
Unrestricted cash equivalents | | | | | | |
Total unrestricted cash and cash equivalents | | $ | | | $ | |
Short-term restricted cash | | | | | | |
Long-term restricted cash | | | | | | |
Total restricted cash | | $ | | | $ | |
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.
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 December 31, 2025, all investments in debt securities were held in U.S. treasury bills and classified as available-for-sale. There was
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Cash equivalents classified as available-for-sale debt securities consisted of the following (in thousands):
| | | | | | | | | | | | |
| | December 31, 2025 | ||||||||||
| | Amortized | | Unrealized | | Unrealized | | Estimated Fair | ||||
| | Cost Basis | | Gains | | Losses | | Value | ||||
U.S. treasury bills | | $ | | | $ | | | $ | — | | $ | |
Total debt securities | | $ | | | $ | | | $ | — | | $ | |
| | | | | | | | | | | | |
| | December 31, 2024 | ||||||||||
| | Amortized | | Unrealized | | Unrealized | | Estimated Fair | ||||
| | Cost Basis | | Gains | | Losses | | Value | ||||
U.S. treasury bills | | $ | | | $ | | | $ | — | | $ | |
Total debt securities | | $ | | | $ | | | $ | — | | $ | |
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 lease payments pursuant to the Boston Lease, tax reserve matter expenses pursuant to the LAVA Purchase Agreement, and interest expense, administrative fees, and other allowable expenses pursuant to the Blue Owl Loan. On December 15, 2023, XRL deposited $
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, the shortfall in interest payment would be paid 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 $
Restricted cash consisted of the following (in thousands):
| | | | | | |
| | December 31, | | December 31, | ||
| | 2025 | | 2024 | ||
Short-term restricted cash held for Blue Owl Loan | | $ | | | $ | |
Short-term restricted cash held for Boston Lease payments | | | | | | — |
Total short-term restricted cash | | $ | | | $ | |
| | | | | | |
Long-term restricted cash held for Blue Owl Loan | | | | | | |
Long-term restricted cash held for Boston Lease security deposit | | | | | | — |
Long-term restricted cash held for Boston Lease payments | | | | | | — |
Long-term restricted cash held for LAVA Tax Reserve payments | | | | | | — |
Total long-term restricted cash | | $ | | | $ | |
Total restricted cash | | $ | | | $ | |
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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.
For the year ended December 31, 2025,
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 4). 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 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 $
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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 has 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 consolidated balance sheet and totaled $
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.
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Effective Interest Rate Method
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.
Cost Recovery Method
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
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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.
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.
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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 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.
For equity-classified awards, total compensation cost is based on the grant date fair value. 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. For liability-classified awards, total compensation cost is based on the fair value of the award on the date the award is granted and is subsequently re-measured at each reporting date until settlement.
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.
Investment in Equity Securities
The Company holds equity securities in publicly traded companies. Equity investments in publicly traded companies are classified in the 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 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 consolidated statement of operations in the period of sale.
Investment in Warrants
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 in 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 consolidated balance sheets and as a component of other income, net on the 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
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value of net assets acquired to certain qualifying assets, exceeds the total cost of the acquisition, a bargain purchase gain is recognized in gain on acquisitions within other income (expense), net in the 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 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 and made soon after the acquisition are reflected as investing cash flows, and as financing activities thereafter, in the Company’s consolidated statements of cash flows.
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 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 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 consolidated statements of operations. After an impairment or adjustment to the right-of-use assets, the remaining right-of-use assets will be amortized on a straight-line basis over the remaining lease term. The operating lease would no longer qualify for the straight-line treatment of total lease expense, but the right-of-use assets reduction and interest accretion related to the operating lease liability will continue to be combined as a single lease expense.
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. Variable non-lease components are recognized in rent expense when incurred.
The Company has also elected not to record on the 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.
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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 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 9.
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 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 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
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.
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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.
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 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.
Functional Currency
The functional and reporting currency of the Company and its subsidiaries is the U.S. dollar. Certain acquired companies had operations that reported in a functional currency other than the U.S. dollar. Following the acquisitions, the Company plans to manage the net assets acquired in aggregate and centrally in the U.S. As such, the acquired companies’ functional currency will become the U.S. dollar upon completion of the post-acquisition integration.
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 $
In accordance with SAB No. 99, Topic 1.M, SAB No. 108, Topic 1.N, and ASC 250, 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 consolidated balance sheet as of December 31, 2024 as well as the statement of stockholders’ equity for the year ended December 31, 2024 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 $
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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
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. The Company
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
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
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
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adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient that allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted, including periods for which financial statements have not been issued or made available for issuance. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606), which refines the scope of derivative accounting to exclude certain non-exchange-traded contracts with underlyings based on the operations or activities specific to one of the parties to the contract and clarifies the accounting for share-based noncash consideration in revenue contracts under ASC 606. ASU 2025-07 is effective for annual periods beginning after December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted. Transition can be applied prospectively to new contracts or on a modified retrospective basis. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans, which introduces the concept of Purchased Seasoned Loans (PSLs) and requires these loans to be accounted for using the gross-up approach. The ASU also permits a policy election to measure expected credit losses using amortized cost rather than the unpaid principal balance for PSLs. ASU 2025-08 is effective for annual periods beginning after December 15, 2026, and interim periods within those annual reporting periods. 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 December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which makes narrow-scope improvements to clarify the applicability and enhance the navigability of interim reporting guidance. The ASU consolidates existing interim disclosure requirements from other ASC topics, and introduces a principle requiring disclosure of events and changes since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim periods within fiscal years beginning after December 15, 2027, for public business entities, and for interim periods within fiscal years beginning after December 15, 2028 for other entities. Early adoption is permitted. Transition may be applied prospectively or retrospectively. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which addresses suggestions received from stakeholders regarding the ASC and makes other incremental improvements to U.S. GAAP. The update represents changes to the codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
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3. Consolidated Financial Statement Details
Investment in Equity Securities
As of December 31, 2025 and 2024, investment in equity securities was $
Intangible Assets, Net
The following table summarizes the cost, accumulated amortization, and net carrying value of the Company’s intangible assets as of December 31, 2025 (in thousands):
| | | | | | | | | |
| | | | Accumulated | | Net Carrying | |||
| | Cost | | Amortization | | Value | |||
As of December 31, 2025 | | | | | | | | | |
Pulmokine - Seralutinib IP (Note 6) | | $ | | | $ | | | $ | |
BioInvent - Contract-based Intangible Asset (Note 5) | | | | | | | | | |
LAVA - Partnered Program IPs (Note 6) | | | | | | | | | |
LAVA-1266 IP (Note 6) | | | | | | | | | |
Total intangible assets | | $ | | | $ | | | $ | |
The following table summarizes the cost, accumulated amortization and net carrying value of the Company’s intangible assets as of December 31, 2024 (in thousands):
| | | | | | | | | |
| | | | Accumulated | | Net Carrying | |||
| | Cost | | Amortization | | Value | |||
As of December 31, 2024 | | | | | | | | | |
Pulmokine - Seralutinib IP (Note 6) | | $ | | | $ | | | $ | |
Total intangible assets | | $ | | | $ | | | $ | |
The estimated remaining life of the intangible assets ranges from
| | | |
| | Intangible Asset | |
| | Amortization | |
2026 | | $ | |
2027 | | | |
2028 | | | |
2029 | | | |
2030 | | | |
Thereafter | | | |
Total | | $ | |
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Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following (in thousands):
| | | | | | |
| | December 31, | | December 31, | ||
| | 2025 | | 2024 | ||
Share-based liability | | $ | | | $ | — |
Accrued short-term interest payable | | | | | | |
Accrued legal and accounting fees | | | | | | |
Accrued incentive compensation | | | | | | |
Accrued payroll and benefits | | | | | | |
Accrued clinical liabilities | | | — | | | |
Income taxes payable in connection with Pulmokine acquisition | | | — | | | |
Other accrued liabilities | |
| | |
| |
Total | | $ | | | $ | |
Other Income, Net
Other income, net for the years ended December 31, 2025 and 2024 was as follows (in thousands):
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Other income, net | | | | | | |
Gain on sale of equity securities | | $ | | | $ | — |
Investment income | | | | | | |
Arranger fee from ESSA transaction | | | | | | — |
Sublease income | | | | | | |
Unrealized gain from change in fair value of equity securities | | | | | | |
Other miscellaneous income, net | | | | | | |
Total other income, net | | $ | | | $ | |
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4. 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 year ended December 31, 2025 (in thousands):
| | | | | | | | | | | | | | | |
| | | Balance as of January 1, 2025 | | | Acquisition of Royalty and Commercial Payment Receivables | | | Receipt of Royalty and Commercial Payments | | | Reclassification of Royalty and Commercial Payment Receivables from the Cost Recovery to the EIR Method | | | Balance as of December 31, 2025 |
Twist | | $ | | | $ | — | | $ | — | | $ | — | | $ | |
Daré (XACIATO) | | | | | | — | | | ( | | | — | | | |
LadRx (MIPLYFFA) | | | | | | — | | | ( | | | ( | | | — |
Palobiofarma | | | | | | — | | | — | | | — | | | |
Kuros | | | | | | — | | | — | | | — | | | |
Castle Creek | | | — | | | | | | — | | | — | | | |
Total | | $ | | | $ | | | $ | ( | | $ | ( | | $ | |
The following table summarizes the royalty and commercial payment receivable activities under the cost recovery method during the year ended December 31, 2024 (in thousands):
| | | | | | | | | | | | | | | | | | | | | |
| | | Balance as of January 1, 2024 | | | Acquisition of Royalty and Commercial Payment Receivables | | | Receipt of Royalty and Commercial Payments | | | Recognition of Contingent Consideration | | | Credit Losses on Purchased Receivables | | | Reclassification of Royalty and Commercial Payment Receivables from the Cost Recovery to the EIR Method | | | Balance as of December 31, 2024 |
Twist | | $ | — | | $ | | | $ | — | | $ | — | | $ | — | | $ | — | | $ | |
Daré | | | — | | | | | | ( | | | — | | | — | | | — | | | |
Talphera | | | — | | | | | | ( | | | — | | | ( | | | — | | | — |
LadRx | | | | | | — | | | ( | | | | | | — | | | — | | | |
Aptevo | | | | | | — | | | ( | | | — | | | — | | | ( | | | — |
Agenus | | | | | | — | | | — | | | — | | | ( | | | — | | | — |
Aronora | | | | | | — | | | — | | | — | | | ( | | | — | | | — |
Palobiofarma | | | | | | — | | | — | | | — | | | — | | | — | | | |
Viracta | | | | | | — | | | ( | | | — | | | — | | | — | | | — |
Kuros | | | | | | — | | | — | | | — | | | — | | | — | | | |
Affitech | | | | | | — | | | ( | | | | | | — | | | ( | | | — |
Total | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | |
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The following table summarizes the royalty and commercial payment receivable activities under the EIR method during the year ended December 31, 2025 (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Balance as of January 1, 2025 | | Reclassification of Royalty and Commercial Payment Receivables from the Cost Recovery to the EIR Method | | Income from Purchased Receivables Under the EIR Method | | Receipt of Royalty and Commercial Payments | | Payment of Sales-Based Milestone | | | Balance as of December 31, 2025 | |||||
Affitech (VABYSMO) | | $ | | | $ | — | | $ | | | $ | ( | | $ | | | $ | |
Aptevo (IXINITY) | | | | | | — | | | | | | ( | | | — | | | |
LadRx (MIPLYFFA) | | | — | | | | | | | | | ( | | | — | | | |
Total | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
The following table summarizes the royalty and commercial payment receivable activities under the EIR method during the year ended December 31, 2024 (in thousands):
| | | | | | | | | | | | | | | |
| | | Balance as of January 1, 2024 | | | Reclassification of Royalty and Commercial Payment Receivables from the Cost Recovery to the EIR Method | | | Income from Purchased Receivables Under the EIR Method | | | Receipt of Royalty and Commercial Payments | | | Balance as of December 31, 2024 |
Affitech | | $ | — | | $ | | | $ | | | $ | ( | | $ | |
Aptevo | | | — | | | | | | | | | ( | | | |
Total | | $ | — | | $ | | | $ | | | $ | ( | | $ | |
The following table summarizes income recognized from purchased receivables under the cost recovery method and EIR method during the years ended December 31, 2025 and 2024 (in thousands):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Affitech (VABYSMO) | | $ | | | $ | |
Aptevo (IXINITY) | | | | | | |
LadRx (MIPLYFFA) | | | | | | — |
Total income from purchased receivables under the EIR method | | $ | | | $ | |
| | | | | | |
Viracta (OJEMDA) | | $ | | | $ | |
Talphera (DSUVIA)(1) | | | | | | — |
Total income from purchased receivables under the cost recovery method | | $ | | | $ | |
| (1) | DSUVIA was withdrawn from the commercial market due to unresolvable manufacturing constraints in the first quarter of 2025. The $ |
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
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only type II RAF inhibitor now marketed as OJEMDA), is 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 $
At the inception of the Viracta RPA, the Company recorded $
As of December 31, 2025 and December 31, 2024, there was $
Royalty and Commercial Payment Purchase Agreements Under the EIR Method
Short-term royalty and commercial payment receivables under the EIR method were $
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 $
At the inception of the Affitech CPPA, the Company recorded $
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
During the first quarter of 2024, a third sales milestone of $
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was recorded under short-term royalty and commercial payment receivables under the cost recovery method on the consolidated balance sheet.
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 $
In March 2025, the Company paid $
The Company recognized $
During the year ended December 31, 2025, the Company received commercial payments pursuant to the Affitech CPPA of $
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 $
At the inception of the Aptevo CPPA, the Company recorded $
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 $
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During the year ended December 31, 2025, the Company received commercial payments pursuant to the Aptevo CPPA of $
LadRx Agreements
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 $
Upon the initial closing of the LadRx Agreements, the Company paid LadRx an upfront payment of $
At the inception of the LadRx Agreements, the Company recorded $
Pursuant to the LadRx Agreements, as of December 31, 2024, the Company paid LadRx $
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 LadRx Agreements. However, during the fourth quarter of 2025, Zevra’s periodically reported MIPLYFFA sales data, available third-party sales projections, and the Company’s history of receipts of commercial payments related to MIPLYFFA provided the Company with a greater ability to estimate future net sales and the commercial payments to be received under the LadRx AAA.
As of October 1, 2025, when the Company assessed it was able to reliably estimate cash flows, the Company reclassified $
During the year ended year ended December 31, 2025, the Company received commercial payments pursuant to the LadRx Agreements of $
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Royalty and Commercial Payment Purchase Agreements Under the Cost Recovery Method
Short-term royalty and commercial payment receivables under the cost recovery method were
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)
Upon the closing of the transaction, the Company paid Castle Creek an upfront payment of $
As of December 31, 2025,
Kuros Royalty Purchase Agreement
In July 2021, the Company entered into the Kuros RPA, pursuant to which the Company acquired the rights to
At the inception of the Kuros RPA, the Company recorded $
In May 2022, Regeneron completed its acquisition of Checkmate Pharmaceuticals resulting in a $
As of December 31, 2025,
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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
Under the terms of the Palo RPA, the Company paid Palo an upfront payment of $
As of December 31, 2025,
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 the rights to
Upon closing of the transaction, the Company paid Twist an upfront payment of $
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 consolidated balance sheet date of December 31, 2025 and, as such,
As of December 31, 2025,
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 $
Upon closing of the transaction, the Company paid Daré an upfront payment of $
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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 reasonably estimable.
Given the limited available information, the Company was unable to reasonably estimate future net sales and the commercial payments to be received over the twelve-month period following the consolidated balance sheet date of December 31, 2025 and, as such,
During the year ended December 31, 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 under the cost recovery method 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.
5. License, Collaboration, and Other Arrangements
License and Collaboration Arrangements
Rezolute License 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 $
The Company has earned
In December 2025, Rezolute announced the Phase 3 clinical trial of ersodetug (RZ358) did not meet its primary and key secondary endpoints.
As of December 31, 2025 and 2024, there were
Takeda Collaboration Agreement and Takeda Revenue Share Agreement
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.
In December 2025, the Company entered into the Takeda Revenue Share Agreement with Takeda and amended the Takeda Collaboration Agreement to exchange a portion of its rights to future royalties and certain expense reimbursements on mezagitamab under the Takeda Collaboration Agreement for rights to share future milestone payments and royalties that Takeda receives from a basket of Takeda’s clinical development programs. The Company accounted for the transaction as a contract modification and updated the transaction price for the Takeda Collaboration Agreement, as amended. Changes in transaction price are recognized on a cumulative catch-up basis. For the year ended
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December 31, 2025, no revenue adjustment was made as a result of this modification since all replacement variable consideration was fully constrained.
The Company has received $
As of December 31, 2025 and 2024, there were
Janssen License Agreement
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 $
As of December 31, 2025 and 2024, there were
Alexion License Agreement
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 $
As of December 31, 2025 and December 31, 2024, there were
BioInvent License Agreement
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 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 $
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 $
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The Company recognized $
Other Arrangements
ESSA Arrangement
In October 2025, the Company acted as structuring agent in connection with the acquisition of ESSA’s issued and outstanding common shares by Xeno. As part of the ESSA Acquisition Agreement, the Company agreed, among other things, to provide bridge financing to Xeno. To facilitate the closing of the acquisition, we extended a short-term loan of $
Sale of Future Revenue Streams
In December 2016, the Company entered into
The Company allocated the total proceeds between the
The Company recognized $
6. Acquisitions and Related Arrangements
LAVA Acquisition
On August 3, 2025, the Company entered into the LAVA Purchase Agreement, as amended on October 17, 2025, pursuant to which the Company acquired LAVA for (i) $
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The acquisition was structured as a two-step transaction. The initial tender offer closed on November 17, 2025, when approximately
LAVA entered into partnered programs with J&J in May 2020 and Pfizer in September 2022. Under the J&J Collaboration and License Agreement, J&J agreed to develop JNJ-89853413, a Phase 1 clinical asset that targets CD33 and hematologic cancers. Under the Pfizer License Agreement, Pfizer agreed to develop PF-08046052, a Phase 1 clinical asset that utilizes LAVA’s proprietary Gammabody technology to target EGFR-positive tumors. LAVA is entitled to receive certain milestone and royalty payments under these partnered programs.
Under the LAVA CVR Agreement dated November 17, 2025, CVR holders are entitled to
Under the LAVA CVR Agreement, CVR holders are also entitled to
Additionally, CVR holders are also entitled to
The total purchase consideration for LAVA, as of November 17, 2025, was as follows (in thousands):
| | | |
Closing cash payment(1) | | $ | |
Deferred consideration payable(2) | | | |
CVR consideration adjustment(3) | | | |
Transaction costs | | | |
Total purchase consideration | | $ | |
The LAVA acquisition was accounted for as an asset acquisition under ASC 805 because the assets acquired did not satisfy the definition of a “business” under ASC 805. As such, the Company recognized the acquired assets and liabilities based on the total purchase consideration using a relative fair value basis. The value of the acquired IP assets
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was reduced by the excess of the fair value of the net assets acquired over the initial consideration based on the relative fair value of each IP.
The following table shows the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company as of November 17, 2025 (in thousands):
| | | |
Cash and cash equivalents | | $ | |
Trade and other receivables, net | | | |
Prepaid expenses and other current assets | | | |
Long-term restricted cash | | | |
LAVA-1266 IP | | | |
LAVA J&J Partnered Program IP | | | |
LAVA Pfizer Partnered Program IP | | | |
Accounts payable | | | ( |
Accrued and other current liabilities | | | ( |
Net assets acquired | | $ | |
HilleVax Acquisition
On August 4, 2025, the Company entered into the HilleVax Merger Agreement through a tender offer for (i) $
Under the HilleVax CVR Agreement, CVR holders are entitled to
Additionally, CVR holders are entitled to
In March 2022, HilleVax entered into the Boston Lease for office and laboratory space, which was historically classified as an operating lease. The lease commenced in April 2022, with base rental payments beginning in January 2023 and ending in December 2032. As of September 17, 2025, the Company concluded that the Boston Lease should be classified as an acquired lease and, in accordance with ASC 805, the Company retained the historical operating lease classification for the lease. In accordance with ASC 842, the Company accounted for the lease as if it commenced on the HilleVax Merger Closing Date. The Company recognized operating lease liabilities of $
On July 31, 2025, HilleVax entered into a sublease agreement with a sublessee for a portion of the Boston Lease premises, with a duration of
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As part of the HilleVax Merger Agreement, the Company acquired the lease and the sublease agreement. The Company concluded that any contingent consideration related to the receipts associated with the Boston Lease is a contingent liability under ASC 450 and will be recognized when probable and estimable. As the return of security deposit and the sublease payments represent probable and estimable payments for which the CVR holders are entitled to
In August 2021, HilleVax entered into the Swiss Lease for its facility in Switzerland, which was historically classified as an operating lease. The Swiss Lease will expire in September 2026, with an
As of September 17, 2025, the Company concluded that the Swiss Lease should be classified as an acquired lease and, in accordance with ASC 805, the Company retained the historical operating lease classification for the lease. In accordance with ASC 842, the Company accounted for the lease as if it had commenced on the HilleVax Merger Closing Date. The Company recognized operating lease liabilities of $
The total purchase consideration for HilleVax, as of September 17, 2025, was as follows (in thousands):
| | | |
Closing cash payment(1) | | $ | |
CVR consideration adjustment(2) | | | |
Transaction costs | | | |
Total purchase consideration | | $ | |
The HilleVax acquisition was accounted for as an asset acquisition under ASC 805 because the assets acquired did not meet the definition of a “business” under ASC 805. As such, the Company recognized the acquired assets and liabilities based on the total purchase consideration using a relative fair value basis. The acquired assets primarily included cash and cash equivalents, restricted cash, and operating lease right-of-use assets. The value of the acquired right-of-use assets were reduced to
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The following table shows the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company as of September 17, 2025 (in thousands):
| | | |
Cash and cash equivalents | | $ | |
Trade and other receivables, net | | | |
Prepaid expenses and other current assets | | | |
Short-term restricted cash | | | |
Long-term restricted cash | | | |
Other assets - long term | | | |
Accrued and other current liabilities | | | ( |
Operating lease liabilities | | | ( |
Long-term operating lease liabilities | | | ( |
Net assets acquired | | $ | |
Reconciliation of net assets acquired to total purchase consideration: | | | |
Net assets acquired | | $ | |
Less: Gain on the acquisition of HilleVax | | | ( |
Total purchase consideration | | $ | |
Under the HilleVax CVR Agreement, the CVR payments are adjusted for the excess and shortfall in the closing net cash, which is accounted for as a working capital adjustment to the purchase price and no contingent liability was recorded as of the acquisition date. In December 2025, the Company recalculated the final closing net cash of HilleVax, and recognized a reduction to the contingent value rights liabilities – long-term in its consolidated balance sheet for the cash shortfall of $
Turnstone Acquisition
On June 26, 2025, the Company entered into the Turnstone Merger Agreement, pursuant to which the Company acquired Turnstone via a tender offer for (i) $
Under the Turnstone CVR Agreement, CVR holders are entitled to up to
The total purchase consideration for Turnstone, as of August 11, 2025, was as follows (in thousands):
| | | |
Closing cash payment(1) | | $ | |
CVR consideration adjustment(2) | | | |
Transaction costs | | | |
Total purchase consideration | | $ | |
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As part of the merger, the acquired assets included certain short-term financial assets, primarily consisting of cash, receivables, and prepaid expenses and other current assets, as well as other long-term assets. The Company has also acquired a short-term lease expiring in February 2026 with a related sublease agreement.
The Turnstone acquisition was accounted for as an asset acquisition under ASC 805 because the assets acquired did not satisfy the definition of a “business” under ASC 805. As such, the Company recognized the acquired assets and liabilities based on the total purchase consideration, on a relative fair value basis. As the fair value of net assets acquired exceeded the total purchase consideration, a bargain purchase gain was recognized on the acquisition of Turnstone in the consolidated statements of operations for the year ended December 31, 2025.
The following table shows the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company as of August 11, 2025 (in thousands):
| | | |
Cash and cash equivalents | | $ | |
Short-term restricted cash | | | |
Trade and other receivables, net | | | |
Prepaid expenses and other current assets | | | |
Accounts payable | | | ( |
Accrued and other current liabilities | | | ( |
Net assets acquired | | $ | |
Reconciliation of net assets acquired to total purchase consideration: | | | |
Net assets acquired | | $ | |
Less: Gain on the acquisition of Turnstone | | | ( |
Total purchase consideration | | $ | |
Mural Acquisition
On August 20, 2025, the Company entered into the Mural Transaction Agreement with Mural, pursuant to which the Company acquired Mural for a cash price of $
The total purchase consideration for Mural, as of December 5, 2025, was as follows (in thousands):
| | | |
Consideration payable(1) | | $ | |
Closing cash payment(2) | | | |
Transaction costs | | | |
Total purchase consideration | | $ | |
The Mural acquisition was accounted for as an asset acquisition under ASC 805 because the assets acquired did not satisfy the definition of a “business” under ASC 805. As such, the Company recognized the acquired assets and
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liabilities based on the total purchase consideration, on a relative fair value basis. As the fair value of net assets exceeded the total purchase consideration, a bargain purchase gain was recognized on the acquisition of Mural in the consolidated statements of operations for the year ended December 31, 2025.
The following table shows the allocation of the purchase consideration based on the relative fair value of assets acquired and liabilities assumed by the Company as of December 5, 2025 (in thousands):
| | | |
Cash and cash equivalents | | $ | |
Prepaid expenses and other current assets | | | |
Accrued and other current liabilities | | | ( |
Net assets acquired | | $ | |
Reconciliation of net assets acquired to total purchase consideration: | | | |
Net assets acquired | | | |
Less: Gain on the acquisition of Mural | | | ( |
Total purchase consideration | | $ | |
Kinnate Acquisition
In April 2024, the Company completed the acquisition of Kinnate through a tender offer for $
Under the Kinnate CVR Agreement, Kinnate CVR holders are entitled to
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 year ended December 31, 2025, the Company sold KIN-3248, KIN-8741 and KIN-7136 to third parties, and recognized $
During the third quarter of 2025, the Company recorded a reduction to the gains on acquisitions of $
Pulmokine Acquisition
In November 2024, the Company acquired Pulmokine for $
Contingent consideration related to the seralutinib asset could be payable subject to certain development and commercial milestones. As of December 31, 2025 and 2024, there were
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7. 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 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 6) 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 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 December 31, 2025 using: | ||||||||||
| | Quoted Prices in | | Significant Other | | Significant | | | | |||
| | Active Markets for | | Observable | | Unobservable | | | | |||
| | Identical Assets | | Inputs | | Inputs | | | | |||
| | (Level 1) | | (Level 2) | | (Level 3) | | Total | ||||
Assets: | | | | | | | | | | | | |
Cash equivalents: | | | | | | | | | | | | |
Money market funds | | $ | | | $ | — | | $ | — | | $ | |
U.S. treasury bills | | | | | | — | | | — | | | |
Total cash equivalents | | | | | | — | | | — | | | |
Exarafenib milestone asset (Note 6) | | | — | | | — | | | | | | |
Investment in equity securities | | | | | | — | | | — | | | |
Castle Creek PRV Interest (Note 4) | | | — | | | — | | | — | | | — |
Castle Creek warrants (Note 4) | | | — | | | — | | | | | | |
Total financial assets | | $ | | | $ | — | | $ | | | $ | |
Liabilities: | | | | | | | | | | | | |
Exarafenib milestone contingent consideration (Note 6) | | $ | — | | $ | — | | $ | | | $ | |
Share-based liability (Note 12) | | | — | | | — | | | | | | |
Total financial liabilities | | $ | — | | $ | — | | $ | | | $ | |
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| | | | | | | | | | | | |
| | Fair Value Measurements as of December 31, 2024 using: | ||||||||||
| | Quoted Prices in | | Significant Other | | Significant | | | | |||
| | Active Markets for | | Observable | | Unobservable | | | | |||
| | Identical Assets | | Inputs | | Inputs | | | | |||
| | (Level 1) | | (Level 2) | | (Level 3) | | Total | ||||
Assets: | | | | | | | | | | | | |
Cash equivalents: | | | | | | | | | | | | |
Money market funds | | $ | | $ | — | | $ | — | | $ | ||
U.S. treasury bills | | | | | — | | | — | | | ||
Total cash equivalents | | | | | — | | | — | | | ||
Exarafenib milestone asset (Note 6) | | | — | | | — | | | | | ||
Investment in equity securities | | | | | — | | | — | | | ||
Total financial assets | | $ | | $ | — | | $ | | $ | |||
Liabilities: | | | | | | | | | | | | |
Exarafenib milestone contingent consideration (Note 6) | | $ | — | | $ | — | | $ | | $ | ||
Total financial liabilities | | $ | — | | $ | — | | $ | | $ | ||
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 December 31, 2025, the estimated fair value of each of the Exarafenib milestone asset and Exarafenib milestone contingent consideration was $
During the year ended December 31, 2025, the estimated fair value of both the Exarafenib milestone asset and Exarafenib milestone contingent consideration increased by $
Castle Creek PRV Interest and Warrants
The Castle Creek PRV Interest and warrants represent the Company's right to receive
Investment in Equity Securities
The equity securities consisted of investments in publicly traded companies’ common stock that are classified on the consolidated balance sheets as current assets as of December 31, 2025 and 2024. The equity securities are revalued each reporting period with changes in fair value recorded in the other income, net line item of the consolidated statements
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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.
Share-Based Liability
The Company uses a fair-value based measure to estimate the share-based liability at each reporting period until settlement. The Company uses the Black-Scholes Model to determine the fair value of the call options and the share-based liability each reporting period until settlement. Fair value of the share-based liability was $
8. 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
Leases Assumed in Acquisitions
Kinnate Lease and Sublease
As part of the Kinnate acquisition in 2024, 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 $
As part of the Kinnate acquisition, the Company acquired a lease assignment agreement with an assignee that expires on June 30, 2026. For the years ended December 31, 2025 and 2024, the Company recognized sublease income of $
Turnstone Lease and Sublease
As part of the Turnstone acquisition, the Company acquired an immaterial short-term lease agreement and a related sublease agreement that expires in February 2026.
HilleVax - Boston Lease
As part of the HilleVax acquisition, the Company acquired the Boston Lease that expires on December 31, 2032. 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 $
HilleVax - Swiss Lease
As part of the HilleVax acquisition, the Company acquired the Swiss Lease that expires on September 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 $
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HilleVax Sublease
As part of the HilleVax acquisition, the Company acquired an executed sublease agreement with a sublessee for a portion of the Boston Lease premises. The sublease commenced on November 1, 2025 and will expire three years and two months following the commencement date. The Company recognized $
The following table summarizes the maturity of the Company’s operating lease liabilities as of December 31, 2025 (in thousands):
| | | |
| | | |
Year | | Rent Payments | |
2026 | | $ | |
2027 |
| | |
2028 |
| | |
2029 | | | |
2030 | | | |
Thereafter | | | |
Total undiscounted lease payments | | $ | |
Present value adjustment | | | ( |
Total net lease liability for operating leases | | $ | |
As of December 31, 2025 and 2024, the total net lease liability was $
As of December 31, 2025 the Company’s current and non-current operating lease liabilities were $
The following table summarizes the cost components of the Company’s operating leases included in G&A in the consolidated statements of operations for the years ended December 31, 2025 and 2024, respectively (in thousands):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Lease costs: | | | | | | |
Operating lease cost | | $ | |
| $ | |
Variable lease cost (1) | | | |
| | |
Total lease costs | | $ | | | $ | |
The following table presents supplemental disclosure for the consolidated statements of cash flows related to operating leases (in thousands):
| | | | | | |
|
| Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
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 December 31, 2025 and 2024, respectively, were as follows:
| | | | | | |
|
| December 31, | | December 31, | ||
| | 2025 | | 2024 | ||
Weighted-average remaining lease term | | | | | ||
Weighted-average discount rate | | | % | | | % |
9. Long-Term Debt
Blue Owl Loan Agreement
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 $
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 $
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
On December 15, 2023, the Company borrowed the initial term loan of $
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
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The initial term loan of $
As of the closing date of December 15, 2023, the Company recorded the $
In March 2025, XRL made a semi-annual payment of $
The following table summarizes the impact of the initial term loan on the Company’s consolidated balance sheet as of December 31, 2025 (in thousands):
| | | |
| | December 31, 2025 | |
Gross principal | | $ | |
Principal repayments | | | ( |
Debt discount and debt issuance costs | | | ( |
Total carrying value net of principal repayments, debt discount, and debt issuance costs | | | |
Less: current portion of long-term debt | | | ( |
Long-term debt | | $ | |
Long-term debt on the Company’s consolidated balance sheet as of December 31, 2025 and 2024 included only the carrying value of the Blue Owl Loan. Fair value of long-term debt was $
Aggregate projected future principal payments of the initial term loan as of December 31, 2025, are as follows (in thousands):
| | | |
Year Ending December 31, | | Payments | |
2026 |
| $ | |
2027 |
| | |
2028 | | | |
2029 | | | |
2030 | | | |
Thereafter |
| | |
Total payments | | $ | |
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Accretion of debt discounts and issuance costs are included in interest expense.
| | | | | | | |
| | Year Ended | | ||||
| | December 31, | | ||||
| | 2025 | | 2024 | | ||
Accrued interest expense | | $ | | | $ | | |
Accretion of debt discount and debt issuance costs | |
| | |
| |
|
Total interest expense | | $ | | | $ | | |
10. Common Stock Warrants
As of December 31, 2025 and 2024, the following common stock warrants were outstanding:
| | | | | | | | | | | |
| | | | | | Exercise Price | | December 31, | | December 31, | |
Issuance Date | | Expiration Date | | Balance Sheet Classification | | per Share | | 2025 | | 2024 | |
May 2018 | | May 2028 | | Stockholders’ equity | | $ | | | | | |
March 2019 | | March 2029 | | Stockholders’ equity | | $ | | | | | |
December 2023 | | December 2033 | | Stockholders’ equity | | $ | | | | | |
December 2023 | | December 2033 | | Stockholders’ equity | | $ | | | | | |
December 2023 | | December 2033 | | Stockholders’ equity | | $ | | | | | |
|
| |
| | |
| |
| |
| |
In May 2018, the Company issued SVB a warrant in connection with the legacy SVB Loan Agreement which is exercisable in whole or in part for up to an aggregate of
In March 2019, the legacy SVB Loan Agreement was amended to extend the draw period from March 31, 2019 to March 31, 2020. In connection with the amendment, the Company issued a second warrant to SVB which is exercisable in whole or in part for up to an aggregate of
In December 2023, in connection with the Blue Owl Loan, the Company issued the Blue Owl Warrants to certain funds affiliated with Blue Owl, which are exercisable in whole or in part for up to an aggregate of
11. 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
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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 $
Contingent Consideration
The Company has committed to pay contingent consideration pursuant to its transactions with LAVA, HilleVax, Pulmokine, Kinnate, Kuros, and Daré (see Notes 4 and 6 for additional information).
As of December 31, 2025, the Company recorded $
During the year ended December 31, 2025, the Company recorded $
During the year ended December 31, 2025, the Company recorded $
The liability for future Kuros sales milestones, the Daré milestones, the Pulmokine contingent consideration, the HilleVax contingent consideration for HIL-216 and the LAVA contingent consideration for partnered programs and LAVA-1266 will be recorded when the amounts, by product, are probable and reasonably estimable.
As of December 31, 2025, none of the contingent consideration related to Pulmokine, Kuros, Daré, HilleVax’s HIL-216, or LAVA’s existing partnerships or dispositions were assessed to be probable and as such,
12. Stock Based Compensation and Other Benefit Plans
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
Employee Stock Purchase Plan
In December 2025, the Board approved the 2025 ESPP, which replaced the Company’s legacy 2015 ESPP.
Both the 2015 ESPP and 2025 ESPP consist of consecutive
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30 and May 31, respectively. Employees are able to purchase shares at
As of December 31, 2025, the Company had
During the years ended December 31, 2025 and 2024, employees purchased
Deferred Savings Plan
Under Section 401(k) of the Internal Revenue Code of 1986, the Board has adopted a tax-qualified deferred compensation plan for employees of the Company. Participants may make contributions which defer up to
Stock Options and Other Stock Awards Plans
2010 Plan Stock Options
In May 2010, the Compensation Committee and Board adopted, and in July 2010 the Company’s stockholders approved the 2010 Plan. The 2010 Plan was most recently amended in 2025 to increase the number of shares of common stock issuable under the 2010 Plan.
From the 2010 Plan, the Company grants stock options to eligible employees, consultants and directors. Stock-based awards granted under the 2010 Plan may be exercised when vested and generally expire
As of December 31, 2025, the Company had
Stock options issued under the 2010 Plan generally vest monthly over
Fair Value Assumptions of 2010 Plan Stock Options
The fair value of the stock options granted under the 2010 Plan during the years ended December 31, 2025 and 2024, was estimated based on the following assumptions:
| | | | | |
| | Year Ended December 31, |
| ||
| | 2025 | | 2024 |
|
Dividend yield |
| | % | | % |
Expected volatility |
| | % | | % |
Risk-free interest rate |
| | % | | % |
Expected term |
| | | ||
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The weighted-average grant-date fair value per share of the options granted under the 2010 Plan during the years ended December 31, 2025 and 2024 was $
Cash-Out Agreement
In October 2025, the Company entered into the Cash-Out Agreement to provide cash settlement for vested stock options expiring in December 2026 and February 2027 held by Thomas Burns, the Company’s then Chief Financial Officer. The agreement specifies
The Cash-Out Agreement is treated as a modification of the respective stock options under ASC 718, which changed the awards’ classification from equity to liability. On the modification date, the Company recorded a share-based liability based on the options’ then-current fair value, and recognized an incremental compensation cost of $
In January 2026, the Cash-Out Agreement was effectively terminated upon the termination of Mr. Burns’ employment. See Note 17.
Stock Option Inducement Awards
On December 30, 2022, the Board appointed Owen Hughes as Executive Chairman of the Board and Interim Chief Executive Officer and Bradley Sitko as the Company’s Chief Investment Officer, effective as of January 1, 2023. Pursuant to the terms of their respective employment agreements, Mr. Hughes and Mr. Sitko were each granted
The Stock Option Inducement Awards were granted to Mr. Hughes and Mr. Sitko outside the 2010 Plan as an inducement material to entering into their respective employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4) but are subject to the terms and conditions of the 2010 Plan. More information on the Stock Option Inducement Awards granted during the three months ended March 31, 2023 can be found in Note 10 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 8, 2024.
The weighted-average grant-date fair value per share of options granted to Mr. Hughes and Mr. Sitko at an exercise price of $
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The activity for all stock options for the year ended December 31, 2025 was as follows:
| | | | | | | | | | | | |
| | | | Weighted | | Weighted | | | ||||
| | | | Average | | Average | | Aggregate | ||||
| | | | Exercise | | Contractual | | Intrinsic | ||||
| | Number of | | Price | | Remaining Term | | Value | ||||
| | shares | | Per Share | | (in years) | | (in thousands) | ||||
Outstanding as of January 1, 2025 | | | | | $ | |
| | | $ | | |
Granted |
| | | |
| |
| | |
| | |
Exercised |
| | ( | |
| |
| | |
| | |
Forfeited, expired or cancelled | | | ( | |
| |
| | |
| | |
Outstanding as of December 31, 2025 | | | | | $ | |
| | | $ | | |
Exercisable as of December 31, 2025 | | | | | $ | | | | | $ | | |
Vested and expected to vest as of December 31, 2025 | | | | | $ | |
| | | $ | | |
The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025 and 2024 was $
The Company recorded $
Performance Stock Unit Awards
Since May 2023, the Company has granted employees
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
In connection with Mr. Hughes’ appointment to full-time Chief Executive Officer in January 2024, the Company granted Mr. Hughes
In November 2024, the $
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 2024 were estimated as follows:
| | | | | | | | | | |
| | | | | | Derived | ||||
Hurdle Price | | Number of | | Fair Value | | Service Period | ||||
Per PSU | | PSUs | | Per Share | | (in years) | ||||
$ | | | | |
| $ | | | ||
$ | | | | |
| $ | | | ||
$ | | | | |
| $ | | | ||
$ | | | | | | $ | | | ||
| | | | |
| | | | | |
The grant date fair values of the PSUs granted in 2025 were estimated as follows:
| | | | | | | | | | | |
| | | | | | | Derived | ||||
| Hurdle Price | | Number of | | Fair Value | | Service Period | ||||
| Per Share | | PSUs | | Per Share | | (in years) | ||||
| $ | | | | | | $ | | | ||
| $ | | | | | | $ | | | ||
| $ | | | | | | $ | | | ||
| $ | | | | | | $ | | | ||
| | | | | | | | | | | |
The Company estimates that it will recognize total stock-based compensation expense of approximately $
The activity for all PSUs for the year ended December 31, 2025, was as follows:
| | | | | | |
| | | | Weighted | ||
| | | | Average | ||
| | | | Grant Date | ||
| | Number of | | Fair Value | ||
| | Unvested PSUs | | Per Share | ||
Unvested balance as of January 1, 2025 | | | | | $ | |
Granted |
| | | |
| |
Vested |
| | ( | |
| |
Forfeited | | | — | |
| — |
Unvested balance as of December 31, 2025 | | | | | $ | |
The Company recorded $
Restricted Stock Unit Awards
In May 2024, the Company granted the non-employee directors of the Board an aggregate of
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The activity for all RSUs for the year ended December 31, 2025 was as follows:
| | | | | | |
| | | | Weighted | ||
| | | | Average | ||
| | | | Grant Date | ||
| | Number of | | Fair Value | ||
| | Unvested RSUs | | Per Share | ||
Unvested balance as of January 1, 2025 | | | | | $ | |
Granted |
| | | |
| |
Vested |
| | ( | |
| |
Forfeited | | | — | |
| — |
Unvested balance as of December 31, 2025 | | | | | $ | |
The Company recorded $
Stock-based Compensation Expense
All stock-based compensation expense is recorded in G&A expenses.
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Equity-classified awards: | | $ | | | $ | |
Liability-classified awards: | | | | | | — |
Total stock-based compensation expense | | $ | | | $ | |
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13. Net Income (Loss) Per Share Available to (Attributable to) Common Stockholders
The following is a reconciliation of the numerator (net income or loss) and the denominator (number of shares) used in the calculation of basic and diluted net income (loss) per share available to (attributable to) common stockholders (in thousands, except per share amounts):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Numerator | | | | | | |
Net income (loss) | | $ | | | $ | ( |
Less: Series A accumulated dividends | |
| ( | |
| ( |
Less: Series B accumulated dividends | | | ( | | | ( |
Less: Allocation of undistributed earnings to participating securities | | | ( | | | — |
Net income (loss) available to (attributable to) common stockholders, basic | | $ | | | $ | ( |
Add: Adjustments to undistributed earnings allocated to participating securities | |
| | | | — |
Net income (loss) available to (attributable to) common stockholders, diluted | | $ | | | $ | ( |
| | | | |
| |
Denominator | |
| | |
| |
Weighted-average shares used in computing net income (loss) per share available to (attributable to) common stockholders, basic | |
| | |
| |
Effect of dilutive Series X Preferred Stock | | | | | | — |
Effect of dilutive warrants for common stock | | | | | | — |
Effect of dilutive PSUs | |
| | | | — |
Effect of dilutive RSUs | | | | | | — |
Effect of dilutive common stock options | |
| | | | — |
Weighted-average shares used in computing net income (loss) per share available to (attributable to) common stockholders, diluted | |
| | |
| |
Net income (loss) per share available to (attributable to) common stockholders, basic | | $ | | | $ | ( |
Net income (loss) per share available to (attributable to) common stockholders, diluted | | $ | | | $ | ( |
Potentially dilutive securities are excluded from the calculation of diluted net income (loss) per share available to (attributable to) common stockholders if their inclusion is anti-dilutive.
The following table shows the weighted-average shares from outstanding securities considered anti-dilutive and therefore excluded from the computation of diluted net income (loss) per share available to (attributable to) common stockholders (in thousands):
| | | | |
| | Year Ended December 31, | ||
| | 2025 | | 2024 |
Convertible Preferred Stock | | — | | |
Common stock options |
| | | |
Contingently issuable PSUs | | — | | |
Warrants for common stock |
| | | |
Total |
| |
| |
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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,
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 $
14. Capital Stock
Series X Convertible Preferred Stock
The Company sold directly to BVF
The Series X Convertible Preferred Stock have the following characteristics, which are set forth in the Certificate of Designation of Series X Convertible Preferred Stock filed with the Nevada Secretary of State.
Dividends— Holders of convertible preferred stock are entitled to receive dividends on shares of convertible preferred stock equal (on an as if converted to common stock basis) to and in the same form as dividends actually paid on the Company’s common stock.
Liquidation Rights— In the event of the Company’s liquidation, dissolution or winding up, holders of convertible preferred stock will participate, on a pro-rata basis, with any distribution of proceeds to holders of common stock.
Conversion— Each share of Series X Convertible Preferred Stock is convertible into
Voting Rights— Series X Convertible Preferred Stock will generally have no voting rights, except as required by law and except that the consent of the holders of the outstanding convertible preferred stock will be required to amend the terms and to issue additional shares of the 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.
Series A Preferred Stock
On December 15, 2020, the Company sold
As of December 31, 2025 and 2024, there were
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The Series A Preferred Stock have the following characteristics, which are set forth in the Certificate of Designation of
Dividends— Holders of the Series A Preferred Stock shall be entitled to receive, when, and if authorized by the Board and declared by the Corporation, cumulative cash dividends at the rate of
Liquidation Rights— In the event of the Company’s liquidation, dissolution or winding up, holders of Series A Preferred Stock will rank senior to all classes or series of common stock as to dividend rights and rights upon liquidation, dissolution or winding-up and on parity with respect to the distribution of assets with the Company’s Series X Preferred Stock. The Series A Preferred Stock have a par value of $
Redemption and Special Optional Redemption— The Company, at its option, may redeem the Series A Preferred Stock, in whole or in part, at any time for a cash redemption price, plus any accrued and unpaid dividends, as follows: $
Conversion— The shares of Series A Preferred Stock are not convertible into or exchangeable for any other property or securities of the Company except upon the occurrence of a delisting event or change in control event and the Company has not, on or before the date of such an event, provided the required notice of its election to redeem the Series A Preferred Stock pursuant to its redemption right or special optional redemption right. In this case, the holder of shares of Series A Preferred Stock can convert some or all of their Series A Preferred Stock into a number of shares of common stock per share equal to the lesser of (A) (i) the sum of the $
Voting Rights— Holders of the Series A Preferred Stock generally will have no voting rights, but will have limited voting rights if the issuer fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.
Classification—The Company evaluated the Series A Preferred Stock for liability or equity classification under the applicable accounting guidance and determined that treatment as equity was appropriate.
Depositary Shares Representing Interest in Series B Preferred Stock
On April 9, 2021, the Company sold
In December 2025, the Company sold
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Officer, for gross proceeds of $
As of December 31, 2025 and 2024, there were
The Series B Preferred Stock has the following characteristics, which are set forth in the Certificate of Designation of
Dividends— Holders of Series B Preferred Stock shall be entitled to receive cash dividends, when and if declared by the Board at the rate of
Liquidation Preference - Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, before any distribution or payment shall be made to holders of shares of Common Stock or any other class or series of capital stock of the Company ranking junior to the Series B Preferred Stock, the holders of shares of Series B Preferred Stock shall be paid out of the assets of the Company, after payment of or provision for the debts and other liabilities and any class or series of capital stock, as to rights upon any voluntary or involuntary liquidation, dissolution or winding up, senior to the Series B Preferred Stock. The Series B Preferred Stock have a par value of $
Redemption and Special Optional Redemption - The Company, at its option, may redeem the Series B Preferred Stock, for cash, in whole or in part, at any time or from time to time, as follows: between April 15, 2025 to April 15, 2026, at a redemption price of $
Conversion - The shares of Series B Preferred Stock are not convertible into or exchangeable for any other property or securities of the Company, except upon the occurrence of a delisting event or a change of control, each holder Series B Preferred Stock will have the right (unless the Company has elected to redeem the Series B Preferred Stock) to convert some or all of the shares of Series B Preferred Stock held by such holder on the delisting event conversion date or change of control conversion date into a number of shares of the common stock (or equivalent value of alternative consideration) per share of Series B Preferred Stock, equal to the lesser of (A) the quotient obtained by dividing (1) the sum of the $
Voting Rights— Holders of the Series B Preferred Stock generally will have no voting rights, but will have limited voting rights if the issuer fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.
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Classification—The Company evaluated the Series B Preferred Stock for liability or equity classification under the applicable accounting guidance and determined that treatment as equity was appropriate.
Dividends
During the year ended December 31, 2025, the Company’s Board declared and paid cash dividends on the Company’s Series A Preferred Stock and Series B Depositary shares as follows:
| | | | | | | | |
| | Series A Preferred Stock | | Series B Depositary Share | | | ||
| | Cash Dividend Declared | | Cash Dividend Declared | | | ||
Dividend Declaration Date | | ($ per share) | | ($ per share) | | Dividend Payment Date | ||
| $ | | | $ | | | ||
| $ | | | $ | | | ||
| $ | | | $ | | | ||
| $ | | | $ | | | ||
| $ | | | $ | | | ||
BVF Ownership
As of December 31, 2025, BVF owned approximately
2025 Common Stock ATM Agreement
On October 3, 2025, the Company entered into the 2025 Common Stock ATM Agreement with Leerink, under which the Company may offer and sell from time to time at its sole discretion shares of its common stock through Leerink as its sales agent, in an aggregate amount not to exceed $
2025 Series B Preferred Stock ATM Agreement
On October 3, 2025, the Company entered into the 2025 Series B Preferred Stock ATM Agreement with HCW, under which the Company may offer and sell from time to time at its sole discretion depositary shares, each representing 1/1000th of a share of the Company’s Series B Preferred Stock, through HCW as its sales agent, in an aggregate amount not to exceed $
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for gross proceeds of $
Stock Repurchase Program
On January 2, 2024, the Board authorized the Company’s stock repurchase program, which permits the Company to purchase up to $
On December 3, 2025, the Company entered into a stock purchase agreement with a stockholder to repurchase
During the year ended December 31, 2025, the Company purchased and retired a total of
15. Income Taxes
The domestic and foreign components of income (loss) before income taxes are as follows (in thousands):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Domestic | | $ | | | $ | ( |
Foreign | | | ( | | | ( |
Income (loss) before income taxes | | $ | | | $ | ( |
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The Company recorded a deferred foreign income tax expense (benefit) as follows (in thousands):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Current: | | | | | | |
Federal | | $ | — | | $ | — |
State | | | — | | | — |
Foreign | | | — | | | — |
Total current tax expense (benefit) | | $ | — | | $ | — |
| | | | | | |
Deferred: | | | | | | |
Federal | | $ | — | | $ | ( |
State | |
| — | |
| ( |
Foreign | | | | | | — |
Total deferred tax expense (benefit) | | $ | | | $ | ( |
Upon adoption of ASU 2023-09, as described in Note 2, Basis of Presentation and Significant Accounting Policies, the reconciliation of taxes at the federal statutory rate to the Company’s provision for income taxes for the year ended December 31, 2025, was as follows (in thousands, except for percentages):
| | | | | | |
| | Year Ended December 31, 2025 | ||||
| | Amount | | Percent | ||
U.S. federal statutory tax rate | | $ | | | | % |
State and local income taxes, net of federal income tax effect | | | — | | — | % |
Foreign tax effects | | | | | | % |
Effect of cross-border tax laws | | | — | | — | % |
Effect of changes in tax laws or rates enacted in the current period: | | | | | | |
Tax credits | | | — | | — | % |
Changes in Valuation Allowances | | | ( | | ( | % |
Nontaxable or nondeductible items: | | | | | | |
Stock based compensation | | | ( | | ( | % |
Nondeductible executive compensation | | | | | | % |
Bargain purchase gain | | | ( | | ( | % |
Other permanent differences | | | | | | % |
Changes in unrecognized tax benefits | | | — | | — | % |
Effective tax rate | | $ | | | | % |
The reconciliation of taxes at the federal statutory rate to the Company’s provision for income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| | | |
| | Year Ended December 31, |
|
| | 2024 |
|
Federal tax at statutory rate |
| | % |
Stock compensation and other permanent differences |
| ( | % |
Nondeductible executive compensation |
| ( | % |
Bargain purchase gain | | | % |
Tax benefit related to Pulmokine acquisition | | | % |
Valuation allowance |
| ( | % |
Total |
| | % |
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Upon adoption of ASU 2023-09, as described in Note 2, Basis of Presentation and Significant Accounting Policies, the total cash paid for income taxes, net of refunds, during the year ended December 31, 2025 was as follows (in thousands):
| | | |
Federal | | $ | |
State | | | — |
Foreign | | | — |
Total cash paid for income taxes, net of refunds | | $ | |
The Company made
The significant components of net deferred tax assets as of December 31, 2025 and 2024, were as follows (in thousands):
| | | | | | |
| | December 31, | ||||
| | 2025 | | 2024 | ||
Capitalized research and development expenses | | $ | | | $ | |
Net operating loss carryforwards | |
| | |
| |
Research and development and other tax credit carryforwards | |
| | |
| |
Stock compensation | |
| | |
| |
Unearned revenue | |
| | |
| |
Royalty receivable | | | | | | |
Lease liabilities | | | | | | |
Intangible Asset | | | | | | — |
Other | |
| | |
| |
Subtotal | |
| | |
| |
Less: valuation allowance | | | ( | | | ( |
Total net deferred tax assets | | | | | | |
| | | | | | |
Right-of-use assets | | | ( | | | ( |
Intangible liability | | | ( | | | ( |
Total deferred tax liabilities | |
| ( | | | ( |
Net deferred tax liabilities | | $ | | | $ | |
The net increase in the valuation allowance was $
Deferred tax assets primarily consist of NOL carryforwards, research and development tax credit carryforwards, and capitalized research and development expenditures. The increase in deferred tax assets during the year ended December 31, 2025 was primarily attributable to capitalized research and development expenditures, including amounts arising from business acquisitions. The Company evaluates the realizability of deferred tax assets on a jurisdictional basis by considering all available positive and negative evidence, including historical operating results, cumulative losses, and expectations of future taxable income. Based on the weight of available evidence, including the Company’s history of cumulative losses and historical operating performance, management determined that it was more likely than not that the Company’s deferred tax assets would not be realized. Accordingly, the Company recorded a full valuation allowance against its net deferred tax assets.
Based on an analysis under Section 382 of the Internal Revenue Code (which subjects the amount of pre-change NOLs and certain other pre-change tax attributes that can be utilized to annual limitations), the Company experienced an ownership change in February 2017 which substantially limits the future use of its pre-change NOLs and certain other pre-change tax attributes per year. The Company has excluded the related tax attributes that will expire as a result of the annual
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limitations in the deferred tax assets as of December 31, 2025 and 2024. To the extent that the Company does not utilize its carryforwards within the applicable statutory carryforward periods, either because of Section 382 limitations or the lack of sufficient taxable income, the carryforwards will expire unused.
As of December 31, 2025, the Company had federal NOL carryforwards of approximately $
The Company had federal orphan drug credit of $
Under current U.S. federal tax law, NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely. The utilization of such net operating losses is generally limited to 80% of taxable income in any given year.
On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law. The legislation includes significant revisions to U.S. corporate income tax laws, including changes to the treatment of research and development expenditures and certain international tax provisions. The enactment of the OBBBA did not have a material impact on the Company’s consolidated financial statements due to the Company’s cumulative losses and full valuation allowance position.
The Company files income tax returns in the U.S., various states, and foreign jurisdictions. The Company’s federal income tax returns for tax years 2022 and beyond remain subject to examination by the Internal Revenue Service. The Company’s state income tax returns for tax years 2021 and beyond remain subject to examination by state tax authorities. The Company's income tax returns outside the U.S. remain open to examination for 2021 and beyond. In addition, all of the NOLs and research and development credit carryforwards that may be used in future years are still subject to adjustment.
The following table summarizes the Company’s activity related to its unrecognized tax benefits (in thousands):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Balance as of January 1 | | $ | | | $ | |
Increase related to current year tax position | |
| | |
| |
(Decrease) Increase related to prior year tax position | |
| — | |
| — |
Balance as of December 31 | | $ | | | $ | |
As of December 31, 2025, the Company had a total of $
The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Through December 31, 2025, the Company has
16. 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
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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., Switzerland, and the Asia Pacific. The CODM uses net income (loss) reported in the 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).
Presented in the table below is segment information for the years ended December 31, 2025 and 2024 (in thousands):
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
Income and revenues | | $ | | | $ | |
Business development and deal related costs | | | ( | | | ( |
| | | | | | |
Other segment items: | | | | | | |
Research and development expenses | | | ( | | | ( |
Depreciation of property and equipment | | | ( | | | ( |
Other general and administrative expenses(1) | | | ( | | | ( |
Credit losses on purchased receivables | | | — | | | ( |
Amortization of intangible assets | | | ( | | | ( |
Gains on acquisitions | | | | | | |
Change in fair value of embedded derivative related to RPA | | | — | | | |
Change in fair value of derivatives related to Castle Creek | | | | | | — |
Interest expense | | | ( | | | ( |
Other income, net | | | | | | |
Income tax expense | | | ( | | | |
Segment and consolidated net income (loss) | | $ | | | $ | ( |
| (1) | Other general and administrative expenses for the years ended December 31, 2025 and 2024 are general and administrative expenses of $ |
Geographic Information
Income and revenue attributed to the following geographic regions was as follows (in thousands) based on the location of the partners and licensees:
| | | | | | |
| | Year Ended December 31, | ||||
| | 2025 | | 2024 | ||
United States | | $ | | | $ | |
Switzerland | | | | | | |
Europe (excluding Switzerland) | | | — | | | |
Asia Pacific | |
| | |
| |
Australia | | | | | | — |
Total | | $ | | | $ | |
The Company’s property and equipment is held in the U.S.
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17. Subsequent Events
Generation Bio Acquisition
In February 2026, the Company acquired Generation Bio through a tender offer for $
Repare Acquisition and XenoTherapeutics Arranger Letter
On November 14, 2025, the Repare Acquisition Agreement was executed, pursuant to which the Company acted as structuring agent in connection with the acquisition of Repare’s issued and outstanding common shares by Xeno. Xeno agreed to pay the Company an arranger fee of $
The Repare acquisition closed on January 28, 2026.
Transition of Chief Financial Officer and Termination of Cash-Out Agreement
In January 2026, the Company announced the resignation of its then Chief Financial Officer, Mr. Burns, and the appointment of Mr. Jeffrey Trigilio as its new Chief Financial Officer. In conjunction with this transition, the Cash-Out Agreement was terminated as of Mr. Burns’ separation date (see Note 12). Mr. Burns’ vested stock options remain outstanding in accordance with their original terms.
Seralutinib Clinical Trial Results
In February 2026, Gossamer Bio announced topline results from the Phase 3 PROSERA clinical trial evaluating seralutinib for the treatment of pulmonary arterial hypertension. The trial did not meet its prespecified primary endpoint. Gossamer Bio plans to engage with regulatory authorities to discuss potential next steps for the seralutinib program. The Company is evaluating the impact of this development on its seralutinib‑related assets.
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FAQ
What is XOMA (XOMA) describing as its core business in the 2025 10-K?
How much cash did XOMA (XOMA) receive from royalties and milestones in 2025?
Which commercial drugs were most important to XOMA’s 2025 royalty revenue?
What major portfolio expansion deals did XOMA (XOMA) complete around 2025?
Did XOMA (XOMA) repurchase any of its common stock in 2025?
How concentrated is XOMA’s royalty portfolio according to the 2025 10-K?
What clinical or regulatory setbacks affecting XOMA-linked programs are disclosed?
