XOMA Corporation (Nasdaq: XOMA), operating as XOMA Royalty Corporation since July 2024, has undergone a profound strategic metamorphosis, transitioning from a traditional biopharmaceutical developer to a specialized biotechnology royalty aggregator. As of December 13, 2025, the company's core business model is centered on the acquisition of economic rights to future milestone and royalty payments derived from therapeutic candidates developed and commercialized by its pharmaceutical and biotechnology partners.

This strategic pivot has repositioned XOMA as a financial entity within the biotech sector, providing non-dilutive and non-recourse funding to drug innovators in exchange for future royalty and milestone streams. This model allows XOMA to generate revenue from successful drug sales and clinical progression without shouldering the substantial costs and inherent risks associated with internal drug discovery and development.

XOMA's current relevance stems from its unique role in the biotech ecosystem. It offers a crucial financing alternative for smaller biotech companies, enabling them to fund their R&D activities without resorting to dilutive equity raises or burdensome debt. While a recent clinical trial setback with partner Rezolute's ersodetug has drawn attention, XOMA's overall strategy, robust financial health, and diversified portfolio, bolstered by strategic acquisitions like LAVA Therapeutics N.V. and Mural Oncology plc in late 2025, underscore its ongoing significance. Analyst firms generally maintain "Buy" ratings, with price targets reflecting confidence in its market potential and long-term revenue projections, which include over $1 billion in expected milestones and royalties over the next 15 years. This positions XOMA as a noteworthy player in facilitating drug development through innovative financing mechanisms.

2. Historical Background

XOMA Corporation's journey, which began on May 21, 1981, in the burgeoning biotech hub of Berkeley, California, is a testament to strategic evolution within the dynamic biopharmaceutical landscape. Founded by Patrick Scannon, the company initially set out with an ambitious mission: to pioneer the development of innovative biopharmaceutical products, with a particular emphasis on antibody technology, especially for endocrine and metabolic diseases.

Early milestones underscored XOMA's initial success and technological prowess. In 1989, the company achieved its first product approval for rBPI21, a Bactericidal/Permeability-Increasing protein. This accomplishment not only validated XOMA's core technology platform but also established its credibility in developing novel biopharmaceutical products. Throughout its nascent years, XOMA distinguished itself through groundbreaking efforts in the discovery and development of antibody therapeutics. This pioneering work led to numerous licensing agreements for its proprietary assets and technologies with other pharmaceutical and biotechnology companies. Crucially, these early licenses laid the groundwork for a substantial portfolio of potential royalty and milestone payments that would prove instrumental in the company's eventual transformation.

The most profound transformation in XOMA's history occurred in 2017, marking a decisive pivot to become a biotech royalty aggregator. This strategic shift represented a fundamental departure from the traditional, high-risk, and capital-intensive research and development (R&D) model of drug development. The company astutely identified an unmet market need for monetizing pre-commercial royalty opportunities, a niche largely overlooked by other financial entities.

The new royalty aggregation model is built upon two foundational pillars:

• Non-Dilutive Capital: XOMA provides non-dilutive and non-recourse funding to biotech companies. In exchange, it acquires future royalty and milestone rights, offering an attractive alternative to traditional debt or equity financing for its partners, who can then focus on advancing their drug candidates.
• Portfolio Diversification: By strategically acquiring royalty rights across multiple therapeutic indications and development stages, XOMA effectively mitigates the inherent single-asset risk that is pervasive in the biotech industry.

This transformative strategy proved highly successful, contributing to a substantial increase in XOMA's share price by over 800% following the 2017 pivot and a return to profitability by 2025. Further key transformations and milestones solidified this new direction:

• 2020 Gevokizumab Royalty Stream Sale: XOMA strategically sold the royalty stream associated with gevokizumab for an upfront payment of $225 million. This move significantly strengthened its balance sheet and provided substantial capital to further support its new strategic direction.
• First Milestone Payment as Royalty Aggregator (2020): The company earned its first $1 million milestone payment from Agenus Inc., related to Merck's advancement of MK-4830 into a Phase 2 study. This event served as a tangible validation of its new business model, demonstrating the viability of acquiring royalty interests in existing licenses.
• Official Name Change (July 2024): To fully align its corporate identity with its evolved business model, XOMA Corporation officially changed its name to XOMA Royalty Corporation.
• Continued Portfolio Expansion (2023-2025): XOMA has aggressively expanded its portfolio through strategic acquisitions of royalty and milestone rights. Notable examples include the acquisition of rights to arimoclomol and aldoxorubicin from LadRx Corporation in 2023, and the acquisitions of LAVA Therapeutics N.V., Turnstone Biologics, and HilleVax in 2025. These acquisitions have further diversified its portfolio with early-stage bispecific antibodies and other therapeutic candidates partnered with major pharmaceutical companies.

Today, XOMA Royalty Corporation stands as a specialized financial entity within the biotech sector, providing critical capital solutions and meticulously building a diversified portfolio of economic rights to future milestone and royalty payments from partnered therapeutic candidates.

3. Business Model

XOMA Corporation (NASDAQ: XOMA), officially operating as XOMA Royalty Corporation since July 2024, has cemented its position as a specialized biotech royalty aggregator. This unique business model centers on the strategic acquisition of economic rights to future potential milestone and royalty payments derived from partnered commercial and pre-commercial therapeutic candidates. As of December 13, 2025, XOMA plays a pivotal role in the biotechnology funding landscape by offering non-dilutive, non-recourse capital to biotech and pharmaceutical companies, enabling them to advance their drug candidates or support general corporate objectives.

Current Business Model:
XOMA's core strategy involves meticulously building and managing a diversified portfolio of intellectual property, primarily in the form of milestone and royalty payment streams. These streams originate from drug products under various stages of development or already commercialized by other companies. A key differentiator for XOMA is its focus on acquiring economic rights to assets across the entire development spectrum, from early to mid-stage clinical assets (Phase 1 and 2) to late-stage clinical or commercial assets. This approach allows XOMA to target opportunities, often below $25 million, that larger royalty aggregators, typically focused on more mature assets requiring substantial capital, might overlook. This niche strategy enables XOMA to secure royalties at more favorable valuations. The company's portfolio boasts over 120 assets spanning more than 11 therapeutic categories, with a significant portion (42 assets) partnered with large-cap pharmaceutical companies.

Revenue Sources:
XOMA Royalty Corporation's revenue is primarily generated from milestone and royalty payments. For the first nine months of 2025, the company reported robust cash receipts of $43.9 million from its partners. This figure was composed of $30.3 million from royalties and commercial payments and $13.6 million from milestone payments and fees. In the third quarter of 2025 alone, royalty receipts reached $14.3 million. The notable increase in income and revenue for the three and nine months ended September 30, 2025, was largely attributed to increased income related to the commercial success of VABYSMO and OJEMDA. Demonstrating its long-term potential, XOMA anticipates collecting over $1 billion in milestones and royalties over the next 15 years.

Product Lines (as Royalty Interests):
XOMA's "product lines" are not traditional drugs or services but rather the economic rights to a diverse portfolio of therapeutic candidates licensed to and being developed by other biotechnology and pharmaceutical companies. These assets span a broad range of therapeutic areas and development stages. Recent strategic acquisitions in 2025 have further bolstered this portfolio, including the securing of royalty economic interests in early-stage partnered assets through the acquisitions of LAVA Therapeutics, Turnstone Biologics, HilleVax, and Mural Oncology plc (which closed on December 5, 2025).

Key pipeline advancements contributing to XOMA's royalty interests include:

• Arimoclomol: Zevra Therapeutics has submitted a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for arimoclomol for the treatment of Niemann-Pick Type C.
• Ersodetug (formerly RZ358): Rezolute Bio is conducting Phase 3 trials for congenital hyperinsulinism (HI) and tumor HI. While a recent Phase 3 study for congenital HI did not meet its primary endpoint, Rezolute plans to engage with the FDA, and a separate Phase 3 trial for tumor HI continues. XOMA has already received $12 million in milestone payments from this agreement and is eligible for high single-digit to mid-teen royalties on net sales if approved.
• Seralutunib: Gossamer Bio anticipates topline results from its Phase 3 trial in pulmonary arterial hypertension (PAH) in February 2026.
• Sildenafil Cream, 3.6%: Discussions with the FDA regarding endpoint assessment for Phase 3 clinical studies for female sexual arousal disorder are ongoing.
• VABYSMO and OJEMDA: These commercialized assets are currently significant contributors to XOMA's income and revenue streams.

Services:
XOMA Corporation primarily functions as a financial partner and aggregator of biotech royalties. While it does not offer traditional "services" in the sense of drug development or direct patient care, its core offering is the provision of non-dilutive, non-recourse funding to biotechnology and pharmaceutical companies in exchange for future milestone and royalty payments. The company also engages in structuring agent activities for company acquisitions, as demonstrated by its role in XenoTherapeutics' acquisition of ESSA Pharma.

Segments:
XOMA Corporation operates as a biotech royalty aggregator with a global reach, primarily in the United States and the Asia Pacific region, and also has operations in Switzerland, Europe, and other areas. While the company's investor relations materials categorize its diverse portfolio by "therapeutic categories" (over 11 distinct areas), these represent the breadth of its royalty interests rather than distinct operational segments in the traditional business division sense.

Customer Base:
XOMA Corporation's customer base comprises the biotechnology and pharmaceutical companies that license its therapeutic candidates and to whom XOMA provides funding in exchange for royalty interests. These partners span the spectrum from early to mid-stage clinical asset developers to those with late-stage clinical or commercial assets. Many of XOMA's licenses originate from its pioneering efforts in antibody therapeutics discovery and development, and a significant portion of its assets are partnered with large-cap pharmaceutical companies.

4. Stock Performance Overview

XOMA Corporation (NASDAQ: XOMA), now officially XOMA Royalty Corporation, has exhibited a highly dynamic stock performance over the past decade, largely influenced by its transformative strategic shifts, key acquisitions, and the progression of its royalty asset pipeline. As of December 13, 2025, the stock's trajectory reflects its evolution into a specialized biotech royalty aggregator.

1-Year Stock Performance (December 13, 2024 – December 13, 2025)

Over the past year, XOMA Royalty's stock has shown a net increase, with some analyses indicating a rise of approximately 13.62%. However, other perspectives suggest a slight underperformance relative to the broader US Biotechs industry (by 5.3%) and the overall US Market (by 13.1%) over this period. The company's market capitalization, as of December 4, 2025, stood at $383.81 million, marking a 9.01% increase year-over-year.

Notable price movements and catalysts within this one-year timeframe include:

• Rebranding to XOMA Royalty Corporation (July 10, 2024): The official name change reinforced the company's dedicated focus on acquiring future economics from pre-commercial and commercial therapeutic candidates. While not directly impacting the stock's ticker symbol ("XOMA"), this move aimed to clarify its market positioning.
• Significant Milestone Payments (July 9, 2024): XOMA received substantial milestone payments, including $8.1 million from Viracta Therapeutics related to a Priority Review Voucher sale, and another $9 million following the U.S. Food and Drug Administration's (FDA) approval of Day One Biopharmaceuticals' New Drug Application for OJEMDA. These payments were instrumental in driving a significant revenue increase, with a 73.1% rise in the last twelve months as of Q1 2024.
• Q1 2025 Financial Results (May 13, 2025): The company reported a net income of $2.4 million for Q1 2025, a substantial turnaround from a net loss of $8.6 million in Q1 2024. Cash receipts for the quarter totaled $18.0 million, including $13.4 million in royalties and commercial payments.
• Strategic Acquisitions and Pipeline Developments (Throughout 2025): XOMA Royalty actively expanded its portfolio through several key acquisitions:
  • Acquisition of Mural Oncology plc (December 5, 2025): Successfully completed, adding to the portfolio.
  • Acquisition of LAVA Therapeutics N.V. (November 21, 2025): The closing of this transaction, along with an earlier amendment to the purchase agreement in October 2025, influenced XOMA's stock, with a reported 4.93% negative impact on the day of the amendment news.
  • Q3 2025 Financial Results (November 12, 2025): Reported $43.9 million in royalties and milestones for the first nine months of 2025, with $14.3 million in royalties during Q3.
  • Acquisitions of Turnstone Biologics and HilleVax: Further diversifying the royalty asset base.
  • FDA Breakthrough Therapy Designation for ersodetug (January 2025): Partner Rezolute received this designation for congenital hyperinsulinism, with topline data anticipated in December 2025.
• Blue Owl Capital Financing (December 19, 2023): A significant financing deal of up to $140 million with Blue Owl Capital provided non-dilutive capital for stock repurchases and further royalty and milestone acquisitions.

5-Year Stock Performance (December 13, 2020 – December 13, 2025)

XOMA Royalty's market capitalization has experienced considerable fluctuations over the past five years. While the last year saw a 9.01% increase, the annual market cap history reveals significant volatility: a substantial increase of 103.60% to $486.40 million in 2020, followed by a decrease of 51.52% to $235.80 million in 2021, and a further decline of 10.64% to $210.70 million in 2022. In 2023, there was a slight recovery of 0.85% to $212.50 million, followed by a substantial jump of 45.69% to $309.60 million in 2024, and a 19.02% increase to $368.50 million in 2025 as of early December.

Key catalysts during this five-year period, beyond the recent one-year events, include:

• Robust Revenue Growth: The company has demonstrated significant revenue growth in recent years. In 2024, XOMA Royalty's revenue reached $28.49 million, representing a remarkable 498.72% increase over 2023. This period also saw a substantial reduction in losses, decreasing by 58.33% in 2024 compared to 2023.
• Aggressive Portfolio Expansion: XOMA has been actively and consistently expanding its royalty and milestone portfolio, acquiring rights to numerous therapeutic candidates. As of early 2025, the company's portfolio comprised over 70 assets.
• Commercial Asset Approvals: The company's 2025 letter to stockholders highlighted two FDA approvals in 2024 for products within its pipeline: OJEMDA (tovorafenib) from Day One Biopharmaceuticals and MIPLYFFA (arimoclomol) from Zevra Therapeutics. These approvals transitioned these assets into commercial status, contributing directly to XOMA Royalty's revenue streams.

10-Year Stock Performance (December 13, 2015 – December 13, 2025)

A decade-long view of XOMA's stock performance reveals a journey marked by extreme volatility and a fundamental shift in business strategy. The market capitalization on December 31, 2015, was $158.00 million. By December 4, 2025, it had grown to $383.81 million, representing a 153.51% increase since December 1, 1998, with a compound annual growth rate of 3.50%. However, this overall growth masks periods of dramatic swings. For instance, in 2017, the market cap experienced a massive 1,036.86% increase to $289.90 million, only to be followed by a sharp decline of 63.40% in 2018 to $106.10 million. In 2016, the market cap had fallen by 83.86% to $25.50 million.

Key catalysts and significant movements over the 10-year span include:

• Transformative Shift to Royalty Aggregator Model: The most significant catalyst over this decade was XOMA's strategic pivot from a traditional biotechnology company focused on internal drug development to a pure-play royalty aggregator. This fundamental change in business model is the bedrock of its current financial structure and growth strategy, moving away from the high-risk R&D model.
• Major Fluctuations Driven by Biotech R&D: The dramatic swings in market capitalization during the earlier part of this decade (e.g., the massive gain in 2017 and sharp declines in 2016 and 2018) are characteristic of biotech companies heavily involved in high-risk drug development. These movements were likely tied to critical clinical trial outcomes, regulatory decisions, partnership agreements, or changes in its internal pipeline.
• Consistent Strategic Focus: In recent years, particularly post-transformation, XOMA's messaging to shareholders has consistently emphasized generating value through "solid execution, wise capital deployment, and deal creativity." This long-term strategy, encompassing non-dilutive financing and opportunistic share repurchases, has aimed to stabilize and grow shareholder value through its diversified royalty model.

In summary, XOMA Royalty Corporation has undergone a profound transformation over the last decade, culminating in its current focus as a biotech royalty aggregator. While the 10-year performance shows a net increase in market capitalization, it has been marked by substantial volatility, particularly during its transition phase. More recently, the company has demonstrated solid revenue growth and a return to profitability in Q1 2025, driven by strategic acquisitions and consistent milestone and royalty payments from its expanding portfolio of royalty assets. Current analyst ratings generally suggest a "Strong Buy" with significant upside potential for the stock in the coming year, reflecting confidence in its refined business model.

5. Financial Performance

XOMA Royalty Corporation (NASDAQ: XOMA), having successfully transitioned its business model, has demonstrated a significant financial turnaround, highlighted by its latest earnings report for the third quarter of 2025. The company's performance reflects its strategic focus on acquiring economic rights to future milestone and royalty payments from partnered pre-commercial and commercial therapeutic candidates.

As of December 13, 2025, here's a detailed analysis of XOMA Royalty Corporation's financial health:

Latest Earnings Report (Q3 2025 – period ended September 30, 2025):
XOMA Royalty Corporation reported its third-quarter 2025 financial results on November 12, 2025, showcasing a strong return to profitability.

• Net Income: The company recorded a net income of $14.1 million for Q3 2025, a substantial improvement compared to a net loss of $17.2 million in the corresponding period of 2024. For the first nine months of 2025, net income reached $25.6 million, a significant reversal from a net loss of $9.9 million in the same period last year.
• Earnings per Share (EPS): GAAP earnings per share for Q3 2025 stood at $0.70, surpassing Leerink Partners' estimate of ($0.02). Basic EPS from continuing operations for the quarter was $0.74, a strong turnaround from a loss of $1.59 per share a year ago. Diluted EPS from continuing operations was $0.70.

Revenue Growth:

• Q3 2025 Revenue: XOMA Royalty reported revenue of $9.35 million for the third quarter of 2025, an increase from $7.2 million in the same quarter of the previous year. However, this figure did miss analysts' consensus expectations of $11.47 million.
• Year-to-Date Revenue (9M 2025): For the nine months ended September 30, 2025, total revenue was $38.39 million, a notable increase from $19.77 million in the prior-year period.
• Trailing Twelve Months (TTM) Revenue: The company's TTM revenue is $47.11 million, reflecting an impressive year-over-year growth of 118.02%. Royalty and milestone cash receipts were $14.3 million in Q3 2025 and $43.9 million for the first nine months of 2025.

Margins:
XOMA Royalty demonstrates strong profitability metrics, indicative of its capital-efficient royalty aggregation model.

• Gross Profit Margin: The company boasts a high gross profit margin of 95.13%.
• EBIT Margin: The Earnings Before Interest and Taxes (EBIT) margin is reported at 11.78%.
• Net Income Margin: The net income margin is 45.94%, with another source citing a net margin of 32.28%.
• Operating Expenses: Q3 2025 operating expenses reached $10.68 million, which was notably higher than operating income, suggesting that core operational costs, excluding royalty income, continue to exert pressure. Research and development expenses have been significantly scaled back to $69,000 in Q3 2025, a sharp decrease from $0.8 million last year, underscoring the shift away from internal R&D.

Debt:

• Debt-to-Equity Ratio: As of December 11, 2025, XOMA Royalty had a debt-to-equity ratio of 1.07 (or 107%). Another recent update indicated a debt-to-equity ratio of 102.5%.
• Total Debt & Net Debt: In December 2024, the company had total debt of US$118.3 million and cash of US$105.2 million, resulting in a net debt of US$13.1 million. More recently, XOMA Royalty reported total debt of $110.7 million and cash and short-term investments of $46.7 million.
• Debt Coverage: The company's debt is not currently well covered by operating cash flow (4.9% coverage), and interest payments are not well covered by EBIT (0.6x coverage). It is important to note that in December 2023, XOMA secured a royalty-backed loan of up to $140 million with Blue Owl Capital, providing significant capital.

Cash Flow:

• Cash and Cash Equivalents: As of September 30, 2025, XOMA Royalty held $130.6 million in cash and cash equivalents, which included $85.4 million in restricted cash. This restricted cash included $43.3 million related to an assumed lease, $39.9 million reserved for the Mural acquisition, and $2.2 million related to the Blue Owl Loan.
• Cash Receipts from Partners: In the first nine months of 2025, XOMA Royalty received $43.9 million in cash from its partners, comprising $30.3 million from royalties and commercial payments and $13.6 million from milestone payments and fees. Q3 2025 alone saw $14.3 million in royalty and commercial payments.

Valuation Metrics (as of December 13, 2025, or nearest available date):

• Stock Price: The stock price for XOMA (NASDAQ: XOMA) has shown recent fluctuations, with figures including $25.22 on December 13, 2025, $27.17 on December 12, 2025, and $34.36 on December 5, 2025.
• Market Capitalization: As of December 13, 2025, XOMA Royalty's market capitalization was $312.22 million. Other recent market cap figures include $322.08 million (Dec 11, 2025) and $377.56 million (Dec 9, 2025).
• P/E Ratio: The P/E ratio was 34.08 as of December 13, 2025, with other recent values including 35.27 (Dec 11, 2025) and 37.5 (Dec 9, 2025). The trailing twelve months (LTM) earnings per share was $0.82.
• PEG Ratio: XOMA's PEG ratio is approximately 0.26 to 0.29, suggesting the stock may be trading at a low price-to-earnings ratio relative to its growth potential.
• Price/Sales (P/S) Ratio: The TTM Price/Sales ratio is 7.89.
• Enterprise Value (EV) and EV/EBITDA: As of September 30, 2025, the trailing twelve-month Enterprise Value (EV) was $496.632 million, and TTM EBITDA was $31.723 million, implying an EV/EBITDA of approximately 15.66.
• Analyst Sentiment: Brokerages currently have an average "Hold" recommendation for XOMA Royalty. However, individual analyst price targets range from $45.00 to $97.00, with some analysts maintaining "Buy" or "Outperform" ratings, citing the company's robust royalty revenue base and promising pipeline.

In conclusion, XOMA Royalty Corporation has successfully pivoted to a profitable and cash-generative business model. While recent revenue growth is strong, and margins are impressive, the debt coverage metrics warrant attention. The company's valuation, particularly its PEG ratio, suggests potential undervaluation relative to its growth prospects, aligning with the generally positive, albeit cautious, analyst sentiment.

6. Leadership and Management

XOMA Royalty Corporation, having fully embraced its identity as a specialized biotechnology royalty aggregator, is guided by a leadership team and board of directors whose collective experience and strategic vision are tailored to this unique business model. As of December 13, 2025, the company's management structure and governance reflect its commitment to a capital-efficient, portfolio-driven approach to value creation.

CEO and Leadership Team
At the helm of XOMA Royalty Corporation is Owen Hughes, who assumed the full-time role of Chief Executive Officer in January 2024, after serving as Executive Chairman and Interim CEO since January 2023. Hughes' leadership has been instrumental in solidifying the company's royalty aggregation strategy. The executive leadership team also comprises:

• Owen Hughes: Chief Executive Officer
• Bradley Sitko: Chief Investment Officer, appointed in January 2023, bringing expertise in identifying and structuring royalty and milestone acquisitions.
• Thomas M. Burns: Senior Vice President, Finance, and Chief Financial Officer, a long-standing member of the team since March 2017, providing financial stability and oversight.
• Maricel Montano: Chief Legal Officer, ensuring legal and regulatory compliance in complex royalty agreements.

The average tenure of XOMA Royalty's management team is approximately 2.9 years, indicating a relatively experienced and focused group, particularly given the recent strategic pivot and growth trajectory.

Board of Directors
The Board of Directors of XOMA Royalty Corporation, as of December 2025, is composed of a diverse and experienced group of individuals with deep knowledge across the pharmaceutical and financial sectors:

• Jack Wyszomierski: Chairman of the Board and Lead Independent Director since May 2023, providing strategic guidance and independent oversight.
• Owen Hughes: CEO and Director, bridging executive leadership with board-level strategy.
• Heather L. Franklin: Director since August 2021, bringing valuable industry insights.
• Natasha Hernday: Director since July 2020, contributing to the board's strategic discussions.
• Barbara Kosacz: Director since January 2019, likely offering legal and transactional expertise crucial for a royalty aggregator.
• Joseph M. Limber: Director since December 2012, providing long-term institutional memory and continuity.
• Matthew Perry: Director since February 2017, contributing to the strategic evolution of the company.

With an average tenure of approximately 6.9 years for the Board of Directors, XOMA Royalty benefits from a stable and knowledgeable governing body, capable of overseeing the company's long-term strategy and navigating the complexities of the biotech royalty market.

Strategic Approach
XOMA Royalty Corporation's strategic approach is laser-focused on its core identity as a biotechnology royalty aggregator. The company's primary objective is to acquire the economic rights to future milestone and royalty payments from partnered pre-commercial clinical candidates. This model is designed to provide non-dilutive, non-recourse funding to biotech companies, thereby enabling them to advance their drug candidates without equity dilution or incurring traditional debt. A key tenet of their strategy is a diversified portfolio approach to asset acquisition, which is crucial for mitigating the inherent risks associated with single-asset exposure in the biotech industry. The company also emphasizes a capital-efficient structure aimed at maximizing shareholder value.

Recent strategic activities in late 2025 underscore this aggressive and opportunistic approach:

• The successful closing of the acquisition of Mural Oncology plc on December 5, 2025.
• The closing of transactions to acquire LAVA Therapeutics N.V. on November 21, 2025.
• The completion of acquisitions of Turnstone Biologics and HilleVax earlier in 2025.
• The deployment of $25.0 million in the first nine months of 2025 specifically for acquiring additional royalty and milestone assets.

Corporate Governance
XOMA Royalty Corporation maintains a strong commitment to corporate governance and transparency. The company ensures that its investors are well-informed through publicly accessible documents, including a comprehensive Code of Ethics and charters for its key committees: Audit, Compensation, and Nominating and Governance. These documents are readily available in the investor relations section of its website, reflecting a dedication to ethical conduct and robust oversight.

Reputation
XOMA Royalty's reputation, as perceived through analyst coverage and market activity as of December 2025, presents a nuanced yet generally optimistic outlook. MarketBeat reports an average "Hold" recommendation from five brokerages, with individual ratings spanning from "Sell" to "Buy." For instance, H.C. Wainwright maintained a "Buy" rating on December 9, 2025, citing the company's diversified portfolio and solid financial health. Conversely, Zacks Research downgraded the stock to a "strong sell" on November 18, 2025, indicating differing perspectives on its near-term prospects. The average 12-month target price among analysts is $65.00.

A significant positive indicator for the company's reputation and future prospects is the recent insider buying activity by CEO Owen Hughes. On December 4, 2025, Hughes acquired 100,000 shares of the company's stock for a total transaction of $2,505,000.00. This substantial increase in his direct ownership (5,000%) is widely interpreted as a strong vote of confidence in the company's strategic direction and long-term value. Despite a slight miss on consensus EPS and revenue estimates for Q3 2025, analysts like Joseph Pantginis of H.C. Wainwright continue to reaffirm a "Buy" rating, emphasizing XOMA's diversified portfolio and robust cash position at the end of Q3 2025.

7. Products, Services, and Innovations

XOMA Royalty Corporation, as a specialized biotech royalty aggregator, does not develop its own drug candidates or offer traditional biopharmaceutical services. Instead, its "products" are the economic rights to a diverse portfolio of therapeutic candidates, and its "innovation" lies in its strategic approach to identifying, acquiring, and managing these royalty interests. As of December 13, 2025, XOMA has significantly expanded its holdings, demonstrating a refined strategic approach to portfolio growth.

Current Royalty Interests (Product Offerings)

XOMA's robust royalty portfolio encompasses both commercialized and late-stage clinical assets, spanning a wide array of therapeutic areas. Key commercial assets that are currently generating royalty revenue for XOMA include:

• OJEMDA (tovorafenib): A pan-RAF inhibitor partnered with Day One Biopharmaceuticals, carrying a mid-single-digit royalty rate.
• IXINITY®: A recombinant Factor IX, partnered with Medexus Pharmaceuticals, also with a mid-single-digit royalty rate.
• XACIATO: For bacterial vaginal infections, partnered with Organon, commanding a high single-digit royalty rate.
• VABYSMO® (faricimab-svoa): An Angiopoietin-2 and VEGF-A bispecific antibody partnered with Roche, contributing a 0.5% royalty.
• DSUVIA® (sufentanil sublingual tablet): An acute pain treatment partnered with Talphera, with a royalty rate ranging from 37.5% to 75% (DoD).
• MIPLYFFA (arimoclomol): A heat-shock protein amplifier partnered with Zevra Therapeutics, with a mid-single-digit royalty rate. Zevra Therapeutics has notably submitted a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for arimoclomol for the treatment of Niemann-Pick Type C.

Innovation Pipelines (Partnered Drug Candidates)

XOMA's "innovation pipeline" is effectively the pipeline of its partners' drug candidates in which XOMA holds royalty interests. This pipeline is robust, comprising over 120 assets, with a significant number in late-stage clinical development as of December 2025.

Notable Phase 3 assets include:

• Seralutinib: An inhaled PDGFR, CSF1R, c-KIT inhibitor for pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD), partnered with Chiesi and Gossamer Bio. Gossamer Bio anticipates topline results from its Phase 3 PROSERA trial in February 2026. XOMA holds a low to mid-single-digit net royalty interest in this asset.
• Rilvegostomig (AZD2936): A TIGIT/PD-1 bispecific antibody partnered with AstraZeneca, representing a significant oncology asset.
• Ficlatuzumab (AV-299): An HGF antibody partnered with AVEO Oncology, an LG Chem company, with a low-single-digit royalty.
• D-Fi (FCX-007): A gene therapy partnered with Castle Creek Biosciences, targeting rare genetic disorders.
• Ovaprene®: A hormone-free contraceptive partnered with Daré Bioscience, addressing a large market need.
• Ersodetug (formerly XOMA 358/RZ358): Licensed to Rezolute Bio for congenital hyperinsulinism (CHI) and tumor hyperinsulinism. While the Phase 3 sunRIZE trial for cHI failed to meet its primary endpoint in December 2025, a separate Phase 3 trial for tumor hyperinsulinism is ongoing, with topline results expected in the second half of 2026. XOMA is eligible for milestone payments and potential royalties ranging from high single-digits to mid-teens on net sales if approved.
• Mezagitamab: Takeda has dosed the first patient in a Phase 3 clinical trial investigating mezagitamab as a treatment for adults with IgA Nephropathy.
• Sildenafil Cream, 3.6%: One of two registrational Phase 3 clinical trials has commenced for the treatment of female sexual arousal disorder, targeting a significant unmet medical need.

Recent strategic acquisitions have further broadened XOMA's pipeline exposure. The company completed acquisitions of Turnstone Biologics and HilleVax and announced acquisitions of LAVA Therapeutics N.V. and Mural Oncology plc, further expanding its royalty and milestone portfolio with promising early-stage and partnered assets.

R&D Strategy

XOMA's R&D strategy is fundamentally distinct from traditional biopharmaceutical companies. As a "biotech royalty aggregator," XOMA does not engage in direct internal drug discovery and development. Instead, its strategy revolves around identifying and acquiring the economic rights to future potential milestone and royalty payments associated with pre-commercial and commercial therapeutic candidates developed by other pharmaceutical and biotechnology companies. This model provides crucial non-dilutive, non-recourse funding to the selling companies, which they can then strategically deploy to advance their internal drug candidates or for general corporate purposes.

The company employs a sophisticated portfolio approach to acquire new royalty assets, meticulously aiming to mitigate single-asset binary exposure. XOMA strategically focuses on both early to mid-stage clinical assets (Phase 1 and 2) with significant commercial sales potential that are licensed to capable partners, and also opportunistically acquires milestone and royalty revenue streams on late-stage clinical or already commercial assets.

Patents (as a Royalty Aggregator)

In its role as a royalty aggregator, XOMA's business model is intrinsically linked to the intellectual property (patents) held by its partners. XOMA does not primarily develop or hold its own patents for drug candidates. Instead, its expertise lies in evaluating, structuring, and acquiring the economic rights to future payments generated from the patents and licensed technologies of other biotech and pharmaceutical companies. This allows XOMA to participate in the commercial success of a diverse array of drug candidates across various therapeutic areas without incurring the substantial direct R&D costs, regulatory risks, and lengthy timelines associated with internal drug development.

Competitive Edge

XOMA's competitive edge is deeply rooted in its differentiated and highly specialized approach within the broader royalty investment market:

• Focus on Earlier-Stage Assets: Unlike larger, more established competitors such as Royalty Pharma, DRI Healthcare Trust, HCRx, and Ligand, which typically target late-stage or commercial royalty assets requiring substantial capital, XOMA strategically focuses on the earlier segments of the royalty market (preclinical through Phase 2 assets).
• Smaller Deal Sizes: This strategic focus enables XOMA to engage in smaller deal opportunities (often sub-$25 million) that larger funds tend to overlook due to their size constraints. This niche allows XOMA to secure royalties at potentially more favorable valuations.
• Capital-Efficient Business Model: XOMA operates under a highly capital-efficient structure, designed to deliver enhanced shareholder value by significantly mitigating single-asset binary exposure through its diversified portfolio.
• Strong Financial Performance: The company has demonstrated a return to profitability, with $0.82 earnings per share over the last twelve months and an impressive revenue growth of 118.02%. It also maintains strong short-term financial health, evidenced by a current ratio of 3.91.
• Extensive and Growing Portfolio: XOMA boasts an expansive and continuously growing portfolio of licenses, encompassing over 120 assets, which is actively expanded through strategic acquisitions. This diversification is a key strength in mitigating the inherent risks of biotech investments.

8. Competitive Landscape

XOMA Royalty Corporation (NASDAQ: XOMA), having fully transformed into a pure-play biotech royalty aggregator as of July 10, 2024, operates in a highly specialized niche within the broader biotechnology and pharmaceutical industries. Its distinctive business model, centered on acquiring future economic rights like milestone payments and royalty streams from partnered therapeutic candidates, positions it differently from traditional drug developers. This strategy provides crucial non-dilutive, non-recourse funding to biotech firms, allowing them to advance their internal drug candidates or for general corporate purposes.

Competitive Landscape and Industry Rivals:

XOMA's primary competitors are entities that also engage in royalty aggregation or provide alternative financing solutions to biotech companies. While direct comparisons to traditional pharmaceutical companies are not entirely apt, rivals can be categorized by their approach to biotech financing and asset monetization. Top direct competitors in the royalty space include:

• Royalty Pharma (RPRX): A dominant player in the royalty acquisition market, typically focusing on late-stage and commercial assets with substantial cash flows.
• DRI Healthcare Trust (DHT.UN.TO): Another significant player in the healthcare royalty space.
• HCRx (formerly HealthCare Royalty Partners): A private investment firm focused on healthcare royalties.
• Ligand Pharmaceuticals (LGND): While having its own drug development, Ligand also engages in a significant royalty model.

Beyond these dedicated royalty companies, XOMA also faces competition from other forms of biotech financing, including:

• Venture Capital and Private Equity Firms: These firms offer equity financing, which can be dilutive but provides substantial capital.
• Specialty Lenders: Providing debt financing to biotech companies.
• Large Pharmaceutical Companies: Often acquiring smaller biotechs outright or forming strategic partnerships that include upfront payments and milestone structures, thereby competing for attractive assets.

Other companies within the broader "medical" sector that could be considered rivals or alternatives for investor capital include BioCryst Pharmaceuticals (BCRX), Dynavax Technologies (DVAX), Novavax (NVAX), OPKO Health (OPK), Rigel Pharmaceuticals (RIGL), Geron (GERN), Verastem (VSTM), Myriad Genetics (MYGN), and Ironwood Pharmaceuticals (IRWD). Additionally, contract development and manufacturing organizations (CDMOs) like Lonza Group and Rentschler Biopharma are sometimes mentioned in a broader competitive context, though their business models are fundamentally different.

XOMA currently ranks 23rd among 223 active competitors, with 65 of them being funded, indicating a competitive but addressable market.

Market Share:

Given XOMA's business model as a royalty aggregator rather than a direct developer or seller of pharmaceutical products, traditional market share metrics (e.g., percentage of sales in a specific drug market) are not directly applicable. Instead, XOMA's success and "market share" can be conceptualized by:

• Size and Diversity of its Royalty and Milestone Portfolio: The breadth and depth of its acquired interests.
• Cash Receipts Generated: The actual revenue derived from these agreements.
• Strategic Capital Deployment: Its ability to identify and acquire new, valuable royalty streams.

The company reported annual revenue of $28.5 million as of December 31, 2024, and a trailing 12-month revenue of $12.6 million as of September 30, 2025. In the first nine months of 2025, XOMA Royalty received $43.9 million in royalties and milestones from its partners, including $14.3 million from royalties during the third quarter. These figures, while not a traditional market share, indicate its activity and success in its niche.

Competitive Strengths:

• Diversified Royalty Portfolio: XOMA's core strength lies in its ability to construct and expand a diversified portfolio of royalty and milestone rights across numerous therapeutic areas and development stages. This diversification is crucial for mitigating the inherent risks associated with the clinical or commercial failure of any single drug candidate.
• Strategic Acquisitions and Proactive Capital Deployment: The company has demonstrated a highly active and strategic approach to portfolio expansion through acquisitions. Recent examples in late 2025 include Mural Oncology (completed December 5, 2025), LAVA Therapeutics (completed November 21, 2025), HilleVax (completed September 17, 2025), and Turnstone Biologics. These moves secure royalty economic interests in early-stage partnered assets, including those with major players like Pfizer and Johnson & Johnson.
• Non-Dilutive Funding Model: XOMA offers an attractive and vital financing alternative for biotech companies, providing non-dilutive and non-recourse funding. This can be a significant advantage for its partners, allowing them to retain equity and control.
• Robust Financial Health (in key aspects): As of December 12, 2025, InvestingPro data highlights XOMA's profitability, with $0.82 earnings per share over the last twelve months and impressive revenue growth of 118.02%. The company also maintains a strong current ratio of 3.91, indicating solid short-term liquidity.
• Experienced Management in Royalty Aggregation: The management team's clear focus on "solid execution, wise capital deployment, and deal creativity" underscores their expertise in this specialized business model.
• Exposure to Late-Stage Pipelines: Benchmark analysts have highlighted XOMA's existing royalty revenue base and its exposure to additional partnered pipeline programs, including ten candidates currently in late-stage (Phase 3) clinical trials, as a significant competitive strength.
• Focus on Underserved Niche: XOMA often targets earlier-stage assets and smaller deal sizes (sub-$25 million) that larger royalty funds might overlook, allowing it to acquire royalties at potentially more favorable valuations.

Competitive Weaknesses:

• Reliance on Partner Performance: XOMA's business model is inherently dependent on the successful development, regulatory approval, and commercialization of its partners' drug candidates. Any setback in a partnered program directly impacts XOMA's expected royalty and milestone payments.
• Clinical Trial Setbacks: A notable recent weakness was the failure of Rezolute Bio's Phase 3 sunRIZE trial for ersodetug (formerly XOMA-358) in congenital hyperinsulinism in December 2025. This missed primary and key secondary endpoints, leading to a significant 22.7% drop in XOMA's stock price on December 11, 2025, and subsequent reductions in price targets from several analysts.
• Stock Price Volatility: The stock has shown considerable volatility, with the ersodetug trial results illustrating the immediate and substantial impact that partner failures can have.
• Analyst Rating and EPS Miss: While some analysts maintain a "Buy" rating, the average rating from five brokerages is "Hold," suggesting a mixed sentiment. The reported Q3 2025 EPS of ($0.35) missed the consensus estimate of ($0.02), which can erode investor confidence.
• Concentration of Risk within Portfolio: Despite overall diversification, a substantial percentage of the calculated net present value of XOMA's portfolio may be represented by a limited number of key products. This concentration makes the company vulnerable to the failure of any one of these high-value assets.
• Limited Direct Control: As a royalty aggregator, XOMA has limited direct control over the scientific, clinical, regulatory, and commercialization processes of its partnered assets. It is entirely reliant on the execution and success of its partners.

9. Industry and Market Trends

XOMA Royalty Corporation (NASDAQ: XOMA), operating as a biotechnology royalty aggregator, is uniquely positioned within the broader pharmaceutical and biotechnology industries. While not directly involved in drug development, its financial performance is intricately linked to the underlying trends, macro drivers, and operational dynamics impacting its partners. As of December 13, 2025, several key sector-level trends, macroeconomic factors, supply chain considerations, and cyclical effects are shaping the landscape in which XOMA operates.

Sector-Level Trends

The biotechnology and pharmaceutical sectors are in a state of rapid evolution, driven by scientific breakthroughs and strategic shifts:

• Technological Advancements: The integration of Artificial Intelligence (AI) and machine learning is profoundly transforming drug discovery, optimizing clinical trial designs, and enhancing molecular modeling. Precision medicine, personalized therapies, and the increasing adoption of immunotherapies are becoming standard, particularly in high-value areas like oncology, immunology, and neurology. Furthermore, cell, gene, and RNA therapies are moving beyond niche applications, with accelerating regulatory approvals and advancements in manufacturing. These innovations are generally favorable for XOMA, as they increase the likelihood of successful therapeutic candidates from which the company can acquire valuable royalty streams.
• Focus on High-ROI Therapeutic Areas: Economic pressures and escalating development costs are compelling drug developers to prioritize therapeutic areas with the highest potential return on investment (ROI). Oncology, immunology/rheumatology, and rare diseases continue to attract significant innovation and investment. Metabolic diseases, particularly those leveraging GLP-1 analogues for obesity, are also experiencing explosive growth. This strategic concentration by drug developers could lead to a more valuable and focused portfolio for XOMA, enhancing the potential of its royalty interests.
• Improved R&D Productivity: The industry is witnessing improved R&D productivity in 2025, largely due to more sophisticated biomarker-driven trial designs, early genomic stratification, and enhanced decision-making systems that filter out non-viable assets earlier. This trend is beneficial for XOMA, as it implies a higher probability of success for the underlying drug candidates in its royalty portfolio.
• M&A and Evolving Funding Landscape: A significant "patent cliff" is anticipated, with over $300 billion in sales at risk through 2030 from expiring patents on blockbuster products. This phenomenon is driving increased merger and acquisition (M&A) activity as larger pharmaceutical companies seek to replenish their pipelines. Concurrently, the biotech funding environment has stabilized, with investors increasingly demanding clear evidence of feasibility, differentiation, and commercial potential, often favoring platform companies, AI-enabled biotechs, and partnership-driven capital access strategies. XOMA's role as a provider of non-dilutive funding becomes exceptionally attractive in this environment, creating ample opportunities to acquire new royalty streams from biotechs seeking capital or from assets being strategically divested.

Macro Drivers

The broader macroeconomic and geopolitical environment significantly influences the pharmaceutical and biotechnology sectors:

• Macroeconomic Uncertainty and Capital Access: The biopharma industry is navigating a period of macroeconomic uncertainty, characterized by factors such as elevated interest rates, persistent inflation, and tighter access to speculative capital. This environment makes XOMA's non-dilutive financing model an increasingly appealing alternative for drug developers seeking to advance their programs without equity dilution.
• Rising Healthcare Spending and Aging Populations: Global healthcare spending continues its upward trajectory, fueled by an aging global population and the escalating prevalence of chronic diseases such as cancer, diabetes, and cardiovascular conditions. This sustained demand for advanced medical treatments underpins the long-term value of pharmaceutical products, directly supporting XOMA's revenue streams.
• Evolving Regulatory Landscape: Regulatory bodies worldwide, including the FDA and EMA, are continually adapting to technological advancements by developing new guidelines for digital health, advanced therapeutics, and the integration of AI. There is also increased scrutiny on drug pricing and access, which could potentially impact the commercial viability and profitability of partner products. While XOMA is not directly subject to these regulations, the success and profitability of its partners' drugs are directly influenced by them, thereby indirectly affecting XOMA's royalty income. Policies encouraging domestic manufacturing or altering ESG compliance standards could also introduce operational complexities for XOMA's partners.
• Geopolitical Instability: Ongoing geopolitical tensions and trade uncertainties contribute to global disruptions, which can impact supply chains and influence regulatory harmonization efforts, indirectly affecting the global commercialization potential of XOMA's royalty assets.

Supply Chain Considerations

Although XOMA is not directly involved in drug manufacturing or distribution, the robustness of its partners' supply chains is a critical, albeit indirect, consideration:

• Increased Scrutiny and Complexity: The life sciences supply chain in 2025 is under considerable pressure due to global disruptions, evolving regulations, and the rapid pace of digital transformation. Regulators are intensifying scrutiny on the sourcing, traceability, and cross-border compliance of active pharmaceutical ingredients (APIs) and finished drug products.
• Focus on Resilience and Digitalization: Companies are heavily investing in digital transformation, including AI-driven tools for supplier scoring, climate risk modeling, and achieving end-to-end supply chain visibility to enhance resilience. Trends such as reshoring/nearshoring, supplier diversification, and sustainability mandates are also gaining traction. Any significant disruptions or increased costs in the supply chains of XOMA's partners could adversely affect their ability to bring products to market or maintain profitability, which would ultimately impact XOMA's royalty revenues.

Cyclical Effects

The biotechnology and pharmaceutical industries exhibit certain cyclical patterns that influence XOMA's operations:

• R&D and Product Launch Cycles: The pharmaceutical industry is characterized by lengthy and costly R&D cycles. However, the increasing integration of AI and advanced technologies aims to accelerate drug discovery and development, potentially shortening these cycles and improving success rates. The successful launch of a partner's product is a direct and significant driver of XOMA's royalty income.
• Patent Cliff and M&A Cycles: The current "patent cliff," where numerous blockbuster drugs are losing market exclusivity, is a major cyclical event fueling M&A activity as large pharmaceutical companies seek to acquire new assets to offset anticipated revenue losses. This dynamic presents continuous opportunities for XOMA to acquire royalty interests from companies seeking non-dilutive capital or from assets being strategically bought or sold in the M&A market.
• Funding and Investment Cycles: Following a volatile period, biotech funding is stabilizing, with investors placing a greater emphasis on "proof of value." This shift, combined with potentially easing interest rates, could lead to a pickup in dealmaking and make XOMA's non-dilutive funding model even more appealing to biotechs seeking capital.
• Economic Cycles: While healthcare spending tends to be relatively stable, broader economic cycles can influence overall investment in R&D and the capital available to XOMA's partners. However, the essential nature of healthcare services often provides a degree of insulation against severe economic downturns.

In summary, XOMA Royalty Corporation is well-positioned to capitalize on several positive industry trends in 2025, including technological advancements, a strategic focus on high-ROI therapeutic areas, and a dynamic M&A landscape driven by patent expirations. While macroeconomic uncertainties, evolving regulatory complexities, and potential supply chain challenges present indirect risks to its partners, XOMA's diversified portfolio and non-dilutive funding model offer resilience and strategic advantages in the constantly evolving biopharmaceutical market. Recent acquisitions of LAVA Therapeutics N.V. and Mural Oncology plc further underscore its proactive role in diversifying and expanding its royalty-generating asset base in this dynamic environment.

10. Risks and Challenges

XOMA Royalty Corporation (NASDAQ: XOMA), as a biotechnology royalty aggregator, navigates a complex landscape fraught with inherent operational, regulatory, and market risks. While recent reports do not explicitly highlight major controversies, the company's unique business model and its reliance on external partnerships expose it to significant challenges.

Operational Risks

XOMA's operational risks are primarily intertwined with its strategy as a royalty aggregator and its fundamental dependence on the successful execution and outcomes of its external partners.

• Clinical Trial Failures: A paramount risk is the inherent uncertainty of clinical trial outcomes. This was starkly demonstrated by the recent failure of Rezolute Bio's Phase 3 trial for ersodetug (formerly XOMA 358), a drug for which XOMA had licensed rights and was eligible for substantial milestone payments and royalties. This setback directly led to a notable drop in XOMA's stock price and subsequent reductions in analyst price targets, underscoring the binary nature of biotech development.
• Revenue Volatility: The company's revenue generation can be volatile, as evidenced by its third-quarter 2025 revenue falling short of analyst expectations. This variability is a direct consequence of the unpredictable timing and success of milestone payments and royalty streams.
• Earlier-Stage Asset Exposure: XOMA's strategy of investing in earlier-stage molecules, while potentially offering higher returns, inherently places it in a higher-risk segment compared to larger rivals that typically target later-stage assets from more established companies with de-risked pipelines.
• Credit Losses: The company has experienced credit losses on purchased receivables, totaling $30.9 million in 2024, including amounts related to transactions with Agenus, Aronora, and Talphera. Such losses highlight the financial risks associated with its deal-making.
• Cybersecurity Threats: Like all modern enterprises, XOMA faces cybersecurity threats, including ransomware and malware. A compromise of its information technology systems or data could lead to significant adverse consequences, including financial loss and reputational damage.
• Key Personnel Reliance: The company relies on a relatively small number of highly skilled employees. The loss of key personnel without adequate succession planning could pose an operational risk.

Regulatory Risks

The biotechnology industry is among the most heavily regulated sectors, exposing XOMA to significant, albeit indirect, regulatory challenges.

• FDA and Government Agency Disruptions: A critical regulatory risk for XOMA, as a royalty aggregator, is the potential for disruptions at key regulatory bodies such as the U.S. Food and Drug Administration (FDA) and other government agencies. Recent events, such as reported mass layoffs of federal employees since January 2025 and an ongoing U.S. federal government shutdown that commenced in October 2025, could significantly impede the timely review and processing of regulatory submissions by XOMA's licensees or royalty-agreement counterparties. Such delays could materially and adversely affect XOMA's business by postponing or preventing milestone and royalty payments.
• Policy Changes: Changes in leadership and policy at U.S. federal regulatory agencies, including the FDA, under the current presidential administration, introduce further uncertainty and potential impacts on the company's business and its royalty providers. Stricter drug pricing policies or changes in approval pathways could diminish the commercial potential of partnered assets.

Controversies

As of December 13, 2025, the available research does not explicitly highlight any major controversies for XOMA Corporation in the sense of scandals, significant legal battles, or widespread public disputes. The company has engaged in a strategy of acquiring struggling biotechnology companies, sometimes referred to as "zombies," and liquidating them to return cash to shareholders and profit from selling intellectual property. While this involves distressed assets, XOMA is generally presented as a firm that aims to "do the right thing" for its partners and the biotech ecosystem in these scenarios.

Market Risks

XOMA Corporation faces several market risks that could impact its financial performance and stock valuation.

• Weak Market Sentiment: The company has experienced weak near and mid-term market sentiment, which could challenge its long-term positive outlook. There is elevated downside risk due to a perceived lack of additional long-term support signals from the market.
• Stock Volatility: XOMA's stock has demonstrated significant price fluctuations, with a reported volatility of 55.53%. This high volatility can be unsettling for investors and makes the stock susceptible to rapid price swings based on news, particularly related to clinical trial outcomes.
• Financial Health Indicators: Some financial health assessments indicate potential concerns. An Altman Z-Score of -5.3 places XOMA in a "distress zone," implying a potential risk of bankruptcy within the next two years. Furthermore, the company's low interest coverage ratio of 0.7 suggests that its earnings are currently insufficient to cover interest expenses, which could necessitate increased debt issuance or impact its ability to service existing debt.
• Biotech Fundraising Climate: The broader difficult fundraising climate for biotechs contributes to market risk, as it affects the financial health and R&D capabilities of the companies from which XOMA acquires royalty interests. A constrained funding environment could reduce the pool of attractive assets or impact the ability of partners to advance their programs.
• Delisting of Acquired Shares: The delisting of shares of acquired companies, while part of the acquisition strategy, could impact the liquidity and valuation of those assets if XOMA retained any equity interests or if the delisting signals broader market challenges for similar entities.

11. Opportunities and Catalysts

XOMA Royalty Corporation (NASDAQ: XOMA), with its specialized business model as a biotech royalty aggregator, is strategically positioned to capitalize on numerous growth opportunities and near-term catalysts. As of December 13, 2025, the company continues to aggressively expand its portfolio through strategic acquisitions and stands to benefit from the progression of its diverse partnered pipeline.

Growth Levers

XOMA's primary growth levers are intrinsically linked to its unique and capital-efficient business model:

• Expanding Royalty and Milestone Portfolio: The core of XOMA's growth strategy involves the continuous acquisition of economic rights to future milestone and royalty payments from drug candidates developed by other pharmaceutical and biotech companies. This model provides crucial non-dilutive funding to the sellers, while simultaneously allowing XOMA to build a highly diversified portfolio. The company's long-term projections are robust, with expectations to collect over $1 billion in milestones and royalties over the next 15 years.
• Diverse Pipeline Progression: XOMA's portfolio currently encompasses a broad range of assets, including six commercial and nine Phase 3-stage small molecule and biological assets. With over 120 assets in total, and 42 partnered with large-cap companies across more than 11 therapeutic categories, this extensive diversification is a key strength, mitigating the risks associated with single-asset binary outcomes.
• Strategic Focus on Early to Mid-Stage Assets: By strategically targeting preclinical through Phase 2 assets, XOMA operates in a segment where deal sizes are typically smaller, and competition from larger royalty funds is less intense. This niche focus allows the company to secure royalty interests at potentially more favorable valuations.
• Recent Product Approvals and Launches: The year 2024 saw significant progress with two products in XOMA's pipeline receiving FDA approval: OJEMDA (tovorafenib) from Day One Biopharmaceuticals and MIPLYFFA (arimoclomol) from Zevra Therapeutics. Furthermore, Daré Bioscience plans to commercially make Sildenafil Cream, 3.6% available as a compounded drug in Q4 2025, while simultaneously pursuing full FDA approval. Upon full approval, this would become XOMA's seventh royalty-generating asset.

New Markets

XOMA's business model inherently allows it to tap into various new markets through the therapeutic candidates of its partners, rather than direct market entry.

• Broad Therapeutic Area Coverage: XOMA's diversified portfolio spans numerous therapeutic categories, ranging from oncology and rare diseases to autoimmune conditions. This broad coverage positions the company to benefit from addressing critical unmet medical needs with the potential to transform existing standards of care across a wide patient population.
• Geographic Expansion through Partners: While XOMA primarily operates in the U.S. and Asia Pacific regions, its partners' commercialization efforts extend globally. For instance, Zevra Therapeutics' submission of a Marketing Authorization Application for arimoclomol with the European Medicines Agency (EMA) and Ipsen's (Day One's partner outside the U.S.) pursuit of an EMA regulatory decision for tovorafenib in the European Union represent significant opportunities for geographic expansion of royalty revenues.

M&A Potential

XOMA has been actively engaged in M&A activities, which serve as a significant component of its growth strategy.

• Recent Acquisitions: XOMA has been highly active on the acquisition front in 2025, completing several key transactions, including Turnstone Biologics and HilleVax.
• Mural Oncology Acquisition: XOMA Royalty successfully completed its acquisition of Mural Oncology plc on December 5, 2025, for $2.035 in cash per share, further bolstering its portfolio.
• LAVA Therapeutics Acquisition: XOMA Royalty also announced and closed the acquisition of LAVA Therapeutics N.V. on November 21, 2025, securing economic interests in two early-stage partnered assets with significant potential.
• Structuring Agent Role: XOMA's role as the structuring agent for XenoTherapeutics' acquisition of ESSA Pharma highlights its capability beyond pure royalty acquisition, potentially opening new avenues for deal flow and value creation.
• Capital for Future Acquisitions: The company's successful raising of up to $140 million with Blue Owl Capital in December 2023 provides significant non-dilutive capital, positioning XOMA to pursue additional royalty and milestone acquisitions strategically.

Near-Term Catalysts (as of December 13, 2025)

Several near-term events could significantly impact XOMA Corporation's performance and investor sentiment:

• Q4 2025 Earnings Release: XOMA Royalty's Q4 2025 earnings release is projected for March 4, 2026. The previous Q3 2025 earnings, reported on November 12, 2025, saw an EPS of ($0.35), missing the consensus estimate of ($0.02), and revenue of $9.35 million, which was below analysts' expectations of $11.47 million. The upcoming Q4 report will be closely watched for signs of improved financial performance and guidance.
• Clinical Trial Readouts:
  • Ersodetug (Rezolute Bio): While topline data from the Phase 3 sunRIZE study for congenital hyperinsulinism (HI) in December 2025 did not meet its primary endpoint, leading to a stock drop, Rezolute plans to discuss next steps with the FDA. Crucially, a separate Phase 3 trial for ersodetug in Tumor Hyperinsulinism is ongoing, with topline results expected in the second half of 2026. A positive outcome here could be a significant catalyst.
  • Seralutunib (Gossamer Bio and Chiesi): Topline results from the Phase 3 PROSERA trial for seralutunib in pulmonary arterial hypertension (PAH) are highly anticipated in February 2026. Positive data could significantly boost XOMA's valuation due to its royalty interest.
• Regulatory Milestones:
  • Arimoclomol (Zevra Therapeutics): The ongoing review of Zevra Therapeutics' Marketing Authorization Application (MAA) by the European Medicines Agency (EMA) for arimoclomol in Niemann-Pick Type C could lead to a significant approval, triggering milestone payments and future royalties.
  • Tovorafenib (Day One Biopharmaceuticals/Ipsen): Ipsen, Day One's partner outside the U.S., expects an EMA regulatory decision on its application to commercialize tovorafenib in the European Union. A positive decision would broaden the commercial reach of this asset.
• CEO Stock Acquisition: XOMA's CEO, Owen Hughes, acquired 100,000 shares of the company's stock on December 4, 2025, for a total of $2,505,000.00. This significant insider buying activity, representing a 5,000% increase in his direct ownership, can be interpreted as a strong vote of confidence in the company's future prospects and a positive signal to investors.
• Analyst Coverage and Price Targets: Despite recent price target adjustments following the ersodetug trial setback (e.g., H.C. Wainwright to $97.00 from $104.00; Leerink Partners to $45.00 from $58.00), other firms like Lucid Capital Markets initiated coverage with a Buy rating and a $76.00 price target, and Benchmark maintained its Buy rating with a $50.00 price target. The average target price from 4 analysts is $72.00, implying a significant upside from the current price, indicating continued analyst interest and potential for re-rating.

12. Investor Sentiment and Analyst Coverage

As of December 13, 2025, XOMA Royalty Corporation (NASDAQ: XOMA), which officially transitioned its name in July 2024, presents a dynamic investor landscape. This environment is characterized by robust Wall Street analyst support, significant and active institutional investor participation, and a varied, yet engaged, retail investor sentiment.

Wall Street Ratings and Analyst Coverage

Wall Street analysts largely maintain a highly positive stance on XOMA Royalty Corporation, reflecting confidence in its unique business model and diversified royalty portfolio.

• Consensus Rating: The prevailing consensus rating from analysts is typically a "Strong Buy" or "Outperform."
• Price Targets: The average 12-month price target from analysts generally ranges from $63.25 to $72.00. Individual analyst projections show a considerable spread, with high estimates reaching between $97 and $104, and low estimates between $35 and $50. This wide range suggests both significant upside potential and a recognition of inherent risks.
• Recent Analyst Actions (December 2025):
  • On December 11, 2025, HC Wainwright & Co. reiterated a "Buy" rating, though it slightly adjusted its price target downward from $104 to $97, likely in response to recent pipeline news.
  • Leerink Partners also maintained an "Outperform" rating on December 11, 2025, but adjusted its price target downward from $58 to $45, indicating a more conservative outlook in the near term.
  • LUCID CAPITAL MARKETS initiated coverage with a "Strong Buy" rating and an impressive $76 price target on December 9, 2025, signaling strong conviction.
  • Benchmark reaffirmed its "Buy" rating and $50 price target on December 12, 2025, despite the recent setback in a clinical trial involving one of XOMA's partners.
  • In November, Zacks Research downgraded XOMA Royalty from a "hold" to a "strong sell," and Weiss Ratings reiterated a "hold (c-)" rating, highlighting some bearish sentiment among certain analytical firms.

Hedge Fund Moves and Institutional Investor Activity

XOMA Royalty Corporation is characterized by substantial institutional ownership, indicating a strong presence of large investment funds and a belief in its long-term strategy.

• Ownership Snapshot: As of the third quarter of 2025 (Q3 2025), 189 institutional owners had filed 13D/G or 13F forms, collectively holding 9,689,814 shares, which represents a significant 78.25% of the company's outstanding shares. Another report indicates that institutions own 47% of the company, with a concentrated majority stake of 53% held by five key investors, suggesting a relatively tight institutional grip.
• Recent Activity (Q3 2025): The third quarter of 2025 saw active trading among institutional investors, with 37 institutions increasing their stakes and 29 reducing them, reflecting ongoing portfolio adjustments.
  • Notable Increases: Significant additions to portfolios included Morgan Stanley (102,029 shares), Wellington Management Group LLP (32,616 shares), Woodline Partners LP (29,715 shares), Vanguard Group Inc. (29,298 shares), and Jane Street Group, LLC (27,363 shares). These moves suggest growing confidence among some major players.
  • Notable Decreases: Stonepine Capital Management, LLC notably reduced its position by 36,684 shares in Q3 2025, indicating a more cautious stance from some funds.
• Largest Shareholder: BVF Inc/il is identified as the largest shareholder, possessing a substantial 21% of the total outstanding shares, giving it significant influence.
• Market Sensitivity: The high level of institutional ownership suggests that XOMA Royalty's stock price is highly responsive to the trading decisions of these large investors. Recent data indicating a 15% drop in institutional holdings value, contributing to a 5.3% one-year loss for shareholders, highlights this sensitivity and the potential for further selling pressure if performance does not improve.

Retail Investor Sentiment

Direct and precisely quantifiable retail investor sentiment for XOMA Royalty Corporation as of December 13, 2025, is challenging to ascertain comprehensively. However, indirect indicators suggest a mixed and cautious, yet actively engaged, retail investor base.

• Mixed Opinions: Platforms like Investing.com display "Members' Sentiments" as both "Bearish" and "Bullish," indicating a split in opinion among individual investors, likely influenced by recent news and the inherent volatility of biotech.
• Cautionary Technical Signals: On December 10, 2025, StockInvest.us issued a "negative evaluation" for XOMA Royalty, citing several negative technical signals and a downward trend in the stock. Similarly, Stock Traders Daily noted "Weak Near and Mid-Term Sentiment" on December 12, 2025, while also acknowledging a potentially challenging long-term positive outlook.
• Active Engagement: Despite the mixed sentiment, retail investors remain actively engaged, as evidenced by XOMA's presence on platforms like Stocktwits, where real-time discussions and trading ideas are actively shared.
• Insider Sentiment: Insider sentiment is reported as "Negative" due to significant open-market selling by key executives over the past six months. However, this is partially offset by the notable recent purchase by the CEO, Owen Hughes, which can be viewed as a positive counter-signal.

In conclusion, XOMA Royalty Corporation benefits from strong "Strong Buy" ratings from a significant portion of Wall Street analysts, who foresee substantial upside potential. Institutional investors hold a dominant position and have demonstrated active trading in recent quarters, reflecting both confidence and opportunistic adjustments. Retail investor sentiment is varied, leaning cautious due to some negative technical signals and previous insider selling, but remains actively engaged in tracking the company's performance and responding to key developments.

13. Regulatory, Policy, and Geopolitical Factors

XOMA Royalty Corporation (NASDAQ: XOMA), as a biotechnology royalty aggregator, operates within a complex web of regulatory, policy, and geopolitical factors. As of December 13, 2025, these external forces significantly influence its business operations and financial outlook, primarily through their impact on XOMA's partners and their licensed therapeutic candidates across global markets.

Regulatory Environment

The global regulatory landscape for biotechnology and pharmaceuticals in 2025 is characterized by significant reforms and evolving priorities, particularly in key markets like the United States and the European Union.

European Union (EU):
A major overhaul of the EU's pharmaceutical policy framework was agreed upon on December 11, 2025. This reform aims to enhance access and availability of medicines, accelerate supply chains, and address drug shortages. Key changes impacting market exclusivity include:

• A base regulatory data and market protection period of eight years.
• An additional year of market protection can be granted if the product meets unmet medical needs, contains a new active substance, or offers significant clinical benefit through new indications.
• The total possible regulatory protection period is capped at 11 years.
• Orphan drugs will be granted between 9 and 11 years of exclusivity, depending on whether they address a breakthrough unmet medical need.
• The "Bolar exemption" has been clarified, allowing generic and biosimilar manufacturers to conduct necessary studies and trials during the originator's market protection period without infringing patent rights.
• The European Medicines Agency (EMA) will play a stronger coordinating role in monitoring medicine shortages, with companies facing stricter obligations to prevent them.

XOMA's partners are actively seeking EMA approvals; for instance, Day One's application for tovorafenib and Zevra Therapeutics' Marketing Authorization Application (MAA) for arimoclomol for Niemann-Pick Type C. The market success of these products and the associated royalties for XOMA will be directly influenced by these new EU regulations, which aim to balance innovation incentives with public access.

United States (US):
In 2025, the U.S. drug pricing policy environment has seen increased legal and legislative activity:

• The Trump administration has revived a "most-favored-nation" (MFN) drug pricing policy and continued implementing Maximum Fair Price (MFP) requirements under the Inflation Reduction Act (IRA).
• The Centers for Medicare & Medicaid Services (CMS) has tightened pricing rules for physician-administered medicines, including essential oncology and immunology therapies.
• Congress expanded the orphan drug exclusion within the Medicare Drug Price Negotiation Program, offering relief and incentives for rare disease innovation.
• The 340B Drug Pricing Program continues to face volatility due to ongoing litigation, a new rebate model, and political pressure for reform.
• Many state legislatures are also pursuing their own drug pricing regulations, such as requiring manufacturers to report pricing information, establishing price review boards, and promoting generic drug use.

The U.S. Food and Drug Administration (FDA) is expected to continue its focus on deregulation, rare disease, and advanced therapies under the current administration. This includes continued support for expedited approval pathways, potentially leveraging real-world evidence (RWE) for faster drug approvals. However, there could be increased scrutiny on the misuse of orphan drug incentives to ensure they primarily benefit smaller biotech firms and address genuine unmet medical needs.

Global Regulatory Trends:
Across the life sciences sector, 2025 trends include an emphasis on:

• Data Integrity and Security: Heightened scrutiny from regulatory bodies like the FDA and EMA on robust data governance practices.
• Digital Transformation & AI: Increased adoption of digital health technologies, AI, and automation for compliance management, monitoring, and diagnostics.
• Patient-Centricity: New policies emphasizing patient engagement, safety, and the use of RWE in clinical trials and post-market surveillance.
• Sustainability and ESG: Growing requirements for companies to comply with environmental, social, and governance (ESG) guidelines.
• Global Harmonization: Efforts by regulators worldwide to align compliance requirements across markets.

These trends directly influence the development and commercialization timelines and costs for XOMA's partners, thus impacting the timing and magnitude of XOMA's royalty and milestone receipts.

Policy Changes

Policy changes, particularly those related to drug pricing and market access, present both risks and opportunities for XOMA Corporation.

• Drug Pricing Policies: The intensified focus on drug affordability and access in both the U.S. and EU means potential downward pressure on drug prices. If pricing-related regulations impact products in XOMA's portfolio, it would directly result in lower royalties for the company.
• Intellectual Property and Exclusivity: While the EU reform generally aims to balance innovation with access, the specific changes to data and market protection periods could alter the competitive landscape for XOMA's partners' products in Europe, affecting the duration and value of royalty streams.
• Market Dynamics: Policies that encourage competition from generics or biosimilars after exclusivity periods could impact the longevity and value of royalties from older assets in XOMA's portfolio. Conversely, policies that streamline approvals for innovative therapies, especially for unmet needs, could accelerate the path to market for new drugs in XOMA's pipeline, translating into earlier and potentially higher royalty revenues.

Government Incentives

Governments worldwide offer various incentives to foster innovation in the biotechnology and pharmaceutical sectors, which indirectly benefit XOMA's royalty aggregation model.

• Innovation Incentives: The EU reform introduces "world-leading incentives for innovative products" and "regulatory sandboxes" for novel medicines, particularly those addressing unmet medical needs.
• Rare Disease Support: The U.S. Congress's expansion of the orphan drug exclusion from Medicare price negotiation and the anticipated support for rare disease drug development by the FDA indicate continued government backing for this area. XOMA's portfolio includes assets for rare diseases, such as arimoclomol for Niemann-Pick Type C, positioning it to benefit from these incentives.
• Expedited Pathways: Continued use of expedited approval pathways (e.g., FDA's accelerated approval, EMA's PRIME scheme) can reduce development times and bring new therapies to market faster, translating into earlier and potentially higher royalty revenues for XOMA.

XOMA benefits from these incentives because they support the underlying drug development and commercialization efforts of its partners, which in turn generate the milestones and royalties XOMA collects.

Geopolitical Risks and Opportunities

The geopolitical environment in 2025 is characterized by significant complexity, unpredictability, and potential disruptions, which can have broad implications for the global biotechnology industry and, by extension, XOMA.

• Global Instability: Increased geopolitical tensions, particularly the U.S.-China great power competition, contribute to a more fragmented global framework, potentially leading to increased policy, trade, and diplomatic conflicts. Such instability can disrupt global supply chains, affecting drug manufacturing and distribution, which could delay or hinder the commercial success of XOMA's partnered products.
• Market Access and Trade Barriers: Shifting geopolitical winds could lead to new trade barriers or stricter market access requirements in certain regions. XOMA operates globally (Switzerland, U.S., Asia Pacific, Europe, and Others), making it susceptible to differing regional policies and potential protectionist measures that might impede its partners' ability to market drugs effectively.
• Supply Chain Resilience: Geopolitical risks, coupled with lessons from the COVID-19 pandemic, are driving companies to re-evaluate supply chain security. Any disruptions in the supply chain of XOMA's partners could impact drug availability and sales, thereby reducing royalty streams.
• Investment Climate: The broader biotech landscape in 2025 is influenced by macroeconomic factors and declining public market valuations, leading to a conservative shift in venture capital funding. Geopolitical considerations are a top concern for investment committees and boards regarding acquisitions and joint ventures. While XOMA is a royalty aggregator, its ability to acquire new royalty streams or for its partners to secure funding for development could be influenced by these trends.
• Opportunities in Shifting Alliances: Some regions, like Japan and India, may see increased strategic investment as countries seek to diversify away from traditional dependencies (e.g., "China plus one" strategy). This could present opportunities for XOMA's partners in new or expanding markets, potentially leading to new revenue streams.
• Operational Resilience: XOMA itself acknowledges potential climate change risks, including increased operating costs due to regulatory requirements and business disruptions, though it does not currently consider these material.

Overall, XOMA Corporation's business model as a royalty aggregator means its financial performance is intrinsically linked to the regulatory and commercial successes of its partners' therapeutic candidates worldwide. Changes in regulatory frameworks, healthcare policies, government incentives for innovation, and the volatile geopolitical landscape will continue to shape the environment in which these partners operate, thereby directly impacting XOMA's revenue and growth prospects in 2025 and beyond.

14. Outlook and Scenarios

As of December 13, 2025, XOMA Royalty Corporation (NASDAQ: XOMA) presents a nuanced outlook, characterized by its strategic focus on biotech royalty aggregation. While a recent clinical trial setback has introduced a degree of short-term volatility, analysts largely maintain a bullish long-term perspective, supported by a diverse portfolio and a healthy financial position. The company continues to execute strategic pivots through acquisitions and disciplined capital deployment.

Bull Case

The optimistic scenario for XOMA is fundamentally built upon its robust and expanding portfolio of royalty assets, particularly the ten late-stage (Phase 3) clinical trial candidates held by its partners. XOMA's business model as a royalty aggregator offers a more predictable and potentially "defensive" revenue stream compared to traditional biotech companies involved in direct drug discovery, which are exposed to higher R&D risks.

Recent financial performance strongly supports this bullish view. XOMA reported strong third-quarter 2025 GAAP earnings per share of $0.70, significantly surpassing analyst estimates, primarily driven by an $18 million gain from the acquisitions of HilleVax and Turnstone. For the first nine months of 2025, XOMA received $43.9 million in royalties and milestones from its partners, including $14.3 million in the third quarter alone. The company maintains a strong cash position, with $130.6 million in cash and cash equivalents as of September 30, 2025, providing ample liquidity for future strategic moves.

Analysts project significant revenue growth for XOMA Royalty Corp, with a forecasted increase of over 20% annually through 2026. Lucid Capital Markets estimates XOMA could collect over $1 billion in milestones and royalties over the next 15 years, driven by its strategic focus on earlier-stage royalty opportunities (preclinical through Phase 2 assets). In this segment, competition is often limited, and deal sizes are smaller, allowing XOMA to secure more favorable valuations. XOMA's current profitability, with $0.82 earnings per share over the last twelve months and an impressive revenue growth of 118.02%, further strengthens the bull case. The company's low PEG ratio of 0.26 suggests it may be trading at a low price-to-earnings ratio relative to its growth, and its strong current ratio of 3.91 indicates solid short-term financial health. InvestingPro's Fair Value assessment suggests XOMA is currently slightly undervalued.

Bear Case

The primary challenge to XOMA's positive outlook is the inherent unpredictability of clinical trials, as starkly demonstrated by Rezolute Bio's ersodetug Phase 3 sunRIZE trial. The trial for congenital hyperinsulinism (CHI) failed to meet its primary and key secondary endpoints in December 2025, causing XOMA's stock to plunge and leading to reduced price targets from some analysts. This setback highlights the significant risk associated with XOMA's reliance on its partners' pipeline advancements for future royalty income. While Rezolute plans to discuss next steps with the FDA and continue a separate Phase 3 trial for ersodetug in Tumor Hyperinsulinism, the failure in CHI represents a material blow to a previously promising asset.

Another potential concern is the variability of revenue and net earnings due to the unpredictable nature of the international biotechnology market and external economic factors. While XOMA aims for a more predictable path through royalty aggregation, failed clinical trials by its partners or challenges in securing adequate funding for drug development by these partners could still hinder XOMA's growth prospects and stock performance. Although current operating expenses are outpacing operating income, the company has significantly scaled back its internal research and development to free up capital for strategic acquisitions. The departure of key executives could also create operational challenges, though there is no explicit mention of recent significant departures in the provided information.

Short-Term vs. Long-Term Projections

Short-Term Projections (through 2026):
The short-term outlook is mixed, with the recent ersodetug trial failure creating immediate negative pressure on the stock. Benchmark reiterated a "Buy" rating and a $50.00 price target despite the setback, noting an 84% upside from the current stock price of $27.17 (as of December 12, 2025). However, Leerink Partners lowered its price target to $45.00 from $58.00 due to the ersodetug results. H.C. Wainwright also lowered its price target to $97.00 from $104.00, while maintaining a "Buy" rating, removing ersodetug from its projections.

Despite these adjustments, the consensus among 2-3 analysts is a "Strong Buy" rating for XOMA, with an average price target ranging from $60.60 to $72.67 by December 2026, implying a significant upside from current levels. Wall Street analysts forecast XOMA's revenue for 2025 to be around $625 million, growing to approximately $737.5 million in 2026. Earnings per share (EPS) are projected to be around $1.11 for 2025, with a wider range of $0.21 for 2026, indicating potential volatility in near-term profitability due to the nature of milestone payments and trial outcomes.

Long-Term Projections (2027 and Beyond):
The long-term outlook remains largely bullish, underpinned by XOMA's strategy of diversifying its royalty portfolio and the potential for its numerous late-stage partnered assets to come to market. The company anticipates generating $49.0 million in revenue by 2026, with a net income of $2.4 million, further bolstered by contributions from earlier-stage assets and potential milestone payments. By 2027, revenue is forecast to reach approximately $883.4 million, with EPS projected to hit $1.21.

Longer-term forecasts from analysts suggest XOMA's stock could reach an average price of $41.95 by 2030, $75.65 by 2040, and potentially $110.09 by 2050, representing substantial growth from current levels. This positive long-term view is supported by the company's continuous execution on innovative ways to increase optionality within its portfolio, while maintaining a healthy cash balance and limiting shareholder dilution.

Strategic Pivots

XOMA has actively pursued several strategic pivots in late 2025 to strengthen its position as a biotech royalty aggregator:

• Acquisition-Led Portfolio Expansion: XOMA has been highly active in acquiring royalty economic interests. Notable recent acquisitions include the finalization of the acquisition of Mural Oncology for $2.035 per share in December 2025, and the closing of transactions to acquire LAVA Therapeutics N.V. in November 2025. The company also completed acquisitions of Turnstone Biologics and HilleVax in the third quarter of 2025, contributing significantly to earnings gains. These acquisitions enhance XOMA's diverse portfolio of early and late-stage assets.
• Focus on Earlier-Stage Royalty Market: XOMA has strategically differentiated itself by targeting the earlier segment of the royalty market (preclinical through Phase 2 assets). This approach allows them to secure royalties at more favorable valuations by focusing on opportunities typically avoided by larger funds, which tend to pursue late-stage or commercial royalty assets requiring substantial capital.
• Disciplined Capital Deployment and Expense Control: The company is committed to prudent cash deployment and strict expense control. XOMA has sharply scaled back its research and development spending to free up capital for strategic moves like acquiring royalty interests.
• Share Repurchase Activity: XOMA has engaged in opportunistic share repurchases, with $0.5 million used to repurchase 25,828 shares in the first quarter of 2025, demonstrating a commitment to generating shareholder value.
• Structuring Agent Role: XOMA has also acted as a structuring agent for other companies' acquisitions, such as XenoTherapeutics' acquisition of ESSA Pharma, further diversifying its involvement in the biotech ecosystem and potentially creating new deal flow.

In summary, despite the recent clinical setback, XOMA Corporation's outlook as of December 2025 remains cautiously optimistic. Its strategic emphasis on royalty aggregation, coupled with active portfolio expansion through acquisitions and disciplined financial management, positions the company for potential long-term growth and stable revenue streams. The success of its diversified pipeline of partnered assets will be crucial in mitigating risks associated with individual trial failures and realizing its full potential.

15. Conclusion

As of December 13, 2025, XOMA Royalty Corporation (NASDAQ: XOMA) presents as a unique player in the biotechnology sector, primarily operating as a royalty aggregator rather than a traditional drug developer. The company's financial performance in 2025 has been robust, marked by strategic acquisitions and a diverse, albeit not without risks, portfolio of royalty interests.

Summary of Key Findings:

• Royalty Aggregator Model: XOMA operates a distinct business model focused on acquiring economic rights to future milestone and royalty payments from therapeutic candidates developed by other pharmaceutical and biotechnology companies. This strategy aims to generate revenue while mitigating the high costs and inherent risks associated with internal drug research and development (R&D).
• Strong Financial Performance in 2025: For the first nine months of 2025, XOMA Royalty reported $43.9 million in cash receipts from partners, with $30.3 million derived from royalties and commercial payments, and $13.6 million from milestone payments and fees. The company achieved a net income of $25.6 million for the first nine months of 2025, a substantial improvement from a net loss in the prior year's corresponding period. As of September 30, 2025, XOMA maintained a healthy cash and equivalents balance of $130.6 million. The company also demonstrated impressive revenue growth of 29.90% and a return on equity (ROE) of 22.45%.
• Active Portfolio Expansion: XOMA has been proactive in expanding its royalty portfolio through strategic acquisitions in 2025. Notably, the company finalized the acquisitions of Mural Oncology plc in December and LAVA Therapeutics N.V. in November, adding new bispecific antibody programs. Additional acquisitions in Q3 2025 included Turnstone Biologics and HilleVax.
• Diverse Pipeline with Mixed Clinical Results: XOMA's portfolio boasts interests in over 120 assets, with 11 candidates currently in late-stage (Phase 3) clinical trials. However, a recent setback occurred in December 2025 when Rezolute Bio's Phase 3 sunRIZE trial for ersodetug (a drug for which XOMA holds licensing rights) in congenital hyperinsulinism failed to meet its primary and key secondary endpoints. This event led to adjustments in some analyst price targets. Conversely, other pipeline assets have shown progress, such as Zevra Therapeutics' submission of a Marketing Authorization Application (MAA) for arimoclomol in Europe and anticipated topline results for Gossamer Bio's seralutunib in February 2026.
• Favorable Analyst Sentiment: Despite the ersodetug setback, the analyst community generally maintains a "Buy" consensus for XOMA. While some price targets were revised downwards, analysts continue to project significant upside potential, with an average target price around $70.67, implying a potential upside of 127.96% from the stock price of $31 USD as of December 4, 2025. Individual price targets range from $45.00 to $97.00.
• Negative Free Cash Flow: Despite strong revenue growth and reported profitability, the company recorded a negative free cash flow of -$63.38 million. This is acknowledged as a common characteristic of biotechnology firms focused on growth and development, where capital is often reinvested into expanding the portfolio.

Balanced Perspective:

XOMA Royalty Corporation presents an intriguing, differentiated investment opportunity within the volatile biotech landscape. Its royalty aggregation model effectively diversifies risk across a broad spectrum of drug candidates, insulating the company from the direct, high-cost R&D expenditures typically borne by traditional pharmaceutical companies. The company's financial performance in 2025, characterized by positive net income and robust royalty and milestone receipts, underscores the effectiveness of its strategy. Furthermore, XOMA's aggressive approach to portfolio expansion through strategic acquisitions demonstrates a commitment to sustained growth and diversification. The generally bullish outlook from analysts, despite recent pipeline challenges, reflects confidence in the long-term potential of its diversified asset base.

However, the recent Phase 3 clinical trial failure for ersodetug serves as a critical reminder of the inherent dependency on partners' clinical and commercial successes. While XOMA's portfolio is designed to mitigate individual asset risks through diversification, such setbacks can impact projections and investor confidence. The negative free cash flow, while typical for growth-focused biotechs, indicates a significant investment phase that requires careful monitoring of liquidity and capital deployment. The company's strategy of targeting earlier-stage assets for acquisition, while potentially offering more favorable valuations, also introduces a longer timeline to commercialization and higher associated risks.

What Investors Should Watch For XOMA Corporation as of December 13, 2025:

1. Upcoming Clinical Trial Readouts and Regulatory Milestones: Investors should closely monitor the numerous upcoming clinical trial results, especially for the 11 assets in Phase 3 development. Key events to watch include Gossamer Bio's seralutunib data in February 2026 and Rezolute's ongoing Phase 3 trial for ersodetug in tumor hyperinsulinism, with topline results expected in the second half of 2026. Regulatory approvals, such as for Zevra Therapeutics' arimoclomol in Europe, will also be critical value drivers.
2. Pace and Quality of New Royalty Acquisitions: XOMA's growth is heavily reliant on its ability to continually acquire new royalty and milestone streams. Investors should assess the strategic fit, financial terms, and potential of future acquisitions, particularly how well the company maintains its focus on sub-$25 million opportunities in earlier-stage assets to secure favorable valuations.
3. Trends in Royalty Receipts and Free Cash Flow: While the company has shown increasing cash receipts from royalties and milestones, the persistent negative free cash flow warrants attention. Investors should observe if royalty income can increasingly cover operational and acquisition costs, progressing towards the company's stated goal of becoming self-sustaining from royalties alone in the near term.
4. Integration and Performance of Acquired Assets: The successful integration of recently acquired assets, such as those from Mural Oncology and LAVA Therapeutics, into XOMA's portfolio and their progression towards commercialization will be crucial for realizing future revenue potential.
5. Portfolio Diversification: Continued emphasis on a diversified portfolio across various therapeutic areas and development stages is essential to mitigate the impact of individual asset failures, as recently experienced with ersodetug. A balanced mix of early-stage, late-stage, and commercial assets will be key to long-term stability.
6. Analyst Coverage and Price Target Revisions: Given the dynamic nature of biotech pipelines and the royalty model, investors should track how analyst ratings and price targets are adjusted in response to new clinical data, business development activities, and financial disclosures.

This content is intended for informational purposes only and is not financial advice