By Mary Welch
Xoma Corp. exercised its option to draw down the second half of a $25 million private financing deal — or $12.5 million — to fund its BPI (bactericidal/permeability-increasing) protein platform, including two Phase III trials, as well as development of other products.
The Berkeley, Calif.-based company negotiated the deal — a private financing in the form of 5 percent convertible preferred stock — in August 1997. Conversions will be based on the market price of Xoma shares at time of conversion.
"It's the same deal," said Peter Davis, vice president of finance and chief financial officer. "It's a routine deal, something we had actually planned to do about six months after the first round. But we were able to delay (exercising the option) because we sold some royalties for $17 million."
The company got $17 million for assigning certain anti-CD20 antibody patents and royalty rights to Pharmaceutical Partners LLC, of New York, a financial manager of limited partnerships. (See BioWorld Today, Jan. 9, 1998, p. 1.)
Proceeds Earmarked For BPI Programs
The proceeds of the private financing will fund development of Xoma's BPI platform, including Neuprex (rBPI21), its lead BPI-derived product. BPI is a human host-defense protein found in white blood cells.
Neuprex works by punching holes in the outer shell of bacteria and killing them. It also enhances antibiotics, and binds and neutralizes endotoxin, a poisonous molecule produced in the cell walls of Gram-negative bacteria. Endotoxin can trigger serious inflammatory complications in infected patients.
Neuprex is in the clinic for several indications, including a Phase III trial for meningococcemia that should conclude this year and a Phase III study for infectious complications associated with hemorrhagic trauma that will go through the end of 1999. The company expects to file a marketing license with the FDA for meningococcemia next year.
Meningococcemia is a blood-borne bacterial infection caused by Neisseria meningitidis, the same bug responsible for meningitis. A seasonal infection that strikes during the cold winter months in the Northern Hemisphere, the bacteria can trigger a damaging inflammatory response that can kill a child in hours. (See BioWorld Today, Jan. 15, 1997, p. 1.)
Xoma's other BPI-derived products include I-PREX, a topical opthalmic formulation of rBPI21, and Mycoprex, an antifungal peptide product.
"The funding principally will go for those Phase III trials, but it will also be used for general funding for the BPI peptides," Davis said.
Principal investors are an affiliate of Credit Suisse First Boston and Southbrook International Investments Ltd., both of New York, and HBK Investments LP, of Dallas.
Brown Simpson Asset Management LLC, of New York, served as advisor to the investors, and Shipley Raidy Capital Partners LP, of Philadelphia, acted as placement agent on behalf of the company.
In the private financing, there is no initial discount on the conversion price, but a 2 percent discount will be added for each month the preferred stock is held, for a maximum of 12 percent.
No conversions will be permitted below a price of $5.26 per share for the first 60 days; the maximum conversion price for the same time period is $6.14 per share. Investors also receive three-year warrants to purchase up to 550,000 shares of Xoma common stock at $7 per share.
Xoma has about 40 million shares outstanding. Its stock (NASDAQ:XOMA) closed Monday at $4.844, up $0.156. *