Xoma Corp. is about to receive a major infusion of cash that willswell its coffers by 25 percent and give the investors asubstantial equity position in the company.
Xoma (NASDAQ:XOMA) of Berkeley, Calif., announced Mondaythat two investment groups, both new to the company, haveagreed to invest $20 million via private placement bypurchasing senior convertible preferred stock and warrants topurchase common stock.
This placement is being done "at a small discount" to the priceof the publicly traded stock, explained John Castello, chiefexecutive officer of Xoma.
The numbers of shares and warrants that will actually beacquired by the investors will be based on a formula that takesinto account the average price of the common stock over thenext 20 trading days, he told BioWorld. (Xoma's common stockclosed unchanged Monday at $6.13 a share. Over the past 20trading days the stock has fluctuated between $6 and $6.75 pershare.)
If the investors decide to exercise the warrants for cash, theirinvestment in Xoma could reach $35 million. The investors aretaking a sizable equity stake in the company (something morethan 5 percent), but in no event will that reach 20 percent ofthe company's voting capital stock, Castello said.
The transaction, which should close before the end of the year,was arranged by Shipley Raidy Capital Corp. of Philadelphia.
"This private placement is part of a plan to add to Xoma'sfinancial resources and enhance the company's position topursue its long-term objectives," Castello said. That plan is toprovide the company with enough cash to see it through thenext four to five years -- "even if there are no productapprovals (of drugs in clinical trials)," he said. "We don't wantto constrain the development of new products simply becausewe don't have the cash."
According to Castello, when the private placement closes,Xoma's cash and equivalents will increase by 25 percent toapproximately $80 million. The company reported cash andshort-term investments of $59.6 million for the quarter endedSept. 30.
Castello told BioWorld that Xoma's net cash outflow for 1993(not including the new infusion of capital) would have beenabout $32 million, but with this filing, it will drop to $10-14million.
Castello's overall target for Xoma is to have $100 million incash with a burn rate of $20 million or less to cover the nextfour to five years.
The company is also exploring additional sources of financing,including product-based corporate partnerships. For instance,Castello said Xoma has recently engaged Vector SecuritiesInternational Inc. to find a marketing partner for recombinantbactericidal permeability increasing protein (rBPI-23), which itis developing for treating Gram-negative bacterial infections.
-- Jennifer Van Brunt Senior Editor
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