Biotech Values

[DonShimoda]

Credit Suisse' Take on the Aceon Opportunity (see message #83091483 )

Aceon Meets Primary Endpoint -
Underappreciated and Partnerable Asset

-Potential Future Upside if Asset is Partnered: While our recommendation
and valuation are based primarily on the opportunity of its lead antibody
program gevokizumab, the positive Phase III results for Aceon could lead to
a new and potentially lucrative partnership in the next six months.

- Substantial Economics for XOMA: XOMA licensed exclusive US
marketing rights to Aceon from Servier and has the right to seek a partner
for commercial sales. XOMA owes Servier up to a mid-teen royalty on Aceon
sales, which provides significant retained profitability for XOMA to seek a
marketing partner for this derisked asset.

-Not a Blockbuster But a Potential Value Driver: Aceon is a fixed dose
combination of a proprietary ACE inhibitor and a calcium channel blocker for
the treatment of hypertension. This market is largely generic, but Aceon
would be differentiated by its fixed dose formulation. In Europe, Servier sells
approximately $150M/year of Aceon. In the right hands, this product could
generate significant non-dilutive cash flow for XOMA.

-Next Events: For Aceon, we expect XOMA will seek a partner in H1:13 and
subsequently file for FDA approval (with a partner). For gevokizumab, we
still anticipate a Phase II readout for the acne trial and announcement of a
third Phase II indication in Q4. Phase II data for osteoarthritis of the hand
and the third indication are expected in mid-2013.