Xoma Ltd. announced the restructuring of its collaboration agreement with Genentech, Inc. related to raptiva (efalizumab), an approved biologic treatment for chronic moderate-to-severe plaque psoriasis in adults age 18 or older who are candidates for systemic therapy or phototherapy.

Under the agreement, Xoma will earn a mid-single digit royalty on worldwide sales of raptiva with an additional royalty rate on sales in the US in excess of a specified level. The original agreement provided Xoma with the option of electing a royalty-only participation in raptiva results, with a higher worldwide royalty rate structure, but required immediate repayment of the development loan. In return, Genentech agreed to discharge Xoma's obligation to pay the $40 million balance on the development loan plus accrued interest and to allow repayment of Xoma's fourth quarter share of raptiva operating losses by offsetting them against future royalties payable by Genentech.

By selecting the royalty option, Xoma will no longer be responsible for funding any development or sales and marketing activities or have the right to co-promote raptiva. This revised agreement is effective as of January 1, 2005, and as a result, raptiva will become immediately profitable for Xoma, beginning in the first quarter of 2005. No further financial details on the restructuring were disclosed, release from Xoma said.

"Our goal over the next three years is to make Xoma profitable while continuing to strengthen and deepen our product pipeline," John L. Castello, chairman, president and chief executive officer of Xoma said adding, "This is a challenging goal, but the restructuring of our agreement with Genentech is a critical first step. We're enthusiastic about raptiva and our continuing excellent relationship with Genentech."

"Besides strengthening our balance sheet by eliminating the $40 million loan payable, this restructuring moves Xoma to a royalty participation on raptiva, providing us with positive cash flow from the product sooner than we would have experienced under the previous profit sharing agreement" said Peter B. Davis, chief financial officer of Xoma.

Xoma is a biopharmaceutical company focused on the development and commercialization of antibody and other protein-based biopharmaceuticals for disease targets that include cancer, immunological and inflammatory disorders, and infectious diseases.