XOMA Ltd.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ☒☒ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File No. 0-14710 XOMA CORPORATION(Exact name of registrant as specified in its charter) Delaware 52-2154066(State or other jurisdictionof incorporation or organization) (I.R.S. Employer Identification No.) 2200 Powell Street, Suite 310, Emeryville,California 94608 (510) 204-7200 (Address of principal executive offices,including zip code) (Telephone number)Securities registered pursuant to Section 12(b) of the Act: Title of each className of each exchange on which registeredCommon Stock, $0.0075 par valueThe NASDAQ Stock Market, LLC Securities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller reporting company ☒ Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ☐ No ☒The aggregate market value of voting common equity held by non-affiliates of the registrant is $40,595,725 as of June 30, 2017, based on the closing price on the NASDAQGlobal Market reported for such date. The calculation of the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant excludes sharesof common stock held by each officer, director and stockholder that the registrant concluded were affiliates on that date. This determination of affiliate status is not necessarily aconclusive determination for other purposes.Number of shares of Common Stock outstanding as of March 2, 2018: 8,329,098DOCUMENTS INCORPORATED BY REFERENCE:Portions of the Company’s Proxy Statement for the Company’s 2018 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report. XOMA Corporation2017 FORM 10-K ANNUAL REPORTTABLE OF CONTENTS PART I Item 1.Business1Item 1A.Risk Factors11Item 1B.Unresolved Staff Comments28Item 2.Properties28Item 3.Legal Proceedings28Item 4.Mine Safety Disclosures29 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data32Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations34Item 7A.Quantitative and Qualitative Disclosures about Market Risk45Item 8.Financial Statements and Supplementary Data46Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure47Item 9A.Controls and Procedures47Item 9B.Other Information47 PART III Item 10.Directors, Executive Officers, and Corporate Governance48Item 11.Executive Compensation48Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters48Item 13.Certain Relationships and Related Transactions, and Director Independence48Item 14.Principal Accountant Fees and Services48 PART IV Item 15.Exhibits and Financial Statement Schedules49Item 16.Form 10-K Summary54SIGNATURES55INDEX TO FINANCIAL STATEMENTSF-1 This annual report on Form 10-K includes trademarks, service marks and trade names owned by us or others. “XOMA,” the XOMA logo and allother XOMA product and service names are registered or unregistered trademarks of XOMA Corporation or a subsidiary of XOMA Corporation in the UnitedStates and in other selected countries. All trademarks, service marks and trade names included or incorporated by reference in this annual report are theproperty of their respective owners. i PART IThis Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or theSecurities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of1995, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs andassumptions and on information currently available to them. In some cases, you can identify forward-looking statements by words such as “may,” “will,”“should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” “intend” and similarexpressions intended to identify forward-looking statements. Examples of these statements include, but are not limited to, statements regarding: our futureoperating expenses, our future losses, the extent to which our issued and pending patents may protect our products and technology, the potential of ourexisting product candidates to lead to the development of commercial products, our ability to receive potential milestone or royalty payments under licenseand collaboration agreements and the timing of receipt of those payments, the timing and adequacy of cost-cutting measures, and our ability to defendagainst claims that have been made in litigation. These statements are based on assumptions that may not prove accurate. Actual results could differmaterially from those anticipated due to certain risks inherent in the biotechnology industry and for our licensees engaged in the development of newproducts in a regulated market. Among other things: our product candidates subject to out-license agreements are still being developed, and our licensees’may require substantial funds to continue development which may not be available; we may not realize the expected benefits of our cost-saving initiatives;we may not be successful in entering into out-license agreements for our product candidates; if our therapeutic product candidates do not receiveregulatory approval, our third-party licensees will not be able to manufacture and market them; products or technologies of other companies may rendersome or all of our product candidates noncompetitive or obsolete; we do not know whether there will be, or will continue to be, a viable market for theproducts in which we have an ownership or royalty interest; even once approved, a product may be subject to additional testing or significant marketingrestrictions, its approval may be withdrawn or it may be voluntarily taken off the market; we and our licensees are subject to various state and federalhealthcare related laws and regulations that may impact the commercialization of our product candidates and could subject us to significant fines andpenalties; and certain of our technologies are in-licensed from third parties, so our capabilities using them are restricted and subject to additional risks.These and other risks, including those related to current economic and financial market conditions, are contained principally in Item 1, Business; Item 1A,Risk Factors; Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations; and other sections of this Annual Report onForm 10-K. Factors that could cause or contribute to these differences include those discussed in Item 1A, Risk Factors, as well as those discussed elsewherein this Annual Report on Form 10-K.Forward-looking statements are inherently uncertain and you should not place undue reliance on these statements, which speak only as of the date thatthey were made. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue inthe future. We do not undertake any obligation to release publicly any revisions to these forward-looking statements after completion of the filing of thisAnnual Report on Form 10-K to reflect later events or circumstances or to reflect the occurrence of unanticipated events. Item 1.BusinessOverview and StrategyXOMA Corporation (“XOMA”), a Delaware corporation, has a long history of discovering and developing innovative therapeutics derived from itsunique platform of antibody technologies. Over our 37 year history, we built an extensive portfolio of fully-funded programs by advancing productcandidates into the earlier stages of development and then licensing them to licensees who assumed the responsibilities of later stage development, approvaland commercialization. Fully-funded programs are those for which our partners pay all of the development and commercialization costs. As licenseesadvance these programs, we are eligible for potential milestone and royalty payments. In March 2017, we transformed our business model to become a royalty aggregator where we focus on expanding our portfolio of fully-fundedprograms by out-licensing our internally developed product candidates and acquiring potential milestone and royalty revenue streams on additional productcandidates. We combined our royalty-aggregator model with a significantly reduced corporate cost structure to further build value for our shareholders. Weexpect that a significant portion of our future revenue will be based on payments we may receive for milestones and royalties related to these programs. Our business model is designed to create value for stockholders by assembling a diversified portfolio of biotech and pharmaceutical revenue streamsand operating that business with an efficient and low corporate cost structure. Our goal is to become a sustainably profitable company that offers investors anopportunity to participate in the promise of the biotech industry in a diversified, lower-risk business investment than a typical biotech model. The followingcharts demonstrate the diversification of our fully-funded asset portfolio across therapeutic areas and development stages.1 In 2017, we added nine new programs to our fully-funded asset portfolio by out-licensing two of our internally developed product candidates, addingthree new phage display licensees and adding four new potential royalty streams through our license agreements with Novartis Pharma AG (“Novartis”) andRezolute, Inc. (formerly AntriaBio, Inc.) (“Rezolute”).OrganizationWe were incorporated in Delaware in 1981 and became a Bermuda-exempted company in December 1998. Effective December 31, 2011, we changedour jurisdiction of incorporation from Bermuda to Delaware and changed our name from XOMA Ltd. to XOMA Corporation. When referring to a time orperiod before December 31, 1998 or after December 31, 2011, the terms “Company” and “XOMA” refer to XOMA Corporation, a Delaware corporation; whenreferring to a time or period between December 31, 1998 and December 31, 2011, such terms refer to XOMA Ltd., a Bermuda company.Our principal executive offices are located at 2200 Powell Street, Suite 310, Emeryville, California 94608, and we maintain a registered office locatedat Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. Our telephone number at our principal executive offices is (510) 204-7200.Our website address is www.xoma.com. The information found on our website is not part of this or any other report filed with or furnished to the Securitiesand Exchange Commission (“SEC”). Licensing and Collaboration Agreements Underlying Our Fully-Funded Program PortfolioHistorically, we have licensed or provided research and development collaboration services to world-class organizations, such as Novartis in pursuit ofnew antibody products under which we are eligible to receive potential future milestone payments and royalties. The following is a summary of license andcollaboration agreements that represent a significant component of our fully-funded program portfolio.Novartis - IL-1In August 2017, we and Novartis entered into a license agreement (the “IL-1 Target License Agreement”), under which we granted Novartis non-exclusive licenses to our intellectual property covering the use of IL-1 beta targeting antibodies in the treatment and prevention of cardiovascular diseaseand other diseases and conditions and an option to obtain an exclusive license (the “Exclusivity Option”) to such intellectual property for the treatment andprevention of cardiovascular disease. We also granted Novartis the right of first negotiation with respect to certain transactions relating to the licensedintellectual property. 2 Under the IL-1 Target License Agreement, we received an upfront cash payment of $10.0 million. In addition, we are eligible to receive low single-digit royalties on canakinumab sales in cardiovascular indications. If Novartis exercises the Exclusivity Option, the royalties on canakinumab sales willincrease to the mid-single digits. In November 2017, Novartis announced it intends to submit data from its canakinumab Phase 3 trial in cardiovasculartreatment for regulatory approval. Novartis – GevokizumabIn August 2017, we and Novartis entered into a license agreement (the “XOMA-052 License Agreement”) under which we granted Novartis anexclusive, worldwide, royalty-bearing license to gevokizumab (an early clinical stage product candidate) and related know-how and patents. Under the termsof the XOMA-052 License Agreement, Novartis will be solely responsible for the development and commercialization of gevokizumab and productscontaining the antibody.Under the XOMA-052 License Agreement, we received total consideration of $30.0 million for the license and rights granted to Novartis. Of the totalconsideration, $15.7 million was paid in cash and $14.3 million (equal to €12.0 million) was paid by Novartis Institutes for Biomedical Research, Inc.(“NIBR”), on our behalf, to settle our loan with Les Laboratories Servier (“Servier”). In addition, NIBR extended the maturity date on our debt to Novartis toSeptember 30, 2022. We also received $5.0 million related to the sale of 539,131 shares of our common stock, at a price per share of $9.2742. Based on theachievement of pre-specified criteria, we are eligible to receive up to $438.0 million in development, regulatory and commercial milestones. We are alsoeligible to receive royalties on sales of licensed products, which are tiered based on sales levels and range from a high single digit percentage rate to a lowdouble-digit percentage rate.Novartis – Anti-TGFβ AntibodyIn September 2015, we and Novartis International Pharmaceutical Ltd. (“Novartis International”) entered into a license agreement (the “LicenseAgreement”) under which we granted Novartis International an exclusive, worldwide, royalty-bearing license to our anti-TGF-β antibody program. NovartisInternational is solely responsible for the development and commercialization of the antibodies and products containing the antibodies arising from thisprogram.Under the License Agreement, we received a $37.0 million upfront fee, and are eligible to receive up to a total of $480.0 million in development,regulatory and commercial milestones. We also are eligible to receive royalties on sales of licensed products, which are tiered based on sales levels and rangefrom a mid-single digit percentage rate to a low double-digit percentage rate. This program is currently in early clinical testing.Novartis – Anti-CD40 AntibodyIn September 2015, we and Novartis Vaccines and Diagnostics, Inc. (“NVDI”), further amended our 2008 Amended and Restated Research,Development and Commercialization Agreement, relating to anti-CD40 antibodies. Under this agreement, NVDI is solely responsible for the developmentand commercialization of the antibodies and products containing the antibodies arising from this program. The parties agreed to reduce the royalty rates thatwe are eligible to receive on sales of NVDI’s clinical stage anti-CD40 antibodies. These royalties are tiered based on sales levels and now range from a mid-single digit percentage rate to a low double-digit percentage rate.In November 2017, Novartis presented the results of a Phase 2a study in Sjögren’s syndrome at the American College of Rheumatology AnnualMeeting. Our right to royalty payments expires on the later of the expiration of any licensed patent covering each product or 10 years from the firstcommercial sale of each product.RezoluteOn December 6, 2017, we entered into a license agreement with Rezolute pursuant to which we granted an exclusive global license to Rezolute todevelop and commercialize X358 (now RZ358), a Phase 2 product candidate, for all indications. We and Rezolute also entered into a common stock purchaseagreement.3 Under the terms of the license agreement, Rezolute is responsible for all development, regulatory, manufacturing and commercialization activitiesassociated with RZ358 and is required to make certain clinical, regulatory and annual net sales milestone payments to us of up to $232.0 million in theaggregate based on the achievement of pre-specified criteria. Rezolute is also obligated to pay us royalties ranging from the high single digits to the mid-teens based upon annual net sales of RZ358. Rezolute is obligated to take customary steps to advance RZ358, including using diligent efforts to commencethe next clinical study for RZ358 by a certain deadline and to meet certain spending requirements on an annual basis for the program until a marketingapproval application for RZ358 is accepted by the Food and Drug Administration (“FDA”). Rezolute’s obligation to pay royalties with respect to a particularRZ358 product and country will continue for the longer of the date of expiration of the last valid patent claim covering the product in that country, or twelveyears from the date of the first commercial sale of the product in that country.Pursuant to the license agreement and common stock purchase agreement, Rezolute is required to pay us $6.0 million in cash and to issue us $12.0million worth of its common stock, contingent on the completion of its financing activities. Further, in the event that Rezolute does not complete a financingthat raises at least $20.0 million in aggregate gross proceeds (“Qualified Financing”) by March 31, 2019, it shall issue to us an additional number of shares ofits common stock equal to $7.0 million divided by the weighted average of the closing bid and asked prices or the average closing prices of Rezolute’scommon stock on the ten-day trading period prior to March 31, 2019. Finally, if Rezolute is unable to complete a Qualified Financing by March 31, 2020, itwill be obliged to pay us $15.0 million in order to maintain the license. Under the common stock purchase agreement, Rezolute granted us the right andoption to sell the greater of (i) 5,000,000 shares of common stock or (ii) one third of the aggregate shares held by us upon failure by Rezolute to list its sharesof its common stock on the Nasdaq Stock Market or a similar national exchange on or prior to December 31, 2018. As of December 31, 2017, we have notreceived any cash or common stock from Rezolute as they have not completed any financing or other activities outlined in the agreement.In addition, under the terms of the license agreement, Rezolute is required to pay us a low single-digit royalty on sales of Rezolute’s other productsfrom its existing programs, currently in preclinical and early clinical stages. Rezolute’s obligation to pay royalties with respect to a particular Rezoluteproduct and country will continue for the longer of twelve years from the date of the first commercial sale of the product in that country or for so long asRezolute or its licensee is selling such product in such country, provided that such royalty will terminate upon the termination of the licensee’s obligation tomake payments to Rezolute based on sales of such product in such country.We also granted Rezolute an option through June 1, 2019 for an exclusive license for their choice of one of our preclinical insulin receptormonoclonal antibody fragments, including X129. If Rezolute exercises the option, we will be eligible for an upfront option fee and additional clinical,regulatory and annual net sales milestone payments to us of up to $237.0 million in the aggregate based on the achievement of pre-specified criteria as wellas royalties ranging from a high single digit percentage rate to a low double-digit percentage rate based on annual net sales. The license agreement containscustomary termination rights relating to material breach by either party. Rezolute also has a unilateral right to terminate the license agreement in its entiretyon ninety-days’ notice at any time. We have the right to terminate the license agreement if Rezolute challenges the licensed patents.Ology Bioservices On November 4, 2015, we entered into an asset purchase agreement with Ology Bioservices, Inc. (“Ology Bioservices”) (formerly NanotherapeuticsInc.) (the “Ology Bioservices Purchase Agreement”), under which Ology Bioservices agreed to acquire our biodefense business and related assets. Under theterms of this agreement, we are eligible to receive a 15% royalty on net sales of any future Ology Bioservices products covered by or involving the relatedpatents or know-how. Further details of the Ology Bioservices Purchase Agreement are provided in the section below, “Sale of Biodefense Assets andManufacturing Facility.” Proprietary Product CandidatesWe have a portfolio of unique monoclonal antibodies and technologies that we intend to license to pharmaceutical and biotechnology companies tofurther their clinical development. A summary of these product candidates is provided below: •X213 (formerly LFA 102) is a first-in-class allosteric inhibitor of prolactin action. It is a humanized IgG1-Kappa monoclonal antibody thatbinds to the extracellular domain of the human prolactin receptor with high affinity at an allosteric site. The antibody has been shown toinhibit prolactin-mediated signaling, and it is potent and similarly active against several animal and human prolactin receptors. In August2017, we entered into a license agreement with PRLA Pharma, Inc. (“PrlA”) pursuant to which we granted PrlA an exclusive, worldwide licenseto develop and commercialize X213, contingent on PrlA obtaining a specified level of financing. In the event PrlA does not obtain adequatefinancing within the specified period, X213 will be returned to us.4 •XMetA is an insulin receptor-activating antibody designed to provide long-acting reduction of hyperglycemia in Type 2 diabetic patients,potentially reducing the advancement to a number of insulin injections needed to control their blood glucose levels. •Additional Preclinical Product Candidates: In November 2016, we unveiled two novel oncology and oncology-related preclinical productcandidates. •The first targets interleukin 2, (“IL-2”), which has long been recognized as an effective therapy for metastatic melanoma andrenal cell carcinoma, but it has serious dose-limiting toxicities that prevent broad clinical use. We have generated novelantibodies that, when given with IL-2, are intended to steer IL-2 to enhance its positive impact with less toxicity, potentiallyimproving the therapeutic index over standard IL-2 therapy. •The other is an anti-parathyroid receptor (“PTH1R”) portfolio that includes several unique functional antibody antagoniststargeting PTH1R, a G-protein-coupled receptor involved in the regulation of calcium metabolism. These antibodies have shownpromising efficacy in in vivo studies and could potentially address unmet medical needs, including primaryhyperparathyroidism and humoral hypercalcemia of malignancy (“HHM”). HHM is present in many advanced cancers and iscaused by high serum calcium due to increased levels of the PTH1R ligand PTH-related peptide (“PTHrP”). Current HHMtreatments often fall short and many cancer patients die from ‘metabolic death'. Our PTH1R antibodies could be beneficial for thetreatment of HHM.Technologies Available for Non-Exclusive LicenseWe have a unique set of antibody discovery, optimization and development technologies available for licensing, including: •ADAPT™ (Antibody Discovery Advanced Platform Technologies): proprietary human antibody phage display libraries, integrated withyeast and mammalian display, which can be integrated into antibody discovery programs through license agreements. We believe access toADAPT™ Integrated Display offers a number of benefits because it enables the diversity of phage libraries to be combined with accelerateddiscovery due to rapid immunoglobulin (“IgG”) reformatting and fluorescence-activated cell sorting based screening using yeast andmammalian display. This increases the probability of success in finding rare and unique functional antibodies directed to targets of interest. •ModulX™: technology which allows modulation of biological pathways using monoclonal antibodies and offers insights into regulation ofsignaling pathways, homeostatic control, and disease biology. Using ModulX™, we have generated product candidates with novelmechanisms of action that specifically alter the kinetics of interaction between molecular constituents (e.g. receptor-ligand). ModulX™technology enables expanded target and therapeutic options and offers a unique approach in the treatment of disease. •OptimX™ technologies: •Human Engineering™ (“HE™”): a proprietary humanization technology that allows modification of non-human monoclonalantibodies to reduce or eliminate detectable immunogenicity and make them suitable for medical purposes in humans. Thetechnology uses a unique method developed by us, based on analysis of the conserved structure-function relationships amongantibodies. The method defines which residues in a non-human variable region are candidates to be modified. The result is anHE™ antibody with preserved antigen binding, structure and function that has eliminated or greatly reduced immunogenicity.HE™ technology was used in development of gevokizumab and certain other antibody products. •Targeted Affinity Enhancement™ (“TAE™”): a proprietary technology involving the assessment and guided substitution ofamino acids in antibody variable regions, enabling efficient optimization of antibody binding affinity and selectivity. TAE™generates a comprehensive map of the effects of amino acid mutations in the complementarity-determining region likely toimpact binding. The technology has been licensed to a number of companies. •Flexible Manufacturing: patented technology relating to a flexible arrangement of mobile clean rooms (“MCRs”) within a manufacturingfacility, with each MCR providing a portable, self-contained environment that allows for drug development. The facility design allows MCRsto connect easily and quickly to a central supply of utilities such as air, water, and electricity. This unique arrangement facilitates flexiblemanufacturing and eliminates change-over downtime. This translates into significantly reduced capital expenditures, production costs, andmaintenance costs while offering meaningful time advantages over conventional manufacturing facilities. When MCRs are not in use, they canbe easily moved to cleaning/refurbishing areas and prepared MCRs can be "plugged in" for manufacturing. The flexible manufacturing systemcan be applied to fields as diverse as pharmaceuticals, biologics, and electronics.5 Sale of Biodefense Assets and Manufacturing FacilityOlogy BioservicesOn November 4, 2015, we entered the Ology Bioservices Purchase Agreement with Ology Bioservices, under which Ology Bioservices agreed toacquire our biodefense business and related assets (including, subject to regulatory approval, certain contracts with the U.S. government), and to assumecertain liabilities of XOMA. As part of that transaction, the parties, subject to the satisfaction of certain conditions, entered into an intellectual propertylicense agreement (the “Ology Bioservices License Agreement”), under which we agreed to license to Ology Bioservices certain intellectual property rightsrelated to the purchased assets. Under the Ology Bioservices License Agreement, we were eligible for up to $4.5 million of cash payments and 23,008 sharesof common stock of Ology Bioservices, based upon Ology Bioservices achieving certain specified future operational objectives. In February 2017, weexecuted an Amendment and Restatement to both the Ology Bioservices Purchase Agreement and Ology Bioservices License Agreement primarily to (i)remove the obligation to issue 23,008 shares of common stock of Ology Bioservices under the Ology Bioservices Purchase Agreement, and (ii) revise thepayment schedule related to the timing of the $4.5 million cash payments due to us under the Ology Bioservices License Agreement. Of the $4.5 million,$3.0 million was contingent upon Ology Bioservices achieving certain specified future operating objectives. In the first quarter of 2017, we were entitled toreceive $1.6 million under the agreement in quarterly payments through September 2018. During the third quarter of 2017, Ology Bioservices achieved thespecified operating objectives and we earned the $3.0 million milestone payment that we are entitled to receive in monthly payments through July 2018. Ofthe total $4.6 million owed to us, we received $2.2 million during the year ended December 31, 2017 which was recognized as other income in ourconsolidated statement of operations.In addition, we are eligible to receive a 15% royalty on net sales of any future Ology Bioservices products covered by or involving the related patentsor know-how. Our right to royalties continues until the expiration of the last-to-expire licensed patent.AgenusOn November 5, 2015, we entered into an asset purchase agreement (the “Agenus Purchase Agreement”) with Agenus West, LLC, a wholly-ownedsubsidiary of Agenus Inc. (“Agenus”), pursuant to which Agenus agreed to acquire our pilot scale manufacturing facility in Berkeley, California, togetherwith certain related assets, including a license to certain intellectual property related to the purchased assets, and to assume certain liabilities of XOMA, inconsideration for the payment to us of up to $5.0 million in cash and the issuance to us of shares of Agenus’s common stock having an aggregate value of upto $1.0 million. The Agenus Purchase Agreement closed on December 31, 2015. At closing, we received cash of $4.7 million, net of the assumed liabilities of$0.3 million. In addition to the cash consideration, we received shares of common stock of Agenus with an aggregate value of $0.5 million, which wesubsequently sold in August 2016 for $0.6 million. The remaining common stock of Agenus will only be received upon our satisfaction of certainoperational matters, which we are unlikely to satisfy.Sale of Future Revenue StreamsRoyalty Acquisition AgreementsOn December 21, 2016, we entered into two Royalty Interest Acquisition Agreements (together, the “Royalty Acquisition Agreements”) withHealthCare Royalty Partners II, L.P. (“HCRP”). Under the first Royalty Acquisition Agreement, we sold our right to receive milestone payments and royaltieson future sales of products subject to a license agreement, dated August 18, 2005, between XOMA and Pfizer, Inc. (“Pfizer”) (formerly Wyeth) for an upfrontcash payment of $6.5 million, plus potential additional payments totaling $4.0 million in the event three specified net sales milestones are met by Pfizer in2017, 2018 and 2019. Based on estimated sales for 2017, the 2017 sales milestone was not achieved. We remain eligible to receive up to $3.0 million ifspecified net sales milestones are achieved in 2018 and 2019. Under the second Royalty Acquisition Agreement, we sold all rights to royalties under anAmended and Restated License Agreement dated October 27, 2006 between XOMA and Shire Plc. (formerly Dyax, Corp.) for a cash payment of $11.5million.Recently Terminated AgreementsNovo NordiskIn December 2015, we entered into a license agreement with Novo Nordisk under which we granted Novo Nordisk an exclusive, world-wide, royalty-bearing license to our XMetA program of allosteric monoclonal antibodies that positively modulate the insulin receptor (the “XMetA Program”), subject toour retained commercialization rights for rare disease indications. Novo Nordisk had an option to add these additional rights to its license upon payment ofan option fee.6 Under the agreement, we received a $5.0 million, non-creditable, non-refundable, upfront payment. Based on the achievement of pre-specified criteria,we were eligible to receive up to $290.0 million in development, regulatory and commercial milestones. We were also eligible to receive royalties on sales oflicensed products, which are tiered up to a high single-digit percentage rate based on sales levels.On April 20, 2017, we received notice from Novo Nordisk regarding the termination of the exclusive license agreement due to strategic and businessreasons. The termination of the exclusive license agreement became effective on July 20, 2017 and XMetA program is now available to license to otherparties.Financing AgreementsNovartisIn connection with the collaboration between XOMA and Novartis AG (then Chiron Corporation), a secured note agreement was executed in May2005. The note agreement is secured by our interest in the collaboration and was due and payable in full on June 21, 2015. On June 19, 2015, we and NVDI,who assumed the note agreement, agreed to extend the maturity date of our secured note agreement from June 21, 2015 to September 30, 2015, which wasthen subsequently extended to September 30, 2020. On September 22, 2017, in connection with the XOMA-052 License Agreement with Novartis, we andNIBR, who assumed the note agreement from NVDI, executed an amendment to the note agreement under which we further extended the maturity date of thenote to September 30, 2022. At December 31, 2017, the outstanding principal balance under this note agreement totaled $14.6 million.ServierIn December 2010, we entered into a license and collaboration agreement (the “Collaboration Agreement”) with Servier to jointly develop andcommercialize gevokizumab in multiple indications. Under the terms of the Collaboration Agreement, Servier obtained worldwide rights to cardiovasculardisease and diabetes indications (cardiometabolic field) and rights outside the United States and Japan to all other indications, including NIU, Behçet’sdisease uveitis and other inflammatory and oncology indications. We retained development and commercialization rights in the United States and Japan forall indications other than cardiovascular disease and diabetes.In December 2010, we also entered into a loan agreement with Servier (the “Servier Loan Agreement”) that provided for an advance of up to €15.0million. The loan was fully funded in January 2011, with the proceeds converting to approximately $19.5 million at the date of funding. The loan wassecured by an interest in XOMA’s intellectual property rights to all gevokizumab indications worldwide, excluding certain rights in the United States andJapan. Interest was calculated at a floating rate based on a Euro Inter-Bank Offered Rate and was subject to a cap. The interest rate was reset semi-annually inJanuary and July of each year. The Servier Loan Agreement was subsequently amended by a Consent, Transfer, Assumption and Amendment Agreemententered into as of August 12, 2013, where the loan was transferred from XOMA Ireland Limited to XOMA (US) LLC.On January 9, 2015, Servier and we entered into Amendment No. 2 (“Loan Amendment”) to the Servier Loan Agreement. The Loan Amendmentextended the maturity date of the loan from January 13, 2016 to three tranches of principal to be repaid as follows: €3.0 million on January 15, 2016, €5.0million on January 15, 2017, and €7.0 million on January 15, 2018. In addition, the loan would become immediately due and payable upon certaincustomary events of default. In January 2016, we paid the principal amount of €3.0 million. In January 2017, we entered into Amendment No. 3 to the ServierLoan Agreement (“Amendment No. 3”). Amendment No. 3 extended the maturity date of the €5.0 million due on January 15, 2017 to July 15, 2017. Theother terms of the loan remained unchanged.On August 25, 2017, NIBR settled the Servier Loan Agreement in cash by paying directly to Servier $14.3 million, which represented the outstandingbalance of the loan based on a euro to dollar exchange rate of 1.1932. The funds that NIBR paid directly to Servier were a portion of the upfront payment dueto us under the XOMA-052 License Agreement. As a result of the debt being fully paid, the intellectual property securing the Servier Loan Agreement wasreleased. 7 Hercules Loan and Security AgreementIn February 2015, we entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc., (the “Hercules Loan Agreement”)under which we borrowed $20.0 million.The interest rate under the Hercules Loan Agreement was calculated at a rate equal to the greater of either (i) 9.40% plus the prime rate as reported fromtime to time in The Wall Street Journal minus 7.25%, and (ii) 9.40%. Payments under the Hercules Loan Agreement were interest only until June 1, 2016,after which we paid equal monthly payments of principal and interest amortized over a 30-month schedule through the scheduled maturity date of September1, 2018 (the “Hercules Loan Maturity Date”). The entire principal balance, including a balloon payment of principal, would be due and payable on theHercules Loan Maturity Date. In addition, a final payment of $1.2 million would be due on the Hercules Loan Maturity Date, or such earlier date specified inthe Hercules Loan Agreement. If we prepaid the loan prior to the Hercules Loan Maturity Date, we would be required to pay Hercules a prepayment chargeequal to 1.00% of the amount prepaid. Our obligations under the Hercules Loan Agreement were secured by a security interest in substantially all of ourassets, other than our intellectual property.On December 21, 2016, we entered into Amendment No. 1 (the “Hercules Amendment”) to the Hercules Loan Agreement. Under the HerculesAmendment, Hercules agreed to release its security interest on the assets subject to the Acquisition Agreements with HCRP. In turn, in January 2017, we paid$10.0 million of the outstanding principal balance owed to Hercules. The $10.0 million payment was not subject to any prepayment charge. After taking intoaccount the January 2017 payment, the principal balance of the Hercules Loan was $6.9 million.On March 21, 2017, the Hercules Term Loan was paid in full and we were not required to pay the 1% prepayment charge due pursuant to the terms ofthe loan.In connection with the Hercules Loan Agreement, we issued a warrant to Hercules that is exercisable for an aggregate of up to 9,063 shares of ourcommon stock at an exercise price of $66.20 per share (the “Hercules Warrant”). The Hercules Warrant may be exercised on a cashless basis and is exercisablefor a term beginning on the date of issuance and ending on the earlier to occur of five years from the date of issuance or the consummation of certainacquisitions of XOMA as set forth in the Hercules Warrant. The number of shares for which the Hercules Warrant is exercisable and the associated exerciseprice are subject to certain proportional adjustments as set forth in the Hercules Warrant.Research and DevelopmentOur research and development expenses include costs of personnel, supplies, facilities and equipment, consultants, third-party costs and otherexpenses related to preclinical and clinical testing. In 2017, our research and development expenses were $7.9 million, compared with $44.2 million in 2016and $70.9 million in 2015.Prior to 2017, our research and development activities can be divided into those related to our internal projects and those related to collaborative andcontract arrangements, which are reimbursed by our collaborators. In March 2017, we initiated a corporate reorganization to discontinue internal productdevelopment and terminated our clinical programs as of June 30, 2017, both of which significantly reduced our research and development expenses.Research and development expenses relating to internal projects were $42.8 million in 2016 and $50.2 million in 2015. Research and development expensesrelated to collaborative and contract arrangements were $1.4 million in 2016 and $20.7 million in 2015.CompetitionThe biotechnology and pharmaceutical industries are subject to continuous and substantial technological change. Some of the drugs our licensees aredeveloping may compete with existing therapies or other drugs in development by other companies. Furthermore, academic institutions, governmentagencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products ortechnologies and may establish collaborative arrangements with our competitors. There can be no assurance that developments by others will not render our,or our licensees’, products or technologies obsolete or uncompetitive.Additionally, our recently-undertaken royalty aggregator model faces competition on at least two fronts. First, there are other companies, funds andother investment vehicles seeking to aggregate royalties or provide alternative financing to development-stage biotechnology and pharmaceuticalcompanies. The competitive companies, funds and other investment vehicles may have a lower target rate of return, a lower cost of capital or access to greateramounts of capital and thereby may be able to acquire assets that we are also targeting for acquisitions. Second, existing or potential competitors to ourpartners’ and licensee’s products, particularly large pharmaceutical companies, may have greater financial, technical and human resources than our licensees.Accordingly, these competitors may be better equipped to develop, manufacture and market products. Many of these companies also have extensiveexperience in preclinical testing and human clinical trials, obtaining FDA and other regulatory approvals and manufacturing and marketing pharmaceuticalproducts.For a discussion of the risks associated with competition, see below under “Item 1A. Risk Factors.”8 Government RegulationThe research and development, manufacturing and marketing of pharmaceutical products are subject to regulation by numerous governmentalauthorities in the United States and other countries. We and our partners and licensees, depending on specific activities performed, are subject to theseregulations. In the United States, pharmaceuticals are subject to regulation by both federal and various state authorities, including the FDA. The FederalFood, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval,advertising and promotion of pharmaceutical products and there are often comparable regulations that apply at the state level. There are similar regulations inother countries as well. For both currently marketed and products in development, failure to comply with applicable regulatory requirements can, amongother things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. In addition, changes in existingregulations could have a material adverse effect on us or our partners. For a discussion of the risks associated with government regulations, see below under“Item 1A. Risk Factors.”Intellectual PropertyIntellectual property is important to our business and our future income streams will depend in part on our ability to obtain issued patents, and ourpartners’ and licensees’ ability to operate without infringing on the proprietary rights of others. We hold and have filed applications for a number of patentsin the United States and internationally to protect our products and technology. We also have obtained or have the right to obtain licenses to, or incomestreams based on, certain patents and applications filed by others. However, the patent position of biotechnology companies generally is highly uncertainand consistent policy regarding the breadth of allowed claims has not emerged from the actions of the U.S. Patent and Trademark Office with respect tobiotechnology patents. Accordingly, no assurance can be given that our, or our partners’ or licensees’ patents will afford protection against competitors withsimilar products or others will not obtain patents claiming aspects similar to those covered by our, or our partners’ or licensees’ patent applications. Below isa list of our patents and patent applications related to our programs: Licensee/PartnerProgramRepresentativePatents/ApplicationsSubject matterExpected expiryNovartisAnti-IL-1b US 7,531,166US 7,582,742 US 7,695,718US 8,101,166US 8,586,036US 9,163,082 US 8,637,029 JP 5763625 Gevokizumab and other antibodies andantibody fragments with similar bindingproperties for IL-1β Methods of treating Type 2 diabetes orType 2 diabetes-induced diseases orconditions with high affinity antibodiesand antibody fragments that bind to IL-1β Methods of treating gout with certaindoses of IL-1β binding antibodies orbinding fragments Pharmaceutical compositions comprisinganti-IL-1β binding antibodies orfragments for reducing acute coronarysyndrome in a subject with a history ofmyocardial infarction. 2027 2027 2028 2030NovartisAnti-TGFb US 8,569,464US 9,145,458US 9,714,285 WO2016/161410 TGFβ antibodies and methods of usethereof Combination therapy using an inhibitorof TGFb and an inhibitor of PD-1 fortreating or preventing recurrence ofcancer2032 20369 NovartisAnti-CD40US 8,828,396*Silent Fc variants of anti-CD40antibodies2031 Rezolute Anti-INSR EP 2 480 254JP 5849050 WO2016/141111Insulin receptor-modulating antibodieshaving the functional properties ofRZ358 Methods of treating or preventing post-prandial hypoglycemia after gastricbypass surgery using a negativemodulator antibody to the insulinreceptor2030 2036Ology BioAnti-BoNT US 8,821,879EP 2 473 191 Coformulations of anti- botulinumneurotoxin antibodies2030PrlA PharmaAnti-PRLRUS 7,867,493EP 2 059 535 Prolactin receptor antibodies2027VariousBacterial cellexpression/Phage displaylibrariesCA 1,341,235 US 8,546,307EP 2 344 686US 7,094,579EP 2 060 628Methods for expression and secretion ofrecombinant proteins from bacteriaXOMA phage display library components2018 2022Actively seeking out licenseAnti-PTH1RWO2018/026748Parathyroid Hormone Receptor 1Antibodies and Uses Thereof2037Actively seeking out licenseAnti-IL2PCT publication pending**Interleukin-2 Antibodies and UsesThereof2037 * Novartis-owned patent**Jointly-owned with Medical University of South Carolina Foundation for Research DevelopmentIf certain patents issued to others are upheld or if certain patent applications filed by others are issued and upheld, our partners and licensees mayrequire certain licenses from others to develop and commercialize certain potential products incorporating our technology. There can be no assurance thatsuch licenses, if required, will be available on acceptable terms.We protect our proprietary information, in part, by confidentiality agreements with our employees, consultants and partners. These parties may breachthese agreements, and we may not have adequate remedies for any breach. To the extent that we or our consultants or partners use intellectual property ownedby others, we may have disputes with our consultants or partners or other third parties, as to the rights in related or resulting know-how and inventions.Financial Information about Geographic AreasWhen and if we are able to generate income, a portion of that income may be derived from product sales and other activities of our third-partylicensees and partners outside the United States. We have determined that we operate in one business segment as we only report operating results on an aggregate basis to the chief operating decisionmaker of XOMA. Our property and equipment is held in the United States.Financial information regarding the geographic areas in which we operate and segment information is included in Note 14 to the December 31, 2017,Financial Statements: Concentration of Risk, Segment and Geographic Information.10 Concentration of RiskNovartis accounted for 95 percent of our total revenue in 2017. Five Prime, Servier, and National Institute of Allergy and Infectious Diseases(“NIAID”) accounted for 27 percent, 22 percent, and 19 percent, respectively, of our total revenue in 2016. In 2015, Novartis accounted for 67 percent of ourtotal revenue. At December 31, 2017, Janssen Biotech, Inc. (formerly Centocor Biotech Inc.) accounted for 100 percent of the accounts receivable balance. AtDecember 31, 2016, NIAID accounted for 85 percent of the accounts receivable balance. None of these parties represent a related party to XOMA and the lossof one or more of these partners could have a material effect on our business and financial condition.EmployeesAs of March 2, 2018, we employed 12 full-time employees. None of our employees are unionized. Our employees are primarily engaged in executive,business development, finance and administrative positions.Available InformationThe following information can be found on our website at http://www.xoma.com or can be obtained free of charge by contacting our InvestorRelations Department at investorrelations@xoma.com or by calling (910) 726-1372: •Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed orfurnished under Section 13(a) or 15(d) of the Exchange Act will be available as soon as reasonably practicable after such material iselectronically filed with the SEC. All reports we file with the SEC also can be obtained free of charge via EDGAR through the SEC’s website athttp://www.sec.gov. •Our policies related to corporate governance, including our Code of Ethics applying to our directors, officers and employees (including ourprincipal executive officer and principal financial and accounting officer) that we have adopted to meet the requirements set forth in the rulesand regulations of the SEC and its corporate governance principles. •The charters of the Audit, Compensation and Nominating & Governance Committees of our Board of Directors.We intend to satisfy the applicable disclosure requirements regarding amendments to, or waivers from, provisions of our Code of Ethics by postingsuch information on our website. Item 1A.Risk FactorsThe following risk factors and other information included in this annual report should be carefully considered. The risks and uncertainties describedbelow are not the only ones we face. Additional risks and uncertainties not presently known to us also may impair our business operations. If any of thefollowing risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected. Risks Related to our Recently Undertaken Royalty Aggregator StrategyOur planned acquisition of royalties may not produce anticipated revenues, and if such transactions are secured by collateral, we may be, or may become,under-secured by the collateral or such collateral may lose value and we will not be able recuperate our capital expenditures in the acquisition.We are engaged in a continual review of opportunities to acquire royalties and other intellectual property assets as part of our royalty aggregatorstrategy or to acquire companies that hold royalty assets. We currently, and generally at any time, have acquisition opportunities in various stages of activereview, including, for example, our engagement of consultants and advisors to analyze particular opportunities, technical, financial and other confidentialinformation, submission of indications of interest and involvement as a bidder in competitive auctions. Many potential acquisition targets do not meet ourcriteria, and for those that do, we may face significant competition for these acquisitions from other royalty buyers and enterprises. Competition for futureasset acquisition opportunities in our markets could increase the price we pay for such assets and could reduce the number of potential acquisition targets.The success of our acquisitions is based on our ability to make accurate assumptions regarding the valuation, timing and amount of future royalty andmilestone payments as well as the viability of the underlying technology. The failure of any of these acquisitions to produce anticipated revenues maymaterially and adversely affect our financial condition and results of operations.11 Some of these acquisitions may expose us to credit risk in the event of default by the counterparty. To mitigate this risk, on occasion, we mayobtain a security interest as collateral in the assets of such counterparty. Our credit risk in respect of such counterparty may be exacerbated when thecollateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount we are due pursuant to the terms of theparticular assets. This could occur in circumstances where the original collateral was not sufficient to cover a complete loss (e.g., our interests were onlypartially secured) or may result from the deterioration in value of the collateral, so that, in either such case, we are unable to recuperate our full capital outlay.Any such losses resulting therefrom could materially and adversely affect our financial condition and results of operations. Many of our potential royalty acquisitions are in companies or assets that have no approved or commercialized products or are dependent on the actionsof unrelated third parties, which may negatively impact our investment returns.As part of our recently launched royalty aggregator strategy, we will likely make investments in royalty assets, such as an upfront payment for aprofit share or royalty stream in the healthcare industry, many of which investments are in companies that, at the time of investment, have limited or noapproved or commercialized products. If the assets are not successfully developed and subsequently commercialized, the value of our investments will benegatively affected. The ultimate success of our royalty aggregator strategy will depend on the ability of the counterparty to innovate, develop andcommercialize their products, in increasingly competitive and highly regulated markets. Their inability to do so would negatively affect our investment. Inaddition, we are dependent, to a large extent, on third parties to enforce certain rights for our benefit, such as protection of a patent estate, and their failure todo so would negatively impact our investment returns. We depend on our licensees and royalty-agreement counterparties for the determination of royalty and milestone payments. While we have rights to auditour licensees and royalty-agreement counterparties, the independent auditors may have difficulty determining the correct royalty calculation, we may notbe able to detect errors and payment calculations may call for retroactive adjustments. We may have to exercise legal remedies to resolve any disputesresulting from the audit.The royalty and milestone payments we receive are determined by our licensees based on their reported development and product sales. Eachlicensee's calculation of the royalty payments is subject to and dependent upon the adequacy and accuracy of its sales and accounting functions, and errorsmay occur from time to time in the calculations made by a licensee. Our license and royalty agreements provide us the right to audit the calculations andsales data for the associated royalty payments; however, such audits may occur many months following our recognition of the royalty revenue, may requireus to adjust our royalty revenues in later periods and may require expense on the part of the Company. Further, our licensees and royalty-agreementcounterparties may be uncooperative or have insufficient records, which may complicate and delay the audit process.Although we intend to regularly exercise our royalty audit rights, we rely in the first instance on our licensees and royalty-agreementcounterparties to accurately report sales and calculate and pay applicable royalties and, upon exercise of such royalty audit rights, we rely on licensees' androyalty-agreement counterparties' cooperation in performing such audits. In the absence of such cooperation, we may be forced to exercise legal remedies toenforce our agreements. The lack of liquidity in our acquisitions may adversely affect our business and, if we need to sell any of our acquired assets, we may not be able to do so ata favorable price. As a result, we may suffer losses.We generally acquire patents, license agreements and royalty rights that have limited secondary resale markets. The illiquidity of most of our assets maymake it difficult for us to dispose of them at a favorable price and, as a result, we may suffer losses if we are required to dispose of any or all such assets in aliquidation or otherwise. In addition, if we liquidate all or a portion of our assets quickly or relating to a liquidation, we may realize significantly less thanthe value at which we had previously recorded these assets. 12 As we continue to develop our business, our mix of assets and our sources of income may require that we register with the SEC as an “investmentcompany” in accordance with the Investment Company Act of 1940.We have not been and have no current intention to register as an "investment company" under the Investment Company Act of 1940, or the ‘40Act, because we believe the nature of our assets and the sources of our income currently exclude us from the definition of an investment company pursuant toSections (3)(a)(1)(A) and (3)(a)(1)(C) under the ‘40 Act and Rule 3a-1 thereunder. Accordingly, we are not currently subject to the provisions of the ‘40 Act,such as compliance with the ‘40 Act’s registration and reporting requirements, capital structure requirements, affiliate transaction restrictions, conflict ofinterest rules, requirements for disinterested directors, and other substantive provisions. Generally, to avoid being a company that is an "investmentcompany" under the ‘40 Act, it must both: (a) not be or hold itself out as being engaged primarily in the business of investing, reinvesting or trading insecurities, and (b) either (i) not be engaged or propose to engage in the business of investing in securities or own or propose to acquire investment securitieshaving a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis or (ii) nothave more than 45% of the value of its total assets (exclusive of government securities and cash items) consist of or more than 45% of its net income aftertaxes (for the last four fiscal quarters combined) be derived from certain types of securities. In addition, we would not be an “investment company” if anexception, exemption, or safe harbor under the ‘40 Act applies.We monitor our assets and income for compliance with the tests under the ‘40 Act and seek to conduct our business activities to ensure that we donot fall within its definitions of “investment company.” If we were to become an “investment company” and be subject to the restrictions of the ‘40 Act, thoserestrictions would likely require changes in the way we do business and add significant administrative burdens to our operations. To ensure that we do notfall within the ‘40 Act, we may need to take various actions which we might otherwise not pursue. These actions may include restructuring the Companyand/or modifying our mixture of assets and income.Specifically, our mixture of securities vs. royalty assets will be important to our classification as an “investment company”. While we currentlybelieve that none of the definitions of “investment company” apply to us, we may in the future rely on an exception under the ‘40 Act provided by Section3(c)(5)(A). To qualify under Section 3(c)(5)(A), as interpreted by the staff of the SEC, we would be required to have at least 55% of our total assets in "notes,drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services" (orQualifying Assets). The SEC staff has stated in a no action letter that royalty interests are Qualifying Assets under this exception. If the SEC or its staff in thefuture adopts a contrary interpretation or otherwise restricts the conclusions in the staff's no-action letter such that our royalty interests are no longerQualifying Assets for purposes of Section 3(c)(5)(A), or if we fail to have 55% of our total assets in Qualifying Assets, we could be required to register underthe ‘40 Act.The rules and interpretations of the SEC and the courts, relating to the definition of "investment company" are very complex. While we currentlyintend to conduct our operations so that we will not be an investment company under applicable SEC interpretations, we can provide no assurance that theSEC would not take the position that the Company would be required to register under the ‘40 Act. Risks Related to our Financial Results and Capital RequirementsWe have sustained losses in the past, and we expect to sustain losses in the foreseeable future.We had net income of $14.6 million for the year ended December 31, 2017, and net losses of $53.5 million and $20.6 million for the years endedDecember 31, 2016, and 2015, respectively. As of December 31, 2017, we had an accumulated deficit of $1.2 billion.We do not know whether we will ever achieve sustained profitability or whether cash flow from future operations will be sufficient to meet our needs.To date, we have financed our operations primarily through the sale of equity securities and debt, and collaboration and licensing arrangements. Thesize of our future net losses will depend, in part, on the rate of our future expenditures and our partner’s ability to generate revenues. If our partner’s productcandidates are not successfully developed or commercialized by our licensees, or if revenues are insufficient following marketing approval, we will notachieve profitability and our business may fail. Our ability to achieve profitability is dependent in large part on the success of our ability to license ourproduct candidates, and the success of our licensees’ development programs, both of which are uncertain. Our success is also dependent on our licenseesobtaining regulatory approval to market our product candidates which may not materialize or prove to be successful. 13 Our new strategy may require us to raise additional funds to acquire royalty assets; we cannot be certain that funds will be available, and if they are notavailable, we may be unsuccessful in acquiring assets to sustain the business in the future.We may need to commit substantial funds to continue our business, and we may not be able to obtain sufficient funds on acceptable terms, or at all.Any additional debt financing or additional equity that we raise may contain terms that are not favorable to our stockholders or us. If we raise additionalfunds through licensing arrangements with third parties, we may be required to relinquish some rights to our technologies or our product candidates, grantlicenses on terms that are not favorable to us or enter into a license arrangement for a product candidate at an earlier stage of development or for a lesseramount than we might otherwise choose.Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available on a timelybasis, we may: •reduce or eliminate royalty aggregation efforts; or •further reduce our capital or operating expenditures; or •curtail our spending on protecting our intellectual property. We have significantly restructured our business and revised our business plan and there are no assurances that we will be able to successfully implementour business plan or successfully operate as a royalty aggregator.We have historically been focused on discovering and developing innovative therapeutics derived from our unique platform of antibodytechnologies. Prospectively, we will become a royalty aggregator where we focus on expanding our portfolio of fully-funded programs by out-licensing ourinternally developed product candidates and acquiring potential milestone and royalty revenue streams on additional product candidates. Our strategy isbased on a number of factors and assumptions, some of which are not within our control, such as the actions of third parties. There can be no assurance that wewill be able to successfully execute all or any elements of our strategy, or that our ability to successfully execute our strategy will be unaffected by externalfactors. If we are unsuccessful in acquiring potential milestone and royalty revenue streams on additional product candidates, or those acquisitions do notperform to our expectations, our financial performance could be adversely affected. We may not realize the expected benefits of our cost-saving initiatives.Reducing costs is a key element of our current business strategy. On August 21, 2015, in connection with our efforts to lower operating expenses andpreserve capital while continuing to focus on our product pipeline, we implemented a workforce reduction, which led to the termination of 52 employeesduring the second half of 2015. On December 19, 2016, we approved a restructuring of our business based on our decision to focus our efforts on clinicaldevelopment, with an initial focus on the X358 clinical program. The restructuring included a reduction-in-force in which we terminated 57 employees (the“2016 Restructuring”). In early 2017, we implemented a royalty-aggregator business model (the “2017 Restructuring”), which resulted in the termination offive additional employees effective June 30, 2017.If we experience excessive unanticipated inefficiencies or incremental costs in connection with restructuring activities, such as unanticipatedinefficiencies caused by reducing headcount, we may be unable to meaningfully realize cost savings and we may incur expenses in excess of what weanticipate. Either of these outcomes could prevent us from meeting our strategic objectives and could adversely impact our results of operations and financialcondition.14 Risks Related to Our Reliance on Third PartiesWe rely heavily on licensee relationships, and any disputes or litigation with our partners or termination or breach of any of the related agreements couldreduce the financial resources available to us, including milestone payments and future royalty revenues.Our existing collaborations may not continue or be successful, and we may be unable to enter into future collaborative arrangements to develop andcommercialize our unpartnered assets. Generally, our current collaborative partners also have the right to terminate their collaborations at will or underspecified circumstances. If any of our collaborative partners breach or terminate their agreements with us or otherwise fail to conduct their collaborativeactivities successfully (for example, by not making required payments when due, or at all), our product development under these agreements will be delayedor terminated. Disputes or litigation may also arise with our collaborators (with us and/or with one or more third parties), including those over ownershiprights to intellectual property, know-how or technologies developed with our collaborators. For example, we are asserting our rights to receive paymentagainst one of our collaborative partners which could harm our relationship with such partner. Such disputes or litigation could adversely affect our rights toone or more of our product candidates and could delay, interrupt or terminate the collaborative research, development and commercialization of certainpotential products, create uncertainty as to ownership rights of intellectual property, or could result in litigation or arbitration. In addition, a significantdownturn or deterioration in the business or financial condition of our collaborators or partners could result in a loss of expected revenue and our expectedreturns on investment. The occurrence of any of these problems could be time-consuming and expensive and could adversely affect our business. Our licensees rely on third parties to provide services in connection with our product candidate development and manufacturing programs. Theinadequate performance by or loss of any of these service providers could affect our licensees’ product candidate development.Third parties provide services in connection with preclinical and clinical development programs, including in vitro and in vivo studies, assay andreagent development, immunohistochemistry, toxicology, pharmacokinetics, clinical trial support, manufacturing and other outsourced activities. If theseservice providers do not adequately perform the services for which we or our licensees have contracted, or cease to continue operations, and we are not able tofind a replacement provider quickly or we lose information or items associated with our product candidates, our development programs may be delayed. Agreements with other third parties, many of which are significant to our business, expose us to numerous risks.Because our licensees, suppliers and contractors are independent third parties, they may be subject to different risks than we are and have significantdiscretion in, and different criteria for, determining the efforts and resources they will apply related to their agreements with us. If these licensees, suppliersand contractors do not successfully perform the functions for which they are responsible, we may not have the capabilities, resources or rights to do so on ourown.We do not know whether we or our licensees will successfully develop and market any of the products that are or may become the subject of any of ourlicensing arrangements. In addition, third-party arrangements such as ours also increase uncertainties in the related decision-making processes and resultingprogress under the arrangements, as we and our licensees may reach different conclusions, or support different paths forward, based on the same information,particularly when large amounts of technical data are involved.Under our contract with NIAID, a part of the National Institute of Health (“NIH”), we invoiced using NIH provisional rates, and these are subject tofuture audits at the discretion of NIAID’s contracting office. These audits can result in an adjustment to revenue previously reported, which potentially couldbe significant. Failure of our licensees’ product candidates to meet current Good Manufacturing Practices standards may subject us to delays in regulatory approval andpenalties for noncompliance.Our licensees may rely on third party manufacturers and such contract manufacturers are required to produce clinical product candidates under currentGood Manufacturing Practices (“cGMP”) to meet acceptable standards for use in clinical trials and for commercial sale, as applicable. If such standardschange, the ability of contract manufacturers to produce our product candidates on the schedule required for our clinical trials or to meet commercialrequirements may be affected. In addition, contract manufacturers may not perform their obligations under their agreements with our licensees, maydiscontinue their business before the time required by us to successfully produce clinical and commercial supplies of our product candidates.15 Contract manufacturers are subject to pre-approval inspections and periodic unannounced inspections by the FDA and corresponding state andforeign authorities to ensure strict compliance with cGMP and other applicable government regulations and corresponding foreign standards. We do not havecontrol over a third-party manufacturer’s compliance with these regulations and standards. Any difficulties or delays in contractors’ manufacturing andsupply of our product candidates or any failure of our licensees’ contractors to maintain compliance with the applicable regulations and standards couldincrease costs, cause us to reduce revenue, make us or our licensees postpone or cancel clinical trials, prevent or delay regulatory approval by the FDA andcorresponding state and foreign authorities, prevent the import and/or export of our product candidates, or cause any of our product candidates that may beapproved for commercial sale to be recalled or withdrawn. Certain of our technologies are in-licensed from third parties, so our and our licensees’ capabilities using them are restricted and subject to additionalrisks.We have licensed technologies from third parties. These technologies include phage display technologies licensed to us in connection with ourbacterial cell expression technology licensing program and antibody products. However, our and our licensees’ use of these technologies is limited by certaincontractual provisions in the licenses relating to them, and although we have obtained numerous licenses, intellectual property rights in the area of phagedisplay are particularly complex. If we are unable to maintain our licenses, patents or other intellectual property, we could lose important protections that arematerial to continuing our operations and for future prospects. Our licensors also may seek to terminate our license, which could cause us and our licensees tolose the right to use the licensed intellectual property and adversely affect our ability to commercialize our technologies, products or services. Because many of the companies with which we do business also are in the biotechnology sector, the volatility of that sector can affect us indirectly as wellas directly.The same factors that affect us directly also can adversely affect us indirectly by affecting the ability of our partners and others with whom we dobusiness to meet their obligations to us and reduce our ability to realize the value of the consideration provided to us by these other companies.For example, in connection with our dispositions or license arrangements, we have in the past and may in the future agree to accept equity securities ofthe licensee in payment of fees. The future value of these or any other shares we receive is subject both to market risks affecting our ability to realize thevalue of these shares and more generally to the business and other risks to which the issuer of these shares may be subject. Risks Related to an Investment in Our Common StockOur share price may be volatile, and there may not be an active trading market for our common stock.There can be no assurance the market price of our common stock will not decline below its present market price or there will be an active tradingmarket for our common stock. The market prices of biotechnology companies have been and are likely to continue to be highly volatile. Fluctuations in ouroperating results and general market conditions for biotechnology stocks could have a significant impact on the volatility of our common stock price. Wehave experienced significant volatility in the price of our common stock. From January 1, 2017, through March 2, 2018, the share price of our common stockhas ranged from a high of $37.25 to a low of $3.96. Additionally, we have two significant holders of our stock that could affect the liquidity of our stock andhave a significant negative impact on our stock price if one or both of the holders were to quickly sell their ownership positions. If we fail to meet continued listing standards of NASDAQ, our common stock may be delisted, which could have a material adverse effect on the liquidity ofour common stock.Our common stock is currently traded on the Nasdaq Global Market. The NASDAQ Stock Market LLC (“NASDAQ”) has requirements that a companymust meet in order to remain listed on NASDAQ.We have in the past temporarily fallen out of compliance with NASDAQ listing standards and there can be no assurance that we will continue to meetNASDAQ listing requirements in the future.We received a letter from the Listing Qualifications Staff of The NASDAQ Stock Market LLC (the “Staff”) on March 22, 2017, providing notificationthat we no longer complied with the $50 million in total assets and total revenue standard for continued listing on The Nasdaq Global Market underNASDAQ’s Listing Rule 5450(b)(3)(A) and that we also did not comply with either of the two alternative standards of Listing Rule 5450(b), the equitystandard and the market value standard.16 On May 2, 2017, following ten consecutive business days where the market value of our listed securities was $50 million or greater, we regainedcompliance with NASDAQ Listing Rule 5450(b)(2)(A).If future events cause our common stock to be delisted, the liquidity of our common stock would be adversely affected and the market price of ourcommon stock could decrease. We may issue additional equity securities and thereby materially and adversely affect the price of our common stock.We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capitalby issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equitysecurities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equitysecurities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to ourexisting stockholders, and new investors could gain rights superior to our existing stockholders.We are authorized to issue, without stockholder approval, 1,000,000 shares of preferred stock, of which 5,003 shares of Series X preferred stock wereissued and outstanding as of March 2, 2018. Each share of Series X is convertible into 1,000 shares of registered common stock based on a conversion priceof $4.03 per share of common stock. The total number of shares of common stock issued upon conversion of all issued Series X convertible preferred stockwill be 5,003,000 shares. Each share is convertible at the option of the holder at any time, provided that the holder will be prohibited from converting intocommon stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares above a conversionblocker, which is initially set at 19.99% of our total common stock then issued and outstanding immediately following the conversion of such shares. Inaddition, we are authorized to issue, generally without stockholder approval, up to 277,333,332 shares of common stock, of which 8,329,098 were issued andoutstanding as of March 2, 2018. If we issue additional equity securities, the price of our common stock may be materially and adversely affected.In addition, funding from collaboration partners and others has in the past and may in the future involve issuance by us of our common stock. Wecannot be certain how the purchase price of such shares, the relevant market price or premium, if any, will be determined or when such determinations will bemade.Any issuance by us of equity securities, whether through an underwritten public offering, an at the market offering, a private placement, in connectionwith a collaboration or otherwise could result in dilution in the value of our issued and outstanding shares, and a decrease in the trading price of our commonstock. We may sell additional equity or debt securities to fund our operations, which may result in dilution to our stockholders and impose restrictions on ourbusiness.In order to raise additional funds to support our operations, we may sell additional equity or debt securities, which would result in dilution to ourstockholders and may impose restrictive covenants that would adversely impact our business. The sale of additional equity or convertible debt securitiescould result in the issuance of additional shares of our capital stock and dilution to all of our stockholders. The incurrence of indebtedness would result inincreased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt,limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability toconduct our business. If we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition andresults of operations could be materially adversely affected and we may not be able to meet our debt service obligations. Our organizational documents contain provisions that may prevent transactions that could be beneficial to our stockholders and may insulate ourmanagement from removal.Our charter and by-laws: •require certain procedures to be followed and time periods to be met for any stockholder to propose matters to be considered at annual meetingsof stockholders, including nominating directors for election at those meetings; and •authorize our Board of Directors to issue up to 1,000,000 shares of preferred stock without stockholder approval and to set the rights,preferences and other designations, including voting rights, of those shares as the Board of Directors may determine.In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), that may prohibit largestockholders, in particular those owning 15% or more of our outstanding common stock, from merging or combining with us.17 These provisions of our organizational documents and the DGCL, alone or in combination with each other, may discourage transactions involvingactual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders ofcommon stock, could limit the ability of stockholders to approve transactions that they may deem to be in their best interests, and could make it considerablymore difficult for a potential acquirer to replace management. As a public company in the United States, we are subject to the Sarbanes-Oxley Act. We have determined our disclosure controls and procedures and ourinternal control over financial reporting are effective. We can provide no assurance that we will, at all times, in the future be able to report that ourinternal controls over financial reporting are effective.Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”).Section 404 requires management to establish and maintain a system of internal control over financial reporting, and annual reports on Form 10-K filed underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), must contain a report from management assessing the effectiveness of our internalcontrol over financial reporting. Ensuring we have adequate internal financial and accounting controls and procedures in place to produce accurate financialstatements on a timely basis is a time-consuming effort that needs to be re-evaluated frequently. Failure on our part to have effective internal financial andaccounting controls would cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, and financialcondition, and could cause the trading price of our common stock to fall. We incur significant costs as a result of operating as a public company, which may adversely affect our operating results and financial condition.As a public company, we incur significant accounting, legal and other expenses, including costs associated with our public company reportingrequirements. We also anticipate that we will continue to incur costs associated with corporate governance requirements, including requirements and rulesunder SOX and the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") among other rules and regulations implemented by theSEC, as well as listing requirements of NASDAQ. Furthermore, these laws and regulations could make it difficult or costly for us to obtain certain types ofinsurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially highercosts to obtain the same or similar coverage. The impact of these requirements could also make it difficult for us to attract and retain qualified persons toserve on our Board of Directors, our Board Committees or as executive officers.New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of SOX and Dodd-Frank and rules adopted by the SEC and NASDAQ, would likely result in increased costs to us as we respond to their requirements. We continue to investresources to comply with evolving laws and regulations, and this investment may result in increased general and administrative expense. Our ability to use our net operating loss carry-forwards and other tax attributes will be substantially limited by Section 382 of the U.S. Internal RevenueCode.Under the newly enacted federal income tax law, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely,but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the newly enactedfederal tax law. In addition, Section 382 of the U.S. Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, generally limitthe ability of a corporation that undergoes an “ownership change” to utilize its net operating loss carry-forwards (“NOLs”) and certain other tax attributesagainst any taxable income in taxable periods after the ownership change. The amount of taxable income in each taxable year after the ownership change thatmay be offset by pre-change NOLs and certain other pre-change tax attributes is generally equal to the product of (a) the fair market value of the corporation’soutstanding shares (or, in the case of a foreign corporation, the fair market value of items treated as connected with the conduct of a trade or business in theUnited States) immediately prior to the ownership change and (b) the long-term tax exempt rate (i.e., a rate of interest established by the U.S. InternalRevenue Service that fluctuates from month to month). In general, an “ownership change” occurs whenever the percentage of the shares of a corporationowned, directly or indirectly, by “5-percent shareholders” (within the meaning of Section 382 of the Internal Revenue Code) increases by more than 50percentage points over the lowest percentage of the shares of such corporation owned, directly or indirectly, by such “5-percent shareholders” at any timeover the preceding three years.18 Based on an analysis under Section 382 of the Internal Revenue Code (which subjects the amount of pre-change NOLs and certain other pre-changetax attributes that can be utilized to an annual limitation), we experienced ownership changes in 2009 and 2012, which substantially limit the future use ofour pre-change NOLs and certain other pre-change tax attributes per year. In February 16, 2017, we completed an equity financing for net proceeds of $24.8million which triggered an additional ownership change under Section 382 that significantly impacted the availability of our tax attributes against futureincome. Further, due to the existence of a net unrealized built-in loss at the ownership change date, Section 382 further limits our ability to fully utilize thetax deductions associated with certain of our assets, including depreciation and amortization deductions recognized during the 60-month period followingthe ownership change ending in 2022. Although these deductions will occur in the post-change period, Section 382 treats the deductions as pre-changelosses subject to the annual 382 limitation. As of December 31, 2017, we have excluded the NOLs and research and development credits that will expire as aresult of the annual limitations. To the extent that we do not utilize our carry-forwards within the applicable statutory carry-forward periods, either because ofSection 382 limitations or the lack of sufficient taxable income, the carry-forwards will also expire unused. The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law that significantly revises the Internal Revenue Code of 1986, asamended. The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of thecorporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings(except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of netoperating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certainnew investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (includingreducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions). Notwithstandingthe reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could beadversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law. The impact of this taxreform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors withrespect to this legislation and the potential tax consequences of investing in or holding our common stock. Risks Related to the Development and Commercialization of our Current and Future Product Candidates We may not be able to successfully identify and acquire and/or in-license other products, product candidates, programs or companies to grow and diversifyour business, and, even if we are able to do so, we may not be able to successfully manage the risks associated with integrating any such products, productcandidates, programs or companies into our business or we may otherwise fail to realize the anticipated benefits of these licenses or acquisitions.To grow and diversify our business, we plan to continue our business development efforts to identify and seek to acquire and/or in-license otherproducts, product candidates, programs or companies. Future growth through acquisition or in-licensing will depend upon the availability of suitableproducts, product candidates, programs or companies for acquisition or in-licensing on acceptable prices, terms and conditions. Even if appropriateopportunities are available, we may not be able to acquire rights to them on acceptable terms, or at all. The competition to acquire or in-license rights topromising products, product candidates, programs and companies is fierce, and many of our competitors are large, multinational pharmaceutical andbiotechnology companies with considerably more financial, development and commercialization resources, personnel, and experience than we have. In orderto compete successfully in the current business climate, we may have to pay higher prices for assets than may have been paid historically, which may make itmore difficult for us to realize an adequate return on any acquisition.Even if we are able to successfully identify and acquire or in-license new products, product candidates, programs or companies, we may not be able tosuccessfully manage the risks associated with integrating any products, product candidates, programs or companies into our business or the risks arising fromanticipated and unanticipated problems in connection with an acquisition or in-licensing. Further, while we seek to mitigate risks and liabilities of potentialacquisitions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are notdisclosed to us, or that we inadequately assess. Any failure in identifying and managing these risks and uncertainties effectively would have a materialadverse effect on our business. In any event, we may not be able to realize the anticipated benefits of any acquisition or in-licensing for a variety of reasons,including the possibility that a product candidate fails to advance to clinical development, proves not to be safe or effective in clinical trials, or that aproduct fails to reach its forecasted commercial potential or that the integration of a product, product candidate, program or company gives rise to unforeseendifficulties and expenditures. Any failure in identifying and managing these risks and uncertainties would have a material adverse effect on our business.19 We may not be successful in entering into out-license agreements for our product candidates, which may adversely affect our liquidity and business.We intend to pursue a strategy to out-license all of our product candidates in order to provide for potential payments, funding and/or royalties onfuture product sales. The out-license agreements may be structured to share in the proceeds received by a licensee as a result of further development orcommercialization of the product candidates. We may not be successful in entering into out-licensing agreements with favorable terms as a result of factors,many of which are outside of our control. These factors include: •research and spending priorities of potential licensing partners; •willingness of, and the resources available to, pharmaceutical and biotechnology companies to in-license drug candidates to fill their clinicalpipelines; or •our inability to generate proof-of-concept data and to agree with a potential partner on the value of our product candidates, or on the relatedterms.If we are unable to enter into out-licensing agreements for our product candidates and realize license, milestone and royalty fees when anticipated, itmay adversely affect our liquidity, which in turn may harm our business. If our licensees’ therapeutic product candidates do not receive regulatory approval, our licensees will be unable to market them.Our licensees’ product candidates cannot be manufactured and marketed in the United States or any other countries without required regulatoryapprovals. The U.S. government and governments of other countries extensively regulate many aspects of our product candidates, including: •clinical development and testing; •manufacturing; •labeling; •storage; •record keeping; •promotion and marketing; and •importing and exporting.In the United States, the FDA regulates pharmaceutical products under the Federal Food, Drug, and Cosmetic Act and other laws, including, in the caseof biologics, the Public Health Service Act. At the present time, we believe all of our product candidates will be regulated by the FDA as biologics.Initiation of clinical trials requires approval by health authorities. Clinical trials involve the administration of the investigational new drug to healthyvolunteers or to patients under the supervision of a qualified principal investigator. Clinical trials must be conducted in accordance with FDA andInternational Conference on Harmonization Good Clinical Practices and the European Clinical Trials Directive, as applicable, under protocols that detail theobjectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Other national, foreign and local regulations alsomay apply. The developer of the drug must provide information relating to the characterization and controls of the product before administration to thepatients participating in the clinical trials. This requires developing approved assays of the product to test before administration to the patient and during theconduct of the trial. In addition, developers of pharmaceutical products must provide periodic data regarding clinical trials to the FDA and other healthauthorities, and these health authorities may issue a clinical hold upon a trial if they do not believe, or cannot confirm, that the trial can be conductedwithout unreasonable risk to the trial participants.The results of the preclinical studies and clinical testing, together with chemistry, manufacturing and controls information, are submitted to the FDAand other health authorities in the form of a New Drug Application (“NDA”) for a drug, and in the form of a Biologic License Application (“BLA”) for abiological product, requesting approval to commence commercial sales. In responding to an NDA or BLA, the FDA or foreign health authorities may grantmarketing approvals, request additional information or further research, or deny the application if they determine the application does not satisfy regulatoryapproval criteria. Regulatory approval of an NDA, BLA, or supplement is never guaranteed. The approval process can take several years, is extremelyexpensive and can vary substantially based upon the type, complexity, and novelty of the products involved, as well as the target indications. Our licenseesultimately may not be able to obtain approval in a timely fashion or at all.20 The FDA and foreign health authorities have substantial discretion in the drug and biologics approval processes. Despite the time and expenseincurred, failure can occur at any stage, and our potential development partners could encounter problems that cause abandonment of clinical trials or torepeat or perform additional preclinical, clinical or manufacturing-related studies.Changes in the regulatory approval policy during the development period, changes in, or the enactment of additional regulations or statutes, orchanges in regulatory review for each submitted product application may cause delays in the approval or rejection of an application.The FDA and other regulatory agencies have substantial discretion in both the product approval process and manufacturing facility approval process,and as a result of this discretion and uncertainties about outcomes of testing, we cannot predict at what point, or whether, the FDA or other regulatoryagencies will be satisfied with our licensees’ submissions or whether the FDA or other regulatory agencies will raise questions that may be material and delayor preclude product approval or manufacturing facility approval. In light of this discretion and the complexities of the scientific, medical and regulatoryenvironment, our licensees’ interpretation or understanding of the FDA’s or other regulatory agencies’ requirements, guidelines or expectations may proveincorrect, which also could delay further or increase the cost of the approval process. Our licensees face uncertain results of clinical trials of product candidates.Drug development has inherent risk, and our licensees are required to demonstrate through adequate and well-controlled clinical trials that productcandidates are effective, with a favorable benefit-risk profile for use in their target profiles before they can seek regulatory approvals for commercial use. It ispossible we or our licensees may never receive regulatory approval for any licensed product candidates. Even if a product candidate receives regulatoryapproval, the resulting product may not gain market acceptance among physicians, patients, healthcare payors and the medical community.Our licensees’ product candidates require significant additional research and development, extensive preclinical studies and clinical trials andregulatory approval prior to any commercial sales. This process is lengthy and expensive, often taking a number of years. As clinical results frequently aresusceptible to varying interpretations that may delay, limit or prevent regulatory approvals, the length of time necessary to complete clinical trials and tosubmit an application for marketing approval for a final decision by a regulatory authority varies significantly. As a result, it is uncertain whether: •our licensees’ future filings will be delayed; •our licensees’ preclinical studies will be successful; •our licensees will be successful in generating viable product candidates; •we will be successful in finding collaboration and licensing partners to advance our product candidates on our behalf; •our licensees will be able to provide necessary data; •results of future clinical trials by our licensees will justify further development; or •our licensees ultimately will achieve regulatory approval for our product candidates.The timing of the commencement, continuation and completion of clinical trials by our licensees may be subject to significant delays relating tovarious causes, including failure to complete preclinical testing and earlier-stage clinical trials in a timely manner, engaging contract research organizationsand other service providers, scheduling conflicts with participating clinicians and clinical institutions, changes in key personnel at clinical institutions,difficulties in identifying and enrolling patients who meet trial eligibility criteria and shortages of available drug supply. In addition, since we license ourproduct candidates to others to fund and conduct clinical trials, we have limited control over how quickly and efficiently such licensees advance those trials.Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the concentration ofpatients in specialist centers, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments.Regardless of the initial size or relative complexity of a clinical trial, the costs of such trial may be higher than expected due to increases in duration or sizeof the trial, changes in the protocol under which the trial is being conducted, additional or special requirements of one or more of the healthcare centers wherethe trial is being conducted, or changes in the regulatory requirements applicable to the trial or in the standards or guidelines for approval of the productcandidate being tested or for other unforeseen reasons.In addition, our licensees conduct clinical trials in foreign countries, which may subject us to further delays and expenses as a result of increased drugshipment costs, additional regulatory requirements and the engagement of foreign clinical research organizations, and may expose us to risks associated withforeign currency transactions to make contract payments denominated in the foreign currency where the trial is being conducted.21 All of our licensees’ product candidates are prone to the risks of failure inherent in drug development. Preclinical studies may not yield results thatsatisfactorily support the filing of an Investigational New Drug application (“IND”) (or a foreign equivalent) with respect to our product candidates. Even ifthese applications would be or have been filed with respect to our product candidates, the results of preclinical studies do not necessarily predict the resultsof clinical trials. Similarly, early stage clinical trials may not predict the results of later-stage clinical trials, including the safety and efficacy profiles of anyparticular product candidates.In addition, there can be no assurance the design of our licensees’ clinical trials will be focused on appropriate indications, patient populations,dosing regimens or other variables that will result in obtaining the desired efficacy data to support regulatory approval to commercialize the drug. Moreover,FDA officials or foreign regulatory agency officials may question the integrity of our data or otherwise subject our licensees’ clinical trials to additionalscrutiny when the clinical trials are conducted by principal investigators who serve, or previously served, as scientific advisors or consultants to us andreceive cash compensation in connection with such services. Preclinical and clinical data can also be interpreted in different ways. Accordingly, FDAofficials or officials from foreign regulatory authorities could interpret the data differently than we or our collaboration or development partners do, whichcould delay, limit or prevent regulatory approval.Administering any of our product candidates may produce undesirable side effects, also known as adverse effects. Toxicities and adverse effects thatwe have observed in preclinical studies for some compounds in a particular research and development program may occur in preclinical studies or clinicaltrials of other compounds from the same program. Such toxicities or adverse effects could delay or prevent the filing of an IND (or a foreign equivalent) withrespect to such product candidates or cause us to cease clinical trials with respect to any drug candidate. In clinical trials, administering any of our productcandidates to humans may produce adverse effects. These adverse effects could interrupt, delay or halt clinical trials of our product candidates and couldresult in the FDA or other regulatory authorities denying approval of our product candidates for any or all targeted indications. The FDA, other regulatoryauthorities, our development partners or we may suspend or terminate clinical trials at any time. Even if one or more of our product candidates were approvedfor sale, the occurrence of even a limited number of toxicities or adverse effects when used in large populations may cause the FDA or other regulatoryauthorities to impose restrictions on, or stop, the further marketing of such drugs. Indications of potential adverse effects or toxicities that may occur inclinical trials and that we believe are not significant during the course of such clinical trials may actually turn out later to constitute serious adverse effects ortoxicities when a drug has been used in large populations or for extended periods of time. Any failure or significant delay in completing preclinical studies orclinical trials for our product candidates, or in receiving and maintaining regulatory approval for the sale of any drugs resulting from our product candidates,may severely harm our reputation and business. Products and technologies of other companies may render some or all of our licensees’ product candidates noncompetitive or obsolete.Developments by others may render our licensees’ product candidates or technologies obsolete or uncompetitive. Technologies developed andutilized by the biotechnology and pharmaceutical industries are changing continuously and substantially. Competition in antibody-based technologies isintense and is expected to increase in the future as a number of established biotechnology firms and large chemical and pharmaceutical companies advancein these fields. Many of these competitors may be able to develop products and processes competitive with or superior to our own for many reasons,including that they may have: •significantly greater financial resources; •larger research and development staffs; •entered into arrangements with, or acquired, biotechnology companies to enhance their capabilities; or •extensive experience in preclinical testing and human clinical trials.These factors may enable others to develop products and processes competitive with or superior to our own or those of our licensees. In addition, asignificant amount of research in biotechnology is being carried out in universities and other non-profit research organizations. These entities are becomingincreasingly interested in the commercial value of their work and may become more aggressive in seeking patent protection and licensing arrangements.Furthermore, many companies and universities tend not to announce or disclose important discoveries or development programs until their patent position issecure or, for other reasons, later. As a result, we and our licensees may not be able to track development of competitive products, particularly at the earlystages.Positive developments in connection with a potentially competing product may have an adverse impact on our revenue derived from developmentmilestones. For example, if another product is perceived to have a competitive advantage, or another product’s failure is perceived to increase the likelihoodthat our licensed product will fail, our licensees may halt development of our licensed product candidates.22 Our licensees may be unable to price our products effectively or obtain adequate reimbursement for sales of our products, which would prevent ourproducts from becoming profitable.If our third-party licensees succeed in bringing our product candidates to the market, they may not be considered cost effective, and reimbursement tothe patient may not be available or may not be sufficient to allow us to sell our products on a competitive basis. In both the United States and elsewhere, salesof medical products and treatments are dependent, in part, on the availability of reimbursement to the patient from third-party payors, such as governmentand private insurance plans. Third-party payors are increasingly challenging the prices charged for pharmaceutical products and services. Our business isaffected by the efforts of government and third-party payors to contain or reduce the cost of healthcare through various means. In the United States, therehave been and will continue to be a number of federal and state proposals to implement government controls on pricing.In addition, the emphasis on managed care in the United States has increased and will continue to increase the pressure on the pricing ofpharmaceutical products. We cannot predict whether any legislative or regulatory proposals will be adopted or the effect these proposals or managed careefforts may have on our business. We do not know whether there will be, or will continue to be, a viable market for the product candidates in which we have an ownership or royalty interest.Even if product candidates in which we have an interest receive approval in the future, they may not be accepted in the marketplace. In addition, we orour licensees may experience difficulties in launching new products, many of which are novel and based on technologies that are unfamiliar to the healthcarecommunity. We have no assurance healthcare providers and patients will accept such products, if developed. Similarly, physicians may not accept a productif they believe other products to be more effective or more cost effective or are more comfortable prescribing other products.Furthermore, government agencies, as well as private organizations involved in healthcare, from time to time publish guidelines or recommendationsto healthcare providers and patients. Such guidelines or recommendations can be very influential and may adversely affect product usage directly (forexample, by recommending a decreased dosage of a product in conjunction with a concomitant therapy) or indirectly (for example, by recommending acompetitive product over our product). Consequently, we do not know if physicians or patients will adopt or use our products for their approved indications.Even approved and marketed products are subject to risks relating to changes in the market for such products. Introduction or increased availability ofgeneric or biosimilar versions of products can alter the market acceptance of branded products. In addition, unforeseen safety issues may arise at any time,regardless of the length of time a product has been on the market. We are exposed to an increased risk of product liability claims.The testing, marketing and sales of medical products entails an inherent risk of allegations of product liability. In the past, we were party to productliability claims filed against Genentech Inc. and, even though Genentech agreed to indemnify us in connection with these matters and these matters havebeen settled, there can be no assurance other product liability lawsuits will not result in liability to us or that our insurance or contractual arrangements willprovide us with adequate protection against such liabilities. In the event of one or more large, unforeseen awards of damages against us, our product liabilityinsurance may not provide adequate coverage. A significant product liability claim for which we were not covered by insurance or indemnified by a thirdparty would have to be paid from cash or other assets, which could have an adverse effect on our business and the value of our common stock. To the extentwe have sufficient insurance coverage, such a claim would result in higher subsequent insurance rates. In addition, product liability claims can have variousother ramifications, including loss of future sales opportunities, increased costs associated with replacing products, a negative impact on our goodwill andreputation, and divert our management’s attention from our business, each of which could also adversely affect our business and operating results. If we and our partners are unable to protect our intellectual property, in particular our patent protection for our principal products, product candidatesand processes, and prevent the use of the covered subject matter by third parties, our licensees’ ability to compete in the market will be harmed, and wemay not realize our profit potential.We rely on patent protection, as well as a combination of copyright, trade secret, and trademark laws to protect our proprietary technology and preventothers from duplicating our products or product candidates. However, these means may afford only limited protection and may not: •prevent our competitors from duplicating our products; •prevent our competitors from gaining access to our proprietary information and technology; or •permit us to gain or maintain a competitive advantage.23 Because of the length of time and the expense associated with bringing new products to the marketplace, we and our collaboration and developmentpartners hold and are in the process of applying for a number of patents in the United States and abroad to protect our product candidates and importantprocesses and also have obtained or have the right to obtain exclusive licenses to certain patents and applications filed by others. However, the mere issuanceof a patent is not conclusive as to its validity or its enforceability.The U.S. Federal Courts, the U.S. Patent & Trademark Office or equivalent national courts or patent offices elsewhere may invalidate our patents orfind them unenforceable. The America Invents Act introduced post-grant review procedures subjecting U.S. patents to post-grant review procedures similar toEuropean oppositions. U.S. patents owned or licensed by us may therefore be subject to post-grant review procedures, as well as other forms of review and re-examination. A decision in such proceedings adverse to our interests could result in the loss of valuable patent rights, which would have a material adverseeffect on our business. In addition, the laws of foreign countries may not protect our intellectual property rights effectively or to the same extent as the laws ofthe United States.If our intellectual property rights are not protected adequately, our licensees may not be able to commercialize our technologies or products, and ourcompetitors could commercialize our technologies or products, which could result in a decrease in our licensees’ sales and market share that would harm ourbusiness and operating results. Specifically, the patent position of biotechnology companies generally is highly uncertain and involves complex legal andfactual questions. The legal standards governing the validity of biotechnology patents are in transition, and current defenses as to issued biotechnologypatents may not be adequate in the future. Accordingly, there is uncertainty as to: •whether any pending or future patent applications held by us will result in an issued patent, or whether issued patents will provide meaningfulprotection against competitors or competitive technologies; •whether competitors will be able to design around our patents or develop and obtain patent protection for technologies, designs or methodsthat are more effective than those covered by our patents and patent applications; or •the extent to which our product candidates could infringe on the intellectual property rights of others, which may lead to costly litigation,result in the payment of substantial damages or royalties, and prevent our licensees from using our technology or product candidates.If certain patents issued to others are upheld or if certain patent applications filed by others issue and are upheld, our licensees may require licensesfrom others to develop and commercialize certain potential products incorporating our technology or we may become involved in litigation to determine theproprietary rights of others. These licenses, if required, may not be available on acceptable terms, and any such litigation may be costly and may have otheradverse effects on our business, such as inhibiting our licensees’ ability to compete in the marketplace and absorbing significant management time.Due to the uncertainties regarding biotechnology patents, we also have relied and will continue to rely upon trade secrets, know-how and continuingtechnological advancement to develop and maintain our competitive position. All of our employees and contractors have signed confidentiality agreementsunder which they have agreed not to use or disclose any of our proprietary information. Research and development contracts and relationships between usand our scientific consultants and potential licensees provide access to aspects of our know-how that are protected generally under confidentialityagreements. These confidentiality agreements may be breached or may not be enforced by a court. To the extent proprietary information is divulged tocompetitors or to the public generally, such disclosure may affect our licensees’ ability to develop or commercialize our products adversely by giving othersa competitive advantage or by undermining our patent position. Litigation regarding intellectual property can be costly and expose us to risks of counterclaims against us.We may be required to engage in litigation or other proceedings to protect our intellectual property. The cost to us of this litigation, even if resolvedin our favor, could be substantial. Such litigation also could divert management’s attention and resources. If this litigation is resolved against us, our patentsmay be declared invalid, and we could be held liable for significant damages.In addition, we may be subject to claims that we, or our licensees, are infringing other parties’ patents. If such claims are resolved against us, we or ourlicensees may be enjoined from developing, manufacturing, selling or importing products, processes or services unless we obtain a license from the otherparty. Such license may not be available on reasonable terms, thus preventing us, or our licensees, from using these products, processes or services andadversely affecting our revenue.24 Risks Related to Employees, Location, Data Integrity, and LitigationThe loss of key personnel, including our Chief Executive Officer or Chief Financial Officer, could delay or prevent achieving our objectives.Our business efforts could be affected adversely by the loss of one or more key members of our staff, particularly our executive officers: James R. Neal,our Chief Executive Officer and Thomas Burns, our Senior Vice President, Finance and Chief Financial Officer. We currently do not have key personinsurance on any of our employees. Because we are a small biopharmaceutical company with limited resources, we may not be able to attract and retain qualified personnel.After a series of restructuring activities during 2016 and 2017, we had 12 employees as of March 2, 2018. We may require additional experiencedexecutive, accounting, legal, administrative and other personnel from time to time in the future. There is intense competition for the services of thesepersonnel, especially in California. Moreover, we expect that the high cost of living in the San Francisco Bay Area, where our headquarters are located, mayimpair our ability to attract and retain employees in the future. If we do not succeed in attracting new personnel and retaining and motivating existingpersonnel, our business may suffer and we may be unable to implement our current initiatives or grow effectively. Calamities, power shortages or power interruptions at our Emeryville headquarters could disrupt our business and adversely affect our operations.Our principal operations are located in Northern California, including our corporate headquarters in Emeryville, California. This location is in an areaof seismic activity near active earthquake faults. Any earthquake, terrorist attack, fire, power shortage or other calamity affecting our facilities may disrupt ourbusiness and could have material adverse effect on our results of operations. Our business and operations would suffer in the event of system failures.Despite the implementation of security measures, our internal computer systems and those of our current and any future licensees, suppliers,contractors and consultants are vulnerable to damage from cyber−attacks, computer viruses, unauthorized access, natural disasters, terrorism, war andtelecommunication and electrical failures. We could experience failures in our information systems and computer servers, which could be the result of acyber−attack and could result in an interruption of our normal business operations and require substantial expenditure of financial and administrativeresources to remedy. System failures, accidents or security breaches can cause interruptions in our operations and can result in a material disruption of ourdevelopment programs and other business operations. The loss of clinical trial data from completed or future clinical trials could result in delays in ourregulatory approval efforts and significantly increase our costs to recover or reproduce the data. Similarly, we rely on third parties to manufacture our productcandidates, and conduct clinical trials of our product candidates, and similar events relating to their computer systems could also have a material adverseeffect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriatedisclosure of confidential or proprietary information, we could incur liability and the development of any of our product candidates could be delayed orotherwise adversely affected. Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our businessand reputation.In the ordinary course of our business, we maintain sensitive data on our networks, including our intellectual property and proprietary or confidentialbusiness information relating to our business and that of our customers and business partners. The secure maintenance of this information is critical to ourbusiness and reputation. We believe companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts togain unauthorized access. These threats can come from a variety of sources, all ranging in sophistication from an individual hacker to a state-sponsoredattack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Cyber-attacks have become more prevalent and muchharder to detect and defend against. Our network and storage applications may be subject to unauthorized access by hackers or breached due to operator error,malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents.These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property andexpose sensitive business information. A data security breach could also lead to public exposure of personal information of our clinical trial patients,customers and others. Cyber-attacks could cause us to incur significant remediation costs, result in product development delays, disrupt key businessoperations and divert attention of management and key information technology resources. These incidents could also subject us to liability, expose us tosignificant expense and cause significant harm to our reputation and business.25 Shareholder lawsuits, and potential similar or related lawsuits, could result in substantial damages, divert management’s time and attention from ourbusiness, and have a material adverse effect on our results of operations.Securities-related class action and shareholder derivative litigation has often been brought against companies, including many biotechnologycompanies, which experience volatility in the market price of their securities. This risk is especially relevant for us because biotechnology andbiopharmaceutical companies often experience significant stock price volatility in connection with their product development programs.It is possible that suits will be filed, or allegations received from stockholders, naming us and/or our officers and directors as defendants. Thesepotential lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The outcome ofthese lawsuits are uncertain. We could be forced to expend significant resources in the defense of these suits and we may not prevail. In addition, we mayincur substantial legal fees and costs in connection with these lawsuits. It is possible that we could, in the future, incur judgments or enter into settlements ofclaims for monetary damages. A decision adverse to our interests on these actions could result in the payment of substantial damages, or possibly fines, andcould have a material adverse effect on our cash flow, results of operations and financial position.Monitoring, initiating and defending against legal actions, including the currently pending litigation, are time-consuming for our management, arelikely to be expensive and may detract from our ability to fully focus our internal resources on our business activities. The outcome of litigation is alwaysuncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legalor contractual rights, which could have a significant adverse effect on our business. In addition, the inherent uncertainty of the currently pending litigationand any future litigation could lead to increased volatility in our stock price and a decrease in the value of an investment in our common stock. Risks Related to Government RegulationEven after FDA approval, a product may be subject to additional testing or significant marketing restrictions, its approval may be withdrawn or it may beremoved voluntarily from the market.Even if we or our licensees receive regulatory approval for our product candidates, we or our licensees will be subject to ongoing regulatory oversightand review by the FDA and other regulatory entities. The FDA, the European Medicines Agency (“EMA”), or another regulatory agency may impose, as acondition of the approval, ongoing requirements for post-approval studies or post-approval obligations, including additional research and development andclinical trials, and the FDA, EMA or other regulatory agency subsequently may withdraw approval based on these additional trials.Even for approved products, the FDA, EMA or other regulatory agency may impose significant restrictions on the indicated uses, conditions for use,labeling, advertising, promotion, marketing and production of such product. In addition, the labeling, packaging, adverse event reporting, storage,advertising, promotion and record-keeping for our products are subject to extensive regulatory requirements.Furthermore, marketing approval of a product may be withdrawn by the FDA, the EMA or another regulatory agency or such a product may bewithdrawn voluntarily by us based, for example, on subsequently arising safety concerns. The FDA, EMA and other agencies also may impose various civil orcriminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval. Healthcare reform measures and other statutory or regulatory changes could adversely affect our business.The United States and some foreign jurisdictions have enacted or are considering a number of legislative and regulatory proposals to change thehealthcare system in ways that could affect our or our licensees’ ability to sell our products, if approved, profitably. Among policy makers and payers in theUnited States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs,improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has beensignificantly affected by major legislative initiatives.26 An expansion in the government’s role in the U.S. healthcare industry may cause general downward pressure on the prices of prescription drugproducts, lower reimbursements for providers, reduced product utilization and adversely affect our business and results of operations. Moreover, certainpoliticians have announced plans to regulate the prices of pharmaceutical products. We cannot know what form any such legislation may take or the market’sperception of how such legislation would affect us. Any reduction in reimbursement from government programs may result in a similar reduction in paymentsfrom private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attainprofitability, or commercialize our current product candidates and those for which we may receive regulatory approval in the future. In addition, given theuncertainties related to the Trump Administration’s stated goal of letting the Affordable Care Act (the “ACA”) fail, we cannot be certain that currentprovisions of the ACA will continue to cover prescription drug products. We and our licensees are subject to various state and federal healthcare-related laws and regulations that may impact the commercialization of ourproduct candidates or could subject us to significant fines and penalties.Our operations may be directly or indirectly subject to various state and federal healthcare laws, including the federal Anti-Kickback Statute, thefederal False Claims Act and state and federal privacy and security laws. These laws may impact, among other things, the commercial operations for any ofour product candidates that may be approved for commercial sale.The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directlyor indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service for which payment may bemade under a federal healthcare program, such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s intent requirement tomean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has beenviolated. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil sanctions such as fines, penalties, imprisonment and possibleexclusion from Medicare, Medicaid and other federal healthcare programs.The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements toobtain payment from the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalfof the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines orsettlement. The filing of qui tam actions has caused a number of pharmaceutical, medical device and other healthcare companies to have to defend a FalseClaims Act action. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damagessustained by the government, plus civil penalties for each separate false claim. Various states also have enacted laws modeled after the federal False ClaimsAct.The Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created new federal criminal statutes that prohibit executing ascheme to defraud any healthcare benefit program and making false statements relating to healthcare matters. The health care fraud statute prohibitsknowingly and willfully executing a scheme to defraud any health care benefit program, including private payors. The statute prohibits knowingly andwillfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with thedelivery of or payment for health care benefits, items or services. HIPAA, as amended by the Health Information Technology and Clinical Health Act, and itsimplementing regulations, also impose certain requirements relating to the privacy, security and transmission of individually identifiable health information.We take our obligation to maintain our compliance with these various laws and regulations seriously.Many states also have adopted laws similar to each of the federal laws described above, some of which apply to healthcare items or servicesreimbursed by any source, not only the Medicare and Medicaid programs. In addition, some states have laws that require pharmaceutical companies tocomply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federalgovernment, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources, and to report information related topayments and other transfers of value to physicians and other healthcare providers; and state laws governing the privacy and security of health information incertain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.Because of the breadth of these laws, it is possible that some of our or our licensees’ business activities could be subject to challenge under one ormore of such laws.If we or our licensees are found to be in violation of any of the laws and regulations described above or other applicable state and federal healthcarelaws, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare reimbursement programsand the curtailment or restructuring of our operations, any of which could have a material adverse effect on our business and results of operations.27 As we or our licensees do more business internationally, we will be subject to additional political, economic and regulatory uncertainties.We or our licensees may not be able to operate successfully in any foreign market. We believe that because the pharmaceutical industry is global innature, international activities will be a significant part of future business activities and when and if we or our licensees are able to generate income, asubstantial portion of that income will be derived from product sales and other activities outside the United States. Foreign regulatory agencies oftenestablish standards different from those in the United States, and an inability to obtain foreign regulatory approvals on a timely basis could put us at acompetitive disadvantage or make it uneconomical to proceed with a product or product candidate’s development. International sales may be limited ordisrupted by: •imposition of government controls; •export license requirements; •political or economic instability; •trade restrictions; •changes in tariffs; •restrictions on repatriating profits; •exchange rate fluctuations; and •withholding and other taxation. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesOur corporate headquarters is located in Emeryville, California. We currently lease three buildings that housed our office space and legacy researchand development laboratories. Our building leases expire in the period from 2021 to 2023, and total minimum lease payments due from January 2018 untilexpiration of the leases is $18.9 million. We have the option to renew our lease agreements for up to two successive five-year periods. On November 21,2017, we entered into a sublease agreement for a portion of one of our leased facilities. Under the term of the sublease agreement, we will receive $5.1 millionover the term of the sublease, which ends at the same time as the original lease in April 2023. Item 3.Legal ProceedingsOn July 24, 2015, a purported securities class action lawsuit was filed in the United States District Court for the Northern District of California,captioned Markette v. XOMA Corp., et al. (Case No. 3:15-cv-3425) naming as defendants us and certain of our officers. The complaint asserted that alldefendants violated Section 10(b) of the Exchange Act and SEC Rule 10b-5, by making materially false or misleading statements regarding our EYEGUARD-B study between November 6, 2014 and July 21, 2015. The plaintiff also alleged that Messrs. Varian and Rubin violated Section 20(a) of the Exchange Act.On September 2, 2016, the defendants filed a motion to dismiss. On September 28, 2017, the Court granted defendants’ motion to dismiss with leave toamend. All parties subsequently agreed to dismiss the action and on October 25, 2017, the Court issued an Order of Dismissal, dismissing the action withprejudice with respect to the named Plaintiff’s individual claims and without prejudice with respect to unnamed class members. On October 1, 2015, a stockholder purporting to act on our behalf, filed a derivative lawsuit in the Superior Court of California for the County ofAlameda, purportedly asserting claims on behalf of the Company against certain of our officers and the members of our board of directors, captioned Silva v.Scannon, et al. (Case No. RG15787990). The lawsuit asserted claims for breach of fiduciary duty, corporate waste and unjust enrichment based on thedissemination of allegedly false and misleading statements related to the Company’s EYEGUARD-B study. The plaintiff was seeking unspecified monetarydamages and other relief, including reforms and improvements to our corporate governance and internal procedures. On December 6, 2017, the parties filed ajoint stipulation, agreeing to dismiss the action. On December 7, 2017, the Court granted the stipulation, issuing an order of dismissal. The order dismissedthe action without prejudice. 28 On November 16, and November 25, 2015, two derivative lawsuits were filed purportedly on our behalf in the United States District Court for theNorthern District of California, captioned Fieser v. Van Ness, et al. (Case No. 4:15-CV-05236-HSG) and Csoka v. Varian, et al. (Case No. 3:15-cv-05429-SI),against certain of our officers and the members of our board of directors. The lawsuits asserted claims for breach of fiduciary duty and other violations of lawbased on the dissemination of allegedly false and misleading statements related to the Company’s EYEGUARD-B study. The plaintiffs sought unspecifiedmonetary damages and other relief including reforms and improvements to our corporate governance and internal procedures. On December 4, 2017, theparties in each case filed joint stipulations, agreeing to dismiss the actions. On December 6, 2017, the Court granted the stipulations, issuing an order ofdismissal in each of the Fieser and Csoka actions. The order dismissed the actions without prejudice. Item 4.Mine Safety DisclosuresNot applicable.29 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket for Registrant’s Common EquityOur common stock trades on The Nasdaq Global Market tier of the Nasdaq Stock Market LLC (“NASDAQ”) under the symbol “XOMA.” All referencesto numbers of common shares and per-share information in this Annual Report prior to October 17, 2016 reflect an adjustment for the Company’s 1-for-20reverse stock split. The following table sets forth the quarterly range of high and low reported sale prices of our common stock on NASDAQ for the periodsindicated: Price Range High Low 2017 First Quarter $7.56 $3.96 Second Quarter $8.13 $5.86 Third Quarter $22.69 $6.85 Fourth Quarter $37.25 $18.94 2016 First Quarter $27.20 $13.80 Second Quarter $19.00 $8.80 Third Quarter $14.00 $8.80 Fourth Quarter $9.60 $4.16 On March 2, 2018, there were 212 stockholders of record of our common stock, one of which was Cede & Co., a nominee for Depository TrustCompany (“DTC”). All of the shares of our common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial ownersare deposited into participant accounts at DTC and are therefore considered to be held of record by Cede & Co. as one stockholder.Dividend PolicyWe have not paid dividends on our common stock. We currently intend to retain any earnings for use in the operations of our business. We, therefore,do not anticipate paying cash dividends on our common stock in the foreseeable future. Recent Sales of Unregistered SecuritiesExcept as previously reported in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the Securities and ExchangeCommission (“SEC”), during the year ended December 31, 2017, there were no unregistered sales of equity securities by us during the year ended December31, 2017.30 Performance GraphThe following graph compares the five-year cumulative total stockholder return for XOMA’s common stock with the comparable cumulative return ofcertain indices. The graph assumes $100 invested on the same date in each of the indices. Returns of the company are not indicative of future performance. This Section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of XOMACorporation under the Securities Act, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporationlanguage in any such filing. As of December 31, XOMA NasdaqCompositeIndex ArcaBiotechnologyIndex 2012 $100.00 $100.00 $100.00 2013 $280.42 $138.32 $150.64 2014 $149.58 $156.85 $222.30 2015 $55.42 $165.84 $246.53 2016 $8.79 $178.28 $198.77 2017 $74.17 $228.63 $272.92 31 Item 6.Selected Consolidated Financial Data The following table contains our selected financial information including consolidated statement of operations and consolidated balance sheet datafor the years 2013 through 2017. The consolidated statement of operations data for the years ended December 31, 2017, 2016, and 2015 and the consolidatedbalance sheet data as of December 31, 2017 and 2016 are derived from our audited consolidated financial statements included elsewhere in this AnnualReport on Form 10-K. The consolidated statement of operations data for the years ended December 31, 2014 and 2013, and the consolidated balance sheetdata as of December 31, 2015, 2014 and 2013 were derived from our audited consolidated financial statements that are not included in this Annual Report onForm 10-K. The selected financial information should be read in conjunction with Item 8: Financial Statements and Supplementary Data and Item 7:Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report. The data set forth below is notnecessarily indicative of the results of future operations. All references to number of common shares and per-share information prior to October 17, 2016reflect an adjustment for XOMA’s 1-for-20 reverse stock split. Year Ended December 31, 2017 2016 2015 2014 2013 (In thousands, except per share amounts) Consolidated Statement of Operations Data Total revenues $52,690 $5,564 $55,447 $18,866 $35,451 Research and development 7,875 44,234 70,852 80,748 74,851 General and administrative 24,337 18,322 20,620 19,866 18,477 Restructuring costs 3,447 4,566 3,699 84 328 Income (loss) from operations 17,031 (61,558) (39,724) (81,832) (58,205)Other income (expense), net (1) (773) 8,028 19,118 43,531 (65,867)Income (loss) before taxes 16,258 (53,530) (20,606) (38,301) (124,072)Income tax (expense) benefit (1,662) — — — 14 Net income (loss) $14,596 $(53,530)$(20,606)$(38,301)$(124,058)Basic net income (loss) per share available to common stockholders $0.75 $(8.89)$(3.50)$(7.13)$(28.54)Diluted net income (loss) per share available to common stockholders $0.73 $(8.89)$(3.50)$(13.49)$(28.54)Shares used in computing basic net income (loss) per share available tocommon stockholders 7,619 6,021 5,890 5,372 4,347 Shares used in computing diluted net income (loss) per share available tocommon stockholders 7,980 6,021 5,890 5,767 4,347 December 31, 2017 2016 2015 2014 2013 (In thousands) Consolidated Balance Sheet Data Cash and cash equivalents $43,471 $25,742 $65,767 $78,445 $101,659 Marketable securities $— $— $496 $— $19,990 Current assets $44,195 $27,160 $72,219 $83,613 $127,060 Working capital (deficiency) $36,773 $(5,346)$48,924 $47,367 $97,415 Total assets $44,935 $28,677 $74,880 $89,402 $134,782 Current liabilities $7,422 $32,506 $23,295 $36,246 $29,645 Long-term liabilities (2) $14,572 $25,381 $53,894 $50,057 $109,124 Accumulated deficit $(1,179,059)$(1,193,613)$(1,140,083)$(1,119,477)$(1,081,176)Total stockholders' equity (deficit) $5,786 $(47,210)$(2,309)$3,099 $(3,987) (1)2016, 2015, 2014, and 2013 include $10.5 million, $17.8 million, $45.8 million, and ($61.0) million, respectively, related to the revaluation ofcontingent warrant liabilities issued in connection with equity financings in June 2009, February 2010, March 2012 and December 2014. There wasno gain or loss on revaluation of contingent warrant liabilities recognized in 2017. All outstanding warrants issued in June 2009, February 2010,December 2014 and March 2012 expired in June 2014, February 2015, December 2016 and March 2017, respectively.32 (2)2015, 2014, and 2013 include $10.5 million, $31.8 million and $69.9 million, respectively, related to contingent warrant liabilities in connectionwith equity financings in June 2009, February 2010, March 2012 and December 2014. There was no contingent warrant liabilities in 2017 and 2016.All outstanding warrants issued in June 2009, February 2010, December 2014 expired in June 2014, February 2015, December 2016 and March 2017,respectively. The balance in 2017, 2016, 2015, 2014, and 2013 includes total non-current interest bearing obligations equal to $14.6 million, $25.3million, $42.8 million, $16.3 million, and $35.2 million, respectively. During the year ended December 31, 2017, we paid off our outstandingobligations aggregating to $31.8 million under our loans with Hercules Technology Growth Capital, Inc. and Les Laboratories Servier. 33 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsOverviewWe have a long history of discovering and developing innovative therapeutics derived from our unique platform of antibody technologies. Over our37 year history, we built an extensive portfolio of fully-funded programs by advancing product candidates into the earlier stages of development and thenlicensing them to licensees who assumed the responsibilities of later stage development, approval and commercialization. Fully-funded programs are thosefor which our partners pay all of the development and commercialization costs. As licensees advance these programs, we are eligible for potentialdevelopment, regulatory and commercial milestone and royalty payments.In March 2017, we transformed our business model to become a royalty aggregator where we focus on expanding our portfolio of fully-fundedprograms by out-licensing our internally developed product candidates and acquiring potential milestone and royalty revenue streams on additional productcandidates. We combined our royalty-aggregator model with a significantly reduced corporate cost structure to further build value for our shareholders. Weexpect that a significant portion of our future revenue will be based on payments we may receive for development, regulatory and commercial milestones androyalties related to these programs.Our business model is designed to create value for stockholders by assembling a diversified portfolio of biotech and pharmaceutical revenue streamsand operating that business with an efficient and low corporate cost structure.Significant Developments in 2017Equity FinancingIn February 2017, we sold 1,200,000 shares of our common stock and 5,003 shares of Series X convertible preferred stock directly to BiotechnologyValue Fund, L.P. and certain of its affiliates (“BVF”) in a registered direct offering, for aggregate net proceeds of $24.8 million.Novartis License AgreementsOn August 24, 2017, we entered into two license agreements with Novartis AG (“Novartis”). Under the first license agreement (the “XOMA-052License Agreement”), we granted Novartis an exclusive, worldwide, royalty-bearing license to gevokizumab, a novel anti-Interleukin-1 (IL-1) beta allostericmonoclonal antibody and related know-how and patents. Under the XOMA-052 License Agreement, we received total consideration of $30.0 million, whichincluded $15.7 million in cash and $14.3 million (equal to €12.0 million) paid by Novartis Institutes for BioMedical Research, Inc. (“NIBR”) on our behalfto settle our debt to Les Laboratories Servier (“Servier Loan”). We also received $5.0 million cash related to the sale of 539,131 shares of our common stock.We are eligible to receive up to $438.0 million in development, regulatory and commercial milestones and royalties on sales of licensed products, which aretiered based on sales levels and range from the high single digits to mid-teens.Under the second license agreement (the “IL-1 Target License Agreement”), we granted to Novartis non-exclusive licenses to our intellectual propertycovering the use of IL-1 beta targeting antibodies in the treatment of cardiovascular disease and other diseases and conditions. We also granted Novartis theright of first negotiation with respect to certain transactions relating to the licensed intellectual property. Under the IL-1 Target License Agreement, wereceived a $10.0 million upfront payment and are eligible to receive low-single-digit royalties on canakinumab sales in cardiovascular indications. We alsogranted Novartis an exclusive option to convert its non-exclusive license with respect to cardiovascular indications into an exclusive license. If Novartisexercises this option, the royalties on canakinumab sales will increase to the mid-single digits.Extension of Novartis Note Maturity DateIn September 2017, in connection with the XOMA-052 License Agreement with Novartis, we and NIBR executed an amendment to our secured noteagreement (“Novartis Note”) under which NIBR extended the maturity date of the Novartis Note from September 30, 2020 to September 30, 2022.RezoluteIn December 2017, we entered into a license agreement with Rezolute, Inc. (formerly AntriaBio, Inc.) (“Rezolute”) pursuant to which we granted anexclusive global license to Rezolute to develop and commercialize X358 for all indications.34 Under the terms of the license agreement, Rezolute is responsible for all development, regulatory, manufacturing and commercialization activitiesassociated with X358 and is required to make certain clinical, regulatory and commercial milestone payments to us of up to $232.0 million in the aggregatebased on the achievement of pre-specified criteria. Rezolute is also obligated to pay us royalties ranging from the high single digits to the mid-teens basedupon annual net sales of any commercial product incorporating X358. Rezolute is obligated to take customary steps to advance X358, including usingdiligent efforts to commence the next clinical study for X358 by a certain deadline and to meet certain spending requirements on an annual basis for theprogram until a marketing approval application for X358 is accepted by the FDA. Rezolute has an option to obtain an exclusive license for their choice ofone of our preclinical monoclonal antibody fragments, including X129, in exchange for an option fee and additional clinical, regulatory and commercialmilestone payments to us of up to $237.0 million in the aggregate based on the achievement of pre-specified criteria as well as royalties ranging from thehigh single digits to the mid-teens based on annual net sales.Rezolute is required to pay us $6.0 million in cash and to issue us $12.0 million worth of its common stock contingent on the completion of itsfinancing activities. Further, in the event that Rezolute does not complete a financing that raises at least $20.0 million in aggregate gross proceeds(“Qualified Financing”) by March 31, 2019, it shall issue to us an additional number of shares of its common stock equal to $7.0 million. Finally, in the eventthat Rezolute is unable to complete a Qualified Financing by March 31, 2020, it will be obliged to pay us $15.0 million in order to maintain the license.The license agreement contains customary termination rights relating to material breach by either party. Rezolute also has a unilateral right toterminate the license agreement in its entirety on ninety days’ notice at any time. We have the right to terminate the license agreement if Rezolute challengesthe licensed patents. As of December 31, 2017, we have not received any cash or common stock from Rezolute as they have not completed any financing orother activities outlined in the agreement.Hercules Term LoanIn March 2017, we paid off our outstanding principal balance of $17.5 million under our loan and security agreement with Hercules TechnologyGrowth Capital, Inc. (“Hercules”). We recognized a loss on extinguishment of $0.5 million from the payoff of the loan with Hercules.Servier LoanIn August 2017, in connection with the XOMA-052 License Agreement, the Servier Loan balance of €12.0 million was paid in full. We recognized aloss on extinguishment of $0.1 million from the payoff of the loan with Servier.Asset Purchase Agreement and License Agreement with Ology Bioservices, Inc.In February 2017, we executed an Amendment and Restatement to both the asset purchase agreement and license agreement with Ology Bioservices,Inc. (formerly Nanotherapeutics, Inc.) (“Ology Bioservices”) primarily to (i) remove the obligation to issue 23,008 shares of common stock of OlogyBioservices under the asset purchase agreement, and (ii) revise the payment schedule related to the timing of the $4.5 million cash payments due to us underthe license agreement. Of the $4.5 million, $3.0 million was contingent upon Ology Bioservices achieving certain specified future operating objectives. Inthe first quarter of 2017, we were entitled to receive $1.6 million under the agreement that we will receive in quarterly payments through September 2018. Inthe third quarter of 2017, Ology Bioservices achieved the specified operating objectives and we earned the $3.0 million milestone fee that we will receive inmonthly payments through July 2018.Termination of Novo Nordisk A/S License AgreementIn April 2017, we received notice from Novo Nordisk A/S regarding the termination of its license agreement with us due to strategic and businessreasons. The termination of the license agreement became effective in July 2017.35 Critical Accounting EstimatesThe accompanying discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statementsand the related disclosures, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation ofthese consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our consolidatedfinancial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, assumptions and judgments described below that have thegreatest potential impact on our consolidated financial statements, including those related to revenue recognition and stock-based compensation. We baseour estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which formthe basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounting assumptionsand estimates are inherently uncertain and actual results may differ materially from these estimates under different assumptions or conditions.While our significant accounting policies are more fully described in Note 2 to the consolidated financial statements, we believe the followingpolicies to be the most critical to an understanding of our financial condition and results of operations because they require us to make estimates,assumptions and judgments about matters that are inherently uncertain.Revenue RecognitionLicense FeesRevenue from non-refundable license, technology access or other payments under license agreements are recognized over the estimated period whenthe transfer of related materials, process and know-how should be delivered to the licensee. After the delivery of the materials, process and know-how to thelicensee, we do not have a continuing obligation to perform under the license agreements.Our license agreements with certain third parties also provide for contingent payments to be paid to us based solely upon the performance of thepartner. For such contingent payments, we recognize the payments as revenue upon completion of the milestone event, once confirmation is received fromthe third party, provided that collection is reasonably assured and the other revenue recognition criteria have been satisfied.Sale of Future Revenue StreamsIn December 2016, we sold our rights to receive milestone payments and royalties on future sales of products under our license agreement with Pfizerand our right to receive royalties on future sales of products under our license agreement with Shire PLC (formerly Dyax Corp.) to HealthCare RoyaltyPartners II, L.P. (“HCRP”). In the circumstance where we have sold our rights to future milestones and royalties under a license agreement and also maintainlimited continuing involvement in the arrangement (but not significant continuing involvement in the generation of the cash flows that are due to thepurchaser), we defer recognition of the proceeds we receive for the milestone or royalty stream and recognize such deferred revenues as contract and otherrevenue over the life of the underlying license agreement. We recognize this revenue under the "units-of-revenue" method. Under this method, amortizationfor a reporting period is calculated by computing a ratio of the proceeds received from the purchaser to the total payments expected to be made to thepurchaser over the term of the agreement, and then applying that ratio to the period’s cash payment.Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjectiveestimates and assumptions. Changes to our estimate of the payments expected to be made to the purchaser over the term of such arrangements could have amaterial effect on the amount of revenues we recognize in any particular period.36 Stock-based CompensationStock-based compensation expense for stock options and other stock awards is estimated at the grant date based on the award’s fair value-basedmeasurement. The valuation of stock-based compensation awards is determined at the date of grant using the Black-Scholes option pricing model (the“Black-Scholes Model”). This model requires highly complex and subjective inputs, such as the expected term of the option, expected volatility, and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop. Our current estimate of volatility is based onthe historical volatility of our stock price. To the extent volatility in our stock price increases in the future, our estimates of the fair value of options grantedin the future could increase, thereby increasing stock-based compensation cost recognized in future periods. To establish an estimate of expected term, weconsider the vesting period and contractual period of the award and our historical experience of stock option exercises, post-vesting cancellations andvolatility. The risk-free rate is based on the yield available on United States Treasury zero-coupon issues. In January 2017, pursuant to the adoption ofAccounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting, we made an election to record forfeitures when they occur.We review our valuation assumptions quarterly and, as a result, we likely will change our valuation assumptions used to value stock-based awardsgranted in future periods. In the future, as additional empirical evidence regarding these input estimates becomes available, we may change or refine ourapproach of deriving these input estimates. These changes could impact our fair value-based measurement of stock options granted in the future. Changes inthe fair value-based measurement of stock awards could materially impact our operating results.For our stock options and service-based awards, we recognize compensation expense on a straight-line basis over the award’s vesting period. In 2017,we granted to certain employees equity awards with performance-based conditions. The actual number of equity awards earned and eligible to vest will bedetermined based on a specified level of achievement against a Board-approved budget and operational targets. For awards with performance-basedconditions, at the point that it becomes probable that the performance conditions will be met, we record a cumulative catch-up of the expense from the grantdate to the current date, and we then amortize the remainder of the expense over the remaining service period. Management evaluates when the achievementof a performance-based condition is probable based on the expected satisfaction of the performance conditions as of the reporting date. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.Results of OperationsRevenuesTotal revenues for the years ended December 31, 2017, 2016, and 2015 were as follows (in thousands): Year Ended December 31, 2016-2017 2015-2016 2017 2016 2015 Change Change License fees $52,311 $3,296 $49,064 $49,015 $(45,768)Contract and other 379 2,268 6,383 (1,889) (4,115)Total revenues $52,690 $5,564 $55,447 $47,126 $(49,883)License FeesLicense fees include fees and milestone payments related to the out-licensing of our product candidates and technologies. The primary components oflicense fees in 2017 were $40.2 million of license fee revenue recognized in connection with the XOMA 052 License Agreement and IL-1 Target LicenseAgreement with Novartis and a $10.0 million milestone earned under a previously existing license agreement with Novartis International Pharmaceutical Ltd.The primary components of license fees in 2016 were $2.0 million in upfront and milestone payments related to various out-licensing arrangements,$0.7 million in annual maintenance fees related to various out-licensing arrangements and $0.6 million in revenue recognized related to the collaborationagreement with Servier, which was terminated in March 2016. The $2.0 million of upfront and milestone payments included a $1.5 million fee for a phagedisplay library license delivered during the first quarter of 2016.The primary components of license fees in 2015 were $46.3 million in upfront and milestone payments related to various out-licensing arrangements,$1.6 million in annual maintenance fees related to various out-licensing arrangements and $1.2 million in revenue recognized related to the loan agreementwith Servier. The $46.3 million included a $37.0 million upfront payment from Novartis International Pharmaceutical Ltd., a $5.0 million upfront paymentfrom Novo Nordisk A/S and a $3.8 million payment from Pfizer.37 Contract and Other RevenuesContract and other revenues include agreements where we have provided contracted research and development services to our contract andcollaboration partners, including Servier and NIAID. Starting in 2017, contract and other revenues include revenue recognized under the Royalty AcquisitionAgreements with HCRP. The following table shows the activity in contract and other revenues for the years ended December 31, 2017, 2016, and 2015, (inthousands): Year Ended December 31, 2016-2017 2015-2016 2017 2016 2015 Change Change NIAID $101 $1,082 $5,084 $(981) $(4,002)Servier — 586 1,178 (586) (592)Royalties and other 278 600 121 (322) 479 Total contract and other revenues $379 $2,268 $6,383 $(1,889) $(4,115) The novation of our NIAID contract to Ology Bioservices and the termination of our Servier collaboration in March 2016 resulted in the decreases inrelated contract revenue in 2017 and 2016, as compared with the relative prior periods. In addition, in December 2017, we recognized $0.1 million ofdeferred revenue related to the NIH rate audit related to billings from 2008-2009. Royalty and other revenue in 2017 relates primarily to the amortization ofthe deferred revenue from the sale of royalty interests in December 2016 under the Royalty Acquisition Agreements with HCRP.The generation of future revenues related to license, milestone, and royalties is dependent on our ability to attract new licensees to our antibodytechnologies and the achievement of milestones or product sales by our existing licensees. Due to the novation of our contract with NIAID to OlogyBioservices and the termination of our collaboration agreement with Servier in March 2016, we do not anticipate significant future contract revenues.Research and Development ExpensesResearch and development expenses were $7.9 million in 2017, compared with $44.2 million in 2016 and $70.9 million in 2015. The decrease of$36.3 million in 2017, as compared with 2016, was primarily due to the implementation of our royalty-aggregator business model during the first quarter of2017, which included the cessation of substantially all development activities. The decrease consisted of a $12.9 million decrease in salaries and relatedexpenses due to a reduction in headcount, an $8.5 million decrease in external manufacturing activities, a $7.6 million decrease in clinical trial costs, a $4.0million decrease in the allocation of facilities and information technology costs, and a $1.0 million decrease in consulting costs. The decrease in allocationof facilities and information technology costs is a result of a decreased proportion of research and development employees as a result of our restructuringactivities in December 2016 and June 2017. The decrease of $26.7 million in 2016, as compared with 2015, was primarily due to decreases of $13.7 millionin salaries and related expenses due to a reduction in headcount, $6.8 million in clinical trial costs, $2.2 million in consulting services due to the terminationof the EYEGUARD global Phase 3 program in the third quarter of 2015 and gevokizumab in pyoderma gangrenosum (“PG”) global Phase 3 program in thefirst quarter of 2016, and $0.8 million in depreciation and facility expenses due to the sale of our manufacturing facility to Agenus in December 2015.Salaries and related personnel costs are a significant component of research and development expenses. We recorded $2.1 million in research anddevelopment salaries and employee-related expenses in 2017, compared with $15.0 million in 2016 and $28.7 million in 2015. Included in these expensesfor 2017 were $1.0 million for salaries and benefits, $0.2 million for bonus expense and $0.9 million for stock-based compensation, which is a non-cashexpense. The decrease of $12.9 million in 2017, as compared with 2016, was primarily due to decreases of $10.2 million in salaries and benefits costs, $1.9million in stock-based compensation and $0.8 million in bonus expense. The decreases were primarily due to the headcount reductions resulting from therestructuring activities initiated in December 2016 and June 2017.We recorded $15.0 million in research and development salaries and employee-related expenses in 2016, compared with $28.7 million in 2015.Included in these expenses for 2016 were $11.2 million for salaries and benefits, $1.0 million for bonus expense and $2.8 million for stock-basedcompensation, which is a non-cash expense. The decrease of $13.7 million in 2016, as compared with 2015, was primarily due to decreases of $10.6 millionin salaries and benefits costs due to fewer employees resulting from our 2015 restructuring activities, $0.9 million in bonus expense and $2.2 million instock-based compensation.38 As our business model has changed, so has our research and development spending activity. For the years ended December 31, 2016 and 2015,approximately 3% and 29%, respectively, of our research and development expense spending relate to collaborative and contract arrangements with Servierand NIAID with the remaining 97% and 71%, respectively, relating to our internal projects; whereas 100% of our research and development spending for theyear ended December 31, 2017 relates to our internal projects. For the year ended December 31, 2017, X358, for which we incurred the largest amount of expenses, accounted for between 40% and 50% of our totalresearch and development expenses. Each of our remaining development programs accounted for less than 10% of our total research and developmentexpenses. Due to our change in business model, for the third and fourth quarters of 2017, we did not incur significant expenses for internally developedprojects.For the year ended December 31, 2016, X358, for which we incurred the largest amount of expenses, accounted for between 50% and 60% of our totalresearch and development expenses. The gevokizumab program and our endocrine research-stage programs each accounted for between 10% and 20% of ourtotal research and development expenses. Each of our remaining development programs accounted for less than 10% of our total research and developmentexpenses.For the year ended December 31, 2015, the gevokizumab program, for which we incurred the largest amount of expense, accounted for between 40%and 50% of our total research and development expenses. A second development program, XMet, accounted for between 30% and 40% of our total researchand development expenses. All remaining development programs accounted for less than 10% of our total research and development expenses.We expect our research and development spending in 2018 will be reduced as compared with 2017 levels due to the implementation of our royalty-aggregator business model and related discontinuation of clinical trial activities.General and Administrative ExpensesGeneral and administrative expenses include salaries and related personnel costs, facilities cost and professional fees. In 2017, general andadministrative expenses were $24.3 million compared with $18.3 million in 2016 and $20.6 million in 2015. The increase of $6.0 million in 2017 ascompared with 2016 was primarily due to increases of $4.0 million in the allocation of facilities and information technology costs due to a greater proportionof general and administrative personnel after our restructuring activities, $2.9 million in costs related to the execution of license agreements, including thetwo Novartis agreements in August 2017, $2.2 million in stock-based compensation, and $0.4 million in consulting services, partially offset by decreases of$2.8 million in salaries as a result of our restructuring activities and $1.0 million in legal fees.The decrease of $2.3 million in 2016 as compared with 2015 was primarily due to a $2.4 million decrease in salaries and related personnel costs due tofewer employees resulting from our 2015 restructuring activities, of which $0.5 million was a decrease in stock-based compensation, which is a non-cashexpense.We expect our general and administrative expenses during 2018 to be decreased as compared with 2017 levels due to expected cost savings related toour royalty-aggregator business model and streamlined operations.Restructuring and Other ChargesOn December 19, 2016, we announced a restructuring of our business based on our decision to focus our efforts on clinical development, with aninitial focus on the X358 clinical programs. The restructuring included a reduction-in-force in which we terminated 57 employees, which was implemented inDecember 2016 (the “2016 Restructuring”). In early 2017, we transformed our business model to become a royalty aggregator where we focus on expandingour portfolio of fully-funded programs by out-licensing our internally developed product candidates and acquiring potential milestone and royalty revenuestreams on additional product candidates and eliminated an additional five employees with an effective termination date of June 30, 2017 (the “2017Restructuring”). During the years ended December 31, 2017 and 2016, we recorded charges of $3.4 million and $3.8 million, respectively, related toseverance, other termination benefits and outplacement services for the 2016 Restructuring and 2017 Restructuring activities. During the year endedDecember 31, 2016, we recognized an additional restructuring charge of $0.6 million in stock-based compensation resulting from the acceleration of vestingof stock awards granted to a former executive under his retention benefit agreement. In connection with the restructuring in 2016, we recorded an assetimpairment charge of $0.2 million for leasehold improvements that have no future use.39 On July 22, 2015, we announced the Phase 3 EYEGUARD-B study of gevokizumab in patients with Behçet’s disease uveitis, run by Servier, did notmeet the primary endpoint of time to first acute ocular exacerbation. In August 2015, we announced our intention to end the EYEGUARD global Phase 3program. On August 21, 2015, in connection with our efforts to lower operating expenses and preserve capital while continuing to focus on our endocrineproduct pipeline, we implemented a restructuring plan that included a workforce reduction resulting in the termination of 52 employees during the secondhalf of 2015. During the years ended December 31, 2016 and 2015, we recorded a credit of $32,000 and a charge of $2.9 million, respectively, related toseverance, other termination benefits and outplacement services. In addition, we recognized additional restructuring charges of $29,000 and $0.8 million incontract termination costs in the years ended December 31, 2016 and 2015, respectively, which primarily include costs in connection with thediscontinuation of the EYEGUARD studies.Other Income (Expense)Interest ExpenseAmortization of debt issuance costs and discounts are included in interest expense. Interest expense is shown below for the years ended December 31,2017, 2016, and 2015, (in thousands): Year Ended December 31, 2016-2017 2015-2016 2017 2016 2015 Change Change Novartis note $490 $405 $329 $85 $76 Servier loan 431 892 1,083 (461) (191)Hercules loan 311 2,628 2,223 (2,317) 405 GECC term loan — — 119 — (119)Other 6 21 11 (15) 10 Total interest expense $1,238 $3,946 $3,765 $(2,708) $181 Interest expense related to the Hercules term loan decreased by $2.3 million in 2017, compared with 2016. The decrease was due to the specialprepayment of $10.0 million under the Hercules term loan in January 2017 and pay off of the remaining balance of the debt in March 2017. In addition, inAugust 2017, the remaining balance of the Servier Loan was paid off.Interest expense related to the Servier loan and General Electric Capital Corporation (“GECC”) term loan decreased by $0.2 million and $0.1 million,respectively in 2016, compared with 2015. The decrease was due to the payment of €3.0 million in principal under the Servier loan in January 2016 and theextinguishment of the GECC term loan in February 2015. This decrease was partially offset by an increase of $0.4 million in interest expense due under ourterm loan with Hercules that was entered into in February 2015.We expect interest expense in 2018 to decrease as compared with 2017 due to the March 2017 payoff of the Hercules loan and August 2017 payoff ofthe Servier Loan.Loss on Extinguishment of DebtIn March 2017, we paid off our outstanding principal balance, final payment fee and accrued interest totaling $6.5 million under our loan and securityagreement with Hercules, and we were not required to pay the 1% prepayment charge pursuant to the terms of the loan. We recognized a loss onextinguishment of $0.5 million from the payoff of the term loan.In August 2017, NIBR, on our behalf, paid off our outstanding principal balance and accrued interest on our Servier Loan totaling $14.3 million inconjunction with the XOMA-052 License Agreement. We recognized a loss on extinguishment of $0.1 million from the payoff of the loan.In February 2015, the GECC term loan was fully paid. We used a portion of the proceeds under the Hercules term loan to repay GECC’s outstandingprinciple balance, final payment fee, prepayment fee, and accrued interest totaling $5.5 million. We recognized a loss on extinguishment of $0.4 million fromthe payoff of the GECC term loan.40 Other Income, NetThe following table shows the activity in other income, net for the years ended December 31, 2017, 2016, and 2015, (in thousands): Year Ended December 31, 2016-2017 2015-2016 2017 2016 2015 Change Change Other income, net Gain on sale of business $— $— $3,505 $— $(3,505)Realized foreign exchange gain (loss) (1,635) 4 69 (1,639) (65)Unrealized foreign exchange gain — 489 1,870 (489) (1,381)Sublease income (loss) (751) 398 — (1,149) 398 Gain on sale and disposal of equipment 1,226 — — 1,226 — Income under the agreement with Ology Bioservices 2,150 — — 2,150 — Other 125 619 56 (494) 563 Total other income, net $1,115 $1,510 $5,500 $(395) $(3,990) The gain of $2.2 million in income under the agreement with Ology Bioservices was due to payments we received for milestones achieved by OlogyBioservices in 2017. The realized foreign exchange loss of $1.6 million was primarily related to re-measurement of the Servier Loan which was paid in 2017.The gain of $1.2 million on the sale and disposal of equipment and leasehold improvements is primarily related to the sale and disposal of equipment locatedin one of our leased facilities during the year ended December 31, 2017. In 2017 we entered into a sublease for a portion of one of our leased facilities andrecognized a loss on the sublease of $0.8 million. Unrealized foreign exchange gains for the years ended December 31, 2016, and 2015, are primarily relatedto the re-measurement of the Servier loan which was denominated in Euros. The sublease income in 2016 is related to the sublease arrangements executedwith Agenus in December 2015 and Ology Bioservices in March 2016. Other income in 2016 primarily consist of $0.4 million generated from our transitionservice agreements with Agenus and Ology Bioservices, partially offset by an other-than-temporary impairment of $0.2 million related to a non-marketablecost method investment that we determined was impaired. The gain on sale of business for the year ended December 31, 2015 is related to the $3.5 milliongain recognized from the sale of our pilot scale manufacturing facility, including certain equipment, to Agenus in 2015.Revaluation of Contingent Warrant LiabilitiesWe have previously issued warrants that contained provisions that were contingent on the occurrence of a change in control, which couldconditionally obligate us to repurchase the warrants for cash in an amount equal to their estimated fair value using the Black-Scholes Model on the date ofsuch change in control. Due to these provisions, we accounted for the warrants issued as a liability at estimated fair value. In addition, the estimated liabilityrelated to the warrants was revalued at each reporting period until the earlier of the exercise of the warrants, at which time the liability would be reclassified tostockholders’ equity at its then estimated fair value, or expiration of the warrants. There were no such warrant liabilities as of December 31, 2017.We revalued the March 2012 warrants at December 31, 2016 using the Black-Scholes Model and recorded a $7.5 million reduction in the estimatedfair value as a gain on the revaluation of contingent warrant liabilities line of our consolidated statement of comprehensive loss for the year ended December31, 2016. The decrease in the estimated fair value of the warrants is primarily due to the decrease in the market price of our common stock at December 31,2016 as compared to December 31, 2015. We revalued the warrants at December 31, 2015 and recorded a $15.6 million reduction in the estimated fair valuein 2015, as gains on the revaluation of contingent warrant liabilities line of our consolidated statement of comprehensive income (loss) for the year endedDecember 31, 2015. During 2017, all of these warrants expired unexercised.The December 2014 warrants expired in December 2016. During the year ended December 31, 2016, we revalued the December 2014 warrants usingthe Black-Scholes Model and recorded a $3.0 million reduction in the estimated fair value as a gain on the revaluation of contingent warrant liabilities lineof our consolidated statement of comprehensive income (loss). We revalued the warrants at December 31, 2015 and recorded a $2.2 million reduction in theestimated fair value as a gain on the revaluation of contingent warrant liabilities line on our consolidated statement of comprehensive income (loss). Thedecrease in the estimated fair value of the warrants is primarily due to the decrease in the market price of our common stock during 2016 as compared toDecember 31, 2015.41 Provision for Income TaxesOur provision for income taxes for the year ended December 31, 2017 differs from the amounts computed by multiplying the federal statutory rate byincome before taxes primary due to a reduction in the valuation allowance and the use of a tax credit carryforward. We are subject to an ownership changepursuant to IRC Section 382 which occurred in February 2017 which significantly limits our ability to use our net operating loss carryforwards and taxcredits against our 2017 taxable income. Due to historical losses, we did not record a provision for income taxes for any period in 2016 and 2015.Liquidity and Capital ResourcesThe following table summarizes our cash and cash equivalents, our working capital and our cash flow activities for each of the periods presented (inthousands): December 31, 2017 2016 Change Cash and cash equivalents $43,471 $25,742 $17,729 Working capital (deficit) $36,773 $(5,346) $42,119 Year Ended December 31, 2016-2017 2015-2016 2017 2016 2015 Change Change Net cash provided by (used in) operating activities $2,686 $(33,689) $(30,892) $36,375 $(2,797)Net cash provided by investing activities 1,606 612 4,450 994 (3,838)Net cash provided by (used in) financing activities 13,258 (6,942) 13,801 20,200 (20,743)Effect of exchange rate changes on cash 179 (6) (37) 185 31 Net increase (decrease) in cash and cash equivalents $17,729 $(40,025) $(12,678) $57,754 $(27,347) Cash Provided by (Used in) Operating ActivitiesThe change in net cash from operating activities for 2017, as compared with the same period in 2016, was primarily due to the $25.7 million cashreceipts under the license agreements executed with Novartis in August 2017, combined with decreased research and development spending related tomanufacturing and clinical trial costs during 2017 due to the implementation of our royalty aggregator business model.The increase in net cash used in operating activities in 2016 as compared to 2015 was primarily due to lower cash received from revenue sources in2016 as compared with 2015. This increase was partially offset by lower salaries and related costs resulting from our 2015 restructuring activities combinedwith decreased research and development spending related to manufacturing and clinical trial costs primarily due to the discontinuation of the gevokizumabstudies under our collaboration agreement with Servier in the third quarter of 2015 and the termination of the collaboration agreement with Servier in March2016. Also contributing to the decrease in clinical trial costs was the termination of the gevokizumab PG global Phase 3 program in March 2016.Cash Provided by Investing ActivitiesNet cash provided by investing activities for the year ended December 31, 2017 of $1.6 million was primarily related to proceeds from the sale ofequipment.Net cash provided by investing activities for the year ended December 31, 2016 was primarily related to proceeds from the sale of marketablesecurities of $0.6 million.Net cash provided by investing activities for the year ended December 31, 2015 was primarily related to proceeds from the sale of our manufacturingfacility of $4.9 million, partially offset by $0.4 million in purchases of property and equipment.Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities for the year ended December 31, 2017 of $13.3 million was primarily related to the sale of convertiblepreferred stock and common stock to BVF for total net proceeds of $24.8 million and the sale of common stock to Novartis for proceeds of $5.0 million.These cash inflows were partially offset by the payoff of our outstanding loan with Hercules of $17.5 million.42 Net cash used in financing activities for the year ended December 31, 2016 was primarily related to $6.9 million of principal payments on our loanswith Servier and Hercules.Net cash provided by financing activities for the year ended December 31, 2015 was primarily related to proceeds from the Hercules term loan of $20.0million and proceeds from the issuance of common stock of $0.5 million. These cash inflows were partially offset by $6.1 million of principal payments onthe GECC term loan, and payment of debt issuance costs of $0.5 million on the Hercules term loan.ATM AgreementOn November 12, 2015, we entered into an At The Market Issuance Sales Agreement (the “2015 ATM Agreement”) with Cowen and Company, LLC(“Cowen”), under which we may offer and sell from time to time at our sole discretion shares of our common stock through Cowen as our sales agent, in anaggregate amount not to exceed $75.0 million. Cowen may sell the shares by any method permitted by law deemed to be an “at the market” offering asdefined in Rule 415 of the Securities Act, including without limitation sales made directly on The NASDAQ Global Market, on any other existing tradingmarket for our common stock or to or through a market maker. Cowen also may sell the shares in privately negotiated transactions, subject to our priorapproval. We will pay Cowen a commission up to 3% of the gross proceeds of the sales price of all shares sold through it as sales agent under the 2015 ATMAgreement. For the year ended December 31, 2017, we sold a total of 110,252 shares of common stock under the 2015 ATM Agreement for aggregate grossproceeds of $0.6 million. Total offering costs of $0.2 million were offset against the proceeds from the sale of common stock. In January 2018, we sold 67,658shares of common stock under the 2015 ATM Agreement for aggregate net cash proceeds of $2.3 million.* * *We have incurred operating losses since inception and have an accumulated deficit of $1.2 billion at December 31, 2017. As of December 31, 2017,we had $43.5 million in cash and cash equivalents, which will enable us to maintain our operations for a period of at least 12 months following the filing dateof this report.Our ability to raise additional capital in the equity and debt markets, should we choose to do so, is dependent on a number of factors, including themarket demand for our common stock or debt, which itself is subject to a number of pharmaceutical development and business risks and uncertainties, as wellas the uncertainty that we would be able to raise such additional capital at a price or on terms that are favorable to us.Commitments and ContingenciesSchedule of Contractual ObligationsPayments by period due under contractual obligations at December 31, 2017, are as follows (in thousands): Contractual Obligations Total Less than1 year 1 to 3 years 3 to 5 years More than5 years Capital leases(1) $75 $27 $48 $— $— Operating leases, net of sublease income(1) 13,843 2,951 6,210 4,116 566 Debt obligations(2) Principal 14,572 — — 14,572 — Interest 2,929 — — 2,929 — Total $31,419 $2,978 $6,258 $21,617 $566 (1)See Note 13: Commitment and Contingencies to the accompanying consolidated financial statements for further discussion.(2)See Item 7A: Quantitative and Qualitative Disclosures about Market Risk and Note 8: Long-Term Debt and Other Financings to the accompanyingconsolidated financial statements for further discussion of our debt obligation.43 We lease administrative facilities and office equipment under operating leases expiring on various dates through April 2023. These leases require us topay taxes, insurance, maintenance and minimum lease payments. In addition to the above, we have committed to make potential future milestone paymentsto third parties as part of licensing and development programs. Payments under these agreements become due and payable only upon the achievement by ourlicensees of certain developmental, regulatory and/or commercial milestones. Because it is uncertain if and when these milestones will be achieved, suchcontingencies, aggregating up to $15.5 million (assuming one product per contract meets all milestones) have not been recorded on our consolidated balancesheet as of December 31, 2017. We are also obligated to pay royalties, ranging generally from 0.5% to 3.5% of the selling price of the licensed componentand up to 40% of any sublicense fees to various universities and other research institutions based on future sales or licensing of products that incorporatecertain products and technologies developed by those institutions. We are unable to determine precisely when and if our payment obligations under theagreements will become due as these obligations are based on future events, the achievement of which is subject to a significant number of risks anduncertainties.Although operations are influenced by general economic conditions, we do not believe inflation had a material impact on financial results for theperiods presented. We believe that we are not dependent on materials or other resources that would be significantly impacted by inflation or changingeconomic conditions in the foreseeable future.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in Accounting Standards Codification (“ASC”) 606,Revenue Recognition — Revenue from Contracts with Customers, which amends the guidance in ASC 605, Revenue Recognition. The standard’s coreprinciple is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration towhich the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued an accounting update to defer theeffective date by one year for public entities such that it is now applicable for annual and interim periods beginning after December 15, 2017. Early adoptionis permitted for periods beginning after December 15, 2016. ASC 606 also permits two methods of adoption: retrospectively to each prior reporting periodpresented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initialapplication (the modified retrospective method). We are required to adopt the standard on January 1, 2018. To date, we have primarily derived our revenuesfrom various license and collaboration arrangements and sale of future royalties. The consideration we are eligible to receive under these agreements includesupfront payments, milestone payments and royalties. Each of our agreements has unique terms that will need to be evaluated separately under ASC 606. Wehave completed our assessment of our active license and collaboration agreements and sale of future royalty arrangements, the impact of the new guidance onour consolidated financial statements, as well as the evaluation of the disclosure requirements under the new standard. We will adopt the new standard usingthe modified retrospective method. We have evaluated the accounting, transition and disclosure requirements of the new standard and we do not expect it tohave a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), (“ASU 2016-02”). Under ASU 2016-02, a lessee will be required torecognize assets and liabilities for leases with lease terms of more than 12 months. Recognition, measurement, and presentation of expenses and cash flowsarising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. ASU 2016-02 will require both types of leases to berecognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount,timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additionalinformation about the amounts recorded in the financial statements. ASU 2016-02 is effective for us for all interim and annual reporting periods beginningafter December 15, 2018. Early adoption is permitted. We are in the process of assessing the impact of ASU No. 2016-02 on our consolidated financialstatements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments (a consensus of the FASB Emerging Issues Task Force), (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues including debtprepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that areinsignificant in relation to the effective interest rate of the borrowing and contingent consideration payments made after a business combination. ASU 2016-15 is effective for all interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. We do not expect the adoption ofASU 2016-15 to have a material impact on our consolidated statements of cash flows. 44 In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, (“ASU 2017-04”). ASU 2017-09 streamlines the application of modification accounting by stating that when making a change to the terms or conditions of a share-basedpayment award, a company should apply modification accounting to the award, unless each of the following conditions is met: 1. The fair value (orcalculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated valueor intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If themodification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate thevalue immediately before and after the modification, and 2. The vesting conditions of the modified award are the same as the vesting conditions of theoriginal award immediately before the original award is modified, and 3. The classification of the modified award as an equity instrument or a liabilityinstrument is the same as the classification of the original award immediately before the original award is modified. ASU 2017-09 is effective for all interimand annual reporting periods beginning after December 15, 2017. Early adoption is permitted. We do not expect the adoption of ASU 2017-09 to have amaterial impact on our consolidated financial statements.Off Balance Sheet ArrangementsWe do not have any off balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC. Item 7A.Quantitative and Qualitative Disclosures about Market RiskInterest Rate RiskOur exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio and our loan facilities. By policy, we makeour investments in high-quality debt securities, limit the amount of credit exposure to any one non-U.S. Treasury issuer, and limit duration by restricting theterm of the instrument. We generally hold investments to maturity, with a weighted average portfolio period of less than twelve months. However, if the needarose to liquidate such securities before maturity, we may experience losses on liquidation.We hold interest-bearing instruments that are classified as cash and cash equivalents. Fluctuations in interest rates can affect the principal values andyields of fixed income investments. If interest rates in the general economy were to rise rapidly in a short period of time, our fixed income investments couldlose value.The following table presents the amounts and related weighted average interest rates of our cash and cash equivalents at December 31, 2017 and 2016(in thousands, except interest rate): Maturity CarryingAmount(in thousands) Fair Value(in thousands) WeightedAverageInterest Rate December 31, 2017 Cash and cash equivalents Daily to 90 days $43,471 $43,471 0.83% December 31, 2016 Cash and cash equivalents Daily to 90 days $25,742 $25,742 0.23% As of December 31, 2017, we have an outstanding principal balance on our note with Novartis of $14.6 million, which is due in 2022. The interest rateon this note is charged at a rate of USD six-month London Interbank Offered Rate (“LIBOR”) plus 2%, which was 3.81% at December 31, 2017. No furtherborrowing is available under this note.The variable interest rate related to our long-term debt instrument is based on LIBOR for our Novartis note. We estimate a hypothetical 100 basis pointchange in interest rates could increase or decrease our interest expense by approximately $0.1 million on an annualized basis.Foreign Currency RiskAs of December 31, 2017, we are no longer subject to changes in exchange rates related to our debt with Servier as the outstanding principal balanceand accrued interest were paid off in August 2017.45 We incur expenses denominated in foreign currencies. The amount of expenses incurred will be impacted by fluctuations in these foreign currencies.When the U.S. Dollar weakens against foreign currencies, the U.S. Dollar value of the foreign-currency denominated expense increases, and when the U.S.Dollar strengthens against these currencies, the U.S. dollar value of the foreign-currency denominated expense decreases. A hypothetical 10% change inforeign exchange rates would not have had a material impact on our consolidated financial statements. Item 8.Financial Statements and Supplementary DataThe following consolidated financial statements of the registrant, related notes and report of independent registered public accounting firm are setforth beginning on page F-1 of this report. Report of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets F-3Consolidated Statements of Comprehensive Income (Loss) F-4Consolidated Statements of Stockholders' Equity (Deficit) F-5Consolidated Statements of Cash Flows F-6Notes to the Consolidated Financial Statements F-8 46 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable. Item 9A.Controls and ProceduresUnder the supervision and with the participation of our management, including our Chief Executive Officer and our Senior Vice President, Finance and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is definedunder Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Our disclosurecontrols and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the SecuritiesExchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’srules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Senior Vice President, Finance andChief Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures. Based on thisevaluation, our Chief Executive Officer and our Senior Vice President, Finance and Chief Financial Officer concluded that our disclosure controls andprocedures were effective as of the end of the period covered by this report.Management’s Report on Internal Control over Financial ReportingManagement, including our Chief Executive Officer and our Senior Vice President, Finance and Chief Financial Officer, is responsible for establishingand maintaining adequate internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f). The Company’s internal controlsystem was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation ofpublished financial statements in accordance with accounting principles generally accepted in the United States.Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 Framework). Based on our assessment we believe that, as of December 31, 2017, our internal control over financial reportingis effective based on those criteria.This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financialreporting. For as long as we remain a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are exempt from the requirement that ourregistered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) ofExchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting. Item 9B.Other InformationNone. 47 PART III Item 10.Directors, Executive Officers, Corporate GovernanceCertain information regarding our executive officers required by this Item is set forth as a Supplementary Item at the end of Part I of this Form 10-K(under Instruction 3 to Item 401(b) of Regulation S-K). Other information required by this Item will be included in the Company’s proxy statement for the2018 Annual Meeting of Stockholders (“2018 Proxy Statement”), under the sections labeled “Item 1—Election of Directors” and “Compliance with Section16(a) of the Securities Exchange Act of 1934”, and is incorporated by reference. The 2018 Proxy Statement will be filed with the SEC within 120 days afterthe end of the fiscal year to which this report relates.Code of EthicsThe Company’s Code of Ethics applies to all employees, officers and directors including the Chief Executive Officer (principal executive officer) andthe Vice President, Finance and Chief Financial Officer (principal financial and principal accounting officer) and is posted on the Company’s website atwww.xoma.com. We intend to satisfy the applicable disclosure requirements regarding amendments to, or waivers from, provisions of our Code of Ethics byposting such information on our website. Item 11.Executive CompensationInformation required by this Item will be included in the sections labeled “Compensation of Executive Officers”, “Summary Compensation Table”,“Outstanding Equity Awards as of December 31, 2017”, “Pension Benefits”, “Non-Qualified Deferred Compensation” and “Compensation of Directors”appearing in our 2018 Proxy Statement, and is incorporated by reference. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation required by this Item will be included in the sections labeled “Common Stock of Certain Beneficial Owners and Management” and“Equity Compensation Plan Information” appearing in our 2018 Proxy Statement, and is incorporated by reference. Item 13.Certain Relationships and Related Transactions, and Director IndependenceInformation required by this Item will be included in the section labeled “Transactions with Related Persons” appearing in our 2018 ProxyStatement, and is incorporated by reference. Item 14.Principal Accountant Fees and ServicesInformation required by this Item will be included in the section labeled “Appointment of Independent Registered Public Accounting Firm”appearing in our 2018 Proxy Statement, and is incorporated by reference. 48 PART IVItem 15.Exhibits and Financial Statement Schedules(a) The following documents are included as part of this Annual Report on Form 10-K:(1) Financial Statements:All financial statements of the registrant referred to in Item 8 of this Report on Form 10-K.(2) Financial Statement Schedules:All financial statements schedules have been omitted because the required information is included in the consolidated financialstatements or the notes thereto or is not applicable or required.(3) Exhibits: Incorporation By ReferenceExhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 3.1 Certificate of Incorporation of XOMA Corporation 8-K 000-14710 3.1 01/03/2012 3.2 Certificate of Amendment of Certificate of Incorporation of XOMA Corporation 8-K 000-14710 3.1 05/31/2012 3.3 Certificate of Amendment to the Amended Certificate of Incorporation ofXOMA Corporation 8-K 000-14710 3.1 05/28/2014 3.4 Certificate of Amendment to the Amended Certificate of Incorporation ofXOMA Corporation 8-K 000-14710 3.1 10/18/2016 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series XConvertible Preferred Stock 8-K 000-14710 3.1 02/16/2017 3.6 By-laws of XOMA Corporation 8-K 000-14710 3.2 01/03/2012 4.1 Reference is made to Exhibits 3.1, 3.2 , 3.3, 3.4, 3.5 and 3.6 4.2 Specimen of Common Stock Certificate 8-K 000-14710 4.1 01/03/2012 4.3 Form of Series X Preferred Stock Certificate 8-K 000-14710 4.1 02/16/2017 4.5 Form of Warrants (February 2015 Warrants) 10-Q 000-14710 4.10 05/07/2015 4.6 Form of Warrants (February 2016 Warrants) 10-Q 000-14710 4.9 05/04/2016 10.1* 1981 Share Option Plan as amended and restated S-8 333-171429 10.1 12/27/2010 10.2* Form of Share Option Agreement for 1981 Share Option Plan 10-K 000-14710 10.1A 03/11/2008 10.3* Restricted Share Plan as amended and restated S-8 333-171429 10.1 12/27/2010 10.4* Form of Share Option Agreement for Restricted Share Plan 10-K 000-14710 10.2A 03/11/2008 10.6* 1992 Directors Share Option Plan as amended and restated S-8 333-171429 10.1 12/27/2010 10.7* Form of Share Option Agreement for 1992 Directors Share Option Plan (initialgrants) 10-K 000-14710 10.3A 03/11/2008 10.8* Form of Share Option Agreement for 1992 Directors Share Option Plan(subsequent grants) 10-K 000-14710 10.3B 03/11/2008 10.9* 2002 Director Share Option Plan S-8 333-151416 10.10 08/28/2003 10.10* Amended and Restated 2010 Long Term Incentive and Stock Award Plan 8-K 001-14710 10.1 05/24/2017 10.11* XOMA Corporation Amended and Restated 2010 Long Term Incentive andStock Award Plan S-8 000-14710 99.1 09/12/2014 49 Incorporation By ReferenceExhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 10.12* Form of Stock Option Agreement for Amended and Restated 2010 Long TermIncentive and Stock Award Plan 10-K 000-14710 10.6A 03/14/2012 10.13* Form of Restricted Stock Unit Agreement for Amended and Restated 2010Long Term Incentive and Stock Award Plan 10-K 000-14710 10.6B 03/14/2012 10.14* 2016 Incentive Compensation Plan 10-Q 000-14710 10.1 05/04/2016 10.15* Form of Amended and Restated Indemnification Agreement for Officers 10-K 000-14710 10.6 03/08/2007 10.16* Form of Amended and Restated Indemnification Agreement for EmployeeDirectors 10-K 000-14710 10.7 03/08/2007 10.17* Form of Amended and Restated Indemnification Agreement for Non-employee Directors 10-K 000-14710 10.8 03/08/2007 10.18* Amended 2015 Employee Share Purchase Plan 8-K 001-14710 10.2 05/24/2017 10.19* 2015 Employee Stock Purchase Plan S-8 333-204367 99.1 05/21/2015 10.20* Form of Subscription Agreement and Authorization of Deduction under the2015 Employee Stock Purchase Plan S-8 333-204367 99.2 05/21/2015 10.21 Lease of premises at 804 Heinz Street, Berkeley, California dated February 13,2013 10-K 000-14710 10.29 03/12/2014 10.22 Lease of premises at 2910 Seventh Street, Berkeley, California dated February13, 2013 10-K 000-14710 10.30 03/12/2014 10.23 First amendment to lease of premises at 2910 Seventh Street, Berkeley,California dated February 22, 2013 10-K 000-14710 10.31 03/12/2014 10.24† License Agreement by and between XOMA Ireland Limited and MorphoSysAG, dated as of February 1, 2002 10-Q/A 000-14710 10.43 12/04/2002 10.25† License Agreement, dated as of December 29, 2003, by and between DiversaCorporation (n/k/a BP Biofuels Advanced Technology Inc.) and XOMAIreland Limited 8-K/A 000-14710 2 03/19/2004 10.26 First Amendment, dated October 28, 2014, to the License Agreement betweenXOMA (US) LLC (assigned to it by XOMA Ireland Limited) and BP BiofuelsAdvanced Technology Inc. (previously Diversa Corporation, previouslyVerenium Corporation). 10-Q 000-14710 10.3 11/06/2014 10.27† Secured Note Agreement, dated as of May 26, 2005, by and between ChironCorporation and XOMA (US) LLC 10-Q 000-14710 10.3 08/08/2005 10.28† Amended and Restated Research, Development and CommercializationAgreement, executed November 7, 2008, by and between Novartis Vaccinesand Diagnostics, Inc. (formerly Chiron Corporation) and XOMA (US) LLC 10-K 000-14710 10.24C 03/11/2009 10.29† Amendment No. 1 to Amended and Restated Research, Development andCommercialization Agreement, effective as of April 30, 2010, by and betweenNovartis Vaccines and Diagnostics, Inc. (formerly Chiron Corporation) andXOMA (US) LLC 10-K 000-14710 10.25B 03/14/2012 10.30† Amendment to Amended and Restated Research, Developmentand Commercialization Agreement, dated September 30, 2015, byand between XOMA (US) LLC and Novartis Vaccines andDiagnostics, Inc. (formerly Chiron Corporation) 10-Q 000-14710 10.4 11/06/2015 50 Incorporation By ReferenceExhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 10.31+ Amendment to Secured Note Agreement, executed September 22,2017, by and between Novartis Vaccines and Diagnostics, Inc.(formerly Chiron Corporation) and XOMA (US) LLC 10.32† Collaboration Agreement, dated as of November 1, 2006,between Takeda Pharmaceutical Company Limited and XOMA (US)LLC 10-K 000-14710 10.46 03/08/2007 10.33 First Amendment to Collaboration Agreement, effective as ofFebruary 28, 2007, between Takeda Pharmaceutical CompanyLimited and XOMA (US) LLC 10-Q/A 000-14710 10.48 03/05/2010 10.34 Second Amendment to Collaboration Agreement, effective as ofFebruary 9, 2009, among Takeda Pharmaceutical Company Limitedand XOMA (US) LLC 10-K 000-14710 10.31B 03/11/2009 10.35† License Agreement, effective as of August 27, 2007, by and betweenPfizer Inc. and XOMA Ireland Limited 8-K 000-14710 2 09/13/2007 10.36† Discovery Collaboration Agreement dated September 9, 2009, by andbetween XOMA Development Corporation and Arana TherapeuticsLimited 10-Q/A 000-14710 10.35 03/05/2010 10.37† Loan Agreement dated as of December 30, 2010, by and betweenXOMA Ireland Limited and Les Laboratoires Servier 10-K/A 000-14710 10.42A 05/26/2011 10.38† Amendment No. 2, effective January 9, 2015, to the Loan Agreement,effective December 30, 2010, by and among XOMA (US) LLC, LesLaboratoires Servier and Institut de Recherches Servier 10-K 000-14710 10.71 03/11/2015 10.39 Amendment No. 1 (Consent, Transfer, Assumption and Amendment),effective January 9, 2015, to the Loan Agreement, effective December30, 2010, by and among XOMA (US) LLC, Les Laboratoires Servierand Institut de Recherches Servier 10-K 000-14710 10.74 03/11/2015 10.40 Loan and Security Agreement, dated February 27, 2015, by andamong XOMA Corporation, XOMA(US) LLC and XOMA Commercialas borrowers and Hercules Technology Growth Capital, Inc., as agentand lender 10-Q 000-14710 10.3 05/07/2015 10.41+ Amendment No. 1, dated December 20, 2016, to Loan and SecurityAgreement, dated February 27, 2015, by and among XOMACorporation, XOMA(US) LLC and XOMA Commercial as borrowersand Hercules Technology Growth Capital, Inc., as agent and lender 10.42 Letter Agreement, dated June 19, 2015, by and between XOMA (US)LLC and Novartis Vaccines and Diagnostics, Inc. 10-Q 000-14710 10.1 08/10/2015 10.43† License Agreement, dated September 30, 2015, by and betweenXOMA (US) LLC and Novartis Institutes for Biomedical Research,Inc. 10-Q 000-14710 10.2 11/06/2015 10.44 Amended Secured Note Agreement, dated September 30, 2015, by andbetween XOMA (US) LLC and Novartis Institutes for BiomedicalResearch, Inc. 10-Q 000-14710 10.3 11/06/2015 10.45 Sales Agreement, dated November 12, 2015, by and between XOMACorporation and Cowen and Company, LLC 8-K 001-14710 10.1 11/12/2015 51 Incorporation By ReferenceExhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 10.46 Settlement and Amended License Agreement dated December 3,2015, by and between XOMA (US) LLC, as a successor-in-interest ofXOMA Ireland Limited and Pfizer Inc. 10-K 001-14710 10.64 03/09/2016 10.47† Asset Purchase Agreement dated November 5, 2015 by and betweenthe Company and Agenus West, LLC 10-K 001-14710 10.65 03/09/2016 10.48 Protective Rights Agreement dated December 21, 2016 by andbetween XOMA (US) LLC and HealthCare Royalty Partners II, L.P.relating to the Royalty Interest Acquisition Agreement datedDecember 20, 2016, by and between XOMA Corporation andHealthCare Royalty Partners II, L.P. and the Amended and RestatedLicense Agreement, dated effective as of October 27, 2006, betweenXOMA (US) LLC and DYAX, Corp. 10-K 001-14710 10.60 03/16/2017 10.49 Protective Rights Agreements dated December 21, 2016 by andbetween XOMA (US) LLC and HealthCare Royalty Partners II, L.P.relating to the Royalty Interest Acquisition Agreement datedDecember 20, 2016, by and between XOMA Corporation andHealthCare Royalty Partners II, L.P. and the License Agreement,dated effective as of August 18, 2005, between XOMA (US) LLC andWyeth Pharmaceuticals 10-K 001-14710 10.61 03/16/2017 10.50 Royalty Interest Acquisition Agreement dated December 20, 2016,by and between XOMA Corporation and HealthCare RoyaltyPartners II, L.P., relating to the Amended and Restated LicenseAgreement, dated effective as of October 27, 2006, between XOMA(US) LLC and DYAX, Corp. 10-K 001-14710 10.62 03/16/2017 10.51 Royalty Interest Acquisition Agreement dated December 20, 2016,by and between XOMA Corporation and HealthCare RoyaltyPartners II, L.P., relating to the License Agreement, dated effective asof August 18, 2005, between XOMA (US) LLC and WyethPharmaceuticals 10-K 001-14710 10.63 03/16/2017 10.52 Amendment of Section 6.10(a) and (b), dated March 8, 2017, toRoyalty Interest Acquisition Agreements dated December 20, 2016,by and between XOMA Corporation and HealthCare RoyaltyPartners II, L.P. 10-K 001-14710 10.64 03/16/2017 10.53+ Amendment No. 3, effective January 17, 2017, to the LoanAgreement, effective December 30, 2010, by and among XOMA (US)LLC, Les Laboratoires Servier and Institut de Recherches Servier 10.54 Subscription Agreement, dated February 10, 2017, by and amongXOMA Corporation, Biotechnology Value Fund, L.P., and certainentities affiliated with BVF 424(b)(5) 333-201882 Annex A 02/13/2017 10.55 Common Stock Purchase Agreement, dated August 24, 2017, by andbetween XOMA Corporation and Novartis Pharma AG 10-Q 001-14710 10.1 11/06/2017 10.56† IL-1b Target License Agreement, dated August 24, 2017, by andbetween XOMA Corporation and Novartis Pharma AG 10-Q 001-14710 10.2 11/06/2017 10.57† License Agreement, dated August 24, 2017, by and between XOMACorporation and Novartis Pharma AG 10-Q 001-14710 10.3 11/06/2017 52 Incorporation By ReferenceExhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 10.58 Asset Purchase Agreement, dated November 4, 2015, between XOMACorporation and Ology Bioservices, Inc. (formerly NanotherapeuticsInc.) 10-Q 001-14710 10.4 11/06/2017 10.59† License Agreement, dated March 23, 2016, between XOMACorporation and Ology Bioservices, Inc. (formerly NanotherapeuticsInc.) 10-Q 001-14710 10.5 11/06/2017 10.60† Amendment and Restatement, dated February 2, 2017, to the AssetPurchase Agreement, dated November 4, 2015, and LicenseAgreement, dated March 23, 2016, between XOMA Corporation andOlogy Bioservices, Inc. (formerly Nanotherapeutics Inc.) 10-Q 001-14710 10.6 11/06/2017 10.61* Officer Employment Agreement, dated August 7, 2017, betweenXOMA Corporation and James R. Neal 10-Q 001-14710 10.7 11/06/2017 10.62* Officer Employment Agreement, dated August 7, 2017, betweenXOMA Corporation and Thomas Burns 10-Q 001-14710 10.8 11/06/2017 10.63* Amended and Restated Change of Control Severance Agreement,dated August 7, 2017, to the Change of Control Severance Agreement,dated January 3, 2011, between XOMA Corporation and James R.Neal 10-Q 001-14710 10.9 11/06/2017 10.64* Amended and Restated Change of Control Severance Agreement,dated August 7, 2017, to the Change of Control Severance Agreement,dated October 28, 2015, between XOMA Corporation and ThomasBurns 10-Q 001-14710 10.10 11/06/2017 10.65+# License Agreement, dated December 6, 2017, between XOMA (US)LLC and Rezolute, Inc. (formerly AntriaBio) 10.66+# Common Stock Purchase Agreement, dated December 6, 2017,between XOMA (US) LLC and Rezolute, Inc. (formerly AntriaBio) 21.1+ Subsidiaries of the Company 23.1+ Consent of Independent Registered Public Accounting Firm 24.1+ Power of Attorney (included on the signature pages hereto) 31.1+ Certification of Chief Executive Officer, as required by Rule 13a-14(a)or Rule 15d-14(a) 31.2+ Certification of Chief Financial Officer, as required by Rule 13a-14(a)or Rule 15d-14(a) 32.1+ Certification of Chief Executive Officer and Chief Financial Officer,as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 ofChapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)(1) 101.INS+ XBRL Instance Document 101.SCH+ XBRL Taxonomy Extension Schema Document 101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document 101.LAB+ XBRL Taxonomy Extension Labels Linkbase Document 101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document 53 †Confidential treatment has been granted with respect to certain portions of this exhibit. This exhibit omits the information subject to thisconfidentiality request. Omitted portions have been filed separately with the SEC.*Indicates a management contract or compensation plan or arrangement.+Filed herewith#Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been submittedseparately to the SEC. Omitted portions have been filed separately with the SEC.(1)This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K.Item 16.Form 10-K SummaryNone. 54 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized, on this 7th day of March 2018. XOMA Corporation By: /s/ JAMES R. NEAL James R. NealChief Executive Officer and DirectorPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James Neal and ThomasBurns, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in hisor her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, withexhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power andauthority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he might orcould do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or their substitute or substitutes, may lawfullydo or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ James R. Neal Chief Executive Officer (Principal Executive Officer) and Director March 7, 2018(James R. Neal) /s/ Thomas Burns Senior Vice President, Finance and Chief Financial Officer (Principal Financialand Principal Accounting Officer) March 7, 2018(Thomas Burns) /s/ W. Denman Van Ness Chairman of the Board of Directors March 7, 2018(W. Denman Van Ness) /s/ Joseph M. Limber Director March 7, 2018(Joseph M. Limber) /s/ Jack L. Wyszomierski Director March 7, 2018(Jack L. Wyszomierski) /s/ Matthew Perry Director March 7, 2018(Matthew Perry) 55 Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets F-3Consolidated Statements of Comprehensive Income (Loss) F-4Consolidated Statements of Stockholders' Equity (Deficit) F-5Consolidated Statements of Cash Flows F-6Notes to the Consolidated Financial Statements F-8 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Stockholders and the Board of Directors of XOMA CorporationOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of XOMA Corporation (the “Company”) as of December 31, 2017 and 2016, therelated consolidated statements of comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the three years in the period endedDecember 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financialstatements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017 and 2016, and the consolidatedresults of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally acceptedaccounting principles.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required tohave, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internalcontrol over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1998. Redwood City, CaliforniaMarch 7, 2018 F-2 XOMA CorporationCONSOLIDATED BALANCE SHEETS(in thousands, except share data) December 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $43,471 $25,742 Trade and other receivables, net 397 566 Prepaid expenses and other current assets 327 852 Total current assets 44,195 27,160 Property and equipment, net 83 1,036 Other assets 657 481 Total assets $44,935 $28,677 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $1,679 $5,689 Accrued and other liabilities 2,545 4,215 Accrued restructuring costs 130 3,594 Income taxes payable 1,637 — Deferred revenue – current 1,413 899 Interest bearing obligations – current — 17,855 Accrued interest on interest bearing obligations – current 18 254 Total current liabilities 7,422 32,506 Deferred revenue – non-current 17,123 18,000 Interest bearing obligations – non-current 14,572 25,312 Other liabilities – non-current 32 69 Total liabilities 39,149 75,887 Commitments and Contingencies (Note 13) Stockholders’ equity (deficit): Convertible preferred stock, $0.05 par value, 1,000,000 shares authorized, 5,003 and 0 shares issuedand outstanding at December 31, 2017 and 2016, respectively — — Common stock, $0.0075 par value, 277,333,332 shares authorized, 8,249,158 and 6,114,145 shares issued and outstanding at December 31, 2017 and 2016, respectively 62 46 Additional paid-in capital 1,184,783 1,146,357 Accumulated deficit (1,179,059) (1,193,613)Total stockholders’ equity (deficit) 5,786 (47,210)Total liabilities and stockholders’ equity (deficit) $44,935 $28,677 The accompanying notes are an integral part of these consolidated financial statements. F-3 XOMA CorporationCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands, except per share amounts) Year Ended December 31, 2017 2016 2015 Revenues: License fees $52,311 $3,296 $49,064 Contract and other 379 2,268 6,383 Total revenues 52,690 5,564 55,447 Operating expenses: Research and development 7,875 44,234 70,852 General and administrative 24,337 18,322 20,620 Restructuring 3,447 4,566 3,699 Total operating expenses 35,659 67,122 95,171 Income (loss) from operations 17,031 (61,558) (39,724) Other income (expense): Interest expense (1,238) (3,946) (3,765)Loss on extinguishment of debt (650) — (429)Other income, net 1,115 1,510 5,500 Revaluation of contingent warrant liabilities — 10,464 17,812 Income (loss) before income tax 16,258 (53,530) (20,606) Provision for income taxes (1,662) — — Net income (loss) and comprehensive income (loss) $14,596 $(53,530) $(20,606)Net income (loss) and comprehensive income (loss) available to common stockholders,basic $5,714 $(53,530) $(20,606)Net income (loss) and comprehensive income (loss) available to common stockholders,diluted $5,810 $(53,530) $(20,606)Basic net income (loss) per share available to common stockholders $0.75 $(8.89) $(3.50)Diluted net income (loss) per share available to common stockholders $0.73 $(8.89) $(3.50)Weighted average shares used in computing basic net income (loss) per share available tocommon stockholders 7,619 6,021 5,890 Weighted average shares used in computing diluted net income (loss) per share available tocommon stockholders 7,980 6,021 5,890 The accompanying notes are an integral part of these consolidated financial statements. F-4 XOMA CorporationCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)(in thousands) Convertible Preferred Stock Common Stock AdditionalPaid-In Accumulated TotalStockholders'Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balance, December 31, 2014 — $— 5,795 $44 $1,122,532 $(1,119,477) $3,099 Exercise of stock options, contributions to401(k) and ESPP — — 27 — 1,467 — 1,467 Vesting of restricted stock units — — 60 — — — — Stock-based compensation expense — — — — 9,727 — 9,727 Issuance of warrants — — — — 450 — 450 Exercise of warrants — — 70 1 3,553 — 3,554 Net loss and comprehensive loss — — — — — (20,606) (20,606)Balance, December 31, 2015 — — 5,952 45 1,137,729 (1,140,083) (2,309)Contributions to 401(k) and incentive plans — — 36 — 844 — 844 Vesting of restricted stock units — — 113 1 (1) — — Stock-based compensation expense — — — — 7,645 — 7,645 Issuance of warrants — — — — 97 — 97 Issuance of common stock — — 13 — 43 — 43 Net loss and comprehensive loss — — — — — (53,530) (53,530)Balance, December 31, 2016 — — 6,114 46 1,146,357 (1,193,613) (47,210)Cumulative effect adjustment to accumulateddeficit due to adoption of ASU 2016-09 — — — — 42 (42) — Exercise of stock options — — 110 1 657 — 658 Issuance of common stock related to 401(k)contribution and ESPP — — 102 1 531 — 532 Vesting of restricted stock units — — 74 1 (1) — — Stock-based compensation expense — — — — 7,301 — 7,301 Issuance of convertible preferred stock 5 — — — 20,019 — 20,019 Issuance of common stock — — 1,849 13 9,877 — 9,890 Net income and comprehensive income — — — — — 14,596 14,596 Balance, December 31, 2017 5 $— 8,249 $62 $1,184,783 $(1,179,059) $5,786 The accompanying notes are an integral part of these consolidated financial statements.F-5 XOMA CorporationCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2017 2016 2015 Cash flows used in operating activities: Net income (loss) $14,596 $(53,530) $(20,606)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: License fee recognized related to repayment of principal and accrued interest under the ServierLoan (14,346) — — Stock-based compensation expense 7,301 7,645 9,727 Common stock contribution to 401(k) 506 785 986 Depreciation and amortization 304 769 1,532 Amortization of debt issuance costs, debt discount and final payment on debt 444 1,451 1,413 Loss on sublease 800 — — Loss on extinguishment of debt 650 — 429 Unrealized gain on foreign currency exchange — (489) (1,870)Realized loss (gain) on foreign currency exchange 1,635 (4) (69)Net gain on sale, disposal and impairment of equipment (1,068) — — Revaluation of contingent warrant liabilities — (10,464) (17,812)Gain on sale of marketable securities — (126) — Impairment of non-marketable cost method investment — 370 — Gain on sale of business in connection with Agenus asset purchase agreement — — (3,505)Other 61 116 57 Changes in assets and liabilities: Trade and other receivables, net 169 3,532 (761)Prepaid expenses and other current assets 106 1,034 (28)Accounts payable and accrued liabilities (6,554) (3,938) (2,080)Accrued restructuring costs (3,464) 3,135 459 Accrued interest on interest bearing obligations 272 331 380 Deferred revenue (363) 15,694 356 Income taxes payable 1,637 — — Other liabilities — — 500 Net cash provided by (used in) operating activities 2,686 (33,689) (30,892) Cash flows from investing activities: Purchases of property and equipment (8) (59) (430)Proceeds from sale of property and equipment 1,614 49 18 Proceeds from sale of marketable securities — 622 — Proceeds from sale of business in connection with Agenus asset purchase agreement — — 4,862 Net cash provided by investing activities 1,606 612 4,450 Cash flows from financing activities: Proceeds from issuance of convertible preferred stock, net of issuance costs 20,019 — — Proceeds from issuance of common stock, net of issuance costs 10,160 57 171 Proceeds from exercise of options 1,550 — 363 Proceeds from exercise of warrants — — 1 Proceeds from issuance of long term debt — — 20,000 Debt issuance costs and loan fees — — (512)Principal payments – debt (16,380) (6,890) (6,128)Payment of final fee related to loan extinguishment (1,150) — — Principal payments – capital lease (51) (109) (41)Taxes paid related to net share settlement of equity awards (890) — (53)Net cash provided by (used in) financing activities 13,258 (6,942) 13,801 Effect of exchange rate changes on cash 179 (6) (37) Net increase (decrease) in cash and cash equivalents 17,729 (40,025) (12,678)Cash and cash equivalents at the beginning of the year 25,742 65,767 78,445 Cash and cash equivalents at the end of the year $43,471 $25,742 $65,767 The accompanying notes are an integral part of these consolidated financial statements. F-6 Supplemental Cash Flow Information: Cash paid for interest $545 $2,142 $1,927 Non-cash investing and financing activities: Marketable securities received in conjunction with the disposal of business $— $— $496 Equipment acquired through capital lease $45 $— $323 Reclassification of contingent warrant liability to equity upon exercise of warrants $— $— $(3,552)Issuance of warrants $— $— $450 Interest added to principal balances on long-term debt $487 $402 $327 Exchange of loan payable for license agreement $14,346 $— $— The accompanying notes are an integral part of these consolidated financial statements. F-7 XOMA CorporationNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of BusinessXOMA Corporation (referred to as “XOMA” or the “Company”), a Delaware corporation, has a long history of discovering and developing innovativetherapeutics derived from its unique platform of antibody technologies. Over the Company’s 37 year history, it built an extensive portfolio of fully-fundedprograms by advancing product candidates into the earlier stages of development and then licensing them to licensees who assumed the responsibilities oflater stage development, approval and commercialization. Fully-funded programs are those for which the Company’s partners pay all of the development andcommercialization costs. As licensees advance these programs, the Company is eligible for potential milestone and royalty payments. In March 2017, the Company transformed its strategy to become a royalty aggregator with a focus on expanding its portfolio of fully-funded programsby out-licensing internally developed product candidates and acquiring potential milestone and royalty revenue streams on additional product candidates.The Company combined its royalty-aggregator model with a significantly reduced corporate cost structure to further build value for its shareholders. TheCompany expects that a significant portion of future revenue will be based on payments it may receive for milestones and royalties related to these programs. 2. Basis of Presentation and Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts andtransactions among consolidated entities were eliminated upon consolidation.Liquidity and Financial ConditionWith the exception of the year ended December 31, 2017, the Company has typically incurred significant operating losses and negative cash flowsfrom operations since its inception. As of December 31, 2017, the Company had cash and cash equivalents of $43.5 million. The Company has evaluated andconcluded there are no conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for aperiod of one year following the date that these financial statements are issued.Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management tomake estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis,management evaluates its estimates including, but not limited to, those related to contingent warrant liabilities, revenue recognition, debt amendments, long-lived assets, restructuring liabilities, legal contingencies, and stock-based compensation. The Company bases its estimates on historical experience and onvarious other market-specific and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basisfor making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differsignificantly from these estimates, such as the Company’s billing under government contracts and the Company’s accrual for clinical trial expenses. Underthe Company’s contracts with the National Institute of Allergy and Infectious Diseases (“NIAID”), a part of the National Institutes of Health (“NIH”), theCompany bills using NIH provisional rates and thus is subject to future audits at the discretion of NIAID’s contracting office. These audits can result in anadjustment to revenue previously reported which potentially could be significant. In March 2016, the Company effected the novation of its remaining activecontract with NIAID to Ology Bioservices, Inc. (“Ology Bioservices”) (formerly known as Nanotherapeutics, Inc.) (see Note 6). The billings made prior to theeffective date of the novation of such contract are still subject to future audits, which may result in significant adjustments to reported revenues.Revenue RecognitionRevenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery hasoccurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. The determination of criteria (2) isbased on management’s judgments regarding whether a continuing performance obligation exists. The determination of criteria (3) and (4) are based onmanagement’s judgments regarding the nature of the fee charged for products or services delivered and the collectability of those fees.F-8 The Company recognizes revenue from its license arrangements, and royalties. In prior years, the Company had also recognized revenues forreimbursements of research and development costs under collaboration agreements as the services were performed. Revenue arrangements with multipleelements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the partnerand whether there is objective and reliable evidence of the fair value of the undelivered items. Each deliverable in the arrangement is evaluated to determinewhether it meets the criteria to be accounted for as a separate unit of accounting or whether it should be combined with other deliverables. In order to accountfor the multiple-element arrangements, the Company identifies the deliverables included within the arrangement and evaluates which deliverables representseparate units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation todeliver services, a right or license to use an asset, or another performance obligation. The consideration received is allocated among the separate units ofaccounting based on their respective fair values and the applicable revenue recognition criteria are applied to each of the separate units. Advance paymentsreceived in excess of amounts earned are classified as deferred revenue until earned.License FeesRevenue from non-refundable license, technology access or other payments under license agreements are recognized over the estimated period whenthe transfer of related materials, process and know-how should be delivered to the licensee. After the delivery of the materials, process and know-how to thelicensee, the Company has no continuing obligation to perform under the license agreements.License agreements with certain third parties also provide for contingent payments to be paid to the Company based solely upon the performance ofthe partner. For such contingent payments revenue is recognized upon completion of the milestone event, once confirmation is received from the third party,provided that collection is reasonably assured and the other revenue recognition criteria have been satisfied.Contract and Other RevenuesContract revenue for research and development involved the Company providing research and development services to collaborative parties or others.Cost reimbursement revenue under collaborative agreements was recorded as contract and other revenues and was recognized as the related research anddevelopment costs were incurred, as provided for under the terms of these agreements. Revenue for certain contracts was accounted for by a proportionalperformance, or output-based, method where performance was based on estimated progress toward elements defined in the contract. The amount of contractrevenue and related costs recognized in each accounting period were based on management’s estimates of the proportional performance during the period.Adjustments to estimates based on actual performance were recognized on a prospective basis and did not result in reversal of revenue should the estimate tocomplete had been extended.Up-front fees associated with contract revenue were recorded as license fees and were recognized in the same manner as the final deliverable, whichwas generally ratably over the period of the continuing performance obligation. Given the uncertainties of research and development collaborations,significant judgment was required to determine the duration of the arrangement. Royalty revenue and royalty receivables are recorded in the periods these royalty amounts are earned, if estimable and collectability is reasonablyassured. The royalty revenue and receivables recorded in these instances are based upon communication with the Company’s licensees, historical informationand forecasted sales trends.Sale of Future Revenue Streams The Company has sold its rights to receive certain milestones and royalties on product sales. In the circumstance where the Company has sold itsrights to future milestones and royalties under a license agreement and also maintains limited continuing involvement in the arrangement (but not significantcontinuing involvement in the generation of the cash flows that are due to the purchaser), the Company defers recognition of the proceeds it receives for themilestone or royalty stream and recognizes such deferred revenue as contract and other revenue over the life of the underlying license agreement. TheCompany recognizes this revenue under the "units-of-revenue" method. Under this method, amortization for a reporting period is calculated by computing aratio of the proceeds received from the purchaser to the total payments expected to be made to the purchaser over the term of the agreement, and thenapplying that ratio to the period’s cash payment.F-9 Estimating the total payments expected to be received by the purchaser over the term of such arrangements requires management to use subjectiveestimates and assumptions. Changes to the Company’s estimate of the payments expected to be made to the purchaser over the term of such arrangementscould have a material effect on the amount of revenues recognized in any particular period.Research and Development ExpensesThe Company expenses research and development costs as incurred. Research and development expenses consist of direct costs such as salaries andrelated personnel costs, material and supply costs, and research-related allocated overhead costs, such as facilities costs. In addition, research anddevelopment expenses have included costs related to clinical trials. Such amounts are expensed as incurred. Stock-Based CompensationThe Company recognizes compensation expense for all stock-based payment awards made to the Company’s employees, consultants and directorsthat are expected to vest based on estimated fair values. The valuation of stock option awards is determined at the date of grant using the Black-ScholesOption Pricing Model (the “Black-Scholes Model”). The Black-Scholes Model requires inputs such as the expected term of the option, expected volatilityand risk-free interest rate. To establish an estimate of expected term, the Company considers the vesting period and contractual period of the award and itshistorical experience of stock option exercises, post-vesting cancellations and volatility. The estimate of expected volatility is based on the Company’shistorical volatility. The risk-free rate is based on the yield available on United States Treasury zero-coupon issues corresponding to the expected term of theaward.The Company records compensation expense for service-based awards over the vesting period of the award on a straight-line basis. For awards withperformance-based conditions, the Company records the expense over the remaining service period when management determines that achievement of themilestone is probable. Management evaluates when the achievement of a performance-based condition is probable based on the expected satisfaction of theperformance conditions as of the reporting date. The amount of stock-based compensation expense recognized during a period is based on the value of theportion of the awards that are ultimately expected to vest.The valuation of restricted stock units (“RSUs”) is determined at the date of grant using the Company’s closing stock price.In January 2017, the Company adopted Accounting Standards Update (“ASU”) No. 2016-09, Compensation—Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, (“ASU 2016-09”). ASU 2016-09 is aimed at the simplification of several aspects of theaccounting for employee share-based payment transactions, including accounting for forfeitures, income tax consequences, classification of awards as eitherequity or liabilities, and classification on the statement of cash flows. Pursuant to the adoption of ASU 2016-09, the Company has made an election to recordforfeitures when they occur. Previously, stock-based compensation was based on the number of awards expected to vest after considering estimatedforfeitures. The change in accounting principle with regards to forfeitures was adopted using a modified retrospective approach. The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.Restructuring and Impairment ChargesRestructuring costs are primarily comprised of severance costs related to workforce reductions, contract termination costs and asset impairments. TheCompany recognizes restructuring charges when the liability has been incurred, except for employee termination benefits that are incurred over time.Generally, employee termination benefits (i.e., severance costs) are accrued at the date management has committed to a plan of termination and employeeshave been notified of their termination dates and expected severance payments. Key assumptions in determining the restructuring costs include the terms andpayments that may be negotiated to terminate certain contractual obligations and the timing of employees leaving the Company. Other costs, includingcontract termination costs, are recorded when the arrangement is terminated. Asset impairment charges have been, and will be, recognized when managementhas concluded that the assets have been impaired.Cash and Cash EquivalentsThe Company considers all highly liquid debt instruments with maturities of three months or less at the time the Company acquires them and that canbe liquidated without prior notice or penalty to be cash equivalents. F-10 Property and EquipmentProperty and equipment is stated at cost less depreciation. Equipment depreciation is calculated using the straight-line method over the estimateduseful lives of the assets (three years). Leasehold improvements were depreciated using the straight-line method over the shorter of the lease terms or theuseful lives. Amortization expense for assets acquired through capital leases was included in depreciation expense in the consolidated statements ofcomprehensive income (loss). Upon the sale, retirement or disposal of assets, the cost and related accumulated depreciation and amortization are removedfrom the consolidated balance sheets, and the resulting gain or loss, if any, is reflected in other income (expense), net in the consolidated statements ofcomprehensive income (loss). Repairs and maintenance costs are charged to expense as incurred.The carrying value of the property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the asset maynot be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventualdisposition is less than its carrying amount. During the years ended December 31, 2017 and 2016, the Company recognized impairment charges of $0.2million and $0.2 million, respectively. WarrantsThe Company had issued warrants to purchase shares of its common stock in connection with financing activities. The Company accounted for someof these warrants as a liability at fair value and others as equity at fair value. The fair value of the outstanding warrants was estimated using the Black-ScholesModel. The Black-Scholes Model required inputs such as the expected term of the warrants, expected volatility and risk-free interest rate. These inputs weresubjective and required significant analysis and judgment to develop. For the estimate of the expected term, the Company used the full remaining contractualterm of the warrant. The Company determined the expected volatility assumption in the Black-Scholes Model based on historical stock price volatilityobserved on the Company’s underlying stock. The assumptions associated with contingent warrant liabilities were reviewed each reporting period andchanges in the estimated fair value of these contingent warrant liabilities were recognized in revaluation of contingent warrant liabilities within theconsolidated statements of comprehensive income (loss).Income TaxesThe Company accounts for income taxes using the liability method under which deferred tax assets and liabilities are determined based on differencesbetween financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when thedifferences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount which is more likely thannot to be realizable.The recognition, derecognition and measurement of a tax position is based on management’s best judgment given the facts, circumstances andinformation available at each reporting date. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as acomponent of income tax expense. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.Net Income (Loss) per Share Available to Common StockholdersBasic net income (loss) per share available to common stockholders is based on the weighted average number of shares of common stock outstandingduring the period. During periods of income, the Company allocates participating securities a proportional share of net income, after deduction of a deemeddividend on preferred stock, determined by dividing total weighted average participating securities by the sum of the total weighted average number ofcommon stock and participating securities (the “two-class method”). The Company’s convertible preferred stock participates in any dividends declared bythe Company on its common stock and are therefore considered to be participating securities. For the year ended December 31, 2017, the convertiblepreferred stock had a deemed dividend which represented the accretion of a beneficial conversion feature. As such, the net income for the year endedDecember 31, 2017 was adjusted for the convertible preferred stock deemed dividend related to the beneficial conversion feature on these shares at issuance.During periods of loss, the Company allocates no loss to participating securities because they have no contractual obligation to share in the losses of theCompany. Diluted net income (loss) per share available to common stockholders is based on the weighted average number of shares outstanding during theperiod, adjusted to include the assumed conversion of preferred stock, and the exercise of certain stock options, RSUs, and warrants for common stock. Thecalculation of diluted income (loss) per share available to common stockholders requires that, to the extent the average market price of the underlying sharesfor the reporting period exceeds the exercise price of any outstanding options, RSUs or warrants and the presumed exercise of such securities are dilutive toearnings (loss) per share available to common stockholders for the period, adjustments to net income (loss) used in the calculation are required to remove thechange in fair value of the warrants for the period. Likewise, adjustments to the denominator are required to reflect the related dilutive shares. (See Note 11). F-11 Comprehensive Income (Loss)Comprehensive income (loss) is comprised of two components: net income (loss) and other comprehensive income (loss). Other comprehensiveincome (loss) refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity, but are excluded from net income (loss). TheCompany did not record any transactions within other comprehensive income (loss) in the periods presented and, therefore, the net income (loss) andcomprehensive income (loss) were the same for all periods presented. Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance codified in Accounting Standards Codification (“ASC”) 606,Revenue Recognition — Revenue from Contracts with Customers, which amends the guidance in ASC 605, Revenue Recognition. The standard’s coreprinciple is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration towhich the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued an accounting update to defer theeffective date by one year for public entities such that it is now applicable for annual and interim periods beginning after December 15, 2017. Early adoptionis permitted for periods beginning after December 15, 2016. ASC 606 also permits two methods of adoption: retrospectively to each prior reporting periodpresented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initialapplication (the modified retrospective method). The Company is required to adopt the standard on January 1, 2018. To date, the Company has primarilyderived its revenues from various license and collaboration arrangements and sale of future royalties. The consideration the Company is eligible to receiveunder these agreements includes upfront payments, milestone payments and royalties. Each of the Company’s agreements has unique terms that will need tobe evaluated separately under ASC 606. The Company has completed its assessment of its active license and collaboration agreements and sale of futureroyalty arrangements, the impact of the new guidance on its consolidated financial statements, as well as the evaluation of the disclosure requirements underthe new standard. The Company will adopt the new standard using the modified retrospective method. The Company has evaluated the accounting, transitionand disclosure requirements of the new standard and does not expect it to have a material impact on the Company’s consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), (“ASU 2016-02”). Under ASU 2016-02, a lessee will be required torecognize assets and liabilities for leases with lease terms of more than 12 months. Recognition, measurement, and presentation of expenses and cash flowsarising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. ASU 2016-02 will require both types of leases to berecognized on the balance sheet. The ASU also will require disclosures to help investors and other financial statement users better understand the amount,timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additionalinformation about the amounts recorded in the financial statements. ASU 2016-02 is effective for the Company for all interim and annual reporting periodsbeginning after December 15, 2018. Early adoption is permitted. The Company is in the process of assessing the impact of ASU No. 2016-02 on itsconsolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments (a consensus of the FASB Emerging Issues Task Force), (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues including debtprepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that areinsignificant in relation to the effective interest rate of the borrowing and contingent consideration payments made after a business combination. ASU 2016-15 is effective for all interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expectthe adoption of ASU 2016-15 to have a material impact on its consolidated statements of cash flows.In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, (“ASU 2017-04”). ASU 2017-09 streamlines the application of modification accounting by stating that when making a change to the terms or conditions of a share-basedpayment award, a company should apply modification accounting to the award, unless each of the following conditions is met: 1. The fair value (orcalculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated valueor intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If themodification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate thevalue immediately before and after the modification, and 2. The vesting conditions of the modified award are the same as the vesting conditions of theoriginal award immediately before the original award is modified, and 3. The classification of the modified award as an equity instrument or a liabilityinstrument is the same as the classification of the original award immediately before the original award is modified. ASU 2017-09 is effective for all interimand annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company does not expect the adoption of ASU 2017-09to have a material impact on its consolidated financial statements. F-12 3. Consolidated Financial Statement DetailCash and Cash EquivalentsAt December 31, 2017, cash and cash equivalents consisted of demand deposits of $34.9 million and money market funds of $8.6 million withmaturities of less than 90 days at the date of purchase. At December 31, 2016, cash and cash equivalents consisted of demand deposits of $21.5 million andmoney market funds of $4.2 million with maturities of less than 90 days at the date of purchase.Property and Equipment, netProperty and equipment, net consisted of the following (in thousands): December 31, 2017 2016 Equipment and furniture $124 $14,023 Leasehold improvements — 554 124 14,577 Less: Accumulated depreciation and amortization (41) (13,541)Property and equipment, net $83 $1,036 As of December 31, 2016, property and equipment held under capital leases, included under equipment and furniture above, amounted to $0.3million, with accumulated amortization of $0.1 million. The Company terminated these capital lease equipment agreements in March 2017. Depreciation andamortization expense was $0.3 million, $0.8 million, and $1.5 million for the years ended December 31, 2017, 2016, and 2015, respectively. During the year ended December 31, 2017, the Company completed the sale of equipment and disposal of other certain equipment located in one ofits leased facilities for total proceeds of $1.6 million. The total carrying value of the equipment sold and disposed of was $0.4 million. Accordingly, theCompany recorded a gain of $1.2 million on the sale and disposal of equipment on the other income (expense), net line of the Company’s consolidatedstatement of comprehensive income (loss).In connection with the restructuring activities implemented in December 2016, the Company determined that the leasehold improvements located inone of its leased facilities are no longer expected to be used by the Company. The Company determined that an impairment charge equal to the net bookvalue of the leasehold improvements of $0.2 million should be recorded as the future economic value, if any, that may be realized from the leaseholdimprovements would be negligible in a sublease transaction. The impairment charge is reflected within the restructuring charge in the consolidated statementof comprehensive income (loss) for the year ended December 31, 2016. During the year ended December 31, 2017, the Company recognized an impairmentcharge of $0.2 million related to one of its leased facilities. There were no significant impairment charges recognized during the year ended December 31,2015.Accrued and Other LiabilitiesAccrued and other liabilities consisted of the following (in thousands): December 31, 2017 2016 Accrued payroll and other benefits $141 $1,582 Accrued clinical trial costs — 458 Accrued incentive compensation 229 — Accrued legal and accounting fees 431 385 Deferred rent 765 707 Liability related to sublease 800 — Other 179 1,083 Total $2,545 $4,215 F-13 4. Collaborative, Licensing and Other ArrangementsCollaborative and Other AgreementsNovartis – Gevokizumab and IL-1 BetaOn August 24, 2017, the Company and Novartis Pharma AG (“Novartis”) entered into a license agreement (the “XOMA-052 License Agreement”)under which the Company granted to Novartis an exclusive, worldwide, royalty-bearing license to gevokizumab, a novel anti-Interleukin-1 (“IL-1”) betaallosteric monoclonal antibody (the “Antibody”) and related know-how and patents (altogether, the “XOMA IP”). Under the terms of the XOMA-052 LicenseAgreement, Novartis will be solely responsible for the development and commercialization of the Antibody and products containing the Antibody. TheCompany completed the transfer of the required proprietary know-how, process, materials and inventory relating to the XOMA IP to Novartis as of December31, 2017.On August 24, 2017, pursuant to a separate agreement (the “IL-1 Target License Agreement”), the Company granted to Novartis non-exclusivelicenses to its intellectual property covering the use of IL-1 beta targeting antibodies in the treatment and prevention of cardiovascular disease and otherdiseases and conditions, and an option to obtain an exclusive license (the “Exclusivity Option”) to such intellectual property for the treatment andprevention of cardiovascular disease. The Company also granted Novartis the right of first negotiation with respect to certain transactions relating to thelicensed intellectual property.Under the XOMA-052 License Agreement, the Company received total consideration of $30.0 million for the license and rights granted to Novartis.Of the total consideration, $15.7 million was paid in cash and $14.3 million (equal to €12.0 million) was paid by Novartis Institutes for BioMedicalResearch, Inc. (“NIBR”), on behalf of the Company, to settle the Company’s outstanding debt with Les Laboratories Servier (the “Servier Loan”). In addition,NIBR extended the maturity date on the Company’s debt to Novartis (see Note 8). The Company also received $5.0 million cash related to the sale of539,131 shares of the Company’s common stock, at a purchase price of $9.2742 per share. The fair market value of the common stock issued to Novartis was$4.8 million, based on the closing stock price of $8.93 per share on August 24, 2017, resulting in a $0.2 million premium paid to the Company (see Note 12).Based on the achievement of pre-specified criteria, the Company is eligible to receive up to $438.0 million in development, regulatory and commercialmilestones. The Company is also eligible to receive royalties on sales of licensed products, which are tiered based on sales levels and range from the highsingle digits to mid-teens. Under the IL-1 Target License Agreement, the Company received an upfront cash payment of $10.0 million and is eligible toreceive low single-digit royalties on canakinumab sales in cardiovascular indications. Should Novartis exercise the Exclusivity Option, the royalties oncanakinumab sales will increase to the mid-single digits.The XOMA-052 License Agreement and IL-1 Target License Agreement were accounted for as one arrangement because they were entered into at thesame time in contemplation of each other. The Company concluded that there are multiple deliverables under the combined arrangement which consisted of(i) the licenses to IL-1 beta targeting antibodies, (ii) the license to gevokizumab antibody and (iii) the transfer of know-how, process, materials and inventoryrelated the gevokizumab antibody. The Company concluded that the license to the gevokizumab antibody and the related transfer of know-how process,materials and inventory each do not have stand-alone value. Accordingly, the Company combined these two deliverables into a single unit of accounting.The Company determined that the Exclusivity Option is a substantive option and not priced at a significant and incremental discount. Therefore, theCompany concluded that the Exclusivity Option is not a deliverable. The agreements were evaluated pursuant to the provisions of the multiple-elementarrangement guidance in determining how to recognize the revenue associated with each unit of account. The total arrangement consideration received fromNovartis is $40.2 million and consists of the $25.7 million upfront cash payments, the $14.3 million Servier Loan payoff and the $0.2 million premium onthe sale of the common stock. The total arrangement consideration was allocated to each unit of account based on their relative selling prices. Revenue wasrecognized as the revenue recognition criteria were met for each identified unit of account. During the year ended December 31, 2017, the Companyrecognized revenue of $31.9 million related to the licenses to IL-1 beta targeting antibodies and the consideration allocated to the gevokizumab antibody of$8.3 million upon completing the transfer of certain proprietary know-how, process, materials and inventory relating to the XOMA IP.The Company determined that future contingent payments that may be received related to development, regulatory and sales milestones under theXOMA-052 License Agreement are based on the performance of Novartis and do not meet the definition of substantive milestones under the accountingguidance. Accordingly, revenue for the achievement of these milestones will be recognized in the period when the milestone is achieved. As of December 31,2017, the Company has not recognized any milestone payments under the XOMA-052 License Agreement. The Company expects to recognize royaltyrevenue in the period of sale of the related products, based on the underlying contract terms. No such amounts were recognized during the year endedDecember 31, 2017.F-14 Novartis – Anti-TGFβ AntibodyOn September 30, 2015, the Company and Novartis International Pharmaceutical Ltd. (“Novartis International”) entered into a license agreement (the“License Agreement”) under which the Company granted Novartis International an exclusive, world-wide, royalty-bearing license to the Company’s anti-transforming growth factor beta (TGFβ) antibody program (the “anti-TGFβ Program”). Under the terms of the License Agreement, Novartis International hasworldwide rights to the anti-TGFβ Program and is responsible for the development and commercialization of antibodies and products containing antibodiesarising from the anti-TGFβ Program.Under the License Agreement, the Company received a $37.0 million upfront fee. The Company is also eligible to receive up to a total of $480.0million in development, regulatory and commercial milestones. Any such payments will be treated as contingent consideration and recognized as revenuewhen they are achieved, as the Company has no performance obligations under the License Agreement beyond the initial 90-day period. The Company isalso eligible to receive royalties on sales of licensed products, which are tiered based on sales levels and range from a mid-single digit percentage rate to upto a low double-digit percentage rate. Novartis International’s obligation to pay royalties with respect to a particular product and country will continue forthe longer of the date of expiration of the last valid patent claim covering the product in that country, or ten years from the date of the first commercial sale ofthe product in that country.The License Agreement contains customary termination rights relating to material breach by either party. Novartis International also has a unilateralright to terminate the License Agreement on an antibody-by-antibody and country-by-country basis or in its entirety on one hundred eighty days’ notice.The Company identified the following performance deliverables under the License Agreement: (i) the license, (ii) regulatory services to be deliveredwithin 90 days from the Effective Date and (iii) transfer of materials, process and know-how, also to be delivered within 90 days from the Effective Date. TheCompany considered the provisions of the multiple-element arrangement guidance in determining how to recognize the revenue associated with thesedeliverables. The Company determined that none of the deliverables have standalone value and therefore has accounted for them as a single unit of account.The Company recognized the entire upfront payment as revenue in the consolidated statement of comprehensive income (loss) in 2015 as it had completedits performance obligations as of December 31, 2015. During the year ended December 31, 2017, Novartis International achieved a clinical developmentmilestone pursuant to the License Agreement and, as a result, the Company earned a $10.0 million milestone payment which was recognized as license andcollaborative fees in the consolidated statement of comprehensive income (loss). As of December 31, 2017, the Company is eligible to receive up to a total of$470.0 million in development, regulatory and commercial milestones.In connection with the execution of the License Agreement, XOMA and Novartis Vaccines Diagnostics, Inc. (“NVDI”) executed an amendment to theirAmended and Restated Research, Development and Commercialization Agreement dated July 1, 2008, as amended, relating to anti-CD40 antibodies (the“Collaboration Agreement Amendment”). Pursuant to the Collaboration Agreement Amendment, the parties agreed to reduce the royalty rates and period thatXOMA is eligible to receive on sales of NVDI’s clinical stage anti-CD40 antibodies. These royalties are tiered based on sales levels and now range from amid-single digit percentage rate to up to a low double-digit percentage rate and royalties are payable until the later of any licensed patent covering eachproduct or ten years from the launch of each product. All other terms of the Amended and Restated Research, Development and CommercializationAgreement remained unchanged (see Note 8).RezoluteOn December 6, 2017, the Company entered into a license agreement with Rezolute, Inc. (formerly AntriaBio, Inc.) (“Rezolute”) pursuant to which theCompany granted an exclusive global license to Rezolute to develop and commercialize X358 (now “RZ358”) for all indications. The Company andRezolute also entered into a common stock purchase agreement.F-15 Under the terms of the license agreement, Rezolute is responsible for all development, regulatory, manufacturing and commercialization activitiesassociated with RZ358 and is required to make certain clinical, regulatory and commercial milestone payments to the Company of up to $232.0 million inthe aggregate based on the achievement of pre-specified criteria. Under the license agreement, the Company is also eligible to receive royalties ranging fromthe high single digits to the mid-teens based upon annual net sales of any commercial product incorporating RZ358. Rezolute is obligated to take customarysteps to advance RZ358, including using diligent efforts to commence the next clinical study for RZ358 by a certain deadline and to meet certain spendingrequirements on an annual basis for the program until a marketing approval application for RZ358 is accepted by the FDA. Rezolute’s obligation to payroyalties with respect to a particular RZ358 product and country will continue for the longer of the date of expiration of the last valid patent claim coveringthe product in that country, or twelve years from the date of the first commercial sale of the product in that country. Rezolute has an option through June 1,2019 to obtain an exclusive license for their choice of one of the Company’s preclinical monoclonal antibody fragments, including X129, in exchange for a$1.0 million upfront option fee and additional clinical, regulatory and commercial milestone payments to the Company of up to $237.0 million in theaggregate based on the achievement of pre-specified criteria as well as royalties ranging from the high single digits to the mid-teens based on annual netsales.Pursuant to the license agreement and common stock purchase agreement, the Company is eligible to receive $6.0 million in cash and $12.0 millionworth of Rezolute’s common stock contingent on the completion of its financing activities. Further, in the event that Rezolute does not complete a financingthat raises at least $20.0 million in aggregate gross proceeds (“Qualified Financing”) by March 31, 2019, the Company will receive an additional number ofshares of Rezolute’s common stock equal to $7.0 million divided by the weighted average of the closing bid and ask prices or the average closing prices ofRezolute’s common stock on the ten-day trading period prior to March 31, 2019. Finally, in the event that Rezolute is unable to complete a QualifiedFinancing by March 31, 2020, the Company is eligible to receive $15.0 million in cash in order to maintain the license. Under the common stock purchaseagreement, Rezolute granted the Company the right and option to sell the greater of (i) 5,000,000 shares of common stock or (ii) one third of the aggregateshares held by the Company upon failure by Rezolute to list its shares of its common stock on the Nasdaq Stock Market or a similar national exchange on orprior to December 31, 2018. In addition, under the terms of the license agreement, the Company is eligible to receive a low single digit royalty on sales of Rezolute’s otherproducts from its current programs. Rezolute’s obligation to pay royalties with respect to a particular Rezolute product and country will continue for thelonger of twelve years from the date of the first commercial sale of the product in that country or for so long as Rezolute or its licensee is selling such productin such country, provided that such royalty will terminate upon the termination of the licensee’s obligation to make payments to Rezolute based on sales ofsuch product in such country.The license agreement contains customary termination rights relating to material breach by either party. Rezolute also has a unilateral right toterminate the license agreement in its entirety on ninety days’ notice at any time. The Company has the right to terminate the license agreement if Rezolutechallenges the licensed patents. The Company concluded that there are multiple deliverables under the license agreement which consist of (i) the license to RZ358, (ii) the transfer ofRZ358 materials and product data/filing, and (iii) the transfer of process and know-how related to RZ358. The Company concluded that the license to RZ358and the related transfer of materials, product data/filing, process and know-how each do not have stand-alone value. Accordingly, the Company combinedthese three deliverables into a single unit of accounting. The Company determined that the option to obtain an exclusive license for one of the Company’spreclinical monoclonal antibody fragments, including X129, is a substantive option and not priced at a significant and incremental discount. Therefore, theCompany concluded that the option is not a deliverable. Under the agreements, no consideration was exchanged upon execution of the arrangement.Rezolute agreed to issue shares of its common stock and pay cash to the Company upon the occurrence of Rezolute’s financing activities and related timingof those activities. At December 31, 2017, Rezolute has not completed any of its financing activities and therefore, the Company has not recognized anyrevenue under the arrangement. ServierIn December 2010, the Company entered into a license and collaboration agreement (“Collaboration Agreement”) with Servier, to jointly develop andcommercialize gevokizumab in multiple indications, which provided for a non-refundable upfront payment of $15.0 million that was received by theCompany in January 2011. In addition, the Company received a loan of €15.0 million, which was fully funded in January 2011, with the proceeds convertingto $19.5 million at the date of funding (see Note 8). Under the terms of the Collaboration Agreement, Servier had worldwide rights to cardiovascular diseaseand diabetes indications and had rights outside the United States and Japan to all other indications, including non-infectious intermediate, posterior or pan-uveitis, Behçet’s disease uveitis, pyoderma gangrenosum, and other inflammatory and oncology indications. XOMA retained development andcommercialization rights in the United States and Japan for all indications other than cardiovascular disease and diabetes. F-16 On September 28, 2015, Servier notified XOMA of its intention to terminate the Collaboration Agreement, as amended, and return the gevokizumabrights to XOMA. The termination, which became effective on March 25, 2016, did not result in a change to the maturity date of the Company’s loan withServier (see Note 8). As the Company is no longer required to provide services to Servier under the Collaboration Agreement, the Company recognized allremaining deferred revenue of $0.6 million from the date of notification to March 25, 2016. The Company and Servier completed the final reconciliation ofcost sharing under the collaboration and all related adjustments are reflected in the consolidated statement of comprehensive income (loss) for the year endedDecember 31, 2016. For the years ended December 31, 2016 and 2015, the Company recorded revenue of $0.6 million and $1.2 million, respectively, fromthis Collaboration Agreement. NIAIDIn September 2008, the Company announced that it had been awarded a $64.8 million multiple-year contract funded with federal funds from NIAID(Contract No. HHSN272200800028C), to continue the development of anti-botulinum antibody product candidates. The contract work was being performedon a cost plus fixed fee basis over a three-year period. The Company recognizes revenue under the arrangement as the services are performed on aproportional performance basis. Consistent with the Company’s other contracts with the U.S. government, invoices are provisional until finalized. TheCompany operated under provisional rates from 2010 through 2014, subject to adjustment based on actual rates upon agreement with the government. In2014, upon completion of a NIAID review of hours and external expenses, XOMA agreed to exclude certain hours and external expenses resulting in a $1.8million adjustment to decrease previously invoiced balances. The adjustment was offset by a $1.9 million deferred revenue balance that was recorded in 2012as a result of a rate adjustment for the period 2007 to 2009. This adjustment reduced accounts receivable and deferred revenue by $1.8 million to reflect thefinal settlement of the 2008 to 2013 hours and external review. NIAID has deferred payment of the remaining $0.4 million in accounts receivable pending thefinal agreement on the ongoing 2010 to 2013 final rate submission. The remaining $0.1 million in deferred revenue in connection with the 2011 NIH rateaudit would be recognized upon completion of negotiations with and approval by the NIH. The Company recognized revenue of $0.1 million and $0.2million under this contract, for the years ended December 31, 2017 and 2015. There was no revenue recognized during the year ended December 31, 2016. Asof December 31, 2017, the Company wrote off the $0.4 million receivable from NIAID as the likelihood of collection is remote.In October 2011, the Company announced that NIAID had awarded the Company a new contract under Contract No. HHSN272201100031C (“NIAID4”) for up to $28.0 million over five years to develop broad-spectrum antitoxins for the treatment of human botulism poisoning. The contract work was beingperformed on a cost plus fixed fee basis over the life of the contract and the Company recognized revenue under the arrangement as the services wereperformed on a proportional performance basis. The Company recognized revenue of $1.1 million and $4.9 million under this contract, for the years endedDecember 31, 2016 and 2015, respectively. There was no revenue recognized during the year ended December 31, 2017. In March 2016, the Companyeffected a novation of the NIAID 4 to Ology Bioservices. The novation was effected upon obtaining government approval to transfer the contract to OlogyBioservices pursuant to the asset purchase agreement executed in November 2015 (see Note 6).PfizerIn August 2007, the Company entered into a license agreement (the “2007 Agreement”) with Pfizer Inc. (“Pfizer”) for non-exclusive, worldwide rightsfor XOMA’s patented bacterial cell expression technology for research, development and manufacturing of antibody products. From 2011 through 2015, theCompany received milestone payments aggregating $4.2 million.On December 3, 2015, the Company and Pfizer entered into a settlement and amended license agreement pursuant to which XOMA granted Pfizer afully-paid, royalty-free, worldwide, irrevocable, non-exclusive license right to XOMA’s patented bacterial cell expression technology for phage display andother research, development and manufacturing of antibody products. Under the amended license agreement, the Company received a cash payment of $3.8million in full satisfaction of all obligations to XOMA under the 2007 Agreement, including but not limited to potential milestone, royalty and other feesunder the 2007 Agreement. The Company recognized the entire payment from Pfizer as revenue upon delivery of the license in 2015.F-17 In August 2005, the Company entered into a license agreement with Wyeth (subsequently acquired by Pfizer) for non-exclusive, worldwide rights forcertain of XOMA’s patented bacterial cell expression technology for vaccine manufacturing. Under the terms of this agreement, the Company received amilestone payment in November 2012 relating to TRUMENBA®, a meningococcal group B vaccine marketed by Pfizer. The Company’s right to royaltiesexpires on a country-by-country basis upon the expiration of the last-to-expire licensed patent. The Company recognized zero and $0.4 million of royaltiesearned from the sales of TRUMENBA during the years ended December 31, 2017 and 2016. The royalties on sales of TRUMENBA for the years endedDecember 31, 2015 were not material. As discussed below under Sale of Future Revenue Streams, the Company sold its right to receive all future milestonesand royalties on future sales of products to HCRP in connection with the Royalty Interest Acquisition Agreement entered into in December 2016.Novo NordiskOn December 1, 2015, the Company and Novo Nordisk A/S (“Novo Nordisk”) entered into a license agreement under which XOMA granted to NovoNordisk an exclusive, world-wide, royalty-bearing license to XOMA’s XMetA program of allosteric monoclonal antibodies that positively modulate theinsulin receptor (the “XMetA Program”), subject to XOMA’s retained commercialization rights for rare disease indications. Novo Nordisk had an option toadd these retained rights to its license upon payment of an option fee.Novo Nordisk obtained worldwide rights to the XMetA Program and was solely responsible at its expense for the development and commercializationof antibodies and products containing antibodies arising from the XMetA Program, subject to the Company’s retained rights described above. The Companyhad transferred certain proprietary know-how and materials relating to the XMetA Program to Novo Nordisk. Under the agreement, the Company received a$5.0 million, non-creditable, non-refundable, upfront payment. Based on the achievement of pre-specified criteria, the Company was eligible to receive up to$290.0 million in development, regulatory and commercial milestones. The Company was also eligible to receive royalties on sales of licensed products,which would be tiered based on sales levels and range from a mid-single digit percentage rate to up to a high single digit percentage rate. Novo Nordisk’sobligation to pay development and commercialization milestones would continue for so long as Novo Nordisk was developing or selling products under theagreement, subject to the maximum milestone payment amounts set forth above. Novo Nordisk’s obligation to pay royalties with respect to a particularproduct and country would continue for the longer of the date of expiration of the last valid patent claim covering the product in that country, or ten yearsfrom the date of the first commercial sale of the product in that country.The Company identified the following performance deliverables under the agreement: (i) the license, and (ii) the transfer of technology and know-howto be delivered within 60 days from December 1, 2015. The Company delivered the majority of the technology and know-how to Novo Nordisk as ofDecember 31, 2015 and determined that any remaining items are perfunctory to the arrangement. Accordingly, the Company recognized the entire $5.0million upfront fee as revenue in 2015.On April 20, 2017, the Company received notice from Novo Nordisk regarding the termination of the license agreement due to strategic and businessreasons. The termination of the license agreement became effective on July 20, 2017.Sale of Future Revenue StreamsOn December 21, 2016, the Company entered into two Royalty Interest Acquisition Agreements (together, the “Acquisition Agreements”) with HCRP.Under the first Acquisition Agreement, the Company sold its right to receive milestone payments and royalties on future sales of products subject to aLicense Agreement, dated August 18, 2005, between XOMA and Wyeth Pharmaceuticals (now Pfizer, Inc.) for an upfront cash payment of $6.5 million, pluspotential additional payments totaling $4.0 million in the event three specified net sales milestones are met in 2017, 2018 and 2019. Based on estimatedsales for 2017, the 2017 sales milestone was not achieved. The Company remains eligible to receive up to $3.0 million if specified net sales milestones areachieved in 2018 and 2019. Under the second Acquisition Agreement, the Company sold all rights to royalties under an Amended and Restated LicenseAgreement dated October 27, 2006 between XOMA and Dyax Corp. for a cash payment of $11.5 million.F-18 The Company classified the proceeds received from HCRP as deferred revenue, to be recognized as contract and other revenue over the life of thelicense agreements because of the Company's limited continuing involvement in the Acquisition Agreements. Such limited continuing involvement isrelated to the Company’s undertaking to cooperate with HCRP in the event of a litigation or dispute related to the license agreements. Because thetransaction was structured as a non-cancellable sale, the Company does not have significant continuing involvement in the generation of the cash flows dueto HCRP and there are no guaranteed rates of return to HCRP, the Company recorded the total proceeds of $18.0 million as deferred revenue. The deferredrevenue is being recognized as contract and other revenue over the life of the underlying license agreements under the "units-of-revenue" method. Under thismethod, amortization for a reporting period is calculated by computing a ratio of the proceeds received from HCRP to the payments expected to be made toHCRP over the term of the Acquisition Agreements, and then applying that ratio to the period’s cash payment. The Company recognized $0.3 million ascontract and other revenue under these arrangements during the year ended December 31, 2017. As of December 31, 2017, the current and non-currentportion of the remaining deferred revenue was $0.6 million and $17.1 million, respectively. As of December 31, 2016, the Company classified the $18.0million as non-current deferred revenue. As of December 31, 2017, the net sales milestone related to 2017 was not met and therefore, the Company did notrecognize any revenue for milestones under the first Acquisition Agreement. 5. Fair Value MeasurementsThe Company records its financial assets and liabilities at fair value. The carrying amounts of certain of the Company’s financial instruments,including cash equivalents, trade receivable and accounts payable, approximate their fair value due to their short maturities. Fair value is defined as theexchange price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. The accounting guidance for fair value establishes a framework for measuring fair value and a fair value hierarchy that prioritizes theinputs used in valuation techniques. The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two areconsidered observable and the last unobservable, that may be used to measure fair value which are the following:Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.Level 2 – Observable inputs, either directly or indirectly, other than quoted prices in active markets for similar assets or liabilities, that are not activeor other inputs that are not observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities;therefore, requiring an entity to develop its own valuation techniques and assumptions.The following tables set forth the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis asfollows (in thousands): Fair Value Measurements at December 31, 2017 Using Quoted Prices inActive Markets forIdentical Assets Significant OtherObservableInputs SignificantUnobservableInputs (Level 1) (Level 2) (Level 3) Total Assets: Money market funds (1) $34,907 $— $— $34,907 Fair Value Measurements at December 31, 2016 Using Quoted Prices inActive Markets forIdentical Assets Significant OtherObservableInputs SignificantUnobservableInputs (Level 1) (Level 2) (Level 3) Total Assets: Money market funds (1) $4,161 $— $— $4,161 (1) Included in cash and cash equivalents During the years ended December 31, 2017 and 2016, there were no transfers between Level 1, Level 2, or Level 3 and the valuation techniques useddid not change compared to the Company’s established practice.F-19 The estimated fair value of the contingent warrant liabilities was determined using the Black-Scholes Model, which required inputs such as theexpected term of the warrants, volatility and risk-free interest rate. These inputs were subjective and generally required significant analysis and judgment todevelop. The Company’s common stock price represented a significant input that affected the valuation of the warrants. The change in the fair value wasrecorded as a gain or loss in the revaluation of contingent warrant liabilities line of the consolidated statements of comprehensive income (loss). As ofDecember 31, 2017, all the warrants accounted for as liability expired.The estimated fair value of the contingent warrant liabilities was estimated using the following range of assumptions at December 31, 2016: December 31, 2016 Expected volatility 64% Risk-free interest rate 0.51% Expected term (in years) 0.19 The following table provides a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the year ended December 31,2016 (in thousands): Balance at December 31, 2015 10,464 Decrease in estimated fair value of contingent warrant liabilities upon revaluation (10,464)Balance at December 31, 2016 $— The fair value of the Company’s outstanding interest-bearing obligations is estimated using the net present value of the payments, discounted at aninterest rate that is consistent with market interest rates, which is a Level 2 input. The carrying amount and the estimated fair value of the Company’soutstanding interest-bearing obligations at December 31, 2017 and 2016 are as follows (in thousands): December 31, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value Hercules term loan $— $— $16,850 $16,453 Servier loan — — 12,231 12,242 Novartis note 14,572 14,178 14,086 13,836 Total interest bearing obligations $14,572 $14,178 $43,167 $42,531 6. DispositionsBiodefense AssetsOn November 4, 2015, the Company and Ology Bioservices entered into an asset purchase agreement under which Ology Bioservices agreed toacquire XOMA’s biodefense business and related assets (including, subject to government approval, certain contracts with the U.S. government), and toassume certain liabilities of XOMA. As part of that transaction, the parties entered into an intellectual property license agreement (the “Ology BioservicesLicense Agreement”), under which XOMA agreed to license to Ology Bioservices certain intellectual property rights related to the purchased assets. Underthe Ology Bioservices License Agreement, the Company was eligible to receive contingent consideration up to a maximum of $4.5 million in cash and23,008 shares of common stock of Ology Bioservices, based upon Ology Bioservices achieving certain specified future operational objectives. In addition,the Company is eligible to receive 15% royalties on net sales of any future Ology Bioservices products covered by or involving the related patents or know-how.F-20 On March 17, 2016, the Company effected a novation of its NIAID 4 contract to Ology Bioservices. On March 23, 2016, the Company completed thetransfer of NIAID 4 and certain related third-party service contracts and materials, and the grant of exclusive and non-exclusive licenses for certain of itspatents and general know-how to Ology Bioservices. The Company believes that NIAID 4 and certain related third-party service contracts and materialsrelated to the biodefense program transferred to Ology Bioservices include a sufficient number of key inputs and processes necessary to generate output froma market participant’s perspective. Accordingly, the Company has determined that such assets qualified as a business. The transaction had no impact on theCompany’s consolidated financial statements as of, and for the year ended, December 31, 2016.In February 2017, the Company executed an Amendment and Restatement to both the asset purchase agreement and Ology Bioservices LicenseAgreement primarily to (i) remove Ology Bioservices’ obligation to issue 23,008 shares to the Company of its common stock under the asset purchaseagreement, and (ii) revise the payment schedule related to the timing of the $4.5 million cash payments due to the Company under the Ology BioservicesLicense Agreement. Of the $4.5 million, $3.0 million was contingent upon Ology Bioservices achieving certain specified future operating objectives, whichOlogy Bioservices achieved in 2017. Based on the payment terms pursuant to the amended Ology Bioservices License Agreement, the Company is entitledto receive an aggregate of $4.6 million. The Company received $2.2 million during the year ended December 31, 2017, which was recognized as otherincome in the consolidated statement of comprehensive income (loss). As the amended Ology Bioservices License Agreement involves extended paymentterms, the remaining $2.4 million, of which $1.7 million is due in monthly installments through July 2018 and $0.7 million is due in quarterly installmentsthrough September 2018, will be recognized as other income as the payments are received.Manufacturing FacilityOn November 5, 2015, the Company and Agenus West, LLC, a wholly-owned subsidiary of Agenus Inc. (“Agenus”), entered into an asset purchaseagreement under which Agenus agreed to acquire XOMA’s manufacturing facility in Berkeley, California, together with certain related assets, includingcertain intellectual property related to the purchased assets under an intellectual property license agreement, and to assume certain liabilities of XOMA, inconsideration for the payment to XOMA of up to $5.0 million in cash and the issuance to XOMA of shares of Agenus’ common stock having an aggregatevalue of up to $1.0 million.On December 31, 2015, XOMA completed the sale of the manufacturing facility, including certain related equipment and furniture, and the grant ofnon-exclusive licenses for certain of its patents and general know-how to Agenus for cash consideration of $4.7 million, net of the assumed liabilities of $0.3million at closing. In addition to the cash consideration, XOMA received 109,211 shares of common stock of Agenus with an aggregate value of $0.5million, which the Company subsequently sold in August 2016. The remaining $0.5 million of Agenus common stock will only be received upon theCompany’s satisfaction of certain organizational matters, which XOMA is unlikely to satisfy. Agenus also paid $0.2 million to the Company as considerationfor the employees who would not have otherwise been retained by the Company had the manufacturing facility closed on October 31, 2015. At closing, thecarrying value of the assets sold was $2.2 million. The Company believes that the assets related to the manufacturing facility and certain other assets sold toAgenus include all key inputs and processes necessary to generate output from a market participant’s perspective. Accordingly, the Company determined thatsuch assets qualified as a business. The Company recorded the gain on the sale of a business of $3.5 million in the other income (expense), net line of theconsolidated statement of comprehensive income (loss) for the year ended December 31, 2015. 7. Restructuring ChargesOn December 19, 2016, the Board of Directors approved a restructuring of its business based on its decision to focus the Company’s efforts on clinicaldevelopment, with an initial focus on the X358 clinical programs. The restructuring included a reduction-in-force in which the Company terminated 57employees (the “2016 Restructuring”). In addition, effective December 21, 2016, the Company’s Chief Executive Officer retired from his position. In early2017, the Company further revised its business model to prioritize out-licensing activities, further curtail research and development spending, and terminatedfive additional employees (the “2017 Restructuring”).During the year ended December 31, 2017, the Company recorded charges of $3.4 million related to severance, other termination benefits andoutplacement services in connection with the workforce reduction resulting from the 2017 Restructuring and 2016 Restructuring activities. During the yearended December 31, 2016, the Company recorded charges of $3.8 million related to severance, other termination benefits and outplacement services inconnection with the workforce reduction resulting from the 2016 Restructuring. The Company recognized $0.6 million of non-cash stock-basedcompensation as a result of the acceleration of a former executive’s options and RSUs under his retention benefit agreement in 2016. In addition, in 2016, theCompany recognized an asset impairment charge of $0.2 million related to leasehold improvements.F-21 On July 22, 2015, the Company announced the Phase 3 EYEGUARD-B study of gevokizumab in patients with Behçet’s disease uveitis, run byServier, did not meet the primary endpoint of increased time to first acute ocular exacerbation. Due to the results and the Company’s belief they would bepredictive of results in its other EYEGUARD studies, in August 2015, the Company announced its intention to end the EYEGUARD global Phase 3 program.On August 21, 2015, the Company, in connection with its efforts to lower operating expenses and preserve capital while continuing to focus on its endocrineproduct pipeline, implemented a restructuring plan (the “2015 Restructuring”) that included a workforce reduction resulting in the termination of 52employees during the second half of 2015.During the years ended December 31, 2016 and 2015, the Company recorded a credit of $32,000 and a charge of $2.9 million, respectively, related toseverance, other termination benefits and outplacement services in connection with the workforce reduction resulting from the 2015 Restructuring. Inaddition, the Company recognized additional restructuring charges of $29,000 and $0.8 million in contract termination costs in 2016 and 2015, respectively,which primarily include costs in connection with the discontinuation of the EYEGUARD studies.The outstanding restructuring liabilities are included in accrued and other liabilities on the consolidated balance sheets. As of December 31, 2017 and2016, the components of these liabilities are shown below (in thousands): EmployeeSeverance Contract and OtherBenefits TerminationCosts Stock-basedCompensation AssetImpairment Total Balance at December 31, 2015 $343 $116 $— $— $459 Restructuring charges 3,720 29 619 198 4,566 Non-cash charges — — (619) (198) (817)Cash payments (469) (145) — — (614)Balance at December 31, 2016 3,594 — — — 3,594 Restructuring charges 3,447 — — — 3,447 Cash payments (6,911) — — — (6,911)Balance at December 31, 2017 $130 $— $— $— $130 The Company expects to pay the remaining $0.1 million in 2018. 8. Long-Term Debt and Other FinancingsNovartis NoteIn May 2005, the Company executed a secured note agreement (the “Note Agreement”) with Novartis, which was due and payable in full in June2015. Under the Note Agreement, the Company borrowed semi-annually to fund up to 75% of the Company’s research and development andcommercialization costs under its collaboration arrangement with Novartis, not to exceed $50.0 million in aggregate principal amount. Interest on theprincipal amount of the loan accrues at six-month London Interbank Offered Rate plus 2%, which was equal to 3.81% at December 31, 2017, and is payablesemi-annually in June and December of each year. Additionally, the interest rate resets in June and December of each year. At the Company’s election, thesemi-annual interest payments could be added to the outstanding principal amount, in lieu of a cash payment, as long as the aggregate principal amount doesnot exceed $50.0 million. The Company made this election for all interest payments. Accrued interest of $0.3 million, $0.4 million and $0.3 million wasadded to the principal balance of the note for the years ended December 31, 2017, 2016, and 2015, respectively. Loans under the Note Agreement weresecured by the Company’s interest in its collaboration with Novartis, including any payments owed to it thereunder.On September 30, 2015, concurrent with the execution of the License Agreement with Novartis International as discussed in Note 4, XOMA and NIBR,who assumed the rights to the note from NVDI, executed an amendment to the Note Agreement (the “Secured Note Amendment”) under which the partiesextended the maturity date of the note from September 30, 2015 to September 30, 2020, and eliminated the mandatory prepayment previously required to bemade with certain proceeds of pre-tax profits and royalties. In addition, upon achievement of a specified development and regulatory milestone, the then-outstanding principal amount of the note will be reduced by $7.3 million rather than the Company receiving such amount as a cash payment.F-22 On September 22, 2017, in connection with the XOMA-052 License Agreement with Novartis, the Company and NIBR executed an amendment to theSecured Note Amendment under which the parties further extended the maturity date of the Secured Note Amendment from September 30, 2020 to September30, 2022. All other terms of the Secured Note Amendment and original Note Agreement remain unchanged. The Company determined that the amendmentresulted in a debt modification. As a result, the Secured Note Amendment will continue to be accounted for using the effective interest method, with a neweffective interest rate based on revised cash flows calculated on a prospective basis upon the execution of the amendment. As of December 31, 2017 and2016, the outstanding principal balance under this Secured Note Amendment was $14.6 million and $14.1 million, respectively, and was included in interestbearing obligations – non-current in the accompanying consolidated balance sheets.Servier Loan AgreementIn December 2010, in connection with the Collaboration Agreement entered into with Servier, the Company executed a loan agreement with Servier(the “Servier Loan Agreement”), which provided for an advance of €15.0 million, which converted to approximately $19.5 million at that time. The loan wassecured by an interest in the Company’s intellectual property rights to all gevokizumab indications worldwide, excluding certain rights in the U.S. and Japan.Interest was calculated at a floating rate based on a Euro Inter-Bank Offered Rate and subject to a cap. The interest rate was reset semi-annually in January andJuly of each year.On January 9, 2015, Servier and the Company entered into Amendment No. 2 (“Loan Amendment”) to the Servier Loan Agreement to extend thematurity date of the loan from January 13, 2016 to three tranches of principal to be repaid as follows: €3.0 million on January 15, 2016, €5.0 million onJanuary 15, 2017, and €7.0 million on January 15, 2018. All other terms of the Servier Loan Agreement remained unchanged. The loan would be immediatelydue and payable upon certain customary events of default. In January 2016, the Company made payments of €3.0 million in principal and €0.2 million inaccrued interest to Servier.In January 2017, the Company entered into Amendment No. 3 to the Servier Loan Agreement (the “Amendment No. 3”) which extended the maturitydate of the portion of the loan equal to €5.0 million due on January 15, 2017 to July 15, 2017. The other terms of the Servier Loan Agreement remainedunchanged. The Company determined that Amendment No. 3 resulted in a debt modification. As a result, the Company continued to account for the loanusing the effective interest method, with a new effective interest rate based on revised cash flows calculated on a prospective basis upon the execution of theAmendment No. 3.Upon initial issuance, the loan had a stated interest rate lower than the market rate based on comparable loans held by similar companies, whichrepresented additional value to the Company. The Company recorded this additional value as a discount to the carrying value of the loan amount, at its fairvalue of $8.9 million.The loan discount was amortized to interest expense under the effective interest method over the remaining life of the loan. The Company recordednon-cash interest expense resulting from the amortization of the loan discount of $0.4 million, $0.6 million and $0.7 million for the years ended December31, 2017, 2016, and 2015, respectively. At December 31, 2016, the net carrying value of the loan was $12.2 million. For the years ended December 31, 2016and 2015, the Company recorded an unrealized foreign exchange gain of $5,000 and an unrealized foreign exchange loss of $0.2 million, respectively,related to the re-measurement of the loan discount. The outstanding principal balance under this loan was $12.6 million using a euro to US dollar exchange rate of 1.052, as of December 31, 2016. TheCompany recognized unrealized foreign exchange gains of $0.5 million and $1.9 million for the years ended December 31, 2016, and 2015, related to the re-measurement of the loan.On August 25, 2017, NIBR settled the Servier Loan in cash by paying directly to Servier $14.3 million, which represented the outstanding balance ofthe loan based on a euro to dollar exchange rate of 1.1932. The funds that NIBR paid directly to Servier were a portion of the upfront payment due to XOMAunder the XOMA-052 License Agreement (see Note 4). As a result of the debt being fully paid, the intellectual property securing the Servier Loan Agreementwas released back to the Company. A loss on extinguishment of $0.1 million from the payoff of the loan was recognized in the consolidated statement ofcomprehensive income (loss) during the year ended December 31, 2017.F-23 Hercules Term LoanOn February 27, 2015 (“Closing Date”), the Company entered into a loan and security agreement with Hercules Technology Growth Capital, Inc. (the“Hercules Term Loan”). The Hercules Term Loan had a variable interest rate that is the greater of either (i) 9.40% plus the prime rate as reported from time totime in The Wall Street Journal minus 7.25%, or (ii) 9.40%. The payments under the Hercules Term Loan were interest only until June 1, 2016 . The interest-only period was followed by equal monthly payments of principal and interest amortized over a 30-month schedule through the scheduled maturity date ofSeptember 1, 2018. As security for its obligations under the Hercules Term Loan, the Company granted a security interest in substantially all of its existingand after-acquired assets, excluding its intellectual property assets.The Hercules Term Loan included certain affirmative and restrictive covenants, but did not include any financial covenants, and also includedstandard events of default, including payment defaults. Upon the occurrence of an event of default, a default interest rate of an additional 5% may have beenapplied to the outstanding loan balances, and Hercules may have declared all outstanding obligations immediately due and payable, and taken such otheractions as set forth in the Hercules Term Loan.The Company incurred debt issuance costs of $0.5 million in connection with the Hercules Term Loan. The Company was required to pay a finalpayment fee equal to $1.2 million on the maturity date, or such earlier date as the term loan was paid in full. The debt issuance costs and final payment feewere being amortized and accreted, respectively, to interest expense over the term of the term loan using the effective interest method. The Companyrecorded non-cash interest expense resulting from the amortization of the debt issuance costs and accretion of the final payment of $0.2 million, $0.7 millionand $0.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.As of December 31, 2016, the outstanding principal balance of the Hercules Term Loan was $17.5 million, and the net carrying value was $16.9million. On December 21, 2016, the Company entered into Amendment No. 1 (the “Amendment”) to the Hercules Term Loan. Under the Amendment,Hercules agreed to release its security interest in the assets subject to the Acquisition Agreements described in Note 4 above. In turn, in January 2017, theCompany paid $10.0 million of the outstanding principal balance owed to Hercules. This amount was included in current interest-bearing obligations as ofDecember 31, 2016. All other terms of the Hercules Term Loan remained unchanged.On March 21, 2017, the remaining balance of the Hercules Term Loan was paid in full and the Company was not required to pay the 1% prepaymentcharge due pursuant to the terms of the loan. A loss on extinguishment of $0.5 million from the payoff of the Hercules Term Loan was recognized in theconsolidated statement of comprehensive income (loss) during the year ended December 31, 2017.In connection with the Hercules Term Loan, the Company issued unregistered warrants that entitle Hercules to purchase up to an aggregate of 9,063unregistered shares of the Company’s common stock at an exercise price equal to $66.20 per share. These warrants are exercisable immediately and have afive-year term expiring in February 2020. The Company allocated the aggregate proceeds of the Hercules Term Loan between the warrants and the debtobligation. The fair value of the warrants of $0.5 million, which was determined using the Black-Scholes Model, was recorded as a discount to the debtobligation. The debt discount was amortized over the term of the loan using the effective interest method. The warrants are classified in stockholders’ equity(deficit) on the consolidated balance sheets. As of December 31, 2017, all of these warrants were outstanding. Interest ExpenseAmortization of debt issuance costs and discounts are included in interest expense. Interest expense in the consolidated statements of comprehensiveincome (loss) for the years ended December 31, 2017, 2016, and 2015, relates to the following debt instruments (in thousands): Year Ended December 31, 2017 2016 2015 Novartis note $490 $405 $329 Servier loan 431 892 1,083 Hercules loan 311 2,628 2,223 Other 6 21 130 Total interest expense $1,238 $3,946 $3,765 F-24 9. Income TaxesThe Company is subject to an ownership change pursuant to IRC Section 382, which occurred in February 2017, which significantly limits its abilityto use its net operating loss carryforwards and tax credits against its 2017 taxable income. Due to historical losses, there was no income tax expense for theyears ended December 31, 2016, and 2015.The provision for income taxes (all current) consists of the following (in thousands): Year Ended December 31, 2017 2016 2015 Federal $1,649 $— $— State 13 — — Total $1,662 $— $—Reconciliation between the tax provision computed at the federal statutory income tax rate of 34% and the Company’s actual effective income taxrate is as follows: Year Ended December 31, 2017 2016 2015 Federal tax at statutory rate 34% 34% 34%Warrant valuation — 7% 29%Stock compensation and other permanent differences 6% — (1)%Tax credits (4)% 2% (14)%Impact of 2017 Tax Act on change in deferred 128% — — Section 382 limitations 868% — — Valuation allowance (1,022)% (43)% (48)%Total 10% 0% 0% The significant components of net deferred tax assets at December 31, 2017 and 2016 were as follows (in thousands): December 31, 2017 2016 Capitalized research and development expenses $26,367 $53,557 Net operating loss carryforwards 4,701 123,672 Research and development and other credit carryforwards 12,225 25,297 Stock compensation 3,680 7,099 Deferred revenue 3,928 6,577 Other 883 1,724 Total deferred tax assets 51,784 217,926 Valuation allowance (51,784) (217,926)Net deferred tax assets $— $— The net (decrease) increase in the valuation allowance was $(166.1) million, $8.2 million, and $19.6 million for the years ended December 31, 2017,2016, and 2015, respectively.Accounting standards provide for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight ofavailable evidence, which includes the Company’s four sources of taxable income including historical operating performance and the repeal of net operatingloss carryback, the Company has determined that total deferred tax assets should be fully offset by a valuation allowance.On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal RevenueCode. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. TheCompany has calculated the impact of the Tax Act in its year end income tax provision in accordance with its understanding of the Tax Act and guidanceavailable as of the date of this filing. In December 2017, SAB 118 was issued to address the application of U.S. GAAP in situations when a registrant does nothave all the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the TaxAct. In accordance with SAB 118, additional work may be necessary for a more detailed analysis of the Company's deferred tax assets and liabilities. Anysubsequent adjustment to the provisional amounts will be recorded in 2018 when the analysis is complete.F-25 Under ASC 740, Accounting for Income Taxes, the enactment of the Tax Act also requires companies to recognize the effects of changes in tax lawsand rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted.Consequently, the Company accounted for a provisional estimated reduction of the deferred tax assets from $72.7 million to $51.8 million with acorresponding decrease to the Company’s valuation allowance. The Company expects the new law to significantly reduce its tax rate in future periods, andits tax footnote reflects the effects of a federal tax rate reduction net of its valuation allowance.As of January 1, 2017, the Company adopted ASU 2016-09 and as a result recognized a stock compensation excess windfall, net of operating losscarryforwards that were converted into deferred tax net operating losses of $1.8 million, with a corresponding increase in valuation allowance of $1.8 million.Based on an analysis under Section 382 of the Internal Revenue Code (which subjects the amount of pre-change NOLs and certain other pre-changetax attributes that can be utilized to annual limitations), the Company experienced an ownership change in February 2017 which substantially limits thefuture use of its pre-change Net Operating Losses ("NOLs") and certain other pre-change tax attributes per year. The Company has excluded NOLs of $119.8million and tax credit carryforwards of $15.4 million that will expire as a result of the annual limitations in these deferred tax assets as of December 31,2017. To the extent that the Company does not utilize its carry-forwards within the applicable statutory carryforward periods, either because of Section 382limitations or the lack of sufficient taxable income, the carryforwards will expire unused.As of December 31, 2017, the Company had federal net operating loss carry-forwards of approximately $13.6 million and state net operating losscarry-forwards of approximately $27.3 million to offset future taxable income. The net operating loss carryforwards begin to expire in 2036 for federal and2028 for state purposes. California net operating losses of $24.3 million, $41.2 million, and $22.4 million, expired in the years 2017, 2016, and 2015,respectively. The Company had federal orphan credit of $1.0 million which if not utilized will expire in 2037. The Company also had $19.8 million ofCalifornia research and development tax credits which have no expiration date.The Company files income tax returns in the U.S. federal jurisdiction, California, Maryland and Texas. The Company’s federal income tax returns fortax years 2014 and beyond remain subject to examination by the Internal Revenue Service. The Company’s state income tax returns for tax years 2013 andbeyond remain subject to examination by state tax authorities. In addition, all of the net operating losses and research and development credit carry-forwardsthat may be used in future years are still subject to adjustment.The following table summarizes the Company's activity related to its unrecognized tax benefits (in thousands): Year Ended December 31, 2017 2016 2015 Balance at January 1 $8,625 $9,666 $5,503 Increase related to current year tax position 581 592 2,687 (Decrease) increase related to prior year tax position (3,705) (1,633) 1,476 Balance at December 31 $5,501 $8,625 $9,666 As of December 31, 2017, the Company had a total of $4.5 million of net unrecognized tax benefits, none of which would affect the effective tax rateupon realization. The Company currently has a full valuation allowance against its U.S. net deferred tax assets which would impact the timing of the effectivetax rate benefit should any of these uncertain tax positions be favorably settled in the future.The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months. The Company will recognizeinterest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Through December 31, 2017, the Company has notaccrued interest or penalties related to uncertain tax positions. 10. Compensation and Other Benefit PlansThe Company grants qualified and non-qualified stock options, RSUs, common stock and other stock-based awards under various plans to directors,officers, employees and other individuals. Stock options are granted at exercise prices of not less than the fair market value of the Company’s common stockon the date of grant. Additionally, the Company has an Employee Stock Purchase Plan (“ESPP”) that allows employees to purchase Company shares at apurchase price equal to 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the lastday of the offering period.F-26 Employee Stock Purchase PlanIn May 2015, the Company’s stockholders approved the 2015 Employee Stock Purchase Plan (the “2015 ESPP”) which replaced the Company’slegacy 1998 ESPP. Under the 2015 ESPP, the Company reserved 15,000 shares of common stock for issuance as of its effective date of July 1, 2015, subjectto adjustment in the event of a stock split, stock dividend, combination or reclassification or similar event. The 2015 ESPP allows eligible employees topurchase shares of the Company’s common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any planlimitations. The 2015 ESPP provides for six-month offering periods ending on May 31 and November 30 of each year, with the exception of the first offeringperiod, which ran from July 1, 2015 through November 30, 2015, as the Company transitioned from the 1998 ESPP. At the end of each offering period,employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offeringperiod or on the last day of the offering period.In February 2017, the Compensation Committee and the Board of Directors adopted, and in May 2017, the Company’s stockholders approved, anamendment to the Company’s 2015 ESPP. The amendment (a) increased by 250,000 the shares of common stock (from 15,000 shares to a total of 265,000shares) available for issuance under the 2015 ESPP; and (b) increased the maximum number of shares of common stock an employee may purchase in anyoffering period to 2,500.During the years ended December 31, 2017, 2016, and 2015, employees purchased 5,314, 7,070, and 6,029 shares of common stock, respectively,under the 2015 ESPP.Deferred Savings PlanUnder section 401(k) of the Internal Revenue Code of 1986, the Board of Directors adopted, effective June 1, 1987, a tax-qualified deferredcompensation plan for employees of the Company. Participants may make contributions which defer up to 50% of their eligible compensation per payrollperiod, up to a maximum for 2017, 2016 and 2015 of $18,000 (or $24,000 for employees over 50 years of age). The Company may, at its sole discretion,make contributions each plan year, in cash or in shares of the Company’s common stock, in amounts which match up to 50% of the salary deferred by theparticipants. The expense related to these contributions was $0.5 million and $0.8 million for the years ended December 31, 2016, and 2015, respectively,and 100% was paid in common stock in each year. The Company applies shares from plan forfeitures of terminated employees toward the Company’smatching contribution. For the year ended December 31, 2017, the forfeitures exceeded the total matching contribution from the Company. Therefore, noexpense was recognized by the Company.Stock Option PlansIn May 2010, the Compensation Committee and the full Board adopted, and in July 2010 the Company’s stockholders approved, a new equity-basedcompensation plan, the 2010 Long Term Incentive and Share Award Plan, which has since been amended and restated as the Amended and Restated 2010Long Term Incentive and Stock Award Plan (the “2010 Plan”). The 2010 Plan replaced the Company’s legacy Option Plan, Restricted Plan and 1992Directors Share Option Plan (the “Directors Plan”) and provided a more current set of terms under which to provide this type of compensation.In February 2016, the Compensation Committee and the Board of Directors adopted, and in May 2016, the Company’s stock holders approved anamendment to the 2010 Plan to, among other things, allow for an increase in the number of shares of common stock reserved for issuance by 170,000 sharesto an aggregate of 1,108,560 shares.In February 2017, the Compensation Committee and the Board of Directors adopted, and in May 2017, the Company’s stockholders approved, anamendment to the 2010 Plan. The amendment (a) increases the number of shares of common stock issuable over the term of the plan by an additional1,470,502 to 2,579,062 shares in the aggregate; (b) increases the number of shares of common stock issuable under the plan as incentive stock options by anadditional 2,004,087 to 2,579,062 shares; (c) increases the per person award limits for purposes of compliance with Section 162(m) of the Internal RevenueCode to 2,000,000 shares for options and stock appreciation rights and to 2,000,000 shares for other types of stock awards; and (d) for purposes of Section162(m) (i) confirms existing performance criteria upon which performance goals may be based with respect to performance awards under the 2010 Plan, and(ii) confirms existing means of adjustment when calculating the attainment of performance goals for performance awards granted under the 2010 Plan.F-27 From the 2010 Plan, the Company grants stock options, RSUs, and other stock-based awards to eligible employees, consultants and directors. Nofurther grants or awards will be made under the Option Plan, the Restricted Share Plan or the Directors Plan. Shares underlying options previously issuedunder the Option Plan, the Restricted Share Plan or the Directors Plan that are currently outstanding will, upon forfeiture, cancellation, surrender or othertermination, become available under the 2010 Plan. Stock-based awards granted under the 2010 Plan may be exercised when vested and generally expire tenyears from the date of the grant or three to six months from the date of termination of employment (longer in case of death or certain retirements). Vestingperiods vary based on awards granted, however, certain stock-based awards may vest immediately or may accelerate based on performance-driven measures.As of December 31, 2017, the Company had 412,314 shares available for grant under the stock option plan. As of December 31, 2017, options andRSUs covering 1,641,492 shares of common stock were outstanding under the stock option plan.Stock OptionsStock options generally vest monthly over three to four years for employees and one year for directors. Stock options held by employees who qualifyfor retirement age (defined as employees that are a minimum of 55 years of age and the sum of their age plus years of full-time employment with the Companyexceeds 70 years) vest on the earlier of scheduled vest date or the date of retirement.Performance-Based Stock OptionsIn February 2017, the Board of Directors approved a grant of 1,018,000 stock options to members of the Board of Directors, executives, and non-executive employees, subject to approval by the Company’s stockholders of an increase in the available shares under the 2010 Plan at the 2017 AnnualMeeting of Stockholders. In May 2017, the shareholders approved the increase in the number of shares available for issuance under the Company’s 2010 Planand 998,000 stock options were issued upon approval. As such, the stock options approved for grant in February 2017 were not deemed granted foraccounting purposes until May 2017. The stock options granted to the non-employee board members and non-executive employees vest monthly over threeyears from the grant date. The stock options granted to the executives contain a combination of time-based and corporate performance-based vestingconditions.In December 2017, the Company granted an additional 130,000 stock options to executives with corporate performance-based vesting conditions.Stock-based compensation expense associated with the corporate performance-based stock options is recognized if the performance condition isconsidered probable of achievement using management’s best estimates. As of December 31, 2017, certain corporate-based milestones were achieved andtherefore the related expense was recognized. During the year ended December 31, 2017, the Company recognized stock-based compensation expense of$1.8 million related to stock options with performance-based vesting criteria.Stock Option Plans SummaryThe following table summarizes the Company’s stock option activity for the year ended December 31, 2017: Number ofshares WeightedAverageExercisePricePer Share Outstanding at beginning of year 568,292 $77.70 Granted 1,387,820 10.94 Exercised (110,400) 5.95 Forfeited, expired or cancelled (223,647) 84.40 Outstanding at end of year 1,622,065 $24.54 Exercisable at end of year 849,279 $32.79 Of the stock options outstanding as of December 31, 2017, 542,500 were granted subject to performance objectives tied to the achievement ofcorporate goals set by the Compensation Committee of the Company’s Board of Directors and will vest in full or part based on achievement of such goals. Asof December 31, 2017, 330,000 of the performance-based stock options have vested upon achievement of the Company’s corporate goals for 2017. The aggregate intrinsic value of stock options exercised in 2017 and 2015 was $2.4 million and $0.4 million, respectively. No stock options wereexercised in 2016. The weighted-average grant-date fair value per share of the options granted in 2017, 2016 and 2015 was $10.26, $4.90 and $51.92,respectively.F-28 As of December 31, 2017, there were 1,622,065 stock options outstanding with a weighted average exercise price per share of $24.54, aggregateintrinsic value of $34.3 million, and a weighted average remaining contractual term of 7.91 years. As of December 31, 2017, there were 849,279 stock optionsexercisable with an aggregate intrinsic value of $18.5 million and a weighted average remaining contractual term of 7.65 years.As of December 31, 2017, $8.6 million of total unrecognized compensation expense related to stock options is expected to be recognized over aweighted average period of 2.2 years. Restricted Stock UnitsRSUs generally vest over three years for employees and one year for directors. RSUs held by employees who qualify for retirement age (defined asemployees that are a minimum of 55 years of age and the sum of their age plus years of full-time employment with the Company exceeds 70 years) vest on theearlier of scheduled vest date or the date of retirement.Unvested RSU activity for the year ended December 31, 2017 is summarized below: Weighted- Number of Average Grant- Shares Date Fair Value Unvested balance at January 1, 2017 91,228 $39.82 Granted 11,799 4.67 Vested (62,405) 37.63 Forfeited (22,142) 45.45 Unvested balance at December 31, 2017 18,480 $18.00 The total grant-date fair value of RSUs that vested in 2017, 2016, and 2015, was $2.3 million, $5.3 million and $5.5 million, respectively. As ofDecember 31, 2017, $88,000 of total unrecognized compensation expense related to employee RSUs was expected to be recognized over a weighted averageperiod of 0.26 years.Stock-based Compensation ExpenseThe fair value of stock options granted during the years ended December 31, 2017, 2016, and 2015, was estimated based on the following weightedaverage assumptions for: Year Ended December 31, 2017 2016 2015 Dividend yield 0% 0% 0%Expected volatility 100% 101% 84%Risk-free interest rate 1.90% 1.84% 1.40%Expected term 5.6 years 5.6 years 5.6 years The following table shows total stock-based compensation expense for stock options, RSUs and ESPP in the consolidated statements ofcomprehensive income (loss) (in thousands): Year Ended December 31, 2017 2016 2015 Research and development $876 $2,805 $5,022 General and administrative 6,425 4,221 4,705 Restructuring — 619 — Total stock-based compensation expense $7,301 $7,645 $9,727 F-29 11. Net Income (Loss) per Share Available to Common StockholdersPotentially dilutive securities are excluded from the calculation of diluted net income (loss) per share available to common stockholders if theirinclusion is anti-dilutive.The following table shows the weighted-average outstanding securities considered anti-dilutive and therefore excluded from the computation ofdiluted net income (loss) per share available to common stockholders (in thousands): Year Ended December 31, 2017 2016 2015 Common stock options and RSUs 346 548 550 Warrants for common stock 100 894 960 Convertible preferred stock 4,372 — — Total 4,818 1,442 1,510 The following is a reconciliation of the numerators and denominators used in calculating basic and diluted net income (loss) per share available tocommon stockholders (in thousands): Year Ended December 31, 2017 2016 2015 Numerator Net income (loss) $14,596 $(53,530) $(20,606)Less: Deemed dividend on convertible preferred stock (5,603) — — Less: Allocation of undistributed earnings to participating securities (3,279) — — Net income (loss) available to common stockholders, basic 5,714 (53,530) (20,606)Adjustments to undistributed earnings allocated to participatingsecurities 96 — — Net income (loss) available to common stockholders, diluted $5,810 $(53,530) $(20,606) Denominator Weighted average shares outstanding used for basic net income (loss) pershare available to common stockholders 7,619 6,021 5,890 Effect of dilutive stock options 360 — — Effect of dilutive warrants 1 — — Weighted average shares outstanding used for diluted net income (loss)per share available to common stockholders 7,980 6,021 5,890 Basic net income (loss) per share of common stock $0.75 $(8.89) $(3.50)Diluted net income (loss) per share of common stock $0.73 $(8.89) $(3.50) 12. Capital StockBiotechnology Value Fund FinancingIn February 2017, the Company sold 1,200,000 shares of its common stock and 5,003 shares of Series X convertible preferred stock directly toBiotechnology Value Fund, L.P. and certain of its affiliates (“BVF”) in a registered direct offering, for aggregate net cash proceeds of $24.8 million.BVF purchased the shares of common stock from the Company at a price of $4.03 per share, the closing stock price on the date of purchase. Each shareof Series X convertible preferred stock has a stated value of $4,030 per share and is convertible into 1,000 shares of registered common stock based on aconversion price of $4.03 per share of common stock. The total number of shares of common stock issued upon conversion of all issued Series X convertiblepreferred stock will be 5,003,000 shares. Each share is convertible at the option of the holder at any time, provided that the holder will be prohibited fromconverting into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares above aconversion blocker, which is initially set at 19.99% of the total common stock then issued and outstanding immediately following the conversion of suchshares. As of December 31, 2017 if the preferred shares were converted, BVF would own 49.1% of the Company’s total outstanding common shares. As ofDecember 31, 2017, none of the preferred stock has been converted into shares of the Company’s common stock.F-30 The designations, preferences, rights and limitations of the convertible preferred shares are set forth in a Certificate of Designation of Preferences,Rights and Limitations of Series X convertible preferred stock filed with the Delaware Secretary of State. Shares of Series X convertible preferred stock willgenerally have no voting rights, except as required by law and except that the consent of the holders of the outstanding Series X convertible preferred stockwill be required to amend the terms of the Series X preferred stock and to approve certain corporate actions. In the event of the Company’s liquidation,dissolution or winding up, holders of Series X convertible preferred stock will participate, on a pro-rata basis, with any distribution of proceeds to holders ofcommon stock. Holders of Series X convertible preferred stock are entitled to receive dividends on shares of Series X convertible preferred stock equal (on anas if converted to common stock basis) to and in the same form as dividends actually paid on the Company’s common stock or other junior securities.The Company evaluated the Series X convertible preferred stock for liability or equity classification under the applicable accounting guidance, anddetermined that equity treatment was appropriate because the Series X convertible preferred stock did not meet the definition of the liability instrumentsdefined thereunder for convertible instruments. Specifically, the Series X convertible preferred shares are not mandatorily redeemable and do not embody anobligation to buy back the shares outside of the Company’s control in a manner that could require the transfer of assets. Additionally, the Companydetermined that the Series X convertible preferred stock would be recorded as permanent equity, not temporary equity, based on the relevant guidance giventhat they are not redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at the option of the holder, and (iii) upon the occurrence of anevent that is not solely within control of the Company.The Company has also evaluated the embedded conversion and redemption features within the Series X convertible preferred stock in accordance withthe accounting guidance for derivatives. Based on this assessment, the Company determined that the conversion option is clearly and closely related to theequity host, and thus, bifurcation is not required. The contingent redemption feature was determined to not be clearly and closely related to the equity-likehost; however, it met the criteria as a scope exception for derivative accounting. Therefore, the contingent redemption feature was also not bifurcated fromthe Series X convertible preferred stock.The fair value of the common stock into which the Series X convertible preferred stock is convertible exceeded the allocated purchase price of theSeries X convertible preferred stock by $5.6 million on the date of issuance, as such the Company recorded a deemed dividend. The Company recognized theresulting beneficial conversion feature as a deemed dividend equal to the number of shares of Series X convertible preferred stock sold on February 16, 2017multiplied by the difference between the fair value of the common stock and the Series X convertible preferred stock effective conversion price per share onthat date. The dividend was reflected as a one-time, non-cash, deemed dividend to the holders of Series X convertible preferred stock on the date of issuance,which is the date the stock first became convertible.ATM Agreement On November 12, 2015, the Company entered into an At The Market Issuance Sales Agreement (the “2015 ATM Agreement”) with Cowen andCompany, LLC (“Cowen”), under which the Company may offer and sell from time to time at its sole discretion shares of its common stock through Cowen asits sales agent, in an aggregate amount not to exceed the amount that can be sold under the Company’s registration statement on Form S-3 (File No. 333-201882) filed with the SEC on the same date. The registration statement under the 2015 ATM Agreement will expire in February 2018. Cowen may sell theshares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, including without limitationsales made directly on The NASDAQ Global Market, on any other existing trading market for the Company’s common stock or to or through a market maker.Cowen also may sell the shares in privately negotiated transactions, subject to the Company’s prior approval. The Company will pay Cowen a commissionequal to 3% of the gross proceeds of the sales price of all shares sold through it as sales agent under the 2015 ATM Agreement. Offering costs, consisting oflegal, accounting, and filing fees, incurred in connection with the 2015 ATM Agreement are capitalized. The capitalized offering costs will be offset againstproceeds from the sale of common stock under this agreement. In the event the offering is terminated, all capitalized offering costs will be expensed. For theyear ended December 31, 2017, the Company sold a total of 110,252 shares of common stock under this agreement for aggregate gross proceeds of $0.6million. Total offering costs of $0.2 million were offset against the proceeds upon sale of common stock. For the year ended December 31, 2016, theCompany sold a total of 10,365 shares of common stock under this agreement for aggregate gross proceeds of $56,000. Total offering costs of $56,000 wereoffset against the proceeds upon sale of common stock. There were no shares of common stock sold under the 2015 ATM Agreement during the year endedDecember 31, 2015.F-31 Common Stock Purchase AgreementIn August 2017, in connection with the XOMA-052 License Agreement, the Company and Novartis entered into a Common Stock PurchaseAgreement under which Novartis purchased 539,131 shares of the Company’s common stock, at a price per share of $9.2742 for an aggregate purchase priceof $5.0 million in cash. The fair market value of the common stock issued to Novartis was $4.8 million, based on the closing stock price of $8.93 per share onthe effective date of the Common Stock Purchase Agreement of August 24, 2017. The excess of the purchase price over the fair market value of the commonstock represents a premium of $0.2 million which was accounted for as additional consideration to the related license agreements (See Note 4 for furtherdiscussion). The shares issued to Novartis are unregistered securities and the Company agreed to use commercially reasonable efforts to make and keeppublic information available and timely file all reports and other documents with the SEC as required of the Company under the Securities Exchange Act of1934, as amended. Under the Common Stock Purchase Agreement, upon a request by Novartis, the Company will use commercially reasonable efforts toregister the shares for resale under the Securities Act on a registration statement on Form S-3, to be filed within 60 days of the written request, and will usecommercially reasonable efforts to keep such registration statement continuously effective under the Securities Act until the date all of the shares of commonstock covered by such registration statement have been sold or can be sold publicly without restriction or limitation under Rule 144.Common Stock WarrantsAs of December 31, 2017 and 2016, the following common stock warrants were outstanding: Exercise Price Number of Shares at December 31, Issuance Date Expiration Date Balance Sheet Classification per Share 2017 2016 March 2012 March 2017 Contingent warrant liabilities $35.20 — 479,277 September 2012 September 2017 Stockholders' equity (deficit) $70.80 — 1,967 February 2015 February 2020 Stockholders' equity (deficit) $66.20 9,063 9,063 February 2016 February 2021 Stockholders' equity (deficit) $15.40 8,249 8,249 17,312 498,556In February 2016, in conjunction with services provided by a third-party consultant, the Company issued a warrant to purchase up to an aggregate of8,249 unregistered shares of the Company’s common stock at an exercise price equal to $15.40 per share. These warrants were exercisable immediately andhave a five-year term expiring in February 2021. The estimated fair value of the warrants of $0.1 million was calculated using the Black-Scholes Model andwas classified in stockholders’ equity (deficit) on the consolidated balance sheet. As of December 31, 2017, all of these warrants were outstanding.In February 2015, the Company issued Hercules five-year warrants in connection with the Hercules Term Loan (see Note 8) that entitle Hercules topurchase up to an aggregate of 9,063 unregistered shares of the Company’s common stock at an exercise price equal to $66.20 per share. The warrants areclassified in stockholders’ equity (deficit) on the consolidated balance sheets. As of December 31, 2017, all of these warrants were outstanding.In December 2014, in connection with a registered direct offering to select institutional investors, the Company issued two-year warrants to purchaseup to an aggregate of 404,833 shares of the Company’s common stock at an exercise price of $158.01 per share. These warrants contained provisions thatwere contingent on the occurrence of a change in control, which could conditionally obligate the Company to repurchase the warrants for cash in an amountequal to their estimated fair value using the Black-Scholes Model on the date of such change in control. Due to these provisions, the Company accounted forthe warrants issued in December 2014 as a liability at estimated fair value. In addition, the estimated fair value of the liability related to the warrants wasrevalued at each reporting period until the earlier of the exercise of the warrants or their expiration. During the year ended December 31, 2016, the Companyrevalued the warrants using the Black-Scholes Model, and recorded a $3.0 million reduction in the estimated fair value as a gain on the revaluation ofcontingent warrant liabilities line of the Company’s consolidated statement of comprehensive income (loss). The decrease in the estimated fair value of thewarrants was primarily due to the decrease in the market price of the Company’s common stock at December 31, 2016 compared to December 31, 2015. InDecember 2016, all of these warrants expired unexercised. In September 2012, the Company issued to GECC five-year warrants in connection with the amendment to the GECC Loan Agreement (see Note 8)that entitle GECC to purchase up to an aggregate of 1,967 unregistered shares of the Company’s common stock at an exercise price equal to $70.80 per share.The warrants are classified in stockholders’ equity (deficit) on the consolidated balance sheets. In September 2017, all of these warrants expired unexercised.F-32 In March 2012, in connection with an underwritten offering, the Company issued five-year warrants to purchase 741,729 shares of the Company’scommon stock at an exercise price of $35.20 per share. These warrants contain provisions that are contingent on the occurrence of a change in control, whichcould conditionally obligate the Company to repurchase the warrants for cash in an amount equal to their estimated fair value using the Black-ScholesModel on the date of such change in control. Due to these provisions, the Company accounts for the warrants issued in March 2012 as a liability at estimatedfair value. In addition, the estimated fair value of the liability related to the warrants is revalued at each reporting period until the earlier of the exercise of thewarrants, at which time the liability would be reclassified to stockholders' equity at its then estimated fair value, or expiration of the warrants. The Companyrevalued the warrants at December 31, 2016 using the Black-Scholes Model and recorded a $7.5 million reduction in the estimated fair value as a gain on therevaluation of contingent warrant liabilities line of the Company’s consolidated statement of comprehensive income (loss). The decrease in the estimated fairvalue of the warrants was primarily due to the decrease in the market price of the Company’s common stock at December 31, 2016 compared to December 31,2015. As of December 31, 2016, the estimated fair value of these warrants was zero. In March 2017, all of these warrants expired unexercised. 13. Commitments and ContingenciesCollaborative Agreements, Royalties and Milestone PaymentsThe Company has committed to make potential future milestone payments to third parties as part of licensing and development programs. Paymentsunder these agreements become due and payable only upon the achievement of certain developmental, regulatory and commercial milestones by theCompany’s licensees. Because it is uncertain if and when these milestones will be achieved, such contingencies, aggregating up to $15.5 million (assumingone product per contract meets all milestones events) have not been recorded on the accompanying consolidated balance sheets. The Company is unable todetermine precisely when and if payment obligations under the agreements will become due as these obligations are based on milestone events, theachievement of which is subject to a significant number of risks and uncertainties.Legal ProceedingsOn July 24, 2015, a purported securities class action lawsuit was filed in the United States District Court for the Northern District of California,captioned Markette v. XOMA Corp., et al. (Case No. 3:15-cv-3425) naming as defendants the Company and certain of its officers. The complaint asserted thatall defendants violated Section 10(b) of the Exchange Act and SEC Rule 10b-5, by making materially false or misleading statements regarding ourEYEGUARD-B study between November 6, 2014 and July 21, 2015. The plaintiff also alleged that Messrs. Varian and Rubin violated Section 20(a) of theExchange Act. On September 2, 2016, the defendants filed a motion to dismiss. On September 28, 2017, the Court granted defendants’ motion to dismiss withleave to amend. All parties subsequently agreed to dismiss the action and on October 25, 2017, the Court issued an Order of Dismissal, dismissing the actionwith prejudice with respect to the named Plaintiff’s individual claims and without prejudice with respect to unnamed class members.On October 1, 2015, a stockholder purporting to act on the behalf of the Company, filed a derivative lawsuit in the Superior Court of California for theCounty of Alameda, purportedly asserting claims on behalf of the Company against certain of officers and the members of Board of Directors of theCompany, captioned Silva v. Scannon, et al. (Case No. RG15787990). The lawsuit asserted claims for breach of fiduciary duty, corporate waste and unjustenrichment based on the dissemination of allegedly false and misleading statements related to the Company’s EYEGUARD-B study. The plaintiff wasseeking unspecified monetary damages and other relief, including reforms and improvements to the Company’s corporate governance and internalprocedures. On December 6, 2017, the parties filed a joint stipulation, agreeing to dismiss the action. On December 7, 2017, the Court granted the stipulation,issuing an order of dismissal. The order dismissed the action without prejudice.On November 16 and November 25, 2015, two derivative lawsuits were filed purportedly on the Company’s behalf in the United States District Courtfor the Northern District of California, captioned Fieser v. Van Ness, et al. (Case No. 4:15-CV-05236-HSG) and Csoka v. Varian, et al. (Case No. 3:15-cv-05429-SI), against certain of the Company’s officers and the members of its Board of Directors. The lawsuits asserted claims for breach of fiduciary duty andother violations of law based on the dissemination of allegedly false and misleading statements related to the Company’s EYEGUARD-B study. Theplaintiffs seek unspecified monetary damages and other relief including reforms and improvements to the Company’s corporate governance and internalprocedures. On December 4, 2017, the parties in each case filed joint stipulations, agreeing to dismiss the actions. On December 6, 2017, the Court grantedthe stipulations, issuing an order of dismissal in each of the Fieser and Csoka actions. The order dismissed the actions without prejudice.F-33 Operating LeasesThe Company leases facilities and office equipment under operating leases expiring on various dates through April 2023. These leases require theCompany to pay taxes, insurance, maintenance and minimum lease payments. For each facility lease, the Company has two successive renewal options toextend the lease for five years upon the expiration of the initial lease term.In September 2017, the Company entered into a lease agreement for an office facility in Emeryville, California. The lease has a term of 63 months andcommenced on November 14, 2017. Under the lease agreement the Company will make total lease payments of $0.9 million through February 2023. Total rental expense, including other costs required under the Company’s leases, was approximately $2.4 million, $3.8 million and $3.7 million forthe years ended December 31, 2017, 2016, and 2015, respectively. Rental expense based on leases allowing for escalated rent payments are recognized on astraight-line basis. At the expiration of the lease, the Company is required to restore certain of its leased property to certain conditions in place at the time oflease inception. The Company believes these costs will not be material to its operations. On November 21, 2017, the Company entered into a non-cancellable sublease agreement for a portion of one of its three leased facilities. The term ofthe sublease agreement commenced on December 26, 2017. Under the term of the sublease agreement, the Company will receive $5.1 million over the term ofthe sublease, which ends at the same time as the original lease in April 2023. Under the sublease agreement, the Company’s future sublease income will beequal to the amount required to be paid to the Company’s landlord. In addition, the sublease provides for a tenant improvement allowance of $0.8 millionthat the Company is to provide to the subtenant; therefore, the Company recognized a loss on the sublease equal to the tenant improvement allowance. Underthe sublease agreement, the Company and the sub-lessee executed a standby letter of credit amounting to $1.0 million to be held by the Company as securityunder the sublease in the event of uncured default by the sub-lessee. As of December 31, 2017, the Company has not drawn any funds from the letter of creditas there was no default by the sub-lessee.The Company estimates future minimum lease amounts (in thousands): Year Ending December 31, RentPayments Subleaseincome 2018 $3,848 $897 2019 3,969 924 2020 4,117 952 2021 3,332 980 2022 2,774 1,010 Thereafter 906 340 Total minimum lease payments $18,946 $5,103 14. Concentration of Risk, Segment and Geographic InformationConcentration of RiskCash equivalents and receivables are financial instruments which potentially subject the Company to concentrations of credit risk, as well as liquidityrisk for certain cash equivalents such as money market funds. The Company has not encountered such issues during 2017 and 2016. The Company’s policy isto focus on investments with high credit quality and liquidity to limit the amount of credit exposure. The Company currently maintains a portfolio of cashequivalents and have not experienced any losses.The Company has not experienced any significant credit losses and does not require collateral on receivables. For the year ended December 31, 2017,one partner represented 95% of total revenues, and as of December 31, 2017, one partner represented 100% of the accounts receivable balance.For the year ended December 31, 2016, three partners represented 27%, 22%, and 19% of total revenues, and as of December 31, 2016, one partnerrepresented 85% of the accounts receivable balance.For the year ended December 31, 2015, one partner represented 67% of total revenues.F-34 Segment InformationThe Company has determined that it operates in one business segment as it only reports operating results on an aggregate basis to the chief operatingdecision maker of the Company.Geographic InformationRevenue attributed to the following geographic regions was as follows (in thousands) based on the location of the licensees: Year Ended December 31, 2017 2016 2015 United States $1,654 $3,822 $10,685 Europe 50,936 1,642 44,662 Asia Pacific 100 100 100 Total $52,690 $5,564 $55,447 The Company’s property and equipment is held in the United States. 15. Subsequent Event In January 2018, the Company sold 67,658 shares of common stock under the 2015 ATM Agreement for aggregate net cash proceeds of $2.3 million.F-35 16. Quarterly Financial Information (unaudited)The following is a summary of the quarterly results of operations for the years ended December 31, 2017 and 2016: Consolidated Statements of Operations Data Quarter Ended March 31 June 30 September 30 December 31 (In thousands, except per share amounts) 2017 Total revenues(1) $260 $10,890 $36,183 $5,357 Restructuring (charge) credit (2,020) (1,460) 29 4 Operating costs and expenses (9,160) (8,119) (7,562) (7,371)Income (loss) from operations (10,920) 1,311 28,650 (2,010)Other income (expense), net 205 (1,026) (600) 648 Net income (loss) before income tax (10,715) 285 28,050 (1,362)Provision for income tax benefit (expense) — — (1,706) 44 Net income (loss) $(10,715) $285 $26,344 $(1,318)Basic net income (loss) per share available to common stockholders $(2.37) $0.02 $2.06 $(0.16)Diluted net income (loss) per share available to commonstockholders(3) $(2.37) $0.02 $1.98 $(0.16) 2016 Total revenues $3,962 $443 $635 $524 Restructuring (charge) credit (36) 21 — (4,551)Operating costs and expenses (17,915) (18,482) (12,727) (13,432)Loss from operations (13,989) (18,018) (12,092) (17,459)Other income (expense), net(2) 5,624 2,858 (433) (21)Net loss $(8,365) $(15,160) $(12,525) $(17,480)Basic net loss per share of common stock $(1.40) $(2.52) $(2.08) $(2.89)Diluted net loss per share of common stock $(1.40) $(2.52) $(2.08) $(2.89) (1)In the third quarter of 2017, total revenues include upfront and milestone payments relating to various out-licensing arrangements, including$35.4 million of license fee revenue recognized in connection with the license agreements with Novartis, and, in the second quarter of 2017,total revenues include a $10.0 million milestone earned under the license agreement with Novartis International. (2)Fluctuations in 2016 primarily relate to (losses) gains on the revaluation of the contingent warrant liabilities. (3)For the quarters ended June 30, 2017 and September 30, 2017, the Company’s diluted net income per share of common stock was computed bygiving effect to all potentially dilutive common stock equivalents outstanding during each of these periods.F-36 Exhibit 10.31 NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.250 Massachusetts Ave.Cambridge, MA 02139 September 22, 2017 XOMA (US) LLC2910 Seventh StreetBerkeley, California 94710 Attention: Jim NealRe: Secured Note Agreement Dear Mr. Neal: Reference is made to that certain Secured Note Agreement, dated May 26, 2005, as amended (the “Note”), between XOMA (US) LLC, aDelaware limited liability company (“XOMA”), and Novartis Vaccines and Diagnostics, Inc. (f/k/a Chiron Corporation), a Delawarecorporation (“NVDI”), which was assigned by NVDI to Novartis Institutes for BioMedical Research, Inc. (“NIBR”). XOMA and NIBR hereby agree to the terms of this letter agreement as an amendment to the Note. Capitalized terms used but not otherwisedefined herein shall have the respective meanings assigned to them in the Note, unless the context requires otherwise. Section 2(e) of the Note is hereby amended and restated to read in its entirety as follows: “(e) Maturity Date. Unless earlier accelerated by the reason of the occurrence of an Event of Default (as provided in Section 5 below), anyunpaid principal amount of any Loan owed by the Company to the Lender, together with all accrued and unpaid interest thereon, shall bedue and payable in full on September 30, 2022.” Except as expressly stated herein, provisions of the Note remain in full force and effect. This letter agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shallconstitute one and the same agreement. Remainder of page intentional left blank. 1  Please confirm that the foregoing is in accordance with your understanding by acknowledging your agreement in the space provided below. NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.By: /s/ Scott Brown Name: Scott A BrownTitle: VP, General Counsel XOMA (US) LLC By: /s/ Jim Neal Name: Jim NealTitle: Chief Executive Officer 2  2.2(d):1.1Section 2.2. A new Section 2.2(e) is hereby inserted immediately after Section Exhibit 10.41 AMENDMENT NO. 1 TOLOAN AND SECURITY AGREEMENT THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (sometimes referred to herein as this “Amendment” andalso as the “First Amendment”) is dated as of December 20, 2016, and is entered into by and among XOMA CORPORATION, aDelaware corporation, XOMA (US) LLC, a Delaware limited liability company, and XOMA COMMERCIAL LLC, a Delaware limitedliability company and each of their Affiliates from time to time made parties (each individually referred to as a “Borrower” andcollectively referred to as the “Borrower”) to that certain Loan and Security Agreement dated as of February 27, 2015, XomaTechnology Ltd., a Bermuda exempted company (“Guarantor”), the several banks and other financial institutions or entities fromtime to time parties to the Agreement (collectively, referred to as “Lender”) and HERCULES CAPITAL, INC., formerly known asHercules Technology Growth Capital, Inc., a Maryland corporation, in its capacity as administrative agent for itself and the Lender(in such capacity “Agent”). Capitalized terms used herein without definition shall have the same meanings given them in the LoanAgreement (as defined below). RECITALS A.Borrower, Guarantor, Agent and Lender have entered into that certain Loan and Security Agreementdated as of February 27, 2015 (as amended and may be further amended, restated, or otherwise modified, the “Loan Agreement”),pursuant to which Lender has agreed to extend and make available to Borrower certain advances of money. B.Borrower has requested Lender’s consent to certain transfers of rights in connection with specificlicense agreements to Health Care Royalty Partners II, L.P., and Lender has agreed to provide such consent pursuant to that certain Consent toTransfers dated as of December 20, 2016, by and among Borrower, Lender and Agent. C.Borrower, Guarantor, Agent and Lender have agreed to amend the Loan Agreement upon the terms andconditions more fully set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing Recitals and intending to be legally bound, the parties hereto agreeas follows: 1.AMENDMENTS. 2.2(e) Special Payment. Provided that on or before January 4, 2017, Borrower consummates thetransactions contemplated by that certain Consent to Transfers dated as of December 20, 2016, by and among Borrower, Lender andAgent, relating to certain Royalty Interest Acquisition Agreements between Borrower and HealthCare Royalty Partners II,L.P., Borrower shall make a special, one-time principal payment toward the outstanding principal under the Term Loan inthe amount of $10,000,000 (the “Special Payment”) on January 13, 2017. The Special Payment shall not be subject to anyPrepayment Charges pursuant to Section 2.5 hereof.  1.2Exhibits and Schedules. The exhibits and schedules previously provided to or byAgent and Lender as of June 24, 2015 are hereby updated and amended, if applicable, as of the date of the First Amendment by theexhibits and schedules attached to this First Amendment. 2.BORROWER’S REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that: (a)Immediately upon giving effect to this Amendment (i) therepresentations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of thedate hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correctas of such date), and (ii) no Default or Event of Default has occurred and is continuing with respect to which Borrower has not beennotified in writing by Lender; (b)Borrower has the corporate power and authority to execute anddeliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment; (c)the certificate of incorporation, bylaws and other organizationaldocuments of Borrower delivered to Lender on the Closing Date remain true, accurate and complete and have not been amended,supplemented or restated since the Closing Date and are and continue to be in full force and effect; (d)the execution and delivery by Borrower of this Amendment andthe performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been dulyauthorized by all necessary corporate action on the part of Borrower; (e)this Amendment has been duly executed and delivered byBorrower and is the binding obligation of Borrower, enforceable against it in accordance with its terms, except as such enforceabilitymay be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application andequitable principles relating to or affecting creditors’ rights; and (f)as of the date hereof, it has no defenses against the obligations topay any amounts under the Secured Obligations. Borrower acknowledges that Lender has acted in good faith and has conducted in acommercially reasonable manner in its relationships with Borrower in connection with this Amendment and in connection with theLoan Documents. Borrower understands and acknowledges that Lender is entering into this Amendment in reliance upon, and in partialconsideration for, the above representations and warranties, and agrees that such reliance is reasonable and appropriate. 3.LIMITATION. The amendments set forth in this Amendment shall be limited precisely as written andshall not be deemed (a) to be a waiver or modification of any other term or condition of the Loan Agreement or of any otherinstrument or agreement referred to therein or to prejudice any right or remedy which Lender may now have or may have in thefuture under or in connection with the Loan Agreement or any instrument or agreement referred to therein; or (b) to be a consent toany future amendment or modification or waiver to any instrument or agreement the execution and delivery of which is consented tohereby, or to any waiver of any of the provisions thereof. Except as expressly amended hereby, the Loan Agreement shall continuein full force and effect. 2  4.EFFECTIVENESS. This Amendment shall become effective upon Agent’s receipt of a fully executedAmendment. 5.COUNTERPARTS. This Amendment may be signed in any number of counterparts, and by differentparties hereto in separate counterparts, with the same effect as if the signatures to each such counterpart were upon a singleinstrument. All counterparts shall be deemed an original of this Amendment. This Amendment may be executed by facsimile,portable document format (.pdf) or similar technology signature, and such signature shall constitute an original for all purposes. 6.INCORPORATION BY REFERENCE. The provisions of Section 11 of the Loan Agreement shall be deemedincorporated herein by reference, mutatis mutandis. [signature page follows] 3  Signature: /s/ James R. Neal Print Name:James R. Neal Title:Senior Vice President and Chief Operating Officer XOMA COMMERCIAL LLC Signature: /s/ James R. Neal Print Name:James R. Neal Title:Senior Vice President and Chief Op erating OfficerG UARANTOR: XOMA TECHNOLOGY LTD. Signature: PrintName:Tom BurnsSignature: /s/ James R. Neal PrintName:James R. Neal Title:Senior Vice President and Chief Operati ng Officer Title:Vice President of Finance/Chief Financial OfficerAGE NT:LENDER:BORROWER:XOMA (US) LLCXOMA CORPORATION Accepted in Palo Alto, California: 4  XOMA TECHNOLOGY LTD. Signature: /s/ Tom Burns Print Name: Title:Tom Burns Vice President of Finance/Chief Financial OfficerAGENT:LENDER:Signature: PrintName:James R. Neal Title:Senior Vice President and Chief Operating Officer XOMA COMMERCIAL LLC Signature:Signature: PrintName:James R. Neal Title:Senior Vice President and Chief Operating Officer Print Name: Title:James R. Neal Senior Vice President and Chief Op erating Officer GUARANTOR:BORROWER:XOMA (US) LLCXOMA CORPORATION Accepted in Palo Alto, California: 5 XOMA CORPORATION Signature: PrintName: Title: XOMA COMMERCIAL LLC Signature: Print Name: Title: GUARANTOR: XOMA TECHNOLOGY LTD. Signature: Print Name: Title:Accepted in Palo Alto, California:AGENT: HERCULES CAPITAL, INC. By: /s/ Jennifer Choe /s/Jennifer Choe, Assistant General CounselXOMA (US) LLC Signature: Print Name: Title: LENDER: HERCULES TECHNOLOGY III, L.P.,a Delaware limited partnership By:Hercules Technology SBIC Management, LLC, itsGeneral Partner By:Hercules Capital, Inc., its ManagerBy: /s/ Jennifer Choe Jennifer Choe, Assistant General Counsel IN WITNESS WHEREOF, the parties have duly authorized and caused this Amendment to beexecuted as of the date first written above. BORROWER: 6  Table of Exhibits and Schedules Exhibit F:Compliance Certificate  Hercules Capital, Inc. (as “Agent”) 400Hamilton Avenue, Suite 310 Palo Alto, CA94301EXHIBIT F COMPLIANCE CERTIFICATE Reference is made to that certain Loan and Security Agreement dated February 27, 2015 and all ancillary documents entered intoin connection with such Loan and Security Agreement all as may be amended from time to time, (hereinafter referred tocollectively as the “Loan Agreement”) by and among Hercules Technology Growth Capital, Inc. (the “Agent”), the several banksand other financial institutions or entities from time to time party thereto (collectively, the “Lender”), XOMA Corporation (the“Company”), XOMA (US) LLC, and XOMA Commercial LLC, as Borrower, and XOMA Technology Ltd, as Guarantor. Allcapitalized terms not defined herein shall have the same meaning as defined in the Loan Agreement. The undersigned is an Officer of the Company, knowledgeable of all Company financial matters, and is authorized to providecertification of information regarding the Company; hereby certifies that in accordance with the terms and conditions of the LoanAgreement, except as set forth below, the Company is in compliance for the periodendingof all covenants, conditions and terms of the Loan Agreement and,except as set forth below, hereby reaffirms that all representations and warranties contained therein are true and correct on and asof the date of this Compliance Certificate with the same effect as though made on and as of such date, except to the extent suchrepresentations and warranties expressly relate to an earlier date, after giving effect in all cases to any standard(s) of materialitycontained in the Loan Agreement as to such representations and warranties. Attached are the required documents supporting theabove certification. The undersigned further certifies that these are prepared in accordance with GAAP (except for the absence offootnotes with respect to unaudited financial statements and subject to normal year end adjustments) and are consistent from oneperiod to the next except as explained below. REPORTING REQUIREMENT REQUIREDCHECKIFATTACHEDCash Balance ReportMonthly within 30 days Interim Financial Statements (ifapplicable)Monthly within 30 days Interim Financial StatementsQuarterly within 45 days Audited Financial StatementsFYE within 150 days The undersigned hereby also confirms the below disclosed accounts represent all depository accounts and securities accountspresently open in the name of each Borrower or Borrower Subsidiary/Affiliate, as applicable.  DepositoryFinancial AC#Institution Account Type(Depository /Securities)Last MonthEndingAccountBalance PurposeofAccountBORROWERName/Address: 1 2 3 4 5 6 7 BORROWERSUSIDIARY/AFFILIATECOMPANYName/Address 1 2 3 4 Very Truly Yours,XOMA, INC.By:_Name:_Its:_ Exhibit 10.53 AMENDMENT NO.3TO THE LOAN AGREEMENTEntered into as of December 30, 2010 BETWEEN: XOMA (US) LLC, a Delaware limited liability company having a place of business at 2910 Seventh Street, Berkeley, California94710 (''XOMA") on the one hand,AND: Les Laboratoires Servier, a corporation organized and existing under the laws of France, having offices at 50 rue Carnot, 92284Suresnes, France, and Institut de Recherches Servier, a corporation organized and existing under the laws of France havingoffices at 3, rue de la Republique, 92150 Suresnes (these two entities jointly referred to as "SERVIER")on the other hand, XOMA and SERVIER are referred to herein individually as a "Party" and collectively as the"Parties". WHEREAS, SERVIER and XOMA are parties to an Amended and Restated Collaboration Agreement entered into as of February 14,2012, and amended by an Amendment N°1 thereto dated as of November 4, 2014 (as such may be further amended by the partiesthereto, the "Collaboration Agreement") pursuant to which, among other things, XOMA and SERVIER established a collaboration forthe continued development, regulatory approval and commercialization of products comprising or incorporating XOMA's monoclonalantibody designated XOMA 052 (gevokizumab), and XOMA granted to SERVIER certain exclusive development andcommercialization rights therein outside the United States and Japan; WHEREAS, SERVIER and XOMA are parties to a Loan Agreement entered into as of December 30, 2010, as amended by aConsent, Transfer, Assumption and Amendment Agreement entered into as of August 12, 2013, and as further amended by anAmendment N°2 to the Loan Agreement entered into as of January 9, 2015 (as such may be further amended by the partiesthereto, the "Loan Agreement") pursuant to which, among other things, SERVIER made a loan to XOMA; and WHEREAS, SERVIER and XOMA have agreed to further modify the Loan Agreement. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration,including a modification on even date herewith of theCollaboration Agreement, the Parties hereto mutually agree to amend the Loan Ag.reem. ent, aFollows: 1.Definitions. All capitalized terms not otherwise defined herein shall have the meanings assigned to them in the LoanAgreement, except if they are otherwise defined in this Amendment, in which case they shall have the meaning ascribed tothem in this Amendment. 2.General. Except as expressly set forth herein, the Loan Agreement shall continue in full force and effect and, as modified oramended, is hereby ratified, confirmed and approved. No provision of this Amendment N°3 may be modified or amended exceptexpressly in a writing signed by both Parties nor shall any terms be waived except expressly in a writing signed by both Partiescharged therewith. ARTICLE 1 AMENDMENT OF THE DEFINITION OF "MATURITY DATE" SET OUT IN ARTICLE 1OF THE LOAN AGREEMENT The definition of "Maturity Date" set out in Article 1 of the Loan Agreement is hereby deleted in its entirety and replaced by thefollowing:"Maturity Date" means January 15, 2018. ARTICLE 2 AMENDMENT OF SECTIONS 3.2 AND 3.3 OF THE LOAN AGREEMENT Section 3.2 of the Loan Agreement is hereby deleted in its entirety and replaced by the following: 3.2Pri11cipal Repayme11t. XOMA US shall make the following principalrepayment payments to SER VIER: (a)three million euros (€3,000,000) 011 January 15, 2016 (whichrepayment has already been received by SER VIER), (b)five million euros (€5,000,000) on July 15, 2017, and (c)seven million euros (€7,000,000) on the Maturity Date. For the avoidance of doubt, notwithstanding any provision to the contrary (including Section 3.1(c) and the aboveterms in this Section 3.2), all outstanding principal, together with all accrued and unpaid interest, shall be due and payable byXOMA US on the Maturity Date, even if such Maturity Date (as determined according to the definition thereof set out in Article 1)occurs prior to one or more of therepayment dates set out above. ARTICLE 3 OTHER PROVISIONSXOMA and SERVIER hereby covenant that each will, at any time and from time to timeupon request by any other, and without the assumption of any additional liability thereby, 2 execute and deliver such further documents and do such further acts as such party may reasonably request in order to fully effect the purpose of thisAmendment N°3. It is understood between the Parties that XOMA shall assume all costs related to any administrative registration that is reasonably required to give fullyeffect to this Amendment N°3. This Amendment N°3 may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken togethershall constitute but one and thesame agreement. All other terms of the Loan Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned by their duly authorised representativeshave executed this Amendment Agreement on the date set forth below. In Suresnes and San Francisco, on January 17th, 2017 LES LABORATOIRES SERVIER By: /s/ Christian Bazantay Name: Mr. Christian BazantayTitle: Proxy XOMA (US) LLC By: /s/ James R. Neal Name: James R. NealTitle: Senior Vice President and COO INSTITUT DE RECHERCHES SERVIERBy: /s/ Eric Falcand Name: Mr Eric FalcandTitle: Proxy 3 EXECUTION COPY [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separatelywith the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Exhibit 10.65COMMON STOCK PURCHASE AGREEMENTTHIS COMMON STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of December 6, 2017 (the“Effective Date”), by and among AntriaBio, Inc., a Delaware corporation (the “Company”), and XOMA Corporation, a Delawarecorporation (“Purchaser”). Terms used but not otherwise defined herein shall have the meanings ascribed to them in the LicenseAgreement (as defined below).WHEREAS, prior to or concurrently with the consummation of the transactions contemplated hereby, and as a condition tothe willingness of, and material inducement to, Purchaser to enter into this Agreement, the Company and XOMA (US) LLC, a whollyowned subsidiary of Purchaser, shall enter into a License Agreement of even date herewith (the “License Agreement”) pursuant towhich the Purchaser will grant a license of certain of its technology to the Company; andWHEREAS, in consideration of the license granted pursuant to the License Agreement, Company desires to issue toPurchaser the Initial Closing Shares, the Interim Financing Shares, the Qualified Financing Shares and the 2019 Shares (each as definedbelow and, together, the “Shares”) of common stock, par value $0.001 per share, of the Company (the “Common Stock”), whichShares shall be authorized and issued in accordance with the terms of this Agreement (the “Common Stock Issuance”).NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forthin this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, theparties hereto hereby agree as follows:1.PURCHASE AND SALE1.1Sale and Issuance of Shares. In consideration of the License Agreement and in express reliance upon therepresentations, warranties and covenants set forth herein, and subject to the terms and conditions set forth in this Agreement, theCompany shall issue and sell to Purchaser, and Purchaser shall purchase from the Company, the Shares; provided that in no event shallthe aggregate number of Shares, or voting securities convertible or exchangeable into the Shares, issued pursuant to this Section 1exceed 19.99% of the total outstanding shares of the Company’s Common Stock calculated as of the time of the issuance (any Sharesrepresenting ownership above such percentage being “Excess Shares”). In the event the aggregate amount of Shares to be issued bythe Company to the Purchaser shall exceed 19.99% of the total outstanding shares of the Company’s Common Stock, in lieu of theExcess Shares, the Company shall issue to the Purchaser non-voting convertible preferred stock on such terms and conditions asmutually agreed by the Purchaser and the Company with a liquidation preference equal to the value of the Excess Shares.1.2Initial Closing. (a)The initial purchase and sale of the Shares shall take place remotely via the exchange ofdocuments and signatures on the earlier of: (1) the date of the closing of the [*] of the Company occurring after the Effective Dateresulting in [*]; or (2) the initiation of [*] for the Company’s clinical study of [*] (which time, date and place are referred to in thisAgreement as the “Initial  Closing”). At the Initial Closing, the Company shall deliver to the Purchaser that number of shares and/or other securities (the “InitialClosing Shares”) equal to [*] divided by: (i) in the case of an Initial Closing triggered by an equity financing, the price per share of thestock (or units, if additional securities are issued together with stock) sold in such financing; or (ii) in the case of an Initial Closingtriggered by a financing that is non-dilutive to the Company (including any convertible note financing) or by clause (2) above, theweighted average of the closing bid and asked prices or the average closing prices of the Common Stock on the Principal Market for theten day trading period prior to the Initial Closing. The Company shall instruct VStock Transfer, LLC (the “Transfer Agent”) to registersuch issuance via book entry at the time of such issuance.(b)If the Initial Closing occurs on or prior to December 31, 2017, then the Company shall,in addition to issuing the Initial Closing Shares, make a cash payment to Purchaser equal to [*] of the value of the Initial Closing Sharesas of the date of the Initial Closing. 1.3Interim Financing Closing. (a)A subsequent purchase and sale of Shares shall take place remotely via the exchange ofdocuments and signatures concurrently with the closing of each Interim Financing (as defined below), or at such other time as theCompany and Purchaser shall mutually agree (each of which time, date and place is referred to in this Agreement as an “InterimFinancing Closing”). At each Interim Financing Closing, the Company shall deliver to Purchaser: (i) in the case of an InterimFinancing that is an equity financing, [*] of the total number of shares and/or other securities issued in such Interim Financing; or (ii) inthe case of an Interim Financing that is non-dilutive to the Company, that number of shares and/or other securities representing [*] ofthe gross proceeds of such financing divided by the weighted average of the closing bid and asked prices or the average closing pricesof the Common Stock on the Principal Market for the ten day trading period prior to the announcement of such Interim Financing (the“Interim Financing Shares”). An “Interim Financing” shall mean any financing event (including, but not limited to, an equityfinancing, debt financing or the receipt of funds resulting from licensing an AntriaBio Product (as defined in the LicenseAgreement)) occurring prior to a Qualified Financing (as defined below), resulting in gross cash proceeds to the Company of less than$20 million. The Company shall provide Purchaser a written notice specifying the date of the Interim Financing Closing, which noticeshall be delivered no less than ten (10) business days prior to the date of the Interim Financing Closing. For the avoidance of doubt, inthe event the Interim Financing results in gross proceeds to the Company of $3 million, the Company shall issue both the First ClosingShares and the Interim Financing Shares at such Interim Financing Closing. The dollar value of the Interim Financing Shares shall bereferred to herein as the “Interim Financing Value.”(b)If an Interim Financing Closing occurs on or prior to December 31, 2017, then theCompany shall, in addition to issuing the relevant Interim Closing Shares, make a cash payment to Purchaser equal to [*] of the valueof such Interim Closing Shares as of the date of such Closing. 1.4Qualified Financing Closing. A subsequent purchase and sale of Shares shall take place remotely via theexchange of documents and signatures concurrently with the closing of a Qualified Financing (as defined below), or at such other timeas the Company and Purchaser shall mutually agree (which time, date and place are referred to in this Agreement as the “QualifiedFinancing Closing”). At the Qualified Financing Closing, the Company shall deliver to Purchaser that number of Shares, and/or othersecurities issued in a Qualified Financing (the “Qualified Financing Shares”) equal to a quotient, the numerator of which shall be: (i)Seven Million Dollars ($7,000,000); minus (ii) the Interim Financing Value represented by Shares issued to Purchaser prior to theQualified Financing; and the denominator of which shall be: (x) in the case of a Qualified Financing that is an equity financing, theprice per share of the stock (or units, if additional securities are issued together with stock) sold in the Qualified Financing;- 2 -  or (y) in the case of a Qualified Financing that is non-dilutive to the Company, the weighted average of the closing bid and asked pricesor the average closing prices of the Common Stock on the Principal Market for the ten day trading period prior to the announcement ofsuch Qualified Financing. A “Qualified Financing” shall mean an equity or debt financing event resulting in aggregate gross cashproceeds to the Company of at least $20 million. The Company shall provide Purchaser a written notice specifying the date of theQualified Financing Closing, which notice shall be delivered no less than ten (10) business days prior to the date of the QualifiedFinancing Closing. For the avoidance of doubt, in the event that the Initial Closing has not occurred prior to the Qualified FinancingClosing, the Company shall issue both the First Closing Shares and the Qualified Financing Shares at the Qualified Financing Closing.1.52019 Closing. In the event that the Qualified Financing Closing has not occurred on or prior to March 31,2019, then a purchase and sale of the Shares shall take place remotely via the exchange of documents and signatures on April 1, 2019(which time, date and place are referred to in this Agreement as the “2019 Closing”). The Initial Closing, each Interim Closing, theQualified Financing Closing and the 2019 Closing is each referred to herein as a “Closing” and, together the “Closings.” At the 2019Closing, the Company shall deliver to the Purchaser that number of Shares, (the “2019 Shares”) equal to Seven Million Dollars($7,000,000) divided by the weighted average of the closing bid and asked prices or the average closing prices of the Common Stockon the Principal Market for the ten day trading period prior to the 2019 Closing. For the avoidance of doubt, in the event that aQualified Financing occurs after the 2019 Closing, the Qualified Financing Shares will be issued in accordance with the terms hereof inaddition to the Initial Closing Shares and the 2019 Shares.1.6Capital Adjustments. If after the Effective Date (A) the Company shall pay a dividend in securities of theCompany (other than in Common Stock) or of other property (including cash) on the Common Stock, (B) there shall occur any merger,consolidation, capital reorganization, stock split, reverse stock split, combination or reclassification in which the Common Stock isconverted or exchanged for securities, cash or other property, the class or series of stock constituting the Common Stock for purposesof this Agreement, shall be appropriately adjusted to reflect such other dividend, merger, consolidation, capital reorganization, stocksplit, reverse stock split or reclassification. After any event referenced in clauses (A) and (B) of the preceding sentence isconsummated, all references herein to the Common Stock shall be deemed to refer to the capital stock or property (including cash) intoor for which the Common Stock was converted or exchanged, with the necessary changes in detail.2.PUT OPTIONThe Company hereby grants the Purchaser the right and option to sell the greater of (i) 5,000,000 Shares or (ii) one third ofthe aggregate Shares held by the Purchaser at the time of the Put Option Triggering Event (as defined below) to the Company, and theCompany agrees to purchase the Shares or to facilitate the orderly sale of the Shares to a third party (the “Put Option”). Upon theoccurrence of the Put Option Triggering Event, the Purchaser shall be permitted to exercise the Put Option by delivering written noticeto the Company (the “Put Option Exercise Notice”) by indicating its agreement to sell all or a portion of the Shares in exchange for thepayment by the Company or a third party buyer (arranged by the Company) to the Purchaser of the Put Option Purchase Price (asdefined below), such amount to be payable by wire transfer of immediately available funds within 15 days after the date of receipt bythe Company of the Put Option Exercise Notice. The “Put Option Triggering Event” shall mean the failure of the Company to list itsshares of Common Stock on the Nasdaq Stock Market or a similar national exchange on or prior to December 31, 2018. The “PutOption Purchase Price” per Share shall mean the lower of (i) $1.00; or (ii) the average of the closing bid and asked prices of theCommon Stock quoted on the Principal Market on the date of the Put Option Exercise Notice. The costs of effecting a sale of theShares pursuant to this Section 2 shall be borne by the Company.- 3 -  3.REPRESENTATIONS AND WARRANTIES OF THE COMPANYAs of the date of each Closing, the Company represents and warrants to Purchaser that, subject to exceptions and disclosuresset forth in any part or subpart of the Company Disclosure Schedule corresponding to the particular Section or subsection of thisSection 3, the statements contained in this Section 3 are true, complete and correct (except that those statements which address mattersonly as of a particular date are true, correct and complete as of such date). The Company shall deliver an updated and current CompanyDisclosure Schedule prior to each Closing. 3.1Organization and Qualification. The Company and each of its subsidiaries is an entity duly incorporatedor otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, withthe requisite corporate power and authority to own and use its properties and assets and to carry on its business as currentlyconducted. Neither the Company nor any of its subsidiaries is in violation or default of any of the provisions of its respective certificateor the Company's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate of Incorporation"), theCompany's Bylaws, as amended and as in effect on the date hereof (the “Bylaws”) or other organizational or charter documents. Eachof the Company and its subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entityin each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, exceptwhere the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in,individually or in the aggregate, a material adverse effect on (i) the business, properties or financial condition of the Company, (ii) theShares or (iii) the enforceability of this Agreement (a “Material Adverse Effect”) and no proceeding has been instituted in any suchjurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. TheCompany has no subsidiaries except as set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017.3.2Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authorityto enter into and perform its obligations under this Agreement and the License Agreement (the “Transaction Documents”), and to issuethe Shares in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by theCompany and the consummation by it of the transactions contemplated hereby and thereby, and the reservation for issuance and theissuance of the Shares issuable under this Agreement, have been duly authorized by the Company's Board of Directors and no furtherconsent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Agreement has been, and eachother Transaction Document shall be on the Effective Date, duly executed and delivered by the Company and (iv) this Agreementconstitutes, and each other Transaction Document upon its execution on behalf of the Company, shall constitute, the valid and bindingobligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may belimited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar lawsrelating to, or affecting generally, the enforcement of creditors' rights and remedies. Except as set forth in this Agreement, no otherapprovals or consents of the Company’s Board of Directors, any authorized committee thereof, and/or stockholders is necessary underapplicable laws and the Company’s Certificate of Incorporation and/or Bylaws to authorize the execution and delivery of thisAgreement or any of the transactions contemplated hereby, including, but not limited to, the issuance of the Shares.3.3Capitalization. As of the date hereof, the authorized capital stock of the Company is set forth in theCompany’s Quarterly Report on Form 10-Q for the three months ended September 30, 2017. Except as disclosed in the SECDocuments (as defined below), (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rightsor any liens or encumbrances suffered or- 4 -  permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights tosubscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capitalstock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company orany of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries oroptions, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rightsconvertible into, any shares of capital stock of the Company or any of its subsidiaries, (iv) other than as set forth in this Agreement,there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any oftheir securities under the Securities Act of 1933, as amended (the “Securities Act”), (v) there are no outstanding securities orinstruments of the Company or any of its subsidiaries which contain any redemption or similar provisions, and there are no contracts,commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to redeem asecurity of the Company or any of its subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similarprovisions that will be triggered by the issuance of the Shares as described in this Agreement and (vii) the Company does not have anystock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. The Company has furnished to thePurchaser true and correct copies of the Certificate of Incorporation, and the Company's Bylaws, and summaries of the terms of allsecurities convertible into or exercisable for Common Stock, if any, and copies of any documents containing the material rights of theholders thereof in respect thereto.3.4Issuance of Shares. Upon issuance and payment therefor in accordance with the terms and conditions ofthis Agreement, the Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions,rights of first refusal and preemptive rights with respect to the issue thereof, with the holders being entitled to all rights accorded to aholder of Common Stock. Upon issuance in accordance with the terms and conditions of this Agreement, the Shares shall be validlyissued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights withrespect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. The Shares have beenduly authorized and reserved for issuance upon purchase under this Agreement.3.5No Conflicts. The execution, delivery and performance of the Transaction Documents by the Companyand the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, thereservation and issuance of the Shares) will not (i) result in a violation of the Certificate of Incorporation, any Certificate ofDesignations, Preferences and Rights of any outstanding series of preferred stock of the Company or the Bylaws or (ii) conflict with, orconstitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rightsof termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of itssubsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and statesecurities laws and regulations applicable to the Company or any of its subsidiaries) or by which any property or asset of the Companyor any of its subsidiaries is bound or affected, except in the case of conflicts, defaults, terminations, amendments, accelerations,cancellations and violations under clause (ii), which could not reasonably be expected to result in a Material Adverse Effect. Neitherthe Company nor its subsidiaries is in violation of any term of or in default under its Certificate of Incorporation, any Certificate ofDesignation, Preferences and Rights of any outstanding series of preferred stock of the Company or Bylaws or their organizationalcharter or bylaws, respectively. Neither the Company nor any of its subsidiaries is in violation of any term of or is in default under anymaterial contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulationapplicable to the Company or its subsidiaries, except for possible conflicts, defaults, terminations or amendments that could notreasonably be expected to have a Material Adverse Effect. The business of the Company and- 5 -  its subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmentalentity, except for possible violations, the sanctions for which either individually or in the aggregate could not reasonably be expected tohave a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the Securities Act orapplicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing orregistration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver orperform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms hereof orthereof. Except as set forth elsewhere in this Agreement, all consents, authorizations, orders, filings and registrations which theCompany is required to obtain pursuant to the preceding sentence shall be obtained or effected on or prior to the CommencementDate. Since one year prior to the date hereof, the Company has not received nor delivered any notices or correspondence from or to theOTCQB or any other exchange on which any of the securities of the Company are listed or designated (the “Principal Market”). ThePrincipal Market has not commenced any delisting proceedings against the Company.3.6SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statementsand other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law orregulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by referencetherein, being collectively referred to herein as the “SEC Documents”) on a timely basis or has received a valid extension of such timeof filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SECDocuments complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable. None ofthe SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be statedtherein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, notmisleading. The financial statements of the Company included in the SEC Documents comply in all material respects with applicableaccounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financialstatements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basisduring the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto andexcept that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respectsthe financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations andcash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end auditadjustments. Except as set forth in the SEC Documents, the Company has received no notices or correspondence from the SEC for theone year preceding the date hereof. The SEC has not commenced any enforcement proceedings against the Company or any of itssubsidiaries.3.7Absence of Certain Changes. Except as disclosed in the SEC Documents, since June 30, 2017, there hasbeen no material adverse change in the business, properties, operations, financial condition or results of operations of the Company orits subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant toany Bankruptcy Law nor does the Company or any of its subsidiaries have any knowledge or reason to believe that its creditors intendto initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debtsas they become due.3.8Absence of Litigation. Other than as set forth in the SEC Documents, there is no action, suit, proceeding,inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, tothe knowledge of the Company or any of its subsidiaries,- 6 -  threatened against or affecting the Company, the Common Stock or any of the Company's or its subsidiaries' officers or directors intheir capacities as such, which could reasonably be expected to have a Material Adverse Effect.3.9Acknowledgment Regarding Purchaser’s Status. The Company acknowledges and agrees that thePurchaser is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactionscontemplated hereby and thereby. The Company further acknowledges that the Purchaser is not acting as a financial advisor orfiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplatedhereby and thereby and any advice given by the Purchaser or any of its representatives or agents in connection with the TransactionDocuments and the transactions contemplated hereby and thereby is merely incidental to the Purchaser's purchase of the Shares. TheCompany further represents to the Purchaser that the Company's decision to enter into the Transaction Documents has been basedsolely on the independent evaluation by the Company and its representatives and advisors.3.10No General Solicitation; No Integrated Offering. Neither the Company, nor any of its affiliates, nor anyPerson acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning ofRegulation D under the Securities Act) in connection with the offer or sale of the Shares. Neither the Company, nor or any of itsaffiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offersto buy any security, under circumstances that would require registration of the offer and sale of any of the Shares under the SecuritiesAct, whether through integration with prior offerings or otherwise, or cause this offering of the Shares to be integrated with priorofferings by the Company in a manner that would require stockholder approval pursuant to the rules of the Principal Market. Theissuance and sale of the Shares hereunder does not contravene the rules and regulations of the Principal Market.3.11Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights orlicenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights,copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respectivebusinesses as now conducted. None of the Company's material trademarks, trade names, service marks, service mark registrations,service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or otherintellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within twoyears from the date of this Agreement. The Company and its subsidiaries do not have any knowledge of any infringement by theCompany or its subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, servicenames, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar oridentical trade secrets or technical information by others, and there is no claim, action or proceeding being made or brought against, orto the Company's knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents,patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement,which could reasonably be expected to have a Material Adverse Effect.3.12Environmental Laws. The Company and its subsidiaries (i) are in compliance with any and allapplicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environmentor hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licensesor other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are incompliance with all terms and conditions of any such permit, license or approval, except where, in each of the three- 7 -  foregoing clauses, the failure to so comply could not reasonably be expected to have, individually or in the aggregate, a MaterialAdverse Effect.3.13Title. The Company and its subsidiaries have good and marketable title in fee simple to all real propertyowned by them and good and marketable title in all personal property owned by them that is material to the business of the Companyand its subsidiaries, in each case free and clear of all liens, encumbrances and defects (“Liens”) and, except for Liens as do notmaterially affect the value of such property and do not materially interfere with the use made and proposed to be made of such propertyby the Company and its subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neitherdelinquent nor subject to penalties. Any real property and facilities held under lease by the Company and its subsidiaries are held bythem under valid, subsisting and enforceable leases with which the Company and its subsidiaries are in compliance with suchexceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by theCompany and its subsidiaries.3.14Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financialresponsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customaryin the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such Subsidiary has beenrefused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe thatit will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similarinsurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial orotherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.3.15Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizationsand permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses,and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification ofany such certificate, authorization or permit.3.16Tax Status. The Company and each of its subsidiaries has made or filed all federal and state income andall other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extentthat the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaidand unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown ordetermined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its booksprovision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports ordeclarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, andthe officers of the Company know of no basis for any such claim.3.17Transactions With Affiliates. Except as set forth in the SEC Documents, none of the officers ordirectors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to anytransaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract,agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to orfrom, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, anyentity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in eachcase in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses- 8 -  incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan ofthe Company.3.18Application of Takeover Protections. The Company and its board of directors have taken or will takeprior to the Commencement Date all necessary action, if any, in order to render inapplicable any control share acquisition, businesscombination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under theCertificate of Incorporation or the laws of the state of its incorporation which is or could become applicable to the Purchaser as a resultof the transactions contemplated by this Agreement, including, without limitation, the Company's issuance of the Shares and thePurchaser's ownership of the Shares.3.19Disclosure. Except with respect to the material terms and conditions of the transactions contemplated bythe Transaction Documents that will be timely publicly disclosed by the Company, the Company confirms that neither it nor any otherPerson acting on its behalf has provided the Purchaser or its agents or counsel with any information that it believes constitutes or mightconstitute material, non-public information which is not otherwise disclosed in the Registration Statement or the SEC Documents. TheCompany understands and confirms that the Purchaser will rely on the foregoing representation in effecting purchases and sales ofsecurities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchaser regarding the Company, itsbusiness and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true and correct and doesnot contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements madetherein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Companyduring the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material factor omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of thecircumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that thePurchaser neither makes nor has made any representations or warranties with respect to the transactions contemplated hereby other thanthose specifically set forth in Section 3 hereof.3.20Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent orother Person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts,entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign ordomestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii)failed to disclose fully any contribution made by the Company (or made by any Person acting on its behalf of which the Company isaware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977,as amended.3.21DTC Eligibility. The Company, through the Transfer Agent, currently participates in the DTC FastAutomated Securities Transfer (FAST) Program and the Common Stock can be transferred electronically to third parties via the DTCFast Automated Securities Transfer (FAST) Program.3.22Sarbanes-Oxley. The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002,as amended, which are applicable to it as of the date hereof.3.23Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company toany broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to thetransactions contemplated by the Transaction Documents. The Purchaser shall have no obligation with respect to any fees or withrespect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 4(w) that may be due inconnection- 9 -  with the transactions contemplated by the Transaction Documents.Investment Company. The Company is not, and immediately afterreceipt of payment for the Shares will not be required to register as, an “investment company” within the meaning of the InvestmentCompany Act of 1940, as amended.3.24Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(g) ofthe Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of,terminating the registration of the Common Stock pursuant to the Exchange Act nor has the Company received any notification that theSEC is currently contemplating terminating such registration. The Company has not, in the twelve (12) months preceding the datehereof, received any notice from any Person to the effect that the Company is not in compliance with the listing or maintenancerequirements of the Principal Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue tobe, in compliance with all such listing and maintenance requirements.3.25Accountants. The Company’s accountants are set forth in the SEC Documents and, to the knowledge ofthe Company, such accountants are an independent registered public accounting firm as required by the Securities Act.3.26No Market Manipulation. The Company has not, and to its knowledge no Person acting on its behalfhas, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of anysecurity of the Company to facilitate the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or, paid any compensation forsoliciting purchases of, any of the Shares, or (iii) paid or agreed to pay to any Person any compensation for soliciting another topurchase any other securities of the Company.3.27Shell Company Status. The Company is not currently, and since January 31, 2013 has not been, an issueridentified in Rule 144(i)(1) under the Securities Act and has filed with the SEC current “Form 10 information” (as defined in Rule 144(i)(3) under the Securities Act) at least 12 calendar months prior to the date of this Agreement reflecting its status as an entity that is nolonger an issuer identified in Rule 144(i)(1) under the Securities Act.3.28No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, anydirector, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20%or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that termis defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “IssuerCovered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act(a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. TheCompany has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.4.REPRESENTATIONS AND WARRANTIES OF PURCHASERAs a material inducement to the Company to enter into and perform its obligations under this Agreement, Purchaserrepresents and warrants to the Company as follows:4.1Authorization; Enforceability. Purchaser has all requisite power and authority to execute, deliver andperform this Agreement. All action on the part of Purchaser and, as applicable, its directors, officers, members, partners andshareholders, necessary for the authorization, execution, delivery and performance of all obligations of Purchaser under this Agreementhas been taken. This- 10 -  Agreement constitutes the valid and legally binding obligations of Purchaser, enforceable in accordance with their terms, except aslimited by the Equitable Exceptions.4.2Investor Representations.(a)The Shares acquired by Purchaser hereunder will be acquired by Purchaser for its ownaccount for investment purposes and not with a view to distribution in violation of the Securities Act. Purchaser does not presentlyhave any contract, undertaking or agreement with any Person to sell, transfer or grant participation rights to such Person or to any otherPerson with respect to any of the Shares acquired by Purchaser hereunder.(b)Purchaser is an “accredited investor” within the meaning of Rule 501(a) promulgatedunder the Securities Act.(c)Purchaser understands that the Shares are characterized as “restricted securities” underthe federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering andthat under such laws and applicable regulations such securities may be resold without registration under the Securities Act only incertain limited circumstances. Purchaser acknowledges and agrees that the Shares must be held indefinitely unless they aresubsequently registered under the Securities Act or an exemption from such registration is available or the Company receives anopinion of counsel reasonably satisfactory to the Company that such registration is not required. Purchaser has been advised or isaware of the provisions of Rule 144 promulgated under the Securities Act as in effect from time to time (“Rule 144”), which permitlimited resale of shares purchased in a private placement subject to the satisfaction of certain conditions.5.CONDITIONS TO PURCHASER’S OBLIGATIONS AT CLOSINGThe obligations of Purchaser under this Agreement to purchase the Shares being purchased by Purchaser at each Closing aresubject to the satisfaction or waiver, at or prior to the applicable Closing, of the following conditions:5.1Representations and Warranties. The representations and warranties of the Company contained in Section 3 ofthis Agreement and in Section 7 of the License Agreement shall be true, correct and complete on and as of the applicable Closing withthe same force and effect as if they had been made at such time (except that those representations and warranties which address mattersonly as of a particular date need only be measured as of the specific date).5.2Performance. The Company shall have performed and complied in all material respects with all other conditions,covenants and agreements contained in this Agreement required to be performed or complied with by it on or before the applicableClosing.5.3Legal Investment. On the date of the applicable Closing, the sale and issuance of the Shares shall belegally permitted by all laws and regulations to which Purchaser and the Company are subject.5.4No Suspension. Trading in the Common Stock shall not have been suspended by the exchange on whichthe Common Stock of the Company is traded.5.5Consents and Approvals. Any consent required for the consummation of the transactions contemplated bythis Agreement, including without limitation, the issuance of the Shares, shall have been obtained (collectively, “Consents”). - 11 -  5.6Qualifications. All authorizations, approvals or permits, if any, of any Governmental Authority that arerequired in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall have been duly obtained andshall be effective on and as of the applicable Closing.5.7No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have beenenacted, entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction which prohibits theconsummation of any of the transactions contemplated by this Agreement.5.8License Agreement. The Company shall have executed the License Agreement.5.9Legal Opinion. Purchaser shall have received from Dorsey &Whitney LLP, counsel for the Company, anopinion, dated as of such Closing in form and substance reasonably satisfactory to counsel for Purchaser.5.10Transfer Agent Instructions. Purchaser shall have received a copy of the instructions to the TransferAgent instructing the Transfer Agent to deliver, on an expedited basis, via book entry to the applicable balance account, the InitialClosing Shares, the Qualified Financing Shares or the 2019 Shares, as applicable, registered in the name of Purchaser.5.11Compliance Certificate. Purchaser shall have received a compliance certificate, executed by the ChiefExecutive Officer and Chief Financial Officer of the Company, dated as of the date of the Closing, to the effect that the conditionsspecified in Sections 4.1 and 4.2 have been satisfied.5.12Secretary’s Certificate. Purchaser shall have received a certificate of the Company’s Secretary certifyingas to (A) the Company’s certificate of incorporation and bylaws, (B) the resolutions of the Board of Directors approving this Agreementand the transactions contemplated hereby, and (C) good standing certificates with respect to the Company from the applicableauthority(ies) in Delaware and any other jurisdiction in which the Company is qualified to do business, dated a recent date before theClosing.6.CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSINGThe obligations of the Company under this Agreement to sell and issue to Purchaser the Shares to be purchased by Purchaserat each Closing are subject to the satisfaction or waiver, at or prior to the applicable Closing, of the following conditions:6.1Representations and Warranties. The representations and warranties of Purchaser contained in Section 4 shall betrue, correct and complete in all respects on and as of the applicable Closing with the same force and effect as if they had been made atsuch time (except that those representations and warranties which address matters only as of a particular date need only be true, correctand complete in all material respects as of such date).6.2Performance. Purchaser shall have performed and complied with all other conditions, covenants and agreementscontained in this Agreement required to be performed or complied with by Purchaser on or before the applicable Closing.6.3Qualifications. All authorizations, approvals or permits, if any, of any Governmental Authority that are required inconnection with the lawful issuance and sale of the Shares pursuant to this Agreement shall have been duly obtained and shall beeffective on and as of the applicable Closing.- 12 -  6.4No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have beenenacted, entered, promulgated or endorsed by any Governmental Authority of competent jurisdiction which prohibits theconsummation of any of the transactions contemplated by this Agreement.6.5Consents and Approvals. Any Consent required for the consummation of the transactions contemplated by thisAgreement, including without limitation, the issuance of the Shares, shall have been obtained. 6.6License Agreement. The Company and the Purchaser shall have executed the License Agreement.7.COVENANTS7.1Piggyback Registrations. The Company shall notify the Purchaser in writing at least fifteen (15) daysprior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company(including, but not limited to, registration statements relating to secondary offerings of securities of the Company) and will afford thePurchaser an opportunity to include in such registration statement all or part of the Shares held by the Purchaser. If the Purchaserdecides not to include all of its Shares in any registration statement thereafter filed by the Company, the Purchaser shall neverthelesscontinue to have the right to include any Shares in any subsequent registration statement or registration statements as may be filed bythe Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. If the Company determines ingood faith, based on consultation with the underwriter, that marketing factors require a limitation of the number of shares to beunderwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to thePurchaser; provided, however, that no such reduction shall reduce the amount of securities of the Purchaser included in the registration[*] of the total amount of securities included in such registration; provided that the Company shall use its commercially reasonableefforts to assure that such reduction shall not reduce the amount of securities of the Purchaser included in the registration [*] of the totalamount of securities included in such registration. If the Purchaser disapproves of the terms of any such underwriting, the Purchasermay elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior tothe effective date of the registration statement. The registration expenses of such registration shall be borne by the Company inaccordance with Section 7.3 hereof.7.2Purchaser Lock-Up. Purchaser covenants and agrees as follows:(a)To the extent requested by underwriters, [*] of the Shares held by the Purchaser prior tothe Qualified Financing shall be subject to a Lock-Up (as defined below) through the period set by such underwriters in connection witha Qualified Financing that is an underwritten public offering, (such period not to exceed 180 days after the closing of the QualifiedFinancing); provided, however, that the Shares shall not be subject to a Lock-Up unless all officers, directors and affiliated stockholdersowning more than five percent (5%) of the Company’s outstanding Common Stock are subject to the same restrictions. The other [*] ofthe Shares held by the Purchaser prior to the Qualified Financing shall not be subject to any Lock-Up and may, in Purchaser’s solediscretion, be sold in the Qualified Financing. For purposes of this Section 7.2, the term “Lock-Up” means an agreement by thePurchaser that, during the applicable period of the Lock-Up entered into in connection with the Qualified Financing, Purchaser will not,without the prior written consent of the Company (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchaseany option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly orindirectly, any Shares or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic- 13 -  consequences of ownership of the Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by deliveryof the Shares purchased in such Closing, in cash or otherwise. Notwithstanding the foregoing, Purchaser may transfer the Shares to anyof its shareholders or Affiliates; provided that in the case of any transfer or distribution pursuant to this subparagraph during therelevant Lock-Up period, each donee or transferee shall sign and deliver a lock-up letter with terms substantially similar to the terms ofthis Section 7.2. (b)Notwithstanding anything to the contrary contained herein, Purchaser agrees thatPurchaser shall not effect any sale, transfer or other disposition of any Shares unless: (a) such sale, transfer or other disposition iseffected pursuant to an effective registration statement under the Securities Act; (b) such sale, transfer or other disposition is made inconformity with the requirements of Rule 144, as evidenced by a broker’s letter and a representation letter executed by Purchaser(reasonably satisfactory in form and content to the Company) stating that such requirements have been met; or (c) counsel reasonablysatisfactory to the Company (which may be counsel to the Company) shall have advised the Company in a written opinion letter(reasonably satisfactory in form and content to the Company), upon which the Company may rely, that such sale, transfer or otherdisposition will be exempt from the registration requirements of the Securities Act.(c)Notwithstanding any other provision of this Section 7.2, this Section 7.2 shall not prohibitor restrict any disposition of Common Stock by Purchaser in connection with (i) a bona fide tender offer by a Person other thanPurchaser or the Company that is not opposed by the Board of Directors and involving a Change of Control of the Company (asdefined below); or (ii) an issuer tender offer by the Company; provided, that in the event that the tender offer is not completed, theShares shall remain subject to the restrictions contained in this Section 7.2. For the purposes of this Agreement, a “Change of Control”means the transfer, in one transaction or a series of related transactions, to a person or group of affiliated persons, of shares of capitalstock of the Company if, after such transfer, the stockholders of the Company immediately prior to such transfer do not own at leasttwenty percent (20%) of the outstanding voting securities of the Company (or the surviving entity).(d)Purchaser acknowledges and agrees that stop transfer instructions will be given to theCompany’s transfer agent with respect to the Shares until the expiration of the applicable Lock-Up.7.3Registration Rights. The Company covenants and agrees as follows:(a)As soon as practicable, and in any event within thirty (30) days following the InitialClosing, the Company shall file a registration statement on Form S-1 or Form S-3 for the Initial Closing Shares and shall cause suchregistration statement to become effective within ninety (90) days following the Initial Closing. (b)To the extent that the Qualified Financing Shares are not registered in the QualifiedFinancing, as soon as practicable, and in any event within thirty (30) days following the Qualified Financing Closing, the Companyshall file a registration statement on Form S-1 or Form S-3 for the Qualified Financing Shares and shall cause such registration statementto become effective within ninety (90) days following the Qualified Financing Closing. (c)As soon as practicable, and in any event within thirty (30) days following the 2019Closing, the Company shall file a registration statement on Form S-1 or Form S-3 for the 2019 Shares and shall cause such registrationstatement to become effective within ninety (90) days following the 2019 Closing. - 14 -  (d)The Company shall maintain the effectiveness of any registration statements with respectto the Registrable Shares (as defined below) in accordance with the terms hereof for a period ending on the date on which allRegistrable Shares covered by such registration statement have been sold pursuant to such registration statement or have otherwiseceased to be Registrable Shares (as defined below).(e)All expenses, other than Selling Expenses (as defined below), incurred in connectionwith registrations, filings or qualifications pursuant to this Section 7.3, including all registration, filing and qualification fees; printers’and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, shall be borneand paid by the Company.(f)For the purposes of this Section 7.3,(i)“Losses” means any loss, damage, claim or liability (joint or several) towhich a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss,damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untruestatement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or finalprospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a materialfact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violationby the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any ruleor regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.(ii)“Registrable Shares” means the Shares held by Purchaser including,without limitation, any shares of Common Stock paid, issued or distributed in respect of any such Shares by way of stock dividend,stock split or distribution, or in connection with a combination of shares, recapitalization, reorganization, merger or consolidation, orotherwise, but excluding shares of Common Stock acquired in the open market before or after the date hereof, provided, however, thatthe Shares will cease to be “Registrable Shares” when (A) the Shares have been sold pursuant to an effective registration statement or(B) the Shares proposed to be sold by Purchaser, in the opinion of counsel satisfactory to the Company, may be distributed to the publicwithout any limitation pursuant to Rule 144 (or any successor provision then in effect).(iii)“Selling Expenses” means the fees and disbursements of counsel forPurchaser.(g)With a view to making available to Purchaser the benefits of Rule 144, for a period ofone year following the date of the latest Closing pursuant to this Agreement, the Company covenants that it will (i) use its best efforts tofile in a timely manner all reports and other documents required, if any, to be filed by it under the Securities Act and the Exchange Actand the rules and regulations adopted thereunder and (ii) make available information necessary to comply with Rule 144 with respect toresales of the Registrable Shares under the Securities Act, at all times, all to the extent required from time to time to enable Purchaser tosell Registrable Shares without registration under the Securities Act within the limitation of the exemptions provided by (A) Rule 144 (ifavailable with respect to resales of the Registrable Shares), as such rule may be amended from time to time or (B) any other rules orregulations now existing or hereafter adopted by the SEC.(h)To the extent permitted by law, the Company will indemnify and hold harmlessPurchaser, and the partners, members, officers, directors, and stockholders of Purchaser; legal counsel and accountants for Purchaser;any underwriter (as defined in the Securities Act) for Purchaser; and each- 15 -  Person, if any, who controls Purchaser or underwriter within the meaning of the Securities Act or the Exchange Act, against any Losses,and the Company will pay to Purchaser, underwriter, controlling Person, or other aforementioned Person any legal or other expensesreasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Losses may result, assuch expenses are incurred; provided, however, that the indemnity agreement contained in this Section 7.3(f) shall not apply to amountspaid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consentshall not be unreasonably withheld, nor shall the Company be liable for any Losses to the extent that they arise out of or are based uponactions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any the Purchaser,underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.(i)To the extent permitted by law, Purchaser agrees to indemnify and hold harmless theCompany, each of the directors of the Company, each of the officers of the Company who shall have signed a registration statement,and each other Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against anyLosses to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as suchLosses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material factcontained in a registration statement or any document incorporated by reference in such document, or arise out of or are based upon theomission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, inlight of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any suchLoss arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made thereinin reliance upon and in strict conformity with written information furnished to the Company by or on behalf of Purchaser for usetherein; provided, however, that the indemnity agreement contained in this Section 7.3 (g) shall not apply to amounts paid in settlementof any such claim or proceeding if such settlement is effected without the consent of the Purchaser, which consent shall not beunreasonably withheld;. The maximum aggregate amount of indemnifiable Losses that may be recovered from the Purchaser under theprovisions of this Section 7.3 (g) shall be the aggregate value of the consideration received for the Shares.(j)Promptly after receipt by an indemnified party under this Section 7.3 of notice of thecommencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, suchindemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7.3, give theindemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and,to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given,and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party(together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain oneseparate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by thecounsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between suchindemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying partywithin a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to theindemnified party under this Section 7.3 to the extent that such failure materially prejudices the indemnifying party’s ability to defendsuch action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnifiedparty otherwise than under this Section 7.3.(k)To provide for just and equitable contribution to joint liability under the Securities Act inany case in which either: (i) any party otherwise entitled to indemnification hereunder- 16 -  makes a claim for indemnification pursuant to this Section 7.3 but it is judicially determined (by the entry of a final judgment or decreeby a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that suchindemnification may not be enforced in such case, notwithstanding the fact that this Section 7.3 provides for indemnification in suchcase, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is providedunder this Section 7.3 then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, orexpenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault ofeach of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted insuch loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of theindemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue orallegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied bythe indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity tocorrect or prevent such statement or omission; provided, however, that, in any such case (x) Purchaser will not be required to contributeany amount in excess of the public offering price of all such Registrable Shares offered and sold by Purchaser pursuant to suchregistration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the SecuritiesAct) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.7.4Notifications.(a)Prior to each Closing, the Company will promptly advise Purchaser in writing of anynotice or other communication from any third Person alleging that the consent of a third Person is required in connection with thetransactions contemplated by this Agreement.(b)Prior to each Closing, each party shall promptly notify the other of any action, suit orproceeding that is instituted or specifically threatened in writing against such party to restrain, prohibit or otherwise challenge thelegality of any transaction contemplated by this Agreement. 7.5Commercial Reasonable Efforts. Each Party will use its commercially reasonable efforts to satisfy in atimely fashion each of the conditions to be satisfied by it under Section 5 and Section 6 of this Agreement.7.6Integration. Purchaser understands that the Company may issue additional securities after the date hereof;provided, however, that the Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of anysecurity (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner thatwould require the registration under the Securities Act of the sale of the Shares or that would be integrated with the offer or sale of theShares for purposes of the rules and regulations of the exchange on which the Shares are listed such that it would require stockholderapproval prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such subsequenttransaction.7.7Securities Laws Disclosure; Publicity. The Company shall, by 9:00 a.m. (New York City time) on theTrading Day immediately following the date hereof, issue a press release disclosing the material terms of the transactions contemplatedhereby, and shall, within four (4) Trading Days following the date hereof, file a Current Report on Form 8-K disclosing the materialterms of the transactions contemplated hereby and including this Agreement as an exhibit thereto. The Company and Purchaser shallconsult with each other regarding the substance of any public disclosure by either party regarding- 17 -  this Agreement or the License Agreement (including the filing of either agreement as an exhibit to a periodic filing with the SEC) andregarding the issuance of any other press releases with respect to the transactions contemplated hereby, and neither the Company norPurchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company,with respect to any press release of Purchaser, or without the prior consent of Purchaser, with respect to any press release of theCompany, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case thedisclosing party shall promptly provide the other party with prior notice of such public statement or communication. 7.8Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of theCompany, any other Person, that Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poisonpill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted bythe Company, or that Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receivingShares under this Agreement or under any other agreement among the Company and Purchaser.7.9Non-Public Information. Except with respect to the material terms and conditions of the transactionscontemplated by this Agreement and the License Agreement, the Company covenants and agrees that neither it, nor any other Personacting on its behalf, will provide Purchaser, or Purchaser’s agents or counsel, with any information that the Company believesconstitutes material non-public information, unless prior thereto Purchaser shall have entered into a written agreement with theCompany regarding the confidentiality and use of such information. The Company understands and confirms that Purchaser will berelying on the foregoing covenant in effecting transactions in securities of the Company. 7.10Indemnification of Purchaser. Subject to the provisions of this Section 7.10, the Company willindemnify and hold Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Personswith a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Personwho controls Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors,officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Personholding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party maysuffer or incur due to a claim by a third party as a result of or relating to any action instituted against the Purchaser Parties in anycapacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such PurchaserParties, with respect to any of the transactions contemplated by this Agreement (unless such action is based upon a breach of suchPurchaser Party’s representations, warranties or covenants under this Agreement or any agreements or understandings such PurchaserParties may have with any such stockholder or any violations by such Purchaser Parties of state or federal securities laws or anyconduct by such Purchaser Parties which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall bebrought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Partyshall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of itsown choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in anysuch action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such PurchaserParty except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Companyhas failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in thereasonable opinion of counsel, a- 18 -  material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case theCompany shall be responsible for the reasonable fees and expenses of no more than one such separate counsel for all Purchaser Partiesentitled to indemnification hereunder. The Company will not be liable to any Purchaser Party under this Agreement (y) for anysettlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld ordelayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breachof any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement. The indemnityagreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company andany liabilities that the Company may be subject to pursuant to law. The Company will have the exclusive right to settle any claim orproceeding, provided that the Company will not settle any such claim, action or proceeding without the prior written consent of thePurchaser Party, which will not be unreasonably withheld or delayed; provided, however, that such consent shall not be required if thesettlement includes a full and unconditional release satisfactory to the Purchaser Party from all liability arising or that may arise out ofsuch claim or proceeding and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalfof any Purchaser Party.7.11Listing of Common Stock. The Company hereby agrees to use commercially reasonable efforts tomaintain the listing or quotation of the Common Stock.7.12Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Shares asrequired under Regulation D and to provide a copy thereof, promptly upon request of Purchaser. The Company shall take such actionas the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Shares for, sale toPurchaser at each Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidenceof such actions promptly upon request of Purchaser.8.SURVIVAL OF REPRESENTATIONSAll representations, warranties, covenants and other agreements of the Company hereunder shall be deemed made on and asof each Closing as though such representations, warranties, covenants and other agreements were made on and as of such date. Allrepresentations and warranties made by a party to this Agreement herein or pursuant hereto shall survive each Closing and the deliveryof the Shares. All covenants and other agreements made by a party to this Agreement herein or pursuant hereto shall survive until allobligations set forth therein shall have been performed or satisfied or they shall have terminated in accordance with their terms.9.TERMINATION9.1Termination. This Agreement may be terminated at any time:(a)by the mutual written consent of Purchaser and the Company;(b)by the Company if (i) any of the representations and warranties of Purchaser contained inSection 4 of this Agreement shall fail to be true and correct or (ii) there shall be a breach by Purchaser of any covenant of Purchaser inthis Agreement that (A) would result in the failure of a condition set forth in Section 6, and (B) which is not curable or, if curable, is notcured upon the occurrence of the twentieth (20th) day after written notice thereof is given the Company to Purchaser;(c)by Purchaser if (i) any of the representations and warranties of the Company contained inSection 3 of this Agreement shall fail to be true and correct or (ii) there shall be a breach by- 19 -  the Company of any covenant of the Company in this Agreement that (A) would result in the failure of a condition set forth in Section5, and (B) which is not curable or, if curable, is not cured upon the occurrence of the twentieth (20th) day after written notice thereof isgiven by Purchaser to the Company; or(d)by either Purchaser or the Company in the event that any court of competent jurisdictionor Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwiseprohibiting the actions contemplated hereby and such order, decree, ruling or other action shall have become final and nonappealable.9.2Effect of Termination. In the event of any termination of this Agreement as provided in Section 8.1, thisAgreement (other than Section 9, which shall remain in full force and effect) shall forthwith become wholly void and of no further forceand effect; provided that nothing herein shall relieve any party from liability for willful breach of this Agreement. 10.GENERAL10.1Successors and Assigns. Except as otherwise provided herein, the terms and conditions of thisAgreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties (includingany permitted transferees of any Shares). Purchaser and the Company may not assign their respective rights or obligations under thisAgreement, in whole or in part, except with the consent of the other party; provided, however, the rights and obligations of Purchasermay be assigned, without the prior written consent of the Company, to one or more of Purchaser’s affiliates. Any attempted assignmentmade in contravention of this Agreement shall be null and void and of no force or effect.10.2Entire Agreement. This Agreement and the License Agreement and the documents, schedules andexhibits referred to herein or therein constitute the entire agreement between the parties and supersede all prior communications,representations, understandings and agreements of the parties with respect to the subject matter hereof and thereof. No party shall beliable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth hereinor therein. All schedules and exhibits hereto are hereby incorporated herein by reference. Nothing in this Agreement, express orimplied, is intended to confer upon any third party any rights, remedies, obligations or liabilities under or by reason of this Agreement,except as expressly provided in this Agreement.10.3General Interpretation. The terms of this Agreement have been negotiated by the parties hereto and thelanguage used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent. ThisAgreement shall be construed without regard to any presumption or rule requiring construction against the party causing suchinstrument or any portion thereof to be drafted, or in favor of the party receiving a particular benefit under this Agreement. No rule ofstrict construction will be applied against any Person.10.4Injunctive Relief. Purchaser and the Company acknowledge and agree that, in view of the uniqueness ofthe Shares, damages at law would be insufficient for any breach by Purchaser or the Company of any of their respective covenants inthis Agreement. Accordingly, each party agrees that in the event of any breach or threatened breach by the other party of anyprovisions of this Agreement, the non-breaching party be entitled to seek equitable relief in the form of an order to specifically performor an injunction to prevent irreparable injury. - 20 -  10.5Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofCalifornia, without regard to the principles of conflicts of law thereof.10.6Jurisdiction. The parties hereby irrevocably and unconditionally submit to the jurisdiction of the UnitedStates District Court for the Northern District of California for the purpose of any suit, action or other proceeding arising out of or basedupon this Agreement.10.7Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto inseparate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constituteone and the same agreement, and may be delivered to the other parties hereto by facsimile.10.8Section Headings and References. The section headings contained herein are for the convenience of the partiesand in no way alter, modify, amend, limit or restrict the contractual obligations of the parties. When a reference is made in thisAgreement to a Section or Exhibit, such reference is to a Section or Exhibit of or to this Agreement unless otherwise indicated. Thewords “hereof,” “herein,” “hereto” and “hereunder” and words of similar import, when used in this Agreement, shall refer to thisAgreement as a whole and not to any particular provision of this Agreement. The terms defined in the singular has a comparablemeaning when used in the plural, and vice versa. References to a Person are also to its successors and permitted assigns. References toan agreement are to such agreement as amended, restated, modified or otherwise supplemented, from time to time. The term “dollars”and “$” means United States dollars. The word “including” means “including without limitation” and the words “include” and“includes” have corresponding meanings.10.9Severability. If any term of provision of this Agreement is determined to be illegal, unenforceable or invalid inwhole or in part for any reason, such illegal, unenforceable or invalid provisions or party thereof shall be stricken from this Agreement,and such provision shall not affect the legality, enforceability or validity of the remainder of this Agreement. If any provision or partthereof of this Agreement is stricken in accordance with the provisions of this Section 10.9, then such stricken provision shall bereplaced, to extent possible, with a legal, enforceable and valid provision that is as similar in tenor to the stricken provision as is legallypossible.10.10Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given:(a) upon personal delivery to the party to be notified, (b) when received by facsimile or email (provided that the party providing suchnotice promptly confirms receipt of such transmission with the other party), (c) when received after having been sent by registered orcertified mail, return receipt requested and postage prepaid or (d) when received after deposit with a nationally recognized overnightcourier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company and toPurchaser at the address as set forth below or at such other address as Purchaser or the Company may designate by 10 days advancewritten notice to the Company (in the case of Purchaser) or Purchaser (in the case of the Company).if to the Company: AntriaBio, Inc.1450 Infinite DriveLouisville, CO 80027Attn: Chief Executive OfficerEmail: nevan@antriabio.com with a copy (which shall not constitute notice) to:- 21 -  Michael WeinerDorsey &Whitney LLP1400 Wewatta StreetSuite 400Denver, CO 80202-5549Facsimile: (303) 629-3450Email: weiner.michael@dorsey.com if to Purchaser: XOMA Corporation2200 Powell StreetSuite 310Emeryville, CA 94608Attn: Chief Executive OfficerCopy to: Legal Department with copies (which shall not constitute notice) to: Cooley LLPAttn: Mike Tenta3175 Hanover StreetPalo Alto, CA 94304Facsimile: (650) 849-7400Email: mtenta@cooley.com 10.11Amendments and Waivers. Except as otherwise expressly set forth in this Agreement, any term of thisAgreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particularinstance and either retroactively or prospectively), only with the written consent of each party hereto (with respect to an amendment)and the written consent of each party from whom a waiver is sought (with respect to a waiver). No waiver of any provision or consentto any action shall constitute a waiver of any other provision or consent to any other action, whether or not similar. No waiver orconsent shall constitute a continuing waiver or consent or commit a party to provide a waiver in the future except to the extentspecifically set forth in writing. 10.12Expenses. Except with respect to the registration of the Shares pursuant to Section 7.2, each party heretowill pay its own expenses in connection with the transactions contemplated hereby.10.13Persons Entitled to Benefits of Agreement. This Agreement is intended for the benefit of the partieshereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by,any other person.10.14Further Assurances. The Company and Purchaser shall use their commercially reasonable efforts, in themost expeditious manner practicable, to satisfy or cause to be satisfied the intent and purposes of this Agreement by executing anddelivering such instruments, documents and other writings as may be reasonably necessary or desirable.10.15Replacement of Shares. If any certificate or instrument evidencing any Shares is mutilated, lost, stolenor destroyed, the Company shall issue or cause to be issued in exchange and- 22 -  substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate orinstrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicantfor a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customaryindemnity) associated with the issuance of such replacement Shares. {signature pages follow} - 23 -  IN WITNESS WHEREOF, the undersigned parties have duly executed this Common Stock Purchase Agreement effective asof the date first above written. COMPANY: ANTRIABIO, INC. By:/s/ Nevan Elam/s/ Name:Nevan Elam Title:CEO Date:06-Dec-2017 PURCHASER: XOMA CORPORATION By:/s/ Jim Neal /s/ Name:Jim Neal Title:Chief Executive Officer Date:06-Dec-2017 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Exhibit ALicense Agreement See attached. [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Execution VersionConfidential[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separatelywith the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Exhibit 10.66LICENSE AGREEMENTTHIS LICENSE AGREEMENT (this “Agreement”) dated as of December 6, 2017 (the “Effective Date”), is entered intobetween XOMA (US) LLC, a Delaware limited liability company, having an address of 2200 Powell Street, Suite 310, Emeryville,CA 94608 (“XOMA”), and AntriaBio, Inc., a Delaware corporation, having an address of 1450 Infinite Drive, Louisville, CO 80027(“AntriaBio”). Each of XOMA and AntriaBio may be referred to herein as a “Party”, or jointly as the “Parties”.WHEREAS, XOMA owns or controls rights in and to its proprietary antibody known as XOMA 358, a fully humanallosteric modulating monoclonal antibody that binds to insulin receptors and attenuates insulin action;WHEREAS, AntriaBio is a clinical stage biopharmaceutical company specializing in the development of innovative drugtherapies to improve the lives of patients with diabetes and metabolic diseases;WHEREAS, AntriaBio desires to obtain an exclusive worldwide license to develop and commercialize products comprisingor containing XOMA 358 and XOMA is willing to grant such license on the terms and conditions set forth herein; andWHEREAS, the Parties have entered into that certain Common Stock Purchase Agreement of even date herewith relating tothe issuance of AntriaBio common stock to XOMA;NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Partiesagree as follows:1.DEFINITIONS1.1“Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, iscontrolled by, or is under common control with, such Person. A Person shall be regarded as in control of another Person if it owns, ordirectly or indirectly controls, more than fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if itdirectly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by anymeans whatsoever. 1.2“Annual Net Sales” means cumulative Net Sales during a calendar year of Licensed Products.1.3“Antibody” means XOMA’s proprietary monoclonal antibody known as XOMA 358, as morespecifically described in Exhibit A. Confidential1.4“AntriaBio Patents” means any Patent that is owned or Controlled by AntriaBio as of the EffectiveDate or during the term of this Agreement that claims or covers the development, manufacture, use or sale of an AntriaBio Product, thePKI Portfolio or the Extended Release Technology, including those Patents set forth in Exhibit B, and any Patent arising therefrom.1.5“AntriaBio Product” means any product that (a) constitutes, incorporates or is based on AntriaBio’sproduct candidate known as AB101 or AntriaBio’s product candidate known as AB301, as each such product candidate may bemodified, improved or combined with other products or components; (b) is part of or arises out of the use of the PKI Portfolio; or (c)incorporates or arises out of the use of the Extended Release Technology; provided that a Licensed Product will not be deemed to bean AntriaBio Product. For clarity, if AntriaBio sells, transfers, licenses or grants a covenant not to sue under some or all AntriaBioPatents or other Patents owned or Controlled by AntriaBio during the Term that claim or cover the development, manufacture, use orsale of any product described in the preceding sentence to a Third Party, such product shall nonetheless continue to be deemed to be anAntriaBio Product.1.6“AntriaBio Product Royalty Term” means, with respect to each AntriaBio Product in each country,the period commencing on the First Commercial Sale of such AntriaBio Product in such country and continuing until the later oftwelve (12) years from such First Commercial Sale or for so long as such AntriaBio Product is being sold in such country, providedthat solely with respect to sales of such AntriaBio Product by a licensee of AntriaBio, the AntriaBio Product Royalty Term for suchAntriaBio Product in a country will terminate upon the termination of such licensee’s obligation to make payments to AntriaBio or itsAffiliate based on sales (whether through a royalty, profit share or otherwise) of such AntriaBio Product in such country. 1.7“BLA” means a Biologics License Application, as defined in the United States Public Health ServiceAct, as amended, and the regulations promulgated thereunder, as filed with the FDA or any comparable application filed with theRegulatory Authority of a country, group of countries or territory other than the United States to obtain approval to market a Product insuch country, group of countries or territory.1.8“Confidential Information” means, with respect to a Party (“Disclosing Party”), all information ofany kind whatsoever, and all tangible and intangible embodiments thereof of any kind whatsoever, which is or was disclosed by or onbehalf of such Party to the other Party (“Recipient”) in connection with this Agreement or the ConfidentialityAgreement. Notwithstanding the foregoing, Confidential Information of a Party shall not include information which Recipient canestablish by written documentation: (a) to have been publicly known prior to disclosure of such information by Disclosing Party toRecipient, (b) to have become publicly known, without fault on the part of Recipient, subsequent to disclosure of such information byDisclosing Party to Recipient, (c) to have been received by Recipient at any time from a source, other than Disclosing Party, rightfullyhaving possession of and the right to disclose such information without restriction, (d) to have been otherwise known by Recipientprior to disclosure of such information by Disclosing Party to Recipient or (e) to have been independently developed by employees oragents of Recipient without access to or use of such information disclosed by Disclosing Party to Recipient.- 2 -Confidential1.9“Confidentiality Agreement” means the Mutual Confidentiality Agreement between the Parties datedSeptember 22, 2017.1.10“Control”, “Controls” or “Controlled” means, with respect to any know-how, patents, proprietaryinformation or trade secrets, or other intellectual property rights (collectively, “Rights”), the legal authority or right (whether byownership, license or otherwise) of a Party to grant a license or a sublicense of or under such Rights to the other Party, or to otherwisedisclose such proprietary information or trade secrets to the other Party, without breaching the terms of any agreement with a ThirdParty, misappropriating the proprietary information or trade secrets of a Third Party, or being required to make a payment to a ThirdParty.1.11“Develop” or “Development” means all development activities for the Antibody or a Product that aredirected to obtaining Regulatory Approval(s) of a Product, including: all non-clinical, preclinical and clinical activities, testing andstudies of such Antibody or Product (including translational research); manufacturing development, process and formulationdevelopment; toxicology, pharmacokinetic, pharmacodynamic, drug-drug interaction, safety, tolerability and pharmacological studies;manufacturing and distribution of such Antibody or Product for use in clinical trials (including placebos and comparators); statisticalanalyses; assay development; instrument design and development; protocol design and development; quality assurance and control;report writing; and the preparation, filing and prosecution of any MAA for such Product; development activities directed to labelexpansion and/or obtaining Regulatory Approval for one or more additional indications or patient populations following initialRegulatory Approval; development activities conducted after receipt of Regulatory Approval which were a condition for the receipt ofsuch Regulatory Approval; and all regulatory activities related to any of the foregoing.1.12“Diligent Efforts” means the use of reasonable, diligent, good faith efforts and resources, in an activeand ongoing program, as would be used by a prudent pharmaceutical or biotechnology company for a product discovered or identifiedinternally by such company, which product is at a similar stage of research, development or commercialization, taking into accountrelevant factors including, without limitation, measures of patent coverage, relative safety and efficacy, product profile and thecompetitiveness of the marketplace. “Diligent Efforts” shall require that AntriaBio (on its own and/or acting through any of itsAffiliates, (sub)licensees or subcontractors), at a minimum: (a) [*]; (b) [*]; and (c) [*]. 1.13“EMA” means the European Medicines Agency or any successor agency thereto.1.14“Equity Financing” means sales of AntriaBio common or preferred stock to a Third Party, excludingany debt financing.1.15“Extended Release Technology” means AntriaBio’s technology for developing extended releasedrug therapies, including through the use of pegylation, microspheres and/or hydrophobic ion pairing.- 3 -Confidential1.16“FDA” means the United States Food and Drug Administration or any successor agency thereto.1.17“FD&C Act” means the United States Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 etseq.), as amended, and the rules and regulations promulgated thereunder.1.18“First Commercial Sale” means, with respect to a Product in any country, the first sale for end use orconsumption by the general public of such Product in such country after marketing approval for such Product has been granted in suchcountry. First Commercial Sale excludes any sale or other distribution of a Product for use in a clinical trial or other developmentactivity, promotional use (including samples) prior to marketing approval or for compassionate use or on a named patient basis.1.19“Interim Financing” means a financing event (including, but not limited to, an equity financing, debtfinancing or the receipt of funds resulting from licensing an AntriaBio Product) occurring prior to a Qualified Financing resulting ingross cash proceeds to AntriaBio of less than Twenty Million Dollars ($20,000,000).1.20“IND” means an Investigational New Drug Application, as defined in the FD&C Act, that is requiredto be filed with the FDA before beginning clinical testing of a Product in human subjects, or an equivalent foreign filing.1.21“Know-How” means all information and data that is not generally known, including information anddata regarding formulae, procedures, protocols, techniques, pharmacological, toxicological and clinical data and results and otherresults of experimentation and testing, and all rights therein and thereto.1.22“Licensed Know-How” means all Know-How which is Controlled by XOMA as of the EffectiveDate and which is necessary or specifically useful for AntriaBio and its Affiliates and sublicensees to use, develop, sell, or seekregulatory approval to market or otherwise exploit the Antibody. Licensed Know-How specifically excludes any Know-How that isowned or licensed by any acquiror or merger partner of XOMA or any of its Affiliates.1.23“Licensed Patents” means the Patents listed on Exhibit C and all Patents issuing therefrom.1.24“Licensed Product” means any product that constitutes or contains the Antibody or an unmutatedfragment thereof.1.25“Licensed Product Royalty Term” means, with respect to each Licensed Product in each country,the later of (a) the expiration of the last to expire Valid Claim in such country that would be infringed, or if such Valid Claim is apending patent application, would be infringed if such application were to issue with the claims as then being prosecuted, but for thelicense granted by this Agreement, or (b) twelve (12) years from the date of the First Commercial Sale of such Licensed Product insuch country.1.26“Licensed Technology” means, collectively, the Licensed Patents and the Licensed Know-How.- 4 -Confidential1.27“MAA” means a marketing approval application, BLA, new drug application or product licenseapplication or its equivalent filed with and accepted by a Regulatory Authority after completion of human clinical trials to obtainmarketing approval for a Product.1.28“Net Sales” means, with respect to any Product, the invoiced sales price of such Product billed byAntriaBio, its Affiliates and (sub)licensees to independent Third Party customers, less (a) credits, allowances, discounts and rebates to,and chargebacks from the account of, such independent customers for spoiled, damaged, out‑dated, rejected or returned Product;(b) actual freight and insurance costs incurred in transporting such Product to such customers; (c) cash, quantity and trade discountsand other price reductions; (d) sales, use, value‑added and other direct taxes incurred; and (e) customs duties, surcharges and othergovernmental charges incurred in connection with the exportation or importation of such Product. Product provided without charge inconnection with research and development, clinical trials, compassionate use, humanitarian and charitable donations, indigent programsor for use as samples will be excluded from the computation of Net Sales.1.29“Option Product” means a fragment of a monoclonal antibody listed on Exhibit D.1.30“Patent” means (a) all patents and patent applications in any country or supranational jurisdiction inthe Territory, (b) any substitutions, divisionals, continuations, continuations-in-part, provisional applications, reissues, renewals,registrations, confirmations, re-examinations, extensions, supplementary protection certificates and the like of any such patents orpatent applications, and (c) foreign counterparts of any of the foregoing.1.31“Pediatric Priority Review Voucher” means a priority review voucher awarded by the FDA to thesponsor of a rare pediatric disease product application pursuant to Section 529 of the FD&C Act, as amended, or an equivalentvoucher under a superseding law.1.32“Person” means an individual, corporation, partnership, limited liability company, trust, business trust,association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmentalauthority or any other form of entity not specifically listed herein.1.33“PKI Portfolio” means AntriaBio’s oral plasma kallikrein inhibitor portfolio.1.34“Phase 2 Clinical Trial” means (a) a trial that would satisfy the requirements for a Phase 2 study asdefined in 21 C.F.R. § 312.21(b), or (b) a Phase 2 study as defined in the ICH E8 Guideline (or, in either case, any amended orsuccessor regulation or guideline). 1.35“Phase 2 Repeat Dose Study” means a Phase 2 Clinical Trial sponsored by AntriaBio or one of itsAffiliates or sublicensees in which patients receive multiple doses of a Licensed Product.- 5 -Confidential1.36“Phase 3 Clinical Trial” means (a) a trial that would satisfy the requirements for a Phase 3 study asdefined in 21 C.F.R. § 312.21(c), or (b) a Phase 3 study as defined in the ICH E8 Guideline (or, in either case, any amended orsuccessor regulation or guideline). A Phase 2/3 clinical trial shall be deemed to be a Phase 3 Clinical Trial upon the date that suchPhase 2/3 clinical trial first satisfies the criteria set forth in clause (b) of this definition.1.37“Product” means a Licensed Product or an AntriaBio Product, as applicable.1.38“Product Data/Filing” means (i) any clinical protocol, study, clinical data or result used in orresulting from any clinical trial of the Antibody or Licensed Product or (ii) any IND, MAA, Regulatory Approval or other regulatoryfiling regarding the Antibody or a Licensed Product.1.39“Prosecute and Maintain” or “Prosecution and Maintenance”, with respect to a particular Patent,means all activities associated with the preparation, filing, prosecution and maintenance of such Patent, together with the conduct ofinterferences, derivation proceedings, inter partes review, post-grant review, the defense of oppositions and other similar proceedingswith respect to such Patent. For clarity, Prosecution and Maintenance shall include any activities associated with claims, including as acounterclaim or declaratory judgment action, of unpatentability, invalidity or unenforceability of such Patent that are brought by aThird Party in connection with an infringement proceeding.1.40“Qualified Financing” means a financing event (including, but not limited to, an equity financing,debt financing or the receipt of funds resulting from licensing an AntriaBio Product) resulting in aggregate gross cash proceeds toAntriaBio of at least Twenty Million Dollars ($20,000,000). 1.41“Regulatory Approval” means any technical, medical and scientific license, registration,authorization or approval (including, without limitation, any approval of a BLA, supplement or amendment, pre- and post- approval,pricing approval, or labeling approval) of any national, supra-national, regional, state or local regulatory agency, department, bureau,commission, council or other governmental entity, necessary for the commercial manufacture, distribution, marketing, promotion, offerfor sale, use, import, export and sale of a Product in a regulatory jurisdiction. 1.42“Regulatory Authority” means any national, regional, state or local regulatory agency, department,bureau, commission, council or other governmental entity in each country of the world involved in the granting of RegulatoryApproval for the Product.1.43“Right of Reference” means a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b)and any comparable right existing under the laws or regulations of any foreign country.1.44“Stock Agreement” means that certain Common Stock Purchase Agreement between the Parties ofeven date herewith.- 6 -Confidential1.45“Sublicense Fees” means all upfront license consideration and other unconditional amounts receivedby AntriaBio or any of its Affiliates in connection with a grant of a sublicense hereunder, including the fair market value of any equityor other assets provided by or on behalf of the sublicensee in connection therewith. Any payment that is due solely with the passage oftime (and without regard to whether the applicable agreement can be terminated in the interim) shall be deemed to be “unconditional”.1.46“Territory” means the entire world.1.47“Third Party” means any Person other than XOMA, AntriaBio and their respective Affiliates.1.48“Valid Claim” means either (a) a claim of an issued and unexpired patent within the Licensed PatentRights, which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agencyof competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to beinvalid or unenforceable through reissue or disclaimer or otherwise; or (b) a claim of a pending patent application within the LicensedPatent Rights, provided that if such claim shall not have issued within [*] years after the earliest filing date from which such claim takespriority, such claim shall not constitute a Valid Claim for the purposes of this Agreement unless and until such claim issues.1.49“Voucher Payment” means any consideration of any kind (including the fair market value of anynon-cash consideration) received by AntriaBio or any of its Affiliates from a Third Party in connection with the monetization of aPediatric Priority Review Voucher awarded to AntriaBio or any of its Affiliates or sublicensees for a Licensed Product. 1.50“XMet Patents” means the Patents listed on Exhibit E and all Patents issuing therefrom. For clarity,the XMet Patents include the Licensed Patents. 2.PRODUCT DEVELOPMENT AND COMMERCIALIZATION2.1Diligence. 2.1.1AntriaBio shall use Diligent Efforts to research, Develop and commercialize LicensedProducts and AntriaBio Products in the United States and Europe. The efforts of AntriaBio’s Affiliates and (sub)licensees shall betreated as the efforts of AntriaBio when evaluating AntriaBio’s compliance with the foregoing diligence obligations. Without limitingthe generality of the foregoing, AntriaBio will be solely responsible for conducting all necessary studies, including safety studies andclinical trials that are necessary in connection with seeking Regulatory Approvals to market the Products in the Territory, atAntriaBio’s cost.2.1.2The Parties have agreed that the financial consideration to be paid to XOMA in exchangefor the rights granted and materials transferred hereunder will be largely deferred until such time as AntriaBio has substantiallyadvanced the Development of the Antibody and Licensed Products and commenced commercialization of Licensed Products, such thatXOMA is reliant on AntriaBio’s diligent Development of the Antibody and Licensed Products and commercialization of the LicensedProducts to fully receive the benefit of its- 7 -Confidentialbargain. Further, AntriaBio acknowledges that the diligent conduct of such Development requires the commitment by AntriaBio of anappropriate level of funding directed to such Development. Accordingly, and without limiting the generality of Section 2.1.1, (a)AntriaBio (together with its Affiliates and sublicensees) shall expend (i) [*] per calendar year (pro rated for partial years) [*] on theDevelopment of the Antibody and Licensed Products until [*] and (ii) [*] per calendar year (pro rated for partial years) [*] on theDevelopment of the Antibody and Licensed Products until such time as the first BLA for a Licensed Product is accepted by the FDA;(b) AntriaBio shall use Diligent Efforts, itself or through an Affiliate or sublicensee, to dose the first patient in the Phase 2 Repeat DoseStudy by [*]; and (c) Antriabio shall, without reference to Diligent Efforts, prior to [*], (i) [*], (ii)[*] and (iii) [*].2.1.3The obligations set forth in this Section 2.1 are material obligations of AntriaBio and anyfailure to fulfill such obligations shall be a material breach of this Agreement.2.2Reporting. AntriaBio shall provide XOMA with written reports detailing the activities of AntriaBio, itsAffiliates and sublicensees with respect to the research and Development of and pre-commercial launch activities for Products in theTerritory, both as to activities conducted during the prior period and planned activities, in sufficient depth to enable XOMA toreasonably assess AntriaBio’s compliance with its diligence obligations hereunder. Such reports shall also include the Developmentfunding expended by AntriaBio in accordance with Section 2.1.2 and the status of AntriaBio’s efforts to obtain and monetize aPediatric Review Voucher in accordance with Section 4.8. AntriaBio shall present such report to XOMA in conjunction with ameeting (either in person or by videoconference, as the Parties may agree) with AntriaBio’s personnel responsible for the conduct ofsuch Development (and, if applicable, pre-commercial launch activities) which personnel shall include at least one AntriaBiorepresentative responsible for such Development (and, if applicable, pre-commercial launch activities) at a level of vice president orhigher. Such reports shall be made on a calendar quarter basis (within thirty (30) days following the end of each calendar quarter) untilsuch time as AntriaBio has paid the milestone payment set forth in Section 4.3(a) and on a calendar year basis thereafter (within thirty(30) days following the end of each calendar quarter), provided that AntriaBio’s obligations under this Section with respect to LicensedProducts in the United States or Europe, as applicable, shall terminate when the First Commercial Sale of a Licensed Product occurs insuch territory and AntriaBio’s obligations under this Section with respect to AntriaBio Products shall terminate when the FirstCommercial Sale of an AntriaBio Product occurs.2.3Data Sharing and Technology Transfer. 2.3.1XOMA shall promptly following January 1, 2018, and in any event by March 1, 2018,disclose to and share with, or cause to be disclosed to and shared with, AntriaBio, all Product Data/Filings and any other technical dataControlled by XOMA and its Affiliates in connection with and specifically relating to the development of the Antibody. AntriaBioand its Affiliates and sublicensees shall have the right to use, without additional payment, any and all such Product Data/Filings orother clinical data provided to support any regulatory filings for the Products in accordance with the terms of thisAgreement. AntriaBio shall reimburse XOMA for its reasonable, documented out-of-pocket costs incurred in connection with suchactivities.- 8 -Confidential2.3.2XOMA hereby grants to AntriaBio and its Affiliates a Right of Reference to any ProductData/Filing to be provided or disclosed by XOMA or its Affiliate or licensee pursuant to Section 2.3.1 for use in regulatory filings forthe Product by AntriaBio and its Affiliates. AntriaBio may sublicense the Right of Reference set forth in this Section 2.3.2 to itssublicensees of the Licensed Products.2.3.3XOMA shall promptly following January 1, 2018, and in any event by March 1, 2018,conduct a technology transfer of all Licensed Know-How in XOMA’s possession and control, and will cooperate with AntriaBio’sreasonable requests for assistance until the first anniversary of the Effective Date with respect to Licensed Know-How to enableAntriaBio to fulfill its rights and obligations under this Agreement. AntriaBio shall reimburse XOMA for its reasonable, documentedout-of-pocket costs incurred in connection with such activities.2.3.4XOMA shall promptly following January 1, 2018, and in any event by March 1, 2018,after the Effective Date, deliver to AntriaBio certain clinical materials related to the Antibody, as described in Exhibit F, for use byAntriaBio in connection with its initial Development activities for the Antibody, including clinical studies. AntriaBio acknowledgesthat such materials are provided “as is” and without any representation or warranty by XOMA as to their suitability or usability forAntriaBio’s development activities or any other purpose. AntriaBio shall reimburse XOMA for its reasonable, documented out-of-pocket costs incurred in connection with such activities.2.3.5Within sixty (60) days following the Effective Date, AntriaBio shall identify to XOMA inwriting those contracts between XOMA and its Third Party vendors that relate solely to the Antibody and Licensed Products whichAntriaBio desires to be assigned to AntriaBio. XOMA shall promptly, and in any event with ninety (90) days after its receipt of suchrequest from XOMA, assign to AntriaBio each such contract if and to the extent such assignment is permitted by the terms of suchcontract. Where such a contract requires the consent of the counterparty for such assignment, XOMA shall use reasonable efforts toobtain such consent.2.4Regulatory Approvals and Regulatory Reporting. AntriaBio will be solely responsible for thepreparation and filing of the Regulatory Approvals for the Licensed Products with the applicable Regulatory Authorities in theTerritory. AntriaBio shall prepare and file the Regulatory Approval Applications for the Products with the Regulatory Authorities inits name and at its cost. AntriaBio shall file, in its own name and at its own expense, all other applications for any approvals requiredfor any clinical study or other study or action necessary or desirable to obtain such Regulatory Approval. AntriaBio shall have the soleresponsibility for communicating with any Regulatory Authority regarding any MAA or any Regulatory Approval for the LicensedProducts once granted or any such other applications. AntriaBio shall be responsible for filing, at its own expense, all reports requiredto be filed in order to maintain any Regulatory Approvals granted for the Licensed Products.2.5Product Labeling. AntriaBio shall be solely responsible for the administrative aspects of preparing,updating and maintaining product labeling in connection with commercialization of the Licensed Products. Such labeling may includebut is not limited- 9 -Confidentialto text and graphical contents of printed labels and labeling components, including but not necessarily limited to healthcare professionalleaflets or inserts, patient leaflets or inserts, and cartons.2.6Commercialization Efforts. Marketing, distribution and sale of the Products in the Territory shall be thesole responsibility of AntriaBio, which shall have the sole right and discretion to make all decisions relating thereto. AntriaBio shalluse Diligent Efforts to launch each Product in each country in the Territory promptly following the Regulatory Approval therefor in theapplicable country. Following launch of a Product in a country, AntriaBio shall use Diligent Efforts to market and sell such Product insuch country. The efforts of AntriaBio’s Affiliates and sublicensees shall be treated as the efforts of AntriaBio when evaluatingAntriaBio’s compliance with the foregoing diligence obligations.2.7Compliance. AntriaBio, its Affiliates and its sublicensees shall comply with all applicable rules, lawsand regulations in connection with their performance under this Agreement. 3.LICENSE AND OPTION GRANTS3.1License Grant. Subject to the terms and conditions of this Agreement, XOMA hereby grants toAntriaBio an exclusive license under the Licensed Technology solely to research, Develop, make, have made, use, offer for sale, sell,have sold, import and otherwise exploit Licensed Products in the Territory.3.2Sublicenses. 3.2.1Until such time as [*] occurs, AntriaBio shall have the right to grant sublicenses under thelicense granted in Section 3.1, including to its Affiliates, only with XOMA’s prior written consent.3.2.2Following AntriaBio’s achievement of [*], (a) AntriaBio may grant sublicenses under thelicense granted in Section 3.1 to its Affiliates, subject to Section 12.14, and (b) AntriaBio may grant sublicenses under the license inSection 3.1 to one or more Third Parties.3.2.3AntriaBio shall provide XOMA with written notice of each such sublicense within thirty(30) days of granting such sublicense and shall ensure that each such sublicense agreement is consistent with the terms and conditionsof this Agreement. AntriaBio shall, within thirty (30) days after granting any sublicense to a Third Party, provide XOMA with a true,complete and legible copy of such sublicense agreement, provided that AntriaBio may redact from such agreement any financial termsthat are unrelated to this Agreement. 3.2.4AntriaBio shall remain directly responsible to XOMA for each of its sublicensees’compliance with this Agreement.3.2.5XOMA’s consent will not be required for a sublicense to a subcontractor of AntriaBio, itsAffiliates or its sublicensees where such sublicense is solely for the purposes of performing services relating to the Antibody orLicensed Products on behalf of- 10 -ConfidentialAntriaBio, its Affiliates or sublicensees, provided that AntriaBio shall remain directly responsible to XOMA for each suchsubcontractor’s compliance with this Agreement.3.3Retained Rights. XOMA retains the right to practice the Licensed Technology Rights in the Territory(a) to fulfill its rights and obligations under this Agreement, and (b) outside the scope of the licenses granted to AntriaBio in Section3.1, including to develop and commercialize in the Territory any product that is not an Antibody or Licensed Product.3.4Negative Covenant; No Implied License; Reservation of Rights. AntriaBio covenants that it shall not,and it shall not permit any of its Affiliates or sublicensees to, use or practice any Licensed Technology outside the scope of the licensesgranted to it under Section 3.1 above. Except as expressly set forth herein, neither Party shall acquire any license or other intellectualproperty interest, by implication or otherwise, under any trademarks, patents or patent applications owned or Controlled by the otherParty. Each Party reserves all rights in and to its Patents, Know-How, trademarks and other intellectual property except as expresslygranted under this Agreement. 3.5Option. XOMA hereby grants to AntriaBio an exclusive option to acquire an exclusive license to asingle Option Product, selected by AntriaBio, on equivalent terms and conditions and the same royalties and milestone payments as setforth herein, provided that in addition to such payments AntriaBio shall pay to XOMA: (a) a [*] option exercise fee, (b) a [*] paymenton the [*], and (c) a [*] payment on the [*]. AntriaBio may exercise such option at anytime prior to June 1, 2019 by providing XOMAwith written notice of such exercise prior to such date specifying the Option Product selected by AntriaBio and accompanied by theoption exercise fee. Following AntriaBio’s exercise of such option for an Option Product, XOMA shall have no further obligations toAntriaBio with respect to any other Option Product. If AntriaBio does not exercise such option by June 1, 2019, then XOMA shallhave no further obligations to AntriaBio with respect to any Option Product. In addition, following AntriaBio’s exercise of its optionwith respect to an Option Product, XOMA shall have no further obligations to AntriaBio with respect to the Option Products notselected by AntriaBio in its exercise notice.4.CONSIDERATION4.1Stock Issuance. AntriaBio shall issue its common stock to XOMA as set forth in the StockAgreement. 4.2Royalties. In consideration for the license granted to AntriaBio herein, during the Licensed ProductRoyalty Term, AntriaBio shall pay royalties to XOMA on Net Sales of Products by AntriaBio, its Affiliates and (sub)licensees in theTerritory as follows:4.2.1Licensed Products.Annual Net SalesRatePortion of Annual Net Sales under $[*][*]%- 11 -ConfidentialAnnual Net SalesRatePortion of Annual Net Sales equal to or greater than $[*] and under $[*][*]%Portion of Annual Net Sales equal to or greater than $[*][*]%Solely with respect to the United States, if the manufacture, use or sale of a Licensed Product in the United States is notcovered by a Valid Claim, then the royalty rates above shall be decreased by [*] until such time, if any, as such Licensed Product iscovered by a Valid Claim.4.2.2AntriaBio Products. AntriaBio will pay XOMA a royalty of [*] on all Net Sales ofAntriaBio Products during the AntriaBio Product Royalty Term. For clarity, this Section 4.2.2 will not survive termination of thisAgreement.4.2.3Combination Products. If a Product is sold in a combination product with other activecomponents, Net Sales, for purposes of royalty payments on the combination product in a country, shall be calculated by multiplyingthe Net Sales of that combination product by the fraction A/A+B, where A is the invoice price of the Product sold separately in suchcountry and B is the invoice price of the other active components in such combination product in such country. If no such separatesales are made by AntriaBio, its Affiliates or (sub)licensees, Net Sales for royalty determination shall be calculated by multiplying NetSales of the combination by the fraction C/(C+D), where C is the fully allocated cost of the Product in such country and D is the fullyallocated cost of such other active components in such country.4.2.4Third Party Royalties. If AntriaBio, its Affiliates or sublicensees are required to payroyalties to any Third Party for a license to a patent claiming the composition of matter of the Antibody in order to exercise its rightshereunder to develop, make, use, offer for sale, sell or import any Licensed Product, then AntriaBio shall have the right to credit [*] ofsuch Third Party royalty payments against the royalties owing to XOMA under Section 4.2.1 above with respect to sales of suchLicensed Product; provided, however, that AntriaBio shall not reduce the amount of the royalties paid to XOMA under Section 4.2.1above with respect to sales of such Licensed Product by more than [*].4.2.5Reporting and Payment. AntriaBio will pay the royalties set forth above on a calendarquarter basis. Within forty-five (45) days after the end of each calendar quarter following the First Commercial Sale of the first Product,AntriaBio shall deliver to XOMA a report containing the following information for the prior calendar quarter on a Product-by-Productand country-by-country basis: (a) the gross sales associated with each Product sold by AntriaBio, its Affiliates and (sub)licensees; (b) acalculation of Net Sales of each Products that are sold by AntriaBio, its Affiliates and (sub)licensees; and (c) a calculation ofpayments due to XOMA with respect to the foregoing. Concurrently with these reports, AntriaBio shall remit to XOMA any paymentdue for the applicable calendar quarter. If no royalties are due to XOMA for such reporting period, the report shall so state. Themethod of payment shall be by check or wire transfer to an address or account specified in writing by XOMA.- 12 -Confidential4.3Milestone Payments. As additional consideration for the license granted to AntriaBio under thisAgreement, AntriaBio shall pay XOMA the following milestone payments upon the first occurrence of each milestone event set forthbelow:(a)[*] upon the [*];(b)[*] upon [*];(c)[*] upon [*];(d)[*] upon the [*];(e)[*] upon [*];(f)[*] upon achieving [*]; (g)[*] upon achieving [*];(h)[*] upon achieving [*]; and(i)[*] upon achieving [*]. Each milestone payment owing by AntriaBio to XOMA pursuant to this Section 4.3 shall be payable by AntriaBio within thirty (30)days following the first achievement of the corresponding milestone event. For the avoidance of doubt, each milestone payment is onlypayable once, regardless of the number of times such milestone may be achieved by AntriaBio, its Affiliates and sublicensees. Uponthe achievement of any milestone under this Section 4.3, payments for any prior milestones which have not been paid by AntriaBioshall be paid simultaneously with the payment for such milestone (whether or not such prior milestone had actually been achieved),provided that either (i) both the milestone payments set forth in subsections (b) and (c) shall be paid or (ii) the milestone payment setforth in subsection (d) above shall be paid, but not both.4.4Sublicense Fees. As additional consideration for the license granted to AntriaBio under thisAgreement, AntriaBio shall pay XOMA [*] of the Sublicense Fees received in connection with any sublicense under the license rightsset forth in Section 3.1 granted prior to the earlier to occur of: (a) [*] paid to XOMA by AntriaBio [*]; (b) [*]; (c) [*]. Subsequent tothe occurrence of one of the foregoing events, AntriaBio shall pay XOMA [*] of the Sublicense Fees received in connection with anysublicense under the license rights set forth in Section 3.1 granted prior to the First Commercial Sale of a Licensed Product.4.5Interim Financing Payment. If any Interim Financing, then within five (5) days following such closing,AntriaBio shall notify XOMA of such financing in writing, including the gross proceeds of such financing. Concurrently with suchclosing, AntriaBio shall issue to XOMA the shares and/or securities described in Section 1.3 of the Stock Agreement. Within fifteen(15) days following such closing, AntriaBio shall pay to XOMA [*] of the gross cash proceeds of such Interim Financing. Any cashamounts paid to XOMA pursuant to this Section 4.5 shall be offset against cash amounts to be paid to XOMA pursuant to Section4.6. - 13 -ConfidentialAny securities issued to XOMA pursuant to this Section 4.5 shall be subject to Section 1.4 of the Stock Agreement.4.6Qualified Financing. Concurrently with the closing of the Qualified Financing, AntriaBio shall issue toXOMA the shares and/or securities set forth in Section 1.4 of the Stock Agreement. Within fifteen (15) days following the closing ofthe Qualified Financing, AntriaBio shall pay XOMA the greater of (a) [*] of the net proceeds from the Qualified Financing and (b) SixMillion Dollars ($6,000,000).4.7Delays in Qualified Financing. 4.7.1If the Qualified Financing has not closed before [*], then AntriaBio will pay XOMA [*]within fifteen (15) days following such date.4.7.2If the Qualified Financing has not closed before April 1, 2019, then AntriaBio shall issueXOMA the additional shares as set forth in the Stock Agreement.4.7.3If the Qualified Financing has not closed before March 31, 2020, then AntriaBio shall payXOMA Fifteen Million Dollars ($15,000,000) within fifteen (15) days following such date. 4.8Voucher Payment Sharing. 4.8.1The Parties shall share any Voucher Payment received with respect to a Licensed Productin the following percentages: [*] for AntriaBio and [*] for XOMA. No Voucher Payment shall be included the Net Sales of theLicensed Product for which royalties are due under Section 4.2. 4.8.2AntriaBio shall give notice to XOMA within fifteen (15) days following receipt of anyVoucher Payment accompanied by XOMA’s share of such Voucher Payment in accordance with Section 4.7.1. Such notice shallcontain the total amount received by AntriaBio in consideration of such Pediatric Priority Review Voucher and a copy of anystatement received by AntriaBio from the Third Party to calculate the Voucher Payment paid to AntriaBio.4.8.3AntriaBio shall not, and shall ensure that its Affiliates and sublicensees do not, monetizeany Pediatric Priority Review Voucher for a Licensed Product except pursuant to a bona fide, arms-length, fair market valuetransaction, except as XOMA may expressly agree in writing.4.9Board Seat. XOMA shall have the right, but not the obligation, to appoint a representative (who shallbe XOMA’s CEO) to AntriaBio’s board of directors. AntriaBio’s board of directors shall appoint XOMA’s nominee immediatelyupon such nominee completing AntriaBio’s standard form of directors and officers questionnaire and will include such nominee in theproxy statement for AntriaBio’s next annual meeting.- 14 -Confidential5.FINANCIAL REPORTS AND AUDITS5.1Financial Reports. During the term of this Agreement following the First Commercial Sale of aProduct, AntriaBio shall furnish to XOMA quarterly written reports showing in reasonably specific detail the calculation of royaltiesowing for the reporting period in accordance with Section 4.2. Such reports shall also show the calculation of any payment due toXOMA with respect to any Sublicense Fees received by AntriaBio during the reporting period. With respect to sales of Productsinvoiced in United States dollars, all amounts shall be expressed in United States dollars. With respect to sales of Products invoiced ina currency other than United States dollars, all amounts shall be expressed in the domestic currency of the party making the saletogether with the United States dollar equivalent. The United States dollar equivalent shall be calculated using the average of theexchange rate (local currency per US$1) published in The Wall Street Journal, Western Edition, under the heading “CurrencyTrading” on the last business day of each month during the applicable calendar year. AntriaBio shall keep complete and accuraterecords in sufficient detail to enable the royalties and other payments payable hereunder to be determined.5.2Audits.5.2.1Upon the written request of XOMA and not more than [*] in each calendar year,AntriaBio shall permit an independent certified public accounting firm of nationally recognized standing selected by XOMA andreasonably acceptable to AntriaBio, at XOMA’s expense, to have access during normal business hours to such of the records ofAntriaBio as may be reasonably necessary to verify the accuracy of AntriaBio’s financial reports under Sections 4.2, 4.8 and 5.2 andDevelopment funding reports under Section for 2.2 for any year ending not more than [*] months prior to the date of such request. 5.2.2If such accounting firm concludes that additional payments were owed during such period,AntriaBio shall make such additional payments within thirty (30) days of the date XOMA delivers to AntriaBio such accounting firm’swritten report so concluding. The fees charged by such accounting firm shall be paid by XOMA; provided, if the audit determines thatthe amounts payable by AntriaBio for the audited period are more than [*] of the amounts actually paid for such period, then AntriaBioshall pay the reasonable fees and expenses charged by such accounting firm.5.2.3XOMA shall treat all financial information subject to review under this Section 5 asconfidential, and shall cause its accounting firm to retain all such financial information in confidence under Section 8 below.6.PAYMENTS6.1Payment Terms. Royalties and payments based on Sublicense Fees that have accrued by each royaltyreport provided for under Section 5.1 above shall be due on the date such royalty report is due. Payment in whole or in part may bemade in advance of such due date.6.2Withholding Taxes. AntriaBio shall be entitled to deduct the amount of any withholding taxes, value-added taxes or other taxes, levies or charges with respect to such- 15 -Confidentialamounts, other than United States taxes, payable by AntriaBio, its Affiliates or sublicensees, or any taxes required to be withheld byAntriaBio, its Affiliates or sublicensees, to the extent AntriaBio, its Affiliates or sublicensees pay to the appropriate governmentalauthority on behalf of XOMA such taxes, levies or charges. AntriaBio shall use reasonable efforts to minimize any such taxes, leviesor charges required to be withheld on behalf of XOMA by AntriaBio, its Affiliates or sublicensees. AntriaBio promptly shall deliverto XOMA proof of payment of all such taxes, levies and other charges, together with copies of all communications from or with suchgovernmental authority with respect thereto.6.3Late Payments. Any amount owed by AntriaBio to XOMA under this Agreement that is not paid on orbefore the date such payment is due shall bear interest at a rate per annum equal to the [*] of (a) the [*] rate in effect on the date thatpayment was due, as published by [*] after such payment is due, [*], or (b) the [*], in either case calculated on the number of dayssuch payments are paid after such payments are due and compounded monthly7.REPRESENTATIONS AND WARRANTIES7.1Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Partyas follows as of the Effective Date:7.1.1Corporate Existence. Such Party is a company duly organized, validly existing and ingood standing under the laws of the state in which it is incorporated.7.1.2Authorization and Enforcement of Obligations. Such Party (a) has the organizationalpower and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (b) has taken allnecessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligationshereunder. This Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, bindingobligation, enforceable against such Party in accordance with its terms.7.1.3No Consents. All necessary consents, approvals and authorizations of all governmentalauthorities and other Persons required to be obtained by such Party in connection with this Agreement have been obtained.7.1.4No Conflict. The execution and delivery of this Agreement and the performance of suchParty’s obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations, and (b) do notconflict with, or constitute a default under, any contractual obligation of it. 7.2XOMA Representations. XOMA represents and warrants:7.2.1XOMA has full right and title to the Licensed Technology free and clear of all liens andencumbrances and has the power to grant the licenses to be granted under this Agreement.7.2.2To the knowledge of XOMA, the Licensed Technology has not and does not infringe,violate or misappropriate the intellectual property of any Person and there- 16 -Confidentialare no claims pending or threatened by any Person against XOMA with respect to the ownership, validity, enforceability, effectivenessor use of the Licensed Technology. To the knowledge of XOMA, no Person is infringing, misappropriating or otherwise violating anyof the Licensed Technology, and XOMA has not made or asserted any claim, demand or notice against any Person alleging any suchinfringement, misappropriation, dilution or other violation.7.3AntriaBio Representations. AntriaBio represents and warrants:7.3.1AntriaBio has full right and title to the AntriaBioPatents free and clear of all liens andencumbrances.7.3.2To the knowledge of AntriaBio, the AntriaBio Products, the PKI Portfolio and theExtended Release Technology have not and do not infringe, violate or misappropriate the intellectual property of any Person and thereare no claims pending or threatened by any Person against AntriaBio with respect to the ownership, validity, enforceability,effectiveness or use of the the AntriaBio Products, the PKI Portfolio or the Extended Release Technology. To the knowledge ofAntriaBio, no Person is infringing, misappropriating or otherwise violating any of the AntriaBio Patents, and AntriaBio has not madeor asserted any claim, demand or notice against any Person alleging any such infringement, misappropriation, or other violation.7.3.3To the knowledge of AntriaBio, AntriaBio has not breached any material obligation underany agreement existing as of the Effective Date pursuant to which AntriaBio has acquired a license to any AntriaBio Patent, and eachsuch agreement is in full force and effect.8.CONFIDENTIALITY8.1Confidentiality Obligations. Recipient shall keep and hold Confidential Information of DisclosingParty in strictest confidence, and shall not use such Confidential Information for any purpose, other than as may be reasonablynecessary for the performance of its duties under this Agreement, without Disclosing Party’s prior written consent. Recipient shall notdisclose any such Confidential Information to any Person without Disclosing Party’s prior written consent, except to its and itsAffiliates’ employees, consultants and agents, as necessary for purposes of performing Recipient’s duties hereunder, under the termsand conditions no less protective of the Confidential Information than the terms and conditions of this Section 8. The obligations ofconfidentiality under this Section 8 shall last until the applicable Confidential Information is no longer secret and confidential or untilone of the exceptions in Section 1.8 applies to such Confidential Information, whichever occurs first.8.2Permitted Disclosures. Notwithstanding anything herein to the contrary, Recipient may discloseConfidential Information of Disclosing Party to the extent necessary to: (a) comply with an applicable law, regulation of agovernmental agency or order of a court of competent jurisdiction, (b) to disclose information to any governmental agency for purposesof obtaining approval to test or market a Product or (c) prosecute or defend litigation; provided that if Recipient is required by law orregulation to make any such disclosure of Disclosing Party’s Confidential Information, it will give reasonable advance notice toDisclosing Party of such- 17 -Confidentialdisclosure requirement and will use commercially reasonable efforts to assist such Disclosing Party to secure a protective order orconfidential treatment of the Confidential Information required to be disclosed. In addition, notwithstanding anything herein to thecontrary, Recipient may disclose Disclosing Party’s Confidential Information to the extent (and only to the extent) such disclosure isreasonably necessary in the following instances: (i) in order for it to reasonably fulfill its obligations herein and to conduct its ordinarycourse of business, to its subcontractors, vendors, outside legal counsel, accountants and auditors under obligations of confidentialitysubstantially similar in scope to the confidentiality obligations herein; (ii) in connection with prosecuting and enforcing intellectualproperty rights in connection with Recipient’s rights and obligations pursuant to this Agreement; and (iii) in connection with exercisingits rights hereunder, to its Affiliates, potential and future bona fide collaborators (including sublicensees, potential and permittedacquirers or assignees and potential investment bankers, investors and lenders);8.3Confidential Terms. Each of the Parties agrees not to disclose to any Third Party the terms andconditions of this Agreement without the prior approval of the other Party, except to advisors (including financial advisors, attorneysand accountants), potential and existing bona fide investors, financing sources, merger or other business partners and acquirers, andothers on a need to know basis, in each case under circumstances that reasonably protect the confidentiality thereof, or to the extentrequired by applicable law.8.4SEC or Similar Filings. Either Party may disclose the terms of this Agreement and events related to thedevelopment or commercialization of Products (including the receipt of milestone payments) to the extent reasonably required tocomply with applicable laws, rules and regulations, including, without limitation, the rules and regulations promulgated by the UnitedStates Securities and Exchange Commission, comparable foreign regulators and self-regulatory organizations (such as securitiesexchanges). Subject to the foregoing, before disclosing this Agreement or any of the terms hereof or other events pursuant to thisSection 8.4, the Parties will reasonably consult with one another on the terms of this Agreement to be redacted in making any suchdisclosure and the scope of such disclosure. The Party making such disclosure agrees, at its own expense, to seek confidentialtreatment of portions of this Agreement, or such terms, as may be reasonably and timely requested by the other Party. 8.5Injunctive Relief Authorized. Each Recipient acknowledges and agrees that (a) the ConfidentialInformation of Disclosing Party is of a special, unique, unusual, extraordinary and intellectual character; (b) the unauthorized use ordisclosure of any Confidential Information of Disclosing Party would constitute a material breach of this Agreement; (c) the interests ofDisclosing Party in and to the Confidential Information would be irreparably injured by the unauthorized use or disclosure of suchinformation; and (d) money damages would not be sufficient to compensate Disclosing Party for any such unauthorized use ordisclosure. Accordingly, Recipient agrees that, in addition to any other remedies available to Disclosing Party at law, in equity orunder this Agreement, Disclosing Party shall be entitled to seek specific performance, injunctive relief and other equitable relief toprevent any actual or threatened use or disclosure of the Confidential Information of Disclosing Party without obligation to post anybond.- 18 -Confidential9.INTELLECTUAL PROPERTY9.1Prosecution and Maintenance of Patents. 9.1.1XOMA shall be responsible for and shall control the Prosecution and Maintenance of theXMet Patents. XOMA shall give AntriaBio an opportunity to review and comment on the text of each patent application within theLicensed Patents before filing, and shall provide AntriaBio with a copy of such patent application as filed, together with notice of itsfiling date and serial number. AntriaBio shall reimburse XOMA for [*] of all [*] incurred by XOMA in conducting the Prosecutionand Maintenance of the XMet Patents, and shall pay XOMA’s invoices therefor with thirty (30) days of receipt thereof.9.1.2If XOMA elects not to file any patent application within the Licensed Patents or otherwiseabandon the Prosecution and Maintenance of any patent application or patent within the Licensed Patents, then (a) XOMA shallprovide AntriaBio with reasonable notice of such decision so as to permit AntriaBio to decide whether to assume such responsibilities(such notice shall, to the extent reasonably feasible for XOMA, be given no later than thirty (30) days prior to the next deadline to takeany necessary action with the relevant patent office); and (b) AntriaBio shall have the right but not the obligation to control theProsecution and Maintenance of such patent application or patent, at AntriaBio’s sole cost.9.1.3AntriaBio may elect, with respect to a particular Licensed Patent in a country to terminateits payment obligations hereunder with respect to such Licensed Patent in such country by written notice given to XOMA, to the extentreasonably feasible for AntriaBio, no later than thirty (30) days prior to the next deadline to take any necessary action with the relevantpatent office with respect to such Licensed Patent. In such event, such Licensed Patent (and all Patents issuing therefrom) shallthereafter be excluded from the license granted to AntriaBio pursuant to Section 3.1 and shall no longer be deemed to be LicensedPatents hereunder.9.1.4Commencing on the fifth (5th) anniversary of the Effective Date, AntriaBio may elect bywritten notice to terminate its payment obligations under Section 9.1.1 solely with respect to those XMet Patents that are not LicensedPatents. AntriaBio acknowledges that its agreement to reimburse the costs of such XMet Patents in accordance with Section 9.1.1prior to the 5th anniversary of the Effective Date is a material portion of the consideration to be paid by AntriaBio for the rights grantedhereunder.9.2Enforcement of Licensed Patents.9.2.1Each Party shall notify the other Party of any infringement known to such Party of anyLicensed Patent by a Third Party that is manufacturing, using, offering for sale, selling or importing a product that comprises theAntibody or a Licensed Product (each, a “Product Infringement”) and shall provide the other Party with the available evidence, ifany, of such infringement.9.2.2AntriaBio, at its sole expense, shall have the first right to determine the appropriate courseof action to enforce the Licensed Patents with respect to such Product Infringement or otherwise abate such Product Infringement, totake (or refrain from- 19 -Confidentialtaking) appropriate action to enforce the Licensed Patents with respect to such Product Infringement, to control any litigation or otherenforcement action and to enter into, or permit, the settlement of any such litigation or other enforcement action with respect to theLicensed Patent and such Product Infringement, and shall consider, in good faith, the interests of XOMA in so doing. If AntriaBiodoes not, within sixty (60) days of receipt of notice from XOMA under Section 9.2.1, abate the infringement or file suit to enforce theLicensed Patents against at least one infringing party, XOMA shall have the right to take whatever action it deems appropriate toenforce the Licensed Patents. The Party controlling any such enforcement action shall not settle the action or otherwise consent to anadverse judgment in such action that adversely affects the rights or interests of the non-controlling Party without the prior writtenconsent of the other Party. For clarity, AntriaBio shall have no right to enforce any Licensed Patent with respect to any infringementthereof that is not a Product Infringement.9.2.3All monies recovered upon the final judgment or settlement of any such suit to enforce theLicensed Patents with respect to a Product Infringement pursuant to this Section 9.2 shall be first used to reimburse each Party for itscosts and expenses incurred in connection with such suit pro rata, and the remainder, if any, shall be allocated as follows: (a) for anysuit initiated and prosecuted by AntriaBio, the remainder shall be deemed Net Sales and allocated in accordance with Section 4.2, and(b) for any suit initiated and prosecuted by XOMA, the remainder shall be shared in proportion to the costs and expenses incurred byeach Party in connection with such suit.9.3AntriaBio Product Patents. AntriaBio shall be solely responsible for the Prosecution and Maintenanceof the AntriaBio Product Patents, at its sole cost. AntriaBio shall not assign or transfer any interest in any AntriaBio Product Patent toany Third Party (other than pursuant to a license under which such Third Party will report Net Sales to AntriaBio of AntriaBioProducts covered by such AntriaBio Product Patent or as part of a transaction that includes a permitted assignment of this Agreement)unless such Third Party has first agreed in writing with XOMA to make the payments to XOMA set forth in Section 4.2.2 with respectto sales of AntriaBio Products covered by such AntriaBio Product Patent in the same manner required of AntriaBio under thisAgreement. 10.TERMINATION10.1Expiration. Subject to early termination pursuant to the provisions of Sections 10.2 and 10.3 below,this Agreement shall expire on the expiration of AntriaBio’s obligation to pay royalties to XOMA under Section 4.2 above. Uponexpiration of the Royalty Term, on a country-by-country basis, the licenses granted to AntriaBio by XOMA under this Agreementshall be fully paid-up, perpetual and irrevocable in the countries in which the Royalty Term has expired.10.2Termination by AntriaBio. AntriaBio may terminate this Agreement in its entirety, in its solediscretion, at any time upon ninety (90) days prior written notice to XOMA.10.3Termination for Cause. Either Party will have the right to terminate this Agreement in full upondelivery of written notice to the other Party in the event of any material breach by the other Party of any terms and conditions of thisAgreement, provided, that such- 20 -Confidentialtermination will not be effective if such breach has been cured within thirty (30) days after written notice thereof is given by the non-breaching Party to the breaching Party specifying in reasonable detail the nature of the alleged breach; provided further, however, thatif the material breach is not reasonably capable of being cured within the thirty-day cure period, and if the breaching party (a) proposeswithin such thirty-day period a written plan to cure such breach that is reasonably acceptable to the non-breaching Party, and (b) makesgood faith efforts to cure such default and to implement such written cure plan and reports at least monthly to the non-breaching Partyin writing as to the status of such efforts and cure, then, until ninety (90) days of receipt of notice of termination, the non-breachingParty may not terminate this Agreement for so long as the breaching Party is diligently pursuing such cure in accordance with suchplan. Notwithstanding the foregoing, in the event of any breach by AntriaBio of any payment obligation hereunder, XOMA will havethe right to terminate this Agreement in full upon delivery of written notice to AntriaBio, provided, that such termination will not beeffective if such breach has been cured within thirty (30) days after written notice thereof is given by XOMA to AntriaBio; for clarity,AntriaBio shall have no right to submit a cure plan with respect to any such breach. 10.4Termination for Patent Challenges. If, during the term of this Agreement, AntriaBio or any of itsAffiliates or sublicensees (a) commences or participates in any action or proceeding (including any patent opposition or re-examinationproceeding), or otherwise asserts any claim, challenging or denying the validity or enforceability of any claim of XOMA’s or itsAffiliates’ patents or patent applications that are licensed to AntriaBio under this Agreement or (b) actively assists any other Person inbringing or prosecuting any action or proceeding (including any patent opposition or re-examination proceeding) challenging ordenying the validity or enforceability of any claim of XOMA’s or its Affiliates’ patents or patent applications that are licensed toAntriaBio under this Agreement (each of (a) and (b), a “Patent Challenge”), then, to the extent permitted by applicable laws, XOMAshall have the right, in its sole discretion, to give notice to AntriaBio that XOMA may terminate the license(s) granted to AntriaBiounder such patents and applications pursuant to this Agreement thirty (30) days days following such notice, and, unless AntriaBiowithdraws or causes to be withdrawn all such Patent Challenge(s) within such thirty (30) day period, XOMA shall have the right toterminate the licenses granted to AntriaBio under such patents and applications pursuant to this Agreement by providing written noticethereof to AntriaBio. 10.5Effect of Expiration or Termination. Upon termination (but not expiration) of this Agreement:10.5.1Termination of Licenses. All rights and licenses granted to AntriaBio hereunder shallterminate.10.5.2Transfer of Development Activities and Know-How. (a)If AntriaBio is conducting any development activity with respect to the Antibodyor any Product on the date of notice of termination, then XOMA shall notify AntriaBio within sixty (60) days after the notice oftermination: (i) with regard to any clinical trial, whether XOMA elects to have AntriaBio: (A) complete such clinical trial on behalf ofXOMA (unless AntriaBio has material safety concerns regarding continuation of such Clinical- 21 -ConfidentialTrial of which it has notified XOMA in writing), (B) wind down such clinical trial as soon as practicable, subject to compliance withethical and legal requirements or (C) transfer such clinical trial to XOMA as soon as practicable; and (i) with regard to any otherdevelopment activity, whether XOMA elects to have AntriaBio wind down or transfer such activity to XOMA.(b)If XOMA notifies AntriaBio of its election to have AntriaBio wind down suchclinical trial or other development activity (or fails to provide notice within such sixty (60) day period), then AntriaBio shall wind-down such clinical trial or development activity as soon as practicable, subject to compliance with ethical and legal requirements. (c)If XOMA notifies AntriaBio of its election to have AntriaBio transfer such clinicaltrial or other development activity to XOMA, then AntriaBio shall transfer to XOMA such clinical trial or other development activityas promptly as practicable (and, in any event, within ninety (90) days) after the effective date of termination.(d)To the extent any Know-How Controlled by AntriaBio, its Affiliates orsublicensees that specifically relates to the Antibody or any Licensed Products is not transferred and assigned to XOMA pursuant tosubsections (a) through (c) above, AntriaBio will transfer and assign such Know-How to XOMA or its designee within ninety (90)days of the effective date of termination.(e)The activities set forth in this Section 10.5.2 shall be performed at AntriaBio’sexpense, unless AntriaBio terminates this Agreement pursuant to Section 10.3 for XOMA’s material breach, in which case suchactivities shall be at XOMA’s expense.10.5.3Confidential Information. AntriaBio shall, within thirty (30) days after the effective dateof termination and at AntriaBio’s expense, return or destroy, at XOMA's election, all XOMA Know-How and other ConfidentialInformation of XOMA (provided that AntriaBio may keep one copy of such Confidential Information subject to an ongoing obligationof confidentiality for archival purposes only). All Know-How and Product Data/Filings licensed, assigned or transferred to XOMApursuant to this Section 10.5 shall be deemed to be Confidential Information of XOMA for the purposes of Article 8 and XOMA shallbe deemed the Disclosing Party and AntriaBio shall be deemed the Recipient with respect to such information, and Section 1.7(d) shallnot apply to such information.10.5.4Product Data/Filings. AntriaBio shall, and hereby does, assign to XOMA, as of theeffective date of termination, all its right, title and interest in, to and under all of AntriaBio’s and its Affiliates’ ownership interest in anyand all Product Data/Filings, including any Regulatory Approvals for the Products, and AntriaBio shall transfer all such ProductData/Filings to XOMA promptly after the effective date of termination.10.5.5License. AntriaBio shall, and hereby does, and shall cause its Affiliates and sublicenseesto, grant to XOMA, as of the effective date of termination, an exclusive, perpetual, royalty-free, sublicensable (through multiple tiers),transferable license under all patents, Know-How and other intellectual property Controlled by AntriaBio, its- 22 -ConfidentialAffiliates or sublicensees solely to the extent necessary or specifically useful to develop, make, have made, use, have used, sell, havesold, offer for sale, have offered for sale, import, have imported, and otherwise exploit, manufacture and commercialize the Antibodyand Licensed Products in the Territory.10.5.6Inventory. At XOMA’s request, AntriaBio shall assign and transfer to XOMA anyinventory of Antibody and Licensed Products then in AntriaBio’s or any of its Affiliates’ or sublicensees’ possession or control,subject to XOMAs reimbursement of AntriaBio’s reasonable, documented costs incurred in acquiring such inventory and with respectto shipping thereof.10.5.7Further Actions. AntriaBio shall take such other actions, and execute any instruments,assignments and documents, as reasonably requested by XOMA as may be necessary to effect the foregoing provisions of this Section10.5. 10.6Survival. Expiration or termination of this Agreement shall not relieve the parties of any obligationaccruing prior to such expiration or termination, and the provisions of Sections 2.7, 3.2.4, 4.2.5 and 5.1 (solely with respect to paymentobligations accruing prior to the effective date of such termination), 5.2, 10.5, 10.6 and Articles 6, 8, 11 and 12 shall survive theexpiration or termination of this Agreement. If termination is only with respect to a particular country, then termination will only applywith respect to such country, and this Agreement shall continue with respect to the non-terminated countries. 11.INDEMNIFICATION11.1Indemnification by AntriaBio. AntriaBio shall defend, indemnify and hold XOMA and its and itsAffiliates’ directors, officers, employees and agents harmless from all losses, liabilities, damages and expenses (including reasonableattorneys’ fees and costs) (collectively, “Losses”) resulting from any claims, demands, actions and other proceedings by any ThirdParty to the extent resulting from (a) AntriaBio’s or its Affiliates’ or sublicensees’ use of the Licensed Technology or negligence, grossnegligence or intentional misconduct, (b) AntriaBio’s breach of this Agreement, or (c) AntriaBio’s breach of the representationscontained in Section 7.1, except in each case to the extent such Losses are subject to XOMA’s indemnification obligations underSection 11.2.11.2Indemnification by XOMA. XOMA shall defend, indemnify and hold AntriaBio and its and its’Affiliates’ directors, officers, employees and agents harmless from all Losses to the extent resulting from any claims, demands, actionsand other proceedings by any Third Party to the extent resulting (a) XOMA’s or its Affiliates’ negligence, gross negligence orintentional misconduct, (b) XOMA’s breach of this Agreement, or (c) XOMA’S breach of the representations contained in Section 7.1and 7.2, except in each case to the extent such Losses are subject to AntriaBio’s indemnification obligations under Section 11.1.11.3Procedure. The Party seeking indemnification (the “Indemnified Party”) promptly shall notify theother party (the “Indemnifying Party”) of any claim, demand, action or other proceeding for which the Indemnified Party intends toclaim indemnification. The Indemnifying Party shall have the right to participate in, and to the extent the Indemnifying Party- 23 -Confidentialso desires jointly with any other indemnitor similarly noticed, to assume the defense thereof with counsel selected by the IndemnifyingParty; provided, however, that the Indemnified Party shall have the right to retain its own counsel, with the fees and expenses to bepaid by the Indemnified Party, if representation of the Indemnified Party by the counsel retained by the Indemnifying Party would beinappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by suchcounsel in such proceedings. The indemnity obligations under this Section 11 shall not apply to amounts paid in settlement of anyclaim, demand, action or other proceeding if such settlement is effected without the prior express written consent of the IndemnifyingParty, which consent shall not be unreasonably withheld or delayed. The failure to deliver notice to the Indemnifying Party within areasonable time after notice of any such claim or demand, or the commencement of any such action or other proceeding, if prejudicialto its ability to defend such claim, demand, action or other proceeding, shall relieve such Indemnifying Party of any liability to theIndemnified Party under this Section 11 with respect thereto, but the omission so to deliver notice to the Indemnifying Party shall notrelieve it of any liability that it may have to the Indemnified Party other than under this Section 11. The Indemnifying Party may notsettle or otherwise consent to an adverse judgment in any such claim, demand, action or other proceeding, that diminishes the rights orinterests of, or places any obligations upon, the Indemnified Party without the prior express written consent of the Indemnified Party,which consent shall not be unreasonably withheld or delayed. The Indemnified Party, its employees and agents, shall reasonablycooperate with the Indemnifying Party and its legal representatives in the investigation of any claim, demand, action or otherproceeding covered by this Section 11.11.4LIMITATION OF DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLEHEREUNDER TO THE OTHER PARTY FOR ANY PUNITIVE, INDIRECT, SPECIAL, INCIDENTAL ORCONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND UNDER ANY THEORY, EVEN IF IT HAS NOTICE OF THEPOSSIBILITY OF SUCH DAMAGES. THE LIMITATIONS SET FORTH IN THIS SECTION 11.4 SHALL NOT APPLYWITH RESPECT TO (I) ANY BREACH OF SECTION 8 OR (II) THE INTENTIONAL MISCONDUCT OR GROSSNEGLIGENCE OF A PARTY. NOTHING IN THIS SECTION 11.4 IS INTENDED TO LIMIT OR RESTRICT THEINDEMNIFICATION RIGHTS OR OBLIGATIONS OF A PARTY UNDER THIS SECTION 11 WITH RESPECT TO ANYDAMAGES OWED OR PAID TO A THIRD PARTY IN CONNECTION WITH A THIRD PARTY CLAIM.11.5Insurance.11.5.1AntriaBio shall maintain at its own cost and at all times during the term of this Agreementpolicies of insurance consistent with normal business practices of prudent pharmaceutical companies similarly situated. Such insurancepolicies shall include. without limitation, commercial general liability insurance, including, without limitation, product liability,covering claims for damages because of bodily injury (including, without limitation, death), personal injury and property damagearising out of AntriaBio’s acts or omissions and including coverage for contractual liabilities. Without limiting the foregoing, no laterthan AntriaBio’s commencement of clinical trials in respect of any Product, AntriaBio shall obtain, and maintain in full force andeffect, adequate clinical trials insurance, for claims arising out of or in connection with such clinical trials. In addition, no later than thecommencement of- 24 -Confidentialcommercial distribution of any Product by or on behalf of AntriaBio, AntriaBio shall obtain, and maintain in full force and effect,adequate general and product liability insurance for bodily injury and property damage claims.11.5.2The policies described in Section 11.5.1 above will be in such amounts and cover suchrisks as are reasonable and prudent for those types of policies, but shall in no event be less than, in the aggregate: (a) one million U.S.dollars (US$1,000,000) as of the Effective Date, (b) ten million U.S. dollars (US$10,000,000) prior to the commencement of anyclinical trial, and (c) twenty million U.S. dollars (US$20,000,000) prior to the commercial launch of any Product. Such policies will bewritten by insurance companies with an A.M. Best's rating of A:VIII or higher (or if such policies are not subject to the Best rating,then by carriers who are reasonably acceptable to XOMA). The foregoing policies will: (i) cover claims arising out of theperformance of this Agreement that are made within a period of not less than six (6) years after the expiration or earlier termination ofthis Agreement; and (ii) be primary and non-contributory to any liability insurance carried by XOMA, which insurance will be excessfor claims and losses arising out of the performance of this Agreement. The policies described above will be specifically endorsed tolist XOMA as an additional insured (as long as such endorsement is allowed by Applicable Law), and AntriaBio will notify XOMAat least sixty (60) days in advance of any cancellation or non-renewal of or material changes in of such insurance coverage. AntriaBioshall provide XOMA with a valid, current certificate of insurance as evidence of the insurance required herein. Renewal certificatesshall be furnished to XOMA ten (10) days prior to the policies' expiration. Maintenance of such insurance coverage will not relieveAntriaBio of any responsibility under this Agreement for damages in excess of insurance limits or otherwise.12.MISCELLANEOUS12.1Notices. Any consent, notice or report required or permitted to be given or made under thisAgreement by one of the Parties to the other shall be in writing and addressed to such other party at its address indicated below, or tosuch other address as the addressee shall have last furnished in writing to the addressor for purposes of this Section 12.1, and shall beeffective upon receipt by the addressee.If to XOMA:XOMA Corporation2200 Powell StreetSuite 310Emeryville, CA 94608Attention: CEOCopy to: Legal Department - 25 -ConfidentialIf to AntriaBio:AntriaBio, Inc.1450 Infinite DriveLouisville, CO 80027Attn: Chief Executive Officer with a copy (which shall not constitute notice) to: Michael WeinerDorsey & Whitney LLP1400 Wewatta StreetSuite 400Denver, CO 80202-5549Facsimile: (303) 629-3450Email: weiner.michael@dorsey.com 12.2Assignment. 12.2.1Except as otherwise expressly provided under this Agreement neither this Agreement norany right or obligation hereunder may be assigned or otherwise transferred (whether voluntarily, by operation of law or otherwise),without the prior express written consent of the other Party; provided, however, that subject to Section 12.2.2 either Party may, withoutsuch consent, assign this Agreement and all of its rights and obligations hereunder (a) to an Affiliate or (b) in connection with thetransfer or sale of all or substantially all of its business relating to this Agreement, or in the event of its merger, consolidation, change incontrol or similar transaction.12.2.2Notwithstanding Section 12.2.1, until such time as a Qualified Financing has occurred,AntriaBio shall have no right to assign this Agreement, whether to an Affiliate or a Third Party, under any circumstance withoutXOMA’s prior written consent, to be withheld in XOMA’s sole discretion.12.2.3Any permitted assignee shall assume in writing all obligations of its assignor under thisAgreement. Any purported assignment or transfer in violation of this Section 12.2 shall be void.12.3Governing Law; Jurisdiction; Venue. This Agreement shall be governed by and construed inaccordance with the laws of the State of California, without regard to the conflicts of law principles thereof. For any legal actionarising from or related to this Agreement, the Parties hereby irrevocably: (a) consent solely to personal jurisdiction of and exclusivevenue in the state and federal courts located in San Francisco County, California, USA; (b) agree that such courts will be the solecourts utilized; and (c) hereby waive any jurisdictional or venue objections to such courts, including without limitation, forum nonconveniens. If any dispute arises between the Parties in connection with this Agreement which leads to a proceeding to resolve suchdispute, the prevailing Party in such proceeding will be entitled to receive its reasonable attorneys’ fees, expert witness fees and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief it may be awarded.- 26 -Confidential12.4Entire Agreement. This Agreement contains the entire understanding of the Parties with respect to thesubject matter hereof. There are no agreements, representations, warranties, covenants or undertakings with respect to the subjectmatter hereof other than those expressly set forth herein. All express or implied representations, agreements and understandings relatingto such subject matter, either oral or written, heretofore made are expressly superseded by this Agreement, including, without limitationthe Confidentiality Agreement.12.5Independent Contractors. Each Party hereby acknowledges that the Parties shall be independentcontractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shallhave the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be bindingon the other Party, without the prior consent of the other Party to do so.12.6Remedies. All remedies, either under this Agreement, by law, or otherwise afforded to any Party,shall be cumulative and not alternative. 12.7Force Majeure. Neither Party shall be held liable or responsible to the other Party nor be deemed tohave defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement solely tothe extent, and for so long as, such failure or delay is caused by or results from causes beyond the reasonable control of the affectedParty including but not limited to fire, floods, embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civilcommotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmentalauthority or the other Party. If any such event continues for more than ninety (90) days, then such other Party shall have the right toterminate this Agreement upon thirty (30) days prior written notice to the affected Party.12.8Fees and Expenses. Each Party shall pay its own costs and expenses in connection with thisAgreement and the transactions contemplated hereby (including the fees and expenses of its advisers, accountants and legal counsel).12.9Further Assurances. At any time or from time to time after the date hereof, the Parties agree tocooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and totake all such further action as the other Party may reasonably request in order to evidence or effectuate the consummation of thetransactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.12.10Interpretation. The captions to the Sections of this Agreement are not a part of this Agreement, butare included for convenience of reference and shall not affect its meaning or interpretation. In this Agreement: (i) the word“including,” “includes,” “included,” and “include” shall be deemed to be followed by the phrase “without limitation” or likeexpression; (ii) the singular shall include the plural and vice versa; (iii) masculine, feminine, and neuter pronouns and expressions shallbe interchangeable; (iv) the words “hereof,” “herein,” “hereto,” “hereby,” “hereunder,” and derivative or similar words refer to thisAgreement as an entirety and not solely to any particular provision of this Agreement; (v) each reference in this- 27 -ConfidentialAgreement to a particular Section, appendix, schedule, or exhibit means a Section, appendix, schedule, or exhibit of or to thisAgreement, unless another agreement is specified; (vi) “the words “will”, “shall” and “must” are synomyms; (vii) “or” is notdisjunctive (i.e., it means “and/or”) unless the context clearly requires otherwise; (viii) references to any party or Person shall include itspermitted successors or assigns; and (ix) whenever this Agreement refers to a number of days, such number shall refer to calendar daysunless business days are specified; and business days means any day, except Saturday and Sunday, on which commercial bankinginstitutions in Los Angeles, California are open for business. This Agreement has been prepared jointly and shall not be strictlyconstrued against either Party.12.11Waivers. It is agreed that no delay or omission to exercise any right, power or remedy accruing toany Party, upon any breach, default or noncompliance by the other Party under this Agreement, shall impair any such right, power orremedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or inany similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval ofany kind or character on the part of any party hereto of any breach, default or noncompliance under this Agreement or any waiver onsuch party’s part of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extentspecifically set forth in such writing. The waiver by a Party of any right hereunder, or of any failure to perform or breach by the otherParty hereunder, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by the other Partyhereunder whether of a similar nature or otherwise.12.12Severability. Whenever possible, each provision of this Agreement shall be interpreted in suchmanner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal orunenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall notaffect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdictionas if such invalid, illegal or unenforceable provision had never been contained herein.12.13Enforcement. Each Party hereto acknowledges that money damages would not be an adequateremedy in the event that any of the covenants or agreements in this Agreement are not performed by the Parties in accordance with itsterms, and it is therefore agreed that in addition to and without limiting any other remedy or right each party may have, each Party willhave the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining anysuch breach and enforcing specifically the terms and provisions hereof.12.14Extension to Affiliates. Except as set forth in Section 3.2, AntriaBio shall have the right to extendthe rights and obligations granted in this Agreement to one or more of its Affiliates. All applicable terms and provisions of thisAgreement shall apply to any such Affiliate to which this Agreement has been extended to the same extent as such terms andprovisions apply to AntriaBio. AntriaBio shall remain directly liable for any acts or omissions of its Affiliates, and AntriaBio herebyexpressly waives any requirement that XOMA exhaust any right, power or remedy, or proceed directly against such Affiliate, for anyobligation or performance hereunder prior to proceeding directly against AntriaBio.- 28 -Confidential12.15Counterparts. This Agreement may be executed in two or more counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile,electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly andvalidly delivered and be valid and effective for all purposes.{Signature Page Follows.} - 29 -ConfidentialIN WITNESS WHEREOF, the Parties have executed this License Agreement as of the Effective Date.XOMA (US) LLC By/s/ Jim Neal /s/NameJim NealTitleChief Executive Officer ANTRIABIO, INC. By/s/ Nevan Elam /s/NameNevan ElamTitleCEO Signature Page to XOMA-AntriaBio License Agreement[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.ConfidentialExhibit AXOMA 358[*] A-1[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.ConfidentialExhibit BAntriaBio Patents[*]{15 pages omitted} B-1[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.ConfidentialExhibit CLicensed Patents[*]{2 pages omitted} C-1 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Confidential Exhibit DOption Products[*] D-1[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Confidential Exhibit EXMet Patents[*] {2 pages omitted} E-1[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Confidential Exhibit FClinical Materials[*]F-1 [*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.Exhibit 21.1 Subsidiaries of the Company Jurisdiction of OrganizationXOMA Technology Ltd. BermudaXOMA (US) LLC DelawareXOMA CDRA LLC DelawareXOMA UK Limited United Kingdom Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-108306, 333-151416, 333-171429, 333-174730, 333-181849, 333-198719, 333-204367, 333-212238 and 333-218378) pertaining to the 1981 Share Option Plan, the Restricted Share Plan, the 1992 DirectorsShare Option Plan, the Amended and Restated 1998 Employee Stock Purchase Plan, the 2007 CEO Share Option Plan, the 2015 Employee Stock PurchasePlan, the Amended and Restated 2010 Long Term Incentive and Stock Award Plan, and the Amended 2015 Employee Share Purchase Plan of XOMACorporation and in the Registration Statement (Form S-3 No. 333-196707) of XOMA Corporation and in the related Prospectus of our report dated March 7,2018, with respect to the consolidated financial statements of XOMA Corporation included in this Annual Report (Form 10-K) of XOMA Corporation for theyear ended December 31, 2017. /s/ ERNST & YOUNG LLPRedwood City, CaliforniaMarch 7, 2018 Exhibit 31.1CERTIFICATIONI, James R. Neal, certify that:1.I have reviewed this annual report on Form 10-K of XOMA Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f))) for theregistrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 7, 2018 /s/ JAMES R. NEAL James R. Neal Chief Executive Officer Exhibit 31.2CERTIFICATIONI, Thomas Burns, certify that:1.I have reviewed this annual report on Form 10-K of XOMA Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f))) for theregistrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;and5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 7, 2018 /s/ THOMAS BURNS Thomas Burns Senior Vice President, Finance and Chief Financial Officer Exhibit 32.1CERTIFICATIONPursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 ofChapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), James R. Neal, Chief Executive Officer of XOMA Corporation (the “Company”), andThomas Burns, Senior Vice President, Finance and Chief Financial Officer of the Company, each hereby certifies that, to the best of his or her knowledge:1.The Company’s Annual Report on Form 10-K for the year ended December 31, 2017, to which this Certification is attached as Exhibit 32.1, fullycomplies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and2.The information contained in Exhibit 32.1 fairly presents, in all material respects, the financial condition and results of operations of theCompany.IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 7th day of March, 2018. /s/ JAMES R. NEAL James R. Neal Chief Executive Officer /s/ THOMAS BURNS Thomas Burns Senior Vice President, Finance, and Chief Financial Officer 3.This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not tobe incorporated by reference into any filing of XOMA Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. 

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