On September 26, 2019, XOMA (US) LLC (the "Company"), a wholly-owned subsidiary of XOMA Corporation, reported that entered into a royalty purchase agreement (the "Purchase Agreement") with Palo Biofarma, S.L. ("Palo"), a company organized and existing under the laws of Spain (Filing, 8-K, Xoma, SEP 26, 2019, View Source [SID1234539844]). Pursuant to the Purchase Agreement, the Company acquired the rights to potential royalty payments in low single digit percentages of aggregate Net Sales (as defined in the Purchase Agreement) associated with six drug candidates in various clinical development stages, targeting the adenosine pathway with potential applications in solid tumors, asthma/chronic obstructive pulmonary disease, inflammatory bowel disease, idiopathic pulmonary fibrosis, lung cancer, psoriasis and nonalcoholic steatohepatitis and other indications (the "Licensed Products") that are being developed by Palo. Novartis Pharma AG is a development partner on one of the Licensed Products (the "Licensee") and such Licensed Product is being developed pursuant to a license agreement between Palo and the Licensee.
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Under the terms of the Purchase Agreement, the Company will pay Palo $10 million (the "Payment") for the rights to potential royalty payments on future sales of the Licensed Products. The Company plans to partially finance the Payment by drawing a $5 million term loan under its Loan and Security Agreement with Silicon Valley Bank dated May 7, 2018, as amended on March 4, 2019, as previously filed as an exhibit to the Company’s Quarterly Reports on Form 10-Q for the three month period ending June 30, 2018 and the three month period ending March 31, 2019.
The Purchase Agreement also contains customary representations, warranties, covenants and indemnities. The Purchase Agreement will terminate six (6) months following the full satisfaction of any amounts due under any of the License Agreements (as defined in the Purchase Agreement) and receipt by the Company of all payments to which it is entitled under the Purchase Agreement.
The description of the Purchase Agreement contained herein does not purport to be complete, and is qualified in its entirety by reference to such Purchase Agreement, together with the exhibits thereto, a copy of which will be filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2019.