The Royalty Aggregator: Xoma’s Unique Path to Biotech Profits

While many biotech firms focus their energy on groundbreaking laboratory discoveries, Xoma Royalty has carved out a distinct and profitable niche. The company operates behind the scenes, building a valuable portfolio through the strategic acquisition of licensing rights to promising therapies. Its recent move to secure rights from Mural Oncology represents the latest in a consistent series of calculated transactions. This unconventional approach raises a compelling question about its potential for long-term value creation.

Strategic Alliances and a Diversified Portfolio

Xoma’s strategy hinges on forming strategic alliances rather than conducting its own research. The company has secured economic interests in firms like Turnstone Biologics, LAVA Therapeutics, and HilleVax—partnerships that often involve industry titans such as Pfizer and Johnson & Johnson. A prime example is the acquisition of Mezagitamab rights from BioInvent for $20 million, plus potential performance-based payments. This model allows Xoma to leverage the innovation of others and share in the success through expertly negotiated licensing agreements.

Robust Financial Performance

The company’s financial results demonstrate the effectiveness of its model. For the first half of 2025, Xoma collected a substantial $29.6 million in royalty and milestone payments. Second-quarter revenue alone reached $11.7 million. These strong cash flows are generated from a diversified array of agreements with various biotech partners.

Net income for Q2 stood at $9.2 million. Although this figure is lower than the prior-year period, that quarter had been boosted by a one-time gain related to the Kinnate acquisition. More notably, total comprehensive income climbed to $13.1 million for the quarter. For the entire first half of 2025, this metric nearly doubled, reaching $29.0 million. This impressive growth was primarily fueled by increasing royalties from blockbuster therapies, including VABYSMO and OJEMDA.

Should investors sell immediately? Or is it worth buying Xoma?

Disciplined Capital Deployment

Xoma’s financial strength is further evidenced by its $78.5 million in liquid assets. This robust cash position provides the flexibility to pursue additional strategic acquisitions while also returning capital to shareholders. In the first six months of the year, the company deployed $25 million to acquire new portfolio assets. It also allocated $2.4 million for share repurchases and distributed $2.7 million in dividend payments.

This pattern of capital allocation is clear: Xoma uses its solid financial foundation to acquire economic interests in promising biotech assets, continually searching for the next lucrative licensing opportunity.

The continued expansion of its portfolio suggests a proven formula. By building a diversified collection of licensing revenue streams, Xoma creates multiple avenues for growth without assuming the direct risks and costs associated with in-house research and development. The relevant question appears to be not if, but to what extent, the company’s aggregator strategy will drive future profitability.