Ashleigh Barreto - IR John Varian - CEO Paul Rubin - SVP, Research and Development and CMO Fred Kurland - VP, Finance and CFO

Adnan Butt – RBC Capital Markets Simos Simeonidis – Cowen & Company Jason Kantor - Credit Suisse

Good afternoon, ladies and gentlemen and welcome to the XOMA Corporation’s First Quarter 2013 Financial Results Conference Call. (Operator Instructions). As a reminder today's conference is being recorded. I will now like to turn the call over to your host for today, Ms. Ashleigh Barreto, Investor Relations at XOMA. You may begin.

Thank you, Operator. Before we begin I must remind you that we’ll be making certain statements in this call limited to statements related to anticipated timing of initiation and completion of the clinical trials, proof-of-concept trials, anticipated size of clinical trials, continued sales of approved products, regulatory approval of unapproved product candidates, efficiency of our cash resources, and anticipated levels of cash utilization and statements that otherwise relate to future periods. Certain statements are forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Security Exchange Act of 1934. These statements are based on assumptions that may not prove accurate. The actual future events may differ materially from those anticipated due to certain risks inherent in the biotechnology industry and for companies engaged in the development of new products in a regulated market. Potential risks to XOMA meeting these expectations are described in more detail in XOMA’s most recent filings on Form 10-K and other SEC filings. Consider such risks carefully when considering XOMA’s prospects. Any forward-looking statements in this conference call represents XOMA’s view only as of the date of this call and should not be relied upon as representing its view on any subsequent date. XOMA disclaims any obligation to update forward-looking statements except where required by applicable laws. Participating in today’s call are John Varian, Chief Executive Officer; Paul Rubin, Senior Vice President, Research and Development and Chief Medical Officer and Fred Kurland, Vice President, Finance, Chief Financial Officer and Secretary. And with that I’d now like to turn the call over to John Varian. John?

Thanks Ashleigh. Hello everyone and thanks for joining us. 2013 is a year of execution for us. In the first quarter we delivered very encouraging top line results from the first study in our proof of concept program. At this study, we evaluate gevokizumab for the treatment of moderate, severe and acclamatory acne. We spent a great deal of time reviewing the data from the study and we have consulted with some of the preeminent leaders in acne including inclinations and regulatory experts. The goal of these conversations was to allow us to get their view of the data that we have generated. We also want their opinions as to the role that gevokizumab could play in treating patients, who have failed or have become intolerant to antibiotic therapies but who have not yet been prescribed Accutane. Accutane is a drug that is distributed on a restricted basis due to its toxicities. The feedback for receiving from these conversations is giving us greater confidence the gevokizumab would be well received by the clinical community and it potentially could be developed as the first non-antibiotic treatment for acne in over 15 years. In addition to understanding the view of these experts, we have begun gathering additional information to help us judge the commercial potential of gevokizumab in acne. We recently launched field research with 100 dermatologists to determine their prescribing preferences for the moderate-to-severe acne population and patient satisfaction with these current therapies. We presented these dermatologists with what we believe gevokizumab's product profile could in this indication and solicited their feedback. The dermatologists’ feedback indicate they clearly see a role for gevokizumab in treating their moderate-to-severe acne patients. We will continue to conduct research in this area. This information will be integrated into our internal discussion later this fall when…

Thank you, John, and good afternoon to all. We already have covered a lot today, but there is a significant activity going on right now. I am pleased that I can finally share with you preliminary data from Servier’s Phase II study in Behçet's uveitis. I will follow this with the discussion of scleritis study being performed by the National Eye Institute as well as the status update and NIU pivotal studies. Then I will get into the details about the ongoing EOA study and the non-elevated CRP EOA study, John just announced. As you recall, Servier launched a Phase II study early last year to determine the gevokizumab dose it wanted to take into our joint Phase III Behcet’s uveitis study. The trial post non-controltrials.com was designed as an open label study to assess safety and pharmacokinetics, in addition to measuring clinical and biological activity, the study was conducted at three sites in Korea, four sites in Turkey and one site in Tunisia. Patients who enrolled, if they had a history of Behcet’s disease had severe uveitis and we’re taking less than a equal to 20 milligrams per day of corticosteroids, as well as at least one pre-specified immunosuppressant. Patients within acute exacerbation patients at the time they were selected were termed acute patients, and patients with an exacerbation in the past 18 months, who had evidence of vascular leakage and were presently stable on their medication we termed at-risk patients. The study enrolled a total of 21 patients comprised of 17 acute and four at-risk patients. The patients replaced into the high dose group which was gevokizumab 60 milligrams dose subcutaneously every four weeks with the low dose group which was 30 milligrams of gevokizumab dose subcutaneously or via IV every four weeks. All patients also received an…

Good afternoon everyone and thanks for attending our call. XOMA reported total revenues of $9.5 million and $9.9 million in the first quarters of 2013 and 2012 respectively. The small decrease in 2013 revenues reflects a reduction in contract and other revenue associated with NAID contracts. Research and development expenses for the first quarter of 2013 were $16.6 million, compared with $15.8 million in the corresponding period of 2012. General and administrative expenses were $4.1 million in the first quarter of 2013, a 12% reduction from the $4.7 million incurred in the first quarter of 2012. As a result of our streamlining activities during the first quarter of last year, we recorded a charge of $3.8 million. For the quarter ended March 31, 2013 we had a net loss of $24.9 million or $0.30 per share, compared with a net loss of $30.4 million or $0.69 per share for the corresponding quarter of 2012. The net loss for the first quarters of 2013 and 2012 included a non-cash charge of $12.8 million or $0.16 per share and $14.4 million or $0.33 per share respectively. Both were related to the revaluation of contingent warrant liabilities which resulted primarily from the appreciation of XOMA's stock price during each of the quarters. Excluding these non-cash charges the net loss in the first quarters of 2013 and 2012 were $12 million or $0.15 a share and $16 million or $0.36 per share respectively. On March 31, 2013, XOMA had cash, cash equivalence and short term investments of $70.4 million. We ended December 31, 2012 with cash, cash equivalents and short term investments of $85.3 million. You may recall that about a year ago, when we initiated a phase III clinical trial evaluating the fixed dose combination product of Perindopril Arginine and Amlodipine Besylate for the treatment of hypertension, we had arranged for the roughly $9 million in study cost to be paid for through a combination of grants from Servier and from the cash proceeds of Aceon sales. I am pleased to say that as of now this liability has been just about fully paid. You will notice this when you see the significant reduction in our accrued liabilities at the end of the quarter. Today, we reconfirmed our financial guidance that anticipated cash used in ongoing operating activities during 2013 will be approximately $50 million. This reflects the cost associated with conducting our EYEGUARD-A, EYEGUARD-B and EYEGUARD-C phase III clinical trials. We continue to believe this capital will fund existing operations to the end of fiscal 2014. I’ll turn the call back to John for few final comments before we take your questions. John?

Thanks, Fred. Just before we turn the call over for your questions, I wanted to remind this all of something. We here at XOMA running as fast as we can to meet all the aggressive timelines we set for ourselves. We are managing multiple clinical trials of gevokizumab and some very different indications across many centers in the U.S. and in some cases in numerous countries around the world. From much of this, we have to coordinate what we do with our partners, Servier and with our contract manufacturer Boehringer Ingelheim. I just want to stop for a moment and thanks the entire cross functional team here at XOMA for their incredible efforts to keep all of this under control and on schedule. The difficulty of their jobs can be overstated and I am proud of the XOMA team and the team at Servier for their successes to date. The complexities of these efforts will not lessen and we will continue to perform at a high level since what we are trying to accomplish is important to us, our shareholders and the patients who are trying to help. But with all the day-to-day urgency, I just wanted to remember the bigger picture. We have a great drug in gevokizumab. We have great team here and Servier developing it. We are doing what we believe are the right studies in indications where modulating IO1 data has a chance to impact the disease. I believe strongly that we are making great strive down in the important path. One they will build XOMA into a strong company built on gevokizumab. With the success and at least one of the indication we are studying and a commercial launch here in the U.S., we have the opportunity to make XOMA the success we collectively envision. We appreciate your participation to this effort. We are up to good start 2013, and we look forward to sharing the top line results from the EOA study with you around Labor Day. Operator we would like to open up the call for questions now.

(Operator Instructions) Our first question comes from the Adnan Butt with RBC Capital Markets Adnan Butt – RBC Capital Markets: First on the EOA study, I am under the impression that CRP levels are elevated with EOA, to begin with. So how was the cutoff level determined via the 2.5 number?

Yes, the 2.5 number was taken from the literature based on the study that was done in Italy, and in that study all patients reported that qualified for the disease from a radiographer perspective, had a CRP of 2.5 or higher. So we took it out from a literature based analysis of patients with EOA. So that was our initial assumption and then when we actually measured in our trial, we found that it’s only a minority, at least in the sites the United States. Even though they had otherwise met criteria for EOA, the elevations with that cut off of CRP were not as high.

And just to follow on that, I mean, it was a tough decision for us because by putting this criteria in place we know the patients who don’t have the elevated CRP do in fact have EOA, because it’s measured based upon the other signs. But we feel that we have the best chance of gevokizumab working in those patients where they have this elevated CRP. So we stuck to our guns and made sure that we complete this trial just in the patients where they have EOA and have elevated CRP. Adnan Butt – RBC Capital Markets: And just a follow up, what gives the company confidence that gevokizumab would work as well or better with higher CRP levels. Is that product data that gives the company confidence?

Yes, it’s just based upon the fact that, and as John suggested, this disease is periodic episodes of very profound inflammation and IL-1 beta has been attributed to that. So we are trying to capture patients during the time when they have the highest level of inflammation and we then concluded blocking the inflammation with hepatitis chance of effect that that point in time. Adnan Butt – RBC Capital Markets: And the second study, has it started already or will it be starting some time later?

It will start in the next few weeks. As a result of the screening process from our first study we have actually accumulated quite a large cohort of patients that will immediately qualify for the second study. So, we’ll roll all those patients into their trials as soon as we possibly can.

Our next question comes from Simos Simeonidis with Cowen & Company. Simos Simeonidis – Cowen & Company: My questions are about the Servier study, UV (ph) data study that you talked about and I was wondering, first of all are we going to see the data at some point before they’re published by Servier? That’s my first question. And then I think it was Paul that separated data in acute and at-risk patients and talked about the 15 evaluable acute patients 11 of which had vitreous haze of 2 plus and you said eight out of 12 had reduction 2 points. First of all can you tell us about the other 3 patients Secondly, from the ones that seemed where the drug worked on the eight of the 11 where was the breakdown between high and low dose? And finally how did the drug do in the four at-risk patients if you have that data. Thank you.

So, in fact the way this study was designed, patients were given a dose and then after two weeks we evaluated. If they did not have an improvement in the disease they weren’t allowed to continue in the trial. So, in fact all patients that received a first dose essentially did improve over the first two weeks. So, everyone responded. Remember, only 11 had two plus or greater. The other four all had active disease but it wasn’t reflected by 2 plus vitreous haze. So all four of those depended on what their signs were did respond as well. I can’t talk about vitreous haze response because they didn’t have to be given. Simos Simeonidis – Cowen & Company: And then for the eight of the 12, what was the breakdown between high-dose and low-dose?

Yes. I think it was about 2 to 1 lower to high but I don’t have those exact numbers in front of me.

I think the most important piece of this is as Paul said, the vitreous haze is the input in our NIU study, the EYEGUARD-A study and so this was really a good group of patients who had exactly the end point that would qualify them for the study and as you heard in a high percentage they actually responded in a way that would have made them as responders in the study. In the study itself, when we sized the EYEGUARD-A study, we made an assumption that we would have a 40% response rate on drug in the EYEGUARD-A study and so we had a very high percentage in this small study; this small Phase 2 study but we sized the EYEGUARD-A study based upon a 40% response.

Yes, so unfortunately this are kind of the data we can share with you right now and the more details, we have to wait till Servier allows us to provide one information. Simos Simeonidis – Cowen & Company: And do you have an idea; are these being reserved for a publication or for the?

They are both presented at a meeting and I can't tell you which one but their intent is to both present it in a meeting as well as publish. Simos Simeonidis- Cowen & Company: Okay finally, I wanted to ask you about the EOA second study. Just to be clear, the study 160, all the patients will meet the initial requirement of above 2.5 grams per liter right or milligrams per liter? Correct?

That was an entry criteria for the trial. So unless you had an hs-CRP value of 2.5 or greater, you didn’t qualify for the study. Simos Simeonidis- Cowen & Company: And then the second study would be; so there is no overlap between the patient groups?

That's correct. There is zero overlap between the two. So at the end of the day, what we want to do is two things. We want to determine whether or not local information is also IL-1 beta modulation dependent without evidence of systemic inflammation, but we also want to because this is a biologic; we want to have no question what the definition of the population that would benefit from this is. We think that's really important as we go forward from a regulatory perspective. Simos Simeonidis- Cowen & Company: And given this two and a half milligram per liter value that have their; it seems to me kind of arbitrary from;

It wasn’t arbitrary. It was taken directly from literature. Simos Simeonidis- Cowen & Company: Sorry what I meant to say is that; it doesn't mean that you are not going to have a response if you have let's say the 10.2 (ph). I was going to ask whether in 162 whether you strive to fine patients according to between 2 and 2.5 or 1.5 -2? In order to find the real let's say cut off that you might use in Phase 3 for example.

That's a good question Simos; I don't think we have an out patients to do that level stratification for this trail. So really it’s more of a proof-of-concept as we mentioned. So we will be able to get as, pretty much selecting a 2.5 mg cutoff which was chosen by literature. So we’ll be able to look at patients above and below that and see if there is a difference in response. Simos Simeonidis- Cowen & Company: Final question, Paul, from a single transduction pattern perspective as it says, would you expect an IL-1 beta inhibitor to work the quote low CRP population. Again the question of rating comes into play, might work between 2.2 and 2.5 for example but how do you think about study I…

That’s also related question Simos but really what we felt was if there was circulating level or an evidence of systemic CRP that would be patients with highest level of inflammation and would have the best chance of responding. Having said that, the real important aspect is what’s going on local in the tissue. So it is possible that there are patients that have significant inflammation occurring at a local level that doesn’t manifest as a systemic single signal as CRP but we initially chose the CRP because we felt that in a proof-of-concept trial, this will have the best chance of showing the benefit of the drug.

Sure, it is important to say that the fact that we’re having this discussion asking each other these questions, we need to have the answers to these questions as we see the regulators and ultimately with the payers et cetera, right. So, we need to understand which is the right patient population for gevokizumab within EOA and we’re fine with it either way it comes out. It’s a great opportunity either way but having the answer to this question is really important.

Our next comes from the Jason Kantor with Credit Suisse.

Couple of questions for you, so do you have to rescreen the people that is screened out because couldn’t CRP the something that’s not constant overtime and that you just catching like you said 25% of people who happen to be in a flaring situation and the people who screened out may screen out again from this trial because they start to flare?

That’s a really good question Jason. We will get another baseline CRP prior to entering and that’s above 2.5 will put them in above 2.5 group, if it below we will keep them in the below. So otherwise they qualified because in addition to having CRP from the first trial, they also have to have radiographic evidence or erosive osteoarthritis. So that wouldn’t get changed and they have to have an underlying baseline of pain that qualifies, which I think was a 50 out of 100 point scale.

Either way it certainly have those things.

It sounds like you guys need to do sort of a time core study with patients just to see where hs-CRP goes overtime without treatment.

That is a great comment and I think that it probably does wax and wane. I think that is probably right as it correlates with the disease but what we are trying to do in the first trial is give the drug its best chance of response. That doesn’t necessarily mean that patients without the CRP wouldn’t respond because we are only doing a small number in a POC trial. So that was the rationale for the initial design.

Got it and then you mentioned that that were some people who relapsed or had symptoms come back. Could you explain were those patients who had relapsed while still on therapy, was this after therapy? Did they get back to…?

Are talking about the NIU trial?

Yes that is what I was talking about, yes.

Yes there were patients, they were observed over a six month period. So some of these patients did have recurrent symptoms but in general the symptoms were not as severe as what they had when they presented at baseline and the ones that did recur, there was a higher rate of recurrence in the low dose group compared to the high dose. So for example we do not believe that this drug is going to cure every patient but it is clear that there was a beneficial effect, at least if you interpret the small trial. It appeared as if there was benefit.

And just so I am clear on sort of the apples to apples numbers for the Behcet’s study, you say you powered your study for 40% but in the relevant population in the study that you just reported on you had eight out of 11 responders by the criteria but the time point they looked out it was a little bit later than the time point you are going to look at but you are saying that the responses come quickly so you do not think that that time difference…

Yes, we don’t think they are too weak really. That is also good. I mean obviously it is not complete apples to apples comparison for a number of reasons. One this is strictly Behcet’s uveitis where the EYEGUARD-A is all uveitis independent of underlying uveology but what we saw was of the active patients that were evaluated 15, surprisingly 11 of these had at least two plus vitreous haze and historically we were told that that was not quite as common in Behcet’s uveitis. So that was also interesting for us to see that it actually was higher. So of those patients, the 11 that had at least the two plus or greater eight out of the 11 had at least a two point improvement and the way the study was designed, they got their intravenous loading dose and two weeks after the intravenous loading dose if they improved they received their sub q dose. So that's how it ended up 70 days as opposed to 56 days. So it was the time from the intravenous loading dose coupled with the 56 days that occurred subsequently. So it was essentially two additional…..

And are you doing intravenous loading dose in the EYEGUARD studies.

No when we look at kinetics we don't believe there is any real advantage to it.

And Servier concluded that too because they're also not doing it in the Behcet’s uveitis study that they will bring.

And when they do recur symptomatically it was generally months after the received the loading dose. So in fact the loading dose had very little to do with it.

And when do think, did you say already, but when do you think that that data could come out is that like AAO (ph) or something like that?

It will be sometime next year but they haven't officially picked the time.

We were really happy to be able to disclose this bunch and they were gracious enough to allow us to do that because we've been getting asking and wanted to disclose this.

I'm not showing any further questions at this time. I'd like to turn the conference back over to CEO John Varian for closing remarks.

That's great. Thank you everyone again for joining our call, and it did give us an opportunity since this first quarter call and our year-end call were close enough together to dive a little deeper into some of the indications that we're chasing. So we appreciate you listening to us as we discussed that. 2013, we're off to a great start and we look forward to sharing the remainder of the year with you. So, thanks again.

Ladies and gentlemen that concludes today's presentation. You may now disconnect and have a wonderful day.