According to the Form 10-K for the fiscal year ended December 31, 2001, on November 29, 2001 and December 20, 2001, respectively, two similar purported class action complaints, captioned Scala v. XOMA Ltd., et al., No. C-01-4610 (WHA) (N.D. Calif.) and Malmut v. XOMA Ltd., et al., No. C-01-5006 (MJJ) (N.D. Calif.), were filed in that same federal district court. After further investigating the issues, plaintiffs' counsel filed with the Court on March 11, 2002, a Stipulation and Proposed Order of Voluntary Dismissal in all three actions. On March 13, 2002, the Court entered an Order dismissing each of the lawsuits without prejudice. No consideration was exchanged.
The complaint alleges the Berkeley-based biopharmaceuticals manufacturer issued false and misleading statements about its plans to file a Food and Drug Administration (FDA) application for Xanelim, an experimental psoriasis drug XOMA was co-developing with Genentech Inc. For investors in XOMA, successful development of Xanelim was pivotal. In 20 years, the company had never turned a profit or brought a drug to market. Filing the application, known as a Biologics Licensing Application (BLA), was an important step in gaining FDA approval for the drug. XOMA repeatedly said it planned to file the BLA with the agency by the end of 2001 or the first quarter of 2002. That timetable would have put XOMA and Genentech in a neck-and-neck race with Biogen, Inc. to be the first manufacturer to market an effective treatment for psoriasis. The winner would gain a significant advantage in a lucrative market that is expected to reach $2 billion by the year 2005. In fact, XOMA and Genetech were nearly a year behind Biogen. At the time XOMA told investors it planned to file its BLA by the end of 2001, it knew but failed to disclose that a change in its manufacturing process would necessarily delay filing until after that date. On October 4, 2001, XOMA admitted that it would not file the BLA until the summer of 2002 at the earliest. The next day the price of XOMA stock fell as low as $6.40 from a closing price of $9.76 per share a day earlier.