Chief Investment Officer, XOMA ROYALTY CORP
Sara Jane Demy Interviews Brad Sitko at BioFuture 2023
This interview features Sara Jane Demy, Demy-Colton and Brad Sitko, XOMA. It followed the panel discussion "Mavericks: ...
About Bradley Sitko
In a September 2024 interview at BioFuture 2023, Bradley Sitko, Chief Investment Officer at Xoma Royalty, discussed the company's royalty model and its role in the biotech financing landscape. Sitko explained that Xoma provides capital to biotech companies in exchange for future at-risk payments from existing partnership deals, describing this as a way to "unlock the innovation of tomorrow using the innovation that was created today." He noted that there are over 600 such partnership deals annually, creating a large market for Xoma's services. Sitko stated that Xoma has completed over a dozen royalty deals and built a portfolio of more than 70 assets. Sitko also commented on the broader biotech environment, saying that companies are "forced to reinvent themselves, to think differently, to spend prudently," which he described as "not a bad thing in the long run." He expressed the view that the industry is "closer to the end of the cycle than to the beginning" and predicted that a true turnaround would occur once there is stability in the macro picture within health and life sciences. Sitko characterized Xoma's approach as offering non-dilutive financing at a stage in a company's lifecycle where it "historically hasn't been available."
Transcript (18 segments)
I
Interviewer0:05
So Brad, yes, tell me about the XOMA royalty model. I mean, it's different, it's different than the other royalty models that most people traditionally hear about, right? And what makes it particularly attractive to biotech companies?
B
Bradley Sitko0:22
For biotech companies where they have an existing partnership in place, they've already created technology, licensed it out to someone else to develop it, and are expecting to in the future receive payments from it. That's capital that's not accessible to them today. So we can provide capital to them today in exchange for those future at-risk payments and allow them to advance their next innovations.
I
Interviewer0:52
So you're talking about partnerships with pharma companies, other biotech companies, correct?
B
Bradley Sitko0:56
Yep, yeah. So that becomes a really rich opportunity. It is. There are over 600 deals like this done every year, partnership deals. So that means for us there's a big environment for us to be able to service and provide capital to. So we unlock the innovation of tomorrow using the innovation that was created today.
I
Interviewer1:17
I'm so glad that you came to BU a future. And I understand that you've had an opportunity to meet and talk to various people while you've been here at the meeting. Will you keep coming back?
B
Bradley Sitko1:29
Absolutely. It's been a very rich set of conversations. There are great companies that we've met with, great investors. It's the ecosystem that you're creating here within New York, especially at this time of year, that's great to bring the thought leadership together. Thank you.
I
Interviewer1:46
Okay. The other question that I asked inside was, what's positive now about the market opportunities? I know, I know it's a tough question.
B
Bradley Sitko1:59
It is. As we look at what's going on in the macro environment and then specifically the environment within biotech, it's easy to lose our way and lose the optimism for innovation that we have. It's easy to get down about it. I think what's really happening is companies are forced to reinvent themselves, to think differently, to spend prudently. That's not a bad thing in the long run. And I think ultimately as we look back, every cycle has ended. So I think we're closer to the end of the cycle than to the beginning. It will end with a healthier community.
I
Interviewer2:37
You're right, it has. And it comes back with a fervor, and people get excited during that upswing. And I think when you look at the blend of both the scientific developments that are happening and the technology that's enabling it, I think we're going to be in for a new era when we can finally look back at this with some fondness. Of course, my question is: when do you think we're going to be looking back at this?
B
Bradley Sitko3:02
I have stopped giving predictions because they're always wrong. There have been times when we've said the next six months, the next six months. I think until the macro picture clears, after we have some visibility that we're stable on a macro picture within health and life sciences, then we'll start to see the green shoots of a true turnaround.
I
Interviewer3:29
Okay, I'm hoping that turnaround happens soon. I'm, you know, yeah, maybe the first half of next year. That's my prediction. First half is very long. Usually when companies say they'll do something by first half, that means like June 29th, June 30th. But I think we'll get there. Just having gone through the cycles, and I know all of us have been in this space for a while, you've seen the cycles come and go. Typically we're much better off at the end of it. But you as a player in the space really does help free up capital for companies to focus on the assets that we happen to like.
B
Bradley Sitko4:13
When there are environments where there's dislocation, non-dilutive financing has taken a long time for the market to understand it. They've understood it in a more mature way when products are commercial. Now we're bringing to the market something that they haven't seen before, which is non-dilutive financing at a point in their life cycle when it historically hasn't been available. So we have the convergence of a couple of those themes that are really helping us: tough financing environment for a lot of companies, desire to unlock innovation, plus education on the type of work that we do.
I
Interviewer4:55
How many royalty deals have you done?
B
Bradley Sitko4:58
Yeah, so we've done over a dozen royalty deals, built a portfolio of over 70 assets, both from legacy XOMA technology and the new ones that we've acquired.
I
Interviewer5:10
How many do you plan to do? We don't talk about that publicly. We're ambitious. Okay, okay. And you have a big bucket of money?
B
Bradley Sitko5:21
We're working on that.
I
Interviewer5:24
Okay, okay. All right, good good. Well, we like you in the space. We want you to stay around and be creative with companies that you're investing in or supporting the deals you do. Thank you so much.
B
Bradley Sitko5:36
Thank you, I appreciate it.