Greetings ladies and gentlemen and welcome to the XOMA first quarter 2008 financial results. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation (Operator Instructions) As a remainder this conference is being recorded. It is now my pleasure to introduce your host Mr. Greg Mann, head of Investor Relations. Thank you Mr. Mann you may begin.

Good morning and welcome to XOMA's first quarter 2008 conference call. Earlier this morning XOMA issued a press release, the financial information for the first quarter of 2008. We expect to file the quarterly report on Form 10-Q with the SEC for the quarter ended March 31, 2008 later today. These documents will be available on the XOMA website, www.xoma.com. Today's webcast can be accessed by XOMA's website and will be available for replay until close of business on August 31, 2008. The telephone replay will also be available beginning later this morning until close of business on May 26, 2008. Access numbers for the replay are listed in the news release that we issued this morning. Leading today's call will be Steven Engle, Chairman and Chief Executive Officer; Alan Solinger, MD, Vice President of Clinical Immunology and David Boyle, Chief Financial Officer. Before beginning, we wish to remind all listeners that certain statements made on the call today will be forward-looking. We have based those statements on assumptions that may not prove to be accurate. XOMA's actual results could differ materially from those we anticipate due to risks inherent by the biotechnology industry as well as for companies engaged in product development in a regulated market. These risks including the success of our existing collaborations, the marketing and sales efforts for RAPTIVA, LUCENTIS, and CIMZIA, our ability to enter into additional arrangements, the size and timing of expenditures, the timing of clinical trials and other events, changes in our collaborative relationships and actions by the Food and Drug Administration, International Drug Regulatory Bodies and the US Patent and Trademark Office are discussed in XOMA's Form 10-K for 2007 and XOMA's Form 10-Q for March 31, 2008 and in other SEC filings. Please consider such risks carefully before making any investment decisions. I will now turn the call over to Steven Engle.

Good morning and thank you for joining our call today. With it’s multiple revenue streams, a world class antibody discovery platform and a growing proprietary pipeline, XOMA has already made significant progress in 2008. We have been busy maximizing our strategic assets including our integrated antibody capabilities, strong IP position and know-how biodefense expertise and our flagship product candidate XOMA 052. As planned XOMA continues to execute our product focus strategy; we achieved three key objectives over the quarter. First we advanced development of our lead antibody drug candidates XOMA 052, a highly potent monoclonal antibody that interrupts the core inflammatory process driving many inflammatory diseases. Second, we made excellent progress in our antibody collaborations, technology licensing and biodefense activities, helping our partners, adding new licenses and technologies and seeing the clinical advance of product candidates including HCD122 and third as announced in this morning's press release, we increased our cash position substantially, by using for our growing royalty revenue streams to secure our non- dilutive financing. Let me first discuss the progress we have made in advancing our proprietary pipeline of antibody drug candidates including XOMA 052, our lead candidates. The development of XOMA 052 is proceeding as planned; we completed enrolment of the fourth of six plans dosing groups in our US Phase I study of XOMA 052 in Type 2 diabetes and we are in the third of six plan dosing groups in the European Phase I Type 2 diabetes study. We remained on track to have preliminary results from our Phase I studies in diabetes in the third quarter of 2008 and preparations are underway for new studies in free additional indications CALP, Systemic Juvenile Idiopathic Arthritis and Rheumatoid Arthritis. We are very encouraged by the growing body of clinical evidence supporting the broad therapeutic approach…

Thanks Steve and good morning to everyone. We released XOMA’s first quarter 2008, financial results and will file the related 10-Q later today and those will be available to you on our website and on the SEC’s website. On the call today I will discuss what I think is most helpful in understanding our current status and future prospects. XOMA's operating loss for the first quarter 2008 was $13 million compared with an operating loss of $8.6 million for the same quarter last year. The net loss for the first quarter was $14.2 million compared to a net loss of $15.9 million in the 2007 quarter. Last year XOMA incurred significant interest expenses related to the derivative revaluation for its convertible notes. As I had noted on previous calls XOMA will be seeing no more of these charges with the full conversion to equity of the convertible notes in the first quarter of last year. Total revenues for the first quarter of 2008 were $12.1 million compared with $12.3 million last year. The decrease in license and collaborative fee of $4.4 million was mostly offset by growth of $2.7 million in contract revenues driven by activities under our contracts with sharing Schering Plough and Takeda and from the increase in royalty revenues from our RAPTIVA and LUCENTIS. With the recent approval of CIMZIA by the FDA, XOMA will begin receiving royalties on this product for sales in the US. As we indicated in our press release, we have adjusted our 2008 revenue expectations based primarily on the timing of revenues from a biodefense sub-contract and secondarily our royalty revenue trends. We now expect 2008 revenue will between be between 80% and 95% compared to previous guidance of 90% to105%, of our record level 2007 revenues of $84.3 million. XOMA's R&D…

Thank you David. Let me turn to Alan Solinger for a clinical update.

Thank you Steve and good morning everyone. As Steve noted earlier, our XOMA 052 program is tracking nicely. XOMA 052 is a highly potent monoclonal antibody that targets and interrupts the IL-1 signaling pathway that is known to cause the inflammatory response related to several dozens difference in seasons and conditions. Our development program currently includes two double blinded randomized placebo controlled studies in Type 2 diabetes; one in the U.S. and one Europe. The studies are designed to evaluate the safety in pharmacokinetics of XOMA 052 and involves several diabetes and inflammation measures including Hemoglobin A1c, fasting plasma glucose and C-reactive protein. We remain on target to have data from the studies in the third quarter of 2008. The studies each involved six groups of six subjects to receive a single dose administration through IV infusion. One subject in each group receives placebo and five receive XOMA 052. Dosage levels are 0.01, 0.03, 0.1, 0.3, 1 or 3 milligrams per kilogram body weight. Subjects have Type 2 diabetes that under reasonable control with baseline Hemoglobin A1c levels in the range of 7.5% to 12%; subjects who are on combatant antidiabetic medication including insulin and hypoglycimix. The US and European studies are very similar in design. The main difference being that the U.S. study includes two additional parts not contained in the European study. Part 2 of the U.S. study will investigate subcutaneous administration of XOMA 052. Part 3 investigates multi-does administration of XOMA 052 and intravenous infusions. We expect to begin Parts 2 and 3 of the U.S Phase 1 study in the second half of 2008. The completion of the Parts 2 and 3 however will not determine or delay the release of data from the European Phase 1 and Part 1 of the US Phase 1 studies.…

Thank you Allen, great update. This concludes our prepared remarks. Operator please review the instructions for the question-and-answer segment.

(Operator Instructions) Our first question comes from the line of Mike King with Rodman & Renshaw. Please go ahead with your question.

I would like to start out with some financial questions and then maybe we can jump back to some of the clinical updates; I will try to be as brief as I can. I just wanted to have Dave discuss, excuse me -- the license in collaborative revenue I guess our view again -- given that this is not a very transparent figure, I guess our view would be that its kind of surprising, even with the biodefense contract revenues coming off that the number is that loss. So I’m just wondering if you can speak to that that a little more, in more GAAP and U.S. what I would find useful and illuminating would be can you tell us roughly speaking how much you generated from Takeda and Schering to date, so we can get an idea how much you would be generating going forward?

Okay so first of all let me clarify something that licensing in collaborative fess does not include the revenues for the work that we do for Takeda and Schering-Plough, I think of those agreements. Those revenues are actually showing in the contract and other revenue. So the contract and other revenues is actually a combination of the revenue that we do under those collaborations and biodefense see the more work that we do. So, they are really maintained in there. License and collaborative fees will primarily be for things like technology licenses and for a – we actually used it for the upfront fee relative to the cost and profit sharing related to the Taligen and Novartis collaboration.

Okay. So it’s that an amortization, figurative or is this just because there were no licenses assigned in the quarter?

No, just because there was no license assigned in the quarter. The other big - now that you may remember from third quarter last year, things like the BCE license to Pfizer that we had $30 million shows up in the license and collaborative fee line?

All right, so should we expect these kind of, the kind of volatility that you had in fourth and ’07, to persist in ’08?

Likely, so yes.

Yes, because you had a reading from a 130,000 up as highest $31 million so?

Right, and let me just speak to that little bit. We obviously as I mentioned in the script have a number of ongoing discussion and prospects to add to that line and we do have some, we think good expectations for that line by the end of the year.

Okay, so is that a guidance statement or?

Yes, it’s within the guidance I provide in the earnings call in the script.

Okay. Just checking?

Thank you Mike.

The debt, can you speak of the cost in capital compared to doing equity at this point and I also would like you to discuss the optics of using a instrument that’s pegged to a variable rate, pegged to LIBOR. Because if you look to the most financial pundit – no - I don’t think its really people thinking that there interest is going down from here. So, I just want to understand better what kind of discussion you guys had internally and at the Board level about the different financing options because what – the way we look at the cost capital on the debt is lower than it would be with equity, but I am just concerned about the perception of the risk having it, though interest rate take to LIBOR?

Well, a couple of things there. First of all let me address the LIBOR question. Yes the LIBOR is likely not go down from where it is at least that’s our view and there is a flow or 3% on the current goal – I mean arrangement that we put into place and when we look at sort of historically it may go up a couple of percent that would still put this loan in a pretty good range in terms of cost of capital particularly, versus some of the other debt financing that we seen out there for up to 17% and since no equities involved we think, with where the share price is and the relative relationship with the share price to what we believe that the true value of XOMA. We think that debt is a much better way to finance the company in the short-term versus equity, because of the costs of capital and the lack of dilution to our shareholders.

All right, could you just talk about, how does work – how doest the recent work and are you capped if LIBOR should got to whatever, pick a number 5%? Are you capped at some point?

We are not capped yet, we have considered putting a cap in the place. The reset works every six months.

And what is your option to extinguish the debt?

There are -- there is an option to prepay, there are certain penalties that we choose to prepay and those off course decreased overtime.

Can you walk us through those?

I believe those are not specifically disclosed.

Whether they are in the Q or the 8K?

I am not sure at this point. I’m not sure exactly what we end up being deducted or not…

And I know that Steve said, that the, you don’t get clients against the royalties, but God forbid say in the case -- XOMA's business goes to hell and you got to pay the interest. Is there a reach through the royalties or how would the debt be satisfied if your core business would have, whatever…

The debt is collateralized by the payment rights to the royalty streams and frankly I think Goldman feels very comfortable with that situation as do we and we're not concerned about the business going under at this point.

Mike, their ability is just essentially as the royalties come in and make them -- collect them until the debt is satisfied. So that once it’s done then the revenues will roll back to us.

Okay and then a couple of quick clinical questions and then I will jump back in the queue. HCD122; Alan, can you talk about -- I know you’ve got a weekly dosing schedule and a variety of dosing, but can you give us some sort of parameters on what kind of doses Novartis is going to explore on HCD122?

Thanks Mike. It’s a good question. Basically, they going to use doses that are within the range already tested in the previous two studies. The design will be slightly different in the doses -- the Bayesian approach to the dosing.

Okay. Can you remind us of the previous doses?

The previous doses have been up to approximately 6 milligrams per kilogram is the maximum dose.

Okay. Will that determine to be the MTD?

Those are not actually determined yet for these two studies and multiple myeloma and CLL.

Okay. So, there is a possibility they could go higher?

That will involve a lot of discussion.

Okay. And then any idea when we will see data?

Repeat the question Mike.

Any idea when we will see first data on HCD122?

No, I can’t really say for sure. I mean it really depends on the safety profile and the enrolment rate and so we will have to choose see how the normal dose is. It just opened recently, it’s a little hard to predict.

Okay, I’ll follow up off line on that and then finally on 052 you say you have third quarter data, I assume that’s top line and do you have any idea where that data might be presented?

We are looking at several alternatives right now for this data and I think this will be dated that’s appropriate for this kind of trial.

Okay and but that’s -- you will just have a top line, met it’s objectives etc or will it be a more --?

Well, we’ll look at into numbers.

Get into the numbers, the specifics.

Yes, we will.

Our next question comes from the line of Jason Kantor with RBC Capital Markets. Please go ahead with your questions.

Great and thanks for taking my questions. I guess a lot of questions got answered. Could you speak to the HCD122 program and why it’s moving at the pace that it is moving at? You said you previously ran a Phase I and CLL and multiple myeloma; what are your plans in those indications?

Just one overview comment, which I have to remind everybody was that this was a Chiron project originally that we worked with them on and then it was taken over by the people at Novartis and so, as one might expect there was a certain amount of extension of timelines based on that. In addition of that though Alan you may want to comment future.

Yes, I think what we are seeing now is part of the carryover from the Chiron discussions which is that the initial therapeutic indication was going to be CLL and MM and these are single dose, not combination dosing and the basic format was to establish reasonable dosing schedules and doses from those two trials and then move into lymphoma. So, we are pretty much on that time allocation that was setup. I think now that we have some initial safety data from CLL and MM we can move into lymphoma with a lot more confidence and hopefully will be able to see some very appropriate results in the near future.

Okay and then there was discussion in your prepared remarks about the investment that Pharma is making and the size of the deals and the M&A I guess, what are you trying to say -- I mean are you saying this that you guys are out there trying to sell yourself to Pharma or is that -- I mean what is the purpose of that?

Thanks for asking. I think what we are trying to indicate that since we are in the business of doing collaborations and technology licensing through our antibody technologies and product support that we are just very pleased to see that the way that started last year, the company spending large amounts of money to develop new products and to gain the technologies that they need to do that continues, and so this is byway of just keeping the investors aware that that whole area continues to be a very active area where the amounts being spent are still quite continuing on. Does that help?

Yeah. Thanks. That’s great. I'll take my other questions off line thanks.

Sure and I just wanted to say two things; one was that the HCD122 project is on clinitrials.gov and so I’ll leave it for you to take a look at that and also just a comment regarding a loan again as David talked about that; we are just excited because that clearly extends us out past this year and in for a year or period in the future in terms of the cash that we need to operate at a minimum and that we feel that this is a great way to go versus going out there to the markets as they stand right now. We would also note that other people done this kinds of royalty deals have given up the right to their products to the assets and in some cases people have done deals where it’s extremely high interest rates. So, we just think this is a much better way to go.

(Operator Instructions) Our next question comes from the line of Aaron Lindberg with William Smith & Co. Please go ahead with your question.

Thank you. Is there a possibility that you advance the XOMA 052 trails beyond the five Phase I trails currently planed and underway, prior to partnering it?

Of course and I’ll talk fully for that.

How do you characterize that likelihood of that?

I think it’s hard to do that or we would give you more of a sense of it -- our thought is that we have got people who are already knocking on the door, so there is interest out there and I think it partially depends on a couple things; one is, as we see the results we will get a better idea of just how strong the affects are. We think this is a superior drug both in its ability to require dosing say either once a month or every other month and also because of its high affinity, it may have a higher or a better therapeutic potency. So, for those reasons as far as for that part goes, we see that as something that we will learn as we get the results out of this first study and thereafter and then the second part of it is just an understanding of our own strategy about developing the drug. As we mentioned, every month now, it seems like there is information coming out from work going on with IL-1 blockers. So, the probabilities of success are going up quite a bit and it really does effect how we would think about our product development strategy going it alone or going it with some one. There are several ways as you know to think about partnering to; obviously one could think about a geographic focus where maybe it would share the rights with someone over in Japan or Europe, but we would maintain rights for the United States, which is the largest of the market, on the other hand these are still -- could be expensive studies and so we will be looking at that issue as well in light of the costs and the cash that we have as a company. So, as you might guess, it’s a fairly complicated set of factors to work with, but it’s something we have done many times and we will try to get you as much forward view as we can as we go along. Our feeling right now is the best strategy is to move forward with these studies, complete them and then we can make up our mind for next steps, but in the mean time no doubt we will have people coming in the door to talk about it. Does that help?

Yes, do you saw anticipate full year licensing and collaborative revenues to be similar to 2007 for the full year; I understand that will be volatile quarter-to-quarter?

Yes, within the range of our guidance. We don’t give specific revenue line guidance, but we do feel that that will be a significant contributor as it was in 2007 to 2008 revenue.

Okay and then can you help us understand any developments in your relationship with Novartis. Obviously you’ve had negotiations going on for a long time; its great to see the positive progress of HCD 122, but more broadly just on the relationship with Novartis; can you shed some light there?

We continue to have a very positive collaboration with Novartis and we do have ongoing discussions and I would characterize those as going very positively at this point.

But nothing new that’s been formalized?

If there was, you would see it probably in France

Okay. So, -

Can’t give you more.

And you still expect one additional contract in 2008 in addition to SRI, NIAID contracts?

At least...

Okay and then of the $8.5 million decrease in the 2008 guidance; how much of that is related to the delay in that SRI contract?

Good portion of it -- two thirds to 75%.

And I did want to add, to provide some color to that which is the way the contracts arranged is that SRI is the primary and one of the sub-contract and basically the purpose to contract is to allow us to support other people who’re doing work that NIAID wants to see funded and so, it really comes back to having those folks coming forward and asking for that support. So, there is no magic to this and it doesn’t represent any problem. It’s just a matter of when the right people out there asking for the work to be done.

Okay and what do you expect, will be your portion of the costs associated of the new HCD122 trails?

That’s not something we’re giving specific guidance

Do you anticipate funding it with the credit facility?

Up to 75%, yes.

Okay and then specifically what are the developments you expect with collaborators in 2008 that you mentioned earlier in your prepared remarks?

Well, I would -- obviously we are doing a number of things with collaborators. I mean let me just take them one by one; with Nevartis we talked about the clinical developments specifically with HCD122. We have a number of other projects in preclinical stage and some of those are moving on very nicely and at some point we maybe able to take about those more specifically. The Takeda Schering-Plough we are advancing the projects that we have ongoing and we expect to add to the number of projects that there we’re doing with those collaborators as well. So, moving forward and all fronts and frankly we have mentioned in different places in times; we continue to have ongoing discussions with others potential future collaborators as well, and we would hope to add other collaborators to the list by the end of this year.

Okay so reaching milestones with current collaborators, potential to add new projects, and thirdly, adding new collaborators altogether?

Yes.

Our final question comes from the line of Jeff Nelson with and Ladenburg. Please go ahead with your question.

Two quick questions for you; first of all, does you revised revenue guidance include expected royalties from CIMZIA and second of all in this Glaxo loan -- so why only put away one years worth of cash with the costs of doing the deal and everything, is it -- this is all the money you could get from your royalty stream or are you just specially confident you'll bring in money from other areas?

A couple of things, let me answer the second question first. You don’t want to incur too much debt. We think it’s a prudent amount of debt. We do expect to have money coming in from other areas that we have indicated particularly in the revenue guidance. So, we think that, the $55 million is a good amount to put away, again interest rates are relatively high, and to the extent that we put away additional cash, you're incurring interest and paying that on that. So, we think the $55 million was a good amount to put into the bank at this time and I'm sorry the first question again was…

That was about CIMZIA and yes it is…

Yes, it’s a part of, but it’s a minor part I think

We have tried to take a very conservative view of the royalties on that till we search and see the trend.

So, just to follow-up if you had wanted more; I mean at this Goldman Sachs line could you have got it best in your obvious?

Yes, we could have.

Gentlemen, there are no further questions in the queue at this time.

Great. Thank you for your questions and participation on our call this morning. Again we are pleased with our business execution in the first quarter. Our XOMA 052 program is on track. We made significant progress with our antibody collaborations including the start of a new trial of HCD122 in lymphoma. We are acquiring new technologies and building the next generation of antibody discovery libraries and using our multiple royalty streams we have added to our cash resources to a non-dilutive loan. We look forward to keep you updated in the coming quarters. Operator you can conclude the call.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.