Good afternoon and welcome to XOMA’s Third Quarter 2008 Conference Call. Today, XOMA issued a press release with financial information for the third quarter period and filed the quarterly report on Form 10-Q with the SEC for the quarter ended September 30th, 2008. Each document will be available on the XOMA website, www.xoma.com. Today’s webcast can be accessed via XOMA’s website and will be available for replay until close of business on February 3rd, 2009. A telephone replay will be available beginning later today until close of business on February 3rd, 2009. Access numbers for the replay are listed in the news release that we issued today. Leading today’s call will be Steven Engle, Chairman and Chief Executive Officer. Joining Mr. Engle is Dr. Alan Solinger, Vice President of Clinical Immunology. We wish to remind all listeners that certain statements made on the call today will be forward-looking that are based on statements and assumptions that may not prove to be accurate. XOMA’s actual results could differ materially from those we anticipate due to risks inherent in 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, the potential regulatory approval of 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 U.S. Patent and Trademark Office are discussed in XOMA’s Form 10-K for 2007 and XOMA’s Form 10-Q for September 30th, 2008 and in other SEC filings. Please consider such risks carefully before making any investment decisions. I’ll now turn the call over to Mr. Steve Engle.

Thank you. Good afternoon everyone and thank you for joining our call today. Earlier today, we issued our quarterly earnings press release addressing the remarkable achievements we made in Q3 and announcing our efforts to focus our R&D spending on our most promising proprietary programs, including XOMA 052 in Type II diabetes while postponing spending on other indications and programs and continuing to develop and offer the next generation of antibody discovery, development, and manufacturing technology. I want to briefly discuss our recent progress as well as our current efforts to refocus and rational for doing so and then we will open the call for Q&A. As you are probably aware in the third quarter of 2008 in a remarkable drive forward for the company and for diabetes patients, XOMA presented encouraging results for supporting one of the most significant medical advances in diabetes in decades that is a move from insulin-based therapy to anti-inflammatory treatment. For the first time we showed that a single dose of an interleukin-1 beta blocker, XOMA 052, increased insulin production up to 91 days in Type II diabetes patients, a remarkable finding supporting the disease- modifying and monthly dosing or longer potential of this anti-inflammatory approach. These results were presented at the European Association Study of Diabetes, EASD meeting in September in a headlining data presentation. The result also demonstrated that XOMA 052 was both safe and well tolerated in patients with Type II diabetes and that use of XOMA 052 reduced glycosylated hemoglobin levels, a standard measure of blood glucose control and reduced C-reactive proteins. In addition, we advanced our biodefense business by signing a $65 million contract with the U.S. Government, we initiated new therapeutic antibody programs under the existing collaboration with Takeda Pharmaceutical Company Limited, signed a Memorandum of Understanding with…

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator Instructions). Our first question is from the line of Aaron Lindberg with William Smith & Company. Please go ahead.

Thank you. What can you tell us about the Phase II trial you are planning to launch next year in terms of size, structure, location and point of costs? What can you help us out with there?

Thank you, Aaron. Let me ask Dr. Solinger to speak to the design of the study.

Thanks.

Well, we really haven’t released any extensive details, but this is going to be a fairly good sized Phase II trial looking at dose binding, will most likely be an international trial and will make use of many of the same endpoints that we’ve been using earlier and they are fairly standard in those BD studies with emphasis click on the data that we are getting on beta cell preservation and improvement hemoglobin A1C.

And then in terms of cost, is it something that you’d like to see a partner come in before you get too far down the road on this, or is it something like to carry the phase-II trial by order partnering?

Our plan Aaron is get it initiated, but we don’t think it’ll be finished by the end of next year being a larger trial requiring more patients. So our expectation is that we would have a partner on before that study is complete. But we continue to think that somewhere around the end of next year, whether it's in the fourth quarter or first quarter of 2010, that we would bring a partner onboard. We have several partners, potential partners that we are talking to right now as you might guess both Big Pharma and others. And as we look at them they are mostly coming in with tiny capabilities you would expect to either very strong franchises in diabetes and cardio vascular and rheumatology. So those are ongoing and we’ll give you an update as we move along those conversations.

Okay. And so to confirm, all the other trials, the three that you have planned previously are postponed, the folks is all on a Phase II trial for type-2 diabetes, and then you mentioned that you made the change based on new clinical results, is that new data that is not yet been published?

Okay. You mentioned that you initiated a new therapeutic antibody programs under the Takeda collaboration, was that before the end of the quarter or after?

Yeah, let me just step back a second, it was one of the thing that I think we won’t to make sure – it was understood we all could be running RA pharmacokinetic study in that same period of time, some time in the beginning of the next year when it would startup. So back to the situation with Takeda, Takeda has assets to expand those programs and they were actually doing additional project for them.

And was that initiated before the end of the quarter I guess, what I am driving at is where there milestone payments associated with that and we just didn’t see them because they were amortized or did that come after the end of the quarter?

That’s exactly right. It was started before the end of the quarter and there were milestone payments that were amortized.

Okay. And that’s over like 15 or 16 years or some really long time.

About 5 years.

Okay.

But it’s about to knock it down. So…

Sure.

We don’t put out a press release immediately on the day with that number.

Fair enough. And then can you help us understand the potential of partners almost 629?

Yeah, I think at this point we place the program on a hold. We’ve had conversations with people who are telling us that we need to get that additional data that we have started to establish a study for. And so at this point I’m sure we’ll continue to have conversations, but I don’t want to set expectations too high, we still need to get through those studies.

Okay. So, that one – that’s not a near-term thing, it’s really just on hold at this point?

That’s right. Yeah, you’ve got to give in somewhere in the current condition and our desire to focus in on the most important (technical difficulty).

Okay. And can you remind us how much longer you receive loyalties on LUCENTIS in the US?

About five more years.

Okay. Great, I will jump back in the queue here and let somebody else get on.

No problem, those were great questions.

Thanks.

Thank you. Our next question is from the line of Jason Kantor with RBC Capital Markets. Please go ahead.

Yeah, thanks for taking the call. There is a lot of interference on the phone, I apologize, could you tell us what is the minimum price, share price associated with the abstinence equity line?

Its $1 Jason.

So if your stock price is below $1 you no longer have access to that?

I think at that point it becomes something that’s not specifically spelled out in the agreement, and it’s a negotiable item in this kind of agreement.

And, was this Novartis restructuring, was it something that was concentrated earlier on in the year end included in your previous guidance or is it somehow additional to that?

It is additional to that, we have been working to take full advantage of HCD 122 and I just want to make it clear to people in general, if we could have bought this out and run it ourselves we would have done that. But being the Novartis felt so strongly about keeping it, we felt that was a better use of our own funds, not to continue to work as a 30% partner. And so we changed the agreement accordingly.

And, I guess with respect to the same deal, how much money where you are spending on that before, by occurrences over – per quarter how much?

You’ve asked a good question. First of all I just note that we don’t usually give details on the breakout of the R&D spending, we haven’t done that historically. I would say probably more generally to help you think about it, the number, because it goes up and down of course each quarter, is between 5 and 10% of total R&D spending. Does that help?

Yeah, that does help. And, the press release that it’s retroactive to July 1, is there – can you give us some sense of – is there – an additional payment that is going to be made to reimburse you for that, or is that already included in the upfront?

We will see additional revenue coming from them before the end of the year and do compensate for things that we’re originally doing as part of our contribution by which now they are paying as part of a fully funded collaboration.

Okay.

That was a very good news part of fueling the deal.

Right. And why is your partnering plan for ’05 too not changed? Yeah, I would think that given the tough situation you would be excited to partner the same kind of now…

Well, I think what we want to do is take the balance as you might get between having the information and having right partners at the table. On the information side, there are certain kinds of information that we will earn over the next few months that we think will increase the value of the deal for a potential partner. Secondly, in terms of getting everybody to the table we’ve got people who are getting up speed, but they are not there yet. Obviously, if they are all up speed and all the data was available we would close the deal now. We suspect, as usual Jason that it will take several months to get everybody lined up. Nonetheless I’d want to assure you we are going as fast as we can and there is always possibility that we will get the deals done maybe a year or something like that next year. But I just didn’t want everybody to plan on these kinds of things.

And one last question, the revenue that we may or may not see come in this year, maybe early next year, has you confidence level in the deals getting done changed at all, or is it just the timing issue?

I think it is – a majority is the timing issue, which is as you get closer to the end of the year, it just gets harder to predict things and from a conservative events we see it as prudent to simply point it out because in the end you don’t control everything, but as far as our confidence in it occurring, our confidence has gone up since the last quarter.

Thank you.

Thank you very much.

Thank you. Your next question is from the line of Jason Kolbert with SIG. Please go ahead.

Hi, good afternoon. This is (inaudible) sitting in for Jason. Steve, I just had a quick question on the CEF, given your trading volume is in the neighborhood of 300,000 to 500,000 shares a day, could you offer some insights on how you plan to use the CEF, I noticed that in the press release you have already drawn down a small amount of it, are you going to take a percentage of the volume over a period of month, so you are going to may be have some larger trades more periodically?

Okay, thank you. And just could you just remind us of the 2.5 to 3% figure you referred to, what was that referring to?

If you look at the contract, which is online and you can see it, there is a prescribed number in the agreement as to the standard amount that’s expected to be used when you are using this, and so it’s not a large amount at all, it’s a very small amount.

Okay, understand. And with regard to the payment from Novartis, that’s recognized in this quarter?

No. In this quarter means fourth quarter, yes, not in the third quarter, no. We would expect that 13 million plus to be revenues recognized in the fourth quarter.

Okay, thank you.

(Operator Instructions). Our next question is from the line of Aaron Lindberg. Please go ahead.

Just had a quick followup. Do you still expect to have one more contract revenue agreement in 2008 in addition to that SRI and NIAID one?

We still expect to do another major agreement for collaboration or something like that. It could be an existing collaboration or it could be a new collaboration before the end of this year and that’s why the guidance spread is as wide as it is and it could be more than one, so we decided to air on the side of a bigger spread.

Okay. And I am talking specifically in contract revenue and kind of a separate -- I know that you talked about additional contract revenue that would be coming in where you’re doing contract manufacturing work, antibody development?

We don’t think a lot more there, I mean there are things that we are doing, but not of the scope that we are talking about with the collaborations and so forth.

Okay. I guess my thought was the big guidance range was primarily due to your expectation around BCE licenses, it looks like you are expecting something in the neighborhood of 13 to 33 million depending on whether one or a couple of these deals close before the end of the year at the…?

That’s exactly right except that wouldn’t limit us to BCE licences. There are other things that we are talking to people about and so – but, yes in that direction exactly.

Okay. And then have you begun work on that SRI and NIAID contract?

The SRI and NIAID – the SRI contract to be specific is designed to allow us to help other people who are developing products to manufacture them and although there has been great deal of discussion, we have not actually used any of that particular contract rather we’ve been working under the NIAID II, NIAID III contract.

Okay. Nobody is really just stepped up to the government initiatives around that at this point?

Not that we are involved with and we probably would know if it was happening. We are in the preferred manufacturer if you will.

Okay, great. And then, how do you feel about the types of shareholders you are getting from the equity financing facility?

Are you talking about the staff?

Yes.

Yeah, no, basically in this case we are fine with the way that that’s working.

Excellent. Thank you.

Thank you.

Thank you. There are no further questions in the queue at this time. I’d like to turn the floor back over to management for any closing comments.

Well, I hope everybody gets a sense of how we are trying to move to both take advantage of the recent Pfizer results with 052 and at the same time to deal with the recent economic events. Let me assure you that we are continuing to evaluate things and as a result of those it could make more changes as we go long here and we are in conversations with partners and other people to work through a number of issues and understand where they want to go. So, we are doing all of those things and as a result we’d say we have made a lot of progress in focusing and we plan to continue to keep watching and keep working with these and we will keep you informed as we make changes in these areas. In the meantime, I can’t tell you how excited the team remains. I think many of you probably may have seen the announcement today of positive results in the trial that Crestor was used in suggesting that inflammation was a big part of the cardiovascular benefit in patients taking patents and we continue to think that this kind of data will over time actually support the value of an anti-inflammatory like XOMA 052 as well. So, it’s been a very very good day for us overall and we look forward to talking to you in the future. Thanks.

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