Good day ladies and gentlemen. And welcome to XOMA’s First Quarter 2011 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) And as a reminder, this conference call may be recorded. At this time I’d like to hand the conference over to Ms. Carol DeGuzman, Senior Director of Investor Relations. Ma'am you may begin.

Thank you operator. Good afternoon and welcome to today’s call. A short while ago, we issued a news release, which included our financial results for the quarter ended March 31, 2011, and a general business update. Our quarterly report on Form 10-Q was filed with the Securities and Exchange Commission this afternoon. Each document will be available on the XOMA website. Today’s webcast also can be accessed via our website and will be available for replay until the close of business on July 5, 2011. Joining me on today’s call is Steven Engle, Chairman and Chief Executive Officer and Fred Kurland our Vice President and Chief Financial Officer and Dr. Alan Solinger, our Vice President of Clinical Immunology. We wish to remind all listeners that certain statements concerning the timing of initiation of clinical trials were interim or other results of early stage trials or that otherwise relate to future periods are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions that may not prove accurate. Actual results could differ materially due to risks inherent in the biotechnology industry and for companies engaged in the development of new products in a regulated market. Among other things, the initiation of clinical trials may be delayed or may never occur as a result of actions or inaction by our collaboration partners, complications in the design implementation or approval of clinical trials or unanticipated safety issues. Results of early-stage clinical trials may not be supported by later findings. Larger trials and/or other actions required for regulatory approval may not be economically feasible, and final results may not be consistent with preclinical or interim results. These and other risks, including the generally unstable nature of current economic and financial market conditions, the results of discovery and pre-clinical testing, the timing or results of pending and future clinical trials including action inaction or delay by the FDA, European or other regulators or their advisory bodies, and analysis or interpretation by, or submission to, these entities or others of scientific data. Changes in the status of existing collaborative or licensing relationships, the ability of collaborators, licensees and others to meet their obligations and their discretion in decision-making. XOMA's ability to meet the demands of the government agency with which it has government contracts; competition; market demand for products; scale-up, manufacturing and marketing capabilities; availability of additional licensing or collaboration opportunities; international operations; share price volatility; XOMA's financing needs and opportunities; uncertainties regarding the status of biotechnology patents and the cost of protecting intellectual property; and risks associated with XOMA's status as a Bermuda company, are described in more detail in XOMA's most recent filing on Form 10-K and in other SEC filings. Consider such risks carefully when considering XOMA's prospects. I'll now turn the call over to Steven Engle, our Chairman and CEO.

Thank you, Carol. In this quarter XOMA achieved an important milestone in our strategy to become a product focused company with commercial operations in the US. Over the last three years, we’ve been moving from a service oriented business model conducting product discovery and development for pharmaceutical companies to one focused on developing and marketing our own products. As a result of our new development and commercialization agreement with Servier for XOMA 052 which provides financial, medical and scientific support in the near-term, international commercial strength in the long term and the rights to market our anti-inflammatory drug in the US, particularly in Behcet’s uveitis we believe we have taken an important step in achieving the strategy. XOMA is fortunate to be a leader in antibody technology and have products like XOMA 052 at a time when the use of antibodies is well accepted and growing rapidly as a primary therapeutic approach to the treatment of diseases. The impact of novel antibody based therapies expanding dramatically bolstered by ground breaking antibody treatments such as Humira, Avastin, Synagis and Rituxan. This growth continues today with recently approved antibody treatments for lupus, osteoporosis and multiple sclerosis. XOMA 052 has shown biologic activity and safety in patients with Behcet's uveitis, an orphan disease of the eye with major unmet medical needs and another diseases. As a result, we believe XOMA 052 has the potential to be one of these important therapies first in Behcet's uveitis and then in other diseases. When we approached our negotiations with Servier, we had three goals in mind. First to gain a season partner to help us successfully develop and market XOMA 052 around the world. Second, to ensure the resources to achieve this, and third to retain the commercial rights to XOMA 052 in the US. We…

Thanks Steve and welcome everybody to our call. XOMA had total revenues of $15.6 million in the first quarter of 2011 compared with $7.2 million in the first quarter of 2010. The increase in revenues in the 2011 period compared with the prior year period, was due to primarily to funding from Servier for XOMA 052 development and increased funding under our US government contracts for XOMA 3AB development. XOMA had a net loss of $6.3 million or $0.22 per share for the first quarter of this year, compared to a net loss of $21.8 million or a $1.36 per share for the first quarter of 2010. Research and development expenses in the first quarter of 2011 were $17.3 million as compared with $17.6 million in the first quarter of 2010. Selling general and administrative expenses were $5.4 million in the first quarter of 2011 compared with $5.6 million in the first quarter of 2010. At March 31, 2011, XOMA had cash and cash equivalent of $56.9 million compared with $37.3 million at December 31st of 2010. The increase in our cash position is primarily due to the receipt of upfront payments from Servier. Operator, this concludes our prepared remarks, please open the call for questions.

(Operator Instructions) Our first question comes from Christopher James from McNicoll, Lewis, & Vlak. Christopher James - McNicoll, Lewis, & Vlak: Hi, good afternoon thanks for taking my questions and congrats on the progress made with Servier and with the NIH. My first question is actually a follow-up to Steve’s remarks about the Phase II program in cardiovascular disease, just wondering why a Phase II program and why not going directly into Phase III, and then why – could you elaborate a little bit on potential end points, do you think you saw great data with C-reactive protein and HDL, do you think that those are – could be primary end points?

Thanks very much Chris. On the first one, I think in terms of what exactly we’ll be doing at Phase II, until people get through the conversation we won’t know and we are in the middle of that kind of thinking at this point in time. As you know these are generally large trials, their outcomes are – kinds of outcomes when you go to the Phase III level. So I think that what we and Servier are thinking through is exactly what we will be looking to measure in a Phase II level study. And so, at this point we really can’t comment much on what it’s going to be, but the main difference here is this question of having some results before you make the step to the much larger and longer Phase III type study. So we see it as a step wise approach to getting to where we want to go. Christopher James - McNicoll, Lewis, & Vlak: And then could you potentially re-acquire the program after, after seeing those data?

Absolutely, absolutely. The contract arrangement we have with Servier allows for that. So, there are several points, which we can move back in. So, all the way up and including having Phase III results before we would actually have to step down and actually step into the program. So, we see this as a very positive situation. As you know the arrangement is such that we would buy in with a fee, which we consider very reasonable, and then also offset some of the costs that have already been occurred, but we could wait until we were much more certain about the likelihood of success in the cardiovascular indication before we would have to do that. Christopher James - McNicoll, Lewis, & Vlak: Okay. That’s helpful. And the – moving on to the diabetes study, the Phase IIA, I think we are –

Chris, can I just add, sorry to interrupt you. Christopher James - McNicoll, Lewis, & Vlak: Yeah.

But I just said, I mean our thinking is, you know, cardiovascular is a large indication, there is quite a bit of funding required to run these studies. So we are very happy to have Servier pushing forward to spend that money to do that. And then as we think about getting in ourselves at some point, by reacquiring the price, in parallel we would expect to bring another large pharmaceutical company with us in the United States to help take care of the cost, it would necessarily be picked up and assuming those rights. So just to be sure, so it's clear to everyone, we would expect that we bring in a larger partner as we did this and that the company when not settling be burdened with all those previous costs at that time. Christopher James - McNicoll, Lewis, & Vlak: Sure, no, I agree. I think the deal allows for a lot of flexibility. Just – the Phase IIA data, we saw interim results with 052 in diabetes, when could we expect to see, the final results from the Phase IIA study.

Yeah. We expect in the summer, you know, it could be in the next couple of months, but it's probably sometime during the summer time and this all depends when the last patient goes through. Christopher James - McNicoll, Lewis, & Vlak: Sure, sure. And then just two more, the bio-defense program, how should we consider I guess placing value on that program and any potential stock piling that could have subsequently occurred?

Yeah. So, obviously we are doing a phase I study in normals to make sure the drug is safe and then when that study is completed we would still be doing work with the animal models to show that we are having the right kind of effect, but obviously with botulism you can't test it for efficacy in humans. So there are couple of other steps, there is also the scaling up on the manufacturing side that we’ll be doing as well. So, those are the kinds of things that are happening. But as you have alluded to the goal here is to get through that effort and be able to actually get the stockpile contract from the US government and I think at this time we have a certain sense of timing on the Phase I study, but we are not completely sure yet. This is a study run by NIAID. So at this time we are not getting complete guidance on the end of that. But you can assume the next 18 months of kind of timeframe that we are thinking about, if it goes past obviously we’ll let you know. But this is one of those sequence dose by dose kind of studies whereas – and so we are not able to run four groups in parallel those kinds of things, and there is a longer time period here required to demonstrate safety. Nonetheless in parallel, we’ll be working on the other issues to move the program forward. Christopher James - McNicoll, Lewis, & Vlak: Okay. And then just one more and I will jump back in the queue. Your R&D line, how should we look – I respect you are not giving guidance for the rest of the year, but what should we, you know, is this an accurate run rate should we expect this to step down in the second quarter and then come back up or how should we think about your R&D?

Chris, this is Fred, the guidance that we’ve given at the end of the – when we produced our fourth quarter earnings and we had a call about a little over a month ago was that we were going to show net cash used in operations of about $30 million. And that guidance remains unchanged. But a bit of a nuance and important for everybody to understand is that, given our relationship with Servier, we expect that the vast majority if not a 100% of the 052 expenses going forward will be paid for by Servier. Now, that doesn’t mean that XOMA will be doing no work, it will probably be doing great deal of work. And so, what you are likely to see is dollar spent on the R&D line for 052 but an equal and offsetting amount of revenue on the licensing line. So that the real cash implications are zero. And that’s why we have been guiding everybody to see – now that everybody is seeing our first quarter results in which we had very little reimbursements, we expect that to kick in right now with the conclusion of the phase II program. And so, you will see a very positive impact on cash, while not necessarily seeing a major change in the R&D line, because now going forward we’ll be seeing more revenue in the form of these reimbursements. Christopher James - McNicoll, Lewis, & Vlak: Great, thanks Fred. And then I’m sorry, just one last one. The Behcet’s trial starting by yearend, when could we see some data from that.

Yeah. So, again since the trial is not – the design of the trial is not complete again because we are talking with regulatory authorities as well as the experts, it's hard to predict exactly but what we have said in general is we thought that the trial would take approximately two years. Christopher James - McNicoll, Lewis, & Vlak: Great. Thanks so much and I’ll jump back in the queue.

Thank you. Our next question comes from Richard Lau from Wedbush. Richard Lau – Wedbush Securities: Hi guys.

Hi Rich. Richard Lau – Wedbush Securities: I was wondering if you guys have had a chance to do any more analysis of the phase IIB data and – can you give us any more color there in terms of maybe subgroup analysis or anything like that?

Yeah, Richard, thank you for asking. And so, we are not finished with the analyses and part of that also lie for the fact that we haven’t gotten the final results out of IIA. And there are some things there that we want to look at as well. So, in reality you might guess we’re looking at all sorts of things to subgroups and so forth to get a sense of things as far as what are driving the patients in terms of the kind of patients and, you know, length of time they have had disease and so forth. So, as you might guess, in a situation like this for diabetes, we’re looking at questions of length of time with diabetes, what kind of other medications they are on, as well as the dosing and so forth, in trying to understand how those may have affected the trial in terms of the primary end point. And the same thing again for what we see with the c-reactive protein results. However, I would add that over 50% of the patients were on statins, and what we find quite interesting is they were able to lower the c-reactive protein levels in these patients so much even though we know that large number of them are already on statins. And so, we see that as a very positive situation. It says that even on top of statins you can have additional impact at least based on what we have seen so far. So, we do have some information but we are not finished. We also of course, as you know, are going through the conversation with our friends in France to go over this, and until we are done with that it's very hard to comment specifically because we would like to get the total picture including the phase IIA results. Richard Lau – Wedbush Securities: Thank you guys.

Thank you.

Thank you. Our next question comes from Matt Kaplan, Ladenburg Thalmann. Matt Kaplan - Ladenburg Thalmann & Co.: Hi guys, can you hear me?

Yes. Matt Kaplan - Ladenburg Thalmann & Co.: Great, great. I’m sorry, I am in an airport, so it might be a little louder. Couple of questions. First one on Behcet’s, so where are you – give us, where are you in your discussions with the regulators in terms of the phase III design. Have you met with the FDA yet or – what’s the status of that, and can you give us a little bit more timing on your plans to meet with regulatory guys in terms of phase III design and getting that locked in.

Right Matt, so thanks for the question. We have already initiated back and forth comments with the agencies. And so, without putting a fine view on it, because we are going to end up doing this for a while. We have initiated and are in those conversations, and our feeling is those are going fine at this time and are likely to be very productive. So, we feel like we are on the right track here to get this worked out. The other side is there are, you know, you are talking about at least the Europe as well as the US Regulatory authorities. So, we are looking to harmonize the trial design between those two areas. So, forgive us for not being more specific. But, until we get through some of that work it's hard to make specific comments on exactly where we are. Matt Kaplan - Ladenburg Thalmann & Co.: Okay. And then in terms of, you know, starting those studies this year, is this a later fourth quarter start or could it be earlier than that?

No. I guess at this point Matt, until we see what comes out of these conversations, we are saying the late fourth quarter as far as timing. If that changes, then of course we will come back to on it. But because we don’t have enough visibility yet on that timing with the agency agreements it's hard for us to say we will start sooner. Matt Kaplan - Ladenburg Thalmann & Co.: And your goal here is to be able to do the same clinical program for the clinical program, so would it be a surprise for US and Europe and outside of US as well?

Yes. We are certainly looking at a program that will work across and around the world as far as we can go. So, that’s part of this harmonization we need to do between the different agencies. Matt Kaplan - Ladenburg Thalmann & Co.: Okay, great. And then stepping back to the bio-defense program, what is the late running step there, is it really to get to the contractors, is it scaling up on manufacturing or is it getting a Phase-I done?

I think that it's probably not that Phase I study itself. I still think there are additional efforts for that to be done on the manufacturing side. But, I think that if that’s part of it and the other part is, we need to agree with the agency on the model to be used for the efficacy study and to set that part up as well. And so, it's several factors in parallel, none of which we don’t think can be accomplished but, it does take time to go through it. Matt Kaplan - Ladenburg Thalmann & Co.: So, just one quick follow up on that. Can you start working on the manufacturing aspect before the commissioning of a Phase I or is that something you will hold until later to make that investment?

No, no. We are working on manufacturing right now. And so, effort is already going on in that area. As you know we have had the NIAID contract for quite some time and we expect to continue on with that. The other part to help with the view of this is, we are also looking at some point to pick up an agreement with [inaudible] as well not just the final stock piling but an agreement that would help us in the further development of the product prior to the stock piling type agreement. Matt Kaplan - Ladenburg Thalmann & Co.: Okay, great. And then one last question. In terms of other indications for 052 in terms of inflammatory indication, when do you think you start to embark down that road and start work – clinical work, get those studies off the ground, is that a 2011 event or what’s your thought about this now beyond [inaudible].

Yeah. As you probably would guess we are in conversations with Servier to figure out what the right mix indications are. And you can imagine on that table is not only new indications that probably haven’t been so well focused on, but also even indications that other companies have gone after. And so we are working through looking at all those different opportunities. But again in one of these conversations we need to go through with our friends. The other thing is that the – as we look at Behcet's as an orphan we think Behcet's uveitis as hopefully, naturally leading into uveitis itself. So, we see that as a natural extension of the work that we are already doing. The endpoints no doubt would be very similar. And so, we see that as a possible next target. Again, we haven’t agreed on that with Servier yet, but it gives you another direction to think about, and there are a series of other inflammatory and other kinds of orphan and other diseases there available for us to go after. And so, that’s part of the evaluation program right now. Matt Kaplan - Ladenburg Thalmann & Co.: Okay. Well thanks a lot for taking my question.

Of course.

Thank you. Our next question comes from Ritu Baral from Canaccord.

Guys thanks for taking the question. Are you guys going to pursue a formal SPA path for Behcet’s going forward, is that something that you would like to formally start soon?

Ritu, thank you. We have that on the list of things that we are discussing. And so, for Behcet's uveitis obviously we will make sure that everybody is in agreement on what we are trying to make happen with the agencies and so forth. And so it's on there, until we get further into these conversations that it’s one of the thing that takes time to put in place as you are probably aware. But also it has some upsides as far as providing more definition to what we have all agreed to and the rigor of that process. So it’s on the list and I think as we get further into conversations we will come back and let you know.

Got it. And for 052 cardiovascular development going forward and even the data that you might have in hand, are there other inflammatory biomarkers of interest to you guys in addition to CRP, do you think that the mechanism basically suggest that you might see some changes in either Lp-PLA2 or maybe even apoB?

Well, let me let Dr. Solinger speak to that. Alan?

Yeah, hi Ritu. That’s a very logical next question. We certainly do have a lot of pre-clinical animal model work that has led us along to believe that XOMO 052 is a very good immunomodulator that ultimately has effects on multiple other cytokines and chemokines further down the cascade. In our current clinical program both in diabetes and Behcet’s we are looking at those items as additional biomarkers to try to assess what would be the best ones to utilize. Even Behcet’s could be considered one of those cardiovascular diseases because it is a disease of blood vessels, it is a vasculopathy. So I think the data we are accumulating right now and what we will be discussing with both our cardiovascular and our immunology key opinion leaders are the kinds of things that should help us move better into this area and design much more I would say informative trials.

Got it. And moving back to Behcet’s for a second. Is there significant variation that you guys are seeing as far as how the disease is treated given the sort of geographical spread of the disease across the different countries and geographies?

Well, actually again a good question. Because although there are published guidelines on standard of care for the various parts of Behcet’s that have been agreed to by most of the sub-specialty groups, you do have local issues that take place. So we know of, for example, one country that we have been talking with as far as leaders likes to use Methotrexate before they use Azathioprine, we have other countries that very heavily make use of interferon such as Germany where most of that research was done. Yet there is also the question about long term safety and acute therapy that does vary from country to country. Another, I would say, very glaring piece of this is that in Japan they rarely use steroids IV. So we will need to take that into account as we design our trials and again when we discuss things with the various regulatory agencies we need to be sure that our trials can adequately cover these issues across the board, so we have a very streamlined and concise program.

I see. And last question. Are there any international Behcet’s medical meetings coming up where you can, you will essentially have the benefit of all the opinion leaders coming together to confer?

Well, that can be put in a couple of ways. One is because it’s a relatively small population, it’s not difficult to get many of them together in a teleconference or a room all at one time and we have done this previously. As far as formal meetings, yes, there are meetings among the ophthalmologists looking at uveitis aspects of the Behcet’s, there are also two major rheumatology meetings and there are almost always Behcet’s papers at those meetings. So that’s, for example, the American College of Rheumatology and the European League Against Rheumatism. There are also some very sort of specialized meetings come up. So there are a reasonable number of these throughout each year where we can present both at a very large audience but specifically at very specialized groups, such as the rheumatologists, the ophthalmologists, the dermatologists.

Ritu, the other thing was that we have met with many of these experts last year both at the International Behcet’s Meeting that was held last summer as well as at a key thought leader meeting that we had arranged. So we have already had that and we have planned out additional meetings as you might guess.

Great, thanks.

Thank you.

Thank you. Our next question comes from Jason Kantor from RBC Capital Markets.

Jason?

Sir, your line is open.

Maybe we lost Jason.

Unfortunately it's not coming through. Adnan Butt – RBC Capital Markets: Can you hear me?

It's Adnan. Adnan Butt – RBC Capital Markets: Yes, can you hear me?

Yes. Adnan Butt – RBC Capital Markets: Steve, Fred, okay, thanks. We are jumping a bunch of holes so I apologize. But I was wondering if the timings for a phase, for a pivotal start has been tightened in any way, have you been able to meet with the agency at this time, have you scheduled meetings, that’s the first question.

On the Behcet’s or? Adnan Butt – RBC Capital Markets: Yes.

Yeah. And so the answer is we have initiated the efforts. Obviously, there is a number of conversations that we had and we need to harmonize the request from both sides together to come up with a global program. But, yes, we have initiated those discussions and we are feeling good about where they are going right now, they are on track. And we think that we are still on track for having steady start around the end of this year. Adnan Butt – RBC Capital Markets: Okay. So that timing is intact. And how much, if any input, does your partner have on this program?

Oh it's very important. I mean, we came in knowing a lot because of what we did last summer. But I would say that the Servier people have done a wonderful job of allocating people to both Behcet’s and cardiovascular and diabetes and creating the teams and getting very involved. And it is a great situation where you have got somebody coming behind you to have the next conversations and now in their case of course catching up with us and in terms of the thoughts and so forth. So, this is very helpful because Servier is very well known around the world and even some of their staff have treated the Behcet’s uveitis patients. So that’s very helpful in terms of having very knowledgeable people on the other end to help us. Adnan Butt – RBC Capital Markets: So when do you think you might be able to give some guidance on this, on the pivotal design, is that some time later in the year?

Yes, I’m sorry, we did discuss this. But the basic idea is that we just can’t get there until we have these additional conversations with the agencies far enough along that we get some sense of where we are going to end up and therefore how quickly we’ll know when we can start. And I said also earlier if we can start sooner we will. But I think given that we haven’t completed those conversations at this point, all we can say is that we are aiming for the end of the year. Adnan Butt – RBC Capital Markets: Sure. And a couple of questions on 3AB, just I guess conceptual questions. What would be the – I mean given the indication, what should we expect the next steps to be and what’s kind of the path to market of a contractor?

So, a couple of things on path to market, the big pieces here are to finish the Phase I study and normals and get the safety data out. And there I said, it’s in the order of 12 to 18 months and because NIAID is actually running it that’s kind of timeframe we are putting on it. Also it is a study where you are going to do one dose and assess the safety and then move to the next because this is the first time in man. So that study will take that kind of time period. In parallel we are moving forward with manufacturing another effort, one of the other thing that’s important then would be to get the animal model defined and agreed to with the FDA and then actually running the study with that model. And so that will also be going on in parallel with running that Phase I study. And in addition to that then of course what we are hoping to do is to get a stock piling contract eventually and in between now and then to establish a contract with our friends at BARDA and as you know NIAID has been funding this project out of the National Institute’s Health budget, but sometimes it needs to move over to the BARDA budget. And so another thing that you would be expecting to see at some point as far as events goes is a deal with BARDA. And so, the timing of those things is not clear at this point, so I can’t give you more schedule but maybe that gives you a better idea of the kinds of events that we are thinking about. Adnan Butt – RBC Capital Markets: Can you say when you might meet to discuss the animal model appropriate for the study?

Not yet, but hopefully sometime in the near future we will be able to say something about working with the agency on that. Again, it’s something that also involves NIAID in the process. So part of how this gets scheduled out lies with them as well as with us. Adnan Butt – RBC Capital Markets: Okay. Thank you.

Okay. Thank you very much.

Thank you. I would now like to turn the conference back over to Ms. Carol DeGuzman for closing remarks.

Thank you operator. We would like to thank you all for joining us today. Our management team will be in New York next month for the Jeffery’s healthcare conference. I hope to see many of you there and operator that concludes our call for today.

Thank you. Ladies and gentlemen thank you for participating in today’s conference, this concludes our program for today you may all disconnect and have a wonderful day.