XOMA Unveils Strategy, Provides Update on NEUPREX(R); European Effort Advances Toward Orphan Drug Designation and Approval Under Exceptional Circumstances; US Trials Progress.

BERKELEY, Calif. -- XOMA Ltd. (Nasdaq:XOMA) today unveiled its strategy and provided an update on the status of its efforts to advance NEUPREX(R) (opebacan) toward regulatory approval in Europe and the US in multiple disease indications.

"Our strategy to find clear approval opportunities for NEUPREX(R) is beginning to demonstrate some meaningful progress. We have ongoing activities in a number of different indications based on NEUPREX(R)'s established activity as a potent neutralizer of bacterial endotoxin," said Jack Castello, XOMA's chairman of the board, president and chief executive officer. "With recent accomplishments here and in Europe, we are pleased to provide our shareholders with an update on our strategy for the approval of NEUPREX(R)."

European Strategy

In spite of the availability of improved vaccines, meningococcemia remains an ongoing life-threatening problem with no meaningful advances in therapy in over a decade. In Europe, XOMA is implementing a two-part regulatory strategy that leverages the large body of clinical data, including phase III studies, that already exists for NEUPREX(R) in meningococcemia. The two elements of this strategy are pursuit of an Orphan Drug Designation, and a marketing authorization of NEUPREX(R) in meningococcemia under the "exceptional circumstances" mechanism established by the European Medicines Agency (EMEA).

Orphan Medicinal Product Designation

On July 14, 2006, the EMEA's Committee for Orphan Medicinal Products (COMP) issued a positive opinion that opebacan (NEUPREX(R)) be granted Orphan Medicinal Product designation in meningococcal disease. XOMA expects the European Commission formally to designate opebacan (NEUPREX(R)) as an orphan medicine in the next two to three months. A number of important benefits would accrue to XOMA under an orphan designation for NEUPREX(R):

--Free formal scientific advice through the Scientific Advice Working Party

--Reduced marketing authorization fees

--Ten year market exclusivity upon marketing authorization

Approval Under Exceptional Circumstances

In parallel with XOMA's efforts to obtain an Orphan Medicinal Product designation, XOMA has held discussions with the EMEA concerning NEUPREX(R)'s potential approvability for meningococcemia under exceptional circumstances. The exceptional circumstances mechanism provides an approval pathway for marketing authorization applications where the applicant is unable to provide comprehensive data on the efficacy and safety under normal conditions of use. Approval under exceptional circumstances may include post-approval commitments to allow for periodic reassessment of the safety of the product.

The EMEA has indicated that the information already available about NEUPREX(R) and the circumstances for obviating extensive additional clinical trials in this rare disease fit within the intent of this European legislation. Based on this understanding, XOMA is now completing its regulatory assessment for this approval pathway for NEUPREX(R) in Europe. XOMA has also held meetings with key opinion leaders and confirmed their continuing interest in the clinical use of opebacan based on its extensive safety database, the results from the phase III clinical trial in meningococcemia and the ongoing unmet therapeutic need for this life-threatening disease.

The next step in the exceptional circumstances regulatory process is to obtain formal scientific advice from EMEA concerning the suitability of the existing NEUPREX(R) data in supporting a marketing authorization application. XOMA plans to complete its regulatory assessment for Europe in the first quarter of 2007.

US Strategy

Because US regulatory pathways differ from Europe's, XOMA's NEUPREX(R) strategy in the US is based on the identification of acute clinical indications in which: 1) endotoxin has been documented in the disease process, 2) the time from disease onset to administration of NEUPREX(R) is known and 3) administration of NEUPREX(R) can occur in time to have a meaningful clinical impact. XOMA has elected to proceed with a strategy that requires only a limited financial investment until convincing clinical benefit has been observed. In keeping with these criteria, XOMA currently is supporting two US investigator-initiated clinical trials in pediatric open heart surgery and severe burns, and will soon start a XOMA-sponsored trial at prominent academic medical centers in allogeneic hematopoietic stem cell transplantation (initially in donor bone marrow transplantation), pending approval of the Investigational Review Boards (IRB) at these institutions.

"Conducting clinical trials through these means allows XOMA to make progress in multiple indications for only a fraction of the cost of conventional studies," said Mr. Castello. "At the same time, we also gain valuable clinical data, which may provide sufficient rationale to justify larger XOMA-initiated follow-on studies and potential marketing licenses for NEUPREX(R)."

Pediatric Open Heart Surgery

Infants undergoing open heart surgery are at risk for endotoxin leakage from the gastrointestinal tract into the blood stream ("endotoxemia") due to their underlying heart disease and cardiac bypass during surgery. Endotoxemia has been documented to occur before, during and after surgery and is associated with increased post-operative complications and prolonged hospital stays for these infants. NEUPREX(R) is being evaluated for both safety and its ability to prevent endotoxin-induced post-operative complications.

The current Phase I/II trial, being conducted at Children's Hospital in Dallas, Texas, is expected to be completed in mid-2007. The design and nature of follow-on trials will be determined by the results of this trial.

Severe Burns

Severely burned patients suffer many complications, including late infections and death. Research at Parkland Burn Center in Dallas has indicated that many of these complications result from endotoxemia and early changes in the patient's immune status, both of which may be corrected by early administration of NEUPREX(R). A trial to assess NEUPREX(R)'s ability to prevent endotoxin-related complications has been initiated at Parkland Burn Center with the dosing of the first patient occurring in July of 2006. XOMA expects this trial to complete enrollment in 2007.

Hematopoietic Stem Cell Transplantation (HSCT)

Prior to receiving a transplant, candidates for donor bone marrow or other stem cell transplantation receive large doses of radiation or chemotherapy to prepare them for the transplant. This regimen disables their immune system and gastrointestinal tract for several weeks and leaves them susceptible to many complications, including endotoxemia and infections. In addition, endotoxemia has been shown to induce or worsen a complication called acute graft vs. host disease (aGvHD), which occurs in approximately 40% of donor stem cell transplant patients. Research indicates that NEUPREX(R) may help prevent or reduce the severity of aGvHD, as well as prevent or reduce infectious complications during the period when these patients are immuno-suppressed from their radiation or chemotherapy regimens.

XOMA is working with major HSCT centers in the US that have expressed interest in participating in this clinical trial and expects to start enrollment before the end of the year.

In addition to its use in conventional medical settings, success in HSCT trials may have relevance to the use of NEUPREX(R) in the early phase of acute radiation syndrome as part of the US Government's bio-defense efforts.

Commenting on XOMA's efforts to advance NEUPREX(R), Mr. Castello stated: "We have a focused strategy that is based on different regulatory options available to us here and in Europe. In addition, the interest expressed by several investigators for NEUPREX(R) has allowed us to assemble a solid strategy to advance NEUPREX(R) towards regulatory approval, with the potential to become an important source of revenue and growth for XOMA. We are pleased with our progress on this strategy, especially in recent months, and will continue providing updates as we reach important milestones."

About NEUPREX(R)

NEUPREX(R) is an injectable formulation of rBPI21 (opebacan), a modified recombinant fragment of BPI (bactericidal/permeability-increasing protein). BPI is a human host-defense protein made by PMN (polymorphonuclear) leukocytes -- a type of white blood cell important in the body's defenses against microbial infection. BPI was discovered in 1978 by Peter Elsbach, M.D., professor of medicine, and Jerold Weiss, Ph.D., professor of microbiology, both at New York University School of Medicine. XOMA has collaborated with NYU since 1991 to extend and apply BPI-related research to the commercial development of pharmaceutical products.

BPI kills gram-negative bacteria, enhances the activity of antibiotics, neutralizes gram-negative endotoxin (a toxic molecule within the cell walls of gram-negative bacteria that can trigger local and systemic inflammatory reactions in the human host) and inhibits angiogenesis (blood vessel growth). Scientists at XOMA developed a 21Kd recombinant version of BPI referred to as rBPI21 or opebacan, which has the same activity as BPI. These characteristics underlie the rationale for testing opebacan in multiple infectious and inflammatory disease indications. More than 1,100 patients have taken part in NEUPREX(R) clinical studies without any apparent safety concerns.

About Meningococcemia

Meningococcemia is an infection of the blood caused by the gram-negative bacterium Neisseria meningitides, and is one of the few diseases that can kill an otherwise healthy child within hours. The disease is characterized by very rapid onset of life-threatening symptoms with high mortality. In survivors, gangrene followed by amputation and/or central nervous system damage are common morbidities. Although the bacteria that cause meningococcemia are generally controlled by first-line antibiotics, there is no current treatment for the toxic inflammatory cascade triggered by bacterial endotoxin that can lead to organ failure, shock and death.

About XOMA

XOMA is a leader in the discovery, development and manufacture of therapeutic antibodies, with a therapeutic focus that includes cancer and immune diseases. XOMA has royalty interests in RAPTIVA(R) (efalizumab), a monoclonal antibody product marketed worldwide (by Genentech, Inc. and Serono, SA) to treat moderate-to-severe plaque psoriasis, and LUCENTIS(TM) (ranibizumab injection), a monoclonal antibody product marketed worldwide (by Genentech and Novartis AG) to treat neovascular (wet) age-related macular degeneration.

The company has built a premier antibody discovery and development platform that includes access to seven of the leading commercially available antibody phage display libraries and XOMA's proprietary Human Engineering(TM) and bacterial cell expression (BCE) technologies. More than 45 companies have signed BCE licenses. XOMA's development collaborators include Lexicon Genetics, Inc., Novartis, and Schering-Plough Corp. With a fully integrated product development infrastructure, XOMA's product development capabilities extend from preclinical sciences to product launch. For more information, please visit the company's website at www.xoma.com.

Certain statements contained herein concerning product development 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 from those anticipated due to certain risks inherent in the biotechnology industry and for companies engaged in the development of new products in a regulated market. These risks, including those related to the results of discovery research and preclinical testing; the timing or results of pending and future clinical trials (including the design and progress of clinical trials; safety and efficacy of the products being tested; 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); uncertainties regarding the status of biotechnology patents; uncertainties as to the cost of protecting intellectual property; changes in the status of the existing collaborative and licensing relationships; the ability of collaborators, licensees and other third parties to meet their obligations; market demand for products; scale up and marketing capabilities; competition; international operations; share price volatility; XOMA's financing needs and opportunities and risks associated with XOMA's status as a Bermuda company, are described in more detail in XOMA's most recent annual report on Form 10-K and in other SEC filings. Consider such risks carefully in considering XOMA's prospects.