Today we have Owen Hughes, CEO, and Brad Sitko, Chief Investment Officer. The floor is yours.
Thank you very much, Josh. Really appreciate it. Thanks for coming this morning. I'm not a big fan of doing presentations. I think we can make this interactive by all means. Ask any questions. We'll give you an overview of where the company is, kind of what we've been up to for the last 6 to 12 months, and hopefully where we're going to be in 12 months' time from now. As it relates to the current portfolio that we have at XOMA, Brad and I joined in 2023, and our goal was to try to increase the shot-selling goal in each of the respective silos that are currently at the company. Obviously, the key is to generate cash flow for the business. When we arrived, we had one asset that was generating cash for us. Fast forward two years, and now we have six assets that are generating revenue.
Most importantly, we have 11 assets that are currently in phase three development. Much of it has come by way of deals that we've done in the last couple of years. Each of these assets is unique in the sense that they have various royalty rates and various peak sales estimates, but they're all very important to us. Some come by way of our traditional business. XOMA, as you may know, is actually the longest tenured publicly traded quote unquote biotech company. Went public in 1984, started the company in 1981. We were an antibody discovery company for the better part of 30 years. Some of the assets that are sitting in the phase three registration silo actually come from that business.
Others, like the Gossamer deal and the Castle Creek deal, and some of the assets that we came from, from DARE actually came through acquisitions or deals that we had done just in the last couple of years. I would point out just two assets that are sitting in phase three that are important to us, mainly just from a timing perspective. The Resolute program is an antibody that was actually developed in-house at XOMA that was licensed out in the 2017 timeframe when we made the pivot from a drug development company to a royalty company. This asset has shown exquisite human data to date. If you look at the phase two data, you're looking at a response rate that is in the high 80%, low 90%. Of that 90%, 61% of those patients actually qualified for the phase three accuracy result.
There was an interim analysis that was done just a few months ago. That interim analysis suggested that that program should continue. No increase in patients, so the statistical plan is adequate. We're very optimistic that this asset will have very fruitful results for patients and ultimately for Resolute and ourselves. This asset's important for XOMA for various reasons. One of them is that this is an asset where the royalty rates are among the highest that we have inside the portfolio. There are two ways to generate revenues in this business: a very low royalty rate with a drug that has very significant peak sales potential. That would be Vabysmo, where we own 50 basis points, and yet that drug is annualizing somewhere around the $4.5 to $5.5 billion range. I believe Roche has given guidance for peak sales of $6 to $10 billion.
The other way is actually to have a drug that does several hundred million dollars, but actually has a relatively high royalty rate, a la Resolute. Interestingly enough, while Resolute peak sales are nowhere near Vabysmo, the Resolute program can actually generate the highest royalty dollars for XOMA. The second is Gossamer. Gossamer is in phase three. This is for pH. This is an asset they licensed initially from Pulmokine, which has only started at Gilead. The data will be in February of next year. This is an asset that we bought just earlier in 2024. Then a number of assets are sitting below that. Candidly, some of these are very high risk. The AstraZeneca PD-1 TIGIT program, obviously, TIGIT has not done all that well from a progression standpoint as most assets have been stopped in phase three.
AstraZeneca is putting significant money behind their program. There are actually 10 phase three programs that are currently enrolling. We'll see what the results are. Our business, as you think about our business relative to our competition, is...
Yeah, so we focus on acquiring future milestones and royalties from, so think of it, the bio box from partnerships that happen between a biotech company and a larger pharma company that's well capitalized and will take a program forward. In the royalty space, which is gaining popularity as a non-dilutive financing source, there's a tremendous amount of competition and folks that are deploying large scales of capital, such as Royalty Pharma, DRI, Healthcare Royalty, or Ligand, that are looking at late-stage assets where they're underwriting them with a very credit-like mindset. There's a lot of folks in the universe that are deploying capital in this format. Where XOMA is very differentiated and has a competitive moat because, as a public company, we can think of it like a permanent capital vehicle. We deploy smaller check sizes that can be meaningful to companies as an alternative to equity dilution.
We know how many companies are out there in the biotech universe where $25 million or less can be really significant, especially at market situations like we're in now. The other part is because we have the portfolio already of over 130 assets, we can add to the portfolio and have patience. For example, in a transaction that we did in late 2023, we acquired 60 preclinical and some entering phase one assets with Twist Bioscience because we can add those to the portfolio and wait patiently as the rest of the portfolio matures over time and then add more capital. This ends up being very differentiated because if a company is sitting at a market cap of $20 million, $40 million, $60 million, $100 million, a $25 million check without any additional shares in the market can be incredibly differentiating.
For that reason, we've been able to build and scale and take advantage of markets like we're in now.
In terms of the business model, where we are from a maturity perspective, is that we've actually been free cash flow positive in 2024. We anticipate the same in 2025. Much of that is a function of the milestones that we've generated from our portfolio. The royalty receipts are actually starting to accumulate such that we believe in the next year or two that our royalties alone will make the company profitable. Milestones will simply be added on top of that. The company's financed itself in very unique ways. While we are the smallest publicly traded royalty company, we actually have the highest dividend yield of roughly 8.5% through our perpetual preferreds. Those perpetual preferreds were offered in the 2020 and 2021 timeframe, enabling us to actually stave off significant equity dilution. We pay out roughly $5.5 million a year in dividends. It's a great piece of paper.
That's actually when interest rates were at roughly 0%. In addition to that, we actually did an asset-backed loan in the end of 2023. We brought in $130 million with the potential to bring in another $10 million based on the progression of Vabysmo. The reason why we did that is that we needed capital on our balance sheet to continue to actually increase the portfolio. Once again, no equity dilution to our shareholders. The only equity that we've raised since 2017 was a rights offering that was done. We don't anticipate issuing equity anytime in the near future. We have other means to raise capital. The reason why we're so hell-bent on not adding equity capital is because the formula that we've been scribed to is that we've actually been reducing our equity count, our equity capital.
Our belief is that in order to get big, you need to get small. If you actually have accelerating revenue growth with a business that has operating margins of roughly 80 to 90% of maturity, and you have an equity base that's shrinking, you're going to increase your free cash flow per share. If you look at the companies that have performed best in the S&P 500 over the last 25 years, there's certainly many tech names, but one name that actually is surprising to us is AutoZone. AutoZone is actually the fourth best-performing stock since 2006 in the S&P 500, so the last 20 years. AutoZone grows revenues roughly 3 to 5% a year, leverages that to 20% earnings growth. What do they do? They buy back 5 to 7% of their stock every single year. The nature of our business would allow us to do the same.
There's only about 13 million shares outstanding in the company at this point in time, common stock. There's another 7 million of options, so 20 million shares diluted. We've actually been buying back stock since we arrived in 2023. We're using that cash flow that we're generating to do two things. One is to reduce the equity capital, but also to redeploy back in the business. How do we think about the business? If you go back to where the portfolio is today, the key difference between where we stand and where our competitors stand is our competitors, frankly, are generating a lot more cash than we are. What they don't have is the assets that are sitting on the left-hand side of this chart, which is the early-stage pipeline. Why do we concentrate on the early-stage pipeline? One, we have to, given our balance sheet.
The benefit of actually generating interest in the early stage is that this is where you can find diamonds in the rough. You can literally pay pennies on the dollar for assets that generate significant cash flow for the company. For Vabysmo, for example, we paid $14 million for what's going to be about $300 million to $350 million of cash flow to the company. Ojemba, we paid $14 million. If Ojemba hits the peak sales estimates that Wall Street has, which is roughly around $1 billion to $1.2 billion, that asset will generate about $600 million of cash flows to us over the lifetime of the agreement. You compare that to our competition, which are great businesses, and we'd love to have their cash flow and their cost of capital. We just don't have that quite yet. They are underwriting to returns that are probably looking at mid-teens.
We can't afford to underwrite to a mid-teens because regardless of where you sit in this business, the likelihood of success is no different for us than anyone else. We're no better scientifically than our competition, and frankly, I'm not quite sure our competition is all that much better than we are. Therefore, we need to actually understand the nature of the risk that we're taking when we're actually putting capital to work. The risk that we're taking is that we could lose all of our money. We have lost bets. We made an acquisition in the 2021, 2022 timeframe. It was a women's health product that was partnered with Organon, and Organon had made the decision not to progress that asset despite what was phase two data. We lost all $15 million in about 12 months. That's the nature of this business.
We have to recognize that the risk that we take is that we could lose all of our capital. That's why, at this point, given where we stand from a business perspective, anything that's entering our portfolio today has a much higher burden than it did when we started the company in 2017 on this royalty path. Why? Because it's just like an equity portfolio. It's the same concept. You know, Brad and I were portfolio managers in our old days in the equity side. This business is no different at all. The benefit of this business relative to the equity business, though, is that we never get diluted. The one thing about drug development is that it's very similar to building a house. It always takes more time, and it always takes more money. What that means for equity investors, generally speaking, is equity dilution.
For royalty investors, however, it doesn't necessarily affect us too much. You can be wrong on the timing, you can be wrong on the actual, you know, the capital amount, so to speak. You can't be wrong on the actual data. We're at a point now where we are actually starting to leverage the increase in cash flows. The one thing that we did when we joined the business in 2023 is that we eliminated all option packages at the company. The only way that we get compensated as managers is actually PSUs, performance stock units. When we put the plan in place in 2023, the stock was at around $17. The first threshold to hit in order for the units to vest was at $30. It was successively higher from there, $30, $35, $40, $45.
Our view is that we shouldn't dilute our shareholders if we actually don't generate any value. These PSU grants are either three years in duration, perhaps five years in duration on a go-forward basis. If we don't hit the threshold, then there's actually no dilution to shareholders. You look at many biotech companies, going back to what I said before about taking more time and more money, there is an evergreen component to the option package. You're getting diluted 3% to 5% a year. If a drug takes three or four more years to actually get approved or get developed, you're talking about 25% to 30% dilution to shareholders. Our view is that that's actually not necessarily right.
What we've been doing is we went to this new approach, and I think based on the analysis that we did, there's only one other company in the healthcare space that has something similar to this nature. We're 100% aligned with our shareholders. Many people ask us, we've been very active in the last, call it 12 months or so, as it relates to acquiring companies. Let me just touch on that. We've acquired what will be hopefully five to six companies over the next couple of months here. We started in late 2024, and we're progressing through this year. Why are we buying these companies?
First is that we actually find that when you actually start peeling the onion back and stop looking at the assets that are actually in the clinic and start looking at the assets that are further behind, there's actually some very interesting things that aren't being valued by the public market. If we can get our hands on those and not pay for it and share over time with the existing shareholders, I'm a big fan of increasing the actual velocity of the portfolio. If you think about 2008 and 2009 in the equity markets, people thought that gold, precious metals, equities, and credit were actually not correlated. What we found is that they're actually correlated. In fact, the correlation was one. Everything went to zero.
In our portfolio, what we're trying to do is we're trying to build as many disparate assets as possible because an oncology asset, a nephrology asset, an antibiotic asset are not correlated at all. There's very little elasticity as it relates to a pharmaceutical product. Will they go down in terms of growth? Yes, we saw that in 2008, 2009, but they don't go to zero. What happens with an oncology product has no bearing on what happens to a virology product, etc. We're building huge diversification because we believe that diversification will lead to actually betterification, not worsification, as we saw in 2008 and 2009. These assets, these acquisitions that we're doing, almost all of them have underlying assets that we think there's actually optionality.
They may actually not pan out, but if they don't pan out, we're still actually making money as companies are essentially paying us to liquidate them. Every now and then, you find an asset or two that are actually quite interesting that can generate huge returns, very similar to our agenda in Vabysmo transactions, and we can actually get those for free. When we canvas the landscape today, there's probably another 60+ assets or companies that are in similar fate where they don't have enough capital to actually get through the development of their existing assets. They are looking for a strategic out, and we have the capital, the know-how, and the expertise to actually make what is a very difficult situation for them hopefully a little bit better. Any comments there?
No, I think that it's philosophically aligned with what we're doing. These end up being negative cost of capital transactions to XOMA, meaning we're getting equity or we're getting cash to add to the balance sheet by putting in sweat equity, which is our own work, finding additional assets that add to the portfolio for the long term. There are additional benefits that come along with these transactions, which will protect the royalty receipts that we have down the road. We're very pleased that this is an opportunistic period in time where it stays aligned with what we're doing philosophically for our shareholders.
In terms of key events over the next, call it 12 to 18 months, I'd mentioned at the outset that we have two phase three data announcements coming in the next couple of months. Resolute will be in December of this year. The Serolutum data from Gossamer will be in February 26th. A number of phase three assets have started. Resolute has actually the same program in tumor hyperinsulism. In fact, going back to a conversation that happened this morning with respect to the FDA, the FDA was actually proactive with the Resolute team, reducing the number of patients required for that second indication and using the first study as confirmatory. I'm not necessarily quite sure that I believe that the FDA is actually not acting in the best interest of our industry. They were proactive with Resolute, and it was a great outcome, hopefully, for patients and the company.
Secondly, the Takeda will start the, or actually has started the mesoglobin map study. This is a CD38 that came from our technology. We actually bought up the royalty in a transaction earlier this year. We owned roughly a 3.5% to 4% royalty. We acquired a royalty from BioInvent, which is a Swedish oncology company that we had used some of their technology to actually create this molecule, for $20 million initially, and an initial $10 million if the drug gets approved. We bought back 2% of the royalties. We now own a 6% royalty on mesoglobin map. Takeda has said that that will be a peak sales estimate of roughly $1 billion to $3 billion. DARE Bio, while they plan to initiate the phase three study, they're actually going down a compounding route for essentially what is generic Viagra for women, sexual arousal disorder.
They're actually going through the, the, hymns and hers type of channel. We'll actually start generating revenue on that by the end of this year. With 20 seconds left, I would just say that a lot of progress over the last 24 months since we've arrived at the company. While we don't necessarily have the cost of capital of our competitors, we certainly have the creativity. I would say, hopefully we can actually bring some of that to fruition over the next couple of months and some creative deals that we're working on. Thank you for your time.