XOMA Royalty's Strategic Acquisition of Mural Oncology: A Value-Driven Play in the Oncology Royalty Space

XOMA Royalty's acquisition of Mural Oncology represents a calculated move to diversify its biotech royalty portfolio and secure long-term income streams in a sector marked by high-risk, high-reward dynamics. The $36.2 million deal, approved by Mural shareholders on October 24, 2025 with over 99% support, underscores XOMA's strategy of acquiring undervalued clinical-stage assets to capitalize on the oncology royalty market's growth potential. While Mural's recent discontinuation of its lead IL-2 variant, nemvaleukin alfa, raises questions about its immediate therapeutic pipeline, the acquisition aligns with XOMA's broader vision of leveraging strategic partnerships and economic rights to generate stable returns.

A Premium Deal with Conditional Value

The transaction terms-$2.035 base price per share plus an additional $0.205 contingent on Mural's closing net cash-reflect a 13.1% premium over Mural's recent share price and a 97.6% premium over its pre-strategic review valuation in April 2025, according to PharmExec. This premium signals XOMA's confidence in Mural's residual value, particularly its cash reserves. As of June 30, 2025, Mural held $77.1 million in cash and equivalents, with projected year-end balances of $43–48 million. These liquidity buffers could enhance the deal's net asset value for XOMA, especially if the company's restructuring efforts-such as its 90% workforce reduction-further optimize operational efficiency.

The acquisition also highlights XOMA's risk-mitigation approach. By structuring the payment as a base price plus a cash-dependent addendum, XOMA limits its exposure to Mural's clinical setbacks while retaining upside potential from its remaining financial assets. This structure mirrors XOMA's prior acquisitions, such as its revised offer for Lava Therapeutics, where flexibility in payment terms aligns with the volatile nature of biotech valuations.

Diversification Through Strategic Partnerships

Mural's oncology royalty portfolio, though diminished by the termination of its IL-2 and IL-18 programs, retains value through its partnerships and intellectual property. XOMA's acquisition of Mural complements its existing portfolio, which includes economic rights to partnered commercial and pre-commercial therapeutic candidates. By integrating Mural's assets, XOMA gains exposure to a broader range of oncology targets, reducing reliance on any single therapeutic modality.

The deal also positions XOMA to benefit from Mural's prior collaborations. For instance, Mural's partnership with Aduro Biotech for its IL-12/IL-18 fusion protein, while discontinued, demonstrates its historical ability to engage with larger pharmaceutical entities. XOMA's management has emphasized that such partnerships could be reactivated or renegotiated to unlock additional value. This aligns with the broader industry trend of royalty-focused firms leveraging their financial flexibility to restructure or extend partnerships in distressing biotech assets.

Income Generation and Long-Term Catalysts

For XOMA Royalty, the acquisition of Mural Oncology is not merely a one-off transaction but a step toward building a diversified income-generating portfolio. The oncology royalty sector, characterized by high barriers to entry and long-term revenue visibility, offers a compelling alternative to traditional biotech equity investments. XOMA's strategy of acquiring companies with late-stage or clinical-stage candidates-such as its prior purchases of HilleVax and Turnstone Biologics-has historically provided a mix of near-term cash flows and long-term upside.

The Mural deal, however, introduces a unique dynamic. While Mural's clinical programs have stalled, its cash reserves and intellectual property could serve as bargaining chips in future licensing deals or collaborations. For example, XOMA could leverage Mural's platform to negotiate co-development agreements or out-licensing deals for its remaining assets. This approach mirrors how royalty firms like Royalty Pharma have historically monetized biotech IP through structured partnerships rather than direct development.

Risks and Market Reaction

Critics may argue that XOMA's acquisition of Mural is a "buyout of a failing company," given the latter's recent clinical failures and cost-cutting measures. However, the overwhelming shareholder approval (99% at both the Scheme Meeting and EGM) suggests that Mural's board and investors view the deal as a superior alternative to continued development risks. For XOMA, the acquisition mitigates the risk of overpaying for unproven assets by acquiring a company with tangible liquidity and a streamlined cost structure.

The market reaction to the deal has been muted, with XOMA's stock trading in a narrow range ahead of the Q4 2025 closing. This reflects broader investor skepticism about the oncology royalty sector, which has faced volatility due to clinical trial setbacks and regulatory uncertainties. However, XOMA's disciplined approach-targeting undervalued assets with clear exit strategies-positions it to outperform in a market where patience and flexibility are rewarded.

Conclusion: A Calculated Bet on Oncology's Future

XOMA Royalty's acquisition of Mural Oncology is a textbook example of value-driven investing in the biotech royalty space. By acquiring a company with strong liquidity, a history of partnerships, and a streamlined operational structure, XOMA enhances its portfolio diversification while securing a foundation for long-term income generation. While the deal carries risks-particularly around Mural's clinical legacy-the strategic alignment with XOMA's broader acquisition strategy and the sector's growth potential make this a compelling play for investors seeking exposure to oncology's evolving landscape.