Xoma Leads Charge in Liquidating Biotech 'Zombies' Amid Industry Shake-up

Biotech Liquidation Trend Gains Momentum

The pharmaceutical industry is witnessing a significant shift as drug royalty firm Xoma spearheads a wave of liquidations targeting struggling biotech companies. This trend, emerging from the aftermath of the COVID-19 biotech boom, is reshaping the landscape of the industry and raising questions about the future of drug development.

In recent months, Xoma has executed a series of deals to acquire and liquidate biotechs that have failed to meet investor expectations. These companies, often referred to as "zombies," are characterized by market capitalizations below their cash reserves. Xoma's strategy involves returning cash to shareholders and profiting from the sale of remaining intellectual property.

Investor Pressure and Market Dynamics

The surge in biotech liquidations reflects broader challenges within the industry. Many companies that went public during the pandemic-driven biotech boom have struggled to maintain their valuations, leading to increased pressure from investors to return capital.

"We're creating a small brand for ourselves as someone that wants to do the right thing for A, our partners, and B, the biotech ecosystem," said Owen Hughes, Xoma's CEO.

This shift in investor sentiment has created opportunities for firms like Xoma, KKR, OrbiMed, and Tang Capital Partners to provide alternative financing solutions or pursue buy-and-liquidate deals. An analysis by William Blair found that six such deals in the second quarter of 2025 involved $1.5 billion in combined net cash on the sellers' balance sheets.

Industry Implications and Future Outlook

The trend toward liquidation is forcing biotech boards to reconsider traditional strategies for struggling companies. Eason Hahm, an analyst at William Blair, noted that boards are increasingly viewing liquidation as a viable option, rather than pursuing mergers or pivoting to new strategies.

Chris Garabedian, CEO of Xontogeny, highlighted the pressure from limited partners in venture capital firms: "They get very frustrated when the VCs don't send any money back. 'We committed $30 million to your fund, and we haven't even gotten one check back after five years?' And so that's where every VC is focused on: how do we exit?"

While some industry insiders view this trend as a necessary correction to improve capital efficiency, others worry about the potential impact on drug development pipelines. The long-term effects of this shift on innovation and patient access to new therapies remain to be seen.