content: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  (mark one)
  
                [X] Quarterly Report Pursuant to Section 13 or 15(d)
                       of the Securities Exchange Act of 1934
                      For Quarterly Period Ended June 30, 2001
  
                                         or
  
                [ ] Transition Report Pursuant to Section 13 or 15(d)
                       of the Securities Exchange Act of 1934
                 For Transition Period from __________ to __________
  
                             Commission File No. 0-14710
  
                                      XOMA Ltd.
  
               (Exact Name of Registrant as specified in its charter)
  
              Bermuda                                52-2154066
  (State or other jurisdiction of       (I.R.S. Employer Identification No.)
  incorporation or organization)
  
                       2910 Seventh Street, Berkeley, CA 94710
                 (Address of principal executive offices) (Zip Code)
  
                                   (510) 644-1170
                (Registrant's telephone number, including area code)
  
                                   Not Applicable
                (Former name, former address and former fiscal year,
                           if changed since last report)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
  required to file such reports), and (2) has been subject to such filing
  requirements for the past 90 days.
  
                                      Yes X No
  
  Indicate the number of shares outstanding of each of the issuer's classes of
  common stock, as of the latest practicable date.
  
  Common shares US$.0005 par value         69,964,135
  Class                                    Outstanding at June 30, 2001
  
  
  
  <PAGE>
  
  
  
                                      XOMA Ltd.
  
                                  TABLE OF CONTENTS
  
  
                                                                              Page
  
  PART I  FINANCIAL INFORMATION
  
          Item 1 Condensed Consolidated Financial Statements (unaudited)
  
                 Condensed Consolidated Balance Sheets as of June 30, 2001
                 and December 31, 2000 .........................................1
  
                 Condensed Consolidated Statements of Operations for the
                 Three and Six Months Ended June 30, 2001 and 2000..............2
  
                 Condensed Consolidated Statements of Cash Flows for the
                 Three and Six Months Ended June 30, 2001 and 2000..............3
  
                 Notes to Condensed Consolidated Financial Statements ..........4
  
          Item 2 Management's Discussion and Analysis of Financial
                 Condition and Results of Operations............................7
  
  PART II OTHER INFORMATION
  
          Item 1 Legal Proceedings.............................................10
  
          Item 2 Changes in Securities and Use of Proceeds.....................10
  
          Items 3 and 5 are either inapplicable or nonexistent and therefore
          are  omitted from this report
  
          Item 4 Submission of Matters to a Vote of Security Holders...........10
  
          Item 6 Exhibits and Reports on Form 8-K..............................11
  
          Signatures   ........................................................13
  
  
  
  
  <PAGE>
  
  
  
  
  <TABLE>
  <CAPTION>
                                      XOMA Ltd.
  
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (In thousands)
  
                                                                                        June 30,          December 31,
                                                                                          2001                2000
                                                                                    (Unaudited)              (Note 1)
  Assets:
  <S>                                                                                    <C>                 <C>
       Cash and cash equivalents                                                         $ 71,808            $ 35,043
       Short-term investments                                                                  40                 172
       Related party receivable                                                               417                 237
       Receivables (net)                                                                    2,381               1,008
       Prepaid expenses and other                                                             113                 162
                                                                                      -----------        ------------
           Total current assets                                                            74,759              36,622
       Property and equipment, net                                                         11,440               8,421
       Deposits and other                                                                     169                 169
                                                                                      -----------        ------------
                                                                                         $ 86,368            $ 45,212
                                                                                      ===========        ============
  Liabilities and Shareholders' Equity (Net Capital Deficiency):
       Accounts payable                                                                  $  4,085            $  2,515
       Accrued liabilities                                                                  3,848               4,311
       Capital lease obligations - current                                                    292                 185
       Deferred revenue - current                                                           3,733               3,333
                                                                                      -----------        ------------
           Total current liabilities                                                       11,958              10,344
       Capital lease obligations - long term                                                  812                 361
       Deferred revenue - long term                                                         4,008               3,609
       Convertible subordinated notes                                                      42,965              39,488
                                                                                      -----------        ------------
           Total liabilities                                                               59,743              53,802
  Shareholders' equity (net capital deficiency)                                            26,625              (8,590)
                                                                                      -----------        ------------
                                                                                         $ 86,368            $ 45,212
                                                                                      ===========        ============
  </TABLE>
  
  Note 1 - Amounts derived from the Company's audited financial statements
  appearing in the Annual Report on Form 10-K for the year ended December 31, 2000
  as filed with the Securities and Exchange Commission.
  
       See accompanying notes to condensed consolidated financial statements.
  
  
  
  
  <PAGE>
  
  
  <TABLE>
  <CAPTION>
                                      XOMA Ltd.
  
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (Unaudited, in thousands except per share data)
  
                                                           Three Months Ended                  Six Months Ended
                                                                June 30,                           June 30,
                                                        ---------------------------        ----------------------------
                                                         2001              2000              2001             2000
                                                        -----------     -----------        -----------    -------------
  Revenues:
  <S>                                                     <C>               <C>               <C>               <C>
       License fees and contract revenue                  $ 5,212           $2,283            $8,068            $4,855
  
  Operating Costs and Expenses:
       Research and development                             9,465            7,390            17,935            14,584
       General and administrative                           2,095            1,589             3,705             3,115
                                                        -----------     -----------        -----------    -------------
                                                           11,560            8,979            21,640            17,699
                                                        -----------     -----------        -----------    -------------
  
  Loss from operations                                     (6,348)          (6,696)          (13,572)          (12,844)
  
  Other Income (Expense):
       Investment  and other income                           580              985               979             1,475
       Interest and other expense                            (880)            (615)           (1,630)           (1,241)
                                                        -----------     -----------        -----------    -------------
  Net loss available to common shareholders
                                                        $  (6,648)      $   (6,326)        $ (14,223)     $    (12,610)
                                                        ===========     ===========        ===========    =============
  Basic and diluted  net loss per share                 $  (0.10)       $    (0.10)        $   (0.21)     $      (0.20)
  
  Shares used in computing basic and diluted net
     loss per common share                                 66,280           65,391            66,227            63,531
  
  </TABLE>
  
       See accompanying notes to condensed consolidated financial statements.
  
  
                                        -2-
  
  <PAGE>
  
  
  <TABLE>
  <CAPTION>
                                      XOMA Ltd.
  
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Unaudited, in thousands)
  
  
                                                                                       Six Months Ended
                                                                                            June 30,
                                                                                  ---------------------------
                                                                                      2001           2000
                                                                                  ------------  -------------
  Cash Flows From Operating Activities:
  <S>                                                                              <C>              <C>
       Net cash used in operating activities                                       $ (11,534)       $ (7,265)
                                                                                  ------------  -------------
  Cash Flows From Investing Activities:
       Proceeds from sale of short-term investments                                      253             506
       Capital expenditures                                                           (3,079)           (395)
                                                                                  ------------  -------------
           Net cash provided by (used in) investing activities                        (2,826)            111
                                                                                  ------------  -------------
  Cash Flows From Financing Activities:
       Proceeds from issuance of common shares, net                                   47,734          33,266
       Proceeds/(payments) related to convertible notes                                3,496          (2,318)
       Payments under capital leases                                                    (105)             --
                                                                                  ------------  -------------
           Net cash provided by  financing activities                                 51,125          30,948
  Net increase  in cash and cash equivalents                                          36,765          23,794
  Cash and cash equivalents at beginning of period                                    35,043          18,539
                                                                                  ------------  -------------
  Cash and cash equivalents at end of period                                        $ 71,808        $ 42,333
                                                                                  ============  =============
  </TABLE>
  
       See accompanying notes to condensed consolidated financial statements.
  
  
                                        -3-
  <PAGE>
  
  
                                      XOMA Ltd.
  
                NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                     (Unaudited)
  
  
  1.   Basis of Presentation
  
       The interim information contained in this report is unaudited but, in
  management's opinion, includes all normal recurring adjustments necessary for a
  fair presentation of results for the periods presented. Interim results may not
  be indicative of results to be expected for the full year. The consolidated
  financial statements should be read in conjunction with the Company's audited
  consolidated financial statements for the year ended December 31, 2000 included
  in its Annual Report on Form 10-K. The preparation of financial statements in
  conformity with generally accepted accounting principles requires management to
  make estimates and assumptions that affect the reported amounts of assets and
  liabilities and disclosure of contingent assets and liabilities, if any, at the
  date of the financial statements and the reported amounts of revenues and
  expenses during the reporting period. Actual results could differ materially
  from those estimates.
  
  2.   Recent Accounting Prounouncements
  
       On June 29, 2001, the Financial Accounting Standards Board, or FASB,
  approved the final standards resulting from its deliberations on the business
  combinations project. The FASB is expected to issue two statements in late July
  2001, Statement of Financial Accounting Standards No. 141, or FAS 141, on
  Business Combinations and FAS 142 on Goodwill and Other Intangible Assets. FAS
  141 will be effective for any business combinations initiated after June 30,
  2001 and also includes the criteria for recognition of intangible assets
  separately from goodwill. FAS 142 will be effective for fiscal years beginning
  after December 15, 2001 and will require that goodwill not be amortized, but
  rather be subject to an impairment test at least annually. Separately identified
  and recognized intangible assets resulting from business combinations completed
  before July 1, 2001 that do not meet the new criteria for separate recognition
  of intangible assets will be subsumed into goodwill upon adoption. In addition,
  the useful lives of recognized intangible assets acquired in transactions
  completed before July 2001 will be reassessed and the remaining amortization
  periods adjusted accordingly. The adoption of FAS 141 and 142 is not expected
  have a significant impact on our financial position at transition.
  
       In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
  Instruments and Hedging Activities" (SFAS 133). XOMA adopted SFAS 133 on January
  1, 2001. Because the Company currently holds no derivative financial instruments
  and does not
  
                                        -4-
  <PAGE>
  
  currently engage in hedging activities, adoption of SFAS 133 had no impact on
  the Company's financial position or results of operations.
  
  3.   Accrued Liabilities
  
       Accrued liabilities consist of the following (in thousands):
  
                                            June 30,              December 31,
                                              2001                    2000
                                          ------------          ---------------
       Accrued payroll costs                   $ 1,961                 $ 2,255
       Accrued clinical trial costs              1,026                   1,151
       Other                                       861                     905
                                          ------------          --------------
                                               $ 3,848                 $ 4,311
                                          ============          ==============
  
  
  4.   Revenue Recognition
  
       Research payments under collaborative arrangements and grants are
  recognized as revenue based on research expenses incurred as provided for under
  the terms of the arrangements.
  
       The Company previously recognized non-refundable license fees as revenue
  when received and when all significant contractual obligations of the Company
  relating to the fees had been met. Effective January 1, 2000, the Company
  changed its method of accounting for non-refundable initial fees to recognize
  such fees over the period of continuing involvement by the Company such as the
  research and development period or the manufacturing period of the agreement, as
  applicable. The Company believes this accounting policy is appropriate based on
  guidance provided in SEC Staff Accounting Bulletin No. 101 - Revenue Recognition
  in Financial Statements (SAB 101). As of January 1, 2000, there was no
  cumulative effect of an accounting change as a result of the adoption of SAB 101
  and there was no pro forma effect of the adoption of SAB 101 in any year
  presented. In connection with the license and supply and development agreements
  with Baxter Healthcare Corporation ("Baxter") on January 25, 2000, the Company
  received $10.0 million as an initial, non-refundable fee. This initial fee was
  deferred and is being amortized over the period of continuing involvement, which
  period is estimated to be 36 months.
  
       In January of 2001, the Company entered into a strategic process
  development and manufacturing agreement with Onyx Pharmaceuticals, Inc. ("Onyx")
  which calls for the Company to scale-up production to commercial volume and
  manufacture Onyx's CI-1042 product. The initial term of the agreement is five
  years, with options to extend for additional
  
                                        -5-
  <PAGE>
  
  periods. Terms of the agreement include an initial payment of $2.0 million,
  payments for development work and material produced, and payments upon achieving
  key milestones. XOMA's objectives are to increase the fermentation volume to
  commercial scale, to improve the purification process, to seek FDA licensure of
  its manufacturing facility for CI-1042, and to produce material for use in
  clinical testing and for commercial sale upon approval. The initial payment was
  deferred and is being amortized over five years.
  
       Milestone payments under collaborative arrangements are recognized as
  revenue upon achievement of the incentive milestone events if it represents the
  culmination of the earnings process and the Company has no future performance
  obligations related to the milestone payment. Milestone payments are triggered
  either by the results of our research efforts or by events external to the
  Company, such as regulatory approval to market a product. Milestone payments and
  amounts that are received in advance which are tied to future service
  performance by the Company are recorded as deferred revenue and are amortized
  over the period of continuing involvement.
  
  5.   Comprehensive Loss
  
       Comprehensive loss includes certain changes in equity that are excluded
  from net loss. Specifically, unrealized holding gains and losses in available
  for sale investments, which were reported separately in shareholders' equity,
  are included in accumulated other comprehensive income (loss). Comprehensive
  loss and its components for the quarters ended June 30, 2001 and 2000 are as
  follows (in thousands):
  
  <TABLE>
  <CAPTION>
                                   Three Months Ended                  Six Months Ended
                                        June 30,                           June 30,
                              ------------------------------    -------------------------------
                                 2001              2000              2001             2000
                              --------------   -------------    --------------   --------------
  <S>                         <C>              <C>               <C>               <C>
  Net loss                    $    (6,648)     $    (6,326)      $   (14,223)      $   (12,610)
  Unrealized gain (loss)
  on marketable securities
  available-for-sale                   --              (41)               --               441
                              --------------   -------------    --------------   --------------
  Comprehensive loss          $    (6,648)     $    (6,367)      $   (14,223)      $   (12,169)
                              ==============   =============    ==============   ==============
  </TABLE>
  
  
  6.   Net Loss Per Common Share
  
       Basic and diluted net loss per common share is based on the weighted
  average number of common shares outstanding during the period in accordance with
  Financial Accounting Standard No. 128. Common share equivalents were not
  included because they are antidilutive in all periods presented.
  
  
                                        -6-
  <PAGE>
  
  
                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
  
  Results of Operations:
  
       Revenues in the second quarter of 2001 increased to $5.2 million, from $2.3
  million in the second quarter of 2000. For the six-month periods ending June 30,
  2001, revenuers were $8.1 million, compared with $4.9 million in the comparable
  prior year period. Licensing revenue, primarily reflecting the amortization into
  revenue of certain license fees and other payments received from Baxter
  Healthcare Corporation and Onyx Pharmaceuticals, Inc., increased to $1.0 million
  and $2.1 million in the three- and six-month periods ended June 30, 2001,
  respectively, compared to $0.8 million and $1.4 million in the comparable prior
  year periods. Contract revenue increased to $4.1 million and $6.0 million in the
  three- and six-month periods ended June 30, 2001 from $1.4 million and $3.4
  million in the comparable 2000 periods.
  
       Operating expenses increased to $11.6 million in the second quarter of 2001
  from $9.0 million in the second quarter of 2000. For the six-month period ending
  June 30, 2001, operating expenses were $21.6 million, compared with $17.7
  million in the comparable 2000 period. This reflected increased spending on
  Xanelim(TM) and XOMA's internal antibody programs, as well as expenses related
  to litigation with Biosite Incorporated.
  
       Research and development expenses increased to $9.5 million and $17.9
  million, respectively in the three and six-month periods ending June 30, 2001,
  from $7.4 million and $14.6 million in the comparable prior year periods.
  Spending in 2001 reflected increased development costs associated with
  Xanelim(TM), ING-1, GENIMUNE(TM) and the Onyx CI-1042 product. This was
  partially offset by reduced spending on NEUPREX(R).
  
       General and administrative expenses increased from $1.6 million and $3.1
  million in the in the three- and six-month periods ending June 30, 2000, to $2.1
  million and $3.7 million in the same 2001 periods.
  
       Interest expense was higher in the second quarter first six months of 2001
  compared to 2000 due to higher interest rates and the higher average note
  balance of the convertible subordinated notes due Genentech, Inc.
  
  Liquidity and Capital Resources:
  
       XOMA ended the quarter with $71.8 million in cash, cash equivalents and
  short-term investments, compared with $35.2 million at December 31, 2000. Net
  cash used in
  
                                        -7-
  <PAGE>
  
  operations in the first six months of 2001 was $11.5 million, compared with net
  cash used in operations of $7.3 million in the second quarter of 2000. The prior
  year cash flow benefited from $10.0 million in licensing fees received from
  Baxter in January 2000, which is being recognized as revenue over a 36 month
  period. See footnote 4, "Revenue Recognition," to the Consolidated Financial
  Statements.
  
       Capital expenditures increased from $0.4 million in the first six months of
  2000 to a net of $3.1 million in the current year period. Current year spending
  included expenses related to the transfer of XOMA's technical development
  operations from Santa Monica to Berkeley, as well as investments related to our
  collaborative arrangement with Onyx.
  
       For the full year 2001, the Company currently expects its loss to be
  somewhat lower than in 2000, with increased expense levels being more than
  offset by higher revenues.
  
       Proceeds from the issuance of common shares, net, were $47.7 million for
  the six months ended June 30, 2001, compared to $33.3 million for the comparable
  period of the prior year. The amount for the first six months of 2001 resulted
  primarily from a registered offering of 3,000,000 of the Company's common shares
  in June 2001 for net proceeds of $43.3 million.
  
       The Company has been able to control its operating cash consumption by
  carefully monitoring its costs. As a result, based on current spending levels
  and taking into account the Onyx transaction, the Company believes its cash
  position and resulting investment income are sufficient to finance the Company's
  currently anticipated levels of spending through approximately the middle of
  2004. Strategic arrangements with Onyx, Baxter and Genentech have reduced
  Company spending levels by paying certain product development costs. The Company
  continues to evaluate a variety of arrangements that would further strengthen
  its competitive position and provide additional funding, but cannot predict
  whether or when any such arrangement or additional funding will be consummated
  or whether additional funding will be available. Without additional funding, the
  Company will have to decrease or eliminate the development of some of its
  products.
  
  Quantitative and Qualitative Disclosures About Market Risk:
  
       Interest Rate Risk. The Company's exposure to market rate risk due to
  changes in interest rates relates primarily to the Company's investment
  portfolio. The Company does not use derivative financial instruments in its
  investment portfolio. By policy, the Company places its investments with high
  quality debt security issuers, limits the amount of credit exposure to any one
  issuer, limits duration by restricting the term and holds investments to
  maturity except under rare circumstances. The Company classifies its cash
  equivalents as
  
                                        -8-
  <PAGE>
  
  fixed rate if the rate of return on an instrument remains fixed over its term.
  As of June 30, 2001, all the Company's cash equivalents are classified as fixed
  rate.
  
       The Company also has a long-term convertible note due to Genentech in 2005.
  Interest on this note of LIBOR plus 1% is reset at the end of June and December
  each year and is therefore variable.
  
       The table below presents the amounts and related weighted interest rates of
  the Company's cash equivalents and long-term convertible note at June 30, 2001:
  
  <TABLE>
  <CAPTION>
                                                                                 Fair Value            Average
                                                              Maturity        ($ in millions)       Interest Rate
                                                           -------------    -------------------   -----------------
  <S>                                                           <C>                <C>                     <C>
  Cash equivalents, fixed rate                                  Daily              $ 71.8                  4.3%
  Long-term convertible note, variable rate                      2005                43.0                  7.1%
  </TABLE>
  
  
       Other Market Risk. At June 30, 2001, the Company had a long-term
  convertible note outstanding which is convertible into common shares based on
  the market price of the Company's common shares at the time of conversion. A 10%
  decrease in the market price of the Company's common shares would increase the
  number of shares issuable upon conversion of either security by approximately
  11%. An increase in the market price of Company common shares of 10% would
  decrease the shares issuable by approximately 9%.
  
  Forward Looking Statements:
  
       Statements made herein related to the estimated size of the Company's loss
  for 2001, the estimated levels of its expenses and revenues for the balance of
  2001, the sufficiency of its cash resources, present or future collaborative
  arrangements and current plans for 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 size and timing of expenditures, unanticipated expenditures,
  availability of funds, changes in the status of the existing collaborative
  relationships, availability of additional collaboration opportunities, the time
  or results of pending and future clinical trials, the ability of collaborators
  and other partners to meet their obligations, market demand for products,
  actions by the Food and Drug Administration of the U.S. Patent and Trademark
  Office, and uncertainties regarding the status of biotechnology patents, are
  discussed in the Company's most recent annual report on Form 10-K and in other
  SEC filings.
  
  
  
                                        -9-
  <PAGE>
  
                             PART II - OTHER INFORMATION
  
  
  Item 1 Legal Proceedings. On July 5, 2001, XOMA filed a complaint in the United
       States District Court for the Northern District of California, San
       Francisco Division, against Biosite Diagnostics Incorporated (since renamed
       Biosite Incorporated). The complaint seeks monetary damages, injunctive and
       other relief for infringement of XOMA's bacterial cell expression
       technology patents in connection with certain Biosite technologies and
       collaborations. The suit also seeks relief for fraud and misrepresentation,
       breach of contract, misappropriation and unfair business practices in
       connection with three limited, non-exclusive licenses granted to Biosite
       under XOMA's bacterial cell expression technology.
  
  Item 2 Changes in Securities and Use of Proceeds. On June 29, 2001, the Company
       completed a registered offering of 3,000,000 common shares. The managing
       underwriters in the offering were U.S. Bancorp Piper Jaffray, CIBC World
       Market Corp., Adams, Harkness & Hill and Arnhold & S. Bleichroeder, Inc.
       The common shares sold in the offering were registered under the Securities
       Act of 1933, as amended, on a Registration Statement on Form S-3 (Reg. No.
       333-50134) that was declared effective by the SEC on November 28, 2000.
       After deducting the underwriting discounts and offering expenses, the
       Company received net proceeds from the offering of approximately $43.3
       million. None of the net proceeds of the offering were paid directly or
       indirectly to any director, officer, general partner of ours or our
       associates, persons owning 10% or more of any class of equity securities of
       ours, or an affiliate of ours.
  
       The Company intends to use the net proceeds from this offering for general
       corporate purposes, including current research and development projects,
       the development of new products or technologies, equipment acquisitions,
       general working capital and operating expenses. Pending application of the
       net proceeds as described above, the Company has invested the net proceeds
       of the offering in short-term, investment-grade, interest-bearing
       securities.
  
  Item 3 Defaults Upon Senior Securities. None.
  
  Item 4 Submission of Matters to a Vote of Security Holders. On May 30, 2001, the
       Company held its annual general meeting of shareholders. The following
  
                                        -10-
  <PAGE>
  
       persons (the only nominees) were elected as the Company's directors, having
       received the indicated votes:
  
  Name                                     Votes For         Votes Withheld
  ----                                     ---------         --------------
  James G. Andress                       54,003,894              480,199
  William K. Bowes, Jr.                  54,008,879              475,214
  John L. Castello                       54,007,248              476,845
  Arthur Kornberg, M.D.                  54,002,361              481,732
  Steven C. Mendell                      54,010,227              473,866
  Patrick J. Scannon, M.D., Ph.D.        54,015,144              468,949
  W. Denman Van Ness                     54,010,111              473,982
  
  
       The appointment of Ernst & Young LLP to act as the Company's independent
       auditors for the 2001 fiscal year was ratified and the authorization of the
       Board to agree to such auditors' fee was approved, having received
       54,120,611 votes for, 266,007 votes against, 97,475 abstentions and no
       broker non-votes. In addition, (1) the amendment to the Company's 1981
       Share Option Plan to extend its term by ten years until November 15, 2011
       and the amendment to the Company's Restricted Share Plan to extend its term
       by eight years until November 15, 2011 were approved, having received
       19,802,132 votes for, 9,801,124 votes against, 355,130 abstentions and
       24,525,707 broker non-votes; and (2) the amendment to the Company's 1981
       Share Option Plan to increase the number of shares issuable over the term
       of the plan by 2,000,000 shares to 8,650,000 in the aggregate was approved,
       having received 19,971,470 votes for, 9,609,686 votes against, 378,230
       abstentions and 24,524,707 broker non-votes.
  
  Item 5 Other Information. None.
  
  Item 6 Exhibits and Reports on Form 8-K.
  
       (a)  Exhibit 10.1 Underwriting Agreement dated as of June 26, 2001 by and
            between XOMA Ltd. and the several underwriters named therein
            (incorporated herein by reference to Exhibit 2 to the Company's
            Current Report on Form 8-K dated June 27, 2001, File No. 000-26169).
  
       (b)  Current Report on Form 8-K dated and filed on June 27, 2001 (File No.
  
  
                                        -11-
  <PAGE>
  
            000-26169), Item 5 (Other Events) and 7 (Exhibits).
  
  
  
  
  
                                        -12-
  <PAGE>
  
  
                                      XOMA Ltd.
  
                                     SIGNATURES
  
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned, thereunto duly authorized.
  
                                 XOMA LTD.
  
  
  Date:    August 9, 2001        By:    /s/ JOHN L. CASTELLO
                                        ------------------------------------------
                                        John L. Castello
                                        Chairman of the Board, President and
                                        Chief Executive Officer
  
  
  Date:    August 9, 2001        By:    /s/ PETER B. DAVIS
                                        ------------------------------------------
                                        Peter B. Davis
                                        Vice President, Finance and
                                        Chief Financial Officer
  
  
                                        -13-
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text: UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 10-Q
  (mark one)
  
                [X] Quarterly Report Pursuant to Section 13 or 15(d)
                       of the Securities Exchange Act of 1934
                      For Quarterly Period Ended June 30, 2001
  
                                         or
  
                [ ] Transition Report Pursuant to Section 13 or 15(d)
                       of the Securities Exchange Act of 1934
                 For Transition Period from __________ to __________
  
                             Commission File No. 0-14710
  
                                      XOMA Ltd.
  
               (Exact Name of Registrant as specified in its charter)
  
              Bermuda                                52-2154066
  (State or other jurisdiction of       (I.R.S. Employer Identification No.)
  incorporation or organization)
  
                       2910 Seventh Street, Berkeley, CA 94710
                 (Address of principal executive offices) (Zip Code)
  
                                   (510) 644-1170
                (Registrant's telephone number, including area code)
  
                                   Not Applicable
                (Former name, former address and former fiscal year,
                           if changed since last report)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
  required to file such reports), and (2) has been subject to such filing
  requirements for the past 90 days.
  
                                      Yes X No
  
  Indicate the number of shares outstanding of each of the issuer's classes of
  common stock, as of the latest practicable date.
  
  Common shares US$.0005 par value         69,964,135
  Class                                    Outstanding at June 30, 2001
  XOMA Ltd.
  
                                  TABLE OF CONTENTS
  
                                                                              Page
  
  PART I  FINANCIAL INFORMATION
  
          Item 1 Condensed Consolidated Financial Statements (unaudited)
  
                 Condensed Consolidated Balance Sheets as of June 30, 2001
                 and December 31, 2000 .........................................1
  
                 Condensed Consolidated Statements of Operations for the
                 Three and Six Months Ended June 30, 2001 and 2000..............2
  
                 Condensed Consolidated Statements of Cash Flows for the
                 Three and Six Months Ended June 30, 2001 and 2000..............3
  
                 Notes to Condensed Consolidated Financial Statements ..........4
  
          Item 2 Management's Discussion and Analysis of Financial
                 Condition and Results of Operations............................7
  
  PART II OTHER INFORMATION
  
          Item 1 Legal Proceedings.............................................10
  
          Item 2 Changes in Securities and Use of Proceeds.....................10
  
          Items 3 and 5 are either inapplicable or nonexistent and therefore
          are  omitted from this report
  
          Item 4 Submission of Matters to a Vote of Security Holders...........10
  
          Item 6 Exhibits and Reports on Form 8-K..............................11
  
          Signatures   ........................................................13
  XOMA Ltd.
  
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (In thousands)
  
                                                                                        June 30,          December 31,
                                                                                          2001                2000
                                                                                    (Unaudited)              (Note 1)
  Assets:
  Cash and cash equivalents                                                         $ 71,808            $ 35,043
       Short-term investments                                                                  40                 172
       Related party receivable                                                               417                 237
       Receivables (net)                                                                    2,381               1,008
       Prepaid expenses and other                                                             113                 162
                                                                                      -----------        ------------
           Total current assets                                                            74,759              36,622
       Property and equipment, net                                                         11,440               8,421
       Deposits and other                                                                     169                 169
                                                                                      -----------        ------------
                                                                                         $ 86,368            $ 45,212
                                                                                      ===========        ============
  Liabilities and Shareholders' Equity (Net Capital Deficiency):
       Accounts payable                                                                  $  4,085            $  2,515
       Accrued liabilities                                                                  3,848               4,311
       Capital lease obligations - current                                                    292                 185
       Deferred revenue - current                                                           3,733               3,333
                                                                                      -----------        ------------
           Total current liabilities                                                       11,958              10,344
       Capital lease obligations - long term                                                  812                 361
       Deferred revenue - long term                                                         4,008               3,609
       Convertible subordinated notes                                                      42,965              39,488
                                                                                      -----------        ------------
           Total liabilities                                                               59,743              53,802
  Shareholders' equity (net capital deficiency)                                            26,625              (8,590)
                                                                                      -----------        ------------
                                                                                         $ 86,368            $ 45,212
                                                                                      ===========        ============
  Note 1 - Amounts derived from the Company's audited financial statements
  appearing in the Annual Report on Form 10-K for the year ended December 31, 2000
  as filed with the Securities and Exchange Commission.
  
       See accompanying notes to condensed consolidated financial statements.
  XOMA Ltd.
  
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (Unaudited, in thousands except per share data)
  
                                                           Three Months Ended                  Six Months Ended
                                                                June 30,                           June 30,
                                                        ---------------------------        ----------------------------
                                                         2001              2000              2001             2000
                                                        -----------     -----------        -----------    -------------
  Revenues:
  License fees and contract revenue                  $ 5,212           $2,283            $8,068            $4,855
  
  Operating Costs and Expenses:
       Research and development                             9,465            7,390            17,935            14,584
       General and administrative                           2,095            1,589             3,705             3,115
                                                        -----------     -----------        -----------    -------------
                                                           11,560            8,979            21,640            17,699
                                                        -----------     -----------        -----------    -------------
  
  Loss from operations                                     (6,348)          (6,696)          (13,572)          (12,844)
  
  Other Income (Expense):
       Investment  and other income                           580              985               979             1,475
       Interest and other expense                            (880)            (615)           (1,630)           (1,241)
                                                        -----------     -----------        -----------    -------------
  Net loss available to common shareholders
                                                        $  (6,648)      $   (6,326)        $ (14,223)     $    (12,610)
                                                        ===========     ===========        ===========    =============
  Basic and diluted  net loss per share                 $  (0.10)       $    (0.10)        $   (0.21)     $      (0.20)
  
  Shares used in computing basic and diluted net
     loss per common share                                 66,280           65,391            66,227            63,531
  See accompanying notes to condensed consolidated financial statements.
  
                                        -2-
  XOMA Ltd.
  
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Unaudited, in thousands)
  
                                                                                       Six Months Ended
                                                                                            June 30,
                                                                                  ---------------------------
                                                                                      2001           2000
                                                                                  ------------  -------------
  Cash Flows From Operating Activities:
  Net cash used in operating activities                                       $ (11,534)       $ (7,265)
                                                                                  ------------  -------------
  Cash Flows From Investing Activities:
       Proceeds from sale of short-term investments                                      253             506
       Capital expenditures                                                           (3,079)           (395)
                                                                                  ------------  -------------
           Net cash provided by (used in) investing activities                        (2,826)            111
                                                                                  ------------  -------------
  Cash Flows From Financing Activities:
       Proceeds from issuance of common shares, net                                   47,734          33,266
       Proceeds/(payments) related to convertible notes                                3,496          (2,318)
       Payments under capital leases                                                    (105)             --
                                                                                  ------------  -------------
           Net cash provided by  financing activities                                 51,125          30,948
  Net increase  in cash and cash equivalents                                          36,765          23,794
  Cash and cash equivalents at beginning of period                                    35,043          18,539
                                                                                  ------------  -------------
  Cash and cash equivalents at end of period                                        $ 71,808        $ 42,333
                                                                                  ============  =============
  See accompanying notes to condensed consolidated financial statements.
  
                                        -3-
  XOMA Ltd.
  
                NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                     (Unaudited)
  
  1.   Basis of Presentation
  
       The interim information contained in this report is unaudited but, in
  management's opinion, includes all normal recurring adjustments necessary for a
  fair presentation of results for the periods presented. Interim results may not
  be indicative of results to be expected for the full year. The consolidated
  financial statements should be read in conjunction with the Company's audited
  consolidated financial statements for the year ended December 31, 2000 included
  in its Annual Report on Form 10-K. The preparation of financial statements in
  conformity with generally accepted accounting principles requires management to
  make estimates and assumptions that affect the reported amounts of assets and
  liabilities and disclosure of contingent assets and liabilities, if any, at the
  date of the financial statements and the reported amounts of revenues and
  expenses during the reporting period. Actual results could differ materially
  from those estimates.
  
  2.   Recent Accounting Prounouncements
  
       On June 29, 2001, the Financial Accounting Standards Board, or FASB,
  approved the final standards resulting from its deliberations on the business
  combinations project. The FASB is expected to issue two statements in late July
  2001, Statement of Financial Accounting Standards No. 141, or FAS 141, on
  Business Combinations and FAS 142 on Goodwill and Other Intangible Assets. FAS
  141 will be effective for any business combinations initiated after June 30,
  2001 and also includes the criteria for recognition of intangible assets
  separately from goodwill. FAS 142 will be effective for fiscal years beginning
  after December 15, 2001 and will require that goodwill not be amortized, but
  rather be subject to an impairment test at least annually. Separately identified
  and recognized intangible assets resulting from business combinations completed
  before July 1, 2001 that do not meet the new criteria for separate recognition
  of intangible assets will be subsumed into goodwill upon adoption. In addition,
  the useful lives of recognized intangible assets acquired in transactions
  completed before July 2001 will be reassessed and the remaining amortization
  periods adjusted accordingly. The adoption of FAS 141 and 142 is not expected
  have a significant impact on our financial position at transition.
  
       In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
  Instruments and Hedging Activities" (SFAS 133). XOMA adopted SFAS 133 on January
  1, 2001. Because the Company currently holds no derivative financial instruments
  and does not
  
                                        -4-
  currently engage in hedging activities, adoption of SFAS 133 had no impact on
  the Company's financial position or results of operations.
  
  3.   Accrued Liabilities
  
       Accrued liabilities consist of the following (in thousands):
  
                                            June 30,              December 31,
                                              2001                    2000
                                          ------------          ---------------
       Accrued payroll costs                   $ 1,961                 $ 2,255
       Accrued clinical trial costs              1,026                   1,151
       Other                                       861                     905
                                          ------------          --------------
                                               $ 3,848                 $ 4,311
                                          ============          ==============
  
  4.   Revenue Recognition
  
       Research payments under collaborative arrangements and grants are
  recognized as revenue based on research expenses incurred as provided for under
  the terms of the arrangements.
  
       The Company previously recognized non-refundable license fees as revenue
  when received and when all significant contractual obligations of the Company
  relating to the fees had been met. Effective January 1, 2000, the Company
  changed its method of accounting for non-refundable initial fees to recognize
  such fees over the period of continuing involvement by the Company such as the
  research and development period or the manufacturing period of the agreement, as
  applicable. The Company believes this accounting policy is appropriate based on
  guidance provided in SEC Staff Accounting Bulletin No. 101 - Revenue Recognition
  in Financial Statements (SAB 101). As of January 1, 2000, there was no
  cumulative effect of an accounting change as a result of the adoption of SAB 101
  and there was no pro forma effect of the adoption of SAB 101 in any year
  presented. In connection with the license and supply and development agreements
  with Baxter Healthcare Corporation ("Baxter") on January 25, 2000, the Company
  received $10.0 million as an initial, non-refundable fee. This initial fee was
  deferred and is being amortized over the period of continuing involvement, which
  period is estimated to be 36 months.
  
       In January of 2001, the Company entered into a strategic process
  development and manufacturing agreement with Onyx Pharmaceuticals, Inc. ("Onyx")
  which calls for the Company to scale-up production to commercial volume and
  manufacture Onyx's CI-1042 product. The initial term of the agreement is five
  years, with options to extend for additional
  
                                        -5-
  periods. Terms of the agreement include an initial payment of $2.0 million,
  payments for development work and material produced, and payments upon achieving
  key milestones. XOMA's objectives are to increase the fermentation volume to
  commercial scale, to improve the purification process, to seek FDA licensure of
  its manufacturing facility for CI-1042, and to produce material for use in
  clinical testing and for commercial sale upon approval. The initial payment was
  deferred and is being amortized over five years.
  
       Milestone payments under collaborative arrangements are recognized as
  revenue upon achievement of the incentive milestone events if it represents the
  culmination of the earnings process and the Company has no future performance
  obligations related to the milestone payment. Milestone payments are triggered
  either by the results of our research efforts or by events external to the
  Company, such as regulatory approval to market a product. Milestone payments and
  amounts that are received in advance which are tied to future service
  performance by the Company are recorded as deferred revenue and are amortized
  over the period of continuing involvement.
  
  5.   Comprehensive Loss
  
       Comprehensive loss includes certain changes in equity that are excluded
  from net loss. Specifically, unrealized holding gains and losses in available
  for sale investments, which were reported separately in shareholders' equity,
  are included in accumulated other comprehensive income (loss). Comprehensive
  loss and its components for the quarters ended June 30, 2001 and 2000 are as
  follows (in thousands):
  Three Months Ended                  Six Months Ended
                                        June 30,                           June 30,
                              ------------------------------    -------------------------------
                                 2001              2000              2001             2000
                              --------------   -------------    --------------   --------------
  Net loss                    $    (6,648)     $    (6,326)      $   (14,223)      $   (12,610)
  Unrealized gain (loss)
  on marketable securities
  available-for-sale                   --              (41)               --               441
                              --------------   -------------    --------------   --------------
  Comprehensive loss          $    (6,648)     $    (6,367)      $   (14,223)      $   (12,169)
                              ==============   =============    ==============   ==============
  6.   Net Loss Per Common Share
  
       Basic and diluted net loss per common share is based on the weighted
  average number of common shares outstanding during the period in accordance with
  Financial Accounting Standard No. 128. Common share equivalents were not
  included because they are antidilutive in all periods presented.
  
                                        -6-
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
  Results of Operations:
  
       Revenues in the second quarter of 2001 increased to $5.2 million, from $2.3
  million in the second quarter of 2000. For the six-month periods ending June 30,
  2001, revenuers were $8.1 million, compared with $4.9 million in the comparable
  prior year period. Licensing revenue, primarily reflecting the amortization into
  revenue of certain license fees and other payments received from Baxter
  Healthcare Corporation and Onyx Pharmaceuticals, Inc., increased to $1.0 million
  and $2.1 million in the three- and six-month periods ended June 30, 2001,
  respectively, compared to $0.8 million and $1.4 million in the comparable prior
  year periods. Contract revenue increased to $4.1 million and $6.0 million in the
  three- and six-month periods ended June 30, 2001 from $1.4 million and $3.4
  million in the comparable 2000 periods.
  
       Operating expenses increased to $11.6 million in the second quarter of 2001
  from $9.0 million in the second quarter of 2000. For the six-month period ending
  June 30, 2001, operating expenses were $21.6 million, compared with $17.7
  million in the comparable 2000 period. This reflected increased spending on
  Xanelim(TM) and XOMA's internal antibody programs, as well as expenses related
  to litigation with Biosite Incorporated.
  
       Research and development expenses increased to $9.5 million and $17.9
  million, respectively in the three and six-month periods ending June 30, 2001,
  from $7.4 million and $14.6 million in the comparable prior year periods.
  Spending in 2001 reflected increased development costs associated with
  Xanelim(TM), ING-1, GENIMUNE(TM) and the Onyx CI-1042 product. This was
  partially offset by reduced spending on NEUPREX(R).
  
       General and administrative expenses increased from $1.6 million and $3.1
  million in the in the three- and six-month periods ending June 30, 2000, to $2.1
  million and $3.7 million in the same 2001 periods.
  
       Interest expense was higher in the second quarter first six months of 2001
  compared to 2000 due to higher interest rates and the higher average note
  balance of the convertible subordinated notes due Genentech, Inc.
  
  Liquidity and Capital Resources:
  
       XOMA ended the quarter with $71.8 million in cash, cash equivalents and
  short-term investments, compared with $35.2 million at December 31, 2000. Net
  cash used in
  
                                        -7-
  operations in the first six months of 2001 was $11.5 million, compared with net
  cash used in operations of $7.3 million in the second quarter of 2000. The prior
  year cash flow benefited from $10.0 million in licensing fees received from
  Baxter in January 2000, which is being recognized as revenue over a 36 month
  period. See footnote 4, "Revenue Recognition," to the Consolidated Financial
  Statements.
  
       Capital expenditures increased from $0.4 million in the first six months of
  2000 to a net of $3.1 million in the current year period. Current year spending
  included expenses related to the transfer of XOMA's technical development
  operations from Santa Monica to Berkeley, as well as investments related to our
  collaborative arrangement with Onyx.
  
       For the full year 2001, the Company currently expects its loss to be
  somewhat lower than in 2000, with increased expense levels being more than
  offset by higher revenues.
  
       Proceeds from the issuance of common shares, net, were $47.7 million for
  the six months ended June 30, 2001, compared to $33.3 million for the comparable
  period of the prior year. The amount for the first six months of 2001 resulted
  primarily from a registered offering of 3,000,000 of the Company's common shares
  in June 2001 for net proceeds of $43.3 million.
  
       The Company has been able to control its operating cash consumption by
  carefully monitoring its costs. As a result, based on current spending levels
  and taking into account the Onyx transaction, the Company believes its cash
  position and resulting investment income are sufficient to finance the Company's
  currently anticipated levels of spending through approximately the middle of
  2004. Strategic arrangements with Onyx, Baxter and Genentech have reduced
  Company spending levels by paying certain product development costs. The Company
  continues to evaluate a variety of arrangements that would further strengthen
  its competitive position and provide additional funding, but cannot predict
  whether or when any such arrangement or additional funding will be consummated
  or whether additional funding will be available. Without additional funding, the
  Company will have to decrease or eliminate the development of some of its
  products.
  
  Quantitative and Qualitative Disclosures About Market Risk:
  
       Interest Rate Risk. The Company's exposure to market rate risk due to
  changes in interest rates relates primarily to the Company's investment
  portfolio. The Company does not use derivative financial instruments in its
  investment portfolio. By policy, the Company places its investments with high
  quality debt security issuers, limits the amount of credit exposure to any one
  issuer, limits duration by restricting the term and holds investments to
  maturity except under rare circumstances. The Company classifies its cash
  equivalents as
  
                                        -8-
  fixed rate if the rate of return on an instrument remains fixed over its term.
  As of June 30, 2001, all the Company's cash equivalents are classified as fixed
  rate.
  
       The Company also has a long-term convertible note due to Genentech in 2005.
  Interest on this note of LIBOR plus 1% is reset at the end of June and December
  each year and is therefore variable.
  
       The table below presents the amounts and related weighted interest rates of
  the Company's cash equivalents and long-term convertible note at June 30, 2001:
  Fair Value            Average
                                                              Maturity        ($ in millions)       Interest Rate
                                                           -------------    -------------------   -----------------
  Cash equivalents, fixed rate                                  Daily              $ 71.8                  4.3%
  Long-term convertible note, variable rate                      2005                43.0                  7.1%
  Other Market Risk. At June 30, 2001, the Company had a long-term
  convertible note outstanding which is convertible into common shares based on
  the market price of the Company's common shares at the time of conversion. A 10%
  decrease in the market price of the Company's common shares would increase the
  number of shares issuable upon conversion of either security by approximately
  11%. An increase in the market price of Company common shares of 10% would
  decrease the shares issuable by approximately 9%.
  
  Forward Looking Statements:
  
       Statements made herein related to the estimated size of the Company's loss
  for 2001, the estimated levels of its expenses and revenues for the balance of
  2001, the sufficiency of its cash resources, present or future collaborative
  arrangements and current plans for 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 size and timing of expenditures, unanticipated expenditures,
  availability of funds, changes in the status of the existing collaborative
  relationships, availability of additional collaboration opportunities, the time
  or results of pending and future clinical trials, the ability of collaborators
  and other partners to meet their obligations, market demand for products,
  actions by the Food and Drug Administration of the U.S. Patent and Trademark
  Office, and uncertainties regarding the status of biotechnology patents, are
  discussed in the Company's most recent annual report on Form 10-K and in other
  SEC filings.
  
                                        -9-
  PART II - OTHER INFORMATION
  
  Item 1 Legal Proceedings. On July 5, 2001, XOMA filed a complaint in the United
       States District Court for the Northern District of California, San
       Francisco Division, against Biosite Diagnostics Incorporated (since renamed
       Biosite Incorporated). The complaint seeks monetary damages, injunctive and
       other relief for infringement of XOMA's bacterial cell expression
       technology patents in connection with certain Biosite technologies and
       collaborations. The suit also seeks relief for fraud and misrepresentation,
       breach of contract, misappropriation and unfair business practices in
       connection with three limited, non-exclusive licenses granted to Biosite
       under XOMA's bacterial cell expression technology.
  
  Item 2 Changes in Securities and Use of Proceeds. On June 29, 2001, the Company
       completed a registered offering of 3,000,000 common shares. The managing
       underwriters in the offering were U.S. Bancorp Piper Jaffray, CIBC World
       Market Corp., Adams, Harkness & Hill and Arnhold & S. Bleichroeder, Inc.
       The common shares sold in the offering were registered under the Securities
       Act of 1933, as amended, on a Registration Statement on Form S-3 (Reg. No.
       333-50134) that was declared effective by the SEC on November 28, 2000.
       After deducting the underwriting discounts and offering expenses, the
       Company received net proceeds from the offering of approximately $43.3
       million. None of the net proceeds of the offering were paid directly or
       indirectly to any director, officer, general partner of ours or our
       associates, persons owning 10% or more of any class of equity securities of
       ours, or an affiliate of ours.
  
       The Company intends to use the net proceeds from this offering for general
       corporate purposes, including current research and development projects,
       the development of new products or technologies, equipment acquisitions,
       general working capital and operating expenses. Pending application of the
       net proceeds as described above, the Company has invested the net proceeds
       of the offering in short-term, investment-grade, interest-bearing
       securities.
  
  Item 3 Defaults Upon Senior Securities. None.
  
  Item 4 Submission of Matters to a Vote of Security Holders. On May 30, 2001, the
       Company held its annual general meeting of shareholders. The following
  
                                        -10-
  persons (the only nominees) were elected as the Company's directors, having
       received the indicated votes:
  
  Name                                     Votes For         Votes Withheld
  ----                                     ---------         --------------
  James G. Andress                       54,003,894              480,199
  William K. Bowes, Jr.                  54,008,879              475,214
  John L. Castello                       54,007,248              476,845
  Arthur Kornberg, M.D.                  54,002,361              481,732
  Steven C. Mendell                      54,010,227              473,866
  Patrick J. Scannon, M.D., Ph.D.        54,015,144              468,949
  W. Denman Van Ness                     54,010,111              473,982
  
       The appointment of Ernst & Young LLP to act as the Company's independent
       auditors for the 2001 fiscal year was ratified and the authorization of the
       Board to agree to such auditors' fee was approved, having received
       54,120,611 votes for, 266,007 votes against, 97,475 abstentions and no
       broker non-votes. In addition, (1) the amendment to the Company's 1981
       Share Option Plan to extend its term by ten years until November 15, 2011
       and the amendment to the Company's Restricted Share Plan to extend its term
       by eight years until November 15, 2011 were approved, having received
       19,802,132 votes for, 9,801,124 votes against, 355,130 abstentions and
       24,525,707 broker non-votes; and (2) the amendment to the Company's 1981
       Share Option Plan to increase the number of shares issuable over the term
       of the plan by 2,000,000 shares to 8,650,000 in the aggregate was approved,
       having received 19,971,470 votes for, 9,609,686 votes against, 378,230
       abstentions and 24,524,707 broker non-votes.
  
  Item 5 Other Information. None.
  
  Item 6 Exhibits and Reports on Form 8-K.
  
       (a)  Exhibit 10.1 Underwriting Agreement dated as of June 26, 2001 by and
            between XOMA Ltd. and the several underwriters named therein
            (incorporated herein by reference to Exhibit 2 to the Company's
            Current Report on Form 8-K dated June 27, 2001, File No. 000-26169).
  
       (b)  Current Report on Form 8-K dated and filed on June 27, 2001 (File No.
  
                                        -11-
  000-26169), Item 5 (Other Events) and 7 (Exhibits).
  
                                        -12-
  XOMA Ltd.
  
                                     SIGNATURES
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned, thereunto duly authorized.
  
                                 XOMA LTD.
  
  Date:    August 9, 2001        By:    /s/ JOHN L. CASTELLO
                                        ------------------------------------------
                                        John L. Castello
                                        Chairman of the Board, President and
                                        Chief Executive Officer
  
  Date:    August 9, 2001        By:    /s/ PETER B. DAVIS
                                        ------------------------------------------
                                        Peter B. Davis
                                        Vice President, Finance and
                                        Chief Financial Officer
  
                                        -13-