XOMA Corporation, a developmental-stage biopharma, has a pipeline focusing on innovative therapeutics based on the anti-bodies. The company has proprietary technology, relevant collaborations and the needed cash to see it through the development phases. The imminent catalysts have the potential to give a boost to the share prices of the company.
XOMA Corporation (XOMA) is a biopharmaceutical company involved in the discovery and development of therapeutics based on antibodies. The company focuses on allosteric modulation in antibody research and development. This presents the opportunity of treating a wide range of human diseases through new classes of therapeutic antibodies. The company has proprietary rights to its monoclonal antibody technologies, which have been licensed to over 60 companies.
The company has a variety of promising candidates in its pipeline, with three candidates in Phase III, two in Phase II and two in Phase I. The results of the phase studies, as presented by the company, look positive.
Competitors of XOMA Corporation include MeImmune L.L.C., Novartis AG, and Regeneron Pharmaceuticals.
The company innovates in the technology relating to antibodies. Their edge lies in the development of fully human therapeutic antibodies by combining multiple antibody discovery and development technologies with intellectual property, technical expertise and know-how and an integrated infrastructure. The technology used for discovery of antibodies is known as ADAPTTM (Antibody Discovery Advanced Platform Technologies), which enables antibody discovery by proprietary phage display libraries, combined with flexible antibody expression options. The custom software package includes SeqAgentTM and XAbTrackerTM.
The ModulXTM technology is used for the modulation of biological pathways using monoclonal antibodies. Finally, the technology used for the optimization of biophysical properties of antibodies, that include stability, affinity, immunogenicity and manufacturability, is known as the OptimXTM, consisting of Human EngineeringTM (HETM) and Target Affinity Enhancement (TAETM).
XOMA collaborated with Les Laboratoires Servier in the January of 2011, for the joint development and commercializing of gevokizumab. The company is eligible to receive $470 million in milestone payments and additional royalties as a result of this collaboration. The first $50 million of the development expenses of gevokizumab is being funded by Servier, as are 50% of the expenses on the Phase III uveitis indication.
XOMA is also receiving funding as part of the contracts awarded to it by the National Institute of Allergy and Infectious Diseases (NIAD), which is a part of the National Institute of Health (NIH). The contracts entail the development of bio-defense related product with anti-botulism neurotoxin monoclonal antibodies.
XOMA has also entered certain development collaborations and licensing agreements in connectionwith its antibody technologies. It receives royalties from the development of products using XOMA's technologies.
Other collaboration agreements of XOMA are with Kaketsuken, Takeda Pharmaceutical Company Limited, Arana Therapeutics Limited, AVEO Pharmaceuticals Inc., UCB Celltech, Novartis AG and Genentech, Inc.
The lead drug candidate of XOMA, Gevokizumab (XOMA 052), is a monoclonal antibody possessing unique allosteric modulating properties. It has the potential to treat a wide range of inflammatory and other diseases. Gevokizumab has the ability to bind strongly with interleukin-1 beta (IL-1 beta), which is a pro-inflammatory cytokine and is responsible for the modulation of signaling events that produce inflammation. The company has designed this product for infrequent dosage and high potency. The product is in Phase III study, for the non-infectious uveitis and Behcets uveitis, an inflammatory condition of the layer of the eye, which is heavily vascularized. A clinical program named as EYEGUARD (A, B, and C) has been initiated on the global level by XOMA and Servier to run phase III studies.
Gevokizumab is in Phase II study for inflammatory acne, cardiovascular diseases, active non-infectious anterior scleritis and erosive osteoarthritis of the hand. Furthermore, it is also in the Phase II of the Proof-of-concept program, to assess its therapeutic potential in diseases involving IL-1 beta.
The XMet program consists of three classes of antibodies, with research focusing on a new therapeutic approach for the treatment of diabetes in patients. The aim of the antibodies study is to activate/sensitize the human insulin receptor. This will potentially generate insulin like activity in the human body and help the diabetic patients to control their blood glucose level without excessive insulin injections. XMet is further aimed at developing new therapeutic approaches to treat numerous diseases having insulin involvement.
XOMA 3AB is a multi-antibody product and is in the Phase I clinical trial for the cure of botulism poisoning, one of the deadliest toxins known. The trial is sponsored by the National Institute of Allergy and Infectious Diseases (NIAD). The preclinical studies of XOMA 3AB have shown that it neutralizes and cleared the botulinum toxin from the bloodstream of animals. The candidate has great potential if it's approved, as it is part of the bio-defense program of the U.S. government and XOMA has already entered contracts worth $120 million.
Preclinical studies for Transforming Growth Factors (TGF), a pleiotropic regulator of cell growth, are underway for the treatment of cancer. The TGFβ found in patients with cancer is believed to play a vital role in the development and progression of colon, lung, prostate, breast, and pancreatic cancers, along with bladder, ovarian, gastric cancers, melanoma and renal cell carcinoma. Oncology related preclinical studies for Fibroblast growth factor receptor 4 (FGFR4) and Recepteur d'origine nantais (RON) are also underway and await completion.
XOMA is also developing candidates with Novartis namely FDC1 in Phase III for hypertension; HCD122 and LFA102 in Phase I and Phase II, for the treatment of certain breast and prostate cancer.
The share performance of XOMA has been positive with a 96.25% YTD increase. The performance has seen an upward trend due to the positive results from the clinical trials of the company.
XOMA has a higher earnings growth rate of 9.17% as compared to the industry rate of 6.90%. This indicates that the company is earning slightly better than the industry.
The price target set by the analysts is a high target of $8 and a low target of $5. And the one year price target has been established at $6.69. However, the mean recommendation is to buy the stocks.
An important upcoming event for XOMA Corporation is the announcement of earnings for the 3rd Quarter of 2013, on the 4th of November, 2013. The event holds importance from both the investor and share prices stand-point.
The Phase II data for the Gevokizumab Erosis osteoarthritis of the hand is due in October. Erosive Osteoarthritis of the hand is a very debilitating condition for those suffering from it, as normal hand functions may become hard to perform due to the possible deformation of the joints of the hand. In the U.S. alone around four million people are suffering from this disease. Hence, positive data regarding the study would prove to be a significant catalyst and move the stock prices upward.
The Phase II data for the gevokizumab for non-infectious scleritis, an inflammatory condition of the eye, is expected in the 4th Quarter of 2013. Scleritis is a serious condition of the outer white coating of the eye and if not treated properly may cause blindness. Positive results from the data will prove to be a catalyst for the stock prices.
In the fourth quarter of 2013, XOMA is likely to select a Phase III indication for the Proof-of-concept program to explore the safety and efficacy of gevokizumab. This selection depends on the phase II data for the Gevokizumab erosis osteoarthritis. This will be a major catalyst for the company as it will reduce the risk of wastage of money for the investors, as is associated with other major clinical candidates.
The phase III data for the study of gevokizumab from EYEGUARD-A in patients who have active non-infectious uveitis, is expected in late 2013. Furthermore, the Phase III data for the EYEGUARD-C study in patients with controlled non-infectious uveitis is expected in the first quarter of 2014. This will also prove as a significant catalyst for the stock prices of the company.
Fundamentals and Potential Risks
The company anticipates a cash usage of approximately $50 million in 2013. This amount will primarily be employed for the clinical trials and activities, according to the Chief Financial Officer. The company as June 30, 2013 had around $58 million in cash and equivalents and a burn rate of $4.3 million per month. The company however, raised additional $29 million through a secondary offering in September, owing to the increased costs of research and development. The company did state in the 2nd Quarter earnings report of 2013, that they expected the existing cash to see them well through the year and into late 2014. There is a risk of further dilution of shares or delay in the development of candidates, as is also mentioned in the above mentioned report, if the company is unable to meet the cash requirements.
The company was granted a loan of € 15 million by Servier in 2010, which is due in 2016. However, in case of an event of default, the loan would become immediately due. This poses a huge risk for the company, as it's already suffering from loss and would find it difficult to service the debt.
Another major risk facing every development stage pharmaceutical company is the risk of failure of the clinical trials. In advent of this failure the stocks of the company would take a nosedive and prove to be detrimental for the company.
XOMA Corporation has bright prospects when it comes to the clinical trials and their data. The company is expected to release the results of their studies over the few months and this data could prove the potential of their trials. The gevokizumab trial data would prove to be a major catalyst and a positive result means that the company would be filing for the BLA (Biologic License Application) in the year 2014. Hence, there is a chance that the share price of the company may achieve its target price in the near future.
The majority of XOMA shares, some 68.05%, are owned by institutional holders. Over 20 million of the shares are owned by Baker Brothers LLC. The company is among the most successful small cap biotech institutional investors. They gained huge with the shares of Acadia Pharma (ACAD) over the last year. Hence, the companies in which Baker Brothers invest are worth taking a look at.
XOMA Corporation must however be evaluated for its potential risks before investing in the company. Overall the company is a sound investment and may have a bright future.