XOMA: Will The Love-Hate Marriage With Investors Finally End Up In A Stable Relationship?

| About: XOMA Corporation (XOMA)
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XOMA (NASDAQ:XOMA) is addictive and its relationship to investors is typical of that of married couples who have a love/hate alternating history, which is interrupted with divorces and remarrying. Around a week ago, the firm announced interim data from a phase 2 proof-of-concept (POC) study on gevokizumab, which is being developed for the treatment of inflammatory facial lesions in patients suffering from moderate to severe acne vulgaris.

Investors in this firm know that gevokizumab (formerly XOMA 052) - a humanized allosteric monoclonal antibody to interleukin beta (IL-1β) - is also in three Phase 3 trials for non-infectious uveitis and in proof-of-concept studies for osteoarthritis of the hand. Based upon its mechanism of action, gevokizumab is considered also therapeutic in cardiovascular disease and other conditions associated with inflammation. They also know that XOMA is developing gevokizumab in collaboration with the French firm, Les Laboratoires Servier, a leading independent pharmaceutical company.

Back to the acne vulgaris' interim results. In phase 2 of the study XOMA enrolled approximately 125 patients until Jan 08, 2013. The preliminary results from the study that considered data on approximately 92 patients out of the 125 showed that the 0.6mg/kg dose of gevokizumab demonstrated significant reduction of 19 in mean inflammatory lesion count compared to that of a reduction of 13 in patients under placebo group on day 42. The difference was maintained throughout the study.

The Phase 2 proof of concept study is a double-blind randomized comparison of gevokizumab 0.2mg/kg and 0.6mg/kg versus placebo. The drug is administered subcutaneously once per month for three consecutive months (appealing to the users).

In line with FDA guidance, inflammatory lesion counts, the primary endpoint in this trial, and overall acne severity as assessed by responder analysis of the Investigator Global Assessment (IGA), defined as at least a two-point improvement on a five-point scale, were measured at different time points up to Day 84. The study was designed to have 80 percent power to detect at least an absolute difference of 15 versus placebo in the mean inflammatory lesion count at Day 84 with statistical significance defined as p≤ 0.10.

The 0.6mg/kg dose group showed a statistically significant reduction of 19 in mean inflammatory lesion count on Day 42 compared to a reduction of 13 in the placebo treated group (p=0.077).

Each of the groups had a mean baseline of approximately 31 inflammatory lesions. The magnitude of the difference was substantially maintained throughout the study, but differences at later measurement points were not statistically significant. However, the same group demonstrated both a clinically and statistically significant improvement in IGA at Day 84, showing a 31 percent responder rate versus a 5 percent responder rate in the placebo group (p= 0.031).

The 0.2mg/kg dose group showed no clinically or statistically significant differences from placebo at any time point in inflammatory lesion count or in IGA.

Gevokizumab appeared to be well tolerated in the trial, and incidence of adverse events was comparable between both active groups and placebo.

Comments by Xoma: Paul Rubin, M.D., Senior Vice President of Research and Development and Chief Medical Officer of XOMA said, "The preliminary results of this initial proof-of-concept trial are encouraging as we demonstrated clear activity according to the IGA parameter, and we also established a no-effect dose. The data from our analysis of inflammatory lesion count demonstrate statistical significance at the 0.6mg/kg dose for the Day 42 measurement. I believe the safety profile and preliminary activity results seen with gevokizumab clearly warrant further evaluation in moderate to severe inflammatory acne, including with higher doses we are using in our other studies. The study also provided key information on placebo response rates in this specific acne population, and this knowledge will be useful in the design of future trials."

Our Comments: Encouraging news is evidently good news, at least better than discouraging news. (We hope that those who sell good news know that we know that good news is good, not bad). The stock did not gain much out of this news because investors might have learned from history and a previous experience by Xoma on acne with a different drug. The old drug has had encouraging in mid-trials, but failed late trials.

Having said that we are optimistic this time on gevokizumab. We have many reasons for this optimism, including the presence of the partner, Les Laboratoires Servier, which we appreciate its knowledge, seriousness and history of success. We also appreciate its stable and continued relationship with Xoma, which reflects its interest in gevokizumab. In November 2012, together with Xoma, Les Laboratoires Servier initiated another proof-of-concept study to evaluate patients who have experienced acute coronary syndrome (ACS).

We also believe that uveitis, scleritis, acute coronary syndrome and acne represent excellent targets for the monoclonal antibody to interleukin beta (IL-1β) gevokizumab. We cross our fingers and hope that the struggling Xoma will finally reach the shore of the achievers, which its sciences, scientists and technologies deserved to reach since long ago.

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