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|Includes: XOMA Corporation (XOMA)
Xoma signed a collaboration agreement with Arana Therapeutics Limited, a wholly owned subsidiary of Cephalon (NASDAQ:CEPH). The agreement involves multiple proprietary antibody research and development technologies, including a new antibody phage display library, and a suite of integrated information and data management systems. XOMA is getting a $6 million fee and will be entitled to milestone payments and royalties on product sales. XOMA will be fully reimbursed for all services it may provide to Arana under the agreement.

Why Xoma?  

Steffen Nock, Acting Chief Executive Officer of Arana said, “Xoma provides a complete suite of validated technologies that enable us to accelerate our antibody development programs toward the clinic. We believe the advantages of these technologies, including XOMA's next-generation antibody libraries, will increase our capacity to cost-effectively develop novel therapeutics."


Prohost Biotech never doubted the high value of Xoma’s scientific and technological capability. We hailed the firm’s early involvement in the bacterial secretion of antibody domains and we were among the first to appreciate the value of its bactericidal cell expression (NYSE:BCE) technology for the high-level expression it provides. Yes, we were aware all-along of the firm’s advantages. The problem, though, is that Xoma kept providing its treasures to others and barely used them for itself. which might have been caused us enormous losses. .   

Our great awareness of Xoma’s excellent technologies and its capabilities of developing targeted therapeutics made us become high hopers, having great expectations for Xoma’s achievements.  Betting on this firm’s scientific and technological capability was correct and smart, except for ignoring that betting on whatever one loves about a firm would include an automatic betting on the firm’s management. This was our sin. The firm’s bright science blinded our eyes, preventing them from unveiling the past managements’ incompetence. For over a decade, Xoma’s superior scientific fundamentals and its built-in huge experience have failed to create value for the firm’s loyal shareholders. As a matter of fact, the firm’s value kept shrinking until it almost disappeared.  

Xoma’s genius was wasted on efforts spent towards rescuing the firm from its managements’ bad decisions, improper choices and uncontrolled spending. Confident that the firm has all that is required for a biotech firm to generate billions of dollars in revenues, the firm’s loyal shareholders lost their investment before they saw any of Xoma’s proprietary products reach the market. Xoma must have fallen into coma during the past decade. At the end of a decade of struggling for survival, the firm had transformed into a poverty-stricken charitable organization. Drugs developed through Xoma’s technologies, Cimza and Lucentis, are generating billions of dollars in revenues for their owners, while Xoma is getting a few bucks that it calls royalties, which it immediately spends on nothing that is visible in its pipeline.   

Our question is: Will the current management change the firm’s direction from extra-spending to what would turn some of its revenues into earning? Will it stop claiming that giving away its technological expertise for pennies is a victory? Will it co-develop its breakthrough proprietary therapeutics with other firms on 50-50 partnership bases? Is this not the only hope for generating billions of dollars in revenues?

Xoma can still strike it big. It has more chances than ever for generating billions of dollars from its monoclonal antibody therapeutics. As a matter of fact a rare opportunity presents now in some of its drugs, precisely Xoma’s multi-targeted investigational therapeutic, XOMA 052. The drug is in two clinical studies for Type 2 diabetes. The molecules target key inflammatory pathways that contribute to the death and impairment of insulin-producing cells. There are no current marketed diabetes drugs aimed at protecting the insulin making cells. The same drug tackles also other inflammatory conditions, including rheumatoid arthritis, gout, systemic juvenile idiopathic arthritis, and cardiovascular disease. Further positive results from XOMA 052 would take the stock price to where it was a few years ago, i.e., over ten times its current stock price.

XOMA 052 is a Human Engineered™ IgG2 antibody. The antibody has an ultra high binding affinity for IL-1β of 300 femtomolar. Based on its combined pharmacokinetic and binding properties, XOMA 052 may provide a convenient dosing of once per one month or longer. If successful and passes the clinical trial tests, XOMA 052 would become the first drug ever to treat diabetes and other inflammatory diseases with once a month injection. Studies with XOMA 052 for rheumatoid arthritis have already been initiated.
Some studies have demonstrated that Amgen’s drug Kineret (Anakinra), an interleukin-1 (IL-1) receptor antagonist, has had positive results on Type 2 diabetes. These studies validate the results of XOMA 052. Anikanra is already marketed for other inflammatory diseases. The difference, however, is that Kineret is administered through daily injections while Xoma 0.52 could be administered once a month.

That said, we will continue riding Xoma’s wave, but sitting on the driver’s seat. We cannot accept our investment to disappear, particularly not as a consequence of management’s inefficiency and lack of stamina. What we need now from the current management is accountability and transparency. We are determined to get both. Among other things, we need to know the fate of Xoma’s product HCD122, a monoclonal antibody that targets CD40, the same target of Rituxan, Genentech’s and Biogen Idec’s best selling lymphoma and anti-inflammatory disease drug. Xoma had licensed this important drug to Chiron, but the drug ended up in Novartis’ lap in April 2006 when this firm acquired Chiron. We want to learn about Novartis’ intended plans and the timetable it has put for various processes that would lead to the drug marketing, if any.

We have not given up on Xoma, because we still believe in its great drug discovery, design and development capabilities. The time has come, though, for the large libraries of molecules to fill Xoma’s pipeline with second to none drugs, instead of filling our ears with bragging. We will not act like the mother who told her son that he is an excellent writer, which led her husband to remark, “Indeed he is, provided he starts to write.”

We will make sure that with the technological wealth in its hand, Xoma’s management will indeed write a happy ending for the company’s tragic story.  

Disclosure: No Positions