I thought I would quickly cover a couple of small biotech stocks to end the trading week. Both have announced potentially significant catalysts recently and each stock sells for less than $2.00 a share. This is beneath the threshold for inclusion into the Biotech Forum portfolio but I have small stakes in both equities as I find their risk/reward profiles attractive at current levels.
The first company is Xoma Ltd. (NASDAQ:XOMA) which currently goes for ~$1.40 a share and has a market capitalization of just over $160 million. I highlighted the potential of the shares after the company signed a possible game changing collaboration deal with drug giant Novartis (NYSE:NVS). Novartis provided an upfront payment of $37 million in this transaction. Xoma could also receive up to $480 million in various milestones and mid-single-digit to low double-digit royalties on net sales for any commercialized products that come out of the collaboration.
On December 1st, Xoma announced another deal with a major drugmaker. The company has granted a global license to its XMetA program of allosteric monoclonal antibodies that up-regulate the insulin receptor to Novo Nordisk (NYSE:NVO) including an option to add commercialization rights for rare disease indications, which XOMA currently retains. Novo Nordisk will be solely responsible for the development and commercialization of antibodies and products containing antibodies from the program, subject to XOMA's retained rights for rare diseases.
For this deal, Xoma will receive an upfront payment of $5 million as well as up to $290 million in milestones and tiered mid-to-high single digit royalties on commercial sales. The company now two major deals with possible lucrative upside with two major players in the market. In addition, with the upfront payments, the company is flush with cash to help fund other development. Not a bad combination to have for a small, speculative concern.
The next small stake I recently took in the space is with Celladon Pharmaceuticals (CLDN), a once promising gene therapy concern that fell on hard times. I picked some shares up on the advice of a friend who is an analyst in the space. A recent transfusion of cash and a merger with privately held Eiger BioPharmaceuticals reminded him to a lesser extent of the same event that has powered a massive rally in KalaBios Pharmaceuticals (KBIO) which has been topic on CNBC lately and the stock has become a favorite of day traders.
I purchased the shares at just over $1.00 a share a couple of weeks ago. The shares now trade at ~$1.50 a share. An article this week on SA did a wonderful job covering this transaction and the reasons for continuing to hold. I have nothing to add to that analysis but plan to hold onto the shares.
That is my take before the last trading day of the week opens. Now on the all-important Jobs Number!
Thank You & Happy Hunting
Founder, Biotech Forum
Disclosure: I am/we are long CLDN, XOMA.