– Exclusively licenses global rights to its (TGFb) antibody program to Novartis
– Could the lucrative agreement spare Xoma the pain of raising money for developing its programs, or filing bankruptcy?
– Reasons to believe that Xoma’s TGFb therapeutic antibodies might become another cancer immunotherapy used alone or in combination with immune checkpoint protein inhibitors such as PD-1 inhibitors, which are considered game changers in cancer management?
Indeed, the deal with Novartis has given Xoma a chance to survive. The deal is good enough to enable Xoma to take care of its programs without the need for financing through borrowing or dilution. As a matter of fact, borrowing and new public offering are hard, if not impossible to achieve for a firm whose stock is trading below $1. Indeed, Novartis deal seems to have come on time to save Xoma. The deal comprises $37.0 million upfront payment and $13.5 million loan maturity date extended to September 2020. On the plate also is a potential milestone payments of up to $480.0 million and, in case of approval, royalties from mid-single digits to low double digits will begin paid to the struggling firm.
In its terrible position, it is not unfair to ask: Could investors still trust Xoma after years of failed promises that devastated its shareholders’ investments over its long history?
Years ago, Xoma was loved and trusted by investors allover the world. It was sufficient to mention the biotech firm’s name in London, New York, Tokyo, Singapore and other countries around the world to find many admirers of Xoma. The firm has a unique monoclonal antibody technology. One of the monoclonal antibody therapeutics promised saving people’s lives from the deadly sepsis and another one that promised treating acne vulgaris, both failed to reach the market. The first failed in late trials and the second in early trials.
In the meantime, Xoma has proven its scientific and technological capabilities by creating monoclonal antibody drugs that were granted approval in the U.S. and in overseas countries’ countries, but for other firms. Unfortunately, all the successful products, some of them best sellers, are owned by large drug firms. None of the approved drugs are owned by Xoma.
The only drug, which Xoma had partnership on with Genentech was XOLAIR® (omalizumab), which has been approved for asthma, chronic idiopathic urticaria (CIU) and chronic hives that did not respond to antihistamines. Unfortunately for Xoma, it couldn’t fulfill its financial obligations towards the early difficult marketing of the drug and was obliged to give away its partnership on the drug for little money that it spent in no time. The royalty payments on the other approved drugs were also forfeited by the mismanagement of the bad old management.
In spite of this bad beginning, still investors hadn’t given up on the scientifically sound firm, especially its monoclonal antibody.
In recent history, though, a series of bad news haunted the firm in a short time. Xoma stock tumbled a little less than 30% when its monoclonal antibody gevokizumabfailed its second clinical trial in three years. In march 2011, Gevokizumab, which was known as XOMA-052 failed a diabetes phase 2 trial. However, the drug continued to be studied in Phase 3 trials for noninfectious and Behcet’s uveitis and other indications by Xoma and its partner the French drug developer Servier. Xoma had also planned a Phase 3 study of the drug in pyoderma gangrenosum, which causes leg ulcers.
Servier is a large pharmaceutical company and investors were feeling confident about the odds of its success in getting the drug approved. It didn’t. The failure of this drug at the hands of Servier did not leave anything else for investors to bet on in Xoma. The selloff was tremendous. After losing 80% of its value, Xoma became a penny stock.
Indeed, nothing remained in this firm except its good science and good antibody technology. and a product pipeline that has yet to be developed.
The Novartis Agreement Effect
Bottomline, investors were not expecting any good news for this firm, especially as big as yesterday agreement with Novartis. The stock soared following the news, which means that there are still some investors that enable themselves to hope for Xoma’s resurrection. Seeing unexpected millions of dollars coming into this firm’s coffers seems to have encouraged investors to bet on the agreement and on the rest of the firm’s pipeline, which has some promising, but incompletely developed products. So, the Novartis agreement has, for sure, injected life in the dead body of the firm and restored some confidence in the firm’s science and in the possibility of continuing the development of the firm’s promising investigational drugs without the need for borrowing or further diluting through stock offering, which is kind of impossible with the firm’s stock becoming worth pennies.
John Varian, Chief Executive Officer of Xoma said, “Xoma and Novartis have worked closely together for several years to develop new product candidates. When they expressed interest in our anti-TGFb program, we knew Novartis was the best company to bring this exciting potential therapy to the patients whom it may help. Novartis is recognized as a leader in oncology, where an anti-TGFb molecule has real potential either as monotherapy or in combination with other therapeutic options.
Regarding a financing opportunity, Mr. Varian stated, “We had said we did not plan to raise equity capital at our recent stock price in order to fund the development of our very exciting endocrine portfolio. With this non-dilutive liquidity of essentially $50.5 million, we currently project this capital, in combination with our planned cost savings measures, will fund operations into 2017. We remain on track to begin our XOMA 358 Phase 2 clinical program this fall and fully anticipate we will have the data from these studies during that timeframe.”
The drug subject of the Novartis agreement
Transforming growth factor-beta (TGFb) is a potent immune suppressive cytokine. It is involved in the inhibition of cell growth and in immune suppression. Elevated levels of TGFb may drive the progression of numerous diseases, including advanced metastatic cancer and fibrosis.
In humans, three isoforms of TGFb exist: TGFb1, 2 and 3. TGFb1 is overexpressed in many cancers and is believed to be involved in metastasis. Inhibiting TGFb1 and 2 while sparing TGFb3 may reduce tumor-protecting regulatory T cells, while allowing for the development of cytotoxic immune responses enhanced by TGFb3, improving the therapeutic index of TGFb inhibitors. Given the role of the TGFb pathway in cancer, it has become an attractive target for cancer drug development.
the TGFb antibody program was made possible through Xoma’s proprietary antibody discovery technology platform. the drug known as XOMA 089 is a fully human, high-affinity drug. It neutralizes TGFb1 and 2 while sparing TGFb3. Data have shown this compound as both active against tumor growth in preclinical models of head and neck cancer as well as breast cancer and breast cancer metastasis.
Preclinical data suggest that it may be synergistic with PD1 inhibition. Investigation highlighting these results was recently presented at the 2015 FASEB meeting on the TGFb Superfamily.
Xoma has made significant progress regarding this lead compound on both the understanding of its activity, mechanism of action, as well as preclinical toxicology and manufacturing. Other antibodies included in this license agreement inhibit TGFb1, which may be a more appropriate approach to certain indications. These antibodies have potential as immunotherapy treatments to be used alone or in combination with immune checkpoint protein inhibitors.
Pipeline
Gevokizumab: In Phase 3 trial for NIU and pyoderma gangrenosum, active non-infectious anterior scleritis, autoimmune inner ear disease, and cardiovascular diseases, as well as diseases under the neutrophilic dermatoses designation, Schnitzler syndrome and giant cell arteritis.
Metabolic activating, sensitizing, and deactivating/antagonizing antibodies: In preclinical stage for diabetes.
XOMA 3AB, a multi-antibody product for human botulism poisoning;
XOMA 629, a topical anti-bacterial product
Xoma licenses antibody discovery, optimization, and development technologies, including Antibody Discovery Advanced Platform Technologies, ModulX and OptimX.
Collaborations: Xoma has collaboration and licensing agreements with Les Laboratoires Servier, National Institute of Allergy and Infectious Diseases, Takeda Pharmaceutical, Novartis AG, Pfizer Inc., Symplmed Pharmaceuticals, LLC and Texas A&M University.
What do we think?
Will the Novartis agreement give Xoma the chance to resurrect and grow big based on the immunotherapy drug subject of the agreement and on the firm’s pipeline?
We only know one thing. We do not throw from hand a stock worth pennies now when it belongs to a firm that has such a great science and technology and a pipeline of important drugs and all the above mentioned partners.
We are in till the end.
“Que Sera, Sera”
Prohost Forward-Looking: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
News & Comments
October 2, 2015
Xoma: A New Chance for Resurrection?
– Exclusively licenses global rights to its (TGFb) antibody program to Novartis
– Could the lucrative agreement spare Xoma the pain of raising money for developing its programs, or filing bankruptcy?
– Reasons to believe that Xoma’s TGFb therapeutic antibodies might become another cancer immunotherapy used alone or in combination with immune checkpoint protein inhibitors such as PD-1 inhibitors, which are considered game changers in cancer management?
Indeed, the deal with Novartis has given Xoma a chance to survive. The deal is good enough to enable Xoma to take care of its programs without the need for financing through borrowing or dilution. As a matter of fact, borrowing and new public offering are hard, if not impossible to achieve for a firm whose stock is trading below $1. Indeed, Novartis deal seems to have come on time to save Xoma. The deal comprises $37.0 million upfront payment and $13.5 million loan maturity date extended to September 2020. On the plate also is a potential milestone payments of up to $480.0 million and, in case of approval, royalties from mid-single digits to low double digits will begin paid to the struggling firm.
In its terrible position, it is not unfair to ask: Could investors still trust Xoma after years of failed promises that devastated its shareholders’ investments over its long history?
Years ago, Xoma was loved and trusted by investors allover the world. It was sufficient to mention the biotech firm’s name in London, New York, Tokyo, Singapore and other countries around the world to find many admirers of Xoma. The firm has a unique monoclonal antibody technology. One of the monoclonal antibody therapeutics promised saving people’s lives from the deadly sepsis and another one that promised treating acne vulgaris, both failed to reach the market. The first failed in late trials and the second in early trials.
In the meantime, Xoma has proven its scientific and technological capabilities by creating monoclonal antibody drugs that were granted approval in the U.S. and in overseas countries’ countries, but for other firms. Unfortunately, all the successful products, some of them best sellers, are owned by large drug firms. None of the approved drugs are owned by Xoma.
The only drug, which Xoma had partnership on with Genentech was XOLAIR® (omalizumab), which has been approved for asthma, chronic idiopathic urticaria (CIU) and chronic hives that did not respond to antihistamines. Unfortunately for Xoma, it couldn’t fulfill its financial obligations towards the early difficult marketing of the drug and was obliged to give away its partnership on the drug for little money that it spent in no time. The royalty payments on the other approved drugs were also forfeited by the mismanagement of the bad old management.
In spite of this bad beginning, still investors hadn’t given up on the scientifically sound firm, especially its monoclonal antibody.
In recent history, though, a series of bad news haunted the firm in a short time. Xoma stock tumbled a little less than 30% when its monoclonal antibody gevokizumabfailed its second clinical trial in three years. In march 2011, Gevokizumab, which was known as XOMA-052 failed a diabetes phase 2 trial. However, the drug continued to be studied in Phase 3 trials for noninfectious and Behcet’s uveitis and other indications by Xoma and its partner the French drug developer Servier. Xoma had also planned a Phase 3 study of the drug in pyoderma gangrenosum, which causes leg ulcers.
Servier is a large pharmaceutical company and investors were feeling confident about the odds of its success in getting the drug approved. It didn’t. The failure of this drug at the hands of Servier did not leave anything else for investors to bet on in Xoma. The selloff was tremendous. After losing 80% of its value, Xoma became a penny stock.
Indeed, nothing remained in this firm except its good science and good antibody technology. and a product pipeline that has yet to be developed.
The Novartis Agreement Effect
Bottomline, investors were not expecting any good news for this firm, especially as big as yesterday agreement with Novartis. The stock soared following the news, which means that there are still some investors that enable themselves to hope for Xoma’s resurrection. Seeing unexpected millions of dollars coming into this firm’s coffers seems to have encouraged investors to bet on the agreement and on the rest of the firm’s pipeline, which has some promising, but incompletely developed products. So, the Novartis agreement has, for sure, injected life in the dead body of the firm and restored some confidence in the firm’s science and in the possibility of continuing the development of the firm’s promising investigational drugs without the need for borrowing or further diluting through stock offering, which is kind of impossible with the firm’s stock becoming worth pennies.
John Varian, Chief Executive Officer of Xoma said, “Xoma and Novartis have worked closely together for several years to develop new product candidates. When they expressed interest in our anti-TGFb program, we knew Novartis was the best company to bring this exciting potential therapy to the patients whom it may help. Novartis is recognized as a leader in oncology, where an anti-TGFb molecule has real potential either as monotherapy or in combination with other therapeutic options.
Regarding a financing opportunity, Mr. Varian stated, “We had said we did not plan to raise equity capital at our recent stock price in order to fund the development of our very exciting endocrine portfolio. With this non-dilutive liquidity of essentially $50.5 million, we currently project this capital, in combination with our planned cost savings measures, will fund operations into 2017. We remain on track to begin our XOMA 358 Phase 2 clinical program this fall and fully anticipate we will have the data from these studies during that timeframe.”
The drug subject of the Novartis agreement
Transforming growth factor-beta (TGFb) is a potent immune suppressive cytokine. It is involved in the inhibition of cell growth and in immune suppression. Elevated levels of TGFb may drive the progression of numerous diseases, including advanced metastatic cancer and fibrosis.
In humans, three isoforms of TGFb exist: TGFb1, 2 and 3. TGFb1 is overexpressed in many cancers and is believed to be involved in metastasis. Inhibiting TGFb1 and 2 while sparing TGFb3 may reduce tumor-protecting regulatory T cells, while allowing for the development of cytotoxic immune responses enhanced by TGFb3, improving the therapeutic index of TGFb inhibitors. Given the role of the TGFb pathway in cancer, it has become an attractive target for cancer drug development.
the TGFb antibody program was made possible through Xoma’s proprietary antibody discovery technology platform. the drug known as XOMA 089 is a fully human, high-affinity drug. It neutralizes TGFb1 and 2 while sparing TGFb3. Data have shown this compound as both active against tumor growth in preclinical models of head and neck cancer as well as breast cancer and breast cancer metastasis.
Preclinical data suggest that it may be synergistic with PD1 inhibition. Investigation highlighting these results was recently presented at the 2015 FASEB meeting on the TGFb Superfamily.
Xoma has made significant progress regarding this lead compound on both the understanding of its activity, mechanism of action, as well as preclinical toxicology and manufacturing. Other antibodies included in this license agreement inhibit TGFb1, which may be a more appropriate approach to certain indications. These antibodies have potential as immunotherapy treatments to be used alone or in combination with immune checkpoint protein inhibitors.
Pipeline
Gevokizumab: In Phase 3 trial for NIU and pyoderma gangrenosum, active non-infectious anterior scleritis, autoimmune inner ear disease, and cardiovascular diseases, as well as diseases under the neutrophilic dermatoses designation, Schnitzler syndrome and giant cell arteritis.
Metabolic activating, sensitizing, and deactivating/antagonizing antibodies: In preclinical stage for diabetes.
XOMA 3AB, a multi-antibody product for human botulism poisoning;
XOMA 629, a topical anti-bacterial product
Xoma licenses antibody discovery, optimization, and development technologies, including Antibody Discovery Advanced Platform Technologies, ModulX and OptimX.
Collaborations: Xoma has collaboration and licensing agreements with Les Laboratoires Servier, National Institute of Allergy and Infectious Diseases, Takeda Pharmaceutical, Novartis AG, Pfizer Inc., Symplmed Pharmaceuticals, LLC and Texas A&M University.
What do we think?
Will the Novartis agreement give Xoma the chance to resurrect and grow big based on the immunotherapy drug subject of the agreement and on the firm’s pipeline?
We only know one thing. We do not throw from hand a stock worth pennies now when it belongs to a firm that has such a great science and technology and a pipeline of important drugs and all the above mentioned partners.
We are in till the end.
“Que Sera, Sera”
Prohost Forward-Looking: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
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