Taking advantage of the expiration of its exclusive oncology collaboration with Novartis AG, XOMA Ltd. expanded an existing deal with Takeda Pharmaceutical Co. Ltd. into the oncology arena.
Three years ago, Berkeley, Calif.-based XOMA entered into an exclusive three-year deal to discover, develop and commercialize antibodies for oncology with Chiron Corp., which was later acquired by Novartis. The deal was XOMA's only exclusive relationship for a specific disease, but it was a whopper of an indication. (See BioWorld Today, March 2, 2004.)
Jack Castello, XOMA's chairman, president and CEO, said the company had to turn down "more than half" of the collaboration proposals it received over the past three years because of the exclusive nature of the Novartis deal. "The end of the exclusivity is probably good for both of us," he added.
XOMA and Basel, Switzerland-based Novartis will continue to collaborate on development-stage oncology products including HCD122, a fully-human anti-CD40 monoclonal antibody for which Novartis is conducting Phase I trials in multiple myeloma and chronic lymphocytic leukemia. Other terms of the deal, such as XOMA's access to a $50 million loan facility, will also remain in effect.
But the end of the exclusivity allows XOMA to pursue oncology deals with other companies, and Castello said he expects the expanded deal with Takeda to be "the first of many."
XOMA and Osaka, Japan-based Takeda teamed up last fall to discover and develop monoclonal antibody therapeutics in indications such as immunology. The deal was valued at up to $100 million before royalties, and XOMA has already received about $8 million. Expanding into oncology ups the pre-royalty value to an estimated $230 million in up-front, R&D funding, milestone and other payments.
Under the terms of the agreement, XOMA will discover antibodies, conduct preclinical studies, manage cell line and process development, and produce antibodies for initial clinical trials. Takeda will be responsible for clinical trials and commercialization as well as manufacturing after Phase II. (See BioWorld Today, Nov. 3, 2006.)
XOMA's shares (Nasdaq: XOMA) traded up 18 cents, or about 6 percent, on Wednesday to close at $3.20. That's just down from its 52-week high of $3.50 reached last week.
Castello said the stock has risen because "people are getting a better appreciation for our overall strategy, which is to get to financial stability by the end of 2008 and broaden our pipeline."
Yet $3.50 is still a long way from XOMA's record high of about $32 reached in the late 1980s and early 1990s. And even though it's a different world for biotech stocks today, the company has suffered a long history of setbacks with its internal pipeline.
Today that pipeline is led by Neuprex, a modified recombinant fragment of bactericidal/permeability-increasing protein (BPI). After an unsuccessful Phase III trial to prevent infection in hemorrhagic shock, a foiled attempt at FDA approval in meningococcemia, and failed partnerships with Baxter Healthcare Corp. and Zephyr Sciences Inc., XOMA is pursuing a European approval under exceptional circumstances in meningococcemia. (See BioWorld Today, Sept. 28, 1999, April 26, 2000, July 9, 2003 and July 19, 2005.)
Neuprex is also the subject of several Phase I trials, and data from an investigator-sponsored trial in pediatric open-heart surgery are expected in "a couple of months," Castello said.
XOMA is also working on reformulating XOMA 629, which proved inconclusive in a Phase II acne trial. And later this spring, Castello said XOMA will "open up the kimono" on XOMA 052, an anti-inflammatory compound with an undisclosed target. (See BioWorld Today, Aug. 18, 2004.)
Michael King, analyst with Rodman & Renshaw LLC in New York, said the XOMA 052 information may "get people excited." But he pointed to the company's "growing" share of revenues on partnered commercial products as "an important source of unencumbered revenue." XOMA shares profits on Genentech Inc.'s Raptiva (efalizumab) and Lucentis (ranibizumab), as well as on UCB SA's Cimzia (certolizumab pegol), which is expected to be launched in Crohn's disease later this year.
David Bouyle, XOMA's vice president of finance and chief financial officer, said that royalties are "an important part" of XOMA's revenues, but also pointed to income from antibody discovery collaborations and other license agreements. He projected the company will build revenue "significantly" going forward and said he'll give more specific information in the upcoming year-end earnings call.
Yet biotechs that can turn a healthy profit without their own products are few and far between. King said the model works in some cases but not in others. He said in the future, a predictable royalty income could allow the company to go out and buy products to bolster its pipeline. But for the time being, he said XOMA doesn't need "a home run" to justify their market capitalization.
XOMA posted a third-quarter net loss of $10.8 million or 11 cents per share. Total revenues were $7.4 million for the third quarter and $20.5 million for the first nine months of 2006, up 63 percent over the same period in 2005.