Xoma Stock Analysis: Why XOMA Is Such a Risky Investment (XOMA)

Xoma Stock Analysis: Summary

  • XOMA’s co-development of Gevokizumab with Servier is currently on track.xoma stock analysis
  • Highly leveraged and dependant on one drugs success makes this investment similar to a binary option flip.
  • Algorithmic analysis is very bullish based on recent price movement and money flow analysis.

XOMA Corporation (NASDAQ: XOMA) is a company which researches antibody based therapeutics in the United States, Europe, and Asia Pacific.

XOMA recently reported Q1 revenues of $2.7 million, in comparison to the same period last year which had revenues of $3.4 million. Other important indicators such as R&D expenses decreased by $1.5m , and SG&A which decreased by $0.1m in comparison to the same period last year. The company made a net loss of $21.7 million this quarter and expects to spend another $60 million through 2015.

At a market cap of $420 million and a net expected loss of $80 million the trial results of their upcoming drug Gevokizumab is really a make it or break it deal. The research is being done alongside Servier, a private French drug maker. Estimates as to the commercialization revenues of this drug can bring in range of anywhere between $1-$3 Billion dollars a year – at a current valuation of $420 million the risk takers who bought it will receive a fat reward for their investment.

There are two major events down the pipeline. The first is the results of the 56-day trial and 168-day trial for uveitis. The disease is an inflammation of the uvea and is typically treated with glucocorticoid steroids – which can eventually cause Immunodeficiency. Gevokizumab could offer an alternative and positive test results will have a strong indication to XOMA’s marketability in the future.

Behcet’s disease is currently in earlier stages of trials; however, offers much more revenue potential. Nearly all patients of the disease have some form of painful oral mucocutaneous ulcerations. The disease is currently incurable with current medication aimed at easing the symptoms. Servier is testing the drug in the Asia while XOMA is doing so in the US – which will hopefully lead to a quick FDA approval.

xoma stock analysis

From a fundamental standpoint the company is extremely risky. Being highly leveraged while leaning on one drug is no short of a disaster for recipe. Also, Servier and XOMA are partnered on this drug which means that XOMA will only receive US’s and Japan’s commercial rights, while Servier receives the rest of the world.
The drug is also being tested for some inflammatory disease spinoffs such as moderate-to-severe acne and autoimmune inner ear disease, which could make a nice additional revenue stream if successful

Another drug in development is XOMA-358 (the lead antibody in the Company’s XMet D program), which is a drug used to reduce excess insulin from the body in order to reduce the risk of hypoglycemia (low blood sugar). Phase 1 was successful and as the table above shows the drug is currently in phase 2; however, if Gevokizumab does not perform well in phase 3 it is doubtful that XOMA-358 will be able to attract the additional funds needed to complete the trials.

Algorithmic Analysis

The I Know First’s market screening algorithm supports the opinion that XOMA’s stock will likely increase in price over the next 3 months and 1 year periods. According to the forecast the 3rd best small cap opportunity is XOMA, with a strong signal (middle number) of 181.10 in the 3 month horizon and 295.78 in the 1 year. The stock has a very high predictability score (bottom number) of 0.52, indicating the algorithm was able to predict its price movement very accurately in the past.

xoma stock analysis

Due to the serious risk involved with this investment we would highly caution before making any decision and would warn that it is certainly possible to make a serious loss on this investment idea. However, with that said it is a huge opportunity to make a serious return in a short period of time. If Gevokizumab’s trials are successful the stock will skyrocket – which is supported by our algorithmic analysis.