Biotech Values

[DonShimoda]

XOMA Q1 2013 Results and CC Notes

1) The company discussed, for the first time, the results of the Servier Ph2 follow-on trial in Behçet's. Of 21 pts enrolled, 17 were considered acute and 4 were "at risk." 11 pts had a vitreous haze score at enrollment that was greater than or equal to 2 which is also the enrollment threshold in the Eyeguard-A Ph3 trial. 8 of 11 patients (72%) experienced a 2 unit reduction. For reference, the primary endpoint for Eyeguard-A is the proportion of patients to see 2 unit improvement in their vitreous haze score day 56. The Ph3 Eyeguard-A trial is powered to show a 40% response so the 72% seen in this Ph2 data is quite encouraging. As pointed out in #msg-87720750 the assessment period in both Ph2 trial and the Ph3 are essentially the same: 56 days in EYEGUARD-A and 56 days after the 14-day loading-dose filtering period in the phase-2 study (i.e. 70 days in all in the phase-2 study).

For reference, the EYEGUARD program consists of three pivotal trials; EYEGUARD-A in patients with active disease is expected to read-out by year end; data from EYEGUARD-C, which is studying the effects of gevokizumab in a maintenance setting, is expected in 1Q14; and, EYEGUARD-B which is enrolling patients with Behçet's is expected to read-out last, in 2Q14. Per discussions with the FDA, the company will likely need to meet the primary endpoint in two of the three trials. The risk is that even though all three trials are in NIU, Eyeguard A and C have a different intent-to-treat population than that actually studied in the Ph2 trial. Of course, the trial for which we have the most data, Eyeguard-B, actually reads out last. However, even though the company is running three separate Ph3 trials, the trials are all in non-infectuous inveitis of which Behçet's uveitis is one of the most severe forms. As an investment, it seems logical that if Gevokizumab works in the most severe form of NIU (Eyeguard B) then it should work in the less severe forms (Eyeguard A,C) of the disease as well. Time will tell.

The company has expanded the number of trial sites in the US from 60 to 80 and expects to have a total of 140 sites in over 20 countries up and running in the next few weeks.

2) Of the 27 million people in the U.S. with osteoarthritis, approximately 1.8-2.2 million have erosive osteoarthritis of the hand (EOA). The company noted that recent research has highlighted the role of IL-1 beta in EOA disease progression. There are no therapeutic options available that work well for these patients, let alone a drug that can modify their disease.

The current PoC is targeting the 500,000 patients who have inflammatory EOA as evidenced by elevated C reactive protein (CRP). However, only about a quarter of the patients being screened for the Ph2 trial have elevated CRP levels. Consequently, the company announced a second PoC trial for EOA patients who do not meet the "active inflammatory" CRP threshold. According to the company, "This study will tell us if gevokizumab works in the broader EOA population as estimated to be 1.8 to 2.2 than people in the U.S. or they may tell us gevokizumab only works in the patients who are in inflammatory stage of the disease which might approximate about 500,000 patients." The second EOA trial in low CRP patients should provide better insight into the validity/necessity of the CRP biomarker.

To date, the company has enrolled 67/90 pts in the initial Ph2 EOA trial and anticipates top-line data by Labor Day.

3) The company continues to explore a commercial path forward in moderate to severe acne and, to that end, has consulted with ~100 dermatologists. The feedback has been positive and the company sees a possible role for gevokizumab in treating patients who have not yet been prescribed acutane, which has known toxicities. The company stated that next Ph3 trial will be in either erosive osteoarthritis or acne.

4) In 1Q13, the company burned ~ $15M and, as of March 31, 2013, had $70.4M in cash. The company expects to use $50M this year which would leave them with ~ $35M by year-end. Although the company stated they have sufficient funding through FY14, I would not be surprised if the company raised funding on a positive Eyeguard-A result (see previous discussion in #msg-85603458).

A copy of the 1Q14 transcript may be found on seeking alpha.