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Xoma zeroes in on diabetes — and a partnership? — again

http://www.bizjournals.com/sanfrancisco/blog/biotech/2012/05/xoma-diabetes-xmeta-ucsf.html

Research was on the chopping block as Xoma Corp. looked to cut costs over the past year. But now, even as takeover talk touches the Berkeley antibody drug developer, Xoma may be showing it was wise to cut elsewhere.
In a paper published in the May issue of the journal Diabetes, Xoma unveiled a preclinical antibody drug, called XMetA, that targets diabetes.

Initial reaction: Diabetes? Really?

Lots of investors and the companies they back have abandoned the diabetes space, running away from the large, pricey trials that the Food and Drug Administration now requires to check for heart-related side effects.
What’s more, Xoma’s most recent venture into diabetes, with gevokizumab, or XOMA-052, failed in a mid-stage trial. It had been hailed as a potential once-a-month treatment for diabetics, tackling diabetes from the angle of inflammation.
Xoma and partner Servier (also a potential buyer, according to Wedbush Securities

Buoyed by partner, Xoma at center of takeover talk now are developing gevokizumab in a variety of inflammation-related areas: the eye disease Behcet’s uveitis, acne, osteoarthritis and cardiovascular disease.

Xoma’s (NASDAQ: XOMA) new drug, not yet tested in humans could shift the patient, drug-development and scientific chatter around diabetes. But it comes with a lot of questions, too.

Like gevokizumab, XMetA could reduce the number of injections that diabetics give themselves, but it also could be used by early-stage diabetics. For a lot of those patients, the body still is making some insulin, but long-term use of insulin has been associated with hypoglycemia and weight gain, and it may stimulate cancer-causing molecular pathways.
XMetA may prevent these side effects. The study published in Diabetes was undertaken by Dr. Ira Goldfine, a professor emeritus at the University of California, San Francisco University of California, San Francisco

“The main aspect of the drug that is intriguing is that it could serve as a way to produce long-acting effects and minimize the frequency of dosing needed for therapeutic efficacy,” Dr. Suneil Koliwad, an assistant professor of medicine at UCSF, and Gerold Grodsky, a professor emeritus at the UCSF Diabetes Center, wrote in an email to the San Francisco Business Times.

“This would, if it worked, enhance the attractiveness of the drug from the standpoint of patients, many of whom already take multiple daily medications.”Koliwad also is president of the community leadership board of the American Diabetes Association’s Bay Area office.

There's a lot of drama on stage as XMetA waits in the wings.

For one, Xoma's been busy cutting its costs. Its budget line shows that internal R&D expenses have fallen from $35.1 million in 2009 to $24.4 million last year. (Those costs totaled $52 million in 2010.) What's more, Xoma cut 84 jobs earlier this year, including eliminating internal research functions that are “non-differentiating” or can be farmed out to contractors.
Deeper cuts to R&D were on the table, one source told me, but the company held off.
The XMet program accounted for 10 percent to 20 percent of Xoma’s total R&D spend last year, Xoma said in a Securities and Exchange Commission filing in March.

There appears to be a future in Xoma research. Last month Xoma added the title of senior vice president of research and development to the duties of Dr. Paul Rubin, who joined the company in June 2011 as chief medical officer.
Then there's Xoma's decision to shine a light on a preclinical drug like XMetA. CEO John Varian makes no bones about one of the reasons Xoma is bringing early attention to XMetA: The company wants to line up a partnership, and it thinks it can do so in short order.

“We know we can find a partner this year, if we decide to,” Varian said. “We will not take this through Phase II ourselves, and we will not have to take it through Phase II.”
Also lurking in the background is a possible buyout of Xoma.

Interestingly, the Xoma stake of New York City’s Felix and Julian Baker aka Baker Bros. Advisors LLC has increased to 30.57 percent, as of Xoma’s April 11 proxy statement filing with the Securities and Exchange Commission. A Baker stake didn’t even register on last year’s proxy.
Baker Bros. was the largest shareholder in Ardea Biosciences Inc., the San Diego developer of the urea disorder drug lesinurad. AstraZeneca plc (NYSE: AZN) bought Ardea last month for $1.26 billion.

Putting all that aside, there are caveats to XMetA’s promise as well, Koliwad and Grodsky warned. For one, it is unclear whether XMetA would work well for patients early in the course of type 2 diabetes. Secondly, Goldfine’s study did not look at which organ XMetA has the greatest effect.

“This will be important in determining what sorts of long-term monitoring in upcoming studies will be needed to evaluate (XMetA’s) side effect profile fully,” Koliwad and Grodsky wrote in their email.

That being said, they said XMetA holds promise to lead a new class of drugs.

Over the coming years it will be up to Xoma or a partner or a buyer to deliver on that promise and prove that the company’s decision to not cut R&D more deeply was a wise one.

Ron Leuty covers biotech for the San Francisco Business Times.