Genentech DNA and UCB Pharma reported positive psoriasis data on Raptiva and Cimzia, respectively, at the American Academy of Dermatology (ADA) meeting this past weekend. Xoma, Ltd. XOMA receives a royalty on sales of both products, along with sales of Genentech's Lucentis. We believe that total royalty payments to XOMA could eclipse $50 million in 2012, helping to drive XOMA to strong profitability.
We continue to recommend the shares at this level. Our near-term price target is $4.
The recent positive data on both Raptiva and Cimzia has sparked a rally in XOMA shares. Royalty payments are 100% margin and provide management with cash to fund internally developed candidates such as X.629 and X.052. We remind investors that Genentech's Lucentis blew away expectations in the fourth quarter and should eventually post global sales over $1B. We estimate that XOMA's royalty on sales of Lucentis is approximately 0.6%.
These royalties are derived through the licensing of XOMA's proprietary antibody development and production technology. We believe there are dozens of candidates in mid-stage trials that will eventually pay a royalty to XOMA. XOMA will disclose these products once they enter phase III trials. Companies such as Protein Design Labs (now PDL BioPharma) and Cambridge Antibody Technologies (now part of AstraZeneca {NYSE: AZN}) pioneered the royalty-revenue based growth model. We see XOMA's royalty suite bringing in over $50 million in 2012. Based on discounted cash flow (DCF) analysis, XOMA shares are worth $3.50 based on just this royalty payment alone.
XOMA initiated with "buy" by Rodman & Renshaw
NEW YORK, January 24 (dailywallstreet.com) - In a research note published yesterday, analysts at Rodman & Renshaw initiate coverage of XOMA Limited (ticker: XOMA) with a "market outperform" rating. The target price is set to $5.
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Xoma CEO says he'll retire
Monday February 26, 3:06 pm ET
Xoma Ltd. said Monday that its president, CEO and chairman, Jack Castello, will retire as soon as a replacement is hired.
The Berkeley company (NASDAQ: XOMA - News) develops therapeutic antibodies. It has royalty interests in drugs being sold by Genentech Inc. and Merck-Sorono SA and by Genentech and Novartis AG.
Castello is 70 years old. He'll keep working throughout the company's search for a new CEO.
Published February 26, 2007 by San Francisco Business Times
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Significant Phase III Results with CIMZIA(TM) in Rheumatoid Arthritis
Friday February 23, 1:15 am ET
BRUSSELS, BELGIUM--(MARKET WIRE)--Feb 23, 2007 --
Radiographic Data Demonstrated Significant Reduction in Joint Damage
Brussels (Belgium), February 23, 2007 at 7:00 AM CET - UCB today announced key results of a pivotal Phase III study (RAPID 1) involving nearly 1,000 patients on CIMZIA(TM) (certolizumab pegol), the first PEGylated, Fc-free anti-TNF, intended for the treatment of moderate to severe rheumatoid arthritis (RA). RAPID 1's radiographic data showed that CIMZIA(TM) in combination with methotrexate prevented structural damage of the joints to a significantly greater degree than placebo plus methotrexate after one year's treatment.
RAPID 1 achieved its co-primary endpoint, the inhibition of progression of structural damage, with a statistically significantly smaller change from baseline in modified Total Sharp Score (mTSS)[a] observed at week 52 in both CIMZIA(TM) treatment arms (400mg at week zero, week two and week four followed by 200mg every two weeks; or 400mg every two weeks) compared with the placebo treated arm (p < 0.001).
The study also showed that in both active treatment arms CIMZIA(TM) improved the signs and symptoms of RA to a clinically statistically significantly greater degree than the placebo arm in patients who had inadequately responded to methotrexate alone (p < 0.001).
Similar results were observed with a second pivotal Phase III study of CIMZIA(TM) in RA, RAPID 2, using CIMZIA(TM)'s new subcutaneous liquid formulation.
In both RAPID 1 and RAPID 2, the primary endpoint, ACR 20 response at 24 weeks, was significantly higher in both CIMZIA(TM) treated arms than in the placebo treated arm (p < 0.001) . In both studies there was no significant difference between response levels in either of the CIMZIA(TM) treatment arms. ACR 50 and ACR 70 responses were also both achieved with statistical significance in both studies.
RAPID 1 and RAPID 2 demonstrated that effective results in the treatment of RA can be achieved with a 400mg total monthly dose of CIMZIA(TM) -- a higher dose is not necessary.
"These results are significant. They showed, for the first time, that the Fc region present in conventional anti-TNFs is not required for activity in rheumatoid arthritis", commented Professor Edward Keystone, Professor of Medicine, University of Toronto, Canada. "These data confirm that certolizumab pegol may provide a valuable new treatment option for patients with this condition."
CIMZIA(TM) was also shown to have a rapid onset of action: approximately three-quarters of actively-treated patients, who achieved ACR 20 at week 24, actually reached ACR 20 within four weeks.
"The RAPID 1 and 2 studies showed consistent and robust efficacy with both the lyophilized and liquid formulations of certolizumab pegol," added Professor Joseph Smolen, Chairman of the Department of Rheumatology, Medical University of Vienna, Austria. "Interestingly, both studies show that maximal response can be achieved as early as 12 to 16 weeks."
The safety and tolerability profile of CIMZIA(TM) in both studies was consistent with that expected of an anti-TNF agent.
Further data from both RAPID 1 and RAPID 2 will be presented at major international rheumatology congresses later this year. Preparation for a licence submission in the treatment of RA is ongoing, with filing planned in the second half of 2007.
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