Foundering Xoma flips its diabetes program to Novo Nordisk in a $295M deal

Xoma CEO John Varian

Xoma ($XOMA), working to stay afloat after the late-stage failure of its lead drug, inked a heavily back-loaded agreement with Novo Nordisk ($NVO), trading the rights to a diabetes program in exchange for short-term cash.

Under the agreement, Novo is paying $5 million up front and promising up to $290 million more for the rights to Xoma's diabetes-treating antibodies. The preclinical treatments are designed to bolster the body's insulin receptors and thereby boost production for diabetics. Novo's license covers the program's future in diabetes, while Xoma is hanging onto the rights to each treatment in rare disease indications, the company said.

This is Xoma's second life-raft deal since it began cutting costs and shedding assets over the summer. Last month, the biotech sold off its cancer candidate to Novartis ($NVS) for $37 million in cash, $13.5 million in debt and a chance at as much as $480 million down the line if the treatment meets all of its goals.

Each agreement is meant to extend Xoma's runway as it figures out what to do with the rest of its pipeline. The company lost about 80% of its market value after disclosing in July that gevokizumab, a Servier-partnered treatment for the ocular disorder Behçet's disease, missed its main goal in a late-stage study. The failure came on the heels of a previous disappointment in osteoarthritis and marked the end of investors' patience with Xoma's top prospect.

But instead of packing it in and liquidating the company, Xoma is pressing forward with plans to out-license as many therapies as possible and keep developing XOMA 358, an insulin-blocking antibody that the biotech believes could come through in rare endocrine disorders.

Earlier this month, Xoma sold off its manufacturing operation to Agenus ($AGEN) for $5 million in cash and $1 million in stock, reducing its payroll by about 50% in the process. The company says it now has enough cash to keep the doors open into 2017.

- read the statement

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