Decimated by clinical failure, Xoma turns to plan B

Xoma CEO John Varian

Xoma ($XOMA), thrust into penny-stock territory after its lead drug failed in Phase III, isn't planning to shut its doors, instead pressing forward with the candidates it has left and promising to transform itself into a nimble biotech with a shot at survival.

The company has lost more than 80% of its value since reporting last month that gevokizumab, a Servier-partnered treatment for the ocular disorder Behçet's disease, missed its main goal in a late-stage study. The antibody had previously failed in osteoarthritis, and its latest setback was apparently the last straw for investors.

But instead of closing up shop and returning cash to shareholders--increasingly uncommon among biotech companies--Xoma is soldiering on with plans to reduce its headcount, cut costs and shift focus to endocrine disorders. The company isn't getting into details about the cuts, and it's unclear how many of the 181 employees it had as of March will stick around for the transition.

"We knew our endocrine portfolio would be important to Xoma regardless of gevokizumab's role," CEO John Varian said in a statement. "Today, it takes center stage."

Key to the company's next phase is XOMA 358, a Phase II-ready antibody designed to treat rare disorders resulting from an overabundance of insulin. The company's endocrine work includes another midstage candidate and a group of preclinical therapies "that provide a critical mass," Varian said. Meanwhile, Xoma is looking to outlicense the early-stage therapies that don't align with its newly narrowed focus, including an immuno-oncology asset.

Xoma has "made some hard decisions" since gevokizumab's failure, Varian said, but the company believes it can build a new identity as "a smaller, focused organization staffed to support the growth and development of our endocrine portfolio."

The Berkeley-headquartered biotech reported $51 million in cash and equivalents as of the end of last quarter.

- read the statement (PDF)

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