Xoma Navigates Clinical Setback with Strategic Acquisition

Xoma US98419J2069

The past week presented a tale of two developments for Xoma Royalty: a clear clinical disappointment from a partner and the successful closure of a significant acquisition. The company's shares have been caught between these contrasting forces, testing the resilience of its business model.

In a move to strengthen its long-term revenue base, Xoma finalized its acquisition of Mural Oncology plc, effective December 5, 2025. The transaction, executed as a cash payment of $2.035 per share, adds to a portfolio that now encompasses economic rights to more than 120 assets. Since July 2024, Xoma has operated as a specialized biotechnology royalty aggregator, a model designed to generate income from milestone payments and royalties rather than through direct drug development. The Mural deal enhances the diversity of the company's future revenue streams, though it does not immediately replace the potential income from the recently challenged asset.

Partner's Phase 3 Trial Misses Primary Endpoint

The source of immediate investor concern was an announcement from partner Rezolute. The company revealed that its Phase 3 sunRIZE study for ersodetug (formerly XOMA 358) failed to meet its primary endpoint. Data showed that the highest dose resulted in approximately 45% fewer hypoglycemia episodes, compared to about 40% in the placebo group—a difference deemed statistically insignificant. Xoma holds the economic rights to ersodetug, entitling it to future milestone payments and potential royalties in the low-to-mid single-digit percentages upon any commercialization. To date, the agreement has delivered $12 million in milestones to Xoma. Rezolute intends to discuss the path forward with the U.S. FDA and is continuing a separate Phase 3 trial in tumor hyperinsulinism, with topline results anticipated in the second half of 2026.

Market Reaction and Financial Health

Equity analysts issued mixed responses following the news. On December 12, Benchmark reaffirmed a "Buy" rating with a $50.00 price target. Conversely, Leerink Partners reduced its target to $45.00 from $58.00 on December 11, and HC Wainwright trimmed its FY2025 EPS estimate to $0.51 from $1.17, also adjusting its price target slightly. In a show of confidence, CEO Owen Hughes purchased 100,000 shares on December 4 for $2,505,000, increasing his direct stake.

The stock has lost momentum recently, closing Friday at €21.60 and declining roughly 23% over the preceding 30 days. Despite this, Xoma reported robust operational cash generation. For the first nine months of 2025, the company collected $43.9 million in royalties and milestones, including $14.3 million in the third quarter alone. As of September 30, 2025, liquid assets stood at $130.6 million.

Looking Ahead: Key Catalysts on the Horizon

Investor attention now turns to two upcoming clinical milestones. Topline data from Gossamer Bio's PROSERA study for seralutinib is expected in February 2026. Furthermore, the additional results from Rezolute's ersodetug trial in tumor hyperinsulinism are due in H2 2026. These events will be critical in assessing the portfolio's ability to overcome the recent setback and the sustainability of its cash flow.