Xoma Royalty Faces Dual Crisis: Clinical Trial Failure and Legal Probe

Xoma US98419J2069

The biotechnology firm Xoma Royalty Corporation is navigating a severe storm following disappointing clinical trial results from a partner company and the subsequent launch of a securities fraud investigation. This combination of setbacks has placed immense pressure on the company's equity value.

Adding a significant new layer of risk, the law firm Pomerantz LLP announced on January 22, 2026, that it has initiated a formal investigation into Xoma Royalty Corporation. The probe will examine whether the company and its executives engaged in securities fraud or other unlawful business practices. This action is likely centered on the company's communications regarding clinical trial outcomes and their impact on the market.

For shareholders, this development introduces substantial uncertainty and potential legal liabilities, elevating the risks well beyond the typical volatility associated with the biotech sector.

The Initial Blow: A Failed Phase 3 Trial

The current situation was triggered by an announcement on December 11, 2025. Development partner Rezolute reported that the pivotal Phase 3 "sunRIZE" trial for its drug Ersodetug, intended to treat congenital hyperinsulinism (HI), failed to meet its primary endpoint. The study did not demonstrate a statistically significant reduction in weekly hypoglycemia events compared to the placebo group. A key secondary goal of the trial was also not achieved.

The market's reaction was swift and severe. On December 19, 2025, Xoma's stock price plummeted by $7.82 per share, a dramatic single-day decline of 22.76 percent. Shares closed the trading session at $25.39.

Fundamental Metrics Reflect Deep Challenges

Current data paints a concerning picture for Xoma's near-term outlook:

• Analyst sentiment is overwhelmingly negative. At Zacks Investment Research, Xoma Royalty currently holds a #5 (Strong Sell) rank.
• Earnings expectations have been slashed. Over the past 60 days, the consensus estimate for the current quarter has been revised down from a projected profit of 6 cents per share to an anticipated loss of 4 cents per share.
• Implied volatility for options on Xoma stock has surged, indicating that traders anticipate continued sharp price movements.
• Management has seen recent changes, with the company announcing a new Chief Financial Officer on January 12, 2026.

The events at Xoma underscore the inherent vulnerabilities of the biotechnology business model. Companies that rely heavily on royalty revenue from drug candidates still in development are exceptionally exposed to clinical trial setbacks. A failed Phase 3 study can directly wipe out anticipated future revenue streams and erode shareholder value. The newly launched legal investigation threatens to further complicate this process, potentially diverting management attention and resources. The company's upcoming quarterly financial report will provide critical insight into how it is managing this dual challenge.