XOMA Shoots up on Immuno-Oncology Deal with Novartis

XOMA CorporationXOMA announced that it has entered into an exclusive license agreement with Novartis NVS . Shares of XOMA were up 43.7% on the announcement.

Per the terms of the agreement, XOMA licensed the global development and commercialization rights to its anti-transforming growth factor-beta (TGFb) antibody program in its immuno-oncology portfolio to Novartis.

Novartis will make an upfront fee of $37.0 million to XOMA. In addition, XOMA is eligible to receive milestone payments up to $480.0 million. XOMA is also entitled to receive royalties on product sales between mid-single digits and low double digits.

In exchange, Novartis will extend the maturity date on the approximate $13.5 million outstanding debt under the secured note agreement to Sep 30, 2020. The notes bear interest at the six-month LIBOR plus 2%.

XOMA will reduce the royalty rate payable to it in connection with Novartis' clinical-stage anti-CD40 antibodies. XOMA expects liquidity of approximately $50.5 million from this deal, along with planned cost savings measures, both of which will fund operations through 2017.

The company still expects to begin its phase II program on XOMA 358 later this year. The candidate enjoys orphan drug designation in the U.S. for the treatment of congenital hyperinsulinism.

We remind investors that Novartis had undertaken a series of actions to reorganize its portfolio in 2014 in order to focus on its core businesses of pharmaceuticals, eye care and generics.

Meanwhile, immune-oncology is gathering a lot of attention in recent times. On its second-quarter earnings call, Novartis stated that two new molecules in immuno-oncology have entered the clinic in solid tumors with four more progressing into the clinical phase later in 2015 and in 2016.

XOMA currently carries a Zacks Rank #2 (Buy), while Novartis carries a Zacks Rank #4 (Sell). Some better-ranked health care stocks are Abbott Laboratories ABT and Novo Nordisk A/S NVO . Both carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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