XOMA. Bull or Bear? Message Board

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Biotech / Medical : XOMA. Bull or Bear?

XOMA 33.34

-2.1%

Nov 7 9:30 AM EST

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From: bob zagorin	7/15/2006 3:38:48 PM
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from zacks KEY POINTS Raptiva continues to provide meaningful royalty revenue to Xoma. Growth outside the U.S. is strong and should help drive royalties higher over the next several years. Xoma exited the first quarter 2006 with $37.4 million in cash and investments. We believe this is enough to fund operations into 2007. Our financial model predicts that Xoma will become cash flow positive toward the end of 2009. We are pleased to see development programs outside Raptiva, for example the oncology therapeutic program with Novartis and the collaboration with Lexicon Genetics, progressing along. We believe the market is applying very little value to these programs. Although Xoma’s pipeline is still very early-stage, it should help contribute to positive momentum in 2006. The 18-month, $15 million development and manufacturing contract with the National Institute of Allergy and Infectious Disease (NIAID) should open the door to additional contract business at Xoma. The recent agreement with Cubist Pharmaceuticals to develop and manufacture antibodies for hepatitis B virus (HBV) infection supports this belief. We believe these agreements help the company reduce cash burn. The company recently signed it first Human Engineering (“HE”) technology licensing deal with privately held AVEO Pharmaceuticals. Xoma’s HE technology offers upfront payments, development milestones, and potential royalties on sales of HE derived products. In late May 2006 Xoma signed another HE technology licensing agreement with Schering-Plough. With the shares trading below $2.00, Xoma is a very volatile stock. However, valuation is attractive based on our 2006 total revenue forecast of $30 million. We believe the shares are well supported in the $1.60 range given the new profitability of the Raptiva alliance and the collaborations with Lexicon and Novartis. Although highly speculative, Xoma may offer aggressive shareholders an impressive return. Our price target is $3.00.

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