Xoma Buddies Up To Pfizer (Forbes)
Steve Schaefer, 08.28.07, 4:21 PM ET
Xoma Limitedsaw its stock price shoot higher Tuesday on news of a licensing deal with pharmaceutical giant Pfizer.
Small-cap biopharmaceutical firm Xoma has never posted a profit and its stock price has struggled, but strategic partnerships with pharmaceutical and biotech companies like Schering Plough, Genentech, Merck, and now Pfizer, have provided much needed equity.
In a note Tuesday morning, Rodman & Renshaw Analyst Michael King reiterated a “Buy” rating on Xoma, and a target price of $5.00. Shares surged more than 20% early Tuesday and ended the day up $0.40, or 17.54%, to $2.68. With a $355 million market capitalization Xoma is hardly a major pharmaceutical player, but adding to its already strong roster of partners goes a long way toward raising its profile in the market.
Miller Tabak Analyst Les Funtleyder said the deal between Xoma and Pfizer is indicative of a partnership trend that will continue. Funtleyder told Forbes.com, “if the capital markets continue to be unfavorable towards biotech firms, you will continue to see firms like Xoma pursuing licensing deals to boost their stock price.” As it gets more difficult for smaller biotech firms to raise equity in the market, their stocks will go down and they will pursue investment through partnerships in order to boost flagging share prices.
On the other side of the equation, large pharmaceutical companies like Pfizer are looking to bolster internal pipelines, finding it less expensive to acquire rights to technology than to develop it in-house, Funtleyder said.
The deal with Pfizer calls for Xoma to receive $30 million up front in exchange for non-exclusive, worldwide rights to the company’s patented bacterial cell expression (BCE) technology for the development and manufacturing of antibody products.
The $30 million up front payment may be spare change to a pharmaceutical giant like Pfizer, but to a firm like Xoma, which lost $7.5 million on revenue of $14.1 million in the last quarter, it’s akin to scratching off a winning lottery ticket. Milestone payments and future royalties associated with the deal could bring the value of the partnership significantly higher.
In a press release trumpeting the partnership deal with Pfizer, Xoma chief executive Steven Engle said “We are very pleased that Pfizer has chosen to incorporate our BCE technology into their global drug development effort, and we look forward to what we anticipate will be a mutually beneficial relationship.” |
