Novartis AG Pays $31 Million+ for XOMA 's Failed Phase III Drug

Published: Aug 25, 2017

Novartis AG Pays $31 Million+ for XOMA's Failed Phase III Drug
August 25, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Berkeley, Calif. – XOMA Corporation (XOMA) licensed the worldwide commercial rights of gevokizumab to Novartis (NVS). XOMA will receive $31 million in upfront payments, a $5 million equity investment, and additional pre- and post-commercialization milestones, and tiered high-single to mid-double-digit royalties on net sales.

Gevokizumab is an anti-IL-1 beta allosteric monoclonal antibody that has the potential to treat a variety of inflammatory and other diseases. It functions by binding to interleukin-1 beta (IL-1 beta), a pro-inflammatory cytokine, and modulating the signaling events that create inflammation.

XOMA has two agreements with Novartis. The second grants Novartis a license to its intellectual property for IL-1 beta for cardiovascular disease.

In addition, Novartis agreed to settle XOMA’s 12 million euro debt to Les Laboratoires Servier and extend the maturity date on its debt to Novartis pushing it from September 2020 to September 2022.

“Today, we achieved a significant milestone in the transformational change that we initiated in March of this year,” said Jim Neal, XOMA’s chief executive officer, in a statement. “The immediate impact of these licensing agreements for gevokizumab and our IL-1 beta intellectual property eliminates almost half of XOMA’s outstanding debt, more than doubles our cash position, and generates potential recurring revenues through royalties. It also validates both the value of XOMA’s scientific advances and our business strategy to build shareholder value by licensing our portfolio of assets and intellectual property to partners who will continue the asset’s clinical development.”

climbed at the news, jumping from $8.96 on August 24 to a high of $11.25. It is currently trading at $10.62.

CNA Finance, noted, “Moving forward, the CNA Finance team will be keeping a close eye on XOMA. In particular, we’re interested in following the license agreement to see what the royalties translate into over time. We’re also interested in following the company’s continued shift toward a licensing model.”

In 2015, gevokizumab failed a Phase III clinical trial for Behcet’s disease uveitis. John Carroll, writing for Endpoints News, says, “With its shares crushed, XOMA had to scramble to stay in business. A few months ago the biotech reported positive but very early proof-of-concept results for a small study of XOMA-358 in postbariatric surgery hyperinsulinism (PBS) and congenital hyperinsulinism.”

At that time, Novartis also bailed out the company, investing $37 million in one of its programs.

Carroll feels that this investment is something of a trend in biotech M&A this year. He writes, “One look at this deal and you can see that Novartis CEO Joe Jimenez is dead serious when he says he won’t pay top dollar for biotech assets. In a bottom feeding expedition, the pharma giant has agreed to pay $31 million for gevokizumab, which includes $5 million for an equity stake. Novartis is also settling a euro12 million bill out-standing with Les Laboratoires Servier while restructuring its own loan to XOMA.”

He supports the assertion, noting that Regenxbio (RGNX) agreed to buy Dimension Therapeutics (DMTX) this morning for only $86 million. A year ago, Dimension Therapeutics had a market cap of more than $200 million.

Carroll writes, “The small deal, along with the news of the Dimension buyout this morning in an all-stock deal, tend to underscore Big Pharma’s lack of interest in executing big money deals this year. It’s been quiet on the deal front, and these new pacts won’t improve the industry’s sentiment on that score.”

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