H.C. Wainwright maintains Buy rating on XOMA with $104 target

On Friday, H.C. Wainwright reaffirmed its Buy rating and $104.00 price target for XOMA Ltd . (NASDAQ:XOMA), reflecting confidence in the company’s diverse portfolio of royalty-bearing assets. The stock, currently trading at $20.97, near its 52-week low of $19.92, represents significant upside potential according to analyst targets ranging from $55 to $104. The biotech firm, known for its unique business model, holds over 120 royalty-bearing partnerships, with six currently contributing to its royalty revenues. InvestingPro data reveals impressive gross profit margins of 89.91% and a strong current ratio of 5.15, indicating solid financial management.

XOMA’s strategy involves leveraging these partnerships to advance various drug candidates through clinical trials, with a particular focus on identifying and prioritizing assets that could significantly enhance the company’s royalty income. The company’s portfolio includes multiple assets in Phase 3 development, each of which has the potential to become a critical turning point for XOMA’s growth trajectory.

The firm’s analyst highlighted the importance of categorizing these Phase 3 assets into high, medium, or low impact categories, based on their anticipated contribution to XOMA’s revenue stream. By evaluating the clinical data, market potential, and overall prospects of each asset, H.C. Wainwright aims to pinpoint the programs that are most likely to produce substantial royalties and serve as major growth inflection points for XOMA. The company has already demonstrated strong revenue growth, with InvestingPro showing a remarkable 498.72% increase in the last twelve months.

The reiterated price target of $104.00 suggests that the firm sees significant upside potential for XOMA’s stock, based on the expected success of its Phase 3 programs and the anticipated growth of its royalty revenues. XOMA’s business model, which is heavily reliant on the progress and success of its partners’ clinical programs, is central to the company’s financial health and future prospects.

Investors and market watchers will be keeping a close eye on XOMA’s ongoing clinical trials and the progression of its partnerships. With a market capitalization of $251.19 million, InvestingPro subscribers have access to additional key metrics and 5 more exclusive ProTips that could help evaluate XOMA’s investment potential. The company’s ability to successfully navigate these assets through to approval and market introduction will be crucial in realizing the growth and value identified by H.C. Wainwright.

In other recent news, XOMA Ltd. reported its 2024 financial results, revealing a GAAP EPS of ($1.65), which fell short of the estimated ($0.40), and full-year revenue of $28.5 million, slightly below the forecast of $30.8 million. Despite the earnings miss, H.C. Wainwright maintained a Buy rating on XOMA, with a price target of $104.00. The firm attributed the earnings shortfall to changes in partnered deals and expenses related to acquisitions, but noted XOMA’s strong cash position of $106.8 million. XOMA’s revenue was bolstered by royalties and milestones, including $2.94 billion in sales from Vabysmo, providing a 0.5% royalty, and promising early results from Ojemda and Miplyffa.

H.C. Wainwright had previously reduced XOMA’s price target from $123.00 to $104.00, citing the exclusion of iscalimab from projections, but reaffirmed confidence in the company’s diversified royalty portfolio. The firm emphasized that this portfolio offers protection against potential negative news from partnered programs, a significant advantage in the volatile biotechnology sector. Additionally, XOMA’s partner Rezolute (NASDAQ:RZLT) announced that their drug candidate ersodetug (RZ358) received Breakthrough Therapy Designation from the FDA for congenital hyperinsulinism, with potential high-single to mid-teen percentage royalties for XOMA if approved.

The upcoming Phase 3 sunRIZE study for ersodetug is expected to deliver topline data in the second half of 2025, with a potential market launch in 2027 and peak sales estimated at approximately $300 million. These developments reflect XOMA’s strategic approach to expanding its royalty portfolio and navigating the challenges of the current financial market.

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