XOMA stock holds Buy rating, $104 target from H.C. Wainwright

On Wednesday, H.C. Wainwright maintained a Buy rating on shares of XOMA Corporation (NASDAQ:XOMA) with a steadfast price target of $104.00, representing significant upside from the current trading price of $24.92. The firm’s analysis follows XOMA’s recent announcement of an increased royalty stake in Takeda’s mezagitamab. XOMA has acquired BioInvent’s interest in the asset, which amplifies their royalty percentage beyond the initial 4%. According to InvestingPro data, XOMA maintains impressive gross profit margins of over 90%.

The financial specifics of the deal reveal that XOMA will pay up to $30 million for the additional royalty claim, which is speculated to be more than 1%, potentially elevating the total royalty to an estimated 5.5%. The payment structure includes an immediate $20 million to BioInvent, with the balance due upon a second approval of mezagitamab.

Furthermore, XOMA’s financial benefits from this transaction extend to potential milestone payments. The company is set to receive $16.25 million in milestone payments from Takeda, contingent upon the achievement of certain developmental and regulatory targets.

The analyst from H.C. Wainwright expressed confidence in XOMA’s strategic move to bolster its royalty stream from mezagitamab, a decision that supports the firm’s positive outlook on the company’s stock. The reiteration of the Buy rating and the $104 price target reflect the anticipated value this deal could bring to XOMA’s future revenue prospects. The company has demonstrated strong growth potential, with revenue increasing by 638% over the last twelve months, as reported by InvestingPro.

In other recent news, XOMA Royalty Corporation completed the sale of its Kinnate Biopharma Inc. assets, a transaction that could bring up to $270 million in payments and royalties. This sale represents a significant financial move for XOMA, with payments set to range from low single digits to mid-teens on commercial sales. Former Kinnate shareholders are entitled to 85% of these payments until 2029. In addition, XOMA reported its 2024 financial results, with a GAAP EPS of ($1.65), missing the estimated ($0.40), and full-year revenue of $28.5 million, slightly below the forecast of $30.8 million. Despite this earnings miss, H.C. Wainwright maintained its Buy rating and $104 price target for XOMA, citing the company’s diverse portfolio of royalty-bearing assets. XOMA’s revenue was bolstered by royalties and milestones from strategic transactions, including Vabysmo and Ojemda, which contributed significantly to its income. The company ended the year with a cash position of $106.8 million, demonstrating financial resilience. H.C. Wainwright emphasized the potential for XOMA’s Phase 3 assets to drive future growth, underscoring the importance of its partnerships and clinical trials.

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