XOMA (Nasdaq:XOMA) really is a remarkable story in many ways. Few companies have survived so long, and raised capital so many times, and done so little with it. While the company has actually approached $100 million in reported sales, and not many biotechs do even that much, the company has never had any real success in the clinic and has basically strung along successive generations of investors on hype and hope. Now that the company is changing up management yet again, investors should be asking themselves if there is really a good reason to stick by a company that has floundered around for more than 20 years to no real purpose.

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A Change at the Top
XOMA announced Wednesday that it's CEO Steve Engle was bailing on the company. Engle said, "I am looking forward to applying my expertise building life science companies in the future."

Hmmm, expertise? Engle became XOMA's CEO in August of 2007. In the those four years, XOMA has gone from a market cap north of $350 million to a current market cap of just under $64 million, and the company really is not a great deal closer to having a winning product in its portfolio.

To be fair, though, Engle did oversee a licensing agreement with Servier that brought a $15 million upfront payment to the company (as well as $20 million more in loans and up to almost half a billion in potential milestones) for XOMA 052 - before the drug bombed in a Phase 2 diabetes study. What's more, Engle was in charge of the company when it monetized its royalty interest in CIMZIA and secured a contract from the National Institute of Allergy and Infectious Disease that could be worth $65 million for anti-botulinum products. Part and parcel of running a biotech is keeping money flowing into the enterprise and Engle was successful in that regard.

A Long History Of Disappointment
If or when XOMA 052 fails, it will be just another in a long line of XOMA setbacks. The company tried to be a player in monoclonal antibodies and had little to show for it - the company's attempts in sepsis failed and the psoriasis drug Raptiva was taken off the market by its partner due to exceptionally severe side-effects (including, ironically, sepsis). Along the way have been other failures in indications like cancer, acne and various autoimmune disorders.

What Now?
The trouble for XOMA shareholders today is that the company has little going for it in the clinic. The company thinks that XOMA 052 still has promise as an IL-1 antibody and gamely talks about a late stage clinical program for Behcet's uveitis and future opportunities in cardiovascular disease, gout and rheumatoid arthritis.

In fact, the company has offered up presentations before highlighting a $18 billion opportunity for IL-1 drugs, with about $7 billion of that from diabetes (now basically just theoretical given the failure of XOMA-052 in diabetes studies). And to be fair, XOMA 052 has shown a strong affinity for IL-1 beta and could be delivered in a convenient monthly dosing schedule.

The problem is, though, that there's just not any real evidence yet to support any of this. Regeneron (Nasdaq:REGN) has an approved IL-1 drug on the market (Arcalyst) and some three years after approval it's annualizing at about $20 million in sales. True, Arcalyst has a limited label and is a different drug, but there's no great clamor to use it off-label.

What's more, Servier is not exactly the strongest partner around and would likely struggle to market an equivocal drug effectively. XOMA has talked about targeting the market for myocardial infarction (a market where almost every biotech has failed) - and competing against the likes of Abbott Labs (NYSE:ABT) and Pfizer (NYSE:PFE) in autoimmune conditions like rheumatoid arthritis. That's a lot of ambition for a company with such a modest track record and an unspectacular partner.

The Bottom Line
Biotech companies like Isis (Nasdaq:ISIS), Vical (Nasdaq:VICL), and XOMA show that decades of disappointment and failure aren't the end of the story so long as they can sell a new generation of investors on their "promising blockbuster technology." To be fair, maybe Isis's mipomersen, Vical's Allovectin-7, or XOMA's XOMA 052 will finally be the winning products that propel the companies to the success that investors have been awaiting for decades.

During that same time period, though, investors could have gone with the likes of Cubist (Nasdaq:CBST), Alexion (Nasdaq:ALXN), Gilead (Nasdaq:GILD) or Celgene (Nasdaq:CELG) and had a great deal more to show for it. Every once in a while a biotech will snag victory from the jaws of long-term defeat, but one of the best predictors of the future in biotech is the past, and investors would do well to bring a healthy dose of skepticism with them to whatever XOMA's new management has to stay about the future of its pipeline. (For additional reading, take a look at A Primer On The Biotech Sector.)

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