XOMA Ltd. (XOMA) shares fell after the company and Genentech (DNA) terminated Phase II testing of Raptiva in patients with rheumatoid arthritis based on evaluation that suggested no overall clinical benefit.
CIBC World downgraded XOMA shares to sector perform. Analyst Matt Geller says he still believes Raptiva will be approved for psoriasis around yearend, but he's concerned that the drug may not have additional applications. He notes the company's financial viability improved when Genentech made loans available, but XOMA still has more debt than cash, and dilution from outstanding debt could lead to over 100 million shares outstanding. He says he needs to understand how the company could achieve meaningful profitability with 25% of profits for Raptiva in psoriasis alone.
Geller sees a loss per share of 65 cents in 2003 and 23 cents in 2004. He suspended his 12-18 month price target, which was $10.