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Loss at XOMA Wider Than Expected

NVS XOMA

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XOMA Corporation’s (XOMA - Snapshot Report) fourth-quarter 2011 loss of 34 cents per share was wider than the Zacks Consensus Estimate of a loss of 25 cents but narrower than the year-ago loss of 84 cents. Higher revenues and lower operating expenses led to the narrower year-over-year loss.

Quarterly Results

Revenue at XOMA improved marginally (2%) to $9.8 million in the fourth quarter of 2011. Revenues, however, were well short of the Zacks Consensus Estimate of $15 million. Revenue from license and collaborative fees came in at $1.3 million, against $0.4 million in the year-ago quarter. Contract and other revenue dipped approximately 6.5% to $8.6 million. Revenues from royalties accounted for the balance.

Operating expenses declined 14.8% to $21.9 million. Both research and development (R&D) expense (down 12.6%) as well as selling, general and administrative (SG&A) expense (down 21.2%) were on the downswing in the reported quarter. R&D expenses declined mainly due to the lower spending on pipeline candidate gevokizumab (XOMA 52). XOMA is evaluating the candidate for multiple indications.

Yearly Results

For the full year 2011, XOMA suffered a loss of $1.04 per share as opposed to a loss of $3.69 suffered in 2010. 2011 loss was wider than the Zacks Consensus Loss Estimate of $0.94 per share. Higher revenues and lower operating expenses led to narrower year-over-year loss.

Even though revenues in 2011 climbed 73% to $58.2 million, they were well short of the Zacks Consensus Estimate of $64 million. Revenue from license and collaborative fees came in at $18.0 million, against $2.2 million in 2010. The massive jump was attributable to the recognition of $16.2 million in 2011 from partner Servier related to gevokizumab. Contract and other revenue climbed 47.1% to $ 40.0 million. Revenues from royalties accounted for the balance.

2012 Projection

XOMA, which boasts of collaborations with big players such as Novartis (NVS - Snapshot Report) and Takeda, expects cash used in operating activities to be $35 million in 2012.

Our Recommendation

Currently, we have a Neutral stance on XOMA in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run.

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