Why XOMA Shares Tanked

Why XOMA Shares Tanked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of XOMA Corp. , a biopharmaceutical company that develops antibody-based therapeutics, dove as much as 16% following the release of its second-quarter earnings results last night.

So what: For the quarter, XOMA reported total revenue of $7.2 million, which is a 23% reduction from the year-ago period because of lower licensing and collaborative revenue. Loss per share rose slightly from last year because of its ongoing clinical work to an adjusted $0.19, right in line with the Street's expectations. What really appears to be getting under shareholders' skin today is a comment made by XOMA CEO John Varian, who said that the pace of enrollment in the company's Eyeguard A and C trials is slower than anticipated. These two trials are for its lead compound, gevokizumab -- with Eyeguard A designed to treat active non-infectious, non-anterior uveitis, and Eyeguard C being a control trial to see if gevokizumab can allow physicians to reduce their reliance on corticosteroid usage when treating non-infectious, non-anterior uveitis.

Now what: I feel what we have here is an overreaction on two fronts. Shareholders have probably been a bit giddy sending shares of XOMA higher in recent months despite not having a single product approved by the Food and Drug Administration. Conversely, shareholders are likely overreacting to Varian's comments about the slow enrollment as gevokizumab is being evaluated in more than a dozen clinical trials -- not just Eyeguard A and C. There are certainly plenty of catalysts in the near future capable of moving this stock impressively in each direction, but with so many of the company's trials still early in their development, I'd rather be on the sidelines waiting for that study data than be caught in front of a runaway bus.

Sure, clinical-stage biotech stocks like XOMA have been soaring recently, but the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.

The article Why XOMA Shares Tanked originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published