Font ResizeBERKELEY — Maybe it was a slap across the face. Maybe a wake-up call. Either way, nobody at Xoma liked to be called a "Biotech Zombie.''
The Berkeley-based company was given the moniker by the New York Times in a 2007 feature article because it never "died" despite constantly bleeding money without a marketable product.
While others focused on what was wrong with Xoma, Steven Engle saw promise. When he took over as chief executive that year, he was optimistic about what was possible.
"I was aware of what was being said about Xoma, but when I talked to people who knew the company it was promising," Engle said. "So many people said, 'You have no idea what great technology is sitting under the hood there.'"
On Monday, Xoma reported its third-quarter earnings in which it saw a net income of $1.5 million compared to a net loss of $20.4 million, or 15 cents per share, for the third quarter of 2008. A profit of any kind is one sign of improvement as Xoma rarely made money prior to 2007. Shares of Xoma dropped 5 cents to close at 71 cents. Its year-to-date stock is up 14.8 percent.
"Everybody knows Xoma's name, and many people have invested in the company and made a lot of money over the years," Engle said.
Xoma was founded in 1981 by Patrick Scannon, who still serves as its chief scientific officer. Along with Chiron and Genentech, it was considered one of the three originators of the biotech industry in the Bay Area. Of
Scannon says what Engle has done is significant.
"I think we're in the most exciting time in the history of this company because we have a CEO that is willing to put his efforts into our own product-development strategy, which is a great motivation for scientists," said Scannon. "I think people don't appreciate the fact that Xoma is a very different company than it was a couple of years ago."
Xoma is very much a company that has hovered under the radar. Its headquarters are just down the street from Bayer HealthCare in Berkeley, but there is no signage on the street.
"Most biotech companies probably wouldn't have survived what we went through, but we had technology in antibodies that have allowed us to keep going," Engle said. "If we can get our own drugs through the pipeline, I feel we can do well."
Currently, its lead product is Xoma-052, which uses an anti-inflammatory approach to target diabetic patients. Last week, Xoma announced it has initiated a Phase 2 trial of Xoma-052.
"We're addressing a fundamental mechanism in diabetes that has never been fully addressed before," Scannon said.
Liana Moussatos, an analyst with Wedbush Morgan, says the company's direction is promising. But the challenge of raising money and getting a partnership for this product still remains. Wedbush has a $2 a share valuation on the company.
Also, Xoma has key patent applications related to the product. If these patents aren't granted, third-parties could potentially copy the drug candidate, Moussatos states in an investor note.
In hindsight, Engle says the "Zombie'' name given to Xoma is unfair. But when you are a well-known name, it's like a celebrity getting written up for a DUI.
"I can tell you right now there is no biotech company that at some point hasn't gone through this 'valley of the death,'" he said. "Everybody has their problems. The question becomes, 'How do you respond to it?'"
