XBiotech Inc (NASDAQ:XBIT) Is Down But Not Out

XBiotech Inc (NASDAQ:XBIT) is not having a great quarter. The company went for just shy of $20 a share at the end of March, dipped to $10 a piece by the end of April and – at the end of last week – took a 66% hit to bottom out at $3.20. That’s an 84% depreciation across the period.The decline comes on the back of a spate of disappointments related to the company’s colorectal cancer programs, specifically a phase III in Europe and a phase III in the US, set up to investigate the impact of the drug when used in combination with standard of care in Symptomatic Colorectal Cancer (SCC) in the former region and Advanced Colorectal Cancer (ACC) in the latter.So what happened?The European trial is at registration submission stage, but the company is having some trouble getting the European Medicines Agency (EMA) to play ball. Data from the phase III that underpins the application came out as positive and the drug both hit on its primary endpoint and registered a clean safety profile. The endpoint in question, however, was a composite of (basically) patient reported wellness inputs and didn’t address survival with a progression free (PFS) or an overall survival (OS) input. The agency put a panel together to discuss whether the composite is sufficient for approval and the panel said no. XBiotech, at the time (this was the catalyst behind the April decline), said it was going to appeal the decision, but markets were more inclined to realign focus on the US phase III, and it looked as though the company wanted to do the same.This phase III just read out interim, however, and things aren’t looking good. An independent data monitoring committee (IDMC) tasked with unblinding the study to make a recommendation as to continuation just told Xbiotech that the study doesn’t look like it’s going to result in a stat-sig improvement in active versus placebo arms and that it recommends discontinuation.So what happens now?Well, when the European program took a hit, markets looked the other way and focused on the US program. Now the US program is over (there’s some post-type analysis but this sort of thing rarely comes to anything valuable), markets have to once again turn to the European program as indicative of value.The real problem here is that now the US data has shown that the drug doesn’t improve survival, the company doesn’t really have the option of carrying out a fresh European study (one with amended endpoints) to appease the EMA.For us, and even with an ongoing appeal in place, the colorectal cancer program is done.That’s obviously not great, and it’s why the company has sold off, but it’s not all doom and gloom either. For a biotech of its size, XBiotech has a remarkably deep pipeline. Trials are ongoing in lung cancer, diabetes, psoriasis, acne and more, all with the same asset, and the versatility of the asset in question, MABp1, is really this company’s saving grace right now. If there were only cancer indications being targeted, it would be a stretch to say it won’t work in colorectal but it might work in lung. Not impossible, but a stretch. With autoimmune added to the picture, however, it’s very reasonable to suggest applicability to things like psoriasis, even with clinical benefit not clearly defined in oncology.With this latter fact noted, then, we think there’s some value in a punt at these prices on the company’s secondary programs. Acne, psoriasis, and diabetes are all blockbuster markets and the company has multiple shots on goal in each with what (prior to this cancer disappointment) has proven a very promising asset.That’s the beauty of multiple shots on goal – you can miss a couple and it won't matter too much long term.We will be updating our subscribers as soon as we know more. For the latest updates on XBIT, sign up below!Disclosure: We have no position in XBIT and have not been compensated for this article.