XOMA Corporation (NASDAQ:XOMA) Is A Changed Company: Here's How And Why

XOMA Corporation (NASDAQ:XOMA) just jumped on some fresh news relating to one of its preclinical programs, and is trading around 15% up on its start of the week pricing heading into the Wednesday morning open in the US. That's a nice boost, but a look at the longer term charts reveals a pretty lackluster twelve-month performance, with the company around 60% down on its this-time-last-year price (adjusted for split).The question is, what can we expect going forward? Is the recent jump symptomatic of a longer term reversal and, by proxy, some 2017 strength? Or, alternatively, is it short a short term reprieve as part of a longer term downtrend?Let's try and answer that question.So, this company is a biotechnology play and it's focused on the development of a wide range of assets, spread across an equally wide range of target indications/disease types. The range of assets is rooted in an antibody discovery platform that – theoretically – has the potential to churn out a large number of promising drug candidates. Multiple candidates across multiple therapeutic arenas means many shots on goal. As a young biotech, multiple shots on goal is a good thing, and it offers a distinct degree of risk diversification for any potential shareholders looking to pull the trigger on a buy position.The problem is, it's not cheap to set up, never mind maintain, said multiple shots.XOMA found this out first hand throughout 2016 and early to mid 2016, and we attribute much of the downside pressure seen in its share price to overstretching.However, as part of a strategic pivot, the company is now working to maintain these shots at as lower cost as possible, and this makes it (in our opinion) and interesting, and pretty unique, opportunity in the space.Management basically set out to do two things – carry its programs as far as possible, and maintain as many of them as possible, while cutting costs considerably. The solution, and this is a solution that is now executed on, was to get its programs in the hands of other companies by way of various licensing agreements. Said agreements mean that the collaboration partners bear the costs of maturation for company's the development pipeline, but XOMA still stands to gain from said pipeline hitting milestones on its way towards commercialization.Sure, the rewards of hitting said milestones are pared down somewhat, but the cost of doing so is dramatically reduced. In executing on this strategy, XOMA has gone from a major dilutive risk exposure to one that looks pretty attractive.So what are the forward value drivers?Well, take a quick look at the image below – it illustrates the catalysts that the company's pipeline is set to hit near term.As the image shows, there's plenty of potential hits, each of which could spark some near term upside momentum; we've seen on the back of the latest release that the company can move on good news.The latest news references a preclinical program that's looking at the potential application of an antibody called an anti-PTH1R antagonist monoclonal antibody (mAb) to a target indication of hyperparathyroidism (HPT) and humoral hypercalcemia of malignancy (HHM). The data from the program points to some degree of efficacy, and this suggestion of efficacy is what's given the company a boost this week. The plan, of course, is to get this into a licensing agreement, just as XOMA has been able to do with the other programs.So the strategy, or so it seems, now, is this: pull an antibody out of the proprietary technology, and trial it to get some preclinical proof of concept. Once this proof of concept is established, license it to an entity with deeper pockets, take an upfront capital injection, and then sit back and let the milestones hit. Of course, not all will be successful, but from a risk management perspective, it looks like a decent approach.To answer our question, then, this could well be the start of a longer term turnaround.We will be updating our subscribers as soon as we know more. For the latest updates on XOMA, sign up below!Disclosure: We have no position in XOMA and have not been compensated for this article.