XOMA

XOMA Royalty Corp ($XOMA) CIO Buys Big as Shares Fall 38%, While CEO and Major Shareholder Sold Near Peak

03/25/2025 20:37

XOMA Royalty Corp ($XOMA) Chief Investment Officer Bradley Sitko has made notable share purchases amid a significant stock price decline. According to recent filings on March 21, the CIO acquired a total of 4,134 shares in two separate transactions for approximately $98,751. This substantial purchase, executed while shares trade near 52-week lows, sends a strong signal to the market about insider confidence. This buying activity comes against the backdrop of a prolonged decline in $XOMA's stock price. After reaching highs of around $34 in late November 2024, shares have fallen to approximately $21, representing a 38% drop. XOMA, with a market capitalization of about $315 million, operates under a unique business model as a biotech royalty aggregator. XOMA Royalty Corp maintains a portfolio of over 120 royalty and milestone assets, focusing on acquiring potential future economics associated with pre-commercial and commercial therapeutic candidates. In 2024, the company deployed $65 million to acquire new milestone and royalty assets while distributing $5.5 million in dividends. This business model offers the advantage of diversified revenue streams, reducing dependence on any single product. A closer examination of Sitko's buying pattern reveals consistent accumulation since late 2024. He purchased 300 shares ($7,770) on December 31, 2024, followed by a total of 545 shares ($13,974) on January 8, 2025, and most recently, approximately 4,134 shares ($98,751) on March 21, 2025. This progressive scaling up of purchases as the stock declined suggests strong insider conviction in the company's value and future growth prospects. In contrast, other insider transactions present a different picture. Notably, CEO Owen Hughes and SVP Thomas Burns sold 21,881 shares ($655,336) and 9,775 shares ($292,664), respectively, on November 13, 2024, when the stock was trading around $30 – effectively selling near the recent peak. Additionally, major shareholder BVF Partners L.P. executed a significant sale of 650,717 shares ($16,983,714) on January 24, 2025. BVF Partners has a complex ownership structure with indirect holdings and special conditions related to convertible preferred stock. Examining XOMA's financial performance, the company reported total income of $28.5 million for 2024, with a net loss of $13.8 million. The year-end cash position stood at $106.4 million, including $4.8 million in restricted cash. Quarterly results show consistent revenue growth, with Q2 2024 revenue increasing 241% year-over-year to $5.65 million, Q3 revenue up 767.1% to $7.20 million, and Q4 revenue growing 375.4% to $8.71 million. However, the company continues to report net losses, highlighting ongoing profitability challenges. A notable business milestone occurred in June 2024, when XOMA received an $8.1 million milestone payment related to Day One Biopharmaceuticals' sale of its priority review voucher. This illustrates how the company's business model can generate meaningful cash inflows. Analyst sentiment toward XOMA remains predominantly positive. The current consensus rating is 'Buy,' with a median 12-month price target of $79.50, representing an approximate 380% premium to the current share price. However, the EPS forecast for 2025 stands at -$0.50, indicating continued expected losses in the near term. The value of biotech royalty companies like $XOMA generally depends heavily on the future value and cash flows from their royalty assets. The clinical success and commercialization potential of therapies in the pipeline are therefore critical factors for long-term success. Investors should also note that the royalty business model typically requires significant upfront investment, with a potentially lengthy timeline to profitability. Despite the CIO's active buying and analysts' high price targets, the stock has shown weakness in the short term. This may reflect a combination of factors including broader biotech sector weakness, the major shareholder's significant divestment, and the company's yet-to-be-profitable financial status. In summary, $XOMA's recent insider trading patterns present an interesting contrast. The CIO's consistent buying suggests potential value at current price levels, while previous executive and major shareholder sales indicate caution may be warranted. Considering the long-term growth potential of the biotech royalty business model, current price levels, and insider buying signals, this situation merits careful consideration by long-term investors.

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