Why Is XOMA Royalty Stock Sinking Thursday?

XOMA Royalty Corporation (NASDAQ:XOMA) stock plunged on Thursday after its partner Rezolute Inc. (NASDAQ:RZLT) reported disappointing trial results for its partnered product, Ersodetug (RZ358).

The company on Thursday released topline results from its Phase 3 sunRIZE study evaluating ersodetug in patients with congenital hyperinsulinism (HI).

Congenital Hyperinsulinism is a rare genetic disorder causing the pancreas to secrete too much insulin, leading to dangerously low blood sugar (hypoglycemia) in infants and children.

Primary Endpoint Missed

The study did not meet its primary endpoint, which assessed the change in the average weekly hypoglycemia events by self-monitored blood glucose.

There was an approximate 45% reduction in hypoglycemia events observed at the top ersodetug dose (10 mg/kg), which was not statistically significant compared to the placebo group, which experienced a 40% improvement.

Background on XOMA–Rezolute Partnership

In 2017, Rezolute executed a license agreement with XOMA for RZ358 (formerly XOMA 358) for Congenital Hyperinsulinism, an ultra-orphan indication.

Under the terms of the agreement, then, XOMA received $18 million in cash and stock and was eligible to receive up to an aggregate of $222 million in clinical, regulatory, and sales milestones.

In addition, XOMA was entitled to receive royalties ranging from the high single digits to the mid-teens based upon annual net sales of RZ358. Rezolute had also agreed to pay XOMA low single-digit royalties on sales of the company's other products.

Under the January 2019 amendment, Rezolute agreed to pay XOMA an additional $8.5 million in a series of quarterly payments beginning later this year.

XOMA Royalty received a $5 million milestone payment after Rezolute completed enrollment in the Phase 3 sunRIZE study. 

Price Action: Rezolute shares were down 88.48% at $1.26 at the time of publication on Thursday. The stock is trading at a new 52-week low, according to Benzinga Pro data. XOMA Royalty shares were down 23.46% at $26.30.

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