XOMA Royalty's Strategic Move into Mezagitamab: A Risk-Mitigated Path to Biotech Growth

The biotech sector has long been a high-risk, high-reward arena, where investors often face the stark choice between speculative early-stage assets and the slower growth of established therapies. XOMA Royalty Corporation's recent acquisition of future royalty and milestone rights to BioInvent International's mezagitamab (TAK-079), however, offers a compelling alternative: a de-risked, late-stage asset with defined financial triggers and a pathway to mid-single-digit royalties post-commercialization. This transaction not only strengthens XOMA's portfolio diversification but also positions the firm to capitalize on a therapy with validated clinical progress and strategic alignment with its royalty-focused model.

A Late-Stage Asset with Clear Milestones: De-Risking Biotech Investing

Mezagitamab, a CD38-targeting monoclonal antibody, is currently in Phase 3 trials for immune thrombocytopenia (ITP) and under evaluation for IgA nephropathy—a rare kidney disease. Takeda Pharmaceutical's initiation of the ITP trial in early 2025 (NCT06722235) has already triggered a $1 million milestone payment to BioInvent, underscoring the asset's advancement. XOMA's acquisition, valued up to $30 million, secures its stake in this pipeline:
- Upfront $20 million provides immediate portfolio diversification.
- $10 million contingent on FDA approval for IgA nephropathy adds a near-term catalyst.
- Up to $16.25 million in milestones and mid-single-digit royalties post-commercialization align with XOMA's strategy of acquiring proven therapeutic candidates with measurable endpoints.

This structure contrasts sharply with early-stage biotechs, where outcomes hinge on unpredictable clinical data or regulatory hurdles. Mezagitamab's progression into Phase 3 reduces execution risk, making it a lower-risk, higher-potential addition to XOMA's royalty portfolio.

Non-Dilutive Capital for BioInvent: A Win-Win for Partnerships

The deal also exemplifies XOMA's ability to create win-win partnerships. BioInvent, which contributed its n-CoDeR® antibody library to the drug's development, secures $20 million upfront without diluting its equity—critical for a company advancing multiple proprietary programs. This capital injection allows BioInvent to focus on its pipeline while monetizing an asset in late-stage development. For XOMA, the acquisition furthers its role as a biotech royalty aggregator, acquiring late-stage assets to diversify revenue streams while sharing risk with development partners like Takeda.

Market Validation and Growth Catalysts: Why XOMA is Undervalued Now

The transaction itself represents market validation of mezagitamab's potential. A $30 million valuation for future rights signals confidence in the drug's prospects, particularly given its Fast Track and Orphan Drug Designations for ITP from the FDA. These designations accelerate regulatory review and offer commercial exclusivity, reducing the time to market and enhancing profitability.

Looking ahead, three key catalysts could drive XOMA's valuation:
1. FDA Approval for IgA Nephropathy: A green light here unlocks the $10 million contingent payment and positions mezagitamab in a $1.2 billion rare disease market.
2. Phase 3 ITP Trial Results: Positive data could fast-track regulatory approvals and trigger additional milestones.
3. Commercialization Royalties: Mid-single-digit royalties on sales would add recurring revenue to XOMA's bottom line, especially if mezagitamab becomes a best-in-class anti-CD38 therapy, as its developers claim.

Why Act Now? A Strategic Entry Point

XOMA's current valuation remains undervalued relative to its diversified royalty streams. The mezagitamab deal adds a high-potential asset to a portfolio already anchored by late-stage therapies like XmAb13676 (in Phase 3 for myeloma). With defined financial triggers and a proven partnership model, the firm is poised to deliver asymmetric returns as these assets advance.

Investors seeking exposure to biotech's growth without the volatility of early-stage bets should view XOMA's acquisition as a strategic entry point. The combination of de-risked assets, non-dilutive capital structures, and proven partnerships makes XOMA a rare risk-mitigated play in an otherwise high-stakes sector.

Final Take: A Portfolio Built to Outperform

XOMA Royalty's move into mezagitamab isn't just about diversification—it's about engineering resilience. With a late-stage asset nearing regulatory milestones and a royalty model insulated from development costs, the firm is primed to capitalize on a drug with multiple pathways to value creation. For investors, this is a rare opportunity to own a de-risked biotech exposure at a compelling valuation—before the market fully recognizes mezagitamab's potential.

The time to act is now.