XOMA Royalty Plummets 22.57% on Rezolute's Failed Phase 3 Trial: A Bearish Crossroad for Biotech Royalty?

Summary
• XOMA Royalty (XOMA) slumps 22.57% intraday to $26.605, a sharp reversal from its $29.45 high.
• Partner Rezolute’s Phase 3 sunRIZE trial for congenital hyperinsulinism misses primary endpoint, erasing $5M in milestone payments.
• Technical indicators signal bearish divergence, with price 23.9% below 52-week high of $39.92.

Today’s collapse in XOMA Royalty underscores the fragility of biotech royalty models tied to unproven clinical assets. The stock’s freefall follows Rezolute’s disastrous trial results, triggering a liquidity crisis and eroding investor confidence in XOMA’s pipeline. With the 200-day moving average at $28.40 acting as a critical inflection point, the market now weighs whether this is a short-term correction or a structural breakdown.

Rezolute's Phase 3 Trial Failure Shatters XOMA's Royalty Pipeline
XOMA Royalty’s 22.57% intraday plunge is directly tied to Rezolute’s failed Phase 3 sunRIZE trial for congenital hyperinsulinism. The trial showed a 45% reduction in hypoglycemia events at the top dose of RZ358, but this was not statistically significant compared to a 40% placebo effect. This outcome nullified $5 million in milestone payments and $222 million in future potential milestones for XOMA, triggering a liquidity crisis. The stock’s freefall reflects a loss of confidence in its royalty pipeline and the broader market’s intolerance for unmet clinical expectations.

Biotech Sector Volatility Amid AI-Driven Disruption: XOMA Underperforms Peers
The biotech sector remains polarized as AI-driven innovation reshapes therapeutic development. While sector leader Amgen (AMGN) rose 0.149% on Thursday, XOMA’s collapse highlights the risks of overreliance on unproven partnerships. XOMA’s lack of AI-integrated drug discovery platforms contrasts with peers leveraging machine learning for target identification and trial optimization. This strategic divergence has amplified XOMA’s vulnerability to clinical setbacks.

Bearish Options and Technical Divergence Signal Aggressive Shorting Opportunities
• MACD: -0.529 (bearish divergence from signal line -0.808)
• RSI: 55.26 (oversold territory but lacks immediate reversal signals)
• Bollinger Bands: Price at $26.605, well below the 29.61 lower band
• 200D MA: 28.40 (price 23.9% below, indicating strong bearish bias)

XOMA’s technical breakdown confirms a short-term bearish bias, with critical support at $25.25 (200D MA) and $21.28 (long-term support). Two options stand out for bearish exposure:

• XOMA20251219P25 (Put, $25 strike, 12/19 expiration):
- IV: 104.65% (extreme volatility)
- Leverage: 26.59% (moderate)
- Delta: -0.321 (moderate sensitivity)
- Theta: -0.043 (rapid time decay)
- Gamma: 0.0819 (high sensitivity to price swings)
- Turnover: 600 shares
- Payoff at 5% downside (24.90): $0.10 per contract. This put offers aggressive leverage for a 5% price drop, with high gamma amplifying gains if the selloff accelerates.

• XOMA20260116P25 (Put, $25 strike, 1/16 expiration):
- IV: 60.82% (reasonable)
- Leverage: 21.28% (moderate)
- Delta: -0.330 (moderate sensitivity)
- Theta: -0.014 (slower decay)
- Gamma: 0.0703 (solid sensitivity)
- Turnover: 750 shares
- Payoff at 5% downside (24.90): $0.10 per contract. This longer-dated put balances time decay with liquidity, ideal for a controlled bearish bet.

Action: Aggressive short-sellers should prioritize XOMA20251219P25 for immediate volatility capture, while XOMA20260116P25 suits a more measured approach. Both contracts benefit from XOMA’s current technical breakdown and sector-wide AI-driven underperformance.

Backtest XOMA Royalty Stock Performance
The backtest of XOMA's performance after a -23% intraday plunge from 2022 to now shows mixed results. While the stock experienced a maximum return of 8.03% over 30 days, the win rates for 3-day and 10-day periods are lower, indicating that short-term gains were not consistent.

XOMA at Critical Support Levels: Watch for 200D MA Breakdown
XOMA’s 22.57% selloff has created a high-risk environment for investors, with the 200D MA at $28.40 acting as a critical inflection point. A break below $25.25 could trigger deeper declines toward $21.28, amplifying bearish momentum. Meanwhile, sector leader Amgen (AMGN) remains resilient, up 0.149%, underscoring the premium on AI readiness. Investors should monitor XOMA’s liquidity and technical structure closely—short XOMA against the 200D MA breakdown or pivot to AI-adopting peers like AMGN for defensive exposure.