XOMA Royalty Plummets 23.9%: What's Fueling the Selloff?

Summary
• XOMA Royalty (XOMA) slumps 23.88% intraday to $26.155, a sharp reversal from its $29.45 high.
• Turnover surges to 210,608 shares, with the stock trading 23.9% below its 52-week high of $39.92.
• Sector news highlights AI’s transformative role in professional services, yet XOMA underperforms peers.

Today’s dramatic selloff in XOMA Royalty has sent shockwaves through the biotechnology sector. The stock’s collapse from its intraday high to a 52-week low underscores a sharp shift in investor sentiment. With AI-driven disruption reshaping the industry, XOMA’s underperformance raises urgent questions about its strategic positioning and market resilience.

Failed Phase 3 Trial Sparks Investor Exodus
XOMA Royalty’s 23.9% intraday plunge is directly tied to the collapse of its partner Rezolute’s Phase 3 sunRIZE trial for congenital hyperinsulinism. The trial failed to meet its primary endpoint, showing a 45% reduction in hypoglycemia events at the top dose of RZ358, which was not statistically significant compared to a 40% placebo effect. This outcome erased $5 million in milestone payments and $222 million in potential future 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.

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 $26.155, well below the 29.61 lower band
• 200D MA: 28.40 (price 23.9% below, indicating strong bearish bias)

Technical indicators confirm a breakdown in XOMA’s short-term structure. The stock is trading below its 200-day average and within a 29.61–34.19 volatility range that favors short-term sellers. Two options stand out for bearish exposure:

• XOMA20251219P25 (Put, $25 strike, 12/19 expiration):
- IV: 99.29% (extreme volatility)
- Leverage: 26.35% (moderate)
- Delta: -0.3366 (moderate sensitivity)
- Theta: -0.0380 (rapid time decay)
- Gamma: 0.0888 (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: 58.13% (reasonable)
- Leverage: 21.08% (moderate)
- Delta: -0.3448 (moderate sensitivity)
- Theta: -0.0127 (slower decay)
- Gamma: 0.0755 (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 -24% intraday plunge from 2022 to now shows mixed results. While the stock experienced a significant drop, it recovered moderately in the short term, with the 3-day win rate at 52.05%, the 10-day win rate at 53.78%, and the 30-day win rate at 57.88%. The maximum return during the backtest period was 7.85% over 57 days, indicating that while the stock had a high probability of positive returns in the short term, the overall performance was modest.

XOMA’s Freefall: A Warning Shot for AI-Resistant Firms
XOMA’s 23.9% selloff is a stark reminder of the market’s intolerance for AI laggards in the biotechnology sector. With technical indicators and options data confirming bearish momentum, the stock faces critical support at $25.25 (200D MA) and $21.28 (long-term support). Investors should monitor the 200D MA as a key inflection point—break below $25.25 to trigger deeper declines. Meanwhile, sector leader Amgen (AMGN) is up 0.488%, underscoring the premium on AI readiness. Takeaway: Short XOMA against the 200D MA breakdown or pivot to AI-adopting peers like AMGN for defensive exposure.