"Pop! Goes the Weasel" is actually an accurate description of developmental biotech XOMA (XOMA 3.94%) today. After the market closed Wednesday, the company announced interim results from two ongoing phase 2 trials evaluating its lead drug candidate for treating erosive osteoarthritis and a rare disease called pyoderma gangrenosum. While the press release touted the importance of the data, investors should know that the results were not statistically significant. Is XOMA's pop based on real progress, or did shareholders just get weaseled?
Statistically significant versus loaded phrases
When companies achieve statistically significant results in trials -- the bread and butter of clinical progress -- they tend to disclose the achievement in press releases. It's, uh, kind of important. Despite reporting that patients in the erosive osteoarthritis study in the gevokizumab arm saw a 23% reduction in Australian/Canadian Osteoarthritis Hand Index, or AUSCAN, scores compared to a 14% reduction in the placebo arm, XOMA did not use the all-important phrase "statistically significant." Instead, the company said the results were "very encouraging and compelling" (it even included that in the title of its press release). Good luck finding that phrase in an announcement from the Food and Drug Administration.
Achieving statistically significant results means the data in hand is likely not due to random chance. At this point -- just halfway through the six-month trial -- it is too early to predict the ultimate outcome. However, you have to figure that if XOMA knew the results were statistically significant it would have paraded the phrase. Does its exclusion mean the trial will disappoint? Is management simply buying time before it faces the wrath of Wall Street?
Of course, these are just interim results. While the AUSCAN scores used in the study are based upon a self-administered questionnaire, they are an acceptable metric to prove clinical benefit from the drug. To be safe, XOMA is backing up the scores with radiographic images of the affected joints and blood levels of C-reactive protein -- which are higher when inflammation is present -- at the end of the full six months. That should conceivably be enough to support a phase 3 trial, but success is far from guaranteed.
The big picture isn't necessarily grim, either. Gevokizumab is a monoclonal antibody that binds to interleukin-1 beta, a molecule that regulates the immune system, and is being evaluated as a treatment for several inflammatory diseases. In fact, the company should eventually gain approval for treating pyoderma gangrenosum given its extreme rarity and lack of options, but even in a best-case scenario approval won't contribute meaningful sales. Nonetheless, the molecule's future is not pinned on the success or failure of erosive osteoarthritis alone. I would just take the latest announcements with a large serving of salt.
Final word, for now
Not achieving statistical significance doesn't mean gevokizumab doesn't work, but it doesn't mean it will provide enough clinical benefit to eventually gain approval, either. Unfortunately, the recent announcement provides no meaningful information about gevokizumab for investors. Perhaps management felt the need to update its shareholders on critical programs, but I have to question why a press release was issued in the first place. If I were an investor, I wouldn't change my investment thesis. Then again, you could use today's pop to reap some profits or simply sit back and wait for full phase 2 data early next year.
