XOMA (Nasdaq: XOMA) updated investors yesterday about its phase 2a trial testing XOMA 052 in diabetics: "The results were as expected based on data from the phase 2a three-month interim review and the phase 2b trial."

That's the nicest way I've ever seen of saying a trial didn't show an effect. You'll recall that the phase 2b trial failed to show a meaningful decrease in the hemoglobin A1c levels, the gold standard for diabetes drugs.

Like the former trial, 052 reduced the levels of C-reactive protein, a measure of cardiovascular risk. But that won't be enough to get the drug onto the market to treat cardiovascular disease. XOMA will likely have to run a large outcomes trial to get 052 approved as a heart protector.

Diabetes was the quickest route to potential riches for XOMA. And if 052 worked, the once-monthly dosing would certainly have competed well with Novo Nordisk's (NYSE: NVO) once-daily Victoza and Amylin Pharmaceuticals (Nasdaq: AMLN) and Eli Lilly's (NYSE: LLY) once-weekly Bydureon. I could even see some patients preferring a monthly injection over daily pills like Merck's (NYSE: MRK) Januvia and Takeda's Actos.

But alas, 052 is dead as a diabetes treatment.

Investors sticking with XOMA are counting on 052 working in patients with an eye disease called Behcet's uveitis. The protein that 052 targets, interleukin-1 beta, seems to play a more important role in that disease than it does in diabetes. Based on the phase 2 results in that indication, there would seem to be a high likelihood of success for the upcoming phase 3 trial in Behcet's uveitis.

The orphan indication won't bring in the level of sales that treating diabetes could have, but with a market cap of just $85 million or so, revenue doesn't have to be that high to justify the valuation.

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