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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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.