RBC Capital Markets said Xoma Ltd. (NASDAQ: XOMA) continues to make steady albeit measured progress toward initiating a pivotal trial in Behcet’s disease, which could begin by year-end 2011, pending regulatory feedback.

Partner Servier could also embark on additional indications for XOMA 052, which would be a positive for the pipeline although timing is uncertain. The next potential catalysts could be announcement of pivotal trial design for Behcet’s, new funding for its biodefense programs, and/or licensing deal(s) for its phage display libraries, said Jason Kantor, an analyst at RBC Capital Markets.

XOMA 052 is being developed to treat Type 2 Diabetes, Behcet’s disease, cardiovascular diseases, and potentially other anti-inflammatory indications. XOMA 052 is a monoclonal antibody being tested in early-to-mid-stage clinical trials to treat type 2 diabetes patients.

Kantor said Xoma continues to fine-tune its Behcet’s pivotal trial design with regulatory agencies in the U.S. and European Union. Kantor finds the approach prudent as the trials conducted will likely need to be worldwide in nature given the rarity of the disease and to speed up enrollment.

Kantor said Xoma is likely to disclose its planned trial designs in second half of 2011 and could begin by year-end 2011 or early 2012. The company conservatively estimates that the trial could take two years to complete.

Partner Servier has embarked on a cardiovascular program, which shows that this indication was an important part of Servier’s reason for licensing the drug. Xoma anticipates a Phase 2 trial in 2012 and Servier is solely responsible for these development costs. While this could be a bigger indication, Kantor believes Behcet’s could be the most rapid path to market potentially in 2014 if approved.

The National Institute of Allergy and Infectious Diseases (NIAID) began the Phase I trial of XOMA 3AB, a novel formulation of three antibodies, for the prevention and treatment of botulism poisoning. The goal is to assess the safety and tolerability of a single, dose escalation, said Kantor.

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Xoma is a biotechnology company based in Berkeley, California, that focuses on the discovery and development of therapeutic antibodies. Xoma's antibody technology platform includes proprietary bacterial cell expression (BCE) technology, Human Engineering (HE) technology for creating human-like antibodies, access to seven phage display antibody discovery libraries through cross-licenses, and process development and manufacturing facilities.

Xoma's primary value driver is XOMA 052 in Phase 1 for type 2 diabetes. Leveraging its technology platform, Xoma has entered into multiple partnerships and currently receives royalties from sales of UCB's Cimzia, for rheumatoid arthritis (RA) and Crohn's disease (CD).

Xoma stock is trading up 1.91 percent at $3.09 on the NASDAQ Stock Market at 9:37 am EDT.