XOMA Corporation (NASDAQ:XOMA) Is a Big Winner For Us This Year

When we first highlighted XOMA Corporation (NASDAQ:XOMA) as a stock to watch in the biotechnology space, the company was trading in and around seven dollars a share.At the time, we pointed to a couple of key fundamental factors that we felt could play a part in a long-term upside revaluation for the company and put forward a pretty solid bull thesis on the stock. XOMA Daily ChartAt its most recent close, XOMA went for $27.59 a share. That's a close to 300% appreciation in the six-month period. The latest major move came yesterday, when the company put out third-quarter earnings and, in line with the numbers, beat on its forecasts for the period.So what's next?First, a quick introduction to the company.XOMA is a biotechnology stock that develops and commercializes antibody-based therapeutics globally. The real beauty of this company is that it has a very diverse, multiple shots on goal approach to its development and growth. To get a little bit more specific on that, XOMA has produced a wide portfolio of assets and, instead of funding them through to commercialization itself (which, obviously, brings with it various dilution concerns for shareholders, it licenses them to big names, with deeper pockets, and sets itself up to receive milestone and royalty payments on future sales.There are some that will argue that this is too conservative a strategy and there is some credence to this suggestion. For anybody looking to gain a binary exposure to the biotechnology space and, at the same time, for somebody looking to pick up triple-digit percentage points returns overnight, this isn't the company to allocate towards.As has been illustrated over the last six months, however, there are substantial returns to be had on a company that takes this approach and, on the other side of the equation, the risk that XOMA is asking shareholders to take on when they pick up a position in the company is dramatically reduced as compares to many of the other options in this sector.Right now, XOMA has more than 20 partnered and fully-funded programs with the potential to drive milestone and royalty payments, along with multiple additional programs ready for out-licensing.There aren't many companies valued at circa $200 million you can say that about.The most recent example of a licensing agreement is one that we covered in our previous coverage of the stock, available here. At the start of September, XOMA announced that it had licensed a preclinical asset called gevokizumab, an anti-inflammatory candidate, and another called canakinumab, which is under investigation as a potential therapy for cardiovascular conditions, to healthcare giant Novartis AG (ADR) (NYSE:NVS).As an example of how rewarding this sort of arrangement can be, the company picked up $31 million as an upfront payment and is in line to receive more than $400 million in milestone and royalty payments going forward. Additionally, Novartis agreed to take a $5 million stake in XOMA and – as a kicker – paid off 50% of some of XOMA's (then) substantial outstanding debt.Of course, if the program matures to completion, the $400 million in milestones and royalty payments is going to drive revaluation. However, one of the great things about this approach is that, even if it doesn't, XOMA has dramatically extended its runway, substantially reduced its debt and climbed in bed with one of the biggest names in the industry – without taking on any extra risk.As per the latest news, the company recorded a net income of $1.98 per share or $26.3 million, after reporting a loss in the same period a year earlier, on revenues of $36.2 million.Again, you just don't see this with a biotechnology stock of this size.Going forward, then, it's all about securing future licensing deals on the company's remaining available for-license assets.There's practically no dilution risk on the table as things stand so any positive news should only serve to attract strong speculative volume towards the stock near term.Check out our previous coverage of this one here.We will be updating our subscribers as soon as we know more. For the latest updates on XOMA, sign up below!Image courtesy of Lynn Chan via FlickrDisclosure: We have no position in XOMA and have not been compensated for this article.