XOMA Royalty (XOMA) Moves 10.7% Higher: Will This Strength Last?

XOMA Royalty (XOMA) shares soared 10.7% in the last trading session to close at $41.97. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 25.6% gain over the past four weeks.

XOMA Royalty’s stock rallied after the company announced that it entered into a definitive agreement with Ligand Pharmaceuticals under which the latter company will acquire XOMA Royalty for $39.00 per share of common stock in cash, for a total equity value of approximately $739 million. The agreement represents about a 14% premium to XOMA’s recent trading average. In addition, shareholders of XOMA Royalty will receive a contingent value right (CVR) tied to potential litigation proceeds.

This drug developer is expected to post quarterly earnings of $0.19 per share in its upcoming report, which represents a year-over-year change of +216.7%. Revenues are expected to be $14.66 million, down 7.9% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For XOMA Royalty, the consensus EPS estimate for the quarter has been revised 46.3% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on XOMA going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

XOMA Royalty is a member of the Zacks Medical - Biomedical and Genetics industry. One other stock in the same industry, Travere Therapeutics (TVTX), finished the last trading session 0.8% higher at $40.81. TVTX has returned 48.6% over the past month.

Travere's consensus EPS estimate for the upcoming report has changed -46.8% over the past month to -$0.3. Compared to the company's year-ago EPS, this represents a change of +36.2%. Travere currently boasts a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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