NEW YORK (TheStreet) -- XenoPort (XNPT)  shares closed Tuesday's trading session down 28.08% to $4.84 as the company's psoriasis drug XP23829 showed frequent, gastrointestinal-related side effects. 

Psoriasis, a prevalent autoimmune diseases, causes itchy or sore patches of thick, red skin with silvery scales.

As a result, nearly a third of its 200 subjects dropped out of the study, Reuters reports.

"XenoPort should stop spending limited resources on a drug that, while active, appears to be inferior to the standard of care in psoriasis," Cowen& Co. analyst Eric Schmidt stated, according to Reuters.

Other gastrointestinal-related side effects included nausea, stomach pain and vomiting, the company noted.

Despite these side effects, the company added that both 800 mg and 400 mg doses of the drug given to patients in Phase 2 clinical trial helped to alleviate psoriasis.

Based in Santa Clara, CA, XenoPort, a biopharmaceutical company, focuses on developing and commercializing a portfolio of product candidates for the treatment of neurological and other disorders.

Separately, TheStreet Ratings team rates XENOPORT INC as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate XENOPORT INC (XNPT) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, unimpressive growth in net income, generally high debt management risk and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, XENOPORT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$21.72 million or 960.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.15 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 10.63, which shows the ability to cover short-term cash needs.
  • The change in net income from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income has significantly decreased by 26.3% when compared to the same quarter one year ago, falling from -$19.39 million to -$24.48 million.
  • XENOPORT INC's earnings per share declined by 25.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, XENOPORT INC continued to lose money by earning -$0.82 versus -$1.80 in the prior year. For the next year, the market is expecting a contraction of 75.6% in earnings (-$1.44 versus -$0.82).
  • You can view the full analysis from the report here: XNPT Ratings Report