Why XOMA Corporation (XOMA) Is Plunging Today

NEW YORK (TheStreet) -- XOMA Corporation  (XOMA) was plunging 25% to $7.08 at 10:26 a.m. on Wednesday after the biotechnology company announced that it would not move forward with late-stage testing of its drug gevokizumab as a treatment for a form of arthritis in the hand after results from two mid-stage studies did not prove the drug effective.

The two studies compared gevokizumab with a placebo to determine if the drug improved pain, stiffness and physical function in the hand via monthly injections. The company announced patients on the placebo actually showed a greater improvement than those on gevokizumab in the final three months of one of the studies. Xoma said its review of the study did not show a significant benefit from the drug after six months.

Credit Suisse also downgraded XOMA to "neutral" from "outperform" on Wednesday in the wake of the company's announcement.

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TheStreet Ratings team rates XOMA CORP as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate XOMA CORP (XOMA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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