Xoma Corp. said it would not proceed with late-stage studies of its lead drug, gevokizumab, as a treatment for a form arthritis of the hand, after data from two mid-stage studies showed that the drug was not effective enough.
The company's shares fell about 20 percent to $7.60 after the bell on Tuesday.
The studies compared gevokizumab with placebo and assessed if the drug improved pain, stiffness and physical function in the hand when injected once a month.
The company said patients given the placebo showed a greater improvement than patients treated with the drug in the final three months of one of the studies.
Xoma said its analyses of the study did not show a significant drug-related benefit even after six months.
Data from a second study showed weaker results than the first study after 84 days of treatment.
The company said the drug was well-tolerated and there were no serious side-effects.
Common side-effects, including headache, pain and urinary tract infections, were comparable between patients who used gevokizumab and those on placebo.
The company said it would review data from the mid-stage studies to determine if there were some patients who responded to the drug, before it starts additional studies in patients with erosive osteoarthritis of the hand.
Xoma said it would focus on completing late-stage studies of the drug as a treatment for an eye disease known as non-infectious uveitis, and starting late-stage development of the drug to treat pyoderma gangrenosum, a rare skin disease.
The company is also testing the drug to treat another form of eye disease, acne and autoimmune ear disease.
Gevokizumab is an antibody, which binds to a protein that causes inflammation and modulates signaling between cells that causes inflammation.
The company's shares closed at $9.44 on Tuesday on the Nasdaq.
© 2014 Thomson/Reuters. All rights reserved.