Jefferies Downgrades XOMA, Slashes Price Target After Significantly Altering Model

In a report published Thursday, Jefferies analyst Biren Amin downgraded the rating on XOMA Corp XOMA from Buy to Hold, while reducing the price target from $7 to $1. Xoma announced that its lead product gevokizumab had missed the primary endpoint on time to "first exacerbation in EYEGUARD-B for Behcet's uveitis" as a result of the placebo having performed better than expected. In the report Jeffries noted, "The mean time to first exacerbation was 119 d for gevokizumab v. 95 d for placebo, a +24 d difference, but did not meet statistical significance. Gevo did show signs of activity in 2 EPs, including less severity in exacerbation and retinal infiltrates." The company's management mentioned that "EG-B may not be predictive of the outcome of the EG-A and –C trials given that EG-A will be looking at gevo's ability to reverse active disease (v. prevention in EG-B) and EG-C allows for the steroid to be tapered to zero (v. 5 mg for EGB)." Analyst Biren Amin pointed out that since there was no specific reason for "why the placebo patients in EG-B deviated so largely from historical control," there was an increased risk that EG-A and -C could face similar issues. Furthermore, both EG-A and -C must be "positive for XOMA to file for approval," Amin added. Jefferies has removed all gevokizumab revenues associated with non-infectious uveitis, including Behcet's Uveitis from its model. "We anticipate topline data for the PIII pivotal program for gevokizumab in pyoderma gangrenosum in 2016, with a potential launch in 2017 and peak sales of $74 million by 2025," Amin wrote.