Xenoport Climbs as Investors Bet on Experimental Drug for MS

By Brett Chase  SEP 20, 2012 2:15 PM

Next month, the company is expected to announce very early clinical results for a drug being tested for multiple sclerosis.

 


MINYANVILLE ORIGINAL The biotech company Xenoport (NASDAQ:XNPT) is having a good run in 2012. The shares almost doubled in the past three months and they are up almost 200% this year.

That’s not bad for a money-losing company battling a major development partner in court. But the enthusiasm for the company has little to do with Xenoport’s one existing product, Horizant (also known as Regnite), which is for restless leg syndrome as well as one other condition in the US. Rather, the shares are trading largely because of a very early-stage experimental treatment for multiple sclerosis. Top-line data for the drug are expected in October, analysts say.

Xenoport has three drugs in various stages of clinical trials. But the developmental product that is garnering the most attention in recent months is a so-called Phase I drug known as XP23829, tested to treat the form of multiple sclerosis known as relapsing-remitting MS. The drug also is being tested to treat psoriasis.  

In recent notes, RBC Capital Markets analyst Michael Yee and Leerink Swann analyst Mark Kozul cited this early-stage drug as the biggest contributor to Xenport’s stock growth. Both analysts recommend buying the stock, but caution that the company is in the very beginning stages of clinical studies of the MS/psoriasis treatment.

While the risk is formidable, so is the potential reward. Biogen Idec (NASDAQ:BIIB) is expected to win approval of a new MS drug, possibly by the end of the year. The analysts see Xenoport’s drug as a potential competitor and that should interest other companies in either licensing or acquiring it, they say. That is, of course, if the drug works, and that’s a big “if” right now. Shares of Xenoport rose 3% to $11.10 midday Thursday.  

Here’s more of the backstory of the company: Xenoport developed a drug for the condition known as restless leg syndrome with GlaxoSmithKline (NYSE:GSK) and Japanese pharmaceutical maker Astellas. Glaxo has rights to sell the drug, known as Horizant, in the US. Astellas sells the product in Japan and five other Asian countries under the brand name Regnite.

In June, Glaxo and Xenoport won approval to sell Horizant in the US for the additional use of treating pain from shingles. That approval came even as the two companies were fighting in court over terms of their collaboration.

While Xenoport will get payments from sales of its only approved drug, investors are looking ahead to the company’s possible future approvals. Xenoport is in the late stages of testing another drug, arbaclofen placarbil, to treat muscle spasms in people with multiple sclerosis. The company expects top-line data from the trial in the first quarter of next year. If the drug works, Xenoport expects to file for US approval in the second half of next year. If approved, the drug may hit the market as soon as 2014. The company also has a drug in the mid-stages of development to treat Parkinson’s. But, clearly, a large share of the stock’s current valuation is tied up in the Phase I drug. If the drug doesn’t pan out, expects a sizable drop in the shares.

Twitter: @brettchase

No positions in stocks mentioned.

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