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XenoPort extends slump after analyst's downgrade

NEW YORK -- Shares of XenoPort Inc. fell Friday after a Piper Jaffray analyst downgraded the stock, saying the company's experimental multiple sclerosis drug is years away from marketing approval or a development partnership.

THE SPARK: Analyst David Amsellem downgraded the stock to "Neutral" from "Overweight." He said the MS drug XP23829 is promising and could become a next-generation version of Biogen Idec Inc.'s drug BG-12 _ a pill that is seen as a potential blockbuster treatment. But Amsellem said XP23829 is 6 to 8 years away from approval and partnerships are also not likely to materialize soon.

He wrote that many companies that are viewed as possible partners on XP23829, like Teva Pharmaceutical Industries Ltd. and Novartis AG, are busy developing their own multiple sclerosis treatments.

Amsellem estimated that it will take XenoPort three or four years to complete mid-stage testing of XP23829, and late-stage trials would take about three more years because the company would be examining two-year relapse and disability rates. The FDA approval process lasts another six or 10 months.

Amsellem added that prescription trends for Horizant, XenoPort's only approved drug, are "lackluster." He maintained a price target of $12 per share.

THE BIG PICTURE: On Oct. 4, XenoPort reported positive data from an early-stage clinical trial of XP23829, and said the drug could be used as treatment for multiple sclerosis and psoriasis. The Santa Clara, Calif., company said it tested four different oral versions of the drug, including one version that could allow for once-per-day dosing.

BG-12 is a pill intended to be taken twice a day. Biogen filed for marketing approval of the drug early this year and the Food and Drug Administration is expected to make a decision by late December.

XNP23829 is a form of the compound monomethyl fumarate and Biogen Idec's BG-12 is called dimethyl fumarate. Both drugs are related to fumaric acid, which is used as a food additive.

Xenoport and GlaxoSmithKline PLC market Horizant as a treatment for restless legs syndrome and post herpetic neuralgia, or nerve pain that follows shingles, a viral infection related to chicken pox.

SHARE ACTION: XenoPort stock lost $1.26, or 10.6 percent, to $10.63 in afternoon trading. While the shares have slumped over the last few days, XenoPort stock has nearly doubled in value since July 23 and has almost tripled in value in 2012.

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