XenoPort Shares Dip On Diabetic Drug Study Failure

NEW YORK (AP) — Shares of XenoPort Inc. fell Monday after the company said a developing pain drug failed in a midstage study, and the drugmaker cited an "unexpectedly high" patient response to placebo as a possible factor.

The stock fell $2.48, or 14.3 percent, to $14.90 in midday trading. Shares reached their lowest point in more than three years earlier in trading session, dipping to $13.79 apiece.

The drug candidate,called GSK1838262, or XP13512, is being developed in a partnership with U.K.-based GlaxoSmithKline as a treatment for diabetic peripheral neuropathy, or pain associated with diabetes. In a 14-week study with 421 patients, the drug failed to meet the goal of improving pain in diabetics.

Lazard Capital Markets analyst Gene Mack downgraded the stock to "Hold" from "Buy" saying the drug candidate's neuropathic pain indications accounted for the majority of his valuation on the Santa Clara, Calif.-based company. He said there are two ongoing studies, with results expected later in 2009.

"While it is not uncommon to get mixed results from different neuropathic pain indications, we believe investors will need to see positive data before they reward the shares," he said, in a note to investors.

He still expects the drug to eventually gain approval for restless leg syndrome, but said the value of that indication is already reflected in the stock price. Patients with the condition experience compelling urges to move their legs.