NEW YORK, Dec. 16, 2013 /PRNewswire/ -- Clinton Group, Inc. ("Clinton Group"), one of the largest owners of Xenoport, Inc. (NASDAQ: XNPT) ("Xenoport"), sent a letter to the Lead Director of Xenoport, Dr. John G. Freund, following a recent meeting with Dr. Freund and Dennis Fenton, another independent director of Xenoport.
In the meeting, the Clinton Group reiterated its view that Xenoport should be solely focused on the development of its novel fumaric acid ester compound (known as "829"), which the Clinton Group believes has the prospect of being a blockbuster drug with a relatively low risk development path. While the directors defended the current capital allocation approach – and the test marketing of gabapentin enacarbil in 40 US markets – they also expressed recognition that the shareholders own Xenoport and that the Chief Executive Officer and directors should be held accountable.
In the meeting, and again in today's letter, the Clinton Group called upon the directors to allow shareholders to vote on each of the directors each year, as is the practice at a majority of public companies in the United States, starting in 2014.
"Xenoport's stock is down more than 35% this year while the Nasdaq Biotechnology Index has soared more than 50%," said Gregory P. Taxin, President of Clinton Group. "And yet, Xenoport may well have one of the most clinically and commercially significant compounds in its labs. We believe shareholders are unhappy that Xenoport has not exclusively focused on 829 and fear further dilution in their ownership of 829 because of the decisions of the Chief Executive and the Board. While we appreciate that the directors expressed a willingness to be held accountable to shareholders, Xenoport's charter protects the Board from real accountability by giving each director a three-year term. These directors have the power to change that. We call upon the directors to put themselves (and their strategy, decisions and track record) on the ballot in 2014, so shareholders can have an up-or-down vote on this Board's stewardship."The Clinton Group believes that the best path forward for Xenoport is to hire a new, accomplished Chief Executive who will act like an owner and focus entirely on the development of 829. The Clinton Group would support the current Board at the 2014 Annual Meeting of Shareholders if the directors move swiftly to identify and hire such a Chief Executive and focus the Company's efforts on 829.