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SANTA CLARA, Calif. (TheStreet) -- An experimental pill from Xenoport (XNPT) reduced psoriasis skin symptoms significantly more than a placebo in a mid-stage study but a high rate of gastrointestinal side effects, including diarrhea, raise questions about the drug's future.

Xenoport said the XP23829 phase II study results were strong enough to justify moving the drug into a phase III study next year. But Xenoport's share price fell 22% to $5.27 in Tuesday trading reflecting investor doubts that XP23829 is differentiated enough from existing psoriasis drugs, including Celgene's (CELG) - Get Celgene Corporation Report recently launched pill Otezla, to make a dent in the market.

The phase II study enrolled 200 patients with moderate to severe psoriasis. Treatment with three different dose regimens of XP23829 over 12 weeks demonstrated mean reductions in psoriasis symptoms of 38% to 51% compared to 25% for placebo patients. Psoriasis response was measured using the Psoriasis Area and Severity Index (PASI.)

Xenoport said was particularly encouraged by the efficacy results from the highest, 800 mg once-daily dose of XP23829, which suggested psoriasis patients would continue to improve if treatment was extended beyond 12 weeks.

The side effects of XP23829, however, raised some alarm bells, notably diarrhea rates ranging from 22% to 40% at the highest, most effective dose. Other GI side effects noted in the study were nausea, abdominal pain and vomiting. Fifteen percent of psoriasis patients treated with the highest dose of XP23829 discontinued the study compared to 2% for placebo patients. On the positive side, the incidence of skin flushing was low and comparable between drug and placebo.

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XP23829 is a fumaric ester acid compound similar to Biogen's (BIIB) - Get Biogen Inc. Report multiple sclerosis drug Tecfidera. Tuesday's XP23829 psoriasis data are comparable to Tecfidera from its own psoriasis studies, although the diarrhea rates for the latter are higher. The efficacy of XP23829 might be better than Celgene's Otezla but at the cost of higher side effects.

The psoriasis market is challenging because highly effective and relatively safe drugs, both injections and pills, are already available for patients. Biogen chose not to develop Tecfidera in psoriasis, which gives Xenoport the opportunity to be the first drug in the fumaric ester class approved for the chronic skin disease. It will compete with

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, which is also gearing up for a phase III psoriasis study of its own fumaric ester compound, for that honor. However, the XP23829 psoriasis data announce Tuesday may have to improve in later, larger studies to be competitive in the market.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.