When Biotech Layoffs Come (XNPT)
When conglomerates and consumer products lay off workers and employees, shareholders generally cheer the company for saving money and cutting costs by figuring out productivity measures that milk more output per employee. That leaves more income and ultimately brings more dividends down the road. But biotech firms are far from being thought of in the same light. These are growth stories and investors generally get more excited about expanding operations. So here comes XenoPort, Inc. (NASDAQ: XNPT) announcing on a Friday that HALF of its workers just won the pink-slip lotto ticket from the HR department. Today just officially became National Employee Morale Day at XenoPort.
XenoPort just announced a restructuring plan today that more narrowly focuses its R&D pipeline, and one that “includes an overall reduction in its workforce of approximately 50%.” The company says this will allow it to focus its resources to advance its later-stage product candidates. This comes on the heels of the February 17, 2010 FDA Complete Response Letter which effectively gave the complete response that its Horizant™ treatment for moderate to severe primary restless legs syndrome was a no-go.
XenoPort is collaborating with Astellas Pharma Inc. and GlaxoSmithKline (NYSE: GSK) to develop and commercialize XP13512, which is Horizant. Its product candidates are being studied for the potential treatment of restless legs syndrome, GERD, migraine headaches, neuropathic pain, spasticity and Parkinson’s disease.
The company called this an “unexpected setback” in the approval of Horizant. It also noted that this action is forcing it to review its operating plans.
It will now focus on later-stage development activities and more importantly will eliminate its own discovery research efforts. XenoPort claims a number of product candidates in clinical development as well as several other advanced preclinical compounds.
The company noted specifically that “maximum value will be created for our stockholders over the next several years by reducing our overall spending while focusing on helping our partners gain approval of Horizant in the U.S. and XP13512 in Japan, completing our ongoing Phase 2b trial of arbaclofen placarbil (AP) in gastroesophageal reflux disease (GERD) patients and initiating a Phase 2 clinical trial of XP21279 in patients with Parkinson’s disease.”
The projected estimates of annual cash saving reductions is approximately $15.6 million, most of which is from cuts to compensation and benefit expenses. XenoPort will incur cash expenditures of up to $4.2 million in the first half of this year and it does expect some non-cash charges as part of the action.
Traders and shareholders are also betting on “National Employee Morale Day” at the company being adverse. The stock is now down 2% at $7.72. The 52-week trading range is $6.39 to $25.42. This one effectively dropped from almost $20 to under $10.00 when the FDA determined that the best action for patients with Restless Leg Syndrome was to have less caffeine and to get more exercise.
The company still has close to $150 million in cash and short-term equivalents ($143.7 million per the company’s latest results) and its market cap is now $234 million. The most recent annual report data (on page 29) shows that XenoPort had 219 full-time employees, about 155 of which were involved in R&D.
This is usually one of those instances where the beatings will continue until morale improves.
JON C. OGG
New Restless Leg Syndrome Review for XenoPort (XNPT, GSK)
XenoPort, Inc. (NASDAQ: XNPT) has a big day coming for its GSK1838262/XP13512 (gabapentin enacarbil) next week. The company has a date of February 9 for an FDA Prescription Drug User Fee Act (PDUFA) decision on its Horizant. This is the dated goal for the company’s New Drug Application for Horizant for the treatment of moderate-to-severe primary restless legs syndrome. Horizant is licensed to GlaxoSmithKline (NYSE: GSK) in the United States and several other countries.
There is one concern here… The company’s release last week noted that the GaxoSmithKline partnership may be in doubt because Glaxo has noted that it may end research on depression and pain treatments. GSK and XenoPort are discussing the next steps in the development plan for XP13512 in the neuropathic pain area and will disclose this development plan at a future date.
XenoPort shares closed up 3.4% at $19.01 Friday on 422,000 shares. Average volume is 337,000 shares, but the stock trading has been elevated over the last week.
Date Volume Close
5-Feb 422,100 $19.01
4-Feb 504,800 $18.38
3-Feb 373,200 $19.90
2-Feb 420,200 $19.99
1-Feb 216,400 $18.50
There is also a binary options event factored in here, although on far fewer options contracts than what you normally see. Here is the CALL and PUT volume for Feb-2010 expiration that expire on February 19, with data on the Friday volume and the open interest:
CALL Volume OpInt
17.50 44 1,006
20.00 167 1,995
22.50 170 1,938
PUT$ Volume OpInt
12.50 209 1,062
15.00 95 1,467
17.50 114 2,055
20.00 170 2,812
The stock did manage to close up for the week, which might be impressive considering the weak stock ticker tape action we saw this last week. It looks like the company still has $150 million or so in liquidity with revenues from partnership income looking very spotty and also looking like they are in the rear-view mirror. Analysts expect losses in 2010 and revenues of only about $63 million per Thomson Reuters consensus data.
XenoPort will be able to survive without GSK if push comes to shove. But the restless leg syndrome is not an area without controversy. Ask someone with it if they think it is real or not. Then ask one of their younger family members if they think it largely from inactivity or what the RLS patient consumes daily.
This PDUFA date may not seal the fate of XenoPort, but a very positive review will be of help. The stock has a 52-week trading range of $13.36 to $28.33 and a market cap of about $576 million.
JON C. OGG
Bill Gates, Small Biotech's New Biggest Investor (ALTH, AMAG, RDEA, ARYX, AUXL, BMRN, ETRM, INCY, ITMN, MAPP, OREX, VRUS, REGN, SGEN, VRTX, XNPT)
Late yesterday came the 13-F quarterly filing from the Bill & Melinda Gates Foundation Trust. Bill and Melinda have invested in drugs and research before, as well as dug companies, but there was a slew of biotech stocks in their quarterly holdings. Some of these are cancer winners, while others may seem random. Below we have broken these out by company and size of the position in dollars (M for million; K for thousand) as well as the number of shares.
ALLOS THERAPEUTICS INC. (NASDAQ: ALTH) $3.090M; 500,000 shares
AMAG PHARMACEUTICALS INC. (NASDAQ: AMAG) $1.839M; 50,000 shares
ARDEA BIOSCIENCES INC. (NASDAQ: RDEA) $2.165M; 210,386 shares
ARYX THERAPEUTICS INC. (NASDAQ: ARYX) $1.635M; 480,799 shares
AUXILIUM PHARMACEUTICALS INC. (NASDAQ: AUXL) $2.062M; 74,400 shares
BIOMARIN PHARMACEUTICAL INC. (NASDAQ: BMRN) $1.295M; 104,856 shares
ENTEROMEDICS INC. (NASDAQ: ETRM) $81K; 59,700 shares
INCYTE CORP. (NASDAQ: INCY) $1.02M; 435,700 shares
INTERMUNE INC. (NASDAQ: ITMN) $1.807M; 109,900 shares
MAP PHARMACEUTICALS INC. (NASDAQ: MAPP) $98K; 46,524 shares
OREXIGEN THERAPEUTICS INC. (NASDAQ: OREX) $36K; 13,900 shares
PHARMASSET INC. (NASDAQ: VRUS) $821K; 83,641 shares
REGENERON PHARMACEUTICALS (NASDAQ: REGN) $492K; 35,500 shares
SEATTLE GENETICS INC. (NASDAQ: SGEN) $34.718M; 3,521,088 shares
VERTEX PHARMACEUTICALS INC. (NASDAQ: VRTX) $2.729M; 95,000 shares
XENOPORT INC. (NASDAQ: XNPT) $2.517M; 130,000 shares
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