What: Shares of Xenoport, Inc. (NASDAQ: XNPT), a commercial-stage biotech struggling to expand its pipeline, jumped a whopping 61.1% last month, according to data from S&P Global Market Intelligence. A generous buyout offer from Arbor Pharmaceuticals, LLC sent the stock soaring.
So what: Privately held Arbor Pharmaceuticals threw the drowning Xenoport a life preserver last month in the form of a buyout offer at about a 60% premium to where it was trading at the time.
Arbor agreed to pay $7.03 per share for a total equity value of about $467 million. The main asset Arbor is after is Horizant, a drug approved by the Food and Drug Administration in 2011 for the treatment of restless leg syndrome.
Now what: The $7.03 per share offered is far below Xenoport's peak of more than $60 per share at the beginning of 2009, but I don't think there will be too many ungrateful shareholders when the deal closes, which will probably happen in the third quarter.
Since Horizant was expanded to the management of shingles pain in 2012, Xenoport shareholders have had little reason to cheer in recent years other than a $45 million up-front offer from Dr. Reddy's Laboratories for exclusive U.S. rights to develop and commercialize XP23829, a drug Xenoport had intended to develop for multiple sclerosis. The late-stage failure of XP23829 in 2013 set the company back several steps as it switched gears and tried to develop the same compound for treatment of psoriasis. The sale of the multiple sclerosis-turned-psoriasis candidate left it with little else to offer Arbor but Horizant.
Sales of the restless-leg drug have been growing, mostly through price increases, to an annual run rate of $54.7 million based on first-quarter sales.
Without R&D expenses, growing Horizant sales might have pushed Xenoport into profitable territory, but without anything coming through the pipe, the company would have suffered in the long run. The sale to Arbor is probably best for everyone involved.