XenoPort's (Nasdaq: XNPT) investors can settle down now. At least a little.
More than a year after the Food and Drug Administration sent XenoPort and its partner GlaxoSmithKline (NYSE: GSK) a complete response letter for their restless leg syndrome drug, Horizant, the agency approved the drug.
The agency was worried about the risk-benefit ratio of the drug given that it was known to cause pancreatic cancer in rats. It seems the duo was able to convince the agency that it wasn't that big of a deal.
Horizant will see some but not a lot of competition for patients with restless leg syndrome, a disease where patients have an uncontrollable urge to move their legs to avoid an uncomfortable sensation. Glaxo sells Requip to treat the disorder and Boehringer Ingelheim's Mirapex is also approved for restless leg syndrome.
Horizant is a modified-release form of Pfizer's (NYSE: PFE) Neurontin, which is available as a generic. Depomed (Nasdaq: DEPO) also has an extended-release version of the drug, but its version is only approved for post-herpetic neuralgia, the pain that occurs after patients get shingles. The two won't compete except in some fairly rare cases of off-label prescriptions by doctors.
Shares of XenoPort are up a whopping 65% today. While getting a first drug approved is always reason for celebration, investors should be very careful here. The euphoric party often causes valuations that don't look as pretty during the ensuing hangover. Dendreon (Nasdaq: DNDN) and Acorda Therapeutics (Nasdaq: ACOR) have both seen their shares slip post-approval as investors worried about the launches of their drugs approved last year.
XenoPort's investors may not be restless for an approval anymore, but now they have something else to keep them pacing.
Pfizer is a Motley Fool Inside Value pick. GlaxoSmithKline is a Motley Fool Global Gains recommendation. The Fool owns shares of GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Motley Fool has a disclosure policy.
