Arbor Pharma Pays $467M for Struggling XenoPort, Restless Legs Drug

Xconomy San Francisco — 

Over the past year, struggling XenoPort has restructured, changed its strategic direction, and reportedly started courting buyers in January. That search looks to have ended today: Arbor Pharmaceuticals has agreed to buy Santa Clara, CA-based XenoPort for $467 million.

Arbor, a specialty pharma company based in Atlanta, GA, has agreed to pay $7.03 per share for the rights to XenoPort (NASDAQ: XNPT). The price represents a roughly 60 percent premium to XenoPort’s $4.40 closing price on Friday. But it’s also a reflection of how far XenoPort has fallen. The company traded at $7.14 per share just eight months ago, and was worth almost nine times its selling price—over $61 a share—in January 2008. The slowdown of the biotech bull run over the past year hasn’t helped matters. “We think [the buyout] represents a good outcome for current XenoPort investors in the current biotech environment,” wrote RBC Capital Markets analyst Michael Yee, in a research note.

Xenoport is perhaps best known for winning FDA approval in 2011 of a drug for restless leg syndrome called gabapentin enacarbil (Horizant) that the agency had rejected just a year earlier. But sales of that drug were so disappointing that British pharma giant GlaxoSmithKline dumped its stake in gabapentin the following year. XenoPort generated just $41.2 million in revenue in 2015.

XenoPort has been trying to diversify beyond gabapentin, and put much of that effort into developing drugs for psoriasis, multiple sclerosis, and Parkinson’s disease. But after some shaky results in a mid-stage study of a drug called XP23829—data XenoPort had initially reported as positive in September—the company completely changed its strategy. Less than a month later, in October, Ronald Barrett retired as CEO and was replaced by Vincent Angotti. XenoPort axed half its work force and discontinued development of XP23829, saying it would only push XP23829 forward with the help of a partner. It turned its attention to selling gabapentin. Reuters reported in January that XenoPort was looking for a buyer. In March, it sold off U.S. rights to XP23829 to Dr. Reddy’s Laboratories.

XenoPort’s exclusive focus on selling gabapentin has helped. XenoPort has projected that the drug will bring in $60 million to $65 million this year, which would be a roughly 33 percent jump from its totals in 2015. And that has enabled the company to find a buyer in Arbor. “The XenoPort sales team has done an excellent job of growing Horizant,” said Arbor CEO Ed Schutter, in a statement. Arbor is privately owned and has several marketed drugs, among them treatments for high blood pressure (azilsartan medoxmil (Edarbi)) and narcolepsy (dextroamphetamine sulfate (Zenzedi)).

Arbor didn’t mention XenoPort’s only other asset, a Parkinson’s drug candidate called XP21279, in the announcement. The acquisition is expected to close in the third quarter.

“We believe that Arbor is well positioned to provide the proper resources for a more expanded commercialization effort of [gabapentin],” Angotti said in the statement.