(For more Reuters Buy or Sell stories click [BUYSELL/]) * Shares plunged 60 pct over last month
* Bulls bet on Horizant approval
* Bears see no near-term catalysts
By Anand Basu
BANGALORE, March 4 XenoPort Inc XNPT.O shares have more than halved in value over the past month after the company's key drug for restless leg syndrome (RLS), Horizant, was denied approval.
Analysts are divided on the future of the drug that holds the key to the company's valuation.
Last month, the U.S. Food and Drug Administration issued a complete response letter for Horizant -- a long-lasting version of the drug gabapentin that is approved for refractory epilepsy -- citing a potential link to cancer found in rats.
Analysts are also split on XenoPort's ability to partner another drug, which is in a mid-stage trial for the treatment of gastroesophageal reflux disease (GERD) that causes heartburn.
Should investors buy the stock or is the worst yet to come?
APPROVAL ON THE HORIZON
"I believe that an approval of (Horizant) could be forthcoming by the end of this calendar year," Wedbush PacGrow LifeSciences analyst Gregory Wade said.
Wade expects XenoPort to be granted an FDA advisory panel to review the drug, which will increase Horizant's approval chances.
"FDA presently has a concern around benefit/risk and therefore the most likely outcome in our opinion is that the FDA would consider this for a panel meeting," he added.
"I believe at a panel an expert set of advisers would communicate to the FDA that there is no cancer risk associated with the drug and the seriousness of RLS disease merits approval of this drug," Wade said.
He said positive mid-stage results from GERD study can also be a game changer for the company.
"They will have no difficulty in attracting a partner or potentially be acquired outright on the other side of a positive Phase IIb GERD data," Wade said.
"Aside from their trial in gastroesophageal reflux disease, they really don't have many value-added catalysts coming up in the near future," Hapoalim Securities analyst Raghuram Selvaraju said.
Selvaraju, who is skeptical about Horizant's approval, raised concerns on XenoPort's ability to partner its GERD drug.
"The GERD trial result is only going to be reported at the end of this year at which point they may still not be able to find a partner for the drug because it's a crowded market," he said.
"They cannot afford to drive forward the development of this drug by themselves. GERD is a big indication they will need to do late-stage studies involving thousand patients," Selvaraju said. (Reporting by Anand Basu in Bangalore; Editing by Ratul Ray Chaudhuri)
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