Staff Writer

Shares in XenoPort Inc. took a hit Monday on news that another diabetic nerve pain study missed its mark, but the company said that an unexpectedly high placebo response rate may explain the negative result.

Santa Clara, Calif.-based XenoPort and partner GlaxoSmithKline plc said that the Phase II study of XP13512/ GSK1838262 failed to significantly improve pain intensity in diabetes patients, possibly due to the placebo response rate.

Neither the XenoPort compound (gabapentin enacarbil) nor the active comparator drug in the study, Pfizer Inc.'s Lyrica (pregabalin), demonstrated a benefit.

Atul Pande, senior vice president of GSK Neurosciences Medicines Development Center, said in a statement that "Although we are disappointed that neither GSK1838262 nor pregabalin demonstrated a clear clinical benefit over placebo in this study, we will be evaluating the study results further in order to determine our next steps."

But the companies pointed out that the compound, sometimes referred to as '512, was generally well tolerated throughout the study.

Attributing the study's failure to the placebo effect seems reasonable, Cowen & Co. analyst Eric Schmidt said, given the size of the effect. The placebo response was higher than in any previous painful diabetic neuropathy study, he noted.

But Leerink Swann analyst Jonas Alsenas was skeptical, citing a lack of data.

Still, he told BioWorld Today that he had a moderate level of optimism about '512 and other XenoPort programs.

"I am not ready to write off '512," Alsenas said, calling it a tough indication. He said that the FDA is likely to require two pivotal studies, but may ignore previous unsuccessful studies.

Alsenas also indicated that the company's studies in postherpetic neuralgia (PHN) could be an easier bar to clear. Symptoms in PHN are more consistent and intense, and it may be much less likely to confuse a placebo effect with a real effect, in that case, he said.

Analysts had hoped that the compound would have a large market opportunity as a treatment for painful diabetic neuropathy, or PDN. But two previous diabetic nerve pain studies have been negative.

Late last year, XenoPort's Japanese partner Astellas Pharma Inc. terminated a Phase II study of XP13512, a transported prodrug of gabapentin, in patients with PDN after an analysis showed it was unlikely that the trial would reach statistical significance.

Another diabetic nerve pain study involving bicifadine did not meet any of the study objectives, nearly wiping out the company's shares. (See BioWorld Today, Nov. 19, 2008.)

Lazard Capital Markets downgraded Xenoport's stock from a buy rating to a hold.

Cowen analyst Schmidt wrote that while the "Phase II failure delays and clouds the development path for '512 in neuropathic pain," the rest of the pipeline and technology platform "hold considerable value" and shares are likely to recover over time.

XenoPort has studied the drug in patients with restless leg syndrome, and is seeking U.S. approval for that indication.

Schmidt said he expects the RLS indication to be approved in late 2009 or early 2010.

GSK also is conducting two additional pain trials in patients with PHN, and data from those studies are expected some time this year, Schmidt said.

In addition, he said the compound has potential as a treatment for migraine and a Phase II study is ongoing.

XenoPort's other compounds include '986 for acid reflux disease and spasticity, and '279 for Parkinson's disease may hold longer-term value, Schmidt said.

Shares in XenoPort (NASDAQ:XNPT) fell $2.62 cents, or 15 percent, closing at $14.76 Monday.