West Coast Editor

Targeting a third Phase III trial with its compound for restless leg syndrome (RLS), XenoPort Inc. priced a public offering of 4.5 million shares at $17 per share, about a dollar less than hoped, to raise $76.5 million for the lead product and another close behind.

XenoPort's shares (NASDAQ:XNPT) closed Thursday at $16.80, down 55 cents.

In a prospectus filed just more than a week ago, Santa Clara, Calif.-based Xenoport estimated proceeds based on an offering price of $18.17, predicting net proceeds of as much as $88 million or so, if underwriters exercised their 30-day overallotment option (675,000 shares) in full. A dollar decrease would drop the net proceeds by about $4.2 million, according to the prospectus.

The company is in a SEC-imposed quiet period and could not comment, but the prospectus details the use of proceeds, some of which will be used to finish two ongoing Phase III trials with XP13512 against RLS. XenoPort's technology deploys specific transporter proteins as molecular "targets," and uses medicinal chemistry techniques to transform drugs into substrates for the transporters.

XP13512, described as a Transported Prodrug of gabapentin (a generic compound primarily used to treat neuropathic pain), is slated for a third Phase III trial in RLS. The second Phase III study began in March, and Xenoport hopes its compound will take some of the market currently served by London-based GlaxoSmithKline plc's dopamine agonist Requip (ropinirole), approved just more than a year ago for RLS, a disorder characterized by an urge to move one's legs, often accompanied by sensations of burning, creeping, tugging or tingling.

XenoPort also plans to use the money for a Phase II/III trial with neuropathic pain, and for the Phase IIa study with another compound, XP19986, for reducing the number of reflux episodes in patients with gastroesophageal reflux disease. In May, preliminary Phase IIa results showed that single doses of XP19986 were well tolerated and produced statistically significant results.

XP19986, a Transported Prodrug of R-baclofen, also will be tried in a Phase II study for spasticity. A third compound, XP21279 for Parkinson's disease, will enter Phase I trials.

As of March 31, XenoPort had about $78 million in cash, cash equivalents and short-term investments.

Morgan Stanley & Co., of New York, is acting as the sole bookrunner and lead manager for the offering. Deutsche Bank Securities Inc., also of New York, and Pacific Growth Equities LLC, of San Francisco, are acting as co-managers.