XenoPort Inc. priced its initial public offering at $52.5 million, raising funds for clinical trials of its Transported Prodrug candidates in restless legs syndrome and post-herpetic neuralgia.

The Santa Clara, Calif.-based company sold 5 million shares of common stock at $10.50 per share, and will allow underwriters the option of purchasing an additional 750,000 shares to cover overallotments. With those shares, the offering would raise net proceeds of $54.2 million.

That's in line with other companies' offerings in 2005. During the first five months of 2005, 14 companies priced IPOs around the globe, raising an average of $52.2 million. Like many other companies, XenoPort had wanted more - its original estimate for the offering was $86.25 million when it filed in January. (See BioWorld Today, Jan. 21, 2005.)

Morgan Stanley & Co. Inc. in New York is sole bookrunner and joint lead manager for the offering, while Deutsche Bank Securities, also of New York, is co-lead manager. Co-managers are San Francisco-based Pacific Growth Equities LLC and New York-based Lazard Capital Markets.

Representatives of XenoPort could not be reached for comment. The company's stock (NASDAQ:XNPT) fell 11 cents on its first day of trading, closing Thursday at $10.39.

XenoPort, which develops candidates that rely on the body's natural nutrient transporter mechanisms to improve existing drugs, said in its prospectus that funding is expected to continue operations into the first quarter of 2007, with the largest portion of the proceeds going toward clinical development, including the completion of a Phase IIb study of once-daily XP13512 in restless legs syndrome patients and the initiation of pivotal trials in that indication. A prodrug of gabapentin, XP13512 recently completed a Phase IIa study in post-herpetic neuralgia, and also is being evaluated as a treatment for neuropathic pain conditions, such as diabetic neuropathy.

XenoPort expects to move its second product, XP19986, a prodrug of R-baclofen, through proof-of-concept studies in gastroesophogeal reflux disease. It recently began a Phase I trial to identify a formulation. Funds from the offering also are expected to support the initiation and completion of Phase I trials of XP20925 in migraine and chemotherapy-induced nausea and vomiting. A prodrug of propofol, it is in preclinical development, and XenoPort expects to file an investigational new drug application in 2006.

In addition to clinical trials, portions of the proceeds are expected to cover manufacturing expenses related to clinical work, and the company also might designate funds for potential acquisitions of technologies, products or companies.

Lead investors in XenoPort prior to the IPO included Frazier Healthcare Ventures, of Seattle, with 9.3 million shares, or 11 percent; New York-based Venrock Associates, with 8.6 million shares, or 10.5 percent; Chicago-based ARCH Venture Fund Partners, with 8 million shares, or 9.8 percent; Palo Alto, Calif.-based Skyline Ventures, with 6.6 million shares, or 8 percent; and New York-based OrbiMed Advisors, with 5.7 million shares, or 7 percent.

For the first quarter of 2005, XenoPort reported revenues of $2.8 million, mostly from collaborations, and operating costs of $12.7 million. The company posted a net loss of $9.7 million. As of March 31, cash, cash equivalents and short-term investments totaled $10.5 million.