XenoPort, Inc. (NASDAQ:XNPT)

CAPS Rating: 4 out of 5

A biopharmaceutical company focused on developing a portfolio of internally discovered product candidates that utilize the body's natural nutrient transporter mechanisms to improve the therapeutic benefits of drugs.

Recs

2
Player Avatar TSIF (99.96) Submitted: 4/9/2011 4:56:49 PM : Underperform Start Price: $10.70 XNPT Score: +19.01

XenoPort Inc's approval of their Restless Leg Syndrome medicine by the FDA was certainly a boon to investors who were either loyal or speculating. Drug approvals and disapprovals can generate the most upward and downward single day volitility you can find anywhere and is pretty good for an adrenaline rush. The problem becomes "what now". For an approval, sometimes the market has gotten ahead of itself. A company still has to price it, produce it or get bought out by a larger company. Valuing drugs takes a bit more effort than speculating on approval. In many cases there is the pop and then the speculators move on and look for the next one on the FDA calendar. Sometimes the biopharmaceutical does stay up awhile on hopes of approval in other countries, other uses for the drug, other drugs in the company's pipleline and always hopes for a buyout. Many other times there is a pop and a drop.

The pop and drop appears likely for XenoPort, Inc. I suffer from restless leg syndrom and my Requip is well know and works fine for me. This isn't a drug approaching a cure or improvement on a life threatening disease. This was mostly a reformulation of an existing drug that is suppose to better help the body absorb it.

A 56% pop was overly aggressive. I believe it will decay away. I'm not looking for a full retrace and it may stabilize upward overtime. No debt, a good cash hoard, and a strong partner. It will need that cash, however, to get production moving, but with GSK as a partner the milestone payments should help keep it in the news. It's body absorbtion technique has a few other uses in various testing. Overall, a short term call on a typical retrrace after a drug approval for a reformulation.

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Member Avatar mhy729 (31.61) Submitted: 5/18/2011 9:52:48 PM
Recs: 0

Good call...btw are there any examples of biotechs -not- experiencing decay/retracement after FDA approval pops? It would seem that such action is the rule rather than exception.

Member Avatar TSIF (99.96) Submitted: 5/19/2011 5:20:18 PM
Recs: 1

There have been a few mhy729. It's all about expectation of the market size and whether the drug company can capitalize on it. Rumors of a buyout can be another catalyst. Dendreon rose for sometime after an FDA approval, but did have a 20% pop that retraced. JAZZ did well, ZZ can probably think of some. Pops and drops on Phase I,II, III data are fairly consistant, but some do hold. It's hard to know when to ride one. If someone has some nice capital gains that would be long term relatively shortly it might be worth a hold, or if there are other drugs in the pipleline on the same technology. It's certainly an area that is volitile and analyst opinion is not usually very valuable.

I did close my pick on this not long ago. My down pitch is left until someone else gets a rec on a down pitch.

http://caps.fool.com/player/zzlangerhans.aspx now has this as an upcall pending some sales data. He has some great blogs and pitches on bios and has been trying to map the cycles.

Good luck.

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