Here’s Why XenoPort, Inc. (NASDAQ:XNPT) Fell 25% Today

It’s not often you see biotech stocks drop after reporting positive clinical data, but that’s exactly what happened to XenoPort, Inc (NASDAQ:XNPT) shares on Tuesday.

Before the opening bell, the drug developer reported positive preliminary results from its Phase 2 clinical trial of XP23829 in the treatment of psoriasis. The drug met its primary endpoint in both 800 mg once daily and 400 mg twice daily doses, demonstrating statistically significant improvements in percentage change from baseline to week 12. (Source: XenoPort Announces Positive Phase 2 Study Results for XP23829 as a Potential Treatment for Patients with Psoriasis, September 15, 2015.)

Unfortunately, it wasn’t enough to impress investors. Following the press release, Xenoport stock fell 25% in morning trading.

XenoPort Chart

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Despite the market’s reaction, today’s news is big news for XenoPort. Psoriasis is a chronic, systemic, inflammatory disease that manifests in the skin and/or joints. It is estimated that approximately 1.5 million adults in the United States are considered to have moderate-to-severe psoriasis and between 150,000 and 260,000 new cases of psoriasis are diagnosed each year.

Richard Kim, M.D., chief medical officer of XenoPort, wrote in the press release:

“We believe these clinical data demonstrate for the first time that a MMF prodrug other than dimethyl fumarate (DMF) can be effective in reducing lesions in psoriatic patients. The magnitude of XP23829’s effect on the primary efficacy endpoint met our expectations for this relatively short duration trial and we are particularly encouraged by the results with 800 mg once-daily dosing. Based on what is known about fumarates, we believe that the efficacy of XP23829 is likely to improve with a more extended duration of treatment beyond 12 weeks.”

Psoriasis could just be the beginning for XP23929. In the press release, Kim emphasizes the drug could be useful in treating other conditions. Specifically, he highlights Multiple Sclerosis as an additional market for the drug.

Investors should keep their eyes on XNPT stock closely. If management is successful in finding new markets for XP23829, shares could have a lot of upside.

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