Why XenoPort Inc. Shares Leaped

Why XenoPort Inc. Shares Leaped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of XenoPort Inc. , a biopharmaceutical company focused on developing therapies to treat neurological disorders, advanced as much as 14% after activist investing group Clinton Group sent a letter to the company's management team calling for the ouster of CEO Ronald Barrett and a refocusing of its product pipeline.

So what: According to Bloomberg, Clinton Group now owns more than 1.3 million shares of XenoPort, making it one of XenoPort's 10 largest stockholders. In its letter to management, Clinton urged the board to replace Barrett and to heavily pursue the development of experimental relapse-remitting multiple sclerosis drug XP23829 instead of going all-in on marketing Horizant, its restless legs syndrome drug. Clinton Group believes that XP23829 holds the key to big sales as it's very similar to current FDA-approved MS drug Tecfidera, which is made by Biogen Idec, but could be even better given its favorable safety profile.

Now what: Today's letter is really all about unlocking shareholder value. Clinton Group has made a sizable investment in XenoPort and doesn't believe in the current management team or that Horizant will be an overwhelming success for XenoPort. Anytime you see an activist hedge fund take charge (and point out that a company could be worth double or more than its current value) you're likely to see a stock pop. While I certainly understand why XenoPort shareholders are excited, it's still far too early to speculate as to whether any changes will develop from Clinton Group's letter to management. XP23829 definitely bears close watching, but it's also years away from making a difference, meaning that in the meantime all eyes should remain focused on the near-term success of Horizant.

Two biotechs producing game-changing drugs right now
The best way to play the biotech space is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In the Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.

The article Why XenoPort Inc. Shares Leaped originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published