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Is XenoPort Up For Sale?

Summary

XenoPort’s Q3 revenue slightly missed analyst estimates; EPS was in line.

The company announced a strategic shift a month ago but given management’s comments on the Q3 call, it seems that they hanged up a “for sale” sign.

Q3 was a second straight quarter of Horizant sales acceleration; the progress could be better with a larger sales force.

The stock seems attractive as a takeover target; Horizant alone is likely worth at least as much as the current market cap.

XenoPort (NASDAQ:XNPT) announced a strategic shift last month following the positive but not that great phase 3 trial results for its leading pipeline product '829. The company intends to find a partner for its pipeline candidates and to focus on commercialization of Horizant. This should result in a more focused approach to growing prescriptions going forward and in a significant reduction of costs as well as workforce reductions, which should significantly reduce the cash burn in the following quarters. I went through the very brief Q3 conference call and got the impression that management is actually looking to sell the whole company rather than just focusing on Horizant's growth going forward. This makes XenoPort more interesting as I believe that Horizant alone is worth more than the company's current market cap, and especially if we consider the strong balance sheet. Rumors of the company being an acquisition target already surfaced last week and Supernus was mentioned as a potential acquirer of either Horizant (which sounds more realistic) or the whole company. The stock has almost erased all of the losses following the not that great phase 3 trials for '829, which could be considered as a great achievement given the negative sentiment in the sector in the last two months. I am reiterating my bullish view on XenoPort, and I am in favor of the company being acquired since I believe that a larger company should do a much better job at marketing Horizant than XenoPort.

Horizant sales accelerating

Horizant's sequential growth rates have accelerated for the second straight quarter in Q3 (see the graph below). The expanded sales force is starting to contribute to higher growth and I expect strong sequential growth rates in the following quarters. The company reiterated the full-year revenue guidance but indicated that revenues will be at the lower end of the guidance range, which implies a 20% sequential...


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