XenoPort, Inc. Under Long Term Investor Investigation

An investor in XNPT shares filed a lawsuit on behalf of purchasers of XenoPort, Inc. common stock during the period between May 5, 2009 and February 17, 2010, against XenoPort. Meanwhile an investigation on behalf of current long term investors of XenoPort, Inc. (NASDAQ:XNPT) over possible breaches of fiduciary duty by certain members of the board of directors and officers was announced.

XenoPort, Inc., located in Santa Clara, CA is a biopharmaceutical company focused on developing and commercializing a portfolio of internally discovered product candidates, which utilizes the body’s natural nutrient transport mechanisms to improve the therapeutic benefits of existing drugs. According to the complaint filed in the United States District Court for the Northern District of California on behalf purchasers of XNPT stock during the period between May 5, 2009 and February 17, 2010, the plaintiff alleges that XenoPort, Inc and certain of its officers and directors violated the Securities Exchange Act of 1934 by issuing between May 5, 2009 and February 17, 2010, misleading and incomplete information about XenoPort's Phase 3 clinical program for an extended-release tablet and development stage drug called Horizant (gabapentin enacarbil), also known as XP13512 ("512"), as a potential treatment for moderate-to-severe primary Restless Legs Syndrome ("RLS"), including that there was strong evidence of safety and indicating that it remained on track, creating an opportunity for XenoPort, Inc. to raise money.

However, XenoPort’s top management was aware that 512 had earlier shown an increased occurrence of pancreatic cancer in lab rats, so the lawsuit, and while the drug had nonetheless been approved for more serious indications, this presented a risk that the U.S. Food and Drug Administration (“FDA”) would not approve 512 for less serious maladies given the devastating impact of pancreatic cancer. Instead of disclosing these findings, which would have affected the public's expectations about the likelihood of FDA approval, defendants repeatedly assured the public as to 512's safety and efficacy, so the plaintiff. As a result of these false and misleading statements, XenoPort stock traded at artificially inflated prices between May 5, 2009 and February 17, 2010, reaching a high of $24.75 per share on September 17, 2009 and permitting XenoPort to complete a secondary offering in July 2009 of 2.875 million shares of XenoPort stock at $19 per share for proceeds of nearly $45 million, so the lawsuit. On February 17, 2010, after the market closed, XenoPort, Inc announced that it has received a complete response letter from the FDA regarding the New Drug Application (NDA) for Horizant indicating that a preclinical finding of pancreatic acinar cell tumors in rats was of sufficient concern to preclude approval of Horizant for Restless Legs Syndrome at this time. On this news, so the lawsuit, XenoPort's stock fell $12.93 per share to close at $6.67 per share on February 18, 2010 -- a one-day decline of 65% on volume of 36.5 million shares, over 16 times the average three-month daily volume. Shares of XenoPort, Inc. (XNPT) traded recently at $6.23 per share, down from its 52weekHigh of $25.42 per share. XNPT shares traded in 2007 at as high as $57.89 per share and rose in early 2008 to over $65 per share, before declining to $17.18 per share in late 2008.