Arbaclofen placarbil by Xenoport, Inc ($XNPT Catalyst Trade)
By @BlueRose and @Bioinvestor71
February 21, 2013
XENOPORT, INC. (XNPT)
3410 Central Expressway
Santa, Clara, CA 95051
XNPT specializes in drugs that treat neurological conditions and develops prodrugs that utilize the body’s nutrient transport systems to improve uptake of a drug.
Spasticity is a common condition resulting from damage to the motor neuron at the spinal cord or cerebral level. It is typically associated with multiple sclerosis (MS), spinal cord injury (SCI), stroke, cerebral palsy, and traumatic brain injury. The prevalence of spasticity is estimated at approximately 5 million individuals in the USA  with 80-85% of patients with MS, 65-78% of patients with SCI and 35% of patients with stroke demonstrating some degree of spasticity[1, 3].
Individuals with spasticity experience an exaggerated response to a velocity dependent increase in the tonic stretch reflex and an increase in muscle tone that is involuntary due to damage to upper motor neurons. Initially, in the early stages of spasticity the patient presents with a normal muscle lengthening reaction to the velocity dependent stretch. However, with time, the amount of muscle stretch elicited decreases resulting in muscle atrophy and contractures. Spasticity can be a hindrance in the ability for a patient to perform activities of daily living, pain, and decrease in quality of life. Even though spasticity has many negative consequences for the patient there may be potential benefits such as enabling a patient to walk or stand.
Assessment of spasticity by the clinician should include the validated Ashworth or modified Ashworth scale which despite its limitations is considered the gold standard. In the Ashworth assessment the clinician tests the passive resistance in a joint and scores it on a scale of 0-4 (Ashworth) or 0-5 (modified Ashworth) based on the examiners perception. Other spasticity evaluations include the Tardieu scale that measures muscle reaction to passive stretch, self-report of perceived spasticity using a visual analogue scale, pendulum test that measures the swing of the dangling leg, and the disability and pain caused by the spasticity as assessed by the clinician.
Management of spasticity is a multiple modality treatment regime that includes physiotherapy, Botulinum toxin A, orally administered drugs, intrathecal baclofen, alcohol or phenol neurolysis, and surgery. The two most common orally administered drugs for spasticity are baclofen and tizanidine (Figure 1). Arbaclofen placarbil (AP) developed by Xenoport (XNPT) is a prodrug of baclofen.
Figure 1 Xenoport, Inc data evaluating orally administered drug treatments for spasticity.
Oral baclofen has been used since the mid-1970’s for the treatment of spasticity and has been shown to reduce velocity dependent muscle tone on the Ashworth scale that is dose dependent [6, 7]. Interestingly, despite the positive impact observed on the Ashworth scale there does not appear to be any effect on the functional impact of spasticity.
Baclofen is a racemic drug in which the “R” form is the active compound. It is absorbed in the small intestine, crosses the blood brain barrier where it binds to the GABA receptor at the presynaptic terminal. This binding results in the decrease of calcium that results in a reduced release of neurotransmitter that inhibits the spinal reflexes. After oral administration baclofen is rapidly absorbed with a mean half-life of 3.5 hours and is rapidly cleared from the blood. It is estimated that 80% of baclofen is excreted, virtually unchanged in the urine. Therefore, patients on oral baclofen must take the drug up to 4 times a day. Even with frequent dosing blood levels of baclofen fluctuate and concentrations in the blood are related to the time after administration.
Many patients cannot tolerate the side effects of baclofen which include sedation, fatigue and drowsiness which together with frequent dosing of the drug decrease the compliance and usefulness[5, 7]. As shown in figures 2 and 3 nearly 45% of patients fail baclofen as their first line treatment with lack of efficacy as the number one reason for discontinuing.
Figure 2 Xenoport, Inc data of clinicians experience with treatment failures.
Figure 3 Xenoport, Inc data of clinicians experience with why baclofen failed.
The frequent dosing requirements, absorption limited to the small intestine, and significant side effects have contributed to the lack of oral baclofen success. Therefore, the development an extended release formulation of baclofen that was absorbed along the entire length of the intestine that had reduced side effects should ultimately increase compliance and patient satifisfaction.
ARBACLOFEN PLACARBIL (AP)
AP is a prodrug that was developed by Xenoport, Inc. A prodrug is a biologically inactive compound that becomes active after metabolic processing. As shown in Figure 4, Xenoport, Inc. made an addition to the known chemical structure of R-Baclofen to yield the prodrug AP . AP is in a class of prodrugs called acyloxyalkyl carbamate. This class of drugs have two significant properties: 1) they contain chemical structures that are recognized by the monocarboxylate transporter-1 which is present within both the small and large intestine and 2) contain chemical structures that are known to undergo hydrolysis to release them from active drug.
Figure 4 Structure of (1) R-Baclofen and (2) AP. From Ref 8.
Figure 5 Schematic demonstrating mechanism of prodrug transport.
In vitro studies on AP showed it was chemically stable over both physiologically ranges of pH and temperatures. The hydrolysis of AP to R-Baclofen was similar from various species in numerous tissue preparations demonstrating the metabolic stability of AP. The major enzyme responsible for the hydrolysis of AP to R-Baclofen is carboxylesterase -2 whereas carbosylesterase-1 plays only a minor role while the CYP450 pathway is not involved in metabolism. Epithelial polarized cell transport studies demonstrated that AP is partially hydrolyzed during transport from apical to basolateral membrane.
Multiple in vivo animal studies in a variety of species were conducted to evaluate the bioavailability of AP and R-Baclofen. Intravenous administration of AP resulted in rapid conversion to R-Baclofen in the blood. Oral administration of AP demonstrated only a small amount of AP enters the blood stream. In addition, the amount of R-Baclofen available after oral administration of AP was dose dependent and bioavailablity was species dependent with upwards of 94% of R-Baclofen present in the blood. Intracolonic administration of AP or just R-Baclofen showed low levels of both in the blood. However, after the administration of AP there was a substantial amount of R-Baclofen demonstrating the addition of the chemical moiety resulted in absorption through the entire intestinal tract.
Recently, the safety and efficacy of AP was studied in patients with SPI who had spasticity as determined by the Ashworth scale. Thirty-seven SPI patients participated in a multiple-dose randomized, double-blind placebo controlled, two-period crossover study . Doses of the drug were 10, 20 and 30 mg and were given twice a day. There was a dose dependent reduction in spasticity as determined by the Ashworth scale meeting the primary endpoint (Figure 6). The secondary endpoint was met with a statistically significant reduction in patient-rated spasticity at doses of 20 and 30 mg. No deaths were reported during the trial nor changes in vital signs, blood values or EKG. Adverse effects (AE) were rated as mild to moderate with urinary tract infection being the most common AE (11%). Other AE’s included pain in extremity, insomnia and nasopharyngitis. No participated stopped the study due to AE.
Figure 6 Ashworth scale data from SCI patients on AP.
After completion of the SCI study that resulted in positive primary and secondary endpoints the FDA approved a single phase 3 efficacy and safety study in MS patients. The phase III clinical trial for the use of AP in patients with MS is called “Command Trial.” The study was conducted in 35 different sites in the US which enrolled 75 patients of either sex from ages of 18-70. The Command Trial is an open label extension study and results are anticipated by April 30, 2013.
Currently, Xenoport, Inc. is near completion of renal impairment studies. Additional studies will include full food effect and carcinogenic studies. Anticipated 2013 NDA filing will also need to be completed.
Overall impression of the scientific research:
1)There has been a complete investigation of the pharmokinetics of AP both in vitro and in vivo in various animalI anticipate the FDA will be satisfied with these studies.
2)SPI studies met both primary and secondary endpoints with statistical significance. The study was well done but the number of patients in the study was small which one must always be aware that in a larger study statistical significance may not be found.
1) Since the mechanism of spasticity in SPI and MS are both due to lesions of the motor neuron at the spinal cord or brain I predict positive phase III clinical trial results in MSMS patients on AP will demonstrate a decrease in spasticity using the Ashworth scale and AEs will be minimal.
2) I predict there will be no problems with their NDA filing of AP due to the fact their published peer reviewed research is quite complete and should satisfy the FDA.
3) I predict approval of AP for the treatment of spasticity in patients with MS and SPI. The only potential concern will be the incidence of urinary tract infections.
4) The lack of statistical significance in other parameters beyond the Ashworth scale ie, decrease in pain due to spasms, sleep quality, patellar reflex scores, etc. will be raised by the FDA but should not be a hindrance since orally administered Baclofen does not affect any of these parameters.
Drugs currently marketed by XNPT include: Horizant® (gabapentin enacarbil) Extended-Release Tablets is approved in the United States. Initially, they were in partnership with GSK for commercialization of Horizant but this agreement has recently ended and XNPT will have sole rights to commercialization. In addition, Regnite® (gabapentin enacarbil) Extended-Release Tablets is approved in Japan and five other asian countries and Astellas Pharma Inc. holds all development and commercialization rights.
CURRENT MARKET VALUATION AND FINANCIALS
XNPT currently has a market cap of $348M. With over $100M in cash and limited debt that leaves XNPT’s pipeline valued at approximately $250M. XNPT retains the sole rights to commercialization of arbaclofen placarbil which gives XNPT very significant upside potential. XNPT hit a high of $13 in October, 2012. With favorable phase 3 results by April 30, 2013, it is possible that XNPT will break through that previous high in 2013 especially given the limited shares available for trading and high institutional ownership (see below).
FLOAT AND INSTITUTIONAL OWNERSHIP
XNPT has 42M shares outstanding of which 33M is the float. 75% of the float are held by institutions. Since institutions own 75% of the 33M float, that only leaves 8.25M shares are available for active trading. Some of those institutions or funds that hold shares literally control billions of dollars such as BlackRock, Vanguard, Orbimed Advisors, Price T. Rowe, Wellington Management, etc. Big money usually does extensive research into companies prior to taking such a large position so one would assume those companies are optimistic regarding the chances of success. If the phase 3 results are positive, one would assume those companies would increase their stake in XNPT. With only 8.25M shares freely trading, there could be a significant upward spike on positive data.
PRICE REFLECTION FOLLOWING PHASE 3 DATA RESULTS BY APRIL 30, 2013
Considering baclofen is the most widely prescribed drug for the treatment of spasticity, a modified and more effective version of the same medication provides XNPT with major market opportunity. Assuming the phase 3 results are positive, it should take little or no effort for sales forces to convert doctors into prescribing XNPT’s modified and more effective version for what they are already prescribing. This should clearly allow for quick and significant market penetration leading to sales and profits in a relatively short time period. FDA hurdles should be relatively easy since they already approved a variant of the same drug. As such, the safety of the drug should not be an issue for the FDA.
XNPT is forming an ascending wedge pattern (note the higher lows and lower highs). The majority of the time ascending wedge patterns break out to the upside. Watch for this break out.
Note the following charts were all obtained from reference 10.
Each Recommendations received from contributors is mapped to one of the I/B/E/S standard ratings. A consensus recommendation is determined by an average of the numeric values, rounding that mean value to the nearest integer. This area currently displays US research coverage only. In many cases, non-US related research coverage can be accessed from the homepage of the respective company.
Firms making recommendations: Cowen & Company, Ladenberg Thalm, Morgan Stanley, RBC Capital, Deutsche Bk Sec, Leerink Swann, Piper Jeffrey, Webush Security
12-MONTH PRICE TARGET RANGE
Analyst consensus at time of recommendation is $13.
Price targets are calculated by estimating future earnings per share and then applying a price-to-earnings multiple, known as the P/E ratio.
FORECAST EARNINGS GROWTH
# of Holders
Total Shares Held:
Holders With Activity:
Sold Out Positions:
TOP FIVE HOLDINGS
PRICE T ROWE ASSOCIATES INC /MD/ 6,074,311
FMR LLC 5,297,207
WELLINGTON MANAGEMENT CO LLP 4,022,724
CAPITAL WORLD INVESTORS 2,792,000
DEERFIELD MANAGEMENT CO /NY 2,686,064
This article is not an endorsement to purchase this stock. We currently hold no positions but may purchase at any time. Looking for an entry into this stock possibly immediately following earnings OR upon strength in trading. General market has been weak with the market down around 100 points yesterday and this may create a great buying opportunity.
1. Nance, P.W., et al., Efficacy and safety study of arbaclofen placarbil in patients with spasticity due to spinal cord injury. Spinal Cord, 2011. 49(9): p. 974-80.
2. Xenoport, I., JPMorgan Global Healthcare Conference. 2012.
3. Nielsen, J.B., C. Crone, and H. Hultborn, The spinal pathophysiology of spasticity–from a basic science point of view. Acta Physiol (Oxf), 2007. 189(2): p. 171-80.
4. Young, R.R., Spasticity: a review. Neurology, 1994. 44(11 Suppl 9): p. S12-20.
5. Rekand, T., Clinical assessment and management of spasticity: a review. Acta Neurol Scand Suppl, 2010(190): p. 62-6.
6. Hudgson, P. and D. Weightman, Baclofen in the treatment of spasticity. Br Med J, 1971. 4(5778): p. 15-7.
7. Simon, O. and A.P. Yelnik, Managing spasticity with drugs. Eur J Phys Rehabil Med, 2010. 46(3): p. 401-10.
8. Lal, R., et al., Arbaclofen placarbil, a novel R-baclofen prodrug: improved absorption, distribution, metabolism, and elimination properties compared with R-baclofen. J Pharmacol Exp Ther, 2009. 330(3): p. 911-21.
9. http://www.xenoport.com/default.asp, February 17, 2013.
10. http://www.nasdaq.com/symbol/xnpt/institutional-holdings, 2013 Feb 13.