Under pressure, XenoPort sells U.S. rights of failed psoriasis pill to Dr. Reddy's

Dr. Reddy's Raghav Chari

Dr. Reddy's Laboratories ($RDY) has signed a $490 million drug licensing deal with California's XenoPort ($XNPT) as the struggling biotech looks to shed its R&D ahead of a rumored sale of the company.  

Hyderabad, India's Dr. Reddy's will be granted exclusive U.S. rights for the development and commercialization of XenoPort's oral new chemical entity, XP23829.

The generic, drug development and manufacturing firm said it now plans to develop XP23829 as a potential treatment for moderate-to-severe chronic plaque psoriasis--and may also develop XP23829 for relapsing forms of multiple sclerosis, as it has a similar mechanism of action as Biogen's ($BIIB) marketed MS drug Tecfidera.

Dr. Reddy's will hope to have better success with the treatment than XenoPort after it posted mixed results for the drug in a Phase II study for psoriasis last year.

The CA-based company initially declared the trial a success and outlined plans for a late-stage effort--but later relented and cut the program altogether. In October, the biotech also announced plans to lay off 25 workers, while its CEO Ronald Barrett--who helped start the company in 2009--announced his imminent retirement.

Under the deal, XenoPort will receive a $47.5 million up-front payment and an additional $2.5 million for transfer of certain clinical trial materials to Dr. Reddy's Laboratories.

It could also get up to $190 million if it hits certain regulatory targets, on top of which it may gain a further $250 million if it also reaches key commercial milestones. Dr. Reddy's has in addition promised to pay up to mid-teens royalties if things go really well, meaning it could take $490 million-plus from the deal.

Raghav Chari, executive VP of the Proprietary Products Group at Dr. Reddy's Laboratories, said: "XP23829 complements our internal development efforts, which have primarily focused on the mild-to-moderate psoriasis segment to date.

"In other markets, fumarates have been used as first-line choices of treatment prior to initiation of biologic therapies in patients with moderate-to-severe psoriasis. We intend to initiate the registration program for XP23829 as soon as feasible so that we can accelerate the availability of this important treatment choice for moderate-to-severe psoriasis patients in the U.S. market."

XenoPort said earlier this year it was looking to sell off its entire R&D portfolio--its only other remaining candidate is the mid-stage Parkinson's disease treatment XP21279.

At the start of the year, Reuters reported XenoPort was in fact looking to sell itself completely--and this latest deal looks like it may still be heading in that direction.   

XenoPort has just one approved asset to date: the restless legs syndrome treatment Horizant and has put all of its efforts behind this drug. It was first approved in 2012 but quickly turned out to be a sales disappointment, with partner GlaxoSmithKline ($GSK) abandoning its stake in Horizant shortly after launch.

The biotech has since begun a trial for the drug as a potential treatment for patients with alcohol use disorder. New CEO Vincent Angotti said in a statement that his firm was now "fully focused on our Horizant commercialization effort," but did not disclose any further details about the biotech's future.

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