XenoPort, Inc. (XNPT) announced a deal with Reckitt Benckiser Pharmaceuticals for the development and commercialization of XenoPort's arbaclofen placarbil (AP). Under this collaboration, Reckitt Benckiser Pharma will advance AP into a phase IIb proof-of-concept study for the treatment of alcohol use disorders.

The study will evaluate the ability of AP to suppress alcohol cravings, reduce alcohol intake and facilitate maintenance of abstinence in people dependent on alcohol. Accordign to the World Health Organization, alcohol use disorders affect more than 140 million people across the world.

Terms of the Deal

According to the terms of the deal, Reckitt Benckiser Pharma has global rights to develop and commercialize AP for all indications. However, XenoPort retains the rights to negotiate with Reckitt Benckiser Pharma for non-addiction indications.

XenoPort will receive an upfront and non refundable cash payment of $20 million and an additional $5 million once certain technology and materials have been transferred to Reckitt Benckiser Pharma. XenoPort could receive up to $70 million and $50 million on the achievement of development and regulatory milestones and commercial milestones, respectively.

Moreover, XenoPort will receive tiered double-digit royalties (up to the mid-teens) on net sales of AP in the U.S. and high single-digit royalties on net sales outside the U.S.

Our Take

We are positive on XenoPort’s agreement with Reckitt Benckiser Pharma. The agreement should be beneficial for XenoPort which is gaining a strong partner in the form of Reckitt Benckiser Pharma, a company with expertise in the field of addiction disorders.

XenoPort carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector include Gilead Sciences Inc. (GILD), ANI Pharmaceuticals, Inc. (ANIP) and Myriad Genetics Inc. (MYGN). All these stocks carry a Zacks Rank #1 (Strong Buy).

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