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XenoPort, Inc. (NASDAQ:XNPT)

Business Update Call

January 15, 2008 8:30 am ET

Executives

Jackie Cossmon – Director of Investor Relations

Ronald W. Barrett, PhD – Chief Executive Officer & Director

William J. Rieflin – President

William G. Harris – Chief Financial Officer & Senior Vice President Finance

Analysts

Rachel McMinn – Cowen & Company, LLC

Steven Harr, M.D. – Morgan Stanley

Juan F. Sanchez – Punk, Ziegel & Co.

[Bill Flattery – Deerfield]

David Amsellem – Friedman, Billings, Ramsey & Co.

Analyst – RBC Capital Markets

Lucy Lu - Citigroup

Operator

Good morning my name is Carol and I will be your conference operator today. At this time I would like to welcome everyone to the XenoPort conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. (Operator Instructions) I will now turn the call over to Jackie Cossmon Director of Investor Relations for XenoPort. You may now begin.

Jackie Cossmon

Good morning and thank you for joining us on the call. Here with me today are Ron Barrett our Chief Executive Officer, Bill Rieflin our President and Bill Harris our Senior Vice President of Finance and Chief Financial Officer. Before we begin our discussion of today’s news, I would like to note that the information to be discussed on this conference call and webcast including answers to questions asked during this call will include forward-looking statements that involve risk and uncertainties including statements relating to XenoPort and its partners clinical development programs for XP13512 and the timing there of, the release of additional XP13512 clinical trial data and the timing there of, the potential filing of an MDA for XP13512 and the timing there of, the therapeutic and commercial potential of XP13512 and GSK future clinical trial.

XenoPort can give no assurance with respect to these statements and we assume no obligation to update them. For detailed information about the risks and uncertainties that could cause actual results to differ materially from those implied by or anticipated in these forward-looking statements please refer to the risks factors in our quarterly report on Form 10Q for the quarter ending September 30, 2007, including our discussion of the inherent risks of clinical trials. This webcast is a copyright of XenoPort. No reproduction, retransmission or other copies of this webcast may be made without the express written permission of XenoPort. At this time I would like to turn the presentation over to Ron.

Ronald W. Barrett, PhD

Good morning everyone. Thank you for joining us on this conference call. We are very pleased to report today the positive top line results from our second Phase III Clinical Trial of Xp13512 also known as GSK1838262. I’ll use the abbreviated 512 for this drug candidate in today’s call. The trial which is designated as XP060 was a nine month study assessing the maintenance of efficacy and safety of 512 in patients with primary restless leg syndrome or RLS. They study design is described in the press release so I won’t repeat all the details on this call. The study enrolled 327 patients with moderate to severe primary RLS. Patients were initially treated for six months with 1200 mg of 512 once a day. At the end of this six months single blind phase of the trial patients were considered responders if they met specific required criteria using both the international restless legs ratings score and the investigator assessed clinical global impression of improvement.

Responders where then randomized to either continue 512 or placebo for an additional 12 week period. 194 patients entered the double blind randomized phase of the trial and were evaluated for relapse or worsening of RLS symptoms over 12 weeks. The primary end point of the trial was the proportion of RLS patients who relapsed or had their RLS symptoms worsen during the 12 week double blind treatment period. Patients were considered to have relapsed if they met one or both of the following criteria: they withdrew from the clinical trial due to lack of efficacy and/or there were two consecutive visits to the physicians office in which the patients IRLS score worsened by at least six points compared to the IRLS score at the point of randomization, the patient achieved an IRLS score of at least 15 and the patient received an assessment of much worse or very much worse as compared to the condition of the patient at the point of randomization using an investigator clinical global impression of change scale.

I am very pleased to report that treatment with 512 resulted in statistically significant lower proportion of relapse when compared to placebo. 9% of 512 treated patients met the relapse criteria in contrast to 23% for placebo treated patients. This was a statistically significant difference with a T-value of 0.0158. We are particularly pleased with these results in the face of the stringent relapse criteria that were arrived at after extensive discussion with the FDA. I would caution against comparison of our 512 results with those of previous similar studies conducted with dopamine agonist. In addition to the fact that 512 works by a different mechanism, there are differences in the clinical study design, patient population and importantly the relapse criteria, any one of which or a combination of which could explain the differences in the results. As I mentioned, our study design and end points were defined after extensive consultation with the FDA and we therefore believe that these positive results will be a supportive part of our NDA.

We are also pleased with the safety and tolerability data in this trial. Study XPO60 had a longer treatment period than any other 512 trial completed to date and we are pleased to see that 512 was well tolerated during the nine month trial. The most commonly reported adverse events in the 512 treated patients during the six month single blind phase of the clinical trial was somnolence which was experienced by 30% of patients and dizziness which was experienced by 22% of patients. These were generally mild and moderate in intensity and transient in nature. The absolute incidents of these side effects should be viewed cautiously since this was a six month single blind portion of the study. Importantly only 7% of patients withdrew during the six month single blind phase of the trial due to adverse effects. We observed far fewer adverse effects during the double blind phase of the study which is consistent with our previous experience with 512 where the adverse events like dizziness and somnolence are transiently observed early in treatment.

In total these results clearly strengthen our believes that 512 has the potential to be a safe and effective treatment of primary RLS. The next step in the 512 RLS program is to wrap up the trial needed for the NDA submission. Patient participation all these studies have been completed with the exception of our one year safety study. In that safety study greater than 100 patients have completed treatment for one year and will be included in the NDA filing. However, there are additional patients wrapping up there participation in the next few months that we expect to include in our NDA safety update.

We plan to report top line results of the third and last Phase III typical efficacy study XP053 later this quarter. As we have indicated in the past we do not intend to disclose the results of other safety and clinical pharmacology studies in the near term unless the results will materially affect our plans.

In the next several months we will be completing study reports that we will then transfer to GSK to enable the NDA to be filed which is expected in the third quarter of this year. We are also focused on executing the development programs for the other candidates in our pipeline. Earlier this month we outlined plans for X219886 and XP21279 and we look forward to reporting results on these programs in the future. With that I will open the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions) We will pause for just a moment to compile the Q&A roster. Our first question will come from the line of Rachel McMinn with Cowen.

Rachel McMinn – Cowen & Company, LLC

I wanted to ask you if you could provide any more details on the individual metrics within the relapse criteria? As you’ve mentioned the relapse criteria are much more stringent than what were used for the dopamine agonists. Can you tell us what drove the efficacy results or how individual components, what that data might have looked like?

Ronald W. Barrett, PhD

Well we are only disclosing top line date at this point. I think it is reasonable if you just do the math to see that the number of relapsers in our study was lower than, particularly the primapexole study. And, if you look at the results of those studies many of those relapsers were due to withdrawal due to lack of efficacy. Because of our total relapse is lower you can safely assume that we had fewer relapses due to lack of efficacy and the majority of our relapses occurred because they met the criteria. I think one of the things I said on the criteria that we use was this requirement for two consecutive visits in which the criteria were met. So that was a pretty high bar, we’re glad that the results were positive and we think this will be very supportive of our NDA.

Rachel McMinn – Cowen & Company, LLC

And then, just separately on the safety side of things can you talk about when the severe adverse events occurred? Was that sort of scattered throughout the trials in five or six patients? Was it an event that was possibly related to stress?

Ronald W. Barrett, PhD

Sure. The efficacies were scattered throughout the trial. Five of the six were unrelated. The one that was possibly related was a suspected seizure. I can’t go into all the details at this stage for obviously patient confidentiality reasons but the patient had an underlying condition that may have contributed to the seizure. She was treated and fully recovered.

Operator

Our next question will come from the line of Steve Harr with Morgan Stanley.

Steven Harr, M.D. – Morgan Stanley

I just wanted to get a little more granularity on this potential [inaudible]. Mechanistically does it make sense that a gabapentin would cause seizures instead of treat them?

Ronald W. Barrett, PhD

Well, gabapentin is approved for the treatment of epilepsy and we don’t really know what the cause of this particular event was. As I mentioned, there may have been confounding factors. However; because the patient was on the 512 treatment arm in the randomized stage the investigator felt that it was possibly related to treatment.

Steven Harr, M.D. – Morgan Stanley

What data do you have from the post randomization period on adverse events? You gave us the 512 arm but what did the placebo arm look like?

Ronald W. Barrett, PhD

The placebo arm had very few events also. There were drop-outs due to lack of efficacy. There were very few drop-outs due to adverse events after the randomization.

Steven Harr, M.D. – Morgan Stanley

When will this data be fully presented?

Ronald W. Barrett, PhD

We are working with GSK on our communications plan for this as well the other studies. We’ll have to give an update in the future because this data is only a couple of days old. We got it just before the weekend and so we haven’t decided when this will be presented.

Operator

Our next question will come from the line of Juan Sanchez with Punk Ziegel.

Juan F. Sanchez – Punk, Ziegel & Co.

I wonder if you can share your thoughts with us when it comes to the position of this drug and the treatment for RLS and light of competing drugs with a different class. Are you planning on running clinical trials with combination therapy with dopamine agonists? And, also in light of the onset of action of gabapentin this indication do you think it is going to positioned as a background therapy? What kind of patients, what is the profile of the patients that should receive combination therapy?

Ronald W. Barrett, PhD

We believe that the profile of 512 in the treatment of RLS patients is going to be very attractive on the efficacy side. Our data suggests that we’re very effective in treating the compendium of symptoms that these patients have, including not only those that are captured by the primary end points in our study but some of the secondary end points in sleep and in painful symptoms. Importantly, also we think that we have quite a different profile on the side effects side. You are probably aware that chronic use of dopamine agonist has been associated with things like augmentation and compulsive behaviors. So, we think that 512 because it works by a different mechanism and at least for the foreseeable future it will be the only approved non-dopaminergic treatment for restless leg syndrome, will be attractive to patient and physicians from the safety side also. Whether we do studies in the future in combination with dopamine agonist we haven’t disclosed that. We think that mono therapy with 512 is very effective and at this point I would say we don’t see a compelling reason why we would want to have a combination with a dopamine agonist. But, that may be something that we look at in the future. We are working closely with our partner GSK and in the Asian territories our partner Astellas to plan how 512 will be positioned in the market.

Operator

The next question comes from the line of [Bill Flattery with Deerfield].

[Bill Flattery – Deerfield]

Three little questions. First, in terms of the death that was deemed not drug related what was the underlying cause? That’s number one. Number two, is the other serious adverse events that were deemed drug unrelated could you describe them? Number three, in the pre-clinical work-ups in your rodent models, could you describe the therapeutic window as it relates to seizure risk? Thanks very much.

Ronald W. Barrett, PhD

Sure on the SAEs I will not go into the details of all the cases again because of the confidentiality reasons. The death was unrelated. It was related to a choking incident very unfortunately but was clearly not related to the drug. The other SAEs were a scattering of reasons. Importantly, none of them were things like liver toxicity or other reasons that might be thought to be related to drug and in judgment of a physician they were clearly unrelated to the drug. With regard to the pre-clinical model there is nothing in our data that suggests any liability with regard to seizures. Gabapentin is a very safe drug, 512 has shown to be very safe in all of the pre-clinical models. It is very difficult to even determine a dose limiting toxicity of 512. In our animal studies we have had to push the dose up to 5 gm per kg in rodents and 2 gm per kg in monkeys and we have studies that go out to in rodent’s chronic tox studies up to a year and monkeys up to nine months. Of course, we have a two year carcinogens’ study that also has completed the NY phase. We see nothing in that data that would suggest any propensity toward seizure activity.

[Bill Flattery – Deerfield]

In terms of the choking was there a previous history of dysphasia or was this related to a difficulty in swallowing or was this a true accidental choking incident?

Ronald W. Barrett, PhD

This was an accidental choking incident relating to food.

Operator

Our next question will come from the line of David Amsellem with Freidman Billings Ramsey.

David Amsellem – Friedman, Billings, Ramsey & Co.

Just on the development going forward, you know Glaxo’s decision to move into a Phase III in migraine rather than going into Phase III right away in neuropathic pain. Can you elaborate on what the strategy in the market expanding indications are? Is the focus on looking at indications that are not in the lyrica and Neurontin labels? Or, is Glaxo still aggressively wants to move forward and eventually get approval in neuropathic pain indications?

Ronald W. Barrett, PhD

I think by their announced plan in neuropathic pain there is plenty of enthusiasm for developing the molecule for neuropathic pain. The planned studies that are starting this quarter are three neuropathic pain studies; a postherpetic neuralgia study that is a multiple dose placebo controlled study, that if positive could possibly serve as a registration study. A PDN study is more of a conventional dose ranging Phase II study.

I think the approach here is to fully understand how to power a successful Phase III study in PDN. As you may know, in PDN the history is such that there have been more failed trials in that type of neuropathic pain than in postherpetic neuralgia and therefore, GSK and we want to get some experience with the drug to understand how to properly power a Phase III study. And the third study is a study in gabapentin failures and if successful would certainly give us confidence to design a Phase III program that would allow one to make statements about the working in gabapentin failures.

I think this is a very aggressive plan in neuropathic pain and in no way suggests that there not interested in that indication. The migraine prophylaxis is emerged out of an analysis that the GSK and we have been doing about the other opportunities for 512 and other indications. And, we particularly like the migraine prophylaxis for a number of reasons. We think that there is a clear medical need, that the use of prophylactic treatment is expanding and the drugs that are currently used for prophylaxis have some significant deficiencies particularly on the safety tolerability side.

I want to caution that the plan’s that GSK announced to go directly into Phase III are contingent upon the agreement with the FDA and so that will be occurring over the next several months. I hope that adequately addresses your question. The general point that you made that there are opportunities in which pregabalin and gabapentin are not approved has not escaped our attention or GSK’s and there could be, likely to be, efforts in the future to look at some other conditions beyond the ones that have been announced so far to date.

David Amsellem – Friedman, Billings, Ramsey & Co.

That is helpful and then I have one question unrelated this is on 986 if I may. Could you just provide any update on maybe ballpark on when you might see the data? I know you had mentioned the later half of 2008. But, do you think that maybe fourth quarter? Or, 1Q of 09? And, are there any comments you would like to make on how the two phase studies are rolling so far? Thanks

Ronald W. Barrett, PhD

Sure. You know we’ve indicated that it’s possible that we could see the results of those two Phase II studies this year. I think it’s too early for us to comment on enrollment. We started the studies in December obviously we had the holidays and we are going to have to get some experience over the next few months for us to really kind of get a good estimate of when those studies will be completed. I still would say it is possible that it could be 2008 but until we see that enrollment data we don’t want to commit to a date.

Operator

Our next question will come from the line of [Mike [inaudible]] with RBC Capital Market.

Analyst – RBC Capital Markets

Two questions: one, can you reclarify which studies you have left to hand over and complete that for the NDA? And then secondly, did you look at any secondary end points related to sleep benefits?

Ronald W. Barrett, PhD

Okay I am taking the last question first. There were a number of secondary endpoints in this study. We looked at some of them as part of the top line data. The ones that we have looked at which include looking separately at IRLS score during the randomized phase and the CGI score randomized phase, support the conclusion of the primary endpoint that is, there was a difference between the two treatment groups that was particularly significant.

With regard to your first question on which studies were left to run, the important efficacy study which is the XPO53 study a 12 week, three arm study will report out top line data this quarter. In addition to that we have indicated that there are a number of safety and clin pharm studies that have been completed or will be completed this quarter and those include a thorough QTC study, a driving study, a more extensive PK study looking at multiple doses and doing full PK in that study, as well as some drug interaction studies and other renal insufficiency study that will allow us to have the appropriate information in our label.

Analyst – RBC Capital Markets

Okay but anything related to sleep specifically? There were some end points there but, we’ll have to wait on the final data?

Ronald W. Barrett, PhD

Yes we do not have the sleep secondary end point data at this point.

Operator

Our next question will come from the line of Rachel McMinn with Cowen.

Rachel McMinn – Cowen & Company, LLC

Just one quick question. So you have these, I think if I understand this correctly, you have more than 100 patients who have completed one year of 512 therapy. Is that correct?

Ronald W. Barrett, PhD

That is correct.

Rachel McMinn – Cowen & Company, LLC

And so can you talk about any of the safety findings there? And, how they may or may not be different than the nine months study reported?

Ronald W. Barrett, PhD

Yes. That data is still being worked up. I would say at this point there is nothing alarming in the data that has come to our attention but, we do not have the full analysis. We did the data cut, that means that we’re cleaning up the data on these patients that had met the one year requirement in December and we still don’t have the compiled data. But, on a kind of global level I would say that there’s nothing in that data that would give us any alarms.

Rachel McMinn – Cowen & Company, LLC

Okay can you say whether there were any serious adverse events within that population?

Ronald W. Barrett, PhD

Well I would say if there weren’t I would be very surprised. This is a long study and serious adverse events always come up in long studies. I don’t know how many were possibly related at this point. If there are any, it’s very few.

Operator

Our next question comes from the line of Steve Harr with Morgan Stanley.

Steven Harr, M.D. – Morgan Stanley

I just wanted to ask two quick questions about the patient that had the choking episode. Any evidence that there is a change in muscle tone with gabapentin, is the first one? The second is any evidence that this patient had significant somnolence prior to this event?

Ronald W. Barrett, PhD

Right. No the patient was doing fine. There is no evidence that mechanistically that we would have of swallowing problem. This is a tragic case and it was choking on one food and it is very unfortunate for the patient and her family but in our judgment as well as the judgment of the physician that was involved this was unrelated to the drug.

Operator

(Operator Instructions) Our next question will come from the line of Lucy Lu with Citi.

Lucy Lu - Citigroup

Just one more question on the case of the seizure. I know after the single blind case study patients are randomized to either receive the drug or the placebo. Can you just please clarify if this case happened when whether or not the patient switched from high dose of 512 to a lower dose or to placebo?

Ronald W. Barrett, PhD

I’m not sure I understand your question.

Lucy Lu - Citigroup

I just wanted to make sure that it’s not related to patients dosing down on 512.

Ronald W. Barrett, PhD

So, this patient was in the 512 treatment arm and at this point that is all the information that we know and are disclosing at this point.

Lucy Lu - Citigroup

Okay and then one more question Ron. Is there any, I was just wondering in the medical literature has there been any documentation on when you switch patients to a higher dose gabapentin to a potentially lower dose sometimes you see any increase in seizure rates?

Ronald W. Barrett, PhD

No. In fact, it is the opposite. If you look at the gabapentin label and pregabalin labels they suggest that there be, in particularly epilepsy patients that there be a down titration period because abrupt withdrawal of gabapentin in epilepsy patients has been associated in low incidence with seizure activity.

Operator

I am showing that we have no further questions at this time. Mr. Barrett do you have any closing remarks?

Ronald W. Barrett, PhD

Yes I would like to thank you all for joining us this morning particularly those of you who are on the west coast at this early hour. We will be available to answer any additional questions and can be reached at 408-616-7220. Thank you.

Operator

Thank you for participating in today’s XenoPort conference call. You may now disconnect.

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