CHICAGO, April 8, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: XenoPort, Inc. (Nasdaq: XNPT), GlaxoSmithKline (NYSE: GSK), Pfizer (NYSE: PFE), Sprint Nextel Corp. (NYSE: S) and AT&T Inc. (NYSE: T).
XenoPort, Inc. (Nasdaq: XNPT) recently received a major boost with the US Food and Drug Administration (FDA) approving its restless leg syndrome (RLS) product, Horizant (gabapentin enacarbil). Horizant, which has been developed in collaboration with GlaxoSmithKline (NYSE: GSK), has been approved for the treatment of moderate-to-severe primary RLS in adults. The product is not recommended for use in patients who are required to sleep during the daytime and remain awake at night.
The product label mentions the increased the risk of suicidal thoughts or behavior in patients. The suicidal thoughts/behavior warning was expected as gabapentin enacarbil is a prodrug of Pfizer's (NYSE: PFE) gabapentin, an antiepileptic drug (AED). AEDs are associated with an increased risk of suicidal thoughts/behavior.
Tough Regulatory Path for Horizant
The approval path for Horizant has not exactly been smooth. Glaxo had first filed a new drug application (NDA) for Horizant in January 2009. However, the FDA issued a complete response letter (CRL) in February 2010. While the agency did not raise any questions regarding the efficacy or the clinical safety of the drug, the agency was concerned about a preclinical signal of pancreatic acinar cell tumors in rats.
A response to the CRL was submitted by Glaxo in October 2010. Glaxo submitted new data from non-clinical studies and two epidemiology studies.
Approval a Major Positive for XenoPort
Given the challenging regulatory process, the approval of Horizant is as a major positive for XenoPort. Horizant is the first medication in its class to be approved for the moderate-to-severe primary RLS indication.
Currently available treatments include Glaxo's Requip, Boehringer Ingelheim's Mirapex and generic versions of these drugs. Opioids, benzodiazepines and anticonvulsants are also used to treat RLS.
According to a study published in Movement Disorders in 2010, it is estimated that about 2% of people in the US suffer from RLS. XenoPort estimates that about 4.6 million prescriptions were written for drugs that are approved for the treatment of RLS in the US in 2010.
Horizant is the first product to gain approval at XenoPort. The company currently recognizes revenues from its collaboration agreements with companies like Glaxo and Astellas. Horizant's approval should boost XenoPort's top-line significantly. XenoPort shares were up 56% in after-hours trading.
Horizant is also being studied for the potential treatment of post-herpetic neuralgia (PHN). We currently have a Neutral recommendation on XenoPort, supported by a Zacks #3 Rank (short-term "Hold" rating). We expect investor focus to remain on the commercialization of Horizant.
Sprint: New Contract, New Hopes
Sprint Nextel Corp. (NYSE: S), the third-largest U.S. wireless carrier, extended its $1.2 billion three-year health care purchasing contract with VHA Inc. Sprint has been providing wireless and wireline services to VHA for more than 14 years.
The contract win will serve as a major catalyst to the company in the current scenario in which it is eyeing opportunities for growth. Sprint has been worried since the proposed merger of AT&T Inc. (NYSE: T) and Deutsche Telekom's unit T-Mobile USA was announced, following which its shares tumbled. The dramatic fall raised management's concerns regarding faltering market sentiments over its stock.
Sprint's share is eroding continuously in the U.S. wireless market due to its inability to provide competitive services. Thus, the merged AT&T might further hurt Sprint's profitability and eat into its subscriber base.
Hence, in the current situation, any positive news flow will breathe life into Sprint. In February, Sprint extended its supplier contract with Western States Contracting Alliance through October 2012 for $360 million. Further, the company has hired the ex-financial chief of Qwest as its new CFO. Sprint is pinning its hopes on the experience and expertise of its new CFO to return to profitability by gaining market share from its rivals.
Moreover, in the fourth quarter of 2010, Sprint started to turn around its post-paid wireless business after several years of cost containment and business stabilization. The company is expected to benefit from increased penetration of smartphones, rising average revenue per user and lower churn in the post-paid wireless segment.
Although we believe Sprint has a little room to regain its lost market share, we are currently maintaining our long-term Neutral recommendation on Sprint with the Zacks #3 (Hold) Rank.
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