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Xenoport Surges on Takeover Bid and Outperforms the Market

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On May 23, 2016, markets moved sideways without gaining or losing very much. The Dow Jones Industrial Average remained unchanged while the SPDR S&P 500 ETF (SPY) went down by 0.1%. The SPDR S&P 500 ETF rose by 0.75 on a YTD (year-to-date) basis.

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Xenoport to be acquired by Arbor

On May 23, 2016, Xenoport (XNPT) was the top performer in the iShares Nasdaq Biotechnology ETF, with a return of 56.4%. The stock moved up on the news that Xenoport will be acquired by Arbor Pharmaceuticals LLC for “$7.03 per share in cash, or a total equity value of approximately $467 million.” Xenoport made clear that “the purchase price per share represents a 60 percent premium to the closing price of XenoPort shares on May 20, 2016.”

On May 23, Xenoport closed at $6.88 and was trading above the 20-day moving average price of $4.4. The stock has risen 25.3% YTD and witnessed a huge trading volume of ~54.3 million shares, as compared to its three-month average trading volume of ~1.3 million shares per day. According to the latest available data, however, nearly 11.9% of the outstanding shares are in short position.

Xenoport has a book value of $0.12 per share. At its current price, the stock is trading at a price-to-book value of ~55.4x. Xenoport makes up IBB only 0.06% of IBB’s portfolio.

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Other outperformers

On May 23, the other top performer within the iShares Nasdaq Biotechnology ETF included Vitae Pharmaceuticals (VTAE), which rose on higher trading volumes, with 411,000 shares being traded as compared to the previous days’ average trading volume of 319,000 shares.

The stock is gaining importance after the Anacor Pharmaceuticals (ANAC) deal with Pfizer (PFE) as Vitae’s atopic dermatitis (AD) pipeline is similar to Anacor’s AD drug. The stock closed at $8.70 and was trading above 20-day moving average price of $7.1, though the stock has fallen by 51.9% YTD.

Other underperformers

Sarepta Therapeutics (SRPT) was the biggest underperformer in the iShares Nasdaq Biotechnology ETF, shedding 8.7% on May 23. The US Food and Drug Administration is due to announce its decision on the approval of Sarepta’s Eteplirsen for the treatment of Duchenne muscular dystrophy. But the Street sees little chance for the drug to be approved, which has pushed the stock down. Sarepta closed at $17.48 and was trading above the 20-day moving average. The stock has a weight of ~0.2% in IBB’s portfolio.

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