XenoPort (XNPT) DEFA14A Additional proxy soliciting materials

SCHEDULE 14A INFORMATION

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Securities Exchange Act of 1934

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x Definitive Additional Materials

¨ Soliciting Material Pursuant to § 240.14a-12

XenoPort, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

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On May 21, 2014, members of management and the board of directors of Xenoport, Inc. (“XenoPort” or the “Company”) met with representatives of Institutional Shareholder Services, Inc. (“ISS”) and made a slide presentation (the “ISS Presentation”) entitled“The Right Strategy and Board to Build Stockholder Value” pertaining to certain proxy matters up for vote at XenoPort’s annual meeting scheduled for June 11, 2014. A copy of the ISS Presentation is filed herewith as Exhibit 1.

EXHIBIT 1 (ISS PRESENTATION)

©

Copyright 2014 XenoPort, Inc.  All rights reserved.

NASDAQ:XNPT

The Right Strategy and Board to Build

Stockholder Value

These slides and the accompanying oral presentation by XenoPort,

Inc.

contain forward-looking statements that involve risks and uncertainties,

including statements relating to the commercial opportunity and value

proposition for HORZIANT; potential future

sales and commercialization

activity for HORIZANT; the XP23829 clinical development program,

including the initiation or conduct of planned or potential future clinical

trials and regulatory submissions and the timing thereof; expected patent

coverage; the anticipated sufficiency of XenoPort's cash reserves to fund

its operations through 2015; and the therapeutic and commercial potential

of XenoPort’s product candidates, including XP23829. 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 Risk Factors section of our Quarterly Report on Form 10-Q for

the quarter ended March 31, 2014 and filed with the SEC.

2

XenoPort Investor Presentation

May 2014

Safe Harbor Language

Safe Harbor Language

XenoPort, Inc., its directors and certain of its executive officers may be deemed to be

participants

in

the

solicitation

of

proxies

from

stockholders

in

connection

with

XenoPort’s

2014

Annual Meeting of Stockholders. XenoPort has filed with the SEC and provided to its

stockholders

a

definitive

proxy

statement

and

a

WHITE

proxy

card

in

connection

with

such

solicitation. XENOPORT STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE

PROXY STATEMENT (INCLUDING ANY AMENDMENTS AND SUPPLEMENTS) AND THE

ACCOMPANYING

WHITE

PROXY

CARD,

AND

ANY

OTHER

RELEVANT

DOCUMENTS WHEN

THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.

Information regarding the names of XenoPort’s directors and executive officers and their

respective interests in XenoPort by security holdings or otherwise is set forth in XenoPort’s

definitive proxy statement for the 2014 Annual Meeting of Stockholders, filed with the SEC on

April 22, 2014, including Appendix B thereto.

The definitive proxy statement (and amendments or supplements thereto) and the accompanying

WHITE

proxy

card,

and

any

other

relevant

documents

and

other

material

filed

by

XenoPort

with

the

SEC,

are

or

will

be

available

for

no

charge

at

the

SEC’s

website

at

www.sec.gov

and

at

XenoPort’s investor relations website at http://investor.xenoport.-com/index.cfm. Copies may also

be obtained free of charge by contacting XenoPort Investor Relations by mail at 3410 Central

Expressway, Santa Clara, California 95051 or by telephone at (408) 616-7200.

Additional Information

Additional Information

3

XenoPort Investor Presentation

May 2014

Clinton’s Agenda

Clinton’s Agenda

Clinton expressed disagreement with XenoPort Board’s

capital allocation decisions

Proposed in October 2013 and continues to recommend that

XenoPort stop the commercialization of HORIZANT

Insists that XenoPort focus all of its resources on XP23829, a

compound that has yet to enter clinical studies in patients

Insists that Board replace CEO

4

XenoPort Investor Presentation

May 2014

Agenda

Agenda

XenoPort overview

Creating value in HORIZANT

®

XP23829 development execution

Monetizing/creating opportunity for other assets

XenoPort’s Board recommendations

5

XenoPort Investor Presentation

May 2014

XenoPort Overview

Background on XenoPort

Background on XenoPort

Founded in 1999; IPO in 2005

92 full-time employees at December 31, 2013

Developed innovative biology/chemistry platform to improve drug efficacy, tolerability, compliance

Discovered and developed 4 patented mid/late stage or marketed compounds

XenoPort Investor Presentation

May 2014

7

$122.5 million of cash, cash

equivalents and short-term

investments at 3/31/14

Operations expected to be funded

through 2015

Additional $25 million in non-dilutive

cash expected in 2014 associated

with licensing agreement

announced 5/15/14*

No debt

All financial data as of March 31, 2014. 

8

*Subject to antitrust clearance of transaction

XenoPort Investor Presentation

May 2014

Financials

Financials

9

Ronald W. Barrett, Ph.D.

Chief Executive Officer

Founder, former Chief Scientific Officer.

More than 25 years of executive management and R&D

experience in the pharmaceutical industry, Glaxo, Affymax, Abbott

Richard Kim, M.D.

Senior VP, Chief

Medical Officer

More than a decade of

experience in both clinical

development and medical

affairs, including head of

the MS therapeutic area at

Elan and global medical

director, medical affairs at

Biogen Idec

Greg Bates, D.V.M.

Senior VP, Regulatory

Affairs and Quality

25 years regulatory affairs

experience, Pharmacyclics,

Otsuka, Genentech,  Syntex.

Vincent Angotti

Executive VP and

Chief Operating

Officer

Over 20 years sales,

marketing, operations

experience.  Relaunched

numerous drugs as 

executive at Reliant Pharma.

Operations roles at Novartis.

William Harris

Chief Financial Officer

Over 25 years finance experience. CFO at

Coulter (acquired by Corixa Corp).  Senior

level finance positions at Gilead.  MBA,

Santa Clara University.

Dave Savello, Ph.D.

Senior VP of

Development

Operations

Over 30 years broad pharma

industry experience.

Executive roles in R&D,

operations, regulatory at

Cardinal Health, Guilford,

Glaxo, Boehringer Ingelheim

and 3M Company.

Gianna M. Bosko

Senior VP, Chief Legal Officer

and Secretary

~20 years industry experience.  Previously

at Cooley LLP, general corporate and

securities law. J.D., University of Chicago

Law School.

XenoPort Investor Presentation

May 2014

Experienced Management Team

Experienced Management Team

10

9 highly-qualified and proven leaders

8 independent directors

3 new directors have joined the Board over the past 5 years

Average tenure of 8.7 years versus average of ~10.1 years

for the S&P 500, ~10.8 years for the S&P 1500, ~10.7 years

for the S&P MidCap index and ~11.5 years for the S&P

SmallCap index¹

22 Board meetings held in 2013 as part of efforts to oversee

XenoPort’s strategy, to monitor progress, to consider strategic

options and to build stockholder value

1

Source:

ISS,

“Director

Tenure

and

Corporate

Governance

Features,”

By

Rob

Yates,

March

25,

2014.

XenoPort Investor Presentation

May 2014

XenoPort’s Current Board Members are

XenoPort’s Current Board Members are

Independent, Qualified and Active

Independent, Qualified and Active

John Freund, M.D., Lead Independent Director

Managing Director: Skyline Ventures

Partner: Chancellor Capital (INVESCO). Morgan Stanley Venture Partners

Co-founder:  Intuitive Surgical

Former Executive: Acuson

Jeryl Hilleman,

Audit Committee Chair

Ernest Mario, Ph.D.*

Dennis Fenton, Ph.D*.

Catherine Friedman

Paul Berns

Compensation Committee Chair

Ronald Barrett, Ph.D.

Wendell Wierenga, Ph.D.

William Rieflin*

Currently CEO at XenoPort

Former R&D Executive: Glaxo, Affymax

Currently CEO at Anacor

Former CEO: Allos, Bone Care

Former Commercial Executive: Abbott, BASF, BMS

Former Amgen EVP worldwide operations,

manufacturing, process development and quality.

Former Managing Director and Head of West Coast

Healthcare Practice for Morgan Stanley

Currently CFO at Ocera.

Former CFO: Amyris, Symx, Geron, Cytel

Former CEO: Capnia, Reliant, Intrabiotics, ALZA,

Glaxo

Currently CEO at NGM Biopharma

Former President/COO: XenoPort;Tularik

Former CEO: Syrrx

Former Senior R&D Executive at Santarus,

Ambit, Neurocrine, Park Davis, UpJohn

11

XenoPort Investor Presentation

May 2014

*Directors added in past 5 years

Board with Proven Records, Relevant

Board with Proven Records, Relevant

Experience and Broad Skill Sets

Experience and Broad Skill Sets

12

XenoPort Phase 3 Trials

4 trials

3 positive

1 negative

•

HORIZANT approved on

the basis of successful

Phase 3 program

XenoPort Phase 2 Trials

11 trials

7 positive

4 negative

•

XP21279 study had trend

to positive outcome that

served as basis for FDA

discussion resulting in

agreement to move to

Phase 3

but…

Only 13% of small molecule drug candidates entering

clinical development are approved.

*

and…

*

Dimasi et al., Clinical Pharmacology & Therapeutics 87, 272-277 (March 2010)

XenoPort Investor Presentation

May 2014

XenoPort Success Rate in Mid/Late Stage

XenoPort Success Rate in Mid/Late Stage

Trials Exceeds Industry Norms

Trials Exceeds Industry Norms

In response to HORIZANT Complete Response Letter

•

Moved rapidly to restructure around securing approval of HORIZANT and

advancing its clinical-stage assets

•

Conserved resources

•

Reduced headcount by approximately 50%

•

Eliminated research function

•

CEO took voluntary pay cut

•

Spearheaded successful effort to get FDA to approve HORIZANT

In response to AP MS spasticity Phase 3 trial results

•

Moved rapidly to shut-down ongoing AP program expenses and re-focused

around two key assets: XP23829 and HORIZANT

•

Put XP21279 and AP on back burner as XP23829 believed to have higher

value-creation potential

•

Successfully out-licensed AP May 15, 2014*

Management and Board Have Made Tough

Management and Board Have Made Tough

Decisions in Response to Setbacks

Decisions in Response to Setbacks

13

*Subject to antitrust clearance of transaction

XenoPort Investor Presentation

May 2014

Pay for Performance Philosophy: CEO Compensation

Pay for Performance Philosophy: CEO Compensation

Aligned with Performance and Peers

Aligned with Performance and Peers

•

Compensation composed of salary, cash bonus and long-term incentives

•

Pay-for-performance philosophy and practice

Note:

Realizable

pay

for

each

year

is

calculated

as

base

salary

and

bonus

/

NEIP

as

disclosed

in

the

Summary

Compensation

Table,

plus

the

intrinsic

value

of

equity

awards

granted

during

the

year,

based

on

FYE

stock

price;

If

payout

is

not

disclosed,

performance

awards

are

assumed

at

target;

Three

year

average

is

calculated

as

average

cash

compensation plus average intrinsic equity value, based on 2013 FYE stock price.

•

Average realizable compensation is <50% that of peers

•

Realizable compensation has increased and decreased

appropriately with stock price performance

•

Equity awards generally weighted towards stock options --

only deliver value if the stock price increases

Corp Bonus

Base Salary

Plan Cash

2008

500,000

$          

Paid in RSU's

2009

500,000

$          

300,000

$          

2010

465,937

$          

No Bonus

2011

458,522

$          

330,136

$          

2012

469,985

$          

444,136

$          

2013

500,000

$          

No Bonus

Cash Compensation

XenoPort Investor Presentation

May 2014

14

$0.9

$1.1

$2.3

$1.0

$1.8

$0.8

$1.1

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

2011

2012

2013

Average at FYE

2013

Realizable Pay and Performance

Peer Median

XenoPort

Peer Median

XenoPort

$1.7

•

2008:

•

2010:

•

2011:

•

2013:

•

2014:

Dr. Barrett requested and the Board agreed to pay bonus in stock to

conserve cash

Dr. Barrett requested and the Board agreed to reduce salary

Minimum Corporate Goal score was not met and no bonus paid

280G gross-up benefit eliminated

Minimum Corporate Goal score was not met and no bonus paid

Dr. Barrett requested and the Board agreed to no increase in salary

50% of long-term incentive grant performance-based

Stock ownership guidelines implemented for executives and Board

* Minimum Corporate Goal performance required for any bonus payment

* Performance-based

equity

grants

in

2010

and

2014

15

Advance development of XP23829 as potential treatment for

psoriasis and/or relapsing forms of multiple sclerosis

Build significant value for HORIZANT

•

Provide funding source to capture the most value for

XP23829

•

Potential revenue through out-licensing deal or through

achieving profitability of commercial effort

•

Hedge risk inherent in XP23829 development

Monetize other assets and create “additional shots on goal”

through partnering

We  believe it would be imprudent to focus ONLY on XP23829,

despite its potential.  XP23829 is just entering Phase 2 studies

and the

biotechnology business has inherent risk.

XenoPort Investor Presentation

May 2014

Strategy to Build Stockholder Value

Strategy to Build Stockholder Value

Existing Stockholders Participated in

Existing Stockholders Participated in

January 2014 Financing

January 2014 Financing

XenoPort regularly meets with stockholders and potential new

investors

XenoPort Board members met with majority of top 15

stockholders in January 2014 prior to financing to get feedback

on Clinton’s demands and XenoPort’s strategy

Majority of largest stockholders participated in subsequent

financing

16

XenoPort Investor Presentation

May 2014

Industry Analysts are Supportive of the

Industry Analysts are Supportive of the

Actions XenoPort is Taking on HORIZANT

Actions XenoPort is Taking on HORIZANT

17

Permission to use quotes was neither sought nor obtained.

XenoPort Investor Presentation

May 2014

“We continue to see HORIZANT ($2.7 million in revenues in Q4 2013) as

contributing modestly to XNPT valuation. However, if XNPT continues to execute

well, we believe HORIZANT could become a profitable business unit and a

modest

contributor

of

cash.”

–

Ladenberg,

2/27/14

“Management has developed a new marketing strategy that shows initial signs of

bearing

fruit.

The

company

has

deployed

40

field

representatives

into

40

territories, and the team has already begun to outperform the marketing effort put

forth

by

GSK.”

–

Jefferies,

4/21/2014

“Horizant

sales

were

$3M

for

the

quarter

with

prescription

trends

continuing

to provide

some

reflection

of

XNPT’s

successful

focused

re-launch,

and

…

its

trajectory

should

enable

the

drug

to

be

cash

flow

positive.”

–

Wells

Fargo,

5/09/14,

XNPT 

“HORIZANT appears to be generating positive momentum in markets where

XNPT

is

focused…

We

believe

HORIZANT

revenues

will

continue

to

grow...”

–

Leerink, 5/11/14

Permission to use quotes was neither sought nor obtained.

Industry analysts recognize the value potential of HORIZANT

Creating Value in

HORIZANT

®

(gabapentin enacarbil)

Extended-Release Tablets

19

HORIZANT –

Discovered and Developed by XenoPort for RLS prior to 2007

Former Partner

Launches

HORIZANT

Former Partner Experiences

Stockout

XenoPort

Initiates

HORIZANT

Commercialization

2010

2007

2008

2009

2011

2012

2013

2014

XenoPort and Former

Partner

Enter Into Licensing

Agreement

Receive

CRL

From FDA

FDA  Approves

HORIZANT for

Moderate-to-Severe

Primary RLS in

Adults

XenoPort

Initiates

Dispute

Process

FDA  Approves

HORIZANT for

Management of PHN

In Adults

XenoPort Reacquires

HORIZANT Rights

HORIZANT Agreement

Terminated

Please review the full prescribing and safety information for HORIZANT. The most common adverse reactions of HORIZANT

in RLS patients: somnolence/sedation and dizziness, and in PHN patients: somnolence, dizziness and headache. 

RLS

NDA

Accepted

XenoPort Investor Presentation

May 2014

We Re-Launched HORIZANT

We Re-Launched HORIZANT

Less Than a Year Ago

Less Than a Year Ago

Over 5 million adults suffer from

moderate-to-severe primary

restless legs syndrome (RLS)

>6 million annual prescription

Widespread use of dopamine

agonists

Growing awareness of issues

related to dopamine agonist use in

treatment of RLS

Sources: RLS Prevelance-NINDs, NIH, Sleep Medicine, Volume 14, No. 7 , 2013,

Mayo

Clinic

Proceedings,

Volume

88,

No.

9,

2013,

Sleep,

Vol.

35,

No.

8,

2012

20

XenoPort Investor Presentation

May 2014

Moderate-to-Severe Primary RLS

Moderate-to-Severe Primary RLS

Market Opportunity in U.S.

Market Opportunity in U.S.

Only non-dopamine agonist approved for treatment of

moderate-to-severe primary RLS in adults

Proven effective in relieving RLS symptoms

HORIZANT is “not interchangeable with other gabapentin

products”

(FDA Label)

Convenient once-a-day dosing

No titration to approved dose

Shows no evidence of augmentation, rebound or impulse

control disorders

Please review the full prescribing and safety information for HORIZANT. The most common adverse reactions

of HORIZANT in RLS patients: somnolence/sedation and dizziness, and in PHN patients: somnolence, dizziness and headache. 

21

XenoPort Investor Presentation

May 2014

HORIZANT Is Differentiated for RLS

HORIZANT Is Differentiated for RLS

International

RLS

Study

Group

Task

Force

recommends

that

ligands should be considered for first-line treatment for patients with

RLS

Willis Ekbom Disease Foundation Medical Advisory Board revised

consensus

statement

on

the

management

of

RLS

recommending

ligands should be considered for initial treatment for patients with RLS

American Academy of  Sleep Medicine identified gabapentin enacarbil

as the only

Ligand with high level of evidence of efficacy for

patients with RLS

RLS Treatment Guidelines Revised Since

RLS Treatment Guidelines Revised Since

HORIZANT Approval

HORIZANT Approval

22

HORIZANT is the only product in the

ligand class

approved for treatment of RLS.

Please review the full prescribing and safety information for HORIZANT. The most common adverse reactions of HORIZANT

in RLS patients: somnolence/sedation and dizziness, and in PHN patients: somnolence, dizziness and headache. 

XenoPort Investor Presentation

May 2014

Results from damage that occurs to

the peripheral nerve fibers during a

shingles outbreak

Pain associated with PHN can be very

intense

About 200,000 patients suffer from

PHN in the U.S.

Clear unmet medical need

•

Only ~30% of patients receive

50%

reduction in PHN pain with gabapentin, the

most widely used agent to treat PHN

Sources:  Decision Resources, Inc. 2010, Neurontin Product Label

23

XenoPort Investor Presentation

May 2014

Postherpetic Neuralgia (PHN)

Postherpetic Neuralgia (PHN)

Simple dosing

•

Three days at 600 mg once a day

•

4

th

day

at

approved

600

mg

twice

daily

Effective at one week

Pharmacokinetic differentiation

•

High bioavailability (75%)

•

Sustained 24-hour gabapentin blood levels (Peak/Trough = 1.5)

•

“Not

interchangeable

with

other

gabapentin

products”

(FDA

label)

Pivotal trial showed 42% of PHN patients experienced

50% pain

intensity score from baseline

24-hour pain reduction

Approved

for

PHN

by

FDA

but

never

launched

by

former

partner

Please review the full prescribing and safety information for HORIZANT. The most common adverse reactions

of HORIZANT in RLS patients: somnolence/sedation and dizziness, and in PHN patients: somnolence, dizziness and headache.  Patients with

renal insufficiency require a modified dose."

24

XenoPort Investor Presentation

May 2014

HORIZANT is Differentiated for PHN

HORIZANT is Differentiated for PHN

25

XenoPort Investor Presentation

May 2014

HORIZANT: What Went Wrong with

HORIZANT: What Went Wrong with

Former Partner?

Former Partner?

Six months after former partner’s launch, market research of targeted

customers showed top three reasons for not prescribing HORIZANT:

•

“Wasn’t aware of HORIZANT”

•

“Did not know enough about HORIZANT to decide”

•

“Did not know HORIZANT was approved”

•

Led to former partner’s $3B settlement with U.S. Government

•

Corporate Integrity Agreement

•

New selling model for former partner (no individual incentives for sales) implemented

on the day of HORIZANT launch

Government investigation of former partner’s past marketing practices

•

Partner exited pain development which was a major part of HORIZANT life cycle

planning

Change in former partner’s development strategy

Change

in

former

partner’s

CEO

–

HORIZANT

champions

departed

Strategy

•

Measure responsiveness quickly and efficiently

•

Build value in HORIZANT to provide strategic optionality (monetize or grow business)

•

Closely monitor results to make sure continued investment is warranted

Tactics

•

Leverage $40 million and 50 metric tons of active ingredient acquired as part of

settlement

•

Implement state-of-the-art promotional tools

•

Personal promotion and marketing efforts focused in 40 territories

26

•

XenoPort sales

specialists call on ~10%

of the potential market

•

~40 sales reps vs.

former partner’s ~300

XenoPort Investor Presentation

May 2014

XenoPort’s Initial Strategy

XenoPort’s Initial Strategy

Demonstrate that

Demonstrate that

HORIZANT is Promotionally Responsive

HORIZANT is Promotionally Responsive

Solid HORIZANT Prescription Performance

Solid HORIZANT Prescription Performance

in 1Q 2014

in 1Q 2014

27

National Prescribed Tablets

XP Territories Prescribed Tablets

Prescribed Tablets per Rep

XenoPort Investor Presentation

May 2014

601,201

746,729

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

GSK 1Q13

XP 1Q14

Former

partner

300

sales

reps

XNPT

40

sales

reps

+24%

359,685

588,434

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

GSK 1Q13

XP 1Q14

2,024

14,710

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

GSK 1Q13

XP 1Q14

+630%

+64%

HORIZANT Prescription Growth Coming

HORIZANT Prescription Growth Coming

from XenoPort Promotion

from XenoPort Promotion

28

XenoPort

Promoted

Territories

Non-Promoted

Territories

Previous

Partner

Stockout

XenoPort

Commercialization

Begins

Weekly HORIZANT Prescribed Tablets

XenoPort Investor Presentation

May 2014

63,599

13,506

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

29

Former Partner Never Launched for PHN Indication

Please review the full prescribing and safety information for HORIZANT. The most common adverse reactions of HORIZANT in RLS patients: somnolence/sedation and

dizziness, and in PHN patients: somnolence, dizziness and headache.  Patients with renal insufficiency require a modified dose."

XenoPort Investor Presentation

May 2014

0

500

1000

1500

2000

2500

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

Monthly HORIZANT TRx by Specialty

PCP

Neuro

Psych

PUD/Sleep

Pain/Anes

Other

XenoPort

Begins

Promotion

Physicians Now Receiving RLS AND

Physicians Now Receiving RLS AND

PHN

PHN

Promotional Messages

Promotional Messages

30

4-Week

Rolling

Average

-

HORIZANT

Prescribed

Tablets

May 31, 2013 to May 9, 2014

XenoPort Investor Presentation

May 2014

69,645 tablets at current WAC price = $489,125 / week

Achieved with 40 sales reps promoting to physicians that

represent ~10% of the potential market

69,645

-

20,000

40,000

60,000

80,000

HORIZANT Gross Demand Sales at ~$25 Million

HORIZANT Gross Demand Sales at ~$25 Million

Annualized Run Rate and Ramping

Annualized Run Rate and Ramping

31

Our focused effort has demonstrated promising promotional

responsiveness

HORIZANT is now appropriately priced to be competitive with branded

peers

•

Prescriptions remain robust after price increases

•

This

value

has

accrued

to

XenoPort

stockholders

because

we

still

own

the

product

HORIZANT has patent protection through 2026

HORIZANT current annualized run rate is ~$25 million and ramping

HORIZANT’s poor performance by former partner is explainable

•

We believe XenoPort is building significant value in an asset whose value

was not apparent to the external world when re-acquired.

•

We believe it would be imprudent to discontinue HORIZANT when value

creation curve remains steep.

XenoPort Investor Presentation

May 2014

HORIZANT Summary

HORIZANT Summary

XP23829 Development Execution

•

Approved in 1990s and widely used for the treatment of psoriasis

in Germany

•

Approved in March 2013 in the United States and February 2013 in

EU for the

treatment of relapsing forms of MS

•

Q1 2014 TECFIDERA revenues were $506 million ($460 million in U.S.; $46

million in sales outside the U.S.)

33

XenoPort Investor Presentation

May 2014

TECFIDERA (dimethylfumarate)

FUMADERM (mixture of dimethylfumarate and monoethyl

fumarate salts)

XP23829 has novel chemical structure that produces the same

active metabolite as TECFIDERA (dimethylfumarate)

Background:

Background:

Fumaric Acid Ester Products

Fumaric Acid Ester Products

Lower incidence/less severe GI side effects and flushing

•

Improved compliance; fewer treatment failures

Onset and/or magnitude of efficacy

•

Earlier onset of immunomodulation

Reduced dosing frequency

•

Once a day rather than twice (TECFIDERA) or three times (FUMADERM)

daily

34

XenoPort Investor Presentation

May 2014

Potential Advantages and Areas of

Potential Advantages and Areas of

Differentiation

Differentiation

Completed numerous preclinical studies

Most studies included DMF for comparison

Animals studies demonstrated less gastric irritation

Phase 1 data has demonstrated favorable pharmacokinetic and

pharmacodynamic effects

Included direct comparison with TECFIDERA

Demonstrated appropriate MMF exposure

Demonstrated immune biomarker effects with once-a-day dosing

Preparing to initiate a Phase 2 clinical trial in patients with moderate-to-

severe plaque psoriasis by mid-2014

35

•

Early-stage development proceeds in a step-wise fashion and is

less costly than later-stage development.

•

XenoPort has aggressively invested in XP23829 by including DMF

and TECFIDERA in studies to assess potential for differentiation.

XenoPort Investor Presentation

May 2014

Ramping Investment in XP23829 Appropriate for

Ramping Investment in XP23829 Appropriate for

its Stage of Development

its Stage of Development

Lymphocyte reductions require further exploration

•

Psoriasis Phase 2 study is designed to establish whether XP23829

differs from

FUMADERM/TECFIDERA and to assess the potential benefits and risks if different

TECFIDERA’s patents likely to be challenged

•

Generic DMF could enter the market and “raise the bar”

for a second generation product

MS and psoriasis markets will be crowded by earliest potential XP23829

launch date

•

Nine approved drugs in U.S. for relapsing forms of MS

•

Generic MS treatments may reach market as early as this year and

change pricing dynamics

•

Seven

approved drugs in U.S. for moderate-to-severe plaque psoriasis

•

Five compounds in Phase 3 development

•

Two oral drugs (apremilast and tofacitinib) expected to enter market in next year

36

We  believe it would be imprudent to focus ONLY on this mid-stage asset,

despite its potential.

XenoPort Investor Presentation

May 2014

XP23829 has Inherent Risk,

XP23829 has Inherent Risk,

Like All Drug Candidates

Like All Drug Candidates

Monetizing/Creating Opportunity for Other Assets

Exclusive world-wide rights granted to Reckitt Benckiser

Pharmaceuticals

announced

on

May

15,

2014

1

Initial development focus: Alcohol Use Disorder

$20 million up-front plus $5 million on technology transfer

completion

Up to $70 million in development and regulatory milestones

Up to $50 million in commercial milestones

Tiered double-digit royalty payments up to mid-teens on a

percentage basis on potential future net sales in the U.S.

High single-digit royalty payments on potential future sales

outside the U.S.

38

1

Subject to antitrust clearance of transaction

Significant value for an asset that Wall Street had recently valued at $0.

XenoPort Investor Presentation

May 2014

AP Agreement Creates Value for XenoPort

AP Agreement Creates Value for XenoPort

Stockholders

Stockholders

XenoPort’s Board Recommendations

June 2013: Clinton began buying and selling XenoPort shares.

October

2013:

Clinton

issues

public

letter

attacking

performance

and

leadership, and demanding replacement of XenoPort’s CEO.

Fall –

Winter 2013: Members of XenoPort’s Board and management

have conference calls, in-person meetings and written exchanges with

Clinton to understand and share views. Clinton fails to meet XenoPort’s

request for the financial analysis offered in Clinton’s October letter.

January 2014: Clinton does not respond to management’s offer to

review HORIZANT progress and public guidance on potential time to

reach profitability.

February 2014: Clinton provides notice of intent to nominate competing

slate of director candidates and present other proposals at Annual

Meeting.

40

XenoPort Investor Presentation

May 2014

XenoPort Board Engagement with Clinton

XenoPort Board Engagement with Clinton

41

1) Clinton Definitive Proxy, Filed 4/25/14

•

XenoPort’s Board attempted to constructively engage with

Clinton to no avail.

•

The Board is open to stockholder feedback and is committed

to doing what is in the best interest of all stockholders. 

XenoPort Investor Presentation

May 2014

February 2014: Members of XenoPort’s Board engage in multiple

discussions with Clinton in an effort to reach a resolution and avoid a

costly and disruptive proxy battle.

March 2014: Clinton does not respond to XenoPort’s modified

settlement proposal.

April 2014:  Clinton reduced his position and reportedly now holds

1.6% of XenoPort stock.

1

XenoPort Board Engagement with Clinton

XenoPort Board Engagement with Clinton

(con’t)

(con’t)

Clinton’s Agenda for Capital Allocation

Clinton’s Agenda for Capital Allocation

Could Destroy Value

Could Destroy Value

Now is the worst time to abandon HORIZANT commercialization

•

Investment in commercial operations is complete

•

Investments in marketing initiatives and programs are largely committed

•

Positive trajectory of sales is increasing the value of a partnership or divestiture of 

HORIZANT

HORIZANT could generate meaningful non-dilutive revenue to fund

further advances of XP23829 development

Diverting funding from HORIZANT to XP23829 will not accelerate its

development

Putting all eggs in one basket is a risky strategy in an inherently risky

industry

42

XenoPort Investor Presentation

May 2014

Clinton’s Agenda to Replace XenoPort CEO and Two

Clinton’s Agenda to Replace XenoPort CEO and Two

Highly-Qualified Directors Could Destroy Value

Highly-Qualified Directors Could Destroy Value

Clinton Agenda:  replace the CEO

43

XenoPort Investor Presentation

May 2014

Dr. Barrett has played, and will continue to play, a pivotal role in executing

XenoPort’s strategy  

Clinton has not identified or proposed an alternative CEO.  Dismissing

current CEO would create a void in the leadership on critical initiatives:

Clinton Agenda: replace three Board members: Dr. Barrett, Ms. Hilleman and Dr.

Wierenga

Initiating by mid-year and conducting a Phase 2 trial for XP23829

Driving education and appropriate use of HORIZANT

Engaging in discussions with potential strategic partners

Replacing these three XenoPort directors removes experience and

expertise that are essential to XenoPort’s future success

Ronald W. Barrett, Ph.D.

Chief Executive Officer of XenoPort since 2001

44

XenoPort Investor Presentation

May 2014

20+ years of executive management experience in the pharmaceutical

industry

Chief Scientific Officer of XenoPort from 1999 to 2001

Various

positions

at

Affymax

Research

Institute,

the

most

recent

of

which was Senior Vice President of Research

Dr. Barrett’s leadership and strategic direction have led to the

discovery and development of our novel product candidates

(including XP23829) and have enabled XenoPort to evolve from a

research-based company to an integrated company with

development and commercialization capabilities.

Director Nominees Provide Expertise

Director Nominees Provide Expertise

Critical to XenoPort’s Success

Critical to XenoPort’s Success

Director Nominees Provide Expertise

Director Nominees Provide Expertise

Critical to XenoPort’s Success

Critical to XenoPort’s Success

Jeryl L. Hilleman

Chair of XenoPort Audit Committee

30+ years of finance, marketing and investment experience and an

impressive history of executive leadership

20+ years as CFO of both private and public companies

Ms. Hilleman’s considerable expertise in finance and accounting

allows her to provide important guidance and direction to

XenoPort in relation to its finance, compliance and auditing needs,

as demonstrated by her work in helping to successfully navigate

the accounting complexities and SEC interactions associated with

the re-acquisition of HORIZANT.  Her knowledge of XenoPort’s

financials would be difficult to replace.

45

XenoPort Investor Presentation

May 2014

Director Nominees Provide Expertise

Director Nominees Provide Expertise

Critical to XenoPort’s Success

Critical to XenoPort’s Success

Wendell Wierenga, Ph.D.

Executive leadership of pharmaceutical research, clinical development and regulatory

functions for a number of national and multi-national corporations, including Santarus

(acquired by Salix Pharmaceuticals for $2.6 B) and Syrrx (acquired by Takeda for $270M)

Director of multiple publicly-traded biopharmaceutical companies, including Onyx

Pharmaceuticals (acquired by Amgen for $10 B)

Dr. Wierenga’s substantial R&D experience has contributed to the

successful development of our pipeline and the approval of HORIZANT. 

His Board experience, including membership of compensation

committees and involvement with M&A processes, provides unique

value to the Board.

46

XenoPort Investor Presentation

May 2014

40 years of leadership of pharmaceutical and biopharmaceutical

companies, including

Participated in the submission of 70+ Investigational New Drug applications

and the filing of 16 New Drug Applications/Biologics License Applications,

and 16 FDA-approved drug products

The Right Strategy and Board to Execute

The Right Strategy and Board to Execute

and Deliver Long-Term Value

and Deliver Long-Term Value

XenoPort Is Committed to Realizing the Full Potential of its Assets and Acting

in the Best Interests of XenoPort Stockholders.

We Ask That You Vote FOR ALL

the Board’s Director Nominees

47

XenoPort Investor Presentation

May 2014

Our

Board

is

active

and

engaged,

and

has

the

depth

and

diversity

of

skills

and

expertise needed to oversee the execution of XenoPort’s strategy

We are making meaningful progress commercializing HORIZANT

We are committed to optimizing the value of XP23829

Our Board has concluded that Clinton’s nominees add no relevant skills,

experience or expertise that is not already well represented on the Board 

Our Board believes that Clinton’s nominees will push an uninformed agenda that

could undermine the Board’s goal of maximally enhancing value of XenoPort

through

current

investment

in

BOTH

HORIZANT

and

XP23829

48

XenoPort Investor Presentation

May 2014

HORIZANT

®

(gabapentin

enacarbil)

Extended-Release

Tablets

INDICATIONS

HORIZANT

®

(gabapentin

enacarbil)

is

a

prescription

medicine

used

to:

treat

adults

with

moderate-to-severe

primary

Restless

Legs

Syndrome

(RLS).

HORIZANT

is

not

for

people

who

need

to

sleep

during

the

daytime and stay awake at night.

manage pain from damaged nerves (postherpetic neuralgia) that follows healing of shingles (a painful rash that comes after a herpes zoster

infection) in adults.

IMPORTANT SAFETY INFORMATION

Do

not

drive

after

taking

your

dose

of

HORIZANT

until

you

know

how

it

affects

you,

including the

morning after

you

take

it.

Do

not

operate heavy machinery or do other dangerous activities until you know how HORIZANT affects you. HORIZANT can cause sleepiness,

dizziness, slow thinking, and can affect your coordination. Ask your healthcare provider when it is okay to do these activities.

Do not take other medicines that make you sleepy or dizzy while taking HORIZANT without talking to your healthcare provider. Taking

HORIZANT with these other medicines may make your sleepiness or dizziness worse.

HORIZANT may cause suicidal thoughts or actions in a very small number of people (about 1 in 500). Pay attention to any changes,

especially sudden changes, in mood, behaviors, thoughts, or feelings. Call your healthcare provider right away if you have any of

these symptoms, especially if they are new, worse, or worry you:

thoughts or actions about suicide, self-harm, or dying; attempt to commit suicide

new or worsening depression or anxiety; or feeling agitated

new or worse restlessness or panic attacks

new or worse trouble sleeping (insomnia); or irritability

acting aggressive, being angry, or violent; acting on dangerous impulses

an extreme increase in activity or talking (mania); other unusual changes in mood or behavior

Do not

stop taking HORIZANT without first talking to your healthcare provider.

Suicidal thoughts or actions can be caused by things other than medicines. If you have these thoughts or actions, your healthcare provider 

may check for other causes.

HORIZANT

may

cause

a

serious

or

life-threatening

allergic

reaction

that

may

affect

your

skin

or

other

parts

of

your

body

such

as

your

liver

or blood cells. You may or may not have a rash with these types of reactions. Call a healthcare provider right away if you have any of the

following

symptoms:

skin

rash,

hives,

fever,

swollen

glands

that

do

not

go

away,

swelling

of

your

lips

or

tongue,

yellowing

of

your

skin

or

eyes,

unusual bruising or bleeding, severe fatigue or weakness, unexpected severe muscle pain, or frequent infections. These symptoms may be  

the first signs of a serious reaction. A healthcare provider should examine you to decide if you should continue taking HORIZANT.

HORIZANT:

HORIZANT:

Important Safety Information

Important Safety Information

49

XenoPort Investor Presentation

May 2014

HORIZANT

is

not

the

same

medicine

as

gabapentin

(for

example,

Neurontin

®

and

Gralise

®

).

HORIZANT

should

not

be

used

in

their

place.

Do not take these or other gabapentin products while taking HORIZANT.

Before taking HORIZANT, tell your healthcare provider if you:

have or have had kidney problems or are on hemodialysis

have

or

have

had

depression,

mood

problems,

or

suicidal

thoughts

or

behavior

have or have had seizures

have a history of drug abuse

have any other medical conditions

are pregnant or plan to become pregnant. It is not known if HORIZANT will harm your unborn baby. Talk to your healthcare provider if

you are pregnant or plan to become pregnant while taking HORIZANT. You and your healthcare provider will decide if you should take

HORIZANT while you are pregnant

are breastfeeding or plan to breastfeed. Your body turns HORIZANT into another drug (gabapentin) that passes into your milk. It is not

known if this can harm your baby. You and your healthcare provider should decide if you will take HORIZANT or breastfeed

drink alcohol

Do not drink alcohol while taking HORIZANT because it may increase the risk of side effects.

Tell

your

healthcare

provider

about

all

the

medicines

you

take,

including

prescription

and

non-prescription

medicines,

vitamins,

and

herbal

supplements. Taking HORIZANT with certain other medicines can cause side effects or affect how well they work. Do not start or stop other

medicines without talking to your healthcare provider.

Do

not

stop

taking

HORIZANT

without

talking

to

your

healthcare

provider

first.

If

you

stop

taking

HORIZANT

suddenly,

you

may

develop

side effects.

The most common side effects of HORIZANT include dizziness, sleepiness, and headache. Tell your healthcare provider about any side effect

that bothers you or does not go away. These are not all the possible side effects of HORIZANT. For more information, ask your healthcare

provider or pharmacist.

You

are

encouraged

to

report

negative

side

effects

of

prescription

drugs

to

the

FDA.

Visit

www.fda.gov/medwatch,

or

call

1-800-FDA-1088.

See Medication Guide.

HORIZANT:

HORIZANT:

Important Safety Information

Important Safety Information