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Xenon Reverses Early Gain And Dives Despite Promising Epilepsy Results

Xenon Pharmaceuticals (XENE) highlighted new test results for its epilepsy treatment on Friday, but after surging early, XENE stock toppled.

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The biotech company tested three doses of its drug in patients with focal epilepsy, a condition in which seizures affect one half of the brain. At the highest dose, patients experienced a median 52.8% reduction in monthly seizures. That fell to 46.4% and 33.2% reductions for patients who received smaller doses.

RBC Capital Markets analyst Brian Abrahams says the results demonstrate "consistent and encouraging activity, including seizure-free rates and no safety surprises."

"Though more incremental that the initial data cut, we believe the new details reaffirm the drug's highly efficacious and competitive profile," he said in a report to clients. "We look forward to an end-of-Phase 2 meeting in mid-2022 to clarify the path forward."

On the stock market today, XENE stock fell 4.3% to 24.76. That reversed an equal jump in earlier action.

XENE Stock: Drug Could Launch In 2025

In almost all instances, the high dose of the medicine outperformed the two lower doses. In the high-dose group, 54.5% of patients reported their seizures declined by half and 29.5% had a three-quarters decline in seizures during the month. A small portion, 6.3%, had no seizures.

RBC's Abrahams expects the Food and Drug Administration to require Xenon to run two Phase 3 tests, leading the biotech company to launch its drug in 2025. He calls for $700 million in peak sales.

He has an outperform rating and 43 price target on XENE stock.

"We remain buyers as despite limited near-term catalysts, we believe the share price under-appreciates (the drug's) long-term potential," he said.

XENE stock remains below its 50-day moving average, according to MarketSmith.com. But shares have a strong Relative Strength Rating of 96 on IBD Digital. This puts XENE stock in the leading 4% of all stocks in terms of 12-month performance.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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