XenoPort to Mail Letter to Stockholders

  XenoPort to Mail Letter to Stockholders

Provides XenoPort Stockholders with the Facts about XenoPort’s Board, Strategy
                           and Record of Execution

Urges Stockholders to Vote “FOR ALL” XenoPort Director Nominees on WHITE Card
                                    Today

Business Wire

SANTA CLARA, Calif. -- May 20, 2014

XenoPort, Inc. (Nasdaq: XNPT) today announced that it is mailing a letter to
stockholders in connection with the Company’s upcoming Annual Meeting, which
will be held on June 11, 2014.

In the letter, XenoPort urges stockholders to protect the value of their
investment by voting “FOR ALL” of XenoPort’s nominees to the Board of
Directors on the WHITE proxy card.

Highlights of the letter include:

  *XenoPort is advancing XP23829;
  *XenoPort is building value in HORIZANT;
  *XenoPort’s Board is committed to fully realizing the value of XenoPort’s
    assets – for the benefit of all XenoPort stockholders;
  *Clinton is waging a misleading proxy campaign to replace three of
    XenoPort’s proven, highly-qualified directors with three of its own
    handpicked nominees; and
  *XenoPort believes Clinton’s uninformed agenda would fail to maximize the
    value of XenoPort’s assets. XenoPort believes Clinton’s agenda is
    short-term focused and puts at risk the opportunity for long-term value
    creation.

The full text of the letter follows:

             WE ARE EXECUTING OUR STRATEGIC PLAN AND ARE ON TRACK

       VOTE “FOR ALL” OF THE XENOPORT NOMINEES ON THE WHITE CARD TODAY

May 20, 2014

Dear Fellow XenoPort Stockholder:

XenoPort’s Board of Directors and management team are successfully executing
on our strategic initiatives to advance the development of XP23829, a
potential treatment for psoriasis and/or relapsing forms of multiple sclerosis
(MS), and to build value in HORIZANT^® (gabapentin enacarbil) Extended-Release
Tablets. The progress we are making on this two-pronged plan, as highlighted
in the attached addendum, demonstrates that we are on track.

     WE ARE COMMITTED TO FULLY REALIZING THE VALUE OF XENOPORT’S ASSETS –
                 FOR THE BENEFIT OF ALL XENOPORT STOCKHOLDERS

We continue to focus on executing our long-term strategy to build value in our
assets and XenoPort. While we are disappointed in the current stock price,
which we believe has been, in part, impacted by recent pressure on the stock
prices of many small cap biopharmaceutical firms, we believe that we are
taking the right steps to deliver long-term stockholder value.

Our ability to realize the value of XenoPort’s assets was exemplified recently
by our May 15^th announcement of a  development and commercialization
partnership with Reckitt Benckiser Pharmaceuticals, Inc. for XenoPort’s
arbaclofen placarbil program. Upon effectiveness of the agreement, which is
subject to regulatory clearance, XenoPort will receive:

  *A $20 million up-front, non-refundable cash payment;
  *Plus, $5 million upon the transfer of certain technology and materials to
    Reckitt Benckiser;
  *Plus, up to $120 million of aggregate cash payments upon the achievement
    by Reckitt Benckiser of certain development, regulatory and commercial
    milestones;
  *Plus, certain royalty payments on potential future net sales in and
    outside the United States.

We are pleased with this agreement, which could provide XenoPort with
potential non-dilutive cash and royalty payments, and creates another
opportunity to build value for XenoPort stockholders.

                         DO NOT BE MISLED BY CLINTON

Clinton Relational Opportunity Master Fund, L.P. and its affiliates
(“Clinton”) are waging a misleading proxy campaign to replace three of
XenoPort’s proven, highly-qualified directors with three of its own handpicked
nominees. Not only is this campaign based on unsubstantiated claims, Clinton
is also pushing an uninformed agenda that we believe would fail to maximize
the value of XenoPort’s assets and, as a consequence, would negatively impact
the value of your investment. We believe Clinton’s agenda is short-term
focused and puts at risk the opportunity for long-term value creation. Keep in
mind: Clinton reportedly holds only 1.6% of XenoPort’s common stock and began
buying and selling XenoPort’s shares just last year.

Here are the facts about XenoPort’s assets, growth strategies and record of
performance:

FACT: We are successfully pursuing a targeted commercialization strategy that
is building value in HORIZANT. HORIZANT is different by design. Discontinuing
the commercialization of HORIZANT now would be contrary to the interests of
stockholders.

  *HORIZANT is differentiated in the market place. We encourage stockholders
    to read the FDA prescribing information, published clinical studies and
    treatment guidelines.
  *Results of XenoPort’s promotional efforts in just the first three full
    quarters since we re-acquired HORIZANT’s rights demonstrate that our
    confidence in HORIZANT’s potential is justified.
  *Initial investments in HORIZANT’s commercial infrastructure are complete,
    and marketing budgets are largely committed. Now is the worst time to
    abandon commercialization, particularly given the upward sales trends we
    are achieving.
  *Capturing the most value from HORIZANT will require that we continue to
    demonstrate strong prescription trends.

FACT: Many industry analysts recognize the progress we have made to
commercialize HORIZANT since reacquiring the rights in May 2013.

  *We urge you to carefully read Clinton’s proxy materials. Buried in the
    footnotes is the fact that many of the analyst reports cited by Clinton
    were issued more than one year ago – before XenoPort had executed its own
    promotional efforts for HORIZANT.
  *More recently, since the time we launched our strategy, analysts have
    said:*

“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, 4/21/14

“Horizant sales were $3M for the quarter with prescription trends continuing
to provide some reflection of XNPT’s successful focused re-launch… its
trajectory should enable the drug to be cash flow positive.”– Wells Fargo,
5/09/14

“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

FACT: Drug development is a step-wise and regulated process that requires much
more than an ability to write a check.

  *The aggregate investment in a product candidate is a function of the stage
    of development of that product candidate. We have been fully investing in
    XP23829 and executing a thoughtful development plan that is appropriate
    for its stage of development.
  *More than simple investment, moving successfully through the drug
    development and regulatory review process also requires experience and
    technical expertise – expertise possessed by members of your Board and
    management team.

FACT: Drug development and commercialization are inherently risky
propositions, and we believe that XenoPort is appropriately managing this
risk. We believe it would be imprudent to focus ONLY on XP23829, however much
its potential.

  *We are proud of the achievements we have made in our advancement of
    XP23829 development, our efforts to offer HORIZANT to patients as a new
    treatment option and the early commercial progress we have made with
    HORIZANT.
  *These achievements are a consequence of disciplined, thoughtful
    development and commercial programs and capital allocation established by
    XenoPort’s leadership.
  *Due to the inherent risk of drug development, allocating all of our
    resources to XP23829, a product candidate that has only completed Phase 1
    development, would be irresponsible and contrary to our fiduciary duties.

FACT: Your Board includes eight independent directors, with three new
directors joining the Board in the last five years. Clinton’s statements are
simply wrong.

  *Your Board is comprised of nine, highly-qualified and proven leaders,
    including eight independent directors.
  *Contrary to the factual errors in Clinton’s proxy materials, three new
    directors have joined XenoPort’s Board in the past five years.
  *The average tenure of XenoPort’s directors is 8.7 years versus an average
    of approximately 10.1 years for the S&P 500; approximately 10.8 years for
    the S&P 1500; approximately 10.7 for the S&P MidCap index; and
    approximately 11.5 years for the S&P SmallCap index.^1

FACT: Replacing XenoPort’s CEO would be a value-impacting distraction at a
critical point in the execution of XenoPort’s strategy.

  *As a XenoPort founder, former Chief Scientific Officer, and current Chief
    Executive Officer, Dr. Barrett has played, and will continue to play, a
    pivotal role in executing XenoPort’s strategy.
  *Dr. Barrett’s work led to XenoPort’s discovery and development of numerous
    novel product candidates, including XP23829 and the recently partnered
    arbaclofen placarbil. His leadership and efforts have enabled XenoPort to
    evolve from a pure research-based company to an integrated pharmaceutical
    company with development and commercialization capabilities.
  *Dr. Barrett has the full confidence of XenoPort’s Board.
  *Clinton’s plan would create a void in leadership just as the Company is
    about to start its Phase 2 trial for XP23829, is in discussions with
    potential partners, and is at an important inflection point in its
    commercialization efforts of HORIZANT.

FACT: Your Board and XenoPort’s nominees provide the skills and expertise
needed to oversee the execution of the Company’s strategy.

  *As a result of her work on complex accounting issues as well as her 30
    years of finance, marketing and investment expertise, including 20 years
    as Chief Financial Officer of both private and public companies, Ms.
    Hilleman, your Audit Committee Chair, possesses important financial
    experience and knowledge of XenoPort’s financials that would be difficult
    to replace.
  *As we work to advance XP23829 and build value in HORIZANT, XenoPort
    greatly benefits from Dr. Wierenga’s proven record and experience in
    pharmaceutical research and clinical development. In addition to his
    leadership at pharmaceutical and biopharmaceutical companies and his
    service on the Boards for several publicly-traded biopharmaceutical
    companies, Dr. Wierenga has participated in the submission of over 70
    Investigational New Drug applications, the filing of 16 New Drug
    Applications/Biologics License Applications, and the launch of 16
    FDA-approved drug products including LIPITOR, NEURONTIN and UCERIS.
  *As previously noted above, as a XenoPort founder, former Chief Scientific
    Officer, and current Chief Executive Officer, Dr. Barrett has played, and
    will continue to play, a pivotal role in executing XenoPort’s strategy.
  *Clinton claims its nominees have experience in biotech, capital allocation
    and corporate governance. However, this expertise is already well
    represented on your Board by multiple directors all of whom, unlike
    Clinton’s nominees, also have experience serving in senior operating roles
    of biopharmaceutical companies and as directors of publicly-traded
    companies.

          PROTECT YOUR INVESTMENT - VOTE THE WHITE PROXY CARD TODAY

Your Board is committed to realizing the full potential of XenoPort’s assets
and acting in the best interests of all XenoPort stockholders. We are making
meaningful progress commercializing HORIZANT and are committed to optimizing
the value of XP23829. In contrast, your Board is concerned that Clinton’s
nominees will push an agenda that will destroy the value potential of
HORIZANT, while stripping the Board of specific knowledge and expertise needed
to oversee the development XP23829.

We urge you to protect your investment by voting the enclosed WHITE proxy card
today “FOR ALL” of XenoPort’s nominees: Ronald W. Barrett, Ph.D., Jeryl L.
Hilleman and Wendell Wierenga, Ph.D., “FOR” Proposals 2 through 4 and 9
through 14 and “AGAINST” Clinton Proposals 5 through 8.

On behalf of your Board of Directors and management team, we thank you for
your continued support.

Sincerely,

                         
/s/ Ronald W. Barrett    /s/ John G. Freund
                         
Ronald W. Barrett, Ph.D. John. G. Freund, M.D.
Chief Executive Officer  Lead Independent Director
                         

*Permission to use quotes was neither sought nor obtained

ADDENDUM 1: XenoPort is advancing XP23829 development and building value in
HORIZANT

                              ADVANCING XP23829

  *2010-13: Completed preclinical studies, including comparison of the
    pharmacokinetics and safety of XP23829 with the active ingredient in
    TECFIDERA
  *Sep 2013: Completed the last of three Phase 1 studies

       *Demonstrated favorable pharmacokinetics compared to TECFIDERA and
         pharmacodynamic effects with once-a-day dosing

  *Dec 2013: Received FDA feedback on a series of submitted questions related
    to development plans for XP23829 as a potential treatment of relapsing
    forms of MS
  *Jan 2014: Expanded team with proven expertise

       *Richard Kim, M.D., Senior VP, Clinical Development and Medical
         Affairs and Chief Medical Officer
       *More than 10 years of experience in clinical development and medical
         affairs, including as VP of clinical development and head of MS
         therapeutic area at Elan Pharmaceuticals

  *1Q 2014: Conducted a Pre-Investigational New Drug (IND) meeting with the
    FDA, submitted IND application, and prepared to initiate a Phase 2 trial
    in psoriasis patients by mid-2014

                          BUILDING VALUE IN HORIZANT

  *May 2013: Reacquired commercialization rights after prior partner missed
    key metrics for performance against their HORIZANT commercialization plan
  *Jun 2013: Initiated promotional efforts
  *Dec 2013: With substantially fewer resources, achieved levels of
    prescribed tablets that surpassed results of previous partner
  *Apr 2014: Presented new data at Annual Scientific Meeting of the American
    Pain Society and at the Annual Meeting of the American Academy of
    Neurology

       *New data analyses support HORIZANT’s benefit/risk profile

  *May 2014: Announced positive prescription trends for 1Q 2014

       *15% increase in nationwide prescribed tablets compared to 4Q13; 25%
         increase compared to 1Q13
       *21% increase in total prescribed tablets in promoted territories
         compared to 4Q13; 64% increase compared to 1Q13

                  If you have any questions, require assistance with
                                   voting your WHITE
          proxy card or need additional copies of the proxy materials, please
                                       contact:

                               MACKENZIE PARTNERS, INC.

                                  105 Madison Avenue
                                  New York, NY 10016

                              proxy@mackenziepartners.com

                             (212) 929-5500 (Call Collect)
                                          Or

                               TOLL-FREE (800) 322-2885

Forward-Looking Statements

This communication contains “forward-looking” statements, including, without
limitation, all statements related to the potential value of XenoPort’s assets
and XenoPort’s ability to achieve its goal of enhancing stockholder value
through the execution of its strategic plan, including all statements related
to the commercial and value opportunity for HORIZANT and the suitability of
XP23829 as a potential treatment for psoriasis or relapsing forms of MS;
XenoPort’s ability to build value in HORIZANT through, and the potential of,
its targeted educational efforts; XenoPort’s current strategy for advancing
the XP23829 clinical development program, including the initiation or conduct
of planned or potential future clinical trials and the timing thereof,
including XenoPort’s expectations with respect to a potential Phase 3
development program for XP23829; potential partnering efforts for XP23829
and/or HORIZANT; the anticipated effectiveness of the license agreement with
Reckitt Benckiser (the “License Agreement”) and XenoPort’s receipt of upfront
payments and potential receipt of milestones and royalties thereunder; and
other statements that are not historical facts. Any statements contained in
this communication that are not statements of historical fact may be deemed to
be forward-looking statements. Words such as “believe,” “could,” “hope,”
“may,” “plan,” “potential,” “will,” “would” and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements are based upon XenoPort’s current expectations. Forward-looking
statements involve risks and uncertainties. XenoPort’s actual results and the
timing of events could differ materially from those anticipated in such
forward-looking statements as a result of these risks and uncertainties, which
include, without limitation: risks related to XenoPort’s lack of
commercialization experience and its ability to successfully market and sell
HORIZANT, including XenoPort’s ability to maintain sales, marketing,
distribution, supply chain and other sufficient capabilities to sell HORIZANT;
XenoPort’s dependence on the success of its strategies for HORIZANT
commercialization, promotion and distribution, as well as its ability to
successfully execute on these activities and to comply with applicable laws,
regulations and regulatory requirements; the competitive environment for and
the degree of market acceptance of HORIZANT; obtaining appropriate pricing and
reimbursement for HORIZANT in an increasingly challenging environment; the
difficulty and uncertainty of pharmaceutical product development and the
uncertain results and timing of clinical trials and other studies, including
the risk that success in preclinical testing and early clinical trials does
not ensure that later clinical trials will be successful; XenoPort’s ability
to successfully advance XP23829 development and to conduct or initiate
clinical trials in the anticipated timeframes, or at all; the uncertainty of
the FDA’s review process and other regulatory requirements, including the risk
that FDA action, including with respect to the investigational new drug
application for XP23829, would delay or prevent the initiation of future
clinical trials of XP23829; XenoPort’s need for and the availability of
resources to develop XP23829 and to support XenoPort’s operations; risks
related to the ability of XenoPort and Reckitt Benckiser to satisfy all the
conditions to effectiveness of the License Agreement, including clearance
under the Hart-Scott-Rodino Antitrust Improvements Act, as amended; XenoPort’s
dependence on collaborative partners, including the risk that if Reckitt
Benckiser were to breach or terminate the License Agreement or otherwise fail
to successfully develop and commercialize products thereunder and in a timely
manner, XenoPort would not obtain the anticipated financial and other benefits
of the License Agreement and the clinical development or commercialization of
arbaclofen placarbil could be delayed or terminated; the uncertain therapeutic
and commercial value of HORIZANT and XP23829; as well as risks related to
future opportunities and plans, including the uncertainty of future operating
results. These and other risk factors are discussed under the heading “Risk
Factors” in XenoPort’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2014, filed with the Securities and Exchange Commission on May 9,
2014. XenoPort expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Company’s expectations with regard thereto
or any change in events, conditions or circumstances on which any such
statements are based.

Important Additional Information and Where to Find It

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.

About XenoPort

XenoPort, Inc. is a biopharmaceutical company focused on developing and
commercializing a portfolio of internally discovered product candidates for
the potential treatment of neurological disorders. XenoPort is currently
commercializing HORIZANT^® (gabapentin enacarbil) Extended-Release Tablets in
the United States and developing its novel fumaric acid ester product
candidate, XP23829, as a potential treatment for patients with
moderate-to-severe chronic plaque type psoriasis and/or relapsing forms of
multiple sclerosis. REGNITE^® (gabapentin enacarbil) Extended-Release Tablets
is being marketed in Japan by Astellas Pharma Inc. XenoPort's pipeline of
product candidates also includes a potential treatment for patients with
Parkinson's disease.

To learn more about XenoPort, please visit the website at www.XenoPort.com.

XNPT2G

^1 Source: ISS, “Director Tenure and Corporate Governance Features,” By Rob
Yates, March 25, 2014.

Contact:

Company Contact:
XenoPort, Inc.
Jackie Cossmon, 408-616-7220
ir@XenoPort.com
 
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