XenoPort Board Ignores Key Issue, Says Clinton Group

             XenoPort Board Ignores Key Issue, Says Clinton Group

PR Newswire

NEW YORK, May 22, 2014

NEW YORK, May 22, 2014 /PRNewswire/ --Clinton Group, Inc. ("Clinton Group")
announced today that it has sent a letter to the stockholders of XenoPort,
Inc. (Nasdaq: XNPT) in advance of the June 11, 2014 XenoPort annual meeting.
The Clinton Group has nominated three independent professionals for the Board
of Directors and is asking for the support of its fellow XenoPort
stockholders.

The Clinton Group noted that XenoPort's incumbent directors recently filed a
lengthy slide presentation defending the existing Board, suggesting
stockholders should be satisfied with the Company's current plans and
directors.

"In 49 slides, two letters and a proxy statement, the incumbent directors have
managed to avoid the principal issue in this proxy contest: why is XenoPort
stock down 80% in five years (and why does the Company have an enterprise
value of a mere $100 million, despite $750 million in spending) and how can
that be fixed?" said Gregory P. Taxin, President of Clinton Group. "In our
view, adding three new directors to a Board of nine, to bring fresh insight
and perspective to the boardroom, is a good start."

Clinton Group encourages its fellow stockholders to review the materials it
has prepared for stockholders, which are available at
https://okapivote.com/clintonxnpt/.

Clinton Group urges stockholders to vote for change at the annual meeting by
returning the GOLD proxy card.

Stockholders with questions should contact Okapi Partners LLC at (212)
297-0720 or Toll-Free (855) 305-0857 or by email to XNPT@clinton.com.

A copy of the letter sent to XenoPort stockholders is included below:

May 22, 2014

To Our Fellow Stockholders of XenoPort:

I write on behalf of The Clinton Group Inc., which together with funds it
manages ("Clinton Group"), is seeking to replace three members of XenoPort,
Inc.'s ("XenoPort" or the "Company") nine member Board of Directors.

In the five years ended yesterday, XenoPort stock was down 80% and has
performed worse than the Nasdaq Biotechnology Index over almost any period one
considers. Having spent more than $750 million since its inception in 1999,
the Company now has an enterprise value of just $100 million. We believe some
new Board members are in order.

The existing Board members, by contrast, believe the same group of directors
who have overseen the past significant destruction of stockholder value should
have the exclusive right to serve as the fiduciaries for stockholders going
forward. They say they do not require any additional skills or assistance and
do not want any help.

We respectfully disagree.

The current Board has now written a definitive proxy statement, sent two
letters to stockholders and produced a 49-page presentation, all in an effort
to defend the record of the current Board and convince you to reelect the
Board's incumbent directors. Perhaps indicative of their misplaced focus,
nowhere in these materials does the Board address the performance of the
stock. (They do, at least, acknowledge that they are "disappointed" with the
price. Cold comfort for those of us who have lost money.) XenoPort is a public
company and the directors are responsible for creating stockholder value. How
many more letters and presentations can they produce that avoid the elephant
in the room?

The Board does spend significant paper and ink on their biographies.
Impressive though they may be, those biographies will not allow the
stockholders to retire in comfort or pay for their kids' college education.
Results matter.

And the results have been alarming. The Company has racked up $500 million in
aggregate losses since inception and has developed no compounds that have
achieved commercial success. Amid a boom in biotechnology stocks, XenoPort has
been left far, far behind, with a stock price that has been cut by two-thirds
from its IPO price.

Unable to defend the stock price performance or, seemingly, dispute the need
for fresh eyes in the Board room, the existing directors have instead created
straw man arguments to defeat. Their letters and presentations have
disingenuously misrepresented our views. So, let me set the record straight.

First, no matter who wins this proxy fight, the existing directors will
continue to constitute a majority of the Board. The only way for our nominees
to make a difference is for them to join the Board deliberation and convince
other directors of the merits of an alternative path. While the existing
directors apparently do not believe this sort of dialogue with experienced and
knowledgeable professionals will be valuable, we expect such debate in the
Board room might well help us all, and it certainly can't hurt.

Second, XenoPort stockholders own Horizant. Nothing about this proxy fight nor
our desire to see XenoPort's future capital and human resources devoted fully
to XenoPort's promising compound, known as 829, will affect that. We do not
understand the Board's claim that we have suggested the Company "put[] all
[its] eggs in one basket." The XenoPort "basket" has two eggs at this point:
Horizant and 829. We are hopeful Horizant is, as management believes, a
valuable asset. Nothing would make us (or, we suspect, you) happier than
XenoPort finding a partner or buyer for this asset.

The question is how should the Company spend its limited capital? We do not
believe that further spending on Horizant is optimal. The Company has
attempted to build a commercial effort around Horizant, something not easily
done well by a science-focused, small biotechnology company like XenoPort. The
goal of this effort, as we understand it, was to highlight the commercial
value of Horizant and, of course, to generate revenue.

We believe the effort has failed on both fronts. Not a single analyst covering
the Company writes that Horizant is more valuable now than it was before the
Company started its commercial efforts. Indeed, three of four have lowered
their estimated value for Horizant. And, the $8 million of spending on
Horizant commercial efforts in Q1 generated only an incremental $220,000 of
revenue.

But even that is not the point.

The point is: Will additional spending on Horizant create a sufficient return?
We believe it will not. Horizant is worth something – we hope a lot – and that
value is, in our view, unlikely to change with more spending. So far, the
spending on Horizant appears to have reduced the value of XenoPort and, in the
eyes of analysts, the value of Horizant. (We note that since the Company
announced its plans to spend $30-40 million commercializing Horizant, the
stock is down about 60%.) If the Company keeps spending $8 million a quarter
to generate $220,000 in incremental revenue, XenoPort will be in a big hole,
fast. We gently remind the Board of the First Rule of Holes: when you find
yourself in one, the first thing you should do is stop digging.

We believe the Company should look to partner or sell Horizant and focus its
scientific prowess on the further development of 829. By preserving the
Company's limited capital for this purpose, XenoPort can hopefully further
develop and de-risk 829 (which we believe could be a blockbuster drug),
without further diluting the current stockholders' ownership of it. We believe
capital spent on 829 has a very high probability-weighted return, the type of
return we believe is expected and rewarded by biotechnology investors.

We ask for you to please support the modest changes to the Board we are
proposing, so that independent and experienced professionals can review these
capital allocation questions with fresh perspective. We frankly do not see how
such a review could possibly hurt.

Please return the GOLD proxy card and call Okapi Partners with any questions.
They can be reached at 855-305-0857 or XNPT@okapipartners.com.

Sincerely,

Gregory P. Taxin
President

About Clinton Group, Inc.

Clinton Group, Inc. is a Registered Investment Advisor based inNew York City.
The firm has been investing in global markets since its inception in 1991 with
expertise that spans a wide range of investment styles and asset classes.

Important Additional Information

CLINTON RELATIONAL OPPORTUNITY MASTER FUND, L.P., CLINTON MAGNOLIA MASTER
FUND, LTD., GEH CAPITAL, INC., CLINTON RELATIONAL OPPORTUNITY, LLC, CLINTON
GROUP, INC. AND GEORGE E. HALL (COLLECTIVELY, "CLINTON") AND KEVIN J. CAMERON,
RAEL MAZANSKY, M.D. AND CHARLES A. ROWLAND, JR. (TOGETHER WITH CLINTON, THE
"PARTICIPANTS") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
ON APRIL 25, 2014 A DEFINITIVE PROXY STATEMENT AND ACCOMPANYING FORM OF PROXY
CARD TO BE USED IN CONNECTION WITH THE PARTICIPANTS' SOLICITATION OF PROXIES
FROM THE STOCKHOLDERS OF XENOPORT, INC. (THE "COMPANY") FOR USE AT THE
COMPANY'S 2014 ANNUAL MEETING OF STOCKHOLDERS (THE "PROXY SOLICITATION"). ALL
STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT
AND OTHER DOCUMENTS RELATED TO THE PROXY SOLICITATION BY THE PARTICIPANTS
BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL INFORMATION
RELATED TO THE PARTICIPANTS. THE DEFINITIVE PROXY STATEMENT AND ACCOMPANYING
PROXY CARD HAVE BEEN FURNISHED TO SOME OR ALL OF THE COMPANY'S STOCKHOLDERS
AND ARE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE ON THE
SEC'S WEB SITE AT HTTP://WWW.SEC.GOV/. IN ADDITION, OKAPI PARTNERS LLC,
CLINTON'S PROXY SOLICITOR, WILL PROVIDE COPIES OF THE DEFINITIVE PROXY
STATEMENT AND ACCOMPANYING PROXY CARD WITHOUT CHARGE UPON REQUEST BY CALLING
(212) 297-0720 OR TOLL-FREE AT (855) 208-8902.

INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR DIRECT OR
INDIRECT INTERESTS BY SECURITY HOLDINGS IS CONTAINED IN THE DEFINITIVE PROXY
STATEMENT ON SCHEDULE 14A FILED BY CLINTON WITH THE SEC ON APRIL 25, 2014.
THIS DOCUMENT CAN BE OBTAINED FREE OF CHARGE FROM THE SOURCES INDICATED ABOVE.

SOURCE Clinton Group, Inc.

Contact: N. Lennox, +1-212-825-0400
 
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