* Drug does not show statistical significance compared withplacebo
* Co had stopped testing the drug to treat heartburn in 2011
* Shares fall 26 pct (Adds comment from conference call, analyst comment; updatesshare movement)
By Vrinda Manocha
May 20 (Reuters) - XenoPort Inc said it would stopdevelopment of an experimental multiple sclerosis treatment itplanned to launch in 2015 after a late-stage trial failed toshow significant improvement over a placebo.
Shares of the company fell 26 percent to $5.03 in morningtrade on the Nasdaq.
"This is disappointing, given (the drug's) promisingmid-stage data," Wells Fargo analyst Brian Abrahams wrote in anote to clients. "We had modeled sales of $77 million by 2017for the product."
The drug, arbaclofen placarbil, was XenoPort's only productin late-stage trial, according to information on the company'swebsite.
A XenoPort executive said on a conference call that thecompany's operating plan had included costs associated with apotential launch, and that it would take several weeks todetermine the savings from the termination.
Xenoport spent about $13.2 million in 2012 on thedevelopment of the drug, according to a March regulatory filing.
The executive said more resources could be allocated to thecompany's experimental drug XP23829 to treat relapsing-remittingmultiple sclerosis, as well as marketing of its restless legssyndrome drug Horizant, its only drug on the market.
XP23829, currently being tested in an early-stage trial, isa derivative of Biogen Idec's multiple sclerosis drugTecfidera. Tecfidera was approved by the U.S. Food and DrugAdministration on March 27.
"(Termination of the study) should enable resources tobecome more focused on XP23829, which we view as the company'score value driver," Wells Fargo's Abrahams wrote in the note.
XenoPort ended its collaboration on Horizant with marketingpartner GlaxoSmithKline PLC in November.
XenoPort said net sales of Horizant in the U.S. as recordedby GSK were $6.5 million in 2012, according to a regulatoryfiling. The drug is marketed by Astellas Pharma Inc asRegnite in Japan.
SECOND SETBACK
The company said on Monday that arbaclofen placarbil did notshow statistical significance compared to the placebo on twoclinical scales - severity of symptoms and response totreatment, and spasticity.
The drug, which was intended to treat spasticity, stiffnessand involuntary multiple spasms, was tested on 228 multiplesclerosis patients in the United States.
Dosages of 30 mg and 45 mg were administered twice a day.
XenoPort said seven patients experienced adverse events,none of which were related to the treatment.
Acorda Therapeutics's Zanaflex, JHP PharmaceuticalsLLC's Dantrium and CNS Therapeutics's Gablofen are some of theapproved treatments for spasticity -- an unusual tightness,stiffness, or "pull" of muscles.
XenoPort had stopped the development of arbaclofen placarbilas a heartburn drug in March 2011, after it failed in amid-stage trial. (http://link.reuters.com/hab38t)
The company's shares were down 11 percent at $6 by midday onthe Nasdaq. (Reporting by Esha Dey and Vrinda Manocha in Bangalore; Editingby Roshni Menon)
Glaxosmithkline (GSK)