Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is a global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients. The company's commercial portfolio currently comprises three products - Fanapt® for the acute treatment of manic or mixed episodes associated with bipolar I disorder and the treatment of schizophrenia, HETLIOZ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and for the treatment of nighttime sleep disturbances in Smith-Magenis Syndrome (SMS), and PONVORY® for the treatment of relapsing forms of multiple sclerosis (MS) to include clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease, in adults.
Business Overview
Vanda's Psychiatry Portfolio: Expanding Addressable Patient Population
Fanapt®, approved in April 2023 for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adults, significantly expands the addressable patient population for the drug, with patent exclusivity expected to last at least through late 2027. The company is also planning to submit a New Drug Application (NDA) for milsaperidone, the active metabolite of Fanapt®, for the treatment of schizophrenia and acute bipolar I disorder to the FDA in early 2025. If approved, pending patent applications could extend exclusivity into the 2040s.
Additionally, Vanda is planning to initiate a registration study of the Fanapt® long-acting injectable (LAI) formulation by the end of 2024. Fanapt® LAI, which could reach the U.S. market after 2026, has a profile compatible with a once-a-month administration, offering a significant tool to address compliance issues in this disease population. Pending patent applications, if issued, could extend exclusivity into the 2040s.
HETLIOZ®: Expanding Indications and Facing Generic Competition
HETLIOZ®, the first product approved by the FDA for patients with Non-24 and for patients with SMS, is facing generic competition in the U.S. market. The company is challenging the FDA's approval of generic versions of HETLIOZ® in U.S. federal courts on the grounds of unlawful FDA approval, patent infringement and other statutory violations.
While the HETLIOZ® capsule formulation commercial opportunity is subject to the launch of generic versions, Vanda is pursuing FDA approval for HETLIOZ® for the treatment of jet lag disorder and insomnia. The company is also evaluating the initiation of a clinical program with HETLIOZ® LQ in pediatric insomnia, an indication with no approved treatments currently. If approved, the addressable patient population for HETLIOZ® LQ would be significantly expanded, and market exclusivity would be expected to last in the 2040s.
PONVORY®: Expanding into Autoimmune Disorders
In December 2023, Vanda acquired the U.S. and Canadian rights to PONVORY®, a once-daily oral selective sphingosine-1-phosphate receptor 1 modulator indicated for the treatment of adults with relapsing forms of MS. The company is planning a commercial launch of PONVORY® in the U.S. in the third quarter of 2024, including the deployment of a specialty sales force.
Beyond the initial MS indication, Vanda is evaluating PONVORY® in additional autoimmune disorders, including psoriasis and ulcerative colitis. If approved in these indications, PONVORY® would significantly expand its addressable patient population, with over 8 million people diagnosed with psoriasis and an estimated 2 million individuals with ulcerative colitis in the U.S. alone.
Tradipitant: Addressing Unmet Needs in Gastroparesis and Motion Sickness
Tradipitant, Vanda's neurokinin-1 receptor antagonist, is currently under review by the FDA for the treatment of gastroparesis, a condition with an estimated prevalence of over 6 million individuals in the U.S. and no approved treatment in over 40 years. The company is also completing a clinical program studying tradipitant's effects in motion sickness, with an NDA filing expected by the end of 2024. An eventual approval for the motion sickness indication would significantly expand the addressable patient population, with approximately 30% of the U.S. population reported to suffer from motion sickness under ordinary travel conditions.
Financials
For the full year 2023, Vanda reported annual net income of $25.09 million, annual revenue of $192.64 million, annual operating cash flow of $12.80 million, and annual free cash flow of $12.42 million.
In the first quarter of 2024, the company reported total revenues of $47.5 million, a 24% decrease compared to the first quarter of 2023. This decrease was primarily due to the launch of generic versions of HETLIOZ® in the U.S. market. However, total revenues for the first quarter of 2024 increased by 5% as compared to the fourth quarter of 2023.
HETLIOZ® net product sales were $20.1 million in the first quarter of 2024, a 49% decrease compared to the first quarter of 2023. The decrease was attributable to a decline in volume, partially offset by an increase in price net of deductions. Fanapt® net product sales were $20.6 million in the first quarter of 2024, a 10% decrease compared to the first quarter of 2023, partially due to inventory destocking at wholesalers. PONVORY® net product sales were $6.8 million in the first quarter of 2024, representing the first full quarter of revenue recognition for the product.
Vanda recorded a net loss of $4.1 million in the first quarter of 2024, compared to net income of $3.3 million in the first quarter of 2023. The net loss included an income tax benefit of $0.5 million, compared to an income tax provision of $2.3 million in the same period of 2023.
Operating expenses in the first quarter of 2024 were $56.7 million, a decrease of $3.8 million compared to the first quarter of 2023, primarily driven by lower selling, general and administrative (SG&A) expenses related to spending on sales activities for the company's commercial products and other corporate activities, partially offset by an increase in research and development (R&D) expenses related to the CFTR development program.
Vanda's cash, cash equivalents and marketable securities stood at $394.1 million as of March 31, 2023, representing an increase of $5.9 million compared to December 31, 2022, and a decrease of $107.4 million compared to March 31, 2022. The decrease from the prior year period was primarily due to the $100 million upfront payment for the acquisition of PONVORY® from Janssen.
Given the uncertainties surrounding the U.S. market for HETLIOZ® due to generic competition and the upcoming commercial launches of Fanapt® in bipolar I disorder and PONVORY® in multiple sclerosis, Vanda is unable to provide financial guidance for 2024 at this time. The company will continue to evaluate its ability to provide guidance in future periods.
Risks and Challenges
Vanda faces several risks and challenges, including the impact of generic competition on HETLIOZ® sales in the U.S. market, the successful commercialization of Fanapt® in bipolar I disorder and PONVORY® in multiple sclerosis, the regulatory approval and commercialization of tradipitant, and the company's ability to expand its product pipeline and diversify its revenue streams.
The company is also involved in various legal proceedings, including patent litigation related to HETLIOZ® and challenges to the FDA's approval of generic versions of the drug. The outcome of these legal proceedings could have a significant impact on Vanda's financial performance and market position.
Conclusion
Vanda Pharmaceuticals is a diversified biopharmaceutical company with a growing portfolio of commercial-stage products and a robust pipeline of product candidates. The company's focus on addressing unmet medical needs, its efficient operations, and its strong cash position position it well for long-term growth and value creation. While facing challenges from generic competition and the successful commercialization of new products, Vanda's diversified revenue streams, innovative pipeline, and experienced management team suggest it is well-positioned to navigate these obstacles and deliver value to shareholders.