Vanda Pharmaceuticals Inc (VNDA) 2011 Q2 法說會逐字稿

Operator: Good day, ladies and gentlemen, and welcome to the Q2 2011, Vanda Pharmaceuticals Inc. earnings conference call. My name is [Aaron], and I'll be your operator for today. (Operator Instructions).

As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Jim Kelly, Senior Vice President and Chief Financial Officer. Please proceed, sir.

Thank you. Good morning and thank you for joining us to discuss Vanda Pharmaceuticals second quarter 2011 performance. Our second quarter 2011 results were released this morning and are available on the SEC's EDGAR system and on our website, www.vandapharma.com.

In addition, we are providing live and archived versions of this conference call on our website and a telephone replay of the call will be available through September 3, 2011. Joining me on today's call are Dr. Mihaelos Polymeropoulos, our President and CEO; John Feeney, our Senior Vice President and Chief Medical Officer; and Gunther Birznieks, our Vice President of Business Development. Following my introductory remarks, Dr. Polymeropoulos and the management team will update you on our ongoing activities. Then I will comment on our financial results for the second quarter 2011 before opening the lines for your questions.

Before we proceed, I'd like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of federal securities laws. Words such as, but not limited to, believe, expect, anticipate, estimate, intend, plan, targets, likely, will, would and could or the negative of these terms and similar expressions or words will identify forward-looking statements.

Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. These risks are described in the Risk Factor section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and quarterly report on Form 10-Q for the fiscal year ended March 31, 2011 which are available on SEC EDGAR system and on our website. We encourage all investors to read these reports and our other SEC filings. The information we provide on this call is provided only as of today, and we undertake no obligation to update or revise publicly any forward-looking statements we make on this call on account of new information, future events, or otherwise, except as required by law.

With that said, I would now like to turn the call over to our CEO, Mihaelos Polymeropoulos.

Thank you, Jim. Good morning and thank you very much for joining us. Vanda has made significant progress on a number of fronts during the second quarter of 2011. To discuss this progress, I'm joined by Dr. John Feeney, our Chief Medical Officer, and by Mr. Gunther Birznieks, our Vice President of Business Development.

First, I would like to discuss the performance of Fanapt in the U.S. which is marketed by our partner Novartis. Prescriptions for Fanapt, as reported by IMS, continued to grow in the second quarter recording a 17% increase, as compared to the first quarter of 2011.

More than 110,000 prescriptions have been filled since launch of Fanapt in the U.S. in early 2010. At Vanda, we have made significant progress towards expanding our Fanapt franchise in the rest of the world.

I would now ask Mr. Birznieks to discuss our business development activities for Fanapt.

Thank you, Mihaelos. During the past month, Vanda entered into two exclusive distribution agreements for Fanapt in Latin America. These two agreements covering Mexico and Argentina represent significant milestones for making Fanapt commercially available outside the U.S. in two markets that together total over $14 billion in annual pharmaceutical sales.

On July 11, we announced our first ex-US agreement with Probiomed for the commercialization of Fanapt in Mexico. Probiomed is a privately owned Mexican company with more than 40 years of experience in R&D, manufacturing and commercialization of health care products including those in neuroscience. We are working with Probiomed currently to seek regulatory approval in Mexico.

On August 1, we announced our partnership with Biotoscana, a wholly-owned affiliate of Biotoscana International headquartered in Colombia to commercialize Fanapt in Argentina. Founded in 1995, Biotoscana is a pharmaceutical company with operating affiliates throughout Latin America, including Colombia, Venezuela, Peru, Ecuador, and Central America, as well as Argentina.

In late July, we filed an application seeking regulatory approval of Fanapt in Argentina.

All right. Thank you, Gunther. We've also made significant progress on the R&D front with the recent filing of the iloperidone dossier in Europe and the continued advancement of the tasimelteon clinical program. To discuss its progress I'm joined by Dr. Feeney, our Chief Medical Officer. John?

Thanks, Mihaelos. As announced last week, the marketing authorization application for iloperidone has been accepted for review by the European Medicines Agency. This represents a significant milestone in advancing the global franchise for Fanapt. To remind you, in a standard EMA review cycle, the EMA will take about 120 days from the time of the application to review the file and ask questions to the sponsor, and then the sponsor will have 90 days to respond. The total review cycle typically is about a year long. We look forward to working through the process with the EMA in preparation for making Fanapt available to patients in Europe.

Let me now turn to our Tasimelteon clinical programs. During the second quarter of 2011, work continued on the ongoing efficacy and safety study of Tasimelteon, Study 3201 for the treatment of Non-24-Hour Sleep-Wake Disorder in totally blind individuals with no light perception. Additional sites were added in both the U.S. and Germany bringing the total number of sites to about 30. At the same time, a substantial outreach effort continues to identity individuals at risk for the disorder and to encourage participation in this, the largest and longest controlled trial for non-24 hour. Top-line results for this study are expected in mid-2012.

The second pivotal efficacy study, Study 3203 has also been designed, and we expect to be discussing the protocol for this study with the review division at the FDA in the near future.

In parallel with the non-24 program, we have initiated the major depression program for Tasimelteon. The IND for depression is now active in the FDA's Division of Psychiatry Products and the first study is on schedule to start this year. This will be a large placebo-controlled, parallel-group study with an eight-week treatment period comparing one dose of Tasimelteon versus placebo as a monotherapy for the treatment of symptoms of major depression.

Thank you, John. I would now turn the call to Jim Kelly; our Chief Financial Officer to discuss our financials for the quarter and six months ended June 30, 2011. Jim?

Thank you, Mihaelos. During the second quarter of 2011, Vanda recorded a net loss of $1.3 million, compared to net income of $1.2 million for the same period of 2010. On a diluted shares basis, this represents a loss of $0.05 a share on the current quarter, as compared to net income of $0.04 per share in the second quarter of 2010. As of June 30, 2011, there were approximately 28.1 million shares of Vanda common stock outstanding.

Total revenue for the second quarter of 2011 was $7.4 million, compared to $8.3 million in the same period of 2010. In these periods there were three sources of revenue. They are licensing revenue, royalty income, and product sales. Second quarter 2011 and 2010 revenue each included $6.6 million of licensing revenue linked to the amortization of the upfront payment received from Novartis for U.S. and Canadian commercial rights. Second quarter 2011 revenues also reflects $752,000 related to Fanapt royalties received from Novartis. This compares to $70,000 received for the second quarter of 2010.

During each period Vanda recognized a 10% royalty on Novartis net sales. Of note, second quarter 2011 sales of Fanapt, as reported by Novartis, included a $2.7 million cumulative adjustment to gross Fanapt sales reserves that resulted in approximately $270,000 less royalties to Vanda in the period.

Finally, second quarter 2010 revenue included a one-time product sales to Novartis of $1.5 million. [No] product sales have been booked during 2011.

Total operating expenses for the second quarter 2011 were $8.9 million. Research and development cost of $6 million, made up the majority of that spend for the current quarter. This compared to $2.4 million for R&D spent in the second quarter of 2010. The increase in R&D expenses over the prior year is a result of costs incurred in connection with the ongoing Phase III trials for tasimelteon in Non-24-Hour Sleep-Wake Disorder.

General and administrative expenses were $2.6 million for the second quarter of 2011, compared to $2.8 million for the second quarter of 2010. The decrease in G&A expenses in 2011 relative to 2010 is primarily due to lower employee-related costs. Intangible asset amortization for the second quarter of 2011 of $400,000 is in line with the amount recorded in the prior year. And finally, Vanda's cash, cash equivalents and marketable securities as of June 30, 2011, totaled $188.4 million, a decrease of $6.2 million since the end of the first quarter of 2011.

I will now turn the call back to Mihaelos.

Thank you very much, Jim. At this time, we will be happy to address any of your questions.

(Operator Instructions). Lauren Migliore.

Hi, thanks for taking the question. Can you provide a little color on what you believe will be the primary catalyst for sales growth over the next few years? Or are you waiting to see a continued ramp up of sales in the U.S. and launches in the rest of the world to push Fanapt sales up to significant levels, or do you see potential approval of the depot formulation as the most promising growth opportunity at this point?

Thank you very much for the question, Lauren. As you know, we have not given any forecast for U.S. sales on Fanapt, but maybe I'll provide a little color of what we see as a short-term catalyst, and what we are looking at.

All right. First of all, as we had expressed in the prior quarter, we are not very excited with what Fanapt is selling in the U.S. right now. We know that Novartis is placing a significant effort and that the project remains a key priority for Novartis in the U.S. The profile of the project continues to be received very well by physicians and patients alike. However over the last 18 month, we have seen a challenging environment with new entrants in the space plus a hesitant and slow acceptance of the drug and similar drugs in the formularies of this state.

Novartis has successfully overcome the formulary challenges and now in 90% of the state, Fanapt is on a preferred drug list or the drug is -- there is no impediment in the access of the drug. So as we see forward in the next half of the year, we are going to be looking very carefully the IMS script trends and we hope that the efforts that Novartis is placing now on the marketing side and the sales side with [quickest progress] around the country will result in better awareness of Fanapt and better acceptance. What is encouraging is 17% growth from quarter-to-quarter, if this was to continue to happen on this next quarter that would be a very exciting situation.

Now, let me address a little bit your question in the rest of the world. We view the rest of the world opportunity in two parts, one is the part where we can file the FDA dossier in countries that will review based on the FDA dossier and proceed with distribution agreements in the respective countries. And you saw recently that we are successful with distribution agreement and imminent filings in Argentina and Mexico. We have filings now pending and under review in Singapore and Australia where we may start hearing definitive decisions towards the end of the year, beginning of 2013. There are a few more countries that we are pursuing at the same time in that part.

The second part is Europe, Europe is a very large area with 500 million in population and therefore tremendous attentions are paid in that market. We have recently successfully filed with EMA, and as John was pointing out earlier, this is about a 12-month process, so around this time next year, we hope to reoccur directionally what's going to happen in Europe. We have not finalized the European strategy where we evaluate licensing, we evaluate distribution partnerships et cetera and we may be in a position later to discuss about that.

So, to summarize, we feel that the short term we'll be watching very carefully the trends in the U.S., continue the distribution agreements around the world, hearing on regulatory approvals around the world and 12 months from now, hopefully hearing on the regulatory approval in Europe as well.

You asked about the depot formulation. The depot formulation totally can be a significant growth driver in the U.S. and Europe. However, this is few years away as the first pharmacokinetic study, the guidance from Novartis is that it will [not] report out sometime the fourth quarter -- third to fourth quarter of 2012.

Having said that, if that study which compares two formulations of a microspheres and is successful that could quickly lead to the single pivotal Phase III study and therefore within a year or so after that we can expect the filing in the U.S. So the drivers, short-term IMS scripts in the U.S. then ROW, EMA approval and the depot is figured out.

Thank you. As a quick follow-up, can you provide us some evidence that you think demonstrates Novartis' continued commitment to the drug?

Unfortunately, I cannot discuss the strategy in fact or the resources behind it, but I can tell you in our [joint sitting] committee opportunities and informal opportunities, certainly that commitment is resonating within the highest levels of the Novartis team. And what I would say, point out Lauren is that, we've seen during the first part of the first quarter this year a slowing down of growth. We saw a flattening of scripts and I think yourself and others who work IMS scripts, you would agree that this second quarter, the results in the growth, the 17% growth are quite encouraging, but we're remaining on the standby to see if this will continue.

Thank you.

Thank you very much. Let's conclude our conference call. We thank you all for your interest and support for Vanda and we look forward to speaking with you again soon.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.