Vanda Pharmaceuticals Inc (VNDA) 2011 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the third quarter 2011 Vanda Pharmaceuticals Incorporated conference call. My name is Erin and I will be the coordinator for today. At this time all participants are in a listen only mode. We will be facilitating a question and answer session toward the end of today's conference. (Operator Instructions). As a reminder this conference is being recorded for replay purposes.

I will now turn the presentation over to your host for today's conference, Mr. Jim Kelly, CFO. Please proceed, sir.

Good morning and thank you for joining us to discuss Vanda Pharmaceuticals third quarter 2011 performance. Our third 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 December 4th. Joining me on today's call are Dr. Mihaeles Polymeropoulos, our President and CEO; Dr. John Feeney, our Senior Vice President and Chief Medical Officer, Bob Repella our Senior Vice President and Chief Commercial Officer, and Gunther Birznieks our Vice President of Business Development. Following my introductory remarks, Dr. Polymenopoulos will update you on our ongoing activities. Then I will comment on our financial results for the third 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 Security 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 words or expressions 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 quarter ended June 30, 2011 which are available on SEC's 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 our call over to our CEO, Mihaeles Polymeropoulos.

Thank you, Jim. Good morning and thank you very much for joining us. I will begin by providing an update on Fanapt, our atypical anti-psychotic drug marketed in the US by our partner Novartis for the treatment of schizophrenia. During the third quarter, Fanapt prescriptions as reported by IMF grew to 33,000 which represents a 10% growth over the prior quarter. Since its launch in January 2010, over 145,000 prescriptions for Fanapt have been written in the US. We are confident with the value that Fanapt can provide for patients with schizophrenia through the good ethical file and (technical difficulties) anticipated favorable disorder in metabolic effect safety profile. Fanapt is slowly gaining market sales in the multi-billion dollar market and we remain optimistic about the prospects of this action.

Our partner Novartis continues with the clinical development of the long acting injectable formulation of Fanapt. Novartis is currently performing a pharmacological kinetic study comparing 2 potential formulations which will lead to the selection of the final formulation for the conduct of phase 3 efficacy study with a long acting injectable formulation. Novartis expects results from this pharmacological kinetic study in late 2012. Vanda is also pursuing registration of Fanapt around the world with active filings in the European Union, Singapore, Australia and Israel and more planned in the coming months. We believe that successful registration of the product in these and other markets has the potential of providing the foundation revenue for Vanda in the foreseeable future.

Let us now turn to Tasimelteon. Tasimelteon is our most advanced asset. A circadian regulator with the potential to treat a variety of significant medical conditions associated with aberrant circadian rhythms. This disorder includes the non 24-hour sleep-wake disorder in the blind or non24, and major depressive disorder. Tasimelteon has received orphan designation for the treatment of non24 in totally blind individuals from both the US, Food and Drug Administration, and the European Union's EMA. Non24 is a serious disorder that often results in a degree of disability which patients have described as worse than blindness itself. There is currently no other drug product for this serious and debilitating orphan indication. The disorder is caused by the patient's inability to sense light which leads to the inability to reset their body clocks to a 24-hour rhythm.

Vanda is involved currently in an extensive clinical development program in the US, France, and Germany, which aims to establish that Tasimelteon can help these patients reset their body clock to a 24-hour rhythm and enable them to consolidate their sleep episodes at night. Such an effect can have dramatic positive impact on the lives of these patients since it has the potential to allow them to effectively participate in a 24-hour world. For the non24 indication, Vanda is currently actively pursuing 4 phase 3 studies and multiple clinical pharmacology studies in over 200 patients across 38 investigator sites in the US, France and Germany. We expect to release the blind results of the first phase 3 study in mid 2012. At the same time, Vanda will be preparing for a regulatory submission to the FDA by mid 2013. Vanda is currently in discussion with the FDA with a name to confirm the path and requirements for this regulatory submission.

In September 2011, we initiated a new phase 2B3 program for the treatment of major depressive disorder with Tasimelteon. The US based Magellan study is expected to enroll 500 patients across 40 sites. This study has an 8 week treatment period followed by an optional 1 year open label extension. During the study, we will monitor the effects of Tasimelteon on standard scales of depression and sleep as well as explore associations with markers of the circadian clock. Due to its differentiated mechanism of action as a circadian regulator, Tasimelteon has the potential to uniquely address the symptoms of major depression. We expect to report the results from the Magellan study in the first half of 2013. I would now turn the call to Jim Kelly, our Chief Financial Officer to discuss our financials for the quarter in the 9 months ended September 30, 2011. Jim.

Thank you, Mihaeles. During the third quarter of 2011, Vanda recorded a net loss of $3.1 million compared to net income of $3.2 million for the same period in 2010. On a diluted shares basis, this resulted in a $0.11 loss per share in the current quarter as compared to net income of $0.11 per share in the third quarter of 2010. As of September 30, 2011, there were approximately 28.1 million shares of Vanda common stock outstanding.

Total revenue for the third quarter of 2011 was $8 million compared to $7.2 million for the same period in 2010. In these periods, there were 2 sources of revenue, they are licensing revenue and royalty income. Third quarter 2011 and 2010 revenue each included $6.8 million of licensing revenue linked to the amortization of the up front payment received from Novartis for US and Canadian commercial rights to Fanapt. Third quarter 2011 revenues reflect $1.2 million related to Fanapt royalties received from Novartis, as compared to 500,000 for the third quarter of 2010. During each period, Vanda recognized a 10% royalty on Novartis net sales.

Total operating expenses for the third quarter 2011 were $11.3 million. Research and development costs of $8.2 million made up the majority of that spend for the current quarter. This compares to $4.1 million for R&D spend in the third quarter of 2010. The increase in R&D expenses over the prior year is a result of costs incurred in connection with the new and on going trials for Tasimelteon and non24 in major depressive disorder. General and administrative expenses were $2.7 million for the third quarter of 2011 compared to $2.1 million for the third quarter of 2010.

The increase in G&A expenses in 2011 relative to 2010 is due to a combination of higher costs associated with the rest of world commercialization of Fanapt plus the return of a one time favorable item in 2010 specifically the reversal of stock based compensation expenses linked to the departure of an executive in the third quarter of 2010. Finally Vanda's cash, cash equivalents and marketable securities as of September 30, 2011, totaled $180.5 million, a decrease of $7.9 million since the end of the second quarter, 2011. I will turn the call back to Mihaeles.

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

(Operator Instructions). Corey Davis, Jefferies.

It's Greg Savonovich for Corey. Let's talk about Fanapt and what are your expectations for the drug's growth on a go-forward basis? Seeing some incremental growth here and there, but not a meaningful inflection, so if you could address what you believe expectations should be?

You announced some licensing agreements in Latin American and perhaps Mexican markets. I wanted to get a sense of any updates that we should be expecting from those licensing agreements.

Let's start with Fanapt. We have not given any revenue guidance, either us or nor Novartis. We agree with your evaluations that while there is some incremental growth from quarter to quarter, it continues to remain anemic. This is, indeed, a multi-billion dollar market and as typical anti-psychotics for schizophrenia are used interchangeably. But also you cannot predict which patient will respond to which.

Which means that the very large population of schizophrenia patients, over 50% of them that switch drugs within a given year become potential users of Fanapt. Fanapt's profile we are almost 2 years on the market, remains as expected from the label in that it has good efficacy and it has an attractive safety profile with favorable metabolic effects, that (inaudible) and weight but also exceptionally favorable effects on movement disorders, especially a placebo-like akathesia (inaudible) symptoms that are among the lowest of the side effects in the class.

What we have seen is annualized revenue tracking by Novartis in the $40 million, $50 million a year as we annualize today's script levels. We are very optimistic that we will continue to see the growth. We know that Novartis is committed with their efforts to increase awareness of the product among physicians and continue an aggressive campaign to allow the familiarizing patients and doctors with the product. While the results so far of the market penetration market share in Fanapt are disappointing, we remain optimistic that we will continue to see growth.

The second part of your question had to do with the progress in the rest of the world deals and I will ask Gunther Birznieks, our Head of Business Development to give you a (inaudible).

You noted the Mexico and Argentina partnerships that we closed over the last quarter. The Argentine partnership has filed for regulatory approval and was looking toward potential regulatory feedback next year. Mexico, our PROBIOMED partner there is currently working on the regulatory dossier for filing later this year and looking to potential regulatory feedback next year. Elsewhere in Latin America, we continue to explore our partnership options, especially in some of the larger markets there, such as Brazil.

I believe you had mentioned on the call that you have active registrations in Europe, Singapore, Australia and Israel. Could you give us some framework on when you are expecting to hear back on a potential approval? Are these 2012 events, or could they be beyond that time frame?

Let's start with Australia. We expect the first feedback from them possibly by the end of this calendar year. Singapore most likely in the first quarter of 2012; Israel will be sometime in the first half of 2012 as well. Europe we filed with EMA in July of 2011 and we expect a potential initial decision by CHMP sometime in the second quarter of 2012.

On Tasimelteon, as you think about the CN-24 and MDD indications, certainly the orphan indication is further ahead. Is there a view as to which from a commercial perspective you see the greater opportunity?

Our most advanced indication is the non-24-hour sleep-wake disorder in the blind indication with a targeted filing sometime by mid-2013. Of course the major depression study, the phase 2B3 study, has just begun. Not knowing the results, it's hard to put a commercial model around it. But let me make some general comments.

On the orphan indication, we think that if Tasimelteon is shown to reset the body clock in these individuals and allow them to effectively participate in a 24-hour world, that could be an exceptional benefit that may be life-changing for those individuals. Remember, these are blind individuals; they are dealing with the disability of blindness, and having the non-24-hour perpetual jet lag syndrome can exclude these patients from employment and regular participation in a social life that requires adapting to a 24-hour clock.

If Tasimelteon were shown to have these clock-resetting abilities, it could be life-changing for some of the individuals with the non-24 disorder. As such, we think it could represent a significant commercial opportunity for Vanda. Being an orphan indication in a blind individual also will give us, based on benefit, a significant price in flexibility as well. In terms of numbers of patients, the estimate in the US is that there are about 65,000 to 95,000 patients.

We recognize that there will be a significant effort required to build this market, build the awareness. This is a new disorder -- a new drug, but with all that comes also the benefit that we will be most likely the only treatment available for this very serious and debilitating disorder.

Just to comment a little bit on the major depressive disorder, there are a number of treatments available for major depression today. Most of them fall into the class of either serotonin reuptake inhibitors or nor-epinephrine reuptake inhibitors or a combination of the 2. While they have provided significant value to patients with major depression, the fact remains that three-quarters of the patients continue to have remaining symptoms after treatment with any of these agents. A number of side effects are seen, including metabolic weight gain but also very significant side effects on disruption of sleep as well as significant effects on sexual dysfunction.

It is our belief that Tasimelteon, with a very unique mechanism action of resetting the body clock and through that receiving positive effects on mood and sleep, it is very likely also because of its short half-life and this unique mechanism of action that we will have minimal side effects. Including the category that has plagued other current major depression treatments which include weight gain, sexual dysfunction and sleep disruption.

So, the summary of major depression is that while we have not seen the profile of the drug yet and we will get the first glimpse of that in the first half of 2013 with the results of the Magellan study, it is likely that these different (inaudible) mechanism of action may play a significant role in the coming few years in the [armamentarium] of depression drugs. And in fact, it may, again, represent a significant opportunity for Vanda.

You referenced in your earlier comments that you are looking to meet with FDA with regards to the next steps or a plan of action that you both can agree on with regard to the end 24 indication. Could you frame for us some of the high level items that you would like to get hammered out with FDA?

The important is that given the fact that this is a orphan indication but it's also very new for the FDA, as there are no applications or no drugs approved. It requires a continuous interaction to develop a common understanding of what matters, what do the experts think are 10 points for the studies, and what would the developing program look like that will result in a successful filing and eventually approval of this orphan indication.

Over the last couple of years, we have had several interactions with the FDA building that continuing of understanding. These interactions include an end of phase 2 meeting, a special protocol assessment which is ongoing on the second phase 3 study, and we expect these interactions to continue over the next few months and next year. We are optimistic and hopeful that we will identify this clear path to filing and have a successful filing in mid 2013.

I would now like to turn the call over to Dr. Mihaeles Polymeropoulos for closing remarks.

Thank you very much. This concludes this conference call. We thank you all for your interest and support for Vanda. And we look forward to speak with you again soon.

Thank you for your participation in today's conference, you may now disconnect. Have a great day.