Vanda Pharmaceuticals Inc (VNDA) 2013 Q4 法說會逐字稿

Welcome to the fourth quarter 2013 Vanda Pharmaceuticals earnings conference call. My name is Shannon and I will be your operator for today's call. (Operator Instructions). Please note that this conference is being recorded. I will now turn the call over to Mr. Jim Kelly, Senior Vice President and Chief Financial Officer. Please begin, sir.

Thank you, Shannon. Good morning. Thank you for joining us to discuss Vanda Pharmaceuticals fourth quarter and full year 2013 performance. Our fourth quarter and full year 2013 results were released this morning and are available on the SEC's EDGAR system on our website, www.vandapharma.com. In addition we are providing live and archive versions of this conference call on our website.

Joining me is Dr. Mihael Polymeropoulous, our President and CEO. Following my introductory remarks, Dr. Polymeropoulous will update you on our ongoing activities. Then I will comment on our financial results for the fourth quarter and full year 2013 before opening the lines to your questions.

Before we proceed I would 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. Our forward-looking statements are based on expectations and involve risks, changes in circumstances, assumptions, and uncertainties. These risks are described in the risk factors in MD&A and Results of Operation sections of our annual report on Form 10-K for the fiscal year ended December 31st 2012, and our subsequently filed quarterly reports which are available on the SEC's EDGAR system and our website.

We encourage all investor 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 may make on this call on account of new information, future events, or otherwise except as required by law. With that said, I would like to turn the call over to our CEO, Dr. Mihaeles Polymeropoulous

Thank you, Jim. Good morning everyone. As we announced last week HETLIOZ [tasimelteon] was approved on January 31st by the US FDA for the treatment of Non-24 Hour Sleep-Wake Disorder. This is a historic moment for blind patients who are suffering with Non-24, and for whom there was no available treatment. Full prescribing information can be seen at www.HETLIOZ.com or the FDA website.

I would like to now discuss our commercial readiness and launch activity. With the on-schedule approval of HETLIOZ by the FDA we are on target for commercial launch early in the second quarter of this year. After extensive research with the blind community and its advocates, we have designed a commercialization approach to appropriately address the needs of our patients in the context of this orphan disorder. When we began our work on Non-24 several years ago,awareness of the disorder was minimal among patients and physicians.

Blind patients knew for years of these troubles with sleep-wake schedules and the impact that this distraction had on their lives. They did not know however that their symptoms were due to Non-24 Hour Sleep-Wake Disorder. This now has changed, and thousands of patients and family and friends are now familiar with the disorder. There is still a lot to be done, and we are indeed during the early. phase of our campaign. But the early response is encouraging.

We are also working to educate physicians so they can appropriately diagnose Non-24 and decide on treatment. Solutions hub services were collecting information on patients' specific physician preferences so that we can directly target our educational campaign to those physicians first. These physicians will be a mixture of specific patients' primary care doctors, as well as sleep specialists in geographic proximity to our patients. All this information is collected voluntarily through our direct response campaign. Through the same campaign we also understand patients' specific needs that will aid us in adequate planning. These include need for co-pay support as well as specific needs for transportation support.

We are committed to identifying physicians for these patients' specific needs and address them so that patients are properly diagnosed and treated. Our extended marketing team is in place andis executing the plan. The field force has been identified and will be soon deployed. Our HETLIOZ solutions hub services have been activated andwill include a range of services including Non-24 disease education, physician referral, insurance verification, co-pay support, transportation support and specialty pharmacy services.

We are confident that our comprehensive launch plan will allow for efficient patient identification and a streamlined access to the HETLIOZ product for those who need it. Our commercial manufacturing campaign is on target to deliver for the launch and it is worth pointing out that HETLIOZ tasimelteon packaging will be the first in the United States to carry blind accessible information through Braille inscription. We are also working with payors to make them aware of our product and the benefits that it can provide to patients with Non-24. We have not yet announced pricing for the project, butwe have guided that it will be consistent with other orphan drug products, and consistent with the benefit that it provides to patients.

We know that there will be many hurdles to overcome during this commercial phase, but we feel that we have in place the right team and the right strategy in order to succeed. With that I will turn the call to our Jim Kelly to discuss the financial results and I will come at the end to answer any questions you may have. Jim?

Thank you, Mihaeles. During the full year 2013 Vandarecorded a net loss of $20.3 million as compared to a net loss of $27.7 million for the full year 2012. On a diluted share basis this reflects a loss of $0.67 per share for the full year 2013 as compared to a diluted net loss per share $0.98 for the prior year.

Turning to the quarterly results Vanda recorded a net loss of $7.6 million for the fourth quarter of 2013 compared to a net loss of $4.6 million during the same period in 2012. On a diluted share basis this reflects a loss of $0.23 per share for both the fourth quarter of 2013 and 2012. As of December 31st 2013 there were approximately 33.3 million shares of Vanda common stock outstanding.

Total revenue for the fourth quarter of 2013 was $8.8 million compared to $7.9 million in the same period of 2012. In these periods, there were two sources of revenue, they are licensing revenue and royalty income. Fourth quarter 2013 and 2012 revenue each included $6.8 million of the licensing revenue related to the amortization of the upfront payments received from Novartis for US and Canadian commercial rights to Fanapt. Fourth quarter 2013 revenue included $2 million in Fanapt royalties received from Novartis as compared to $1.2 million for the fourth quarter of 2012.

During each period Vanda recognized that 10% royalty on Novartis' net sales of Fanapt. Fanapt prescriptions as reported by IMS were approximately 43,400 for the fourth quarter of 2013. This represents a 1% decrease versus the third quarter of 2013 prescriptions and a 14% increase over the fourth quarter of 2012 prescriptions. Total operating expenses for the fourth quarter of 2013 were $16.5 million compared to $14.3 million for the fourth quarter of 2012.

General and administrative costs of $9.9 million made up the majority of that spend for the fourth quarter of 2013. This compares to $3.2 million for G&A spend inthe fourth quarter of 2012 and reflects the increased commercial activity in preparation for the launch of HETLIOZ in the United States. Research and development expenses for the fourth quarter of 2013 were $6.2 million as compared to $10.6 million in 2012.

The decrease in cost is primarily related to completion of the efficacystudies for Tasimelton in Non-24 and major depressive disorder. Vanda's cash, cash equivalent, and marketable securities as of December 31st 2013 totaled $130.4 million adecrease of $11.8 million since the end of the third quarter in 2013.

Regarding 2014 financial guidance, while Vanda will not be providing full year 2014 financial guidance at this time, we will evaluate our ability to provide additional guidance as the year progresses. This will include the appropriate launch metrics for use in discussing the progress of HETLIOZ commercialization during 2014. Now back to Mihaeles

I would now -- I would like to answer any questions you may have.

(Operator Instructions). Our first question coming from Josh Schimmer from Piper Jaffray

Hey guys, thank you for taking the questions. I wonder if you could help provide some estimates for the European opportunity and how we should think about the ease of tapping into that market compared to the U.S.

Thank you, Josh. Built on our past and what we understand the specific issues in Europe may be. We are in the process, having initiated the process for a European filing. We hope that we will be able to file this year. That will lead to 12 to 15 months after filing to the decision by the EMA. and therefore (technical difficulty) the process of negotiating (inaudible) reimbursement with different countries. That can be a protected process, nine months or so.

Our philosophy is that for the patience we need (inaudible) we should be able to negotiate orphan pricing very consistent with what others have done in the field. The opportunity indeed can be quite large. The population, of course, is a bit larger than the United States. The incidents and prevalence of Non-24 appears to be the same. So if you take as an analog to about 80,000 patients estimate in the U.S. it will be over 100,000 in Europe.

Of course, the individual differences between EU country members pricing and reimbursement creates additional complexity. To remind everyone we do have (technical difficulties) in France for several years in the orphan [blue] study about 40 plus patients there. (technical difficulties) patients in Germany and we have specific interests in other major countries (technical difficulties). First things first is the focus on the European filing to complete or begin the filing this year. We are in the process of discussing the health (inaudible).

That is very helpful. Can you give us a sense of the pace of new patient identifications in the target markets that you have identified with your radio campaign? Do you continue to see a steady pace of new patient identification? Do you tend to see an initial [bullus] into decline or just a little color to help us extrapolate off your early success and future success

Certainly. Just to go back a little bit in time,we have done a lot of pre-work to understand how this community of blind patients, [lighting] patients with Non-24 creates what are their preferences, media access (technical difficulties) And what we came to recognize is there could be an efficient streamlined way of reaching patients. And you saw that with an initial pilot in the end of 2013 on the radio which now has beginning in January has expanded to a [both lot of] markets and national radio campaign.

We will not recognize numbers of patients (technical difficulties) significant amount (technical difficulties). Specifically to address your question we do not believe that we have reached saturation with the radio campaign. We are also exploring additional campaigns that may include a [vivid] awareness pilot with television in the spring of this year. All metrics now will be in this campaign should be steady growth (technical difficulties) and certainly we have not yet attacked the majority of the patients. We continue to see the growth.

Great. Maybe one last question for me. There is so much opportunity for development in the circadian rhythm space that seems to be under-addressed area for the pharmaceuticals industry. Do you have now or down the road any plans to broaden beyond HETLIOZ to target those other sleep disorders or non-sleep circadian rhythm disorders?

First of all, HETLIOZ we are absolutely committed to explore what we consider a very large opportunity in Non-24 hour disorder in the totally blind. I want to be clear about that. We also have communicated that we want to expand or study to the pediatric blind population with Non-24. There's a significant need there. And we also have discussed our [immanent] plans to begin a program in the Smith-Magenis syndrome, the rare developmental chromosomal disorder where young patients have inverse circadian rhythms.

The broader question our level of commitment in understanding circadian biology and develop (inaudible -- background noise). We absolutely are committed as pioneers in this field of developing the first circadian regulator,to understand other ways to address circadian rhythms. As we have discussed before while we concentrated on the rhythm of the circadian cycle in the context of Non-24, circadian rhythms affect a number of [peripheral clocks] (technical difficulties) study (technical difficulties) including cardiovascular rhythm (technical difficulty)

There is a growing understanding in the biology and a growing supply of new (technical difficulty) that will address this peripheral [clocks]. We are absolutely committed to understand this, but we caution these are all very early and the immediate success of Vanda is around the Non-24 hour Disorder opportunity

Great. Thank you for taking the questions.

Our next question from Jason Butler from JMP Securities

Hi, thanks for taking my questions. Seems like you have been making good progress with building awareness and education with patients. Could you talk to us a little bit more about the work you're doing with physicians, and how you are building the referral network. And maybe if possible quantify how many physicians you feel could be early adopters when the drug is launched?

Thank you, Jason. So just a little bit on our evolving strategy. The physician education and engagement. First of all, sleep doctors, there are about 2000 of them in sleep centers around the country, are fully aware of the circadian rhythm disorders and certainly are aware of Non-24. However as expected for the disorder in the absence of any therapeutic, historically they have treated very few patients.

The ability to recognize the patients, blind patients with the Sleep-Wake Disorder, and place in the differential diagnosis of Non-24 is very high. The specific awareness of the disorder is high among physicians. Now that there is a solution, things are indeed simpler. However, we want to be very targeted. Therefore with a small footprint of a sales force in educating physicians, bringing physicians up to speed not only about disease awareness already is there but also with what HETLIOZ is and how it can be used.

To that effect as I mentioned in my remarks. We are looking at a dual strategy. While broad awareness (technical difficulties) we have and we will launch, we are also extremely interested to identify the specific doctors that our potential patients are telling us they would rather see. There is only two classes.

Either it is a preference for a primary care doctor who has seen this patient for obvious is for many years, but also most of the patients are very keen to see a sleep specialist in the area. And we have the significant opportunity of targeting (technical difficulties) because we know who the patients are, we know where they are geographically located,we know who the physician preference is, and we know who the sleep doctors in that area are. Therefore as we are launching it creates an opportunity to in fact have very targeted and specific education to physicians that will soon see the blind patients with potential Non-24 in treatment

That is helpful. Also you said you haven't given pricing yet. When do you expect to disclose what the price of the drug is? Is it when you launch the drug or could it be earlier than that?

We intend to discuss the pricing prior to the launch so we can get all of the payors ready and in fact do some pre-work and pre-qualify patients so they are ready as soon as the drug becomes available to special pharmacies to access it. The price and communication will likely be in advance of the drug availability

Great. Just a quick one for Jim. Obviously you are not giving financial guidance right now. Could you talk to us about what specifically was in the R&D expense line for fourth quarter 2013 and whether there are one time items, and what the right way to think about a run-rate in 2014 is?

Thanks for the question. When you look at -- of course we are not able to give the forward looking expectation. I can talk a little bit about what is in the fourth quarter number. In the fourth quarter in R&D you've got a combination of, of course the people, plus you have got the facilities, the classic overhead, you know, your office. The meaningful part in terms of activities are two things. One is the trailing safety studies that we have ongoing for HETLIOZ.

So as Mihaeles mentioned earlier, we are doing studies in Europe. We've got one that is a safety study in France. We also have the U.S.-based. That is one piece. The second piece is we have an ongoing proof of concept study for our VLY-686 which is in pruritis in treatment-resistant atopic dermatitis. Those are the components.

The expectation of course is that the VLY-686 study continues into next year. Then as we move to 2014 there will be a conclusion at some point during the year of the safety extensions for the HETLIOZ studies that of course those patients would love to find appropriate way for them to convert to commercial patients

Great and then just one last follow-up. Could you tell us in the U.S. how many patients are currently receiving drugs in the safety study?

Yes. The patients in the U.S. are just a bit over 70. The patients in France a little bit over 40.

Great. Thank you for taking the questions.

At this time I would now like to turn the call back to Dr Mihaeles Polymeropoulis for closing remarks.

Thank you very much, all for [questions]and of course we thank you for your all your interest and support of Vanda. Thank you.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect.