(VNDA) 2024 Q1 法說會逐字稿

Thank you for standing by. My name is Hermine, and I will be your conference operator today. At this time I would like to welcome everyone to Q1 2024 Vanda Pharmaceuticals Inc. Earnings Conference Call. (Operator Instructions)

I would now like to turn the call over to Vanda's Chief Financial Officer, Kevin Moran. Please go ahead.

Thank you, Hermine. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' first quarter 2024 performance. Our first quarter 2024 results were released this afternoon 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.

Joining me on today's call is Dr. Mihael Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board; and Tim Williams, our General Counsel. Following my introductory remarks, Mihaels will update you on our ongoing activities. I will then comment on our financial results before we open the lines for 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 upon current expectations and assumptions that involve risks, changes in circumstances and uncertainties. These risks are described in the cautionary note regarding forward-looking statements, risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other filings with the SEC, which are available on the SEC's EDGAR System and on our website. We encourage all investors to read these reports and our other 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 now like to turn the call over to our CEO, Dr. Mihael Polymeropoulos.

Thank you very much, Kevin, and good afternoon, everyone. Thank you all for joining us to discuss Vanda's first quarter 2024 results.

Let me start by providing details on the progress for our psychiatry portfolio of compounds. Fanapt was approved on April 2 as a first-line therapy for the acute treatment of manic or mixed episodes associated with bipolar I disorder in adults, which -- for this discussion, I will refer to as bipolar I disorder.

The results of the study supporting this approval were published in the Journal of Clinical Psychiatry earlier this year. This approval for bipolar I disorder significantly expands the addressable patient population for Fanapt, where patent exclusivity is expected to last at least through late 2027.

For milsaperidone the active metabolite of Fanapt, a New Drug Application, NDA, is expected to be submitted to the Food and Drug Administration in early 2025. If approved for marketing for schizophrenia and bipolar I disorder, there are pending patent applications that, if issued, could extend exclusivity into the 2040s. We're currently planning clinical programs to test the efficacy of Fanapt and milsaperidone in the treatment of depressive symptoms, which, if successful, will significantly further expand the addressable patient population.

In addition, we are planning to initiate a registration study of the Fanapt long-acting injectable or Fanapt LAI formulation by the end of 2024. Fanapt LAI in earlier studies has demonstrated a profile compatible with a once-a-month administration offering a significant tool to address compliance issues in this disease population. Fanapt LAI could reach the U.S. market after 2026, and their pending patent applications that, if issued, could extend exclusivity into the 2040s.

This is a key differentiation from some currently marketed branded antipsychotics for which physical chemical properties or dosing requirements prevent the development of long-acting injectables. Fanapt LAI could potentially address a large patient population with chronic psychiatric conditions where compliance is a significant treatment challenge. We're also evaluating the use of Fanapt LAI in the treatment of major depression for which there is currently no approved long-acting injectable treatment.

In addition to Fanapt, milsaperidone has further differentiated physical chemical properties that beyond the oral formulation could permit the additional development of long-acting injectables with variable duration that could extend up to several months. It is worth underscoring that most currently approved drugs in this atypical antipsychotic class have not been formulated as long-acting injectables, making Fanapt and milsaperidone differentiated and it's greater than $1 billion estimated commercial opportunity.

It is our vision to develop a multiproduct psychiatry portfolio that will address multiple psychiatric indications and will expand the estimated addressable patient population to over 20 million people across these indications.

Turning now to HETLIOZ. HETLIOZ, our circadian rhythm regulator approved in 2014 for Non-24-hour sleep-wake disorder is the first and only treatment approved for this disorder that disproportionately affects totally blind people. HETLIOZ with its unique mechanism of action, has revolutionized treatment for this disorder and has significantly impacted patient's lives.

HETLIOZ LQ was approved in 2020 for the treatment of nighttime sleep disturbances in Smith-Magenis Syndrome, again offering the first-ever approved treatment for symptoms of this rare orphan disorder.

The FDA application for HETLIOZ in insomnia received a complete response letter from the FDA in March 2024, and the final agency action of our application for the treatment of Jet Lag Disorder is being challenged in the U.S. Court of Appeals for the D.C. Circuit. A study of HETLIOZ in the late sleep phase disorder, an indication with no approved treatment is ongoing in the U.S. and Germany. We're currently evaluating the initiation of the clinical program with HETLIOZ LQ in pediatric insomnia for children with or without neurodevelopmental comorbidities.

HETLIOZ LQ is not subject to a generic challenge at this time. Although exact estimates of prevalence of insomnia in children are difficult to quantify, it is estimated that 20% to 40% of children experienced significant sleep problems. There are currently no approved treatments for pediatric insomnia. If ultimately approved for marketing the addressable patient population for HETLIOZ LQ will be significantly expanded and market exclusivity would be expected to last in the 2040s.

The HETLIOZ capsule formulation commercial opportunity is subject to the launch of the 3 generic formulations. Vanda is currently challenging all 3 products on the grounds of unlawful FDA approval, patent infringement and other statutory violations in U.S. Federal Courts. We believe that the exceptional mechanism of action of HETLIOZ can be leveraged to address the needs of millions of people that suffer with disorders where the circadian rhythm circuitry is perturbed.

Turning now to PONVORY. With the December 2023 acquisition of PONVORY, this makes the third commercial stage product for Vanda. Currently approved as a once-a-day oral treatment for people with multiple sclerosis. PONVORY has a differentiated profile from other drugs in the class with high specificity and rapid reversibility making for a versatile use to address the need for people with multiple sclerosis.

The transition from Janssen, a Johnson & Johnson Company is progressing well with the completion expected in the coming months. In preparation for the U.S. commercial launch, Vanda is planning a cost of commercial activities, including the creation of a specialty sales force, a prescriber awareness program and a comprehensive marketing program. In addition, Vanda is evaluating PONVORY in additional autoimmune disorders, including psoriasis and ulcerative colitis.

Prior to our acquisition, PONVORY was tested in patients with psoriasis and demonstrated significant effects in both induction and maintenance of response. If approved in this indication, PONVORY will be the first oral sphingosine1-phosphate analog in treating psoriasis and would significantly expand the addressable patient population of PONVORY with over 8 million people diagnosed with psoriasis in the U.S. alone.

Additionally, this class of drugs has proven to be effective in treating ulcerative colitis, where PONVORY with its differentiated profile could have a competitive advantage and significantly expand the addressable patient population with an estimated prevalence in the U.S. of approximately 2 million individuals with ulcerative colitis.

Our vision is to increase awareness for PONVORY is an option for patients with multiple sclerosis in need of a specific and versatile agent. In addition, we intend to exploit the application of PONVORY in a host of autoimmune disorders in which its mechanism of action could be therapeutically desirable.

Finally, an update on tradipitant. Tradipitant, our neurokinin-1 receptor antagonist is currently being developed for the treatment of gastroparesis with a New Drug Application under review by the FDA and an expected target action date in September of 2024. Gastroparesis prevalence is estimated to be over 6 million individuals in the U.S., and there has been no approved treatment in over 40 years.

In addition to the FDA review, a clinical study is ongoing with over 600 patients to examine the safety and the exposure response relationship of tradipitant in patients with gastroparesis. Close to 40 people have also been approved for treatment in the expanded access program with some of them have now been treated for duration in excess of 2 years.

Approval in this indication, gastroparesis, (inaudible) will address a serious unmet medical need and bring a new therapeutic option to these patients for the first time in over 40 years. Tradipitant is also now completing the clinical program studying its effects in motion sickness, with an NDA filing expected by year-end. Results from the second and final Phase III clinical study are expected in the coming months.

The efficacy of tradipitant motion sickness has previously been demonstrated in two clinical studies where tradipitant was effective in preventing vomiting associated with motion, in traveling in the coastal waters of the United States. An eventual approval for this indication is received will significantly expand the addressable patient population with approximately 30% of the U.S. population reported to suffer from motion sickness under ordinary travel conditions that include sea, air and land.

Our vision is to evaluate and commercialize tradipitant for a host of indications, including gastroparesis, motion sickness and other disorders where this mechanism of action is desirable. Vanda also has earlier clinical programs which seek to address unmet medical needs for common and rare disorders ranging from dry eye, performance anxiety and onychomycosis to polycythemia vera and sarcomere to disease.

We have been able to accomplish all this with a small but efficient organization that is enthusiastic to continue developing and commercializing treatments for people who need them. We expect several significant milestones in the coming months, including the launch of Fanapt in bipolar I disorder, the launch of PONVORY in multiple sclerosis, the potential approval of tradipitant in gastroparesis, the Phase III results of tradipitant in motion sickness, the upcoming NDA filings of milsaperidone in psychiatric disorders and tradipitant motion sickness and the initiation of clinical programs in depression, psoriasis, ulcerative colitis and pediatric insomnia. We are confident that our robust revenue, strong cash position and efficient operations position us well for significant growth and value creation in the years to come.

Before I turn to Kevin to walk you through our business and financial performance for the quarter, I want to take a minute to cover some other recent developments at Vanda. Yesterday, we issued a press release announcing that we are in receipt of a revised unsolicited takeover proposal. The Board and management team are dedicated to act in the best interest of our shareholders, and we would consider any ideas that would drive long-term shareholder value.

To that end, our Board of Directors, alongside our independent financial and legal advisers is in the process of reviewing and evaluating this revised unsolicited proposal. We will not comment further on this unsolicited takeover proposal before the Board has completed its review.

With that, I'll turn now to Kevin to discuss our financial results. Kevin?

Thank you, Mihaels. I'll begin by summarizing our first quarter 2024 financial results. Total revenues for the first quarter of 2024 were $47.5 million, a 24% decrease compared to $62.5 million for the first quarter of 2023. This decrease was primarily due to the launch of generic versions of HETLIOZ, which we have discussed in detail.

Notably, total revenues for the first quarter of 2024 increased by 5% as compared to $45.3 million in the fourth quarter of 2023. HETLIOZ net product sales were $20.1 million for the first quarter of 2024, a 49% decrease compared to $39.6 million in the first quarter of 2023. HETLIOZ net product sales in the first quarter decreased by 5% as compared to $21.1 million in the fourth quarter of 2023. The decrease to net product sales relative to the first quarter of 2023 was attributable to a decrease in volume, partially offset by an increase in price net of deductions.

Our HETLIOZ net product sales as reported for the first quarter of 2024 and 2023 included transactions that resulted in higher unit sales as compared to recent prior periods. The higher unit sales during the first quarter of 2024 and 2023 resulted in a significant increase of inventory stocking at certain specialty pharmacy customers. HETLIOZ net product sales during the first quarter of 2024 reflect lower unit sales as compared to the first quarter of 2023 which was partially attributable to lower demand and the continued reduction of the elevated inventory levels at certain of our specialty pharmacy customers during the first quarter of 2024.

Turning to Fanapt. Fanapt net product sales were $20.6 million for the first quarter of 2024, a 10% decrease compared to $22.9 million in the first quarter of 2023. Fanapt net product sales in the first quarter of 2024 decreased by 9% as compared to $22.6 million in the fourth quarter of 2023. This decrease was partially attributable to inventory destocking at wholesalers in the first quarter of 2024 relative to elevated inventory stocking levels at the end of 2023. Fanapt prescriptions in the first quarter of 2024 as reported by IQVIA Xponent decreased by approximately 4% compared to the fourth quarter of 2023.

PONVORY net product sales were $6.8 million for the first quarter of 2024. As a reminder, we purchased the right to market and sell PONVORY in the U.S. and Canadian markets in December of 2023. As such, this represents the first full quarter of PONVORY revenue recognition at Vanda and a positive step in diversifying our product mix with innovative and value-generating products.

For the first quarter of 2024, Vanda recorded net loss of $4.1 million compared to net income of $3.3 million for the first quarter of 2023 and a net loss of $2.4 million in the fourth quarter of 2023. The net loss for the first quarter of 2024 included an income tax benefit of $0.5 million as compared to an income tax provision of $2.3 million for the same period in 2023. And an income tax provision of $0.7 million in the fourth quarter of 2023.

Operating expenses in the first quarter of 2024 were $56.7 million compared to $60.5 million in the first quarter of 2023. The $3.8 million decrease was primarily driven by lower SG&A expenses related to spending on sales activities for our commercial products and other corporate activities, partially offset by an increase in R&D expenses related to spending on our CFTR development program.

Operating expenses in the first quarter of 2024 increased by $4.3 million as compared to $52.4 million in the fourth quarter of 2023. This increase was primarily driven by additional spend on legal and other corporate activities a portion of which are not expected to continue in future periods, partially offset by a decrease in R&D spend due to onetime activities in the fourth quarter of 2023, including $2.4 million of expense recorded for the tradipitant NDA filing fee, $2 million for the associated NDA milestone payment to Eli Lilly and $3 million of milsaperidone manufacturing costs.

SG&A expenses may increase in future periods as a result of the upcoming commercial launches of Fanapt in bipolar I disorder and PONVORY in multiple sclerosis. Vanda's cash, cash equivalents and marketable securities referred to as cash as of March 31, 2024 was $394.1 million representing an increase of $5.9 million to cash compared to December 31, 2023. And a decrease of a $107.4 million compared to March 31, 2023. The change in cash during the first quarter of 2024 benefited from the timing of cash in from customers for revenue and related payments of rebates to payers as compared to recent prior periods. The change in cash as compared to the first quarter of 2023 is driven by the acquisition of PONVORY from Janssen for $100 million upfront payment.

Given uncertainties surrounding the U.S. market for HETLIOZ for the treatment of Non-24 as a result of the continued generic competition in the U.S. and the upcoming commercial launches of Fanapt in bipolar I disorder and PONVORY in multiple sclerosis, Vanda is unable to provide 2024 financial guidance at this time. Vanda will continue to evaluate its ability to provide financial guidance in future periods.

HETLIOZ net product sales will likely decline in future periods potentially significantly related to the launch of generic versions of HETLIOZ in the U.S. Additionally, the company constrained HETLIOZ net product sales for the full year 2023 and the first quarter of 2024 to an amount not probable of significant revenue reversal. As a result, HETLIOZ net product could experience variability in future periods as the remaining uncertainties associated with variable consideration are resolved and depending on inventory levels at specialty pharmacy customers.

We are highly focused on sustainable long-term value creation. In regards to the upcoming Q3 launches of Fanapt in bipolar I disorder and PONVORY in multiple sclerosis, we have initiated a host of commercial activities on both products including an expansion of neuroscience sale force detailing Fanapt psychiatrists, PCPs and other prescribers the creation of a targeted specialty sales force detailing PONVORY neurologists as well as prescriber awareness programs and comprehensive marketing programs for both products.

We believe these commercial investments in Fanapt bipolar I disorder and PONVORY for multiple sclerosis will result in near-term revenue growth. Our goal is efficient revenue generation, ultimately resulting in profitability and cash flow generation. Vanda has a proven and long track record of fiscal responsibility and successfully commercializing products in an efficient manner, leading to 7 consecutive years of positive cash flow, removing for the impact of capital offerings and acquisitions, which results in our current strong cash position.

With that, I'll now turn the call back to Mihaels.

Thank you very much, Kevin. At this point, we'll be happy to answer any questions you may have.

(Operator Instructions) And your first question comes from the line of Andrew Tsai with Jefferies.

This is AJ for Andrew. First of all, congrats on all the progress, especially Fanapt approval in bipolar. And I guess, firstly for Fanapt, what kind of expenses will you need to launch this effectively? And how are you thinking about the peak sales potential ahead of IP expiry?

I will let Kevin address some of the parts of this question. But what we do know about this class of drugs is that bipolar I disorder, it presents a significantly larger opportunity than the one in schizophrenia, for which Fanapt was approved up to now. We also know that despite the availability of a number of atypical antipsychotics, there remains a significant unmet medical need where patients are cycling very frequently from one drug to another seeking control of their symptoms.

And in terms of the marketing, we know that this class of drugs is significantly sensitive to promotion and increased awareness among prescribers. So it is very important to make significant but efficient investments before you drive growth. But Kevin.

Yes. And AJ, thanks for the question. Obviously, we haven't provided guidance at this time, so -- but I'll give you some kind of general direction on where we see things going. So as a reminder, Fanapt already was approved and in the market for schizophrenia for quite some time. We had established commercial infrastructure and personnel. But that being said, we are in the process of expanding our sales force to meet the opportunity this bipolar I disorder indication presents as well as support it with the appropriate marketing and awareness programs. Some of those activities and increased spend is reflected in the second -- or the first quarter financial results. And some of it will be expected to be seen progressing throughout this year, beginning with the second quarter.

Got it. Okay. So maybe shifting gears a little bit. So for PONVORY, how have sales trended to your expectations? And where could they go in 2024?

Yes. So just to set it up and Kevin can give you more detail. This is the first quarter that we are booking sales without, of course, having any marketing activity. There was no marketing activity from J&J or Vanda because we're in the midst of this transition. Kevin, go ahead.

Yes. And AJ, on that side, as a bit of a reminder on the background here, J&J had kind of decrease their commercial activities towards the end of 2022, beginning of 2023 around PONVORY such that there was limited commercial support for the product during 2023. And so the audited financial statements for PONVORY that we filed subsequent to the acquisition, the annualized run rate of PONVORY was in the neighborhood of $30 million a year, which is in line also with the portion of revenue that we recognized in the fourth quarter.

And so the approximately $7 million of revenue that was recognized in the first quarter as we're transitioning the product in-house. And as Mihaels mentioned, towards the third quarter, beginning our commercial activities in full force is essentially flat with what we saw kind of the trajectory being last year with J&J not providing any support. So it's essentially maintaining at where it was, and we'll look to, as we initiate activities resume patients being added in revenue growth in future periods.

Okay. Got it. So is it fair to, I guess, expect potentially a sales inflection in Q3? Or when will those marketing activities really start?

Yes. So those activities, AJ, will start. Some of them have already commenced some of the commercial support activities, and some of them will commence in full effect in the beginning of the third quarter, such that I would expect to see sales inflection in the back half of the year, but it may take a quarter or so to see the results of the activities in the third quarter.

Okay. Understood. And then maybe on tradipitant for gastroparesis. Can you speak to how your FDA discussions have been going? Or what's your level of confidence here in an approval? And how would you expect label to look?

Yes. I would say the FDA is very good, not to give you a signal on this or any other product. However, I would admit that the interactions are continuous and very significant, with a very large number of requests for additional information that we're responding to. So I would characterize it that the review team is very engaged.

Okay. That's very helpful. And then last question here, I just -- I have to ask, so on the shareholder activism front. Are you able to summarize your communications to date? And how do you think you can unlock more value as a stand-alone company?

Yes. The back end of your question, I think what we discussed today presents a good summary of the value proposition, a company with three commercial assets, a significant revenue stream, financially are very prudent of how we make investments and a very deep pipeline with very late-stage assets, some of them that can address very quickly multibillion market opportunities.

And in terms of the unsolicited offer, as we've expressed already, the Vanda Board of Directors considers any and all offers, with our independent financial and legal advisers. And in this case, as we said earlier, we had concluded that the offer presented was not in the best interest of the company and its shareholders as it significantly undervalued the company. And as you know, there was a second or an additional revised offer publicly communicated yesterday. And as I expressed a minute ago, this is, again, an offer that the Board will carefully evaluate with our financial and legal advisers, and that is all we can say for now.

Understood. And congrats again on all the good work.

Thank you very much, AJ.

That concludes our Q&A session. I will now turn the conference back over to Vanda's management for closing remarks.

Thank you, much -- everyone, for joining us on this first quarter call. And we look forward to talking to you in future periods.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.