Vanda Pharmaceuticals Inc (VNDA) 2025 Q2 法說會逐字稿

Good day, everyone, and thank you for standing by. My name is Argy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2025 Vanda Pharmaceuticals Inc.'s 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.

Great. Thank you, Argy. Good morning and thank you for joining us to discuss Vanda Pharmaceuticals' second-quarter 2025 performance. Our second-quarter 2025 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.

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, Mihael 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. Good morning, everyone.

During the second quarter, we continued the expansion of the Fanapt sales force and also continued our broad awareness campaign. Fanapt revenue increased by 27% compared to the same period in the prior year, driven by the launch of the bipolar I indication. Fanapt is now promoted in the US across all 50 states with a dedicated sales force of approximately 300 representatives.

With the expansion of the sales force during the second quarter, we observed a significant increase in activity with a total number of calls going by more than 40% as compared to the first quarter of 2025 and growing by over 400% compared to the second quarter of 2024. Since the bipolar launch, demand is measured by total prescriptions, TRX; new prescriptions, NRX; and new-to-brand prescriptions, NBRX, with new highs in the second quarter.

The commercialization of Fanapt is also supported by a broad speakers' program operating across the country that educates prescribers on the profile of Fanapt and how to use it. We're excited by the progress our organization has made as we continue to support the commercialization of Fanapt, aiming for further growth in the coming periods.

Total revenue from our three commercial-branded products, Fanapt, HETLIOZ, and PONVORY, reached $102.6 million in the first six months of 2025. HETLIOZ continues to be the market share leader despite the availability of three generic products, a testament to the brand loyalty of our patient customers over the last 11 years.

We continue to build out and train our dedicated PONVORY salesforce team, addressing prescribers for multiple sclerosis. In the last quarter, we saw an increase in new prescriptions as we intensify our consumer and prescriber awareness programs. Key regulatory clinical updates.

First, on Bysanti. The NDA for Bysanti for the acute treatment of bipolar one disorder and the treatment of schizophrenia was accepted for filing by the FDA with a PDUFA target action date of February 21, 2026. The exclusivity for Bysanti, including pending patent applications, could extend into the 2040s. Bysanti is a new chemical entity which was recently identified as an active metabolite of Iloperidone.

Vanda discovered that milsaperidone, that's the generic name of Bysanti, when administered orally, quickly interconverts to iloperidone. In case that milsaperidone and iloperidone have been shown to be bioequivalent at both low and high doses, administered both in single and multiple dose studies.

The results of these clinical studies were presented in late May at the 2025 American Society of Clinical Psychopharmacology Annual Meeting in Scottsdale, Arizona.

The Bysanti Phase III clinical study for use as a daily adjunctive treatment for major depressive disorder is ongoing. The results of that study are expected in 2026.

On Tradipitant, the new drug application for Tradipitant for the treatment of motion sickness was accepted for filing by the FDA with a PDUFA target action date of December 30, 2025. In the fourth quarter of 2024, Vanda initiated a clinical trial to study tradipitant in the prevention of vomiting induced by GLP-1 analog, Wegovy, that is semaglutide. The results are expected soon in the third quarter of 2025. On Fanapt, first schizophrenia, a Phase III program for the long-acting injectable LAI formulation of Fanapt in the treatment of schizophrenia in relapse prevention is ongoing.

On hypertension, Vanda initiated now a study of Fanapt long-acting injectable as a once-a-month injectable for uncontrolled hypertension and plans to begin enrolling patients soon. Imsidolimab, a BLA for imsidolimab in the treatment of the rare orphan disorder, generalized pustular psoriasis, GPP, is expected to be submitted to the FDA this year, in 2025.

PONVORY, an investigational new drug applications for PONVORY in the treatment of psoriasis and ulcerative colitis were accepted by the FDA in the fourth quarter of 2024, and Vanda has initiated the psoriasis study and plans to initiate a study in ulcerative colitis by early 2026.

On the early-stage programs, VQW-765, the alpha-7-nicotinic acetylcholine receptor partial agonist is currently in clinical development for the treatment of acute performance anxiety in social situations. Vanda has initiated a Phase III program and plans to begin enrolling patients soon.

The IND application for VCA-894A for the treatment Charcot-Marie-Tooth Disease, axonal, type 2S, an inherited peripheral neuropathy, for which there is no available treatment, was accepted by the FDA in 2024. VCA-894A was granted an Orphan Drug designation for the same indication in 2023. The Phase I clinical study for VCA-894A enrolled the patient with a specific mutation, and this patient has already received several doses of VCA-894A.

Finally, as part of our public policy contributions to drug development, Vanda responded to an HHS request for information. On May 14, 2025, the U.S. Department of Health and Human Services, HHS, issued a request for information entitled, "Ensuring Lawful Regulation and Efficient Innovation to Make America Healthy Again".

On July 14, 2025, Vanda submitted a public response to this RFI. Vanda's response proposed that FDA repeal unlawful regulations that delay or burden the drug approval process, and that FDA repeal 1990s-era guidance mandating lethal animal testing.

Our full response with the exhibit is available on the investors' page of our website, www.vandapharma.com, and the government website, regulations.com.

With this, I'll turn it back to Kevin. Kevin?

Great. Thanks, Mihael. I will begin by summarizing our financial results for the first six months of 2025 before turning to discuss the second quarter of 2025.

Financial revenues for the first six months of 2025 were $102.6 million, a 5% increase compared to $97.9 million for the same period in 2024. The increase was primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch.

Fanapt net product sales were $52.8 million for the first six months of 2025, a 21% increase compared to $43.7 million in the same period in 2024. This increase to net product sales relative to the first six months of 2024 was attributable to an increase in volume.

Turning to HETLIOZ, HETLIOZ net product sales were $37.1 million for the first six months of 2025, a 4% decrease compared to $38.8 million in the same period in 2024. The decrease to net product sales relative to the first six months of 2024 was attributable to a decrease in volume partially offset by an increase in price net of deduction.

Of note, through the second quarter of 2025, HETLIOZ continues to retain the majority of market share despite generic competition for over two and a half years.

HETLIOZ net product sales continue to be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. Going forward, HETLIOZ net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers or may be variable depending on when specialty pharmacy customers need to purchase again.

Further, HETLIOZ net product sales may decline in future periods potentially significantly related to continued generic competition in the US. Additionally, the company constrained HETLIOZ net product sales for the first and second quarter of 2025 and for the years ended December 31, 2024 and 2023 to an amount not probable of significant revenue reversal.

As a result, HETLIOZ net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration related to inventory stocking by specialty pharmacy customers are resolved.

Turning now to PONVORY, PONVORY net product sales were $12.7 million for the first six months of 2025, an 18% decrease compared to $15.4 million in the same period of 2024. The decrease in net product sales relative to the first six months of 2024 was attributable to a decrease in volume and a decrease in price net of deductions.

For the first six months of 2025, Vanda recorded a net loss of $56.7 million compared to a net loss of $8.7 million for the same period in 2024. The net loss for the first six months of 2025 included an income tax benefit of $15.6 million as compared to an income tax benefit of $1.5 million for the same period in 2024.

Operating expenses for the first six months of 2025 were $182.2 million compared to $117.3 million for the same period in 2024. The $64.8 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, and higher R&D expenses primarily related to the exclusive global license agreement with Anaptys for the development and commercialization of imsidolimab, which was entered into during the first quarter of 2025.

During 2024 and 2025, we commenced a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs. A direct-to-consumer campaign that started in the first quarter of 2025 continued in the second quarter of 2025, elevating brand awareness of the company and the key products, Fanapt and PONVORY.

SG&A expenses may increase in future periods as a result of the ongoing commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis.

Vanda's cash, cash equivalents and marketable securities, referred to as cash, as of June 30, 2025, was $325.6 million, representing a decrease of $49.1 million compared to December 31, 2024, and a decrease of $15.4 million compared to March 31, 2025. The change in cash during the second quarter of 2025, as compared to the first quarter of 2025, was driven by the net loss in the second quarter of 2025, partially offset by the favorable impact of the timing of cash in from customers for revenue and related payments of rebates to payers, as well as the timing of cash due to third parties for services related to operating expenses.

Turning now to our quarterly results. Total revenues for the second quarter of 2025 were $52.6 million, a 4% increase compared to $50.5 million for the second quarter of 2024. The increase, as compared to the second quarter of 2024, was primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch.

Let me now break this down by product. Fanapt net product sales were $29.3 million for the second quarter of 2025, a 27% increase compared to $23.2 million in the second quarter of 2024, and a 24% increase compared to $23.5 million in the first quarter of 2025.

Fanapt total prescriptions in the second quarter of 2025 increased by approximately 24% compared to the second quarter of 2024, and 13% compared to the first quarter of 2025. The increase in Fanapt revenue between the second quarter of 2025 and the second quarter of 2024 was primarily attributable to an increase in volume, which was driven by increased total prescriptions, or TRXs, as reported by IQVIA Xponent.

The increase in Fanapt revenue between the second quarter of 2025 and the first quarter of 2025 was attributable to an increase in volume, primarily driven by increased total prescription demand and increased inventory levels at wholesalers in line with historic levels.

Fanapt new patient starts in the second quarter of 2025, as reflected by new-to-brand prescriptions, or NBRX, increased by over 200% compared to the second quarter of 2024, and by over 50% compared to the first quarter of 2025.

Turning now to HETLIOZ. Hetlioz net product sales were $16.2 million for the second quarter of 2025, a 13% decrease compared to $18.7 million in the second quarter of 2024. The decrease in net product sales relative to the second quarter of 2024 was primarily attributable to a decrease in volume and price net of deductions.

And finally, turning to PONVORY. PONVORY net product sales were $7.1 million for the second quarter of 2025, a decrease of 18% compared to $8.6 million in the second quarter of 2024, and an increase of 26% compared to $5.6 million in the first quarter of 2025.

The decrease in net product sales as compared to the second quarter of 2024 was attributable to a decrease in price net of deductions, partially offset by higher volume. The increase in net product sales as compared to the first quarter of 2025 was attributable to an increase in volume sold, a portion of which was driven by increased underlying patient demand but was also impacted by increased specialty pharmacy and specialty distributor inventory levels above historic levels.

As a reminder, we completed the acquisition of the US and Canadian rights to PONVORY in December of 2023 and initiated the commercial launch of PONVORY in the third quarter of 2024. As such, this represents the third full quarter of PONVORY revenue recognition since the initiation of commercial launch activities and significant progress in diversifying our product mix with innovative and value-generating products.

Of note, an amount of variable consideration related to PONVORY net product sales is subject to dispute, of which approximately $3 million was recognized for the three months ended December 31, 2024.

For the second quarter of 2025, Vanda recorded a net loss of $27.2 million compared to a net loss of $4.5 million for the second quarter of 2024. From an income tax perspective, the net loss for the second quarter of 2025 included an income tax benefit of $7.7 million as compared to an income tax benefit of $1 million for the second quarter of 2024.

Of note on the tax side, the company assesses the need for a valuation allowance against its deferred tax asset each quarter through the review of all available positive and negative evidence. The company generated a pre-tax loss for the quarter ended June 30, 2025.

If the company continues to generate pre-tax losses and or if the company's projections indicate pre-tax losses in future periods, the conclusion about the appropriateness of the valuation allowance could change in the future. An increase in the valuation allowance would result in non-cash income tax expense during the period of change.

Operating expenses in the second quarter of 2025 were $91.1 million compared to $60.6 million in the second quarter of 2024. The $30.5 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY for multiple sclerosis, and higher R&D expenses.

During 2024 and 2025, we commenced a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, including expansions of our sales force and the development of prescriber awareness and comprehensive marketing programs. A direct-to-consumer campaign that started in the first quarter of 2025 continued in the second quarter of 2025, elevating brand awareness of the company and the key products, Fanapt and PONVORY.

SG&A expenses may continue to increase in future periods as a result of the continued ongoing commercial efforts around Fanapt in bipolar disorder and PONVORY in multiple sclerosis.

With regards to the launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, as I mentioned, the launches were initiated in 2024 and we expect to continue the buildout of our full commercial infrastructure with the impact of these commercial efforts expected to contribute to revenue growth in 2025 and beyond.

We have already seen significant growth in our commercial activities. Several lead indicators suggest a strong market response to our commercial launch of Fanapt for bipolar I disorder, including new patient starts as reflected by NBRX, increasing by more than 200% in the second quarter of 2025 as compared to the second quarter of 2024.

In the second quarter of 2025, as compared to the second quarter of 2024, total prescriptions increased by approximately 24%. Of particular note, Fanapt was one of the fastest growing atypical antipsychotics in the market through the first half of 2025 based on prescription metrics.

Our Fanapt sales force continues to expand. As of the end of the second quarter of 2024, our sales force numbered approximately 100 representatives and currently, we now have approximately 300 representatives. These expansions have allowed us to significantly increase our reach and frequency with prescribers.

To that end, face-to-face calls in the second quarter of 2025 were more than 40% higher than face-to-face calls in the first quarter of 2025. And face-to-face calls in the second quarter of 2025 were more than 400% higher than the face-to-face calls in the second quarter of 2024.

We have now completed over 1,400 Fanapt prescriber awareness programs and the number of programs completed in the second quarter of 2025 was 10% higher than the number of programs completed in the first quarter of 2025.

In addition to our Fanapt sales force, we have established a specialty sales force to market PONVORY to neurology prescribers around the country. We are currently in the process of growing the sales force to approximately 50 representatives in the third quarter of 2025. Of particular note, PONVORY new patient prescriptions in the second quarter of 2025 grew to a record high since the initiation of Vanda's commercial launch.

Before turning to our financial guidance, I would like to remind folks that with Fanapt, HETLIOZ, and PONVORY already commercially available; the tradipitant NDA for motion sickness accepted for filing by the FDA, the milsaperidone, or hopefully to be known under the brand name Bysanti, NDA for bipolar I disorder and schizophrenia accepted for filing by the FDA; and a BLA for imsidolimab expected to be submitted later this year, Vanda could have six products commercially available in 2026.

Turning now to our financial guidance, Vanda is reiterating its 2025 financial guidance and expects to achieve the following financial objectives in 2025: Total revenue from Fanapt, HETLIOZ, and PONVORY of between $210 million and $250 million. Year-end 2025 cash of $280 million to $320 million. This revenue range would imply revenue growth in 2025 of between 6% and 26% as compared to full year 2024 revenue.

Of note related to revenue for the remainder of 2025, with Fanapt and PONVORY both in the early stages of commercial launch, Fanapt for bipolar I disorder and PONVORY for multiple sclerosis, revenue is expected to be back weighted as these products continue to grow.

Our expectation is that Fanapt will grow on a quarterly basis with the trajectory accelerating as we move later into the year and exit into next year. This growth will potentially be offset by variability and or a decline in HETLIOZ revenue.

If the conversion of our investments into Fanapt revenue takes a little longer and or we see a larger decline in HETLIOZ revenue, we could end the year at the lower end of the revenue guidance range. The year-end 2025 cash guidance reflects the impact of the conditional investments that Vanda is currently making to facilitate future revenue growth, both in the form of R&D investments and potentially outsized commercial investments, which could continue to increase depending on the success of these commercial strategies.

Again, if we see the conversion of our investments into Fanapt revenue taking a little longer and or we see a larger decline in HETLIOZ revenue than expected, we could end the year at or below the lower end of our cash guidance range.

The potential market opportunity for our growing psychiatry portfolio is significant and necessitates the increased investments we are currently making to enhance the commercial profile of Fanapt, obtain approval for Bysanti and Fanapt LAI, and bring them to market and expand the Bysanti label, if approved, to include major depressive disorder.

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

Thank you very much, Kevin. At this point, we will be happy to answer your questions.

Thank you, gentlemen. (Operator Instructions) Ram Selvaraju, H.C. Wainwright.

Thank you very much for taking my questions and congratulations on all the progress made on multiple fronts so far this year.

I wanted to first of all ask about the outlook for Bysanti commercialization, assuming an on-time approval next year. How quickly do you expect to be able to put all of the commercial preparations in place to launch this product and what kind of sales and marketing infrastructure expansion do you think would be necessary to support the launch, assuming, again, an on-time approval?

Thank you very much for the question, Ram. There are two key items for the launch of Bysanti. One is commercial product preparedness and we believe that we will be ready by the end of the second quarter. So if the drug is approved by the end of February, we would be ready to be able to launch.

However, the other one is also a strategic consideration of timing, given where Fanapt is in its own lifecycle. So we're going to have to talk about that in future quarters as we're getting closer to that date.

On your question of what else is needed, in fact, the investments we have been making and continue to make in the Fanapt sales force and awareness campaigns are all immediately transferable to Bysanti. We expect, upon launch of Bysanti, very immediate additional commercial operation spend needed. But again, it's hard to predict right now, but it will be a product switch.

Thank you very much. And then the second question is related to PONVORY. There are a couple of things here.

Firstly, Kevin, you mentioned in your prepared remarks the existence of a dispute. And I just wanted to understand better what the nature of this dispute is and what the revenue amount related to PONVORY is that could conceivably be affected by or be the subject of this dispute.

And then secondly, with respect to kind of where things are with PONVORY on the multiple sclerosis front, I was just wondering what your expectations are at this point for PONVORY revenues related to the on-label indication and if you anticipate meaningful acceleration of revenue growth for that product in the second half of 2025 based on the efforts made so far to position it optimally.

Yep. And Mihael, I can take that one and you can chime in. So on the first question, Ram, as you might expect, given the nature of a dispute, can't comment extensively on dispute and or litigation matters.

But based on what we've disclosed, it relates to a gross to net item. And in terms of the quantification of it, what we've communicated is there's about $3 million, which is the same amount we disclosed last quarter, that was included in revenue in 2024 where we have received the proceeds, but a gross to net adjustment is in dispute.

On the second question around the expectations for PONVORY moving forward, as we previously communicated, the PONVORY in multiple sclerosis efforts, we believe there's a significant commercial opportunity there.

But it is an opportunity that takes time to both build the relationships with the neurology prescribers in the space, generate kind of the trust both in the product and in the company. And then once prescription activity is generated for it to work it through the hub reimbursement process. And so all of those things have been initiated, and we continue to see progress on that front with the commercial launch activities being initiated in the back half of last year.

And with the second quarter having the highest number of new patient prescriptions that we've seen since bringing the product over the wall to Vanda. So very encouraged by kind of the uptake of the product in the market and the trends that we're seeing, but I expect the growth to be more kind of steady rather than a rapid acceleration.

And just very quickly -- sorry, go ahead.

Yes. Just to add a little more color. As Kevin explained earlier, we commercially launched PONVORY in the third quarter with a small sales force of about 20 to 30 people. And there are a lot of learnings.

And one of them is that the number of calls that are possible daily is small, given the format of these prescriber practices, as far as academics and centers, et cetera So we're in the midst of doing a reset in the sales force and further bolster the numbers with an emphasis to be able to address not only more prescribers, but with higher frequency.

And the end results are very encouraging. As Kevin highlighted, we saw a significant increase in new prescriptions coming in. However, there is an add, given the specialty category of the drug between a script and a dual script.

And then just very, very quickly, thank you very much for that information. I wanted to ask about tradipitant and whether you anticipate, between now and the end of this year, progress on the regulatory front with that candidate, and what you anticipate might potentially be how the scenario unfolds for that product candidate, and if you have a better line on when or if it might ultimately make it to the market in the US.

So two part answer on this. Tradipitant, first of all, has been developed for the indication gastroparesis, which you all know that they did not approve last September. And we since have gone through the option of requesting a hearing, and that hearing has not been granted yet. In fact, CDER, the review division of the FDA, is advising the commission not to have a hearing.

And of course, we have explained that history shows that the FDA has avoided hearings for about the last 30 years. So we think it is important to have these hearings. Well, first of all, that's what the law says and if we were to have a hearing with an independent group of people, as signed by the law, presided by the commissioner, we think we'll succeed in that indication.

Now on tradipitant motion sickness, the review is going on. We understand that the division, the review division, does not have any issues with the data and that they will continue to review the adequacy of the preclinical and clinical safety data.

To remind you that there is a very large packet of thousands of patients treated, many of them up to three months. And the preclinical package is extensively, but it is multidimensional with thousands of animals, rats, dogs, with no evidence of any issue. And also, first in the industry, we have submitted a comprehensive micro physiological system evaluation package with organoid micro spheroids, and also a four organ system. So all of these evaluations have provided no safety issues that would be of any concern.

So having said all that, to answer your question, when would tradipitant be on the market, it could be on the market as early as January 1, 2026, if it is approved on December 30. We're keen to see tradipitant at its full potential on the market, especially and first for the benefit of patients.

And I remind you, Ram, and everyone that many patients experienced clinically significant effects affecting their quality of life, and dozens of them, over 100 now, have requested expanded access. And for the majority of them, the FDA has already granted expanded access.

Our first patient has been on the drug for almost five years, and quite a big number of them have been on the drug for over a year. And we share all the stories daily, which is a huge encouragement for us to keep trying to get this product on the market.

Olivia Brayer, Cantor Fitzgerald.

On Bysanti, are you able to characterize how your interactions with the agency are going so far with the review? And as we think about the commercial launch next year, how should we be thinking about margins and Medicaid impact for that product? Because assuming a similar WAC, I know we've talked about this in the past, but I'd imagine you'd start to see more upside to revenues just by capturing a similar number of patients that are already on Fanapt. So that's my first question.

And then as a follow-up on Bysanti, just on MDD, can you remind us what the agency's stance is on running one Phase III study versus needing two?

Thank you for the questions. I'll take the Bysanti regulatory and clinical, and I will let Kevin walk through the potential revenue benefit on the Bysanti launch.

First of all, on regulatory, the review is ongoing. We have not received any hint of any major issues, just ordinary questions back and forth. And I remind everyone that the core clinical data come from the two bioequivalence pharmacokinetic studies that we have already published. And these studies were extensively discussed with the FDA, both at the design phase, but also the results of them in the course of the pre-NDA preparation, the pre-NDA meeting. So we're encouraged that the review will continue to be going well, and that we'll have a good outcome there.

You asked about the major depression FDA stance on one study. In general, the FDA's position has been that one study could be adequate, but drugs that are for the first time on the market, they prefer to see two studies.

Now, we have a precedent here that the bipolar I indication that was just approved last year was based on one study. And I know there is a lot of questioning, especially on the investor and analyst side, whether one is enough or two are needed. And clearly, the case of the bipolar is a good example that the FDA will approve for an indication, depending on the strength of the data, but also the size of the study.

On the MDD study, this is a large pivotal study, and if successful without any guesses or uncertainties i'm sure that there's a very good chance that it could be adequate for approval.

I'll let Kevin answer the revenue question.

Yep. Thanks, Mihael. Thanks, Olivia, for the question.

So maybe just for a bit of background before answering it, when you look at the IQVIA data on payer mix for both Fanapt and the broader atypical antipsychotic market, there's three large payer segments between Medicaid, Medicare, and commercial, with Medicaid generally being about 30% to 40% of the unit volume.

And then for Medicaid, there is a statutory rebate that every product owes as a rebate as part of participating in Medicaid that begins at 23.1%, but can increase beyond that potentially significantly, depending on certain factors, including price increases above inflation.

Now, specifically on Fanapt and Bysanti, given that Fanapt has been on the market for about 15 years, and the inflation during that period compared to price increases taken both by Vanda but also by Novartis in the earlier days of the product, our price increases relative to that calculation results in essentially 100% rebate on our Medicaid business.

So for Fanapt, we're about 30% to 40% of our business is Medicaid. Given that Medicaid rebate, essentially that contributes zero net revenue. With the Bysanti approval, if we just assume for hypothetical a similar WAC and a similar payer mix, that 30% to 40% of revenue would be given a reset and would be subject to the 23.1% statutory rebate, but no additional rebate at launch.

And so as you can see, that could result in a significant gross to net favorability between Fanapt and Bysanti, where we've typically spoken about the Fanapt gross net being in the neighborhood of 50%, and Bysanti could be meaningfully below that potentially about half that number at 25% to 30%.

So hopefully, Olivia, that helps characterize just given the significant price favorability that we could see on a Bysanti net revenue calculation compared to the current Fanapt net revenue calculation.

(Operator Instructions) Andrew Tsai, Jefferies.

Good morning thanks, appreciate the update. For my first question on Bysanti, my understanding is you filed a 505(b)(1) for the NDA as opposed to 505(b)(2). And so can you just remind us the justification of doing that? I would have thought bioequivalence is more related to 505(b)(2), and what exactly is included in your current data package? Thanks.

Thank you, Andrew, for the question. So the justification is because the FDA asked us to do that. We were also a little confused whether it was a (b)(2) or a (b)(1). And we asked them a couple of years ago, what would that be? The rationale they gave is because it is a new molecule.

So it is not the bioequivalence that drives. So the way it works is that it is a new molecule. And the question is, what evidence do you need to get this molecule approved? And in this case, the evidence that was needed was an evidence of bioequivalence. So that's why it is a (b)(1).

And what is included are the studies we discussed, the pharmacokinetic bioequivalence studies, multiple doses, multiple doses, both at a low dose and the highest dose to show bioequivalence and infer linearity. And these are studies the FDA had requested and agreed. And the pre-clinical and clinical file is by reference to the NDA. And it has a unique CMC section for the new tablets. All these are at the strengths, which are the same with Fanapt. But of course, it is a new chemical molecule. And it is a new manufacturing package.

I see. Thank you. And secondly, for milsaperidone, Bysanti again, Phase III MDD, the results are expected in 2026 as an adjunctive therapy. So what kind of efficacy delta versus placebo do you want to see to make you feel like you have a very compelling product over the other antipsychotics?

The protocol does not specify a specific value. It is a typical primary endpoint of statistical superiority of placebo. And it is powered at the same power that all other risk types have.

Now, you mentioned competitive. So what happens in this category is there's a lot of variability in the magnitude of, as you know, within even the same drug from study to study. That is the reason that these MDD studies are not that straightforward to do with variable placebo effect.

So the determination of competitiveness is not done on the magnitude of change as compared to placebo, but it is rather on the profile and tolerability of the drug. Having said that, the minuscule effect, it was very variable from study to study, there are questions of the efficacy overall.

So the simple question is, those results will tell us superiority over placebo. And of course, we're going to get to the magnitude of that response. But until we see that, we're not going to be able to discuss whether it's going to be comparable or not.

Understood. And then my last question to the commercial launches of Fanapt and PONVORY, you started the DTC campaign in Q1 and Q2. Can you remind us when that campaign ends or those campaigns end? And once that ends, how do you expect sales to change from there?

Correct. The direct-to-consumer campaigns, which include company brand awareness and PONVORY and Fanapt, are ongoing. And we will continue to make investments in that in support of the commercial program.

If you're thinking, campaigns don't go on forever, they have a plateau effect of response We're not there yet. And we're continuing to evaluate daily the effectiveness of these campaigns.

Great. Congrats on the execution.

That ends our Q&A session, and we appreciate your participation. I will now turn the call back over to Vanda Management. Please go ahead.

Thank you very much, everybody, for participating on this call. And we look forward to seeing you in future calls. Thank you very much.

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