Vanda Pharmaceuticals Inc (VNDA) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Vanda Pharmaceuticals Inc. Second Quarter 2021 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Kevin Moran, Vanda's Chief Financial Officer. Please go ahead.

Thank you, Joelle. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' Second Quarter 2021 Performance. Our second quarter 2021 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. Mihales Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board. Following my introductory remarks, Mihales will update you on our ongoing activities. I will then comment on our financial results before opening 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 annual report on Form 10-K for the fiscal year ended December 31, 2020, 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 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. Mihales Polymeropoulos.

Thank you very much, Kevin. Good afternoon, everyone, and thank you for joining us. We are excited to share our second quarter 2021 performance and our upcoming clinical development milestones. 2021 is poised to be an exciting year for Vanda, with several late-stage clinical programs that have the potential for significant short-term value creation as well as long-term advancement of the growth in revenue. In addition to our ongoing commercial launch of HETLIOZ for Smith-Magenis Syndrome, we are looking forward to the completion of our Phase III gastroparesis study and reporting the top line results by the end of the year.

On commercial performance, we see continued growth year-over-year. In the second quarter of 2021, total net product revenue for HETLIOZ and Fanapt were $67.9 million, a 9% increase compared to the second quarter of 2020. Net product revenue for HETLIOZ saw a 7% increase in the second quarter of 2021 compared to the second quarter of 2020, and net product revenue for Fanapt saw a 13% increase compared to the second quarter of 2020.

HETLIOZ demand, measured by prescriptions received, continues to far exceed prescriptions filled. We are keen to improve access to patients and to this end, we have engaged with a number of payers to discuss ways to improve patient access.

Now on the Smith-Magenis Syndrome, nighttime sleep disturbances approval and launch. In December 2020, the FDA approved the oral cap formulation of HETLIOZ and the new liquid formulation, HETLIOZ LQ, for the treatment of adults and children, respectively, with nighttime sleep disturbances in Smith-Magenis Syndrome.

While we are still in the early stages of the commercial launch of the HETLIOZ capsule and HETLIOZ LQ liquid formulations, we are encouraged by the early results. We continue to connect with SMS families who are at various stages of discussing the treatment option with their physicians.

We are now implementing the second phase of our commercial launch, which is intended to reach a larger number of diagnosed and undiagnosed individuals in a similar fashion to our Non-24 efforts. We plan to reach patients and doctors with a combination of direct-to-consumer advertising and our specialized and personal salesforce. While it is difficult at this time to estimate the growth trajectory for the adoption of HETLIOZ by SMS patients, we are excited about the emerging opportunity as we continue to deploy a number of strategies to reach and inform the community of approximately 15,000 SMS patients in the U.S.

Given the genetic testing available for SMS, a significant number of patients are already diagnosed, and these are expected to be the first to come to treatment. It is estimated that between 80% to 100% of patients with SMS suffer from nighttime sleep disturbances for which HETLIOZ is the only approved treatment. We expect that the number of SMS patients on treatment with HETLIOZ will continue to increase in the second half of the year and that greater awareness will lead to adoption.

The paper describing our study in Smith-Magenis Syndrome, the largest of its kind, was published this week in the journal, "Genetics in Medicine". This study, the largest ever conducted in patients with SMS, enrolled genetically confirmed patients with SMS in a double-blind, 2 period crossover study and demonstrated favorable effects of tasimelteon over placebo in a number of primary and secondary endpoints, including sleep quality and sleep duration measures. The results presented in this paper are consistent with the putative mechanism of action of tasimelteon as a circadian regulator.

As we are resuming activity in most of our clinical programs, I would like to highlight our progress in some of these key programs.

First, the Phase III study of tradipitant in gastroparesis nearing completion with 95% of the target of 200 patients already enrolled. We expect results from this study by the end of the year. Following the completion of the study, we plan to meet with the FDA for a pre-NDA meeting and discuss our upcoming application. As we have previously communicated, we believe the current Phase III study can be the last efficacy study required for NDA filing. As a reminder, the ongoing Phase III study aims to enroll gastroparesis patients with either idiopathic or diabetic etiology. The study is a 12-week double-blind placebo-controlled study, which will measure the effect of tradipitant in improving the symptoms of gastroparesis. This Phase III study follows the successful completion of a four-week Phase II randomized study in the same population. The results of that study were published in the journal Gastroenterology in January of 2021.

Additionally, more than a dozen study participants have requested to continue treatment with tradipitant post completion of the clinical study through an expanded access program. We have worked in collaboration with these patients, their doctors and the FDA to ensure that they can receive further treatment with tradipitant.

Gastroparesis is a severe unmet medical condition with only one approved treatment option in the last 40 years. Our estimates for the size of the commercial opportunity for a gastroparesis therapy are based on several key assumptions. One, the estimated prevalence of gastroparesis in the U.S. is about 6 million patients, the majority of whom remain undiagnosed. Second, at present, there are more than 600,000 patients estimated to have a confirmed diagnosis of gastroparesis. And finally, based on IQVIA data, there are 300,000 prescriptions of oral metoclopramide per month in the U.S. Given the highly limited treatment options and the early response as we witness the recruitment through direct-to-consumer advertising tradipitant in gastroparesis can achieve a significant market share, which we believe will create an opportunity for Vanda to address an important unmet medical need and represents a potentially transformational commercial opportunity for the company.

Going into the second half of the year, the completion of the gastroparesis study represents our most imminent and significant clinical milestone, however, there are a number of additional programs that present near-term value creation that I will briefly discuss.

First, on HETLIOZ. We have previously discussed our clinical programs with HETLIOZ with studies in delayed sleep phase disorder, or DSPD, Autism Spectrum Disorder, and pediatric non-24 hour sleep-wake disorder, all of which are ongoing. The most advanced of these programs is in DSPD, which represents what we believe to be an important value creation opportunity for Vanda with a high probability of technical success.

DSPD is likely the most prevalent circadian sleep disorder affecting approximately 1% of the population and 7-10% of patients with disorders of initiating or maintaining sleep. The prevalence of delayed sleep phase disorder is highest in adolescents and young adults with rates estimated between 3.3% and 4.6% and some as high as 7%.

We believe that HETLIOZ could have a significant benefit over classic insomnia drugs to treat this condition by addressing the underlying cause and aligning the internal clock and therefore, improving sleep at the appropriate time. Classic insomnia drugs provide a small sleep benefit with a number of side effects, while not addressing the underlying issue of a misaligned circadian sleep clock.

The DSPD study has started randomizing patients in a number of clinical sites across the United States, and we will be able to provide greater detail on time lines as we understand the rate of recruitment over the next few months.

An observational open-label treatment study of the effects of HETLIOZ in patients with Autism Spectrum Disorder and sleep disorders is scheduled to begin imminently. Sleep disruption is commonly seen in people with autism and is associated with increased burden of disease and impact on functioning. There is currently no FDA-approved treatment for sleep disturbance in autism.

I will now turn to Fanapt. The ongoing clinical development programs for Fanapt include bipolar disorder, Parkinson's disease psychosis and the long-acting injectable formulation in schizophrenia are also in various stages of preparation and execution.

The four-week Phase III study of Bipolar I disorder with iloperidone includes sites in both the United States and Europe. The study has quickly started to randomize patients in the U.S., and we plan to begin randomizing patients in Europe later this summer.

On Parkinson's disease psychosis, we are planning two studies. A Phase II open-label study of two cohorts followed by a larger randomized, placebo-controlled Phase III study. Both studies are designed to evaluate the efficacy and durability of Fanapt in the treatment of psychosis in Parkinson's disease. 20% to 40% of people with Parkinson's disease are reported to experience varying degrees of psychosis. There are almost a million people in the U.S. with Parkinson's disease. With only one approved treatment for Parkinson's disease psychosis and the significant burden the condition has on patients and their caregivers, this remains an important unmet medical need. The Phase II, two-cohort open label study of 24 patients has received approval to proceed by the FDA and is expected to commence soon.

Studies with a long-acting injectable formulation of Fanapt are ongoing. We are expected to lead into a clinical efficacy study in schizophrenia in 2022. In addition, a clinical pharmacology study of the active metabolite P88 of iloperidone is ongoing as well.

On tradipitant and beyond the gastroparesis program, the ODYSSEY study for tradipitant in patients with COVID-19 pneumonia is ongoing while the tradipitant motion sickness study is on hold due to pandemic-related travel restrictions.

VQW-765 is a [performance anxiety study with the] (added by the Company after the call) alpha 7 nicotinic agonist which is currently recruiting patients in a program to be tested for the effects on performance anxiety, and that study is currently recruiting patients. The primary objective of this study is to evaluate the effect of a single oral dose of 10 milligrams VQW-765 relative to placebo in change of anxiety as measured by Subjective Units of Distress Scale (SUDS) during a Trier Social Stress Test or TSST.

The TSST is the gold standard for inducing acute pyschosocial stress in a lab setting and has been accepted by the FDA for developing acute treatments for anxiety-related disorders. Subjective Units of Distress Scale or SUDS, which is a clinically validated self-assessment for acute anxiety with scores ranging from zero to 100, is used to measure the intensity of the distress during the TSST assessment. We'll be talking more about VQW-765 and the performance anxiety study in future discussions.

In conclusion, the second quarter of 2021 was another strong quarter for Vanda, and we are looking forward to a number of important milestones in the second half of the year. The launch of HETLIOZ for nighttime sleep disturbances in SMS is progressing well, and we are pursuing collaborations with payers to further facilitate access to HETLIOZ for our patients. We also continue to look forward to the results of our tradipitant gastroparesis study later this year, and the number of life cycle management programs in our pipeline that are poised to continue Vanda's value creation well into the future. With the upcoming gastroparesis results, Vanda is approaching what we believe to be a transformational milestone with a significant revenue opportunity.

I will now turn the call back to Kevin to discuss our financial results for the second quarter, and after that we'll be happy to address any questions you may have. Kevin?

Thank you, Mihales. I'll begin by summarizing our financial results for the first six months of 2021 before turning to discuss the second quarter of 2021.

Total revenues for the first six months of 2021 were $130.6 million, a 9% increase compared to $120.2 million for the same period in 2020.

HETLIOZ net product sales of $83.9 million were the primary contributor and driver of our revenues for the first six months of 2021, and saw a 9% increase compared to the same period in 2020.

Fanapt net product sales of $46.7 million for the first six months of 2021 reflect an 8% increase compared to the same period in 2020.

For the first six months of 2021, Vanda recorded net income of $18.3 million compared to net income of $9.2 million for the same period in 2020. Net income for the first six months of 2021 included an income tax provision of $4.7 million as compared to an income tax provision of $3.1 million in the same period in 2020.

Vanda's cash, cash equivalents and marketable securities (referred to as cash) as of June 30, 2021, were $396.5 million representing an increase of $56.6 million compared to June 30, 2020.

Turning now to our quarterly results. Total revenues for the second quarter of 2021 were $67.9 million, a 9% increase compared to $62.2 million for the second quarter of 2020.

HETLIOZ net product sales were $44.5 million for the second quarter of 2021, a 7% increase compared to $41.6 million in the second quarter of 2020.

Fanapt net product sales in the second quarter of 2021 were $23.4 million, a 13% increase compared to $20.6 million in the second quarter of 2020. Fanapt net product sales in the second quarter of 2021 were essentially flat as compared to $23.3 million in the first quarter of 2021. Fanapt prescriptions in the second quarter of 2021, as reported by IQVIA Xponent, increased by 1% compared to the first quarter of 2021.

For the second quarter of 2021, Vanda reported net income of $9.7 million compared to net income of $8.7 million for the second quarter of 2020. Net income for the second quarter of 2021 included an income tax provision of $3 million as compared to an income tax provision of $2.4 million for the same period in 2020.

Operating expenses in the second quarter of 2021 were $55.5 million compared to operating expenses of $53 million in the second quarter of 2020. The $2.5 million increase was primarily driven by higher R&D expenses related to the late-stage tradipitant, HETLIOZ and Fanapt development programs, partially offset by lower SG&A expenses related to awareness and branded DTC campaigns.

Vanda expects to achieve the following financial objectives in 2021. Net product sales from both HETLIOZ and Fanapt of between 270 and $300 million, HETLIOZ net product sales of between 180 and $200 million, Fanapt net product sales of between 90 and $100 million, year-end 2021 cash of greater than $400 million.

Of note, our HETLIOZ net product sales guidance is based on our currently approved FDA indications for Non-24 and nighttime sleep disturbances in SMS.

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

Thank you very much, Kevin. At this point, we'll be happy to answer any questions. And I understand my audio may not have been great, but please let me know if you cannot hear me well.

(Operator Instructions) Our first question comes from Olivia Brayer with Bank of America.

Hi guys. Congrats on the quarter and thanks for the question. My first one is around payer positioning now that we're several quarters into the SMS launch. I know getting on formularies has obviously been a hurdle for HETLIOZ in Non-24, but are you seeing a similar level of pushback in SMS or have there been any sort of advantages to being that second indication for HETLIOZ that could maybe help patients get faster access to therapy? And then I have one follow-up on tradipitant.

Yes, Olivia. Thank you very much for the question. And first of all, I will say that we're very focused on patient access. We care a lot that every patient that is being prescribed get the chance to try HETLIOZ and continue treatment. I will answer briefly and I will let Kevin elaborate a little bit. First, HETLIOZ is on the formulary of, I would say, most or all plans today, and that is for Non-24. For SMS, it is a bit early given the cycle of the P&A committees, which are evaluating inclusion for their utilization management criteria.

But so far, we do not find any particular strong resistance by payers on covering patients with Smith-Magenis Syndrome. However, we continue to see something we have reported in prior quarters, a significant resistance on Non-24, where the demand is much higher than the scripts filled, and we're talking about on-label indications. There can be various reasons, but the most common one is the misperception with payers that the indication does not necessarily include Non-24-sighted people. But that part has been settled with a lengthy 14-page document that the FDA published last year in 2020 and signed by Dr. Woodcock where actually it clarifies and confirms that the indication for HETLIOZ is Non-24 without any qualifications on visual acuity. Having said all that, we are engaged with payers to find ways to improve access. And I will ask Kevin if you have anything to add to that.

Yes. Thanks, Mihales. And just to reiterate, very focused on improving patient access and reducing patient burden, looking for ways to collaborate with the payers to increase that patient access and just highlighting that our prescription demand is far in excess of our prescription filled, which just means that this also represents an opportunity for patients to get access to the drug and for us to continue to look to grow the business.

Okay. Great. Thanks, guys. And I know we're coming up, obviously, on the gastroparesis data and filing for tradipitant. But I do think there's a lot of interest around the expanded access program and how much of that patient data will eventually be looked at by the FDA.

So I guess the question is, how much of that EAP data could feasibly be included in the initial filing? And is there a certain minimum length of time on therapy to make the cut for that initial portion of the submission? And then maybe just as a quick follow-up on that is, whether there are other opportunities through the review process in which you could add more safety data from that expanded access program as more patients take part in the program?

Yes. Thank you very much, Olivia. First of all, we're thrilled with the interested patients who are concluding the 3-month treatment either in the double-blind randomized pivotal study or the open label and their interest to continue on the drugs.

And in the words of any of these patients, they're describing the experience as life altering. Now in terms of numbers, we have at least a dozen patients that have fully applied for the expanded access program, and the majority of them have been already reviewed by the FDA and approved. The initial approval for each of one these patients is a period of six months and several patients are coming up to the six-month mark including patients that have been approved beyond that to extend to two years.

And I believe our first patient will be completing the 12 months in seeking extended beyond the 12 months very shortly. In terms of the NDA application we're collecting the data and we will be submitting all this data to the application. So that would mean that at least for several of the patients by the time of submission, we will have a 12-month safety data. And certainly, there is an opportunity within the middle of the year to see submit updated safety data. So we expect all the patients that are now in the expanded access program and others that may come will continue to produce safety data, which actually will bolster the safety data submitted to the agency.

Okay. Great. Thank you very much.

I'm not showing any further questions at this time. I would now like to turn the call back over to Vanda management for closing remarks.

Yes. Thank you very much. Thank you all for joining us, and we look forward to talking to you about our progress in future calls. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect.