Vanda Pharmaceuticals Inc (VNDA) 2021 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Q1 2021 Vanda Pharmaceuticals Inc. earnings conference call. (Operator Instructions)

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

Great. Thanks, Ashley. Good afternoon and thank you for joining us to discuss Vanda Pharmaceuticals' first quarter 2021 performance. Our first 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 and CEO. 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 31st, 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 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 will now turn the call over to our CEO, Dr. Mihales Polymeropoulos.

Thank you very much, Kevin. Good afternoon, everyone. Following a challenging year as the world faced the COVID-19 pandemic, Vanda entered 2021 with our focus on value creation from both our pipeline and the continuous value creation from our commercial products. The potential future value creation and innovation in our pipeline can be seen in tradipitant for the treatment of gastroparesis with results from our ongoing Phase III study expected later this year and an anticipated launch in 2022; the emerging DSPD, delayed sleep phase disorder program, in HETLIOZ, which we believe can advance quickly; and finally, our late-stage Fanapt evaluations in bipolar disorder, a long-acting injectable formulation and in Parkinson's disease psychosis. In the first quarter, we also launched HETLIOZ and HETLIOZ LQ for Smith-Magenis Syndrome, nighttime sleep disturbances, and we're excited about its anticipated contribution to our value creation story.

On commercial performance, we see continued growth year-over-year. In the first quarter of 2021, total net product revenue for HETLIOZ and Fanapt was $62.7 million, an 8% increase compared to the first quarter of 2020. Net product revenue on HETLIOZ saw an 11% increase in the first quarter of 2021 compared to the first quarter of 2020 and net product revenue for Fanapt saw a 3% increase compared to the first quarter of 2020. While during the first quarter of every year, patients navigate insurance changes, which can temporarily impact patients on therapy, we're pleased with the performance on both HETLIOZ and Fanapt despite these challenges. I will later discuss our late-stage life cycle management programs, which can present us with a number of additional revenue growth opportunities in the near term.

I will now turn to the Smith-Magenis Syndrome nighttime sleep disturbances approval by the FDA and launch of the product. In December, the FDA approved the oral capsule formulation of HETLIOZ and the new liquid formulation HETLIOZ LQ for the treatment of nighttime sleep disturbances in adults and children with Smith-Magenis Syndrome, respectively. SMS is a neurodevelopmental disorder caused by a genetic mutation of chromosome 17, which is a microdeletion in about 90% of the patients and a point mutation in the RAI gene, which is included in this microdeletion region in the remaining 10% of the patients. SMS affects one in 15,000 to 25,000 births with an estimated U.S. prevalence of approximately 15,000 patients. The most common and most disruptive clinical expression of SMS is a sleep disorder that impacts the function of patients and, consequently, their families.

During the first quarter of 2021, we launched HETLIOZ and HETLIOZ LQ for SMS. As part of the early launch, we have reached out to an existing database of SMS patients, family members, and caregivers, and in collaboration with the patient advocacy organization PRISMS, expanded our outreach to a broader group of patients and their families.

While we are still in the beginning phase of the commercial launch of the HETLIOZ capsule and the HETLIOZ LQ liquid formulations, we're encouraged by the early results. We continue to connect with new SMS families and these families are now at different stages of discussing the treatment option with their physicians. At the same time, more than 50 patients have already received prescriptions and are navigating the insurance approval process.

We are in the midst of finalizing the second phase of our commercial launch, which will reach out to a larger number of diagnosed and undiagnosed individuals. While it is difficult at this time to estimate an exact growth trajectory for the adoption of HETLIOZ by SMS patients, we're 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 throughout the year and that greater awareness will lead to adoption.

As we're resuming activity in most of our clinical programs, I would like to highlight our progress in some key clinical programs. First off, on tradipitant, we're excited about the upcoming completion of the gastroparesis study leading to an expected NDA filing either later this year or early next. The Phase III study in gastroparesis is ongoing with 85% of the study now enrolled, on track to complete enrollment over the summer and report results later in 2021. Following the results of the study, we plan to meet with the FDA for a pre-NDA meeting. Depending on the timing of that meeting, our NDA filing may occur at the end of 2021 or early 2022. As we have previously communicated, we believe that 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 a total of 200 patients with gastroparesis, 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.

Several 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 they can receive further treatment with tradipitant. These patients have been approved for up to six months of expanded access treatment of tradipitant with one patient already approved for up to 12 months of expanded access treatment.

Patients with gastroparesis suffer from chronic, severe and debilitating nausea, as well as other GI symptoms. Many patients with gastroparesis also experience vomiting, which can lead to weight loss, and in severe cases, hospitalizations due to nutritional deficiencies. The debilitating nausea and other GI symptoms makes it difficult for patients with gastroparesis to function day-to-day. Gastroparesis is a severe, unmet medical condition with only one approved treatment option in the last forty years. There's definitely a significant unmet need for this disorder. The response to our television campaign for recruitment in the Phase III study has been overwhelming, with thousands of patients already expressing interest since late December.

Our estimates for the opportunity for gastroparesis therapy are based on several key assumptions. One, the estimated prevalence of gastroparesis in the U.S. is about six 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 United States. Metoclopramide is currently the only FDA-approved treatment for gastroparesis, approved in 1979. And due to its potential of severe side effects, it carries a black box warning and limitations of use of no more than three months. Given the highly limited treatment options, we believe that a new therapy could achieve significant market share. We're excited about tradipitant in gastroparesis, as this Phase III program represents a transformational opportunity for Vanda to address an important unmet medical need and create a substantial revenue opportunity.

I will now turn to HETLIOZ. The emerging clinical program for HETLIOZ is in delayed sleep phase disorder or DSPD. It is progressing quickly and 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 rhythm sleep disorder, affecting approximately 1% of the population, and 7% to 10% of patients with disorders of initiating or maintaining sleep.

The defining feature of individuals with DSPD is delayed sleep onset. Individuals with DSPD habitually go to bed and wake up significantly later than the typical or desired times and have an inability to fall asleep at an appropriate time. In addition to the delayed sleep onset, patients with DSPD suffer from insufficient sleep and daytime impairment. Their delayed bedtime, combined with conventional school/work start times that require early waking, can cause significant reductions in total sleep time for DSPD patients. Circadian desynchronization in DSPD is similar to that of jet lag, where individuals may have low energy in the daytime because they attempt to stay awake while the propensity for sleep is high. Comorbid depression is common among patients with DSPD and a delayed circadian preference has been described in adults with bipolar one disorder, in some cases correlating with higher relapse rates.

The prevalence of delayed sleep-wake phase disorder is highest in adolescents and young adults with rates estimated between 3.3% and 4.6% and some as high as 7%. The prevalence of DSPD in adults is lower, with estimates between 0.2% and 1.7%. DSPD is less prevalent in adults likely due to the changes in a person's circadian timing as they get older.

DSPD is the most common circadian rhythm sleep disorder. In a study of patients seen for circadian rhythm sleep disorders, 83% were diagnosed with DSPD. In the same study, 90% of those patients diagnosed with DSPD reported an onset of their symptoms during childhood or adolescence.

Taken together, the consensus in the literature is that the prevalence of adults with DSPD is about 1% of the U.S. population or over three million people. DSPD represents a large commercial opportunity for Vanda with prevalent assessments varying across different groups.

We believe a circadian regulator, like HETLIOZ, has a significant probability of technical success in treating patients with delayed sleep phase disorder. We also 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 clock. The DSPD study is expected to begin randomizing patients imminently in a number of clinical sites across the United States.

Finally, on Fanapt. The ongoing clinical development programs for Fanapt, including 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 includes sites in both the United States and Europe. The study recently began randomizing patients in the U.S. and we plan to begin randomizing patients in Europe later this summer.

On Parkinson's disease psychosis, we're 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 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 other approved treatment for Parkinson's disease psychosis and the significant burden the condition has on the 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.

The pharmacokinetic study of the Fanapt long-acting injectable is ongoing, and we're in the process of understanding and optimizing the dosing and administration. Upon completion of this repeat-dose PK study, we're planning the Phase III study of the long-acting injectable for acute schizophrenia treatment.

In addition to our Fanapt programs, the investigation new drug for P88, the active metabolite of iloperidone recently received clearance from the FDA to proceed. We plan to begin a bioequivalence study of Fanapt in P88 in healthy volunteers in the near term. We believe that P88 has the potential to improve on the clinical profile of iloperidone and create sustained, long-term value in Vanda's treatment portfolio for psychiatric disorders.

In conclusion, the first quarter of 2021 was a strong quarter for Vanda and we're optimistic that the positive momentum will continue for the rest of 2021. The approval of HETLIOZ for nighttime sleep disturbances in Smith-Magenis Syndrome patients provides an opportunity to continue our innovative and successful approach to identifying and treating patients with orphan disorders. We also continue to look forward to the results of our tradipitant gastroparesis study and the number of life cycle management programs in our pipeline that are poised to continue Vanda's value creation well into the future.

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

Thank you, Mihales. I will begin by summarizing our first quarter 2021 financial results. Total revenues for the first quarter of 2021 were $62.7 million, an 8% increase compared to $58 million for the first quarter of 2020.

HETLIOZ net product sales were $39.3 million for the first quarter of 2021, an 11% increase compared to $35.3 million for the first quarter of 2020.

HETLIOZ net product sales in the first quarter of 2021, decreased by 11% as compared to $44.2 million in the fourth quarter of 2020. Consistent with prior years and expectations, in early first quarter 2021, we saw a decline in our HETLIOZ patients on therapy attributable to the annual payor disruption linked to new plan years, plan changes and reauthorizations. As expected, this early first quarter decline reversed and patient demand subsequently grew during the remainder of the first quarter.

Turning to Fanapt. Fanapt net product sales in the first quarter of 2021 were $23.3 million, a 3% increase compared to $22.7 million in the first quarter of 2020. Fanapt net product sales in the first quarter of 2021 decreased by 1% as compared to $23.5 million in the fourth quarter of 2020. Fanapt prescriptions in the first quarter of 2021 as reported by IQVIA Xponent decreased by 5% compared to the fourth quarter of 2020. This decrease is consistent with the performance of Fanapt during the first quarter of 2020.

For the first quarter of 2021, Vanda recorded net income of $8.7 million compared to net income of $500,000 for the first quarter of 2020. Net income for the first quarter of 2021 included an income tax provision of $1.8 million as compared to an income tax provision of $800,000 for the same period in 2020.

Operating expenses in the first quarter of 2021 were $52.3 million compared to operating expenses of $58.1 million in the first quarter of 2020. The $5.8 million decrease was primarily driven 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 million and $300 million. HETLIOZ net product sales of between $180 million and $200 million. Fanapt net product sales of between $90 million and $100 million. And 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.

I will now turn the call back to Mihales.

Thank you very much, Kevin. At this point, I will be happy to answer any questions you may have.

(Operator Instructions) Your first question comes from the line of Chris Howerton with Jefferies.

Great. Thank you so much for taking the questions. Congratulations on the progress despite the pandemic. So I guess maybe a few questions from me for first of all on the gastroparesis program and the submission, outside obviously of completing the efficacy study that you described, what other steps need to be taken by the team to kind of get that package ready to go and be submitted in the timeline that you described. So that's one question. The second question would be, I'm very interested in thinking about the opportunity for, I think you said it was P88, the active...

Yes.

So what specifically are the potential advantages that that metabolite would have over the parent molecule. And then maybe just a last one for Kevin. With respect to the guidance, is it possible for you to give us some relative contribution of SMS within the HETLIOZ revenue guidance?

Okay. Thank you very much, Chris. Okay. I'll take the first and I'll leave the last one for Kevin. So the question is preparedness for NDA filing. As you know, there are three main components, the preclinical package, which we have adjusted and discussed and it is complete. The clinical package, which has been completed along this Phase III clinical study, we're conducting a pharmacokinetic clinical pharmacology study understanding the full effect if there is any. These are labeling studies. Otherwise, the manufacturing preparedness is there. Of course, we've scaled up for some time now and we'll have all the necessary stability data for filing by the end of the year. So really what is in the critical path here are the results of the study and subsequent meeting with the FDA to make sure that we're on the same page.

Your second question was on P88 and what could be a potential advantage over iloperidone. As you know, iloperidone because it's alpha-1 adrenergic receptor blocking effect, it does have orthostatic hypertension in the beginning of treatment leading to titration requirement and then to administer this twice a day. Of course, we don't know the answer, but there is a likelihood among other potentials for P88 is to decrease this pick to drop chains and decrease the need for both titration and the twice a day, making the administration of P88 over iloperidone more tolerable. And of course the dosing more flexible. Of course, there could be other things we learn along the way.

What is interesting, Chris, also is that you noticed we're conducting a bioequivalent study and that is because we know from metabolism that iloperidone, when administered quickly, comes into an equilibrium between P88 and iloperidone itself. And, therefore, there is a likelihood that P88 may be bioequivalent to iloperidone, where you can understand that this may lead to a much faster program registration. If it did, we can substitute one for the other. If P88 was to show some pharmacokinetic and tolerability advantages, you would have actually a very interesting, quick extension of the franchise itself. Any follow-up questions for that before Kevin addresses your question?

Yes, no. First of all, thank you, Mihales, that's very clear. I guess, with respect to the pharmacokinetic features, is that speculation at this point, or is that supported by evidence that your team has generated?

Yes, we have some initial data, but of course, we would need to have direct study of that before we can make any definitive claims. And another interesting part about P88 is that, as you know, we're developing a long-acting injectable iloperidone, which actually is based on a crystal formulation that we're injecting directly, and that allows actually the depot behavior in the muscle.

For P88, P88 chemistry is such that potentially allows for a lipid conjugate, which would be a more classic way of developing a long-acting injectable. So that can be an additional opportunity to develop a long-acting injectable with different properties from iloperidone itself.

Got it. Yes. Actually, that was one of the questions in the back of my mind, was just if there were advantages for P88 along both the clinical path and then certainly for sustainable growth, as you say, does it make sense to continue to invest on the long-acting injectable formulation for iloperidone as well?

It absolutely does. We're actually very late in that development. We have surprising results, being able to achieve great pharmacokinetic profiles with the crystals, and you understand having crystals is actually the most straightforward manufacturing you can possibly have. It's actually crystals of iloperidone that you will go through the process and then inject them.

The other big advantage of starting with iloperidone is that we know how iloperidone itself behaves on efficacy. So the Phase III study that we're designing now, and the initial thinking around efficacy, is to run a short four- to six-week acute schizophrenia Phase III study, where then the injectable of iloperidone will first be applied to the short-term treatment of schizophrenia in an acute phase.

And there are not a lot of examples of that, and we think it will have a unique commercial advantage as well. So many reasons why to proceed. One, we know that this formulation works for P88. We don't know the pharmacokinetics and we don't fully understand the potential of the lipid conjugate.

Okay. Okay, well, very good. Like I said, that's a very interesting and potentially very exciting advance of the pipeline. I guess we'll just stay tuned for that. And I guess the other question that I had was just related to the guidance.

Yes. And that's the breaking out SMS. Kevin, please go ahead.

Yes. And just as a reminder, our financial guidance for the year included $180 million to $200 million of HETLIOZ revenue. We didn't provide any detail around the breakout of that between HETLIOZ Non-24 in the U.S. or HETLIOZ Non-24 in Germany or HETLIOZ SMS here in the U.S. What I can tell you though is that we're very excited about the early progress that Mihales noted, with patient family engagement continuing to increase and the prescription generation that we're seeing. There was revenue included in the first quarter related to SMS, but given the timing of the approval and launch, we expect to see this continue to build through future quarters.

Okay. Well maybe I'll just hop back in the queue then. I appreciate you taking the questions.

Thank you, Chris.

There are no further questions at this time. I will now turn the call back to Vanda management for closing remarks.

Thank you very much. In fact, Chris, if you have any follow-up, we'll be happy to take any questions.

Okay. If there are no more questions, I would like to thank you all for participating in this call. We look forward to a successful and exciting year, both from the commercial side and the clinical pipeline. Thank you very much.

This concludes today's conference call. Thank you for joining. You may now disconnect.