VNDA (2021 - Q1)

Good day and thank you for standing by. Welcome to the Q1 2021 Vanda Pharmaceuticals Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to hand the conference over to Kevin Moran, Vanda’s Chief Financial Officer. Please go ahead. Kevin Mo

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.

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 the results from our ongoing Phase 3 study expected later this year and then 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 are 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 in 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 in certain changes, which contemporarily impact patients on therapy, we are pleased with the performance on both HETLIOZ and Fanapt despite these challenges. I would like to discuss our late-stage lifecycle management programs, which can present us with a number of additional revenue growth opportunities in the near term.

Thank you, Mihael. I will begin by summarizing our first quarter 2021 financial results. Total revenues for the first quarter of 2021, was $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 payer 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 Mihael.

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

Your first question comes from the line of Chris Howerton with Jefferies. Your line is now open.

Great, thank you so much for taking the questions. Congratulations on the progress despite the pandemic. So I guess maybe 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, very interested in thinking about the opportunity for I think you said it was P88 the, 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? Thank you.

Okay, thank you very much, Chris. I will take the first one and 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 exhaustively discussed and it is complete. The clinical package which has been completed along this Phase 3 clinical side, we were conducting a pharmacokinetic clinical pharmacology study understanding the full effect if there is any labeling studies. Otherwise the manufacturing preparedness is there. Of course we’ve scaled up for some time now. And we will have all the necessary stability data for filing by the end of the year. So really what is in the clinical path here are the results of this study and subsequent meeting with the FDA to make sure that we are on the same page. Your second question was on P88 and what could be potential advantage over iloperidone. As you know iloperidone because it’s also one adrenergic receptor blocking effect. It does have orthostatic hypertension in the beginning of treatment, leading to titration requirement and then administered as 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 overall iloperidone more tolerable, and of course the dosing more flexible. Of course, there could be other things we learned 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 much faster program registration. If it did, we can substitute one for the other. And 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 on that before Kevin addresses your...

Yes, no, I mean first of all, thank you. So, that’s very clear. For the – I guess would be with respect to the pharmacokinetic features. Is that kind of like 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 need to have direct studying of that before we can make any definitive claims. And another interesting part about P88 is that as you know, we are developing a long-acting injectable iloperidone which actually is based on a crystal formulation that we are injecting directly, because – and that allows actually the different behavior in the muscle. For P88 chemistry in fact 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.

Yes, I mean I actually, I was – 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 are actually very late in that development. We have surprising results, so being able to achieve great pharmacokinetic profiles with the crystals. And you understand we have increased is actually the most straightforward manufacturing you can possibly have. It’s actually crystals of iloperidone that you go through the process and then inject them. The other big advantage of starting with iloperidone is that we know how iloperidone itself behaves and efficacy. So the Phase 3 study that we are designing now in the initial thinking around efficacy is to run a short 4 week to 6 week acute schizophrenia Phase 3 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 take – we 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 a lipid conjugate.

Okay, okay. Well, very good. And well, I mean like I said, that’s a very interesting and potentially very exciting advance of the pipeline. So I guess we will just stay tuned for that. And my guess the other question that I had was just related to the guidance?

Yes, 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. are or HETLIOZ Non-24 in Germany or HETLIOZ SMS here in the U.S. So what I can tell you though is that we are very excited about the early progress that Mihael has noted with patient firm 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 and I appreciate you taking the questions.

So 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 will 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 on 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.