Vanda Pharmaceuticals Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

There are 5 speakers on the call.

Operator

Good afternoon. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2023 Vanda Pharmaceuticals Inc. Earnings Call. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. At this time, I would like to turn the conference over to Kevin Moran, Vanda's Chief Financial Officer. Please go ahead.

Speaker 1

Thanks, Audra. Good afternoon and thank you for joining us to discuss Vanda Pharmaceuticals' Q2 2023 performance. Our Q2 2023 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 Doctor.

Speaker 1

Mihael Palomiropoulos, Our President, Chief Executive Officer and Chairman of the Board and Tim Williams, our General Counsel. Following my introductory remarks, Mahal 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.

Speaker 1

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 ks As updated by our subsequent quarterly reports on Form 10 Q, current reports on Form 8 ks 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 With that said, I would now like to turn the call over to our CEO, Doctor. Mihael Polymeropoulos.

Speaker 2

Thank you very much, Kevin, and good afternoon, everyone. Thank you for joining us to discuss Vanda's Q2 2023 results. I will first discuss key highlights from our commercial products and clinical pipeline and then I will ask our General Counsel, Tim Williams to provide a brief update On litigation matters before turning the call over to Kevin Moran to discuss our commercial products and financial results. Taking into account the challenging environment due to the at risk launch of generic tazemetin, We have had a strong first half of the year. Over the last several months, we have taken a number of steps We position the business for continued success, including the reorganization of our sales force that will support our current Commercial projects as well as the potential near term expansion of the Fanapt franchise if we receive FDA approval for bipolar 1 disorder.

Speaker 2

Let's begin with our results for HETLIOZ. Despite The at risk launch of generic tazemetian, our team delivered solid performance and continues to work tirelessly We support patients on therapy and prescribers. During the Q2, we recorded a greater number of Jetty's expenses done in the Q1. Turning to Fanapt, we are focused on driving growth in the currently approved indication of schizophrenia and ensuring Fanapt is well positioned to capitalize on the bipolar market, significantly larger than the schizophrenia market This quarter we recognized slight year over year growth for Fanapt in schizophrenia that we will look to build upon as we put into place initiatives intended to drive brand recognition among providers and patients. Building on the previous strong clinical trial results for bipolar disorder, we continue to pursue FDA approval for Fanapt in this indication.

Speaker 2

For HETLIOZ, we also continue to pursue FDA approval for insomnia. We believe that HETLIOZ for insomnia Could present a meaningful commercial opportunity and provide an exciting therapeutic option for this. We're also pursuing FDA approval for Tradipitant in patients with gastroparesis. In support of our new drug application, cortradipitant, we will be submitting to the FDA results of preclinical studies that we believe demonstrate substantial evidence of efficacy of Tradipitant in this indication as well as The safety database to support the tolerability of return. The expanded access program is ongoing With multiple patients have been treated for acute 6 months and the longest treated patient for more than 3 years.

Speaker 2

In May, we announced positive results from the Phase 3 study of modipitant in the treatment of motion sickness. We're currently conducting additional studies and plan to apply for marketing approval after the completion of the clinical program. In addition to these late stage programs, we also announced that the FDA granted orphan drug designation So VCA-eight ninety four A,

Speaker 1

our

Speaker 2

antisense oligonucleotide therapeutic for the treatment of sarcoma 2 CMT PAS is a rare subtype of sarcoma2 and inherited peripheral neuropathy for which there is no available treatment. At this point, I will ask Tim Williams, our General Counsel to provide a brief update on mitigation matters. Tim?

Speaker 3

Thank you, Mihael. I'll start with our intellectual property and related litigation. As previously disclosed, we appealed the negative decision in our HETLIOZ and the litigation to the Court of Appeals for the Federal Circuit. Back in May, the Federal Circuit panel affirmed the lower court ruling and we then petitioned the full Federal Circuit Court to rehear the case. Earlier this month, the Federal Circuit requested that Teva and Apotex respond to our petition for rehearing by this Tuesday, August 1st.

Speaker 3

Separately, we have an additional patent infringement lawsuit pending in Delaware against Teva and Apotex Regarding a method of treatment patent for HETLIOZ that was not litigated in the prior case. And finally, we have a pending lawsuit against Teva In New Jersey for violations of the Lanham Act related to Teva's at risk launch of its generic version of Hevilis. We intend to vigorously pursue our interest in each of these matters. I'll turn now to some of our recent regulatory Challenges related to generic product approvals. We continue to challenge the FDA for its approval of generic tazemetian without Braille labeling.

Speaker 3

We filed suit in federal court challenging FDA's approval of Teva's generic tezomelteon and we filed citizen's petitions Challenging FDA's approval of both Teva and Apotex's generic tazemetian, both of which were approved by the FDA without braille labeling. The FDA responded to these citizens petitions earlier this week rejecting our arguments. We continue to believe that FDA's approvals are improper under law and we intend to continue vigorously pursuing these matters including our pending litigation. Separately, we continue to challenge other FDA actions undertaken during review of generic applications. We filed 2 citizens petitions challenging FDA's approval of Teva and MSN's generic tezomelteon with what we believe to be inadequate bioequivalence We have not yet received a response from the FDA on these petitions.

Speaker 3

And last, we filed a lawsuit in the court of federal claims Seeking economic damages based on what we believe was FDA's unlawful disclosure of our confidential information and trade secrets to generic and to filers during the FDA's review of applications for the generic versions of both HETLIOZ and Fanapt. More detail on this and our other pending litigation matters can be found in our periodic filings and on public docketing systems. With that, Mihael, I'll turn it back to you.

Speaker 2

Thank you very much, Tim. I would now turn the call to Kevin Moran to discuss our commercial progress and financial results. Kevin?

Speaker 1

Thank you, Mahal. I'll begin by summarizing our financial results for the 1st 6 months of 2023 before turning to discuss the Q2 of 2023. Total revenues for the 1st 6 months of 2023 were 108,600,000 a 13% decrease compared to $124,600,000 for the same period in 2022. HETLIOZ net product sales were $61,600,000 for the 1st 6 months of 2023 and saw a 21% decrease compared to $78,200,000 for the same period in 2022. The at risk launch of a generic version of HETLIOZ had a significant impact on HETLIOZ performance during the 1st 6 months of 2023.

Speaker 1

The decrease to net product sales was attributable to a decrease in price net of deductions, partially offset by an increase in volume. Our HETLIOZ net product sales for the Q1 of 2023 reflected higher unit sales as compared to recent prior periods and resulted in a significant increase of inventory stocking at specialty pharmacy customers at the end of both the Q1 of 2023 and the Q2 of 2023. Turning now to Fanapt. Fanapt net product sales of $47,000,000 for the 1st 6 months of 2023 reflect a 1% increase compared to 46 $4,800,000 compared to a net loss of $3,900,000 for the same period in 2022. Net income for the 1st 6 months of 2023 included an income tax provision of $3,300,000 as compared to an income tax provision of $100,000 for the same period in 2022.

Speaker 1

Operating expenses for the 1st 6 months of 2023 were $109,400,000 compared to 128,800,000 for the 1st 6 months of 2022. The $19,400,000 decrease was primarily driven by lower R and D expenses, Lower SG and A expenses and lower cost of goods sold. The decrease in R and D expenses was primarily driven by decreases related to our late stage clinical program for Fanapt and our VQW765 development program, partially offset by increases related to our tritipitant activities and our early stage ASO program. The decrease in SG and A expenses was primarily driven by lower expenses associated with marketing, Sales and commercial support activities for our commercial products. The lower cost of goods sold is due to lower HETLIOZ net product sales and the decrease in the royalty rate owed to BMS on HETLIOZ net product sales from 10% to 5% effective in December 2022.

Speaker 1

Vanda's cash, cash equivalents and marketable securities referred to as cash as of June 30, 2023 was $489,400,000 representing an increase of $48,500,000 to cash compared to June 30, 2022 and an increase of 22,500,000 compared to December 31, 2022. Turning now to our quarterly results. Total revenues for the Q2 of 2020 were $46,100,000 a 28 percent decrease compared to $64,400,000 for the Q2 of 2022. HETLIOZ net product sales were $22,000,000 for the Q2 of 2023, a 47% decrease compared to $41,200,000 in in Q2 of 2022. The at risk launch of a generic version of HETLIOZ continued to have a significant impact on HETLIOZ performance during the Q2 of 2023.

Speaker 1

The decrease to net product sales was attributable to a decrease in volume and a decrease in price, net of deductions, partially offset by the recognition of $4,800,000 of net product sales related to a change in estimate on revenue constraint during the Q1 of 2023. Our HETLIOZ net product sales as reported for the Q1 of 2023 reflected higher unit sales as compared to recent prior periods. The higher unit sales during the Q1 of 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at the end of both the Q1 of 2023 and the Q2 of 2023. HETLIOZ net product sales during the Q2 of 2023 reflect lower unit sales as a result of the reduction of the elevated inventory levels at specialty pharmacy customers at the end of the Q1 of 2023. Turning to Fanapt.

Speaker 1

Fanapt net product sales were $24,100,000 for the Q2 of 2023, A 4% increase compared to $23,200,000 in the Q2 of 2022. SNAP net product sales in the Q2 of 2023 increased by 5 as compared to $22,900,000 for the Q1 of 2023. SNAP prescriptions in the Q2 of 2023, as reported by Aquivya Exponent, increased by less than 1% compared to the Q1 of 2023. For the Q2 of 2023, Vanda recorded net income of 1,500,000 compared to net income of $2,600,000 for the Q2 of 2022. Net income for the Q2 of 2023 included an income tax provision of $1,100,000 as compared to an income tax provision of $1,200,000 for the same period in 2022.

Speaker 1

Operating expenses in the Q2 of 2023 were $48,900,000 compared to $60,900,000 in the Q2 of 2022. The $12,000,000 decrease was primarily driven by lower SG and A expenses related to spending on marketing and sales activities for our commercial products, lower R and D expenses related to our late stage Fanapt development program and our VQW765 development program, partially offset by expenses related to our early stage ASO program and lower cost of goods sold due to lower HETLIOZ net product sales and the decrease in the royalty rate owed to BMS on HETLIOZ net product sales from 10% to 5% effective in December 2022. Operating expenses in the Q2 of 2023 decreased by $11,600,000 as compared to $60,500,000 in the Q1 of 2023. The decrease was primarily driven by lower SG and A expenses related ongoing litigation and other corporate expenses and lower R and D expenses related to our Tradipitant development program. Given uncertainties surrounding the U.

Speaker 1

S. Market for HETLIOZ for the treatment of non-twenty four as a result of the ongoing HETLIOZ patent litigation and the at risk launch of a generic version of HETLIOZ, Vanda is unable to provide 2023 financial guidance at this time. Vanda will continue to evaluate its ability to provide financial guidance as the year progresses. HETLIOZ net product sales will likely decline in future periods, potentially significantly related to the at risk launch of a generic version of HETLIOZ in the U. S.

Speaker 1

Additionally, the company constrained HETLIOZ net product sales for the 1st 6 months of 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 are resolved. With that, I'll now turn the call back to Mihael.

Speaker 2

Thank you very much, Kevin. At this point, we will be happy to open the line to any questions you may have. Thank

Operator

you. We'll take our question from Andrew Tissai at Jefferies.

Speaker 4

Hi, everyone. Thanks so much. Appreciate all the updates. So the first question for us is on HETLIOZ existing sales. Just curious what were the Organic sales in Q2 in terms of price and volume outside of inventory fluctuations.

Speaker 4

So just trying to gauge how much Inventory drawdown there was in Q2 or if there was a buildup. And we're also trying to see whether Q3 sales could Potentially increase quarter over quarter assuming this quarter did see some type of inventory drawdown. Thanks.

Speaker 2

Yes. Thank you very much, Andrew. I will let Kevin answer this question.

Speaker 1

Yes. Thanks for the question, Andrew. So there are a couple of different pieces there, and I'll provide the detail where we've provided it in the release. So So what we saw in the Q2 was a drawdown of the inventory stocking or a portion of the inventory stocking that we saw in the Q1, But inventory levels at the end of the second quarter were still elevated relative to recent prior periods. So not as high as the Q1, but Still higher than we've seen in recent prior periods.

Speaker 1

So there's still some inventory to work through before they would return to historic levels.

Speaker 4

Very clear. And so speaking of the ongoing, I guess, litigation versus the generics, I think It sounded like you've petitioned to rehear the case, court case. And I think You mentioned Teva and the other party has until next Tuesday to respond. So what would be the next steps After that and how quickly can we get a potential resolution?

Speaker 2

Yes. I would like Tim Williams handle this and maybe Tim you can discuss a little bit about the procedure With the Federal Circuit.

Speaker 3

Yes. Happy to do that, Mihael. These petitions for rehearing Can be decided by the Federal Circuit without any response from the other parties. In certain instances, The Federal Circuit may request a response, because 1 or more of the judges sitting on the Federal Circuit are Interested to learn a little bit more information about the case to hear from the other party. So that's what occurred in this case.

Speaker 3

And so there's really not a Set procedure from here in terms of required next steps. If the request from the court holds In terms of timing then Teva and Apotex would need to file this response with the court, like I mentioned on Tuesday of next week. And after that, we may have an opportunity to provide additional reply, but there's not a definite Procedure around that. The timing is likewise, there's no prescribed timing in the either the Federal Circuit's court rules or the Rules of, appellate procedure. So it's a little bit unclear, what the timing would look like and what the resolution would be.

Speaker 4

Got it. Very clear though nonetheless. So speaking about the pipeline, as we think about the next 6 to 12 months, there does seem to be potentially a good set of catalysts. And so the question would be, Have you filed the NDA or sNDAs for HETLIOZ and insomnia, Tradipitant for gastroparesis, FANAT for bipolar? And if not, what are the gating steps to those filings?

Speaker 4

And feel free to talk about your confidence on all three potential approvals later in 2024.

Speaker 2

Yes. We do not give specific details and interim updates Such as when we submit, when the FDA files and what the PDUFA date is. But what we can tell you, it is that all three applications are progressing Without necessarily telling you which ones have been submitted, filed or to be submitted. But given where we are, we expect that a regulatory decision Should be able to be rendered in each one and all of them within the next 12 months.

Speaker 4

Got it. And maybe one more question, last one is just As we think about your existing cash, I think almost $500,000,000 how do you foresee to spend that cash? Specifically, I ask in the context of business development, are you open to that? And secondly, If you are, what kind of deal structure, what indication areas are you looking for? Are you looking to buy immediate revenues or Are you thinking about more about building up the earlier stage pipeline?

Speaker 4

Thank you.

Speaker 2

Yes. Certainly, because we have, the marginal profitability allows us to have a lot of flexibility To look at potential business development opportunities from the outside. And we have a number of them Ongoing. And in terms of types, we're very focused to first Diversify our revenue and support our commercial presence. As Our own organic pipeline, as we discussed just a minute ago, is actually exceptional with 3 new filings Ongoing.

Speaker 2

So we believe that we Can be generally agnostic in the types of indications where a compound with maybe already commercial presence Exist, but we think we are keen to understand Opportunities that can be synergistic with our already existing commercial infrastructure. But again, we're more agnostic on indications and more focused on late stage And potential diversification of revenue sources.

Speaker 1

Got it. Thank you very much.

Speaker 2

Sure, Andrew. Thank you for your questions.

Operator

And that does conclude the question and answer session. I'd like to turn the conference back to Vanda Management for closing remarks.

Speaker 2

Yes. Thank you very much. And thank you all for joining this quarterly call. Looking forward to Talk to you in future periods. Thank you.

Operator

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

Remove Ads
Powered by Quartr
Earnings Conference Call
Vanda Pharmaceuticals Q2 2023
00:00 / 00:00
Remove Ads