Vanda Pharmaceuticals (VNDA) is navigating a complex landscape marked by new drug launches, regulatory hurdles, and strategic decisions regarding potential acquisitions. Despite recent FDA approvals and ongoing clinical trials, the company faces significant challenges in differentiating its products and achieving sustainable revenue growth.
Fanapt's Struggle in a Crowded Market
Fanapt (iloperidone), Vanda's drug for bipolar 1 disorder, has entered a market dominated by well-established and generic second-generation antipsychotics. While bipolar disorder represents a substantial indication, Fanapt's lack of differentiation from drugs like Abilify, which is available as a generic for as low as $5 a month, poses a significant barrier to market penetration. Physicians' extensive experience with these existing agents further complicates Fanapt's prospects. Despite its launch in Q3 2024, it is difficult to see how Fanapt will break even in this market after accounting for its cost of clinical development and ongoing SG&A expenses related to its launch and commercialization.
Tradipitant's Regulatory and Market Obstacles
Vanda continues to pursue FDA approval for tradipitant in both gastroparesis and motion sickness, despite previous setbacks. In May, Vanda reported results from its second Phase 3 study in motion sickness, demonstrating a reduction in vomiting relative to placebo (p<0.01). However, even if approved, tradipitant will face competition from widely used and affordable generic treatments like scopolamine and antihistamines. Moreover, the focus on vomiting as the primary endpoint may limit its appeal, as motion sickness encompasses other symptoms such as nausea and dizziness.
The prospects for tradipitant in gastroparesis appear even more challenging. Phase 3 results published in Clinical Gastroenterology and Hepatology indicated that the drug "did not meet the prespecified primary endpoint at week 12 (difference in nausea severity change drug vs placebo; P = .741) or prespecified secondary endpoints" in the intention-to-treat (ITT) population. The FDA has also imposed a partial clinical hold on tradipitant clinical protocols of longer than 12 weeks duration. Given the availability of generic antiemetics like Zofran for gastroparesis-related nausea, it is difficult to envision tradipitant being approved in gastroparesis.
Financial Performance and Strategic Decisions
In Q2 2024, Vanda reported revenues of $50.5 million (up 10% year-over-year) and an EPS of -$0.08. However, revenue declines from Hetlioz and Fanapt were masked by the recent acquisition of Ponvory from Janssen for $100 million. Vanda's internally developed Hetlioz is also succumbing to generic competition. Its revenue fell to $38.761 million in 1H 2024 compared to $61.595 million in 1H 2023.
Interestingly, Vanda rejected multiple takeover bids in June, despite offers with generous premiums. The company stated that the prices "substantially undervalue Vanda and are not in the best interests of the company and its shareholders." Given the challenges facing their lead prospects, this decision has raised concerns about the company's strategic direction and cash management.
Ponvory Acquisition
In December, Vanda acquired Ponvory (siponimod) from Janssen (JNJ) for $100 million. Ponvory is one of four oral S1PR modulators utilized for multiple sclerosis [MS]. Ponvory does not appear differentiated from the other S1PR modulators. Novartis' (NVS) Gilenya (fingolimod) revenues reached $3.3 billion in 2018, but have since waned due to generic competition. Q2 2024 revenue for Gilenya was just $138 million, down nearly 50% year-over-year. So there's a reason Janssen was willing to part ways with Ponvory for just $100 million. Subsequently, I don't anticipate Ponvory will impact Vanda's bottom line.
