Vanda Pharmaceuticals Inc. Q2 FY2025 Earnings Call

Good day, everyone, and thank you for being here. My name is Argee, and I will be your conference operator today. I would like to welcome everyone to the Q2 2025 Vanda Pharmaceuticals, Inc. Earnings Conference Call. I will now turn the call over to Vanda's Chief Financial Officer, Kevin Moran. Please go ahead.

Great. Thank you, Argee. Good morning, and thank you for joining us to discuss Vanda Pharmaceuticals' Second Quarter 2025 performance. Our second quarter 2025 results were released this morning 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. Mihael Polymeropoulos, our President, Chief Executive Officer, and Chairman of the Board; and Tim Williams, our General Counsel. Following my introductory remarks, Mihael will update you on our ongoing activities. I will then comment on our financial results before we open 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 most recent annual report on Form 10-K 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 would now like to turn the call over to our CEO, Dr. Mihael Polymeropoulos.

Thank you very much, Kevin. Good morning, everyone. During the second quarter, we continued the expansion of the Fanapt sales force and also continued our broad awareness campaign. Fanapt revenue increased by 27% compared to the same period in the prior year, driven by the launch of the bipolar I indication. Fanapt is now promoted in the U.S. across all 50 states with a dedicated sales force of approximately 300 representatives. With the expansion of the sales force during the second quarter, we observed a significant increase in activity with the total number of calls growing by more than 40% as compared to the first quarter of 2025 and growing by over 400% compared to the second quarter of 2024. Since the bipolar launch, demand is measured by total prescriptions, new prescriptions, and new-to-brand prescriptions reached new highs in the second quarter. The commercialization of Fanapt is also supported by a broad speakers program operating across the country that educates prescribers on the profile of Fanapt and how to use it. We're excited by the progress our commercial organization has made as we continue to support the commercialization of Fanapt, aiming for further growth in the coming periods. Total revenue from our three commercial branded products, Fanapt, HETLIOZ, and PONVORY reached $102.6 million in the first 6 months of 2025. HETLIOZ continues to be the market share leader despite the availability of generic products, a testament to the brand loyalty of our patient customers over the last 11 years. We're continuing to build out and train our dedicated PONVORY sales force team, addressing prescribers for multiple sclerosis. In the last quarter, we saw an increase in new prescriptions as we intend to enhance our consumer and prescriber awareness programs. For the regulatory clinical updates, first, on Bysanti. The NDA for Bysanti for the acute treatment of bipolar I disorder and the treatment of schizophrenia was accepted for filing by the FDA with a PDUFA target action date of February 21, 2026. Exclusivity for Bysanti, including pending patent applications, could extend into the 2040s. Bysanti is a new chemical entity, which was recently identified as an active metabolite of iloperidone. Vanda discovered that milsaperidone, the generic name of Bysanti, administered orally quickly interconverts to iloperidone. In clinical studies, milsaperidone and iloperidone have been shown to be bioequivalent at both low and high doses administered in both single and multiple dose studies. Results of these clinical studies were presented in late May at the 2025 American Society of Clinical Psychopharmacology Annual Meeting in Scottsdale early on. The Bysanti Phase III clinical study for use as a daily adjunctive treatment for major depressive disorder is ongoing. Results of that study are expected in 2026. The new drug application for tradipitant for the treatment of motion sickness we expect for filing by the FDA with a PDUFA target action date of December 30, 2025. In the fourth quarter of 2024, Vanda initiated a clinical trial to study tradipitant in the prevention of vomiting induced by GLP-1 analog, Wegovy, that is semaglutide. Results are expected soon in the third quarter of 2025. On Fanapt, first, schizophrenia, a Phase III program for the long-acting injectable formulation of Fanapt in the treatment of schizophrenia in relapse prevention is ongoing. On hypertension, Vanda initiated a study of the Fanapt long-acting injectable as a once-a-month injectable for controlled hypertension and plans to begin enrolling patients soon. Imsidolimab, a BLA for imsidolimab in the treatment of the rare orphan disorder, generalized pustular psoriasis, is expected to be submitted to the FDA this year in 2025. PONVORY, investigational new drug applications for PONVORY in the treatment of psoriasis and ulcerative colitis were accepted by the FDA in the fourth quarter of 2024, and Vanda has initiated the psoriasis study and plans to initiate a study in ulcerative colitis by early 2026. On early-stage programs, VQW-765, the alpha-7 nicotinic acetylcholine receptor partial agonist is currently in clinical development for the treatment of acute performance anxiety in total situations. Vanda has initiated the Phase III program and plans to begin enrolling patients soon. The IND application for VCA-894A for the treatment of Charcot-Marie-Tooth disease, axonal, type 2S, an inherited peripheral neuropathy for which there is no available treatment was accepted by the FDA in 2024. VCA-894A was granted Orphan Drug Designation for the same indication in 2023. The Phase I clinical study for VCA-894A enrolled a patient with a specific mutation, and this patient has already received several doses of VCA-894A. Finally, as part of our public policy contributions to drug development, Vanda responded to HHS request for information. On May 14, 2025, the U.S. Department of Health and Human Services issued a request for information entitled 'Ensuring Lawful Regulation and Unleashing Innovation to make America Healthy Again.' On July 14, 2025, Vanda submitted a public response to this RFI. Vanda, in response, proposed that the FDA repeal unlawful regulations that delay and overburden the drug approval process and that the FDA repeal 1990s era guidance mandating minimal animal testing. Our full response with exhibits is available on the Investors page of our website and at the government website, regulations.com. With this, I'll turn it back to Kevin.

Great. Thanks, Mihael. I will begin by summarizing our financial results for the first 6 months of 2025 before turning to discuss the second quarter of 2025. Total revenues for the first 6 months of 2025 were $102.6 million, a 5% increase compared to $97.9 million for the same period in 2024. The increase was primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch. Fanapt net product sales were $52.8 million for the first 6 months of 2025, a 21% increase compared to $43.7 million in the same period in 2024. This increase to net product sales relative to the first 6 months of 2024 was attributable to an increase in volume. Turning to HETLIOZ. HETLIOZ net product sales were $37.1 million for the first 6 months of 2025, a 4% decrease compared to $38.8 million in the same period in 2024. The decrease to net product sales relative to the first 6 months of 2024 was attributable to a decrease in volume, partially offset by an increase in price net of deductions. Of note, through the second quarter of 2025, HETLIOZ continues to retain the majority of market share despite generic competition for over 2.5 years. HETLIOZ net product sales continue to be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. Going forward, HETLIOZ net product sales may reflect lower unit sales as a result of the reduction of elevated inventory levels at specialty pharmacy customers or may be variable depending on when specialty pharmacy customers need to purchase again. Further, HETLIOZ net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. Additionally, the company constrained HETLIOZ net product sales for the first and second quarters of 2025 and for the years ended December 31, 2024 and 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 related to inventory stocking by specialty pharmacy customers are resolved. Turning now to PONVORY. PONVORY net product sales were $12.7 million for the first 6 months of 2025, an 18% decrease compared to $15.4 million in the same period of 2024. The decrease in net product sales relative to the first 6 months of 2024 was attributable to a decrease in volume and a decrease in price net of deductions. For the first 6 months of 2025, Vanda recorded a net loss of $56.7 million compared to a net loss of $8.7 million for the same period in 2024. The net loss for the first 6 months of 2025 included an income tax benefit of $15.6 million as compared to an income tax benefit of $1.5 million for the same period in 2024. Operating expenses for the first 6 months of 2025 were $182.2 million compared to $117.3 million for the same period in 2024. The $64.8 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis and higher R&D expenses primarily related to the exclusive global license agreement with Anaptys for the development and commercialization of imsidolimab, which was entered into during the first quarter of 2025. During 2024 and 2025, we commenced a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs. A direct-to-consumer campaign that started in the first quarter of 2025 continued in the second quarter of 2025, elevating brand awareness of the company and the key products, Fanapt and PONVORY. SG&A expenses may increase in future periods as a result of the ongoing commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis. Vanda's cash, cash equivalents and marketable securities referred to as cash as of June 30, 2025, was $325.6 million, representing a decrease of $49.1 million compared to December 31, 2024, and a decrease of $15.4 million compared to March 31, 2025. The change in cash during the second quarter of 2025 as compared to the first quarter of 2025 was driven by the net loss in the second quarter of 2025, partially offset by the favorable impact of the timing of cash in from customers for revenue and related payments of rebates to payers as well as the timing of cash due to third parties for services related to operating expenses. Turning now to our quarterly results. Total revenues for the second quarter of 2025 were $52.6 million, a 4% increase compared to $50.5 million for the second quarter of 2024. The increase as compared to the second quarter of 2024 was primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch. Let me now break this down by product. Fanapt net product sales were $29.3 million for the second quarter of 2025, a 27% increase compared to $23.2 million in the second quarter of 2024 and a 24% increase compared to $23.5 million in the first quarter of 2025. Fanapt total prescriptions in the second quarter of 2025 increased by approximately 24% compared to the second quarter of 2024 and 13% compared to the first quarter of 2025. The increase in Fanapt revenue between the second quarter of 2025 and the second quarter of 2024 was primarily attributable to an increase in volume, which was driven by increased total prescriptions as reported by IQVIA exponent. The increase in Fanapt revenue between the second quarter of 2025 and the first quarter of 2025 was attributable to an increase in volume, primarily driven by increased total prescription demand and increased inventory levels at wholesalers in line with historic levels. Fanapt new patient starts in the second quarter of 2025 as reflected by new-to-brand prescriptions increased by over 200% compared to the second quarter of 2024 and by over 50% compared to the first quarter of 2025. Turning now to HETLIOZ. HETLIOZ net product sales were $16.2 million for the second quarter of 2025, a 13% decrease compared to $18.7 million in the second quarter of 2024. The decrease in net product sales relative to the second quarter of 2024 was primarily attributable to a decrease in volume and price net of deductions. And finally, turning to PONVORY. PONVORY net product sales were $7.1 million for the second quarter of 2025, a decrease of 18% compared to $8.6 million in the second quarter of 2024 and an increase of 26% compared to $5.6 million in the first quarter of 2025. The decrease in net product sales as compared to the second quarter of 2024 was attributable to a decrease in price net of deductions, partially offset by higher volume. The increase in net product sales as compared to the first quarter of 2025 was attributable to an increase in volumes sold, a portion of which was driven by increased underlying patient demand, but was also impacted by increased specialty pharmacy and specialty distributor inventory levels above historic levels. As a reminder, we completed the acquisition of the U.S. and Canadian rights to PONVORY in December of 2023 and initiated the commercial launch of PONVORY in the third quarter of 2024. As such, this represents the third full quarter of PONVORY revenue recognition since the initiation of commercial launch activities and significant progress in diversifying our product mix with innovative and value-generating products. Of note, an amount of variable consideration related to PONVORY net product sales is subject to dispute, of which approximately $3 million was recognized for the 3 months ended December 31, 2024. For the second quarter of 2025, Vanda recorded a net loss of $27.2 million compared to a net loss of $4.5 million for the second quarter of 2024. From an income tax perspective, the net loss for the second quarter of 2025 included an income tax benefit of $7.7 million as compared to an income tax benefit of $1 million for the second quarter of 2024. Of note on the tax side, the company assesses the need for a valuation allowance against its deferred tax asset each quarter through the review of all available positive and negative evidence. The company generated a pretax loss for the quarter ended June 30, 2025. If the company continues to generate pretax losses and/or if the company's projections indicate pretax losses in future periods, the conclusion about the appropriateness of the valuation allowance could change in the future. An increase in the valuation allowance will result in a noncash income tax expense during the period of change. Operating expenses in the second quarter of 2025 were $91.1 million compared to $60.6 million in the second quarter of 2024. The $30.5 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis and higher R&D expenses. During 2024 and 2025, we commenced a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, including expansions of our sales force and the development of prescriber awareness and comprehensive marketing programs. A direct-to-consumer campaign that started in the first quarter of 2025 continued in the second quarter of 2025, elevating brand awareness of the company and the key products, Fanapt and PONVORY. SG&A expenses may continue to increase in future periods as a result of the ongoing commercial efforts around Fanapt in bipolar disorder and PONVORY in multiple sclerosis. With regards to the launches of Fanapt in bipolar I disorder and PONVORY in multiple sclerosis, as I mentioned, the launches were initiated in 2024, and we expect to continue the build-out of our full commercial infrastructure with the impact of these commercial efforts expected to contribute to revenue growth in 2025 and beyond. We have already seen significant growth in our commercial activities. Several lead indicators suggest a strong market response to our commercial launch of Fanapt for bipolar I disorder, including new patient starts as reflected by NBRx, increasing by more than 200% in the second quarter of 2025 as compared to the second quarter of 2024. In the second quarter of 2025 as compared to the second quarter of 2024, total prescriptions increased by approximately 24%. Of particular note, Fanapt was one of the fastest-growing atypical antipsychotics in the market through the first half of 2025 based on prescription metrics. Our Fanapt sales force continues to expand. As of the end of the second quarter of 2024, our sales force numbered approximately 100 representatives. Currently, we now have approximately 300 representatives. These expansions have allowed us to significantly increase our reach and frequency with prescribers. To that end, face-to-face calls in the second quarter of 2025 were more than 40% higher than face-to-face calls in the first quarter of 2025. And face-to-face calls in the second quarter of 2025 were more than 400% higher than the face-to-face calls in the second quarter of 2024. We've now completed over 1,400 Fanapt prescriber awareness programs, and the number of programs completed in the second quarter of 2025 was 10% higher than the number of programs completed in the first quarter of 2025. In addition to our Fanapt sales force, we have established a specialty sales force to market PONVORY to neurology prescribers around the country. We are currently in the process of growing the sales force to approximately 50 representatives in the third quarter of 2025. Of particular note, PONVORY new patient prescriptions in the second quarter of 2025 grew to a record high since the initiation of Vanda's commercial launch. Before turning to our financial guidance, I would like to remind folks that with Fanapt, HETLIOZ, and PONVORY already commercially available, the tradipitant NDA for motion sickness accepted for filing by the FDA, the milsaperidone, hopefully to be known under the brand name Bysanti NDA for bipolar I disorder and schizophrenia accepted for filing by the FDA, and the BLA for imsidolimab expected to be submitted later this year, Vanda could have six products commercially available in 2026. Turning now to our financial guidance. Vanda is reiterating its 2025 financial guidance and expects to achieve the following financial objectives in 2025. Total revenue from Fanapt, HETLIOZ, and PONVORY are between $210 million and $250 million; year-end 2025 cash of $280 million to $320 million. This revenue range would imply revenue growth in 2025 of between 6% and 26% as compared to full year 2024 revenue. Of note, related to revenue for the remainder of 2025. With Fanapt and PONVORY both in the early stages of commercial launch, Fanapt for bipolar I disorder and PONVORY for multiple sclerosis, revenue is expected to be backweighted as these products continue to grow. Our expectation is that Fanapt will grow on a quarterly basis with the trajectory accelerating as we move later into the year and exit into next year. This growth will potentially be offset by variability and/or a decline in HETLIOZ revenue. If the conversion of our investments into Fanapt revenue takes a little longer and/or we see a larger decline in HETLIOZ revenue, we could end the year at the lower end of the revenue guidance range. The year-end 2025 cash guidance reflects the impact of the conditional investments that Vanda is currently making to facilitate future revenue growth, both in the form of R&D investments and potentially outsized commercial investments, which could continue to increase depending on the success of these commercial strategies.

Thank you very much, Kevin. At this point, we will be happy to answer your questions.

Your first question comes from the line of Ram Selvaraju of H.C. Wainwright.

Congratulations on all the progress made on multiple fronts so far this year. I wanted to, first of all, ask about the outlook for Bysanti commercialization, assuming an on-time approval next year. How quickly do you expect to be able to put all of the commercial preparations in place to launch this product? And what kind of sales and marketing infrastructure expansion do you think would be necessary to support the launch, assuming, again, an on-time approval?

Thank you very much for the question, Ram. So there are two key items for the launch of Bysanti. One is commercial product preparedness, and we believe that we'll be ready by the end of the second quarter. So if the drug is approved by the end of February, we would be ready to be able to launch in Q3. However, the other one is also the strategic consideration of timing given where Fanapt is in its life cycle. So we're going to have to talk about that in future quarters as we're getting closer to that date. On your question of what else is needed. In fact, the investments we have been making and continue to make on the Fanapt sales force and awareness are all immediately transferable to Bysanti. So we expect upon launch of Bysanti, very little immediate additional commercial operation spending needed. But again, it's hard to put that right now, but it will be a product switch.

And then the second question is related to PONVORY. There are a couple of things here. Firstly, Kevin, you mentioned in your prepared remarks the existence of a dispute. And I just wanted to understand better what the nature of this dispute is and what the revenue amount related to PONVORY is that could conceivably be affected by or be the subject of this dispute? And then secondly, with respect to kind of where things are with PONVORY on the multiple sclerosis front. I was just wondering what your expectations are at this point for PONVORY revenues related to the on-label indication and if you anticipate meaningful acceleration of revenue growth for that product in the second half of 2025 based on the efforts made so far to position it optimally.

I can address that question. Regarding the first inquiry, I can't provide in-depth comments on the dispute or litigation matters due to its nature. However, based on our disclosures, it pertains to a gross to net issue with an estimated $3 million involved, the same amount we mentioned last quarter that was included in revenue for 2024, where we have received proceeds, but the gross to net adjustment is disputed. As for expectations for PONVORY going forward, we believe there is a significant commercial opportunity with PONVORY and multiple sclerosis efforts. This opportunity requires time to establish relationships with neurology prescribers and build trust in both the product and the company. Once prescription activity begins, we will navigate the hub reimbursement process. All these initiatives are in progress, and we are seeing advancements with the commercial launch activities starting in the latter half of last year. The second quarter showed the highest number of new patient prescriptions since we transitioned the product to Vanda. We are optimistic about the product's market uptake and the trends, but I anticipate growth to be steady rather than experiencing rapid acceleration.

And just very quickly, please continue.

Yes, it's Mihael. Just to add a little more color. As Kevin explained earlier, we commercially launched PONVORY in the third quarter with a small sales force of about 25 to 30 people. And there are a lot of learnings and one of them is that the number of calls that are possible daily is small, given the format of these prescriber practices, large academic centers, etc. So we're in the midst of doing a reset in the sales force and further bolster the numbers with an emphasis to be able to address not only more prescribers but with higher frequency. And the end results are very encouraging. As Kevin highlighted, we saw a significant increase in new prescriptions coming in. However, there is a lag given the specialty category of this drug between a script and a new script.

And then just very quickly. Thank you very much for that information. I wanted to ask about tradipitant and whether you anticipate between now and the end of this year, progress on the regulatory front with that candidate? And what you anticipate might potentially be how the scenario unfolds for that product candidate? And if you have a better line on when or if it might ultimately make it to the market in the U.S.?

Yes. So two-part answer on this. Tradipitant, first of all, has been developed for the indication gastroparesis, which the FDA did not approve last September. We since have gone through the option of requesting a hearing, and that hearing has not been granted yet. In fact, CDER, the review division of the FDA, is advising the commission not to have a hearing. And of course, we have explained that history shows that the FDA has avoided hearings for about the last 30 years. So we think it is important to have these hearings. Well, first of all, that's what the law says. And if we were to have a hearing with an independent group of people designed by the law presided by the commissioner, we think we'll succeed in that indication. Now on tradipitant motion sickness, the review is ongoing. We understand that the review division does not have any issues with efficacy data and that they will continue to review the adequacy of the preclinical and clinical safety data. And to remind you that there is a very large pocket of thousands of patients treated, many of whom have been treated for up to 3 months. And the preclinical package we discussed extensively that it is multidimensional with thousands of animals, rats/dogs, with no evidence of any issue. And also, first in the industry, we have submitted a comprehensive pathophysiological system evaluation package with organ-on-a-chip micro-system and also a four organ system. So all of these evaluations have provided no safety issues that would be of any concern. So having said all that, to answer your question, when would tradipitant be on the market? It could be on the market as early as January 1, 2026, if it is approved on December 30. But we're keen to see tradipitant at its full potential in the market, especially and first for the benefit of patients. And I remind you, Ram, and everyone that many patients experienced clinically significant effects affecting their quality of life and dozens of them, over 100 now, have requested expanded access. For the majority of them, the FDA has already granted expanded access. Our first patient has been on the drug for almost 5 years, and quite a big number of them have been on the drug for over a year, and we share all the stories daily, which is a huge encouragement for us to keep trying to get this product on the market.

Your next question comes from the line of Olivia Brayer of Cantor Fitzgerald.

On Bysanti, are you able to characterize how your interactions with the agency are going so far with the review? And as we think about the commercial launch next year, how should we be thinking about margins and Medicaid impact for that product? Because assuming a similar WACC, I know we've talked about this in the past, but I'd imagine you'd start to see more upside to revenues just by capturing a similar number of patients that are already on Fanapt. So that's my first question. And then as a follow-up on Bysanti, just on MDD, can you remind us what the agency's stance is on running one Phase III study versus needing two?

Thank you for the questions. I'll take the Bysanti regulatory and clinical, and I will let Kevin walk through the potential revenue benefit on Bysanti launch. First of all, regulatory, the review is ongoing. We have not received any hint of any major issues, just ordinary questions back and forth. And I remind everyone that the core clinical data come from the two bioequivalence pharmacokinetic studies that we have already published. And these studies were extensively discussed with the FDA, both at the design phase but also the results of them in the course of the pre-NDA preparation, the pre-NDA meeting. So we are encouraged that the review will continue to be going well and that we'll have a good outcome there. You asked about the major depression FDA stance on one study. In general, the FDA's position has been that one study could be adequate, but the drugs that are first-time on the market, they prefer to see two studies. Now we have a precedent here that the bipolar I indication that was just approved last year was based on one study. And I know there is a lot of question, especially on the investor and analyst side, whether one is enough or whether two are needed. And clearly, bipolar is a good example that the FDA will approve for an indication depending on the strength and quality of data, but also the size of the study. On the MDD study, this is a large study. If successful without any basis or uncertainties, I'm sure there is a very good chance that it can be adequate for approval. I'll let Kevin answer the revenue question.

Yes. Thanks, Mihael, and thanks, Olivia, for the question. So maybe just for a bit of background before answering it. When you look at the IQVIA data on payer mix for both Fanapt and the broader atypical antipsychotic market, there are three large payer segments between Medicaid, Medicare, and commercial, with Medicaid generally being about 30% to 40% of the unit volume. And then for Medicaid, there is a statutory rebate that every product owes as a rebate as part of participating in Medicaid that begins at 23.1%, but can increase beyond that potentially significantly depending on certain factors, including price increases above inflation. Now specifically on Fanapt and Bysanti, given that Fanapt has been on the market for about 15 years and the inflation during that period compared to price increases taken both by Vanda but also by Novartis in the earlier days of the product, our price increases relative to that calculation result in essentially a 100% rebate on our Medicaid business. So for Fanapt, where about 30% to 40% of our business is Medicaid. Given that Medicaid rebate, this contributes zero net revenue. With the Bysanti approval, if we just assume for hypothetical a similar WACC and a similar payer mix, that 30% to 40% of revenue would be given a reset and would be subject to the 23.1% statutory rebate but no additional rebate at launch. And so as you can see, that could result in significant gross to net favorability between Fanapt and Bysanti, where we've typically spoken about the Fanapt gross to net being in the neighborhood of 50% and Bysanti could be meaningfully below that, potentially about half that number at 25% to 30%. So hopefully, Olivia, that helps characterize just given the significant price favorability that we could see on a Bysanti net revenue calculation compared to the current Fanapt net revenue calculation.

Our next question comes from Andrew Tsai of Jefferies.

Appreciate the update. For my first question on Bysanti, my understanding is you filed a 505(b)(1) for the NDA as opposed to 505(b)(2). And so can you just remind us the justification of doing that? I would have thought bioequivalence is more related to 505(b)(2) and what exactly is included in your current data package?

Thank you for the question, Andrew. The reason for this is that the FDA requested it. We were somewhat unclear whether it should be a 505(b)(2) or a 505(b)(1), and we sought clarification from them a couple of years ago. They explained that because it is a new molecule, bioequivalence is not the primary factor. The important aspect is determining the evidence required for approval of this molecule. In this instance, the evidence needed was related to bioequivalence, which is why it falls under 505(b)(1). The studies included are the pharmacokinetic bioequivalence studies conducted at various doses—both low and high—to demonstrate bioequivalence and to infer linearity. These studies were requested and agreed upon by the FDA. The preclinical and clinical trials refer to the NDA and contain a distinctive CMC section for the new tablets, which, while having the same strength as Fanapt, represent a new chemical entity and a new manufacturing process.

I see. And secondly, for milsaperidone and Bysanti again, Phase III MDD, the results are expected in 2026 as an adjunctive therapy. So what kind of efficacy delta versus placebo do you want to see to make you feel like you have a very compelling product over the other antipsychotics?

The protocol does not specify, but it is a typical primary endpoint focused on the statistical superiority of placebo, and it is powered similarly to all other drugs. Regarding competitiveness, this category exhibits considerable variability in the magnitude of effects, even within the same drug across different studies. This variability complicates the execution of MDD studies due to fluctuating placebo effects. Thus, evaluating competitiveness relies not on the degree of changes from placebo, but on the overall profile and tolerability of the drug. That said, the drug showed a very small effect that varied significantly between studies, raising questions about its overall efficacy. The straightforward answer is that those results will indicate superiority over placebo. Until we see the results, we cannot discuss whether it will be comparable or not.

Understood. And then my last question to the commercial launches of Fanapt-PONVORY. You started a DTC campaign in Q1 and Q2. Can you remind us when that campaign ends or those campaigns? And once that ends, how do you expect sales to change from there?

Correct. The direct-to-consumer campaigns, which include company brand awareness and PONVORY and Fanapt, are ongoing. We will continue to make investments in that in support of the commercial program. As hinting, campaigns don't go on forever, and they have a plateau effect of response that adjust these campaigns. We're not there yet, and we are continuing to evaluate daily the effectiveness of these campaigns.

That ends our Q&A session, and we appreciate your participation. I will now turn the call back over to Vanda management. Please go ahead.

Thank you very much, everybody, for participating in this call, and we look forward to seeing you in future calls. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.