Vanda Pharmaceuticals Inc. Q4 FY2025 Earnings Call

Thank you for holding. My name is Jordan, and I will be your conference operator today. I would like to welcome you to the Vanda Pharmaceuticals, Inc. Earnings Conference Call. Thank you. Now, I will hand the call over to Kevin Moran, Vanda's Chief Financial Officer. Please proceed.

Thank you, Jordan. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' Fourth Quarter and Full Year 2025 performance. Our fourth quarter and full year 2025 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. 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 afternoon, everyone, and thank you for joining Vanda Pharmaceuticals Fourth Quarter and Full Year 2025 Financial Results Conference Call. 2025 was a year of strong commercial execution and significant regulatory and clinical advancements for Vanda. I will briefly address some of the key highlights. Our lead product, Fanapt, drove impressive growth. Full year net product sales increased 24% to $117.3 million versus 2024, and supported by a 28% rise in total prescriptions and a remarkable 149% surge in new-to-brand prescriptions. This reflects accelerating momentum in broader prescriber adoption and the impact of our target commercial investments, including direct-to-consumer campaigns that boosted brand awareness. Our full commercial franchise, Fanapt, HETLIOZ, HETLIO LQ, and PONVORY generated total revenues of $216 million for the year, up 9% year-over-year, demonstrating solid performance across our marketed products. Clinical and regulatory milestone highlights, we achieved a major regulatory win with the FDA approval of Nereus tradipitant in late 2025, for the prevention of vomiting induced by motion. The first new oral pharmacologic option in this space in over 40 years. This approval offers a substantial market opportunity in motion sickness. It is a common condition, with prevalence estimates indicating that approximately 25% to 30% of U.S. adults—roughly 65 million to 78 million people—experience symptoms during travel or motion exposure. Tens of millions seek pharmacologic relief annually, yet current users are often limited by adverse events or inconsistent efficacy. Tradipitant addresses this unmet need, is well-tolerated, targeted neurokinin receptor antagonist, and we're actively preparing for its commercial launch to address this common issue. Separately, we see strong adjunct potential for Tradipitant in the rapidly expanding GLP-1 agonist market. These therapies used for diabetes and obesity management have seen explosive growth, with market projections in tens of millions annually, and vomiting remains a frequent side effect, impacting up to 50% of patients on agents like semaglutide. Tradipitant demonstrated positive clinical results in preventing vomiting induced by the GLP-1 analog semaglutide in our study. To capitalize on this, we plan to initiate a dedicated Phase III program in the first half of 2026, pursuing label expansion in this high-potential area where better tolerability will significantly improve adherence and outcomes. The NDA for bipolar 1 disorder and schizophrenia is under FDA review with a PDUFA target action date of February 21, 2026. Approval would further strengthen our growing suite and franchise alongside Fanapt in the global psychotic category. This category has a total addressable market estimated at approximately $20 billion in 2025. We submitted the imsidolimab BLA in the fourth quarter of 2025 for generalized pustular psoriasis, advancing us towards potential approval for this serious unmet need. Imsidolimab is a fully humanized ID4 monoclonal antibody that inhibits IL-36 receptor signaling and is being developed for GPP. Regulatory and patent exclusivity for Imsidolimab is expected to extend into the late 2030s. Vanda holds an exclusive global license for the development and commercialization of imsidolimab from AnaptysBio. GPP flares involve painful patches over large skin areas accompanied by redness, itching, and systemic symptoms and can be life-threatening. Late-stage clinical development programs include a Phase III study of Visante as a once-a-day adjunct treatment for major depression, which is ongoing, and results are expected by the end of the year. Major depressive disorder is the most common psychiatric disorder in the United States, affecting more than 20 million American adults in any given year according to estimates. It is characterized by persistent feelings of sadness, loss of interest or pleasure, fatigue, changes in appetite and sleep, feelings of worthlessness, and impaired concentration for decision-making, often leading to significant functional impairment in work, relationships, and daily life. Despite the availability of multiple evidence-based treatments, a substantial unmet medical need remains, with approximately 30% to 50% of patients achieving only partial response or remission with first-line therapies. Many experience treatment-resistant depression, relapse rates are high even after initial improvement, and side effects can delay the onset of action, limiting tolerability for a significant percentage of individuals. This persistent gap underscores the need for novel, more effective, and better-tolerated adjunctive or alternative treatments to address the full spectrum of MDD. The Phase III study of the long-acting injectable formulation of Fanapt continues to enroll patients for schizophrenia relapse prevention, representing a key enhancement to Fanapt's long-term utility in psychiatric care. The long-acting injectable market represents a significant and growing opportunity within the broader antipsychotic and psychiatric treatment landscape, driven by the need for improved adherence in chronic conditions like schizophrenia and bipolar 1 disorder. A Phase III study of VQW765, our alpha-7 nicotinic acetylcholine receptor partial agonist, in adults with social anxiety disorder has been initiated, with results expected by the end of 2026. Social anxiety disorder affects approximately 30 million American adults according to the 2023 National Health and Wellness Survey. Standard treatments include cognitive behavioral therapy, but many patients struggle to initiate or tolerate exposure due to the severity of anxiety. This highlights the need for novel on-demand therapies like VQW765 to address acute episodes more effectively. Our clinical development programs for PONVORY, ponesimod in psoriasis and ulcerative colitis are ongoing, building on its established profile as a selective S1P1 receptor modulator approved for relapsing multiple sclerosis. We look forward to progressing these programs and sharing updates as they advance. Looking forward, we expect 2026 total revenues of $230 million to $260 million from our current marketing products, establishing a strong baseline. We anticipate continued growth from this portfolio with further contributions from the Nereus launch and potential approvals of imsidolimab and progress across our late-stage programs. In summary, 2025 showcased our ability to drive revenue while building a diversified, high-potential pipeline. We remain committed to delivering innovative therapies and long-term value for patients and shareholders. With that, I'll turn it over to Kevin.

Thank you, Mihael. I'll begin by summarizing our financial results for the full year 2025 before turning to discuss the fourth quarter of 2025. Total revenues for the full year 2025 were $216.1 million, a 9% increase compared to $198.8 million for the full year 2024. The increase was primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch, partially offset by decreased HETLIOZ revenue as a result of generic competition. Let me break this down now by product. Fanapt net product sales were $117.3 million for a 24% increase compared to $94.3 million for the full year 2024. This increase in net product sales relative to the full year 2024 was attributable to an increase in volume. Fanapt total prescriptions increased by 28% compared to the full year 2024. Turning to HETLIOZ. HETLIOZ net product sales were $71.4 million for the full year 2025, a 7% decrease compared to $76.7 million in the full year 2024. The decrease was primarily due to decreased volume and price net of deductions. Of note, for the full year 2025, HETLIOZ continued to retain the majority of market share despite generic competition for over 3 years. And finally, turning to PONVORY. PONVORY product sales were $27.4 million for the full year 2025, a 2% decrease compared to $27.8 million for the full year 2024. For the full year 2025, Vanda recorded a net loss of $220.5 million compared to a net loss of $18.9 million for the full year 2024. This net loss included an income tax expense of $81.8 million compared to an income tax benefit of $4 million for the full year 2024, primarily driven by a one-time noncash income tax charge. The net loss for the full year 2025 included the impact of recording a valuation allowance of $113.7 million against all of Vanda's deferred tax assets. To reiterate, the recording of this valuation allowance is one-time in nature and is a noncash charge. Operating expenses for the full year 2025 were $367.3 million compared to $239.4 million for the full year 2024. The 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. Vanda's cash, cash equivalents and marketable securities as of December 31, 2025, were $263.8 million, representing a decrease of $110.8 million compared to December 31, 2024. Turning now to our quarterly results. Total revenues were $57.2 million for the fourth quarter of 2025, an 8% increase compared to $53.2 million for the fourth quarter of 2024 and a 2% increase compared to $56.3 million in the third quarter of 2025. The increases were primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch. Let me break this down now by product. Fanapt net product sales were $33.2 million for the fourth quarter of 2025, a 25% increase compared to $26.6 million in the fourth quarter of 2024. Fanapt total prescriptions in the fourth quarter of 2025 increased by 36% compared to the fourth quarter of 2024. HETLIOZ net product sales were $16.4 million for the fourth quarter of 2025, an 18% decrease compared to $20 million in the fourth quarter of 2024. The decrease was primarily due to a decrease in price and volume sold. PONVORY net product sales were $7.6 million for the fourth quarter of 2025, an increase of 17% compared to $6.5 million in the fourth quarter of 2024. The increase was attributable to an increase in price net of deductions. In the fourth quarter of 2025, Vanda recorded a net loss of $141.2 million compared to a net loss of $4.9 million for the fourth quarter of 2024. The net loss for the fourth quarter of 2025 included an income tax expense of $103.2 million compared to an income tax benefit of $1.6 million for the fourth quarter of 2024, primarily driven again by the one-time noncash income tax charge. Operating expenses in the fourth quarter of 2025 were $97.6 million compared to $63.5 million in the fourth quarter of 2024, primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the commercial launches. We've established a specialty sales force to market PONVORY to neurology prescribers around the country. We've grown this sales force to approximately 50 representatives at the end of 2025. To that end, the number of face-to-face calls in the fourth quarter of 2025 was more than twice the number of calls in the fourth quarter of 2024. Our Fanapt performance remains the focus of our commercial initiatives and encourages us to anticipate strong growth in 2026. With Fanapt, HETLIOZ, and PONVORY already commercially available and with the NDA recently approved for motion sickness, Vanda could have 6 products commercially available in 2026. Turning now to our financial guidance, Vanda expects to achieve total revenues from Fanapt, HETLIOZ, and PONVORY of between $230 million and $260 million. The midpoint of this revenue range would imply revenue growth in 2026 of approximately 13% compared to full year 2025 revenue. We have already seen significant growth in our commercial activities. Several lead indicators suggest a strong market response to our commercial activities related to Fanapt.

Thank you very much, Kevin. At this point, we'll be happy to address your questions.

Your first question comes from the line of Madison El-Saadi from B. Riley Securities.

Maybe I'll start with the pathway and the bioequivalent to Fanapt you've shown. I'm just curious if you could characterize any FDA communication on outstanding issues that arose during the review cycle, including any requests related to CMC or labeling scope that you could discuss. Additionally, assuming approval, is there a day one commercial strategy you could outline for us? Just recognizing it's really about transitioning patients from Fanapt to the new product.

Yes, thanks, Madison. First, this is an NDA and not a bioequivalence like a generic drug. While bioequivalence data are significant, consider it a completely new drug application. Regarding the review, we don’t provide incremental updates, but we are optimistic about receiving timely approval. As for the commercial plan, if we get approved later this month, we will need some time in Q3 for the commercial supplies to be ready. In the meantime, we’ll be able to share more details about the launch strategy and how it interacts with Fanapt.

I was wondering if you could comment on what you expect the commercial infrastructure size and scope to be for imsidolimab assuming timely approval?

Thank you very much. As you know, GPP is quite rare and most likely addressed with a small sales force visiting dermatologists and any advocacy organizations around this disorder. There is a better awareness than it used to be since the 2021 approval of specolimab from Boehringer Ingelheim. So we believe that a dedicated small specialty sales force will be the key commercial asset that is needed.

Is there any additional detail you can provide regarding promotional activities in support of Fanapt, particularly as this pertains to any direct-to-consumer campaigns you may have planned over the course of 2026?

At this time, we don't have a Visante campaign plan. The direct-to-consumer campaigns that Kevin mentioned focus on brand awareness for Vanda overall through sponsorships and direct-to-consumer efforts for both Fanapt and PONVORY. We expect this approach to continue similarly to the past year, and with the commercial launch of a new product, we anticipate having a dedicated campaign for that, but we do not have any concrete plans at this moment.

And then with respect to Nereus and tradipitant as a whole, can you maybe offer us some additional contextual information on the following three aspects? Firstly, could you confirm when you expect Nereus to be commercially available for the recently approved indication? Secondly, any additional feedback or context regarding the regulatory outlook for tradipitant? Lastly, what do you expect the timeline to be for the completion of enrollment in the envisaged Phase III trial assessing tradipitant and the attenuation or prevention of nausea and vomiting associated with GLP-1 receptor agonist drugs?

Of course. On commercial availability, we're working on preparing materials now, and we expect them to be ready by late Q2 or early Q3. In terms of the regulatory path in gastroparesis, we are now preparing for a hearing at the FDA. In terms of the US study for GLP-1 analog, we had a very strong Phase II study in prevention of vomiting and are now initiating a Phase III study, which we believe could produce results by late Q3 or Q4.

Just one last quick question for me. Regarding the iloperidone LAI, you mentioned in the prepared remarks that the Phase III program for iloperidone LAI is currently enrolling patients. Do you anticipate completing enrollment in that Phase III program before the end of this year?

Yes, it is enrolling. However, we're not satisfied with the speed. This is primarily due to delays in launching this study in Europe, where there is more resistance to conducting placebo-controlled studies, which has slowed down the rate of recruitment. It is encouraging that things are picking up in the U.S., but I don’t have good visibility on whether we will reach the recruitment goals by year-end.

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

This is Sam on for Olivia. A quick one for me. Could you provide some more color on the Fanapt GTN impacts given the increase in volume and the difference between that and the sales increase year-over-year?

Yes, so on a year-over-year basis, what we've seen is that the script growth outpaced overall revenue growth. There has been a relatively small reduction in net price due to a couple of gross-to-net items, which we highlighted during last year's earnings call. That was primarily related to the introduction of the Medicare benefit redesign. Additionally, we've seen an increased gross-to-net item and unfavorable gross item related to commercial co-pay support. This is reflected in the relationship between TRx growth and revenue growth.

Is that expected to stabilize, or could it keep increasing moving forward?

The Medicare piece has a phase-in; there was a 1% fee in 2025 that increases to 2% this year. In general, we would expect the gross to net to be consistent unless there is a significant change in the underlying business or payer dynamics. The dynamics on the new product will be significantly different and favorable relative to Fanapt, as it will receive a complete reset on the Medicaid URA calculation, which will positively impact revenue.

One more on the guidance this year, $150 million to $170 million at the midpoint seems like that could be 35% to 40% year-over-year growth. You mentioned in the prepared remarks a volume growth of 10%, give or take, at the midpoint. Does that imply net price will be growing by 30%? If so, why? Additionally, how much of that guidance range for 2026 seems like cannibalization from the launch in Q3?

Our revenue guidance range, the $150 million to $170 million, so the midpoint at $160 million points to that revenue getting to $160 million would be almost entirely TRx driven. With Medicaid and now the Medicare redesign as part of IRA, price increases are somewhat capped. The revenue growth is almost entirely volume-driven. Regarding cannibalization from the new launch, we are looking at it carefully, but as Mihael mentioned, any new revenue contribution will not occur until the second half of the year. We haven't communicated a price on Nereus yet; in terms of other treatments in the market for motion sickness, we expect our price to have a premium relative to those products. As Mihael mentioned, the launch is likely happening in late Q2 or early Q3, and we didn’t provide guidance at this time but are excited about the potential.

Regarding the Phase III trial, can you confirm if the Phase III trials will be designed similarly to the Phase II? Are you expecting to see the same 50% relative reduction in vomiting?

Yes, the design is going to be very similar. We are using a one-milligram challenge dose again for naive patients. As for the titration questions, it is logical; rapid titration may occur to see the drug work effectively. We do not expect that the drug will work initial dosing will be low, as outlined in the guidance.

That concludes the question-and-answer session. I'd now like to turn the call back over to Vanda management for closing remarks.

Thank you very much all for joining us. We will see you at the next call.

That concludes today's meeting. You may now disconnect.