Vanda Pharmaceuticals Inc. (VNDA) September 2026 Conference Transcript

Hello, everybody. Welcome here and joining us right now. Sorry, I'm a little winded. I was running here. My name is Jan Zies. I'm an equity research associate on Ram Silverado's team. Thank you for coming. It's my pleasure to introduce Kevin from Avanda Pharmaceuticals.

Could you give us a brief introduction going into, you know, for those who are still trying to get familiar with vonda uh could you give a simple snapshot of the company today and how the portfolio has broadened overall yeah perfect and first off i'd like to say thank you jan and the hcw team for having us here thank you very much um and yeah so to kind of table set for folks um as we entered 2026 we had three products on the market three commercial products we had finapt which is an atypical antipsychotic approved for bipolar and schizophrenia um doing a little more than 100 million of revenue per year. We had Hetliose, which is an orphan product approved for two sleep indications, non-24-hour sleep-wake disorder and nighttime sleep disturbances and Smith-McGinnis syndrome. And then we had a third product, Ponvorie, which is an S1P approved for multiple sclerosis. As we entered 2026, we had two new products approved, one just before the end of the year and one at the beginning of the year. The first one of those was Nereus for motion sickness, And then Bisanti, also an atypical antipsychotic, approved for bipolar and schizophrenia. So as we are here today, we have five approved products in the U.S. market, four of which have been launched, and Bisanti, which is expected to be launched by the end of the year. And then in addition to those five products, we have a potential sixth product approval later this year, which is Imsidolimab, which we licensed from Anaptis in 2025 and have a PDUFA date for generalized pustular psoriasis, GPP, by the end of the year. In addition to those six potentially approved products by the end of the year, we have a number of upcoming exciting clinical readouts within the next few quarters. So prior to the end of this year, so by the end of 2026, we have phase three readouts for Hetlios in delayed sleep phase disorder, another product called VQW-765 in social performance anxiety, and then Nereus in vomiting and nausea induced by a GLP-1. So those are all expected to read out prior to the end of this year. And then we have for Bisanti, a phase three program underway for MDD, which is expected to read out in the first half of next year. So as we stand here today, a very diversified commercial portfolio, and it's growing in the years to come, hopefully, with a number of exciting clinical readouts, which hopefully will lead to either additional new product approvals or label expansions into, you know, large and exciting markets.

That's really exciting. You seem like you guys are really busy. We are. And I'd like to touch on all of those going forward, but briefly before we do so, you know, looking past the heavier investment years, how should people start thinking about 2027 at a higher level?

So if you look at this year, we began the year with cash of about $260 million. We ended the second quarter with about $170 million. So just to give you some sense of kind of what the burn trajectory had been to date. And what we talked about on the Q2 call is that we're at a somewhat high watermark, I would say, on the operating expense perspective, given the four phase three programs that we have reading out fairly soon, the commercial inventory production that's necessary for these two and maybe three commercial launches, as well as the build out of commercial infrastructure to support those launches. So what we expect to see as the year progresses and into 2027 is that as those activities begin to complete, we'll see expenses begin to moderate, likely not in Q3. I think Q3 will look pretty similar to Q2, but as early as Q4 and into next year. So, you know, we at this point with as we've completed a number of those investments that we've been working hard on for several years to kind of get to these milestone moments, the outcome of those will have a significant impact on what 2027 looks like and where we're making our next investments. But, you know, the vision that we have for next year is that we've got a growing psychiatry portfolio with a launch of Basanti, a switch strategy on, you know, as FNAPT reaches its end of exclusivity and Basanti comes into the market. And then that hopefully developing into a potential label expansion with, you know, if we see good MDD data next year and move towards an SNDA, and then, you know, additional products that round out kind of this diversified revenue opportunity. And, again, some of the outcomes of those clinical readouts will also determine kind of what the next clinical catalyst, you know, might be for the company, depending on those outcomes.

Great. I think that's the perfect segue, actually, into the next part of your pipeline, your psychiatry franchise. And I'm wondering, could you walk us through how you think about FNAPT and Basanti and the part they play in the greater franchise you have?

Yep, absolutely. So the reminder for folks is FNAPT has been on the market for now over 15 years. It was originally approved in acute schizophrenia. Subsequent to that had maintenance added to the label. And then in 2024, had the bipolar indication added, right? The product is expected to lose exclusivity towards the end of next year. And it's, you know, done very well in recent years as we've put additional commercial resources behind it with the bipolar expansion. You know, we've seen 30%, you know, kind of revenue and script growth year over year last year. And our guidance this year would would tell a similar story right um as we head into 2027 though with the bisanti product coming to market bisanti is bioequivalent to finapt right so the uh the kind of bisanti launch has you know at a minimum two elements to it right switching existing patients of finapt to bisanti and then switching patients that are on other medications to bisanti right so growth growth through through additional volume growth from you know patients that are not currently on um as we look at the opportunity there the other thing that's important to highlight is that on gross to net finapt has a gross net that's in the neighborhood of about 50 is what we've said and the largest driver of that uh is the medicaid ura given that finapt has been on the market for as long as it has uh the medicaid ura is essentially a hundred percent of the of the medicaid business so we essentially generate no revenue from our medicaid business line on FNAP. With Basanti coming to market, you actually get a reset on pricing there. And so the discount or the gross to net adjustment on Medicaid will be 23.1% at launch. Because of that, the gross to net on Basanti is expected to be in the mid-30s as compared to the 50% that we currently see on FNAP. And so that provides a significant revenue growth opportunity outside of volume just on the ability to have the medicaid price reset um so that's kind of how we're seeing things you know play through on the switch and then kind of the the the next leg to the stool or next leg to the story is that um as we head towards this phase three readout on mdd uh depending on what that data shows hopefully we're moving towards an snda next year and then a label expansion as early as 28. so in our minds 27 you know launch and switch and then 28 label expansion and additional, you know, inflection point opportunity for growth, just given the size of the MDD market relative to the size of the bipolar and schizophrenia markets.

Got it. So you're talking about MDD as the next, being the next development step. What would you say is the most attractive, or why do you find that indication really attractive?

Yeah, so, you know, for a couple of different reasons. First and foremost, you know, when we're looking at potential indications, you know, we're looking for unmet need, right, where patients are, you know, either underserved or could be better served by having another option available. And, you know, unfortunately, the atypical space is that, you know, scenario where there's a number of treatment options available, but there's no silver bullets and, you know, providing additional alternatives to patients and providers, you know, will meaningfully benefit, you know, those folks. And so that's always kind of first and foremost as we're evaluating programs. And because of that in the space, we think there's certainly an opportunity for Basanti to, you know, be a meaningful treatment option for patients on MDD. Additionally, as we evaluate market opportunities, you're always considering, you know, what the dynamics of a market could be and whether it's obviously there's going to be a positive ROI on pursuing that type of market. When we look at the patients in the schizophrenia patient population, you know, varying estimates, but in the neighborhood of let's say 3 million patients in the U.S., you know, bipolar, you know, two, maybe three times larger than that, right? And from a patient population, you know, bipolar patients tend to be more accessible than schizophrenia patients to commercial efforts. And then MDD is even further on that spectrum with a patient population estimates in the 20 million neighborhood, right? And again, an accessible patient population for commercialization efforts. So it's both larger and more accessible and therefore provides, you know, we think a great opportunity to provide patients with an additional treatment option and also a very potentially lucrative option for the company from an ROI perspective.

Got it.

So taking your psychiatry franchise as a whole uh how do you think about the scale of that business over you know the next several years or so yeah so so as we look you know towards the next couple years first just kind of from where we sit now so when we received the bipolar approval for that back in 2024 we first we had a sales force in place at that time of about 50 uh sales reps so relatively small and that was given the nature of the finap product and the indication of the time that was sufficient to support that need um once we received that bipolar uh indication we expanded the sales force to 150 in 2024 um and then again in 2025 we doubled it to about 300 right so just give you some side and that's where we stand right now um across the space that's i would say um in the competitive size but you do see many of our competitors with larger some much larger um sales forces and so we think that that Salesforce gets us a good, you know, reach and frequency with the providers that we're targeting. But if we see MDD data that's positive and move towards, you know, hopefully an approval in that indication, we may need more, a larger Salesforce to support what is a larger prescriber base and target universe. And so we feel like we're very well positioned to support our existing business in both FNAF and Basanti. And I mean, that's both from a sales perspective and then all the other aspects of kind of commercial infrastructure but again with good news could come the need for you know additional investment to make sure we're maximizing you know the opportunity and our ability to get in front of uh the appropriate providers absolutely uh moving away from your psychiatry franchise now towards nearest uh specifically now with motion sickness i find this to be a really interesting uh opportunity given that the market's not really well established here.

How are you framing the opportunity overall? Yeah.

So when we look at the market opportunity for Nereus, we also find it very interesting. So there's a very large potential market. There's about 70 million people in the U.S. impacted by motion sickness. There's actually more than 10 million people seeking treatment on an annual basis. So a very large market and a very large market where people are seeking treatment. In addition to that, though, there's a potentially kind of not well quantified potential large market of people that are impacted, but not seeking treatment. And that's because they just don't participate in the activities that are causing motion sickness, right? So if I get on a boat and I'm, you know, terribly impacted by motion sickness and either I don't, I, you know, I don't want to take tramamine because whatever the side effect profile is, I just choose not to go on boats, right? And so there's an additional population that's again, a little bit more difficult to quantify. That's people that don't, don't seek treatment because they don't experience symptoms because they don't participate in those activities, right? So very large market. That being said, it's a very broad market. So it's not necessarily a market where you can go after a very specific, you know, segment. It's a very broad general market, right? And so we think it's a very large opportunity. We think there's, you know, a number of patients that would are underserved by existing options and would find this as a useful and meaningful treatment. We think, though, that it's going to take some time, given the breadth, you know, the broadness of the market, to raise the awareness level, right? Because that's to the point of, you know, it's hard to target a subset of the market and run very directed commercial efforts. It's a pretty broad market, you know, in terms of you have to kind of do broad reach to access those. So we think it'll take, you know, some time to establish, you know, the large market, but we think the potential market size over time is tremendous, right? And so we're excited with that front. And from a commercial plan perspective, what we communicated earlier this year was that the product became available in May, and we launched our direct-to-consumer website where you can purchase the product, you know, cash pay, right? And so that's a very novel, you know, approach in this space. It's also available, obviously, through insurance channels, and we'll be actively pursuing that as well. But that was, you know, kind of the initial launch with some deliberate DTC and commercial efforts supporting it. On the Q2 call, what we additionally commented on is that our psychiatry sales force and our neurology sales force would begin detailing Nearest to their target universe in the later part of this year as we think there's significant overlap with those targets and providers that may be seeing patients with motion sickness. So very early in the launch of those activities, we'll be looking forward to sharing updates on those in coming quarters about the receptivity in the market to nearest by providers and hopefully script volume growth through that channel as well as the direct-to-consumer channel.

That's great. Those all sound like very encouraging early signals. Is there anything other than what you just listed that you'd also consider to be these positive early signs leading up to the launch?

I think from a much more qualitative perspective, a significant amount of interest in the market about the product right um and you know i think that with the early response we've seen from um again from a qualitative perspective from the advertising and from you know our our interactions with prescribers is positive now whether whether that translates to scripts and revenue and over what period of time remains to be seen um but from a qualitative perspective very encouraging you know kind of uh feedback that we that we continue to hear got it now moving from motion sickness now to glp1 nausea uh you know there's been a lot of interest in the glp1 nausea idea overall and i'm i'm curious what made the opportunity worth uh pursuing yeah so uh you know in the glp1 space obviously a rapidly growing you know market right for you know the products that are already approved and in market and the number of products that are in development um as you look across those products, you know, almost universally, they all have significant nausea and vomiting side effect profiles, which is the reason why they all have significant titration schedules. And so folks, you know, take many months to get to the actual therapeutic levels because they have to mitigate that side effect profile, right? So the reported incidents of nausea and vomiting in the GLP-1 scene vary, you know, widely, but in many cases are cited as being over 50% of patients, right? And another figure that you see is there's significant amount of discontinuations in the GLP-1 space, also of about 50% within the first year or so, many of those due to the side effect profile, right? So there's a significant issue here in the market in terms of patients being unable to reap the benefit of these medications over long periods of time due to the side effect profile of the medications, right? So very significant opportunity there, right? And And the interesting part about it, which isn't always the case in any business or drug development scenario, is this is largely a win-win-win scenario, meaning payers win in the sense that they would get these patients to be able to stay on the therapy, get the benefit, and therefore hopefully have lower long-term health care cost issues. Patients and providers benefit, obviously, because they're staying on the medication that the patient and provider want them to be on. And then we would benefit, obviously, because we would be selling the product and generate revenue, right? So we think it's, you know, a tremendous opportunity. As we look across the landscape, you know, we think we're one of, you know, the kind of leaders out in front in terms of developing something in this indication. Our phase two data was very positive. So if you remember, we had a placebo arm and drug arm where patients were taking one milligram of Wagovi with either drug or placebo. Reminder, their one milligram is about the third month in the titration schedule for You start with 0.25, then go to 0.5, then go to one. What we saw in the trial was that about 60% of the patients in the placebo arm experienced vomiting, some of them multiple or many vomiting incidents in the days that we're talking about. And then in the drug arm, we saw the vomiting incidents at about 30%, so a very significant effect size, right, and very encouraging. And subsequent to that, by the way, Nereus was approved in motion sickness. So at the time we had the phase two data, Nereus was not yet approved in any indication, right? So we had the positive phase two data, had NERIUS approved in motion sickness, and then initiated our phase three program. And the phase three program, as a reminder, is expected to read out by the end of this year. And the trial design is very similar to the phase two trial design that we ran. So we're obviously very optimistic about those results and what the path forward could be there. And we think it could be a very significant opportunity for all the reasons that I highlighted, but maybe just one more to flag is it's not necessarily something where you can readily identify who is going to have kind of the debilitating nausea and vomiting when you're prescribing a GLP-1. So it's not necessarily something that is limited to a subset of folks that are experiencing symptoms. It may be something that's used in more kind of a, you know, preventative measure, right, as we're looking at that. So very exciting, very, you know, very large market, you know, in terms of the GLP-1 market.

And we think, you know, as an adjunct to that, this could be a very large market opportunity we felt the phase two data was very compelling it subsequently has been approved in a different indication and the phase three trial again is similar in design and so we're excited to get to those results excited to see those results as well uh just in the interest of time i'd like to quickly you know ask you a little bit about quimilza uh and then you know in closing what you could see for the upcoming for the effort vanda So you have a December PDUFA for quimilza in GPP. Can you frame the opportunity for us?

So as we look across the potential GPP space, you know, orphan indication, varying estimates in the, you know, 5,000 to 30,000, you know, kind of depending on where you look in terms of what the potential population is. But these folks, you know, that are experiencing this, you know, need treatment. So this is, you know, the folks that are actually experiencing these flares need treatment. There's an existing product approved, which is Spavigo, which has done very well in the space in, you know, being the first approved for GPP. We think that there's certain items about Quimilza that could make it a very interesting medication for prescribers and patients and have a very, you know, significant role in the space for GPP. um coupled with you know some of the time we're looking at commercial opportunities you know you may be saying hey we're going to need to have a significant amount of DTC to support this opportunity Quibbles is not really that type of opportunity it's much more akin to traditional orphan opportunity where we think we can do it in a very efficient commercial model as well which also makes it very you know appealing as we think of substantial revenue opportunity that can also be uh commercialized in a very efficient fashion great you've given us a lot

of good stuff to digest. In closing, when you look at Vanda as it stands today, which area do you think has the best chance of becoming much larger than the market currently assumed?

Yeah, good and bad, I think there's a number of different ones. So it's hard to pick one to focus on, but maybe just given the proximity of them, I would say, you know, the Basanti opportunity, both in the existing market that it's approved in, but also in potentially the MDD expansion in the near future, It provides for a very large opportunity. And then the GOP one for Nereus is just such a large market with such an unmet need that that also could be very exciting. And we've got data right in front of us. So again, we love all of our children, right? But I think in terms of proximity-wise, those are the ones that we're kind of most excited about as near-term kind of inflection.

Kevin, thank you so much again for coming and doing this fireside chat with us and to all the investors for coming and attending.