Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) Q3 2022 Earnings Conference Call November 2, 2022 4:30 PM ET
Company Participants
Kevin Moran – Senior Vice President & Chief Financial Officer
Mihael Polymeropoulos – President & Chief Executive Officer
Tim Williams – General Counsel
Conference Call Participants
Operator
Good afternoon. My name is Abba and I will be your conference operator today. At this time, I would like to welcome everyone to the Vanda Pharmaceuticals Third Quarter 2022 Earnings Conference Call. [Operator Instructions] After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.
I would now like to hand the call over to Kevin Moran, Vanda’s Chief Financial Officer. Kevin, you may begin your conference.
Kevin Moran
Thank you, Emma. Good afternoon. And thank you for joining us to discuss Vanda Pharmaceuticals third quarter 2022 performance. Our third quarter 2022 results were released this afternoon, and are available on the SEC 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. Additionally, we have Tim Williams, our General Counsel and Gunther Birznieks, our Senior Vice President of Business Development and R&D Committee Member. Following my introductory remarks, Mihael will update you on our ongoing activities. I will then comment on our financial results before opening 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 annual report on Form 10-K for the fiscal year ended December 31, 2021, 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 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 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.
Mihael Polymeropoulos
Thank you, Kevin. And good afternoon, everyone. Thank you for joining us to discuss Vanda’s third quarter 2022 results. Over the last quarter, Vanda continue to focus on enhancing performance of its current commercial products, advancing clinical programs in leveraging innovation to position the company for long term growth. I will discuss some highlights of our clinical and regulatory efforts, and Kevin will discuss our commercial progress.
Patient Fanapt; our clinical program pipelines advancing with the recent completion of an enrollment in the Fanapt, bipolar mania clinical study, for which we expect results by the end of this quarter. Additionally, we have completed enrollment in our VQW-765 study in performance anxiety, for which also we expect results by the end of this quarter. On to dividend preparation of the new drug application gastroparesis is ongoing, with FDA submission expected in the first half of 2023. The submission will include the results from to adequate and well controlled studies in patients with idiopathic and diabetic gastroparesis, which provides substantial evidence of effectiveness in the indication. If approved, through the Fanapt will be the first treatment in more than 40 years, approved by the FDA for people with gastroparesis. Additionally, a 400-patient open label study of tradipitant in patients with gastroparesis is ongoing, which will provide further information on the safety and efficacy of tradipitant in gastroparesis.
We recently presented the results of the pooled analysis from studies VLY-686-3301 and VLY-686-2301 which included a total of 342 patients, 175 on yield dividend, 1067 on placebo, which showed significant improvements in the clinical endpoints or change of nausea. Percent nausea free days and the gastroparesis core symptom improve in scale GC SI at week for treatment. In the sub-population, which excludes non protocol compliant patients, as determined by PK analysis, a total number of 283 patients, highly significant effects were seen in each of these parameters. Improvements were also seen across the other core symptoms of gastroparesis as well. This work was recently presented at the American College of Gastroenterology Conference and received the Presidential Poster Award.
Through dividends efficacy is also appreciated by patients who are participating in an expanded access program some already for over the years. Through dividends in motion sickness. On to dividend, we’re also progressing with a clinical program in motion sickness, with a pivotal study currently ongoing and expected to be completed in the first half of 2023.
HETLIOZ; enrollment is ongoing in the clinical development programs of HETLIOZ for the treatment of delayed sleep phase disorder, and for sleep disturbances in autism spectrum disorder. Additionally, were preparing for the submission of a supplemental NDA for HETLIOZ in the treatment of insomnia. This submission will include the results of three adequate and well controlled studies. One four-week study in people with primary insomnia, and two times insomnia studies induced by phase advance of the sleep wake cycle. The studies show that HETLIOZ is effective in improving sleep onset difficulty in people with primary insomnia, with the effect observed as early as the first night of treatment. The supplemental NDA of the catalyst for insomnia is planned to be submitted to the FDA this quarter
VPO-227 in cholera. We recently announced that the FDA has granted orphan drug designation for VPO-227 for the treatment of cholera. Cholera remains a major public health challenge and recognized unmet medical need despite decades long public health efforts. We’re excited about the potential of VPO-227 to treat patients that suffer from cholera. We expect to submit an investigational new drug application to the FDA for VPO-227 in 2023.
Finally, we recently announced the research and development agreement with all parts of Korea to jointly develop a set of antisense oligonucleotides or ASOs based on all the passes proprietary modified peptide nucleic acids. These evolve in discovery and development platform is intended to support Vanda’s development of antisense oligonucleotide based precision medicine therapeutics.
Tim Williams, our General Counsel will now discuss highlights of our legal regulatory activities. Tim?
Tim Williams
Thank you, Mihael. I’d like to touch briefly on some key litigation activities. First, in intellectual property, that you probably know we had a trial last March in Delaware Federal Court, asserting a family of HETLIOZ patents again several generic drug manufacturers. Patents in this litigation have expertise ranging from 2033 to 25 — 2035. So positive victory on any single patent extends HETLIOZ’s exclusivity, at least into 2033 and possibly all the way into 2035. We expect a decision from the court no later than the end of this year.
I’ll turn for a moment to our ongoing regulatory litigation. We continue to challenge regulators when we believe those regulators have ignored or violated law in a manner that harms our business or impacts our ability to help patients. A prime example of this is our lawsuit against CMS filed in April this year. At the end of 2021, CMS issued a new rule that expanded the scope of products subject to certain rebate requirements. And it did so by reversing an agency interpretation that had been in place for over 10 years. Rather than getting greater authority from Congress to expand its rebate powers. CMS simply changed its long-standing interpretation of the law and issued the new rule. This new rule now subjects novel product formulations to expensive rebate requirements, and has an immediate financial consequence for innovators like Vanda. It also negatively impacts the viability of future products development across the industry to the detriment of patients suffering with unmet medical needs.
We are not the only company to challenge CMS on this rule in court. But we hope to be the first to prevail and striking it down. This is just one example of our efforts to advance standards business by holding regulators accountable to the law. And our other efforts are more fully described in our public disclosures and publicly available court papers.
With that, I’ll turn it back to Mihael.
Mihael Polymeropoulos
Thank you very much, Tim. I’ll turn now to Kevin to discuss our commercial progress and financial results.
Kevin Moran
Thank you, Mihael. I’ll begin by summarizing our financial results for the first nine months of 2022, before turning to discuss the third quarter of 2022. Total revenues for the first nine months of 2022 were $189.9 million, a 5% decrease compared to $200.7 million for the same period in 2021. HETLIOZ net product sales of $119.6 million were the primary contributor and driver of our revenues for the first nine months of 2022 and so on 8% decrease compared to the same period in 2021. The first nine months of 2022 reflect the continued reimbursement challenges for prescriptions for patients with non-24.
Turning now to Fanapt; Fanapt’s net product sales of $70.3 million for the first nine months of 2020 to reflect a 1% decrease compared to the same period in 2021. For the first nine months of 2022, being recorded a net loss of 600,000 compared to net income of $26.1 million for the same period in 2021. The net loss for the first nine months of 2022 includes an income tax provision of $2.3 million as compared to an income tax provision of $7.7 million for the same period in 2021.
Operating expenses for the first nine months of 2022 were $190.2 million, compared to $167.1 million for the first nine months of 2021. The $23.1 million increase was primarily driven by both higher R&D expenses and higher SG&A expenses. The increase in R&D expenses was primarily driven by increases related to our late-stage clinical program for Fanapt, as well as a $3 million upfront fee expense in the third quarter of 2022 in consideration for entering into the previously announced OliPass agreement. The increase in SG&A expenses was driven primarily by higher costs associated with legal support related to ongoing litigation, sales activities, commercial support, and other corporate activities. In U.S. cash, cash equivalents and marketable securities referred to US cash as of September 30, 2022 was $454.8 million, representing an increase of $48.8 million in cash, or 12% as compared to September 30, 2021, and an increase of $22 million or 5% as compared to December 31, 2021.
Turning now to our quarterly results. Total revenues for the third quarter of 2022 were $65.3 million, a 7% decrease compared to $70.1 million for the third quarter of 2021. HETLIOZ net product sales were $41.3 million for the third quarter of 2020, a 9% decrease compared to $45.6 million for the third quarter of 2021. Consistent with the first nine months of 2022, net sales for the period reflect the continued reimbursement challenges for prescriptions for patients with non-24.
Turning to Fanapt. Fanapt net product sales for the third quarter of 2022 were $24 million, a 2% decrease compared to $24.5 million for the third quarter of 2021. Fanapt prescriptions for the third quarter of 2022, as reported by equivalent exponent decreased by approximately 2% compared to the second quarter of 2022. For the third quarter of 2022, Vanda recorded net income of $3.3 million, compared to net income of $7.8 million for the third quarter of 2021. Net income for the third quarter of 2022 included an income tax provision of $2.2 million as compared to an income tax provision of $3 million for the same period in 2021.
Operating expenses for the third quarter of 2022 were $61.4 million compared to $59.3 million for the third quarter of 2021. The $2.1 million increase was driven primarily by higher R&D expenses, partially offset by a decrease in SG&A expenses. The increase in R&D expenses was driven primarily by costs associated with our late-stage clinical programs for Fanapt antidepressant and the $3 million upfront fee expense in the third quarter of 2022 in consideration of the previously discussed slowly past agreement. The decrease in SG&A expenses was driven primarily by a decrease in DTC awareness spending, partially offset by an increase in salesforce expenditures. Operating expenses for the third quarter of 2022 were essentially flat as compared to $60.9 million for the second quarter of 2022. And again, the third quarter operating expenses included the $3 million upfront fee associated with the OliPass agreement.
Vanda’s cash balance as of September 30, 2022, again was $454.8 million, representing an increase of $13.9 million or 3% as compared to June 30, 2020. Vanda’s providing an update to its prior 2022 guidance. Vanda expects to achieve the following financial objectives in 2022. Net product sales from both HETLIOZ and Fanapt have between $240 million and $270 million. This compares to prior guidance of between $240 million and $280 million.
HETLIOZ net product sales of between $150 million and $170 million. This compares to prior guidance of between $150 million and $180 million. Fanapt net product sales of between $90 million and $100 million, and year end 2022 cash are greater than $450 million. This compares to prior guidance of greater than $440 million.
With that, I’ll now turn the call back to Mihael.
Mihael Polymeropoulos
Thank you very much, Kevin, and Tim. At this point, we’ll be happy to answer any questions we have.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question today comes from the line of Chris Howerton with Jefferies. Your line is now open.
Unidentified Analyst
Hi, this is Atrigger [ph] for Chris, can you go over what led to your decision to file on sNDA for HETLIOZ and for insomnia now? Have you discussed your application with the FDA? And will you be using the 2008 study? Or is there some new data that you’re submitting?
Mihael Polymeropoulos
First of all, just to clarify, we have not filed yet the sNDA. We plan to file this quarter. And yes, the chronic insomnia four-week study is the 2008 study. And the two additional studies in that will support this application are changing insomnia studies are phase advance that we have reported in the past.
Unidentified Analyst
Got it. Thank you.
Operator
There are no further questions at this time, I would now like to turn the call back over to Vanda management for closing remarks.
Kevin Moran
Thank you very much for joining us for this call. And we’ll talk to you in the future. Thank you.
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