Good day, ladies and gentlemen, and welcome to the first quarter 2008 Vanda Pharmaceuticals Incorporated earnings conference call. My name is Katrina and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I will now turn the presentation over to our host for today's call, Mr. Steve Shallcross, Senior Vice President and Chief Financial Officer. Please proceed.

Thanks, Katrina. Good morning and thank you for joining us to discuss Vanda Pharmaceuticals' first quarter 2008 performance. Our first quarter 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, and a telephone replay of the call will be available through May 8th. Joining me on today's call is Dr. Mihael Polymeropoulos, our President and CEO. Following my introductory remarks, Dr. Polymeropoulos will update you on our ongoing activities and plans for our lead programs during 2008. Then I will return to comment on our financial results for the first quarter and discuss our 2008 financial guidance before opening the lines for your questions. Before we proceed, I would like to remind everyone that various statements we make on this call will be forward-looking statements within the meaning of federal securities laws. Words such as, but not limited to, believe, expect, anticipate, estimate, intend, plan, target, likely, will, would, and could, and similar expressions or words will identify forward-looking statements. Our forward-looking statements are based on current expectations that involve changes in circumstances, assumptions, and uncertainties and other risks. These risks are described in the ‘Risk Factors’ section of our Annual Report on Form 10-K for the full year ended December 31, 2007, which is available on the SEC's EDGAR system and on our website. We encourage all investors to read this report and our other SEC filings. The information we provide on this call is provided only as of today, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events, or otherwise. With that said, I would like to now turn the call over to our CEO Mihael Polymeropoulos.

Thank you, Steve. Good morning and thank you very much for joining us. I will start with a review of our lead program, Fanapta, formerly known as Fiapta or iloperidone, for the treatment of schizophrenia. As you know, we expect a regulatory action on our NDA on or around July 27th of this year. In the meantime, we are continuing our pre-launch commercial activities, including the development of our positioning, messaging, targeting, and managed care strategies, alongside our ongoing publication and presentation efforts. In the past few months we have made significant progress with our publication efforts. Peer review papers on the short-term and long-term Phase III efficacy and safety studies were published in the April issue of the Journal of Clinical Psychopharmacology. In addition, the journals of Molecular Psychiatry and Pharmacogenomics have also recently published papers detailing some of our important pharmacogenetic findings. You may access these publications through our website. We will also have a major presence at the upcoming American Psychiatric Association meeting to be held next week in Washington, D.C. In addition to having data from our Fanapta studies presented in 10 posters, we are also sponsoring the symposium on Genetics in the Treatment of Schizophrenia. To further address the questions from the investment community, on Tuesday, May 6th at 6.00 p.m. Eastern we will be hosting an analyst meeting. At this meeting, two leading physicians will be presenting clinical data from the meeting and will be available to answer questions. For those of you not attending the conference, our analyst meeting will be webcast, and we invite you to listen live or by replay. We believe that Fanapta will occupy an important place among the available treatments for schizophrenia, a disease with a significant unmet medical need, and we continue to prepare for its approval…

Thanks Mihael. Overall, our first-quarter results reflect the progress we have made on the pre-launch commercial activities for Fanapta and the Phase III trial for tasimelteon. Our R&D expenses for the quarter totaled $11.1 million, compared to $12.6 million in the fourth quarter of 2007, and $10.6 million in the first quarter of 2007. The quarter-over-quarter decrease is primarily attributable to lower tasimelteon clinical program costs including the ongoing Phase III tasimelteon chronic primary insomnia clinical trial for which we plan to report top-line results in June of 2008. The increase in R&D expenses in the first quarter of 2008 relative to the first quarter of 2007 is primarily attributable to the same tasimelteon trial, which we initiated in late 2007. General and administrative expenses totaled $9 million in the first quarter of 2008, down from $9.5 million in the fourth quarter of 2007, and up from $6.2 million in the first quarter of 2007. The sequential decrease in G&A expenses in the first quarter of 2008 relative to the fourth quarter of 2007 is primarily due to lower costs as a result of the timing of specific pre-launch commercial activities for Fanapta. The increase in G&A expenses in the first quarter of 2008 relative to the first quarter of 2007 is primarily due to increased stock-based compensation charges, salaries and related costs of non-R&D personnel, marketing, insurance, and facilities expenses. Employee stock-based compensation expense recorded in the first quarter of 2008 was $5.1 million. Of the total $5.1 million of non-cash charges, $1.1 million was recorded in R&D expenses and $4 million was recorded in G&A expenses. In the fourth quarter of 2007 and the first quarter of 2007, total stock-based compensation was $5.2 million and $4 million, respectively. The increase in stock-based compensation from the first quarter of…

Thank you, Steve. As always, I am extremely proud of our team and their performance. We look forward to some significant upcoming milestones, most notably, the regulatory action on Fanapta expected at the end of July of this year and the top-line Phase III clinical results on tasimelteon expected in June. We look forward to providing you with updates on these programs in the near future. Operator, we'll be happy to address any questions at this time.

(Operator instructions) Your first question will come from the line of Corey Davis representing Natixis. Please Proceed. Corey Davis – Natixis Bleichroeder: Thanks very much. A Geodon ZODIAC study is now out and been presented a couple times and Pfizer has done very little to promote the fact that the study showed no difference in cardiac outcomes between Geodon and Zyprexa. So I guess the question is how relevant is this study to iloperidone in kind of putting to rest the idea of QTc affect clinically and any other thoughts you might have about some of the details of the study?

Thank you, Corey. We think that the study is quite significant because it confirms what physicians already know and they are telling us. And that is that they do not believe that QTc-prolonging effects of drugs in this class of atypical antipsychotics has any clinical significance in cardiac outcomes. And just to remind everyone on the call, (inaudible) several years back. One of the commitments they have is to run an outcome Phase IV study comparing Geodon and Zyprexa and measuring cardiac outcomes and specifically mortality. And the ZODIAC study that was recently presented – concluded and presented actually confirms the fact that despite the QTc-prolonging effects of Geodon, there are no clinically significant differences on cardiac mortality between this drug and Zyprexa, the (inaudible) compound that is not known to have a QTc-prolongation. And in terms of Fanapta, this is important because it confirms our assertion from all along that while Fanapta does prolong the QTc in a fashion similar to Geodon, it is not expected to translate to any cardiac events and has not translated to any cardiac events in the course of the Phase III program. Corey Davis – Natixis Bleichroeder: Great. And then next question would be I know you can't give the intimate details of your FDA interaction, but have you asked about the potential for an advisory panel and what do you think the chances are that you will have one getting – or getting much closer to the PDUFA date?

Yes, thank you. Yes, we have. And the answer is what you expect it to be. An advisory panel has not been scheduled at this time. I know this is not very informative. Maybe I can say what we believe advisory panels are scheduled for are for issues that the FDA would like to have additional advice from external experts. We have no indication of course today that an advisory panel will be convened or not convened. However, times suggested that the next few weeks will clarify this question because of the fact that there is usually a six- to eight-week notice to the sponsor of an advisory committee panel coming and the advisory committee panel has to convene a few weeks before the action date. If you calculate all this backwards you will arrive at the conclusion that we should have a definitive answer in the next few weeks. Corey Davis – Natixis Bleichroeder: Okay. Thanks, Mihael.

Your next question comes from the line of David Amsellem representing FBR. Please proceed. David Amsellem – Friedman, Billings, Ramsey: Hi, thanks for taking my questions. So just looking beyond the PDUFA for iloperidone, can you elaborate on your plans for your build-out of your sales force and if you are exploring potential co-promotion arrangements? And then secondly, on the sales force question, do you expect that there will be any contract sales force arrangements that will go into your commercial organization? Thanks.

Thank you, David. Let me recap a little bit of what the current strategy is around preparing for launch. We have made a decision to put our major effort in pre-sales activities, and that means concentrating on marketing activities, publication activities, managed care, infrastructure activities, and trade activities. On the sales side, our activities today is mostly sizing and targeting, so we will be ready at launch to implement. Now your question of whether we think this is a solo launch, a partner launch, and how the build-out will happen in exact means, I cannot give you a definitive answer because we have not made one yet. However, we are examining all these options. And just to be a little more clear, we are of course continue to be open and explore potentials for co-promotion in the U.S. and partnerships ex-U.S. So this will continue to be an element of our strategy. On the question of whether we are going to use contract sales organizations or not or a combination of in-house and contracts, it is not clear yet. However, all these options are being examined as we speak. David Amsellem – Friedman, Billings, Ramsey: Okay, that's helpful. And then one more question, if I may, just on 162. Just thinking beyond the data readout next June, what – and given your current cash position, what additionally can you do in terms of next steps beyond this current chronic insomnia study?

Thank you. First of all, just for clarity, the results are this June, this coming June. So in the (multiple speakers) David Amsellem – Friedman, Billings, Ramsey: That's what I meant, this June. Right.

Okay. And clearly while we are going report the top-line results, there is quite a bit to be done for top-line results in a given study. Now, our continuing efforts are dual. We are putting together a very thorough understanding of the options that we have in front of us with tasimelteon. Given the mechanism of action we understand that's going to be applied for the treatment of a series of sleep and mood disorders and we are clarifying that plan. Now the second effort is taking very concrete steps to clarify the path to full development and submission of an application for tasimelteon. So what that means is that we do not expect to initiate new clinical trials in the next four to six months, but certainly we would be moving into new clinical trials by the end of this year. But we should be able to give you a lot more detail post the results of the study and a timetable for this compound. David Amsellem – Friedman, Billings, Ramsey: Okay, thanks.

Thank you, David.

Your next question comes from the line of Laurence Bleicher representing Noble Financial Group. Please proceed. Laurence Bleicher – Noble Financial Group: My only remaining question is on the cash guidance. The burn rate of the last couple quarters would imply that the cash guidance is quite conservative or is taking into account a significant ramp up in the – and I think Fanapta commercial activities. So could you give us a sense perhaps as to which of these is more the case? And if it is implying a significant ramp up in Fanapta commercial activities, how complete an extent will the launch organization be able to the built out with cash that's already on hand for the company? Thanks, guys.

Okay. Thanks, Laurence. I think that the best way to look at this is that for Q2 expenses will be very similar to Q1. You will see a slight decrease in R&D and a slight increase in marketing activities, but the plan is primarily back-end loaded post PDUFA and that gives us a tremendous amount of flexibility depending on what the outcome is on the PDUFA action date. Does that help you? Laurence Bleicher – Noble Financial Group: Yes, that does help. Thanks. With regard to the back-end loaded plan, could you expand a little bit more on just how thorough of a foundation to launch you are able to lay with the current cash on hand? It sounds like you can go most of the way towards a successful launch with cash that's currently on hand, is that a fair statement?

Yes, maybe let me reiterate the timeline that we have communicated before and that is that with an expected PDUFA date of July 27, 2008 we have communicated that our anticipated launch will be in the first quarter of 2009. So with that, while we cannot give you detail of how much can we progress towards the launch, certainly we have enough time to prepare for a Q1 launch. Laurence Bleicher – Noble Financial Group: Thank you, guys.

With no further questions in queue, I would now like to turn the call back to management for closing remarks.

Thank you. Let's conclude this first quarter investor call. We thank you all for your interest and support of Vanda and we look forward to speaking with you again next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.