Vanda Pharmaceuticals Inc. (VNDA) Q2 2020 Earnings Report, Transcript and Summary

Welcome to the Q2 2020 Vanda Pharmaceuticals Inc. Earnings Conference Call. My name is Vanessa and I'll be the operator for today's call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Kevin Moran, Vanda’s Senior Vice President and Chief Financial Officer. Kevin, you may begin.

Thank you, Vanessa. Good afternoon and thank you for joining us to discuss Vanda Pharmaceuticals second quarter 2020 performance. Our second quarter 2020 results were released this afternoon and are available on 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 and CEO. Following my introductory remarks, Mihael will update on our ongoing activities, I will then comment on our financial results 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. Our forward-looking statements are based on current expectations that involve risks, changes in circumstances, assumptions and uncertainties. These risks are described in our risk factors and management discussion and analysis of financial conditions and results of operations sections of our annual report on Form 10-K for fiscal year ended December 31, 2019, as updated by our subsequent quarterly report 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 SEC filings. The information we provide on this call is provided only as of today, and we undertake no obligations 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. First of all, I would like to congratulate Kevin Moran for his new role as the Chief Financial Officer of Vanda and we wish him every success. Good afternoon, everyone and thank you for joining us. While the world continues to face challenges related to the COVID-19 pandemic, Vanda remains focused on ways we can innovate and improve the lives of the patients we serve. I will begin with an update on our second quarter 2020 financial performance and then provide an update on the business. I'm encouraged by the record performance of our commercial projects during the second quarter of 2020. Despite the challenging climate, we reported a 5% year-over-year total revenue growth and a 7% growth as compared to the first quarter of 2020. HETLIOZ revenues grew by 10%, compared to the second quarter of 2019, and 18% compared to the first quarter of 2020. While we saw a decline in Fanapt revenues compared to the second quarter of 2019, Fanapt performed in line with other branded drugs in atypical antipsychotic class during the second quarter of 2020. Our sales representatives have shown great flexibility in their ability to adapt to the change in environments in their territories and have found ways to effectively serve doctors both remotely and in person. In June, we began our direct-to-consumer campaign on schizophrenia and Fanapt aimed at creating awareness about schizophrenia and encouraging people to learn more about therapeutic options and Fanapt. The program has been well received by people with schizophrenia and their friends, as well as healthcare practitioners. As we reported on Monday, the FDA accepted our filings for HETLIOZ in the treatment of Smith-Magenis Syndrome, with a priority review of six months with a target action date of December 1, 2020. We look forward to working with the FDA during the review of our applications as we continue our efforts to bring this important treatment to patients and their families. If approved, we believe that HETLIOZ can bring significant value to patients and represent at the same time, a significant commercial opportunity for Vanda. The estimated SMS patient population in the US is approximately 15,000 people. The Smith-Magenis Syndrome community is organized with strong advocacy and at this time we have already connected with approximately 150 to 200 SMS families who are interested in learning more about our programs and progress. We're working towards a comprehensive plan to ensure the recommend to people with SMS and their families become aware of and are able to gain access to HETLIOZ as soon as we obtain FDA approval. On tradipitant, earlier this month we announced the initiation of an expanded access protocol for a gastroparesis patient that had completed the 12 week randomization study. This is an individual patient program that was reviewed and approved by the FDA. Following the approval of the patient recently, several other patients have expressed an interest in resuming tradipitant treatment. These patients are now pursuing formal FDA approval and Vanda's prepared to support expanded access protocols for these patients. Under these protocols, Vanda will provide tradipitant and collect safety and efficacy data as we monitor the progress of this patient's treatment. While these protocols are expected to extend to an additional six months of treatment duration, the FDA has indicated that they will consider an extension beyond the six month period upon review. We're very excited with this development that was driven by the individual patient's recognition that tradipitant is the only treatment that effectively reduced their gastroparesis symptom burden. Many of these patients have characterized their experiences with tradipitant as life changing. These reports are motivating us even further to expediently conclude the program and pursue marketing authorization. As we have previously communicated, we believe the current Phase III study can be the last efficacy study required for NDA filing. With enrollment estimated to be completed in the first half of 2021, we expect an NDA filing for gastroparesis later in 2021. At the same time, we continue to pursue with the FDA resolution of our dispute over animal toxicology studies required to support a chronic indication. The estimated prevalence of gastroparesis in the US is over 5 million patients, many of whom remain undiagnosed. The only FDA approved treatment for gastroparesis is Metoclopramide approved in 1979, which due to its potential severe side effects, carries a black box warning and limitations of years of no more than three months. Based on IQVIA data there are over three million prescriptions of oral Metoclopramide annually. Given the highly limited treatment options, and the safety and tolerability profile of Metoclopramide, we believe that a new therapy could achieve significant market share and represent a billion-dollar peak revenue opportunity for Vanda. Our motion sickness, recruitment and screening of new patients for the pivotal tradipitant Phase III program is ongoing. After the successful meeting with the FDA earlier this year, we have agreement of the appropriate endpoints and trial design to evaluate tradipitant in the treatment of motion sickness. While patient identification continues with the challenge of the pandemic, no more tests [ph] are scheduled at this time. However, they will resume as soon as it is safe to do so. Additional clinical programs are currently on hold given the effects of the pandemic on the conduct of clinical trials. Finally, the recruitment for ODYSSEY, the study of tradipitant in patients with severe form of COVID-19 has slowed down given the significant reduction of hospitalizations in the New York area. We plan to conduct an interim analysis and determine next steps. I will now turn the call back to Kevin. Kevin?

Thank you, Mihael. I'll begin by summarizing our second quarter 2020 financial results. Total revenues for the second quarter of 2020 were 62.2 million or 5% increase compared to 59.1 million for the second quarter of 2019. HETLIOZ net product sales were 41.6 million, a 10% increase compared to 37.8 million in the second quarter of 2019. The year-over-year growth in the HETLIOZ business was driven by a combination of unit demand and net price favorability. The second quarter of 2020 saw our highest net product sales and specialty pharmacy orders since the launch of HETLIOZ and as a result of exceptional patient adherence, countered by lower new patient starts during the quarter. As of June 30, 2020, the specialty pharmacy channel held less than two weeks of inventory on hand. Specialty pharmacy's inventory on hand, calculated based on trailing demand at the end of the second quarter of 2020 was flat when compared to the first quarter of 2020. Fanapt's net product sales were 20.6 million, a 3% decrease compared to 21.2 million in the second quarter of 2019. As of June 30, 2020, wholesalers have lower inventory on hand calculated based on trailing demand when compared to the first quarter of 2020. The value of this inventory change was less than $100,000. Fanapt prescriptions in the second quarter of 2020, as reported by IQVIA exponent decreased by 3%, compared to the first quarter of 2020. The performance of the Fanapt business during the period was impacted by the pandemic and the related disruption to patient visits with their physicians and restrictions on physical access to our sales force to health care providers. Based on IQVIA reported data for the second quarter of 2020, other branded drugs in atypical antipsychotic class were also negatively impacted by the pandemic. For the second quarter of 2020, Vanda recorded net income of 8.7 million, compared to net income of 11.5 million for the second quarter of 2019. The second quarter of 2020 net income of 8.7 million included a provision for income taxes of 2.4 million, as compared to a provision for income taxes of effectively zero in the second quarter of 2019. Operating expenses in the second quarter of 2020 were 53 million compared to 49.2 million in the second quarter of 2019. The $3.8 million increase was due to a combination of higher R&D expenses relating to our late stage clinical programs and higher commercial expenses related to Non-24 awareness and Fanapt marketing efforts. Operating expenses in the second quarter of 2020 decreased by 5.1 million, as compared to 58.1 million in the first quarter of 2020. The primary drivers of this decrease were lower R&D expenses related to new recruitment for clinical trials being placed on hold as a result of the global pandemic and lower corporate expenses. We expect operating expenses in the second half of the year to be highly dependent on the developments in the global pandemic, and the extent to which it continues to impact our R&D and commercial activities. Vanda's cash, cash equivalents and marketable securities, referred to as cash as of June 30, 2020 were 339.8 million, representing an increase in cash of 47.2 million compared to June 30, 2019. We will continue to assess the impact of the evolving pandemic on our business and operations and will provide feature updates of our financial guidance as necessary. The financial objectives we previously communicated included the following financial objectives; net product sales from both HETLIOZ and Fanapt of between 240 million and 260 million, HETLIOZ net product sales of between 155 and 165 million, Fanapt net product sales of between 85 million and 95 million. In addition Vanda is providing an update to year-end 2020 cash and expects to achieve the following financial objective. Year-end cash is expected to be greater than 340 million. This compares to prior guidance of greater than 320 million. I'll now turn the call back to Mihael.

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

Thank you. We will now begin the question-answer-session. [Operator Instructions] We have no questions at this time. I'll now turn the call back to Vanda management for closing remarks.

Thank you very much, Vanessa and thank you all for joining this call. I will talk to you soon. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.