Good afternoon. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2023 Vanda Pharmaceuticals Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would like now to turn the call over to Kevin Moran, Vanda's Chief Financial Officer. Mr. Moran, you may begin your conference.

Thank you, Jeannie. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' fourth quarter and full year 2023 performance. Our fourth quarter and full year 2023 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 opening 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 and good afternoon everyone. Thank you for joining us to discuss Vanda's fourth quarter and full year 2023 results. I will briefly discuss key updates and then I will ask our General Counsel, Tim Williams, to provide a brief update on litigation measures, before turning the call over to Kevin Moran to discuss our financial results. We have significantly advanced our development pipeline now with three PDUFA action dates in 2024, including our supplemental new drug application or sNDA for bipolar I disorder in adults with a PDUFA date in April of 2024 and our New Drug Application, or NDA, for gastroparesis with a PDUFA date in September 2024. On our supplemental NDA for HETLIOZ in the treatment of insomnia, as we previously communicated this week, our sNDA was accepted for filing and is under review by the FDA with a PDUFA target action date of March 4, 2024. Earlier this week, we announced that we had received a notification from the FDA stating that the FDA has identified deficiencies that preclude discussion of labeling and post-marketing requirements and commitments at this time. No deficiencies were disclosed by the FDA in the notification, and the FDA stated that the notification does not reflect a final decision on the information on the review. However, frequently, such a communication from the FDA is followed by a complete response letter. Subsequent to that development on February 6, 2024, a Vanda filed suit in the US District Court for the District of Colombia, challenging the FDA's conduct in reviewing the insomnia sNDA. Vanda is asking the District Court to compel the FDA to adhere to the legally mandated 180-day review period for sNDAs and to declare as unlawful and void the regulations the FDA relies upon to issue complete…

Thank you, Mihael. I'll provide a few litigation updates, starting with our HETLIOZ ANDA litigation. We filed a cert petition with the Supreme Court in January, asking the court to hear our case and clarify important aspects of patent obviousness law for the benefit of lower courts, including the Federal Circuit. The defendants, Teva and Apotex have waived their opportunity to respond to our petition. And today, the petition was distributed to chambers at the Supreme Court for consideration. We await their review. Next, I'll provide an update of our case pending in the US Court of Federal Claims. In May of 2023, we sued the US Government for uncompensated taking of our trade secrets and confidential information. This suit alleges a pattern of FDA reviewers improperly disclosing proprietary information to generic companies as part of the review of generic versions of Fanapt and HETLIOZ. The US Government moved to dismiss the case. After a January hearing on the matter, the court denied the government's motion to dismiss, allowing us to proceed with fact discovery, which will include document production and depositions of FDA personnel involved in these matters. We've also had positive developments in our cases, challenging other agency actions of the FDA. In September of 2022, we sued to compel the FDA to adhere to the procedural and timing requirements of the Food Drug Cosmetic Act with respect to our jet lag sNDA for HETLIOZ. In January, the court ruled in our favor by finding that the FDA violated the Food Drug Cosmetic Act and ordering the FDA to take action on our hearing requests by March 5th, more than four months earlier than FDA had originally proposed to the court. The court found the FDA's conduct to be both unlawful and unreasonable. Specifically, the judge noted that…

Thank you very much, Tim. I will now turn the call to Kevin Moran, our Chief Financial Officer, to discuss our financial results. Kevin?

Thank you, Mihael. And as Mihael mentioned, I'll begin by highlighting the acquisition of the US and Canadian rights to PONVORY from Actelion Pharmaceuticals Ltd or Janssen, a Johnson & Johnson Company for $100 million that was completed in December of 2023 and where the transition is ongoing. PONVORY is a once-daily oral selective S1P1R modulator approved by the FDA in Health Canada to treat adults with relapsing forms of multiple sclerosis. During this transition period, Janssen will continue to operate the business pursuant to a customary transition agreement, while Vanda and Janssen transitioned regulatory and supply responsibility, for PONVORY to Vanda. This acquisition represents a significant milestone for Vanda expanding our commercial portfolio, diversifying our sources of revenue and providing Vanda the opportunity to develop a potential therapeutic candidate for the treatment of a diverse group of inflammatory and autoimmune disorders ranging from psoriasis to ulcerative colitis. Turning now to our financial results. I'll first discuss the results for the full year 2023 before turning to discuss the fourth quarter of 2023. Total revenues for the full year 2023 were $192.6 million, a 24% decrease compared to $254.4 million for the same period in 2022. HETLIOZ net product sales were $100.2 million for the full year 2023 and saw a 37% decrease compared to $159.7 million for the same period in 2022. The at-risk launch of generic versions of HETLIOZ had a significant impact on HETLIOZ performance during 2023. The decrease to net product sales was attributable to a decrease in price net of deductions and a decrease in volume. Our HETLIOZ net product sales for the first quarter of 2023 reflected higher unit sales as compared to recent prior periods and has resulted in a significant increase of inventory stocking at specialty pharmacy customers throughout 2023. Turning now…

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

[Operator Instructions] And your question comes from Andrew Tsai with Jefferies. Your line is open.

Hey, good afternoon. Thanks for taking my questions, and big congratulations on the acquisition of PONVORY. So maybe a couple of questions on that asset. First, what do you guys think you can do that J&J might not have been able to do in terms of driving sales growth at PONVORY? And then secondly, why is this differentiated from the other multiple sclerosis drugs out there? What's the appeal here?

Thank you very much, Andrew. First of all, to give a background here for everyone. PONVORY ponesimod belongs in the class of sphingosine-1-phosphate receptor analogs. And their mechanism of action is by sequestering or preventing the egress of lymphocytes from peripheral lymph nodes, so that they can have wide applications in disorders where you have autoimmune attack on a system or organ of the body, in the case of multiple sclerosis, this central nervous system. As you also know, this class of drugs has several members. It started some years ago with Fingolimod or Gilenya, now generic and has expanded with additional members in the class. We believe that ponesimod due to its receptor specificity and quick reversibility of effect can play a critical role for the treatment of multiple sclerosis for many groups of patients, especially for those that require a specificity avoiding side effects and quick reversibility. It has been clear that this drug may be attractive, especially to women of childbearing aids as they contemplate family planning and that the drug will come out of the circulation within a short period of time in a matter of days. And the same is true about the recovery of the lymphocytes. So directly to your question, the increased specificity and quick reversibility both in amount and lymphocyte counts make this drug differentiated and attractive. Second part of your question was what can we do different from J&J. And the simple answer is we plan to market it. J&J for their own business reasons had decided to remove their market in support of the product, while they were in the process of identifying a potent partner to divest it to. And so we believe there is a significant opportunity both with neurologists and multiple sclerosis centers and consumers to be…

Thanks. That's very helpful. Thank you for the color. And then shifting gears to the HETLIOZ for insomnia news. What would be the realistic scenario here? Do you start hiring the sales force? Or do you wait until approval? How does this all work out? Thank you.

Andrew, let me clarify. Are you asking about the insomnia in HETLIOZ or the bipolar in Fanapt

HETLIOZ for insomnia.

Yes. For HETLIOZ in insomnia, of course, we think given the negative letter by the FDA of deficiencies, although not named, preclude label negotiations. We think the most historical likely outcome is that will be followed by a complete response letter. We cannot imagine what the deficiencies are for this melatonin agonist now marketed for 10 years in dissolved indications and with the file that clearly and ambiguously supports the effect of the drug in sleep onset insomnia. We are not expanding the HETLIOZ sales force and we're not planning any immediate marketing plans there.

Got it. And then maybe just speaking of the Fanapt for bipolar then or as well as tradipitant for gastroparesis, my final question is, is your confidence in those applications the same despite the insomnia development and second to that is, are you hiring ahead of the potential PDUFA decision. Thank you.

Yes. So just to talk about confidence. Of course, we're optimistic because we believe in science and the robustness of our packages that we have already communicated with you all. But of course, we're – the experience with the agencies that we are prepared for unpredictable results. And having said that, we're cautiously working towards being ready to expand the already existing Fanapt salesforce. And I will let Kevin give you a little more color of how we think about cadence of operational expenses there. And the same thing holds through for tradipitant in gastroparesis. We have done work prelaunch to understand the market and develop a commercial plan. But of course, we're quite a few months away from an agency action in September of 2018. And yet again there, we are proceeding very cautiously with the expenditures ahead of that decision. But I will let Kevin give you more color.

Yes. And thanks, Andrew. On the Fanapt side, specifically, as Mihael mentioned, we have a very well-established commercial infrastructure given Fanapt's history on the market and as well as HETLIOZ's history on the market in the supporting activities and infrastructure associated with those. That being said, we've certainly taken actions to be prepared to expand quickly on positive news. So, I'd expect from a cadence perspective that there will be some preparation costs that we've began to execute against the first quarter, but more so, it would be upon a positive development that we would see a kind of cadence change.

Very good. Thank you. Thank you all for the developments.

Thank you very much Andrew. thank you.

There are no further questions at this time. I will now turn the call back over to Vanda management for closing remarks.

Thank you very much all for joining us on this call. Thank you.

This concludes today's call. You may now disconnect.