Thank you for standing by. My name is Meg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2024 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 now like to turn the conference over to Mr. Kevin Moran, Vanda's Chief Financial Officer. You may begin.

Thank you, Meg. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals second quarter 2024 performance. Our second quarter 2024 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 we open 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 second quarter 2024 results. The beginning of the quarter was marked with a significant milestone of the FDA approval of Fanapt for the treatment of bipolar I disorder. This approval expands the commercial potential of Fanapt and lays down the foundation for our psychiatry portfolio. As a result of this development, we focused our operational efforts in expanding and strengthening our commercial organization to better position us to maximize the commercial value of the asset. In a short period of time, we have increased by three times the size of our sales force, significantly expanded our Fanapt speakers' program and began engaging with prescribers. In addition, we're building our marketing campaign, and we expect to reach full operational capacity in the fourth quarter of this year. In addition to these commercial efforts, the clinical development of the psychiatry portfolio is advancing with a new drug application filing expected in early 2025 for milsaperidone, an active metabolite of Fanapt for the treatment of bipolar disorder and schizophrenia. We are also preparing to initiate the clinical program in major depression with milsaperidone in the fourth quarter of this year. The long acting injectable program of iloperidone is continuing with the expected initiation of the Phase 3 study for the maintenance of treatment in schizophrenia later this year. We're excited with the prospects of our psychiatry franchise that we expect to provide significant value to patients, and provide Vanda with significant revenue growth well into the future. With the acquisition of PONVORY from Janssen, and the full transfer of ownership to Vanda, we have also focused in building a commercial organization to promote PONVORY in the treatment of multiple sclerosis. We are now close to completing…

Thank you, Mihale. I'll begin by summarizing our financial results for the first six months of 2024 before turning to discuss the second quarter of 2024. Total revenues for the first six months of 2024 were $97.9 million, a 10% decrease compared to $108.6 million for the same period in 2023. This decrease was primarily due to the launch of generic versions of HETLIOZ, which we have discussed in some detail partially offset by the introduction of PONVORY revenue, following our acquisition of the product in December of 2023. Fanapt net product sales were $43.7 million for the first six months of 2024, a 7% decrease compared to $47 million in the same period in 2023. This decrease to net product sales relative to the first six months of 2023 was attributable to a decrease in volume. Turning to HETLIOZ. HETLIOZ net product sales were $38.8 million for the first six months of 2024, a 37% decrease compared to $61.6 million in the same period in 2023. The decrease to net product sales relative to the first six months of 2023 was attributable to a decrease in volume partially offset by an increase in price net of deductions. HETLIOZ net product sales as reported for the first quarter of 2023, reflected higher unit sales as compared to recent prior periods. The higher unit sales during the first quarter of 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers at March 31, 2023. During the remainder of 2023, although there was continued destocking at specialty pharmacy customers, inventory levels at December 31, 2023 remained elevated relative to inventory levels prior to the entrance of generic competition and continue to remain elevated at March 31, 2024 and June 30, 2024. Going forward, HETLIOZ net product sales may reflect…

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

Thank you. The floor is now open for questions. [Operator Instructions] And your first question comes from the line of Charles Duncan with Cantor Fitzgerald. Please go ahead.

Yes. Hi, Mihael and team. Congrats on a good quarter of progress. And really appreciate you reinstating the financial guidance for the second half of the year and all the color that you provided in the remarks. I had a couple of questions, Fanapt and then I'll hop back in the queue. But with regard to Fanapt, I know that the launch just started this year or this quarter. But I guess I'm wondering, is there any feedback that you can share with regard to prescriber perspective following the recent label expansion? Any -- I think, Kevin alluded to this recently in terms of new patient starts. But any perspectives that you can give with regard to prescribing for Fanapt with that new label?

Yes. Maybe I'll start and I have Kevin follow-up on that. Thank you very much for joining, Charles. First of all, something environmental about this market it is that despite the fact that there are a number of antipsychotics approved for this type of indication, there is still a significant unmet medical need for people who don't respond well or do not tolerate well other drugs. And chance this market is promotionally sensitive. But there is competition in the market for share of voice. And therefore, it requires a significant investment, which we began making to increase awareness. It is important to note that while schizophrenia is a very significant indication, the bipolar space of indications with bipolar I disorder is actually far more frequent and encountered in prescriber offices outside necessarily of psychiatry. And therefore, it presents a much larger opportunity. We are receiving of course anecdotal evidence of excitement of learning more about the data very significant participation of prescribers and new prescribers into our speakers program. And what we noted is the early signs based on IQVIA data we are referring to the trend on the NBRx which as you know it is a metric of new starts, not refills, but new starts. And there we see positive results compared to prior quarters and positive results compared to last year as a whole. It is early. And as you know it takes some time to get the sales force out create the awareness get the new starts get the refills. But typically NBRxs are followed by NRxs and TRxs. But we want to make sure that everybody understands, this is the quarter we're going to be first with a full sales force out. Our expansion continues and our full marketing operations are not going to be in foreseeing but in the fourth quarter of next year. So we're enthusiastic about the prospects of revenue growth, but we want to caution that it may take a few months before we get a clear signs of the effect of our efforts.

That makes good sense to us. And then I wondered if you could provide a perspective on the possibility that there could be another new entrant in terms of class to psychosis treatment. And that is with the muscarinic modulators with a possible approval of the candidate called KarXT this fall. Are you -- I mean I'm sure you're prepared for that but what would be the response from your messaging in the face of that increased -- that increased competition? Or do you believe that the label is sufficiently differentiated and Fanapt stands on its own to continue to gain share?

Yes. Of course, we're looking at the competitive space and we're becoming more and more familiar with this new class of drugs. And first of all, I would say it is terrific that after many years folks are working on new mechanisms of action to address unmet medical needs. So first I would say we welcome more enthusiasm in the space and more attention to treat these difficult disorders. And I think a success of that drug will underscore the remaining unmet medical need in the space. In terms of differentiation we have to wait and see the profile, but I would say a strong factor in differentiating Fanapt not only from new entrants but also the drugs in the market is the tolerability profile. That is well understood. It is not a new entrant. The drug has been in the market for about 15 years since the first approval. So there's a lot of experience and familiarity. So we're looking at Fanapt as a well-known friend that now has a new utility. And for new entrants we welcome them all and we welcome more education of psychiatrists and other specialties around these markets and drugs.

And then one last question in terms of the pipeline with regard to tradipitant. When you think about gastroparesis versus motion sickness do you think gastroparesis is a nice to have or need to have in terms of your kind of view of where Vanda can be in a year with regard to commercial opportunities? Or is motion sickness perhaps a little bit more consistent with some of your marketing efforts thus far? And you mentioned filing later on this year. Does that depend on what the agency has provided you or will provide you with regard to a response on gastroparesis? Thank you.

Yes. I'll take separately the two parts of the question. We believe that tradipitant has a useful effect in treating symptoms of gastroparesis, which is a significant unmet medical need. And the testimony that does not come just from our clinical trial results. All of them have been published. But also by what is personally exciting to me the dozens of patients who have come over the years to request and be granted expanded access. We just celebrated our first patient four years on the drug with her testimony of the drug changing her life. So if you see it from the pace in need, I think it is very important that tradipitant makes it to the armamentarium of drugs for gastroparesis. But given the diversification of revenue that the company has and the deep and diversified and stage pipeline, we can tolerate a delay in approval which I guess that's the signal we can interpret now. When it comes to motion sickness the motion sickness filing and motion sickness approval it is unlikely depends on anything we learned from the FDA. The FDA will likely point to their questions around the strength of efficacy and they will point back to long-term preclinical safety additional data they may need. However, when it comes to motion sickness, there's no question about safe -- efficacy that the drug prevents vomiting in the setting of motion sickness. And that's something that we have extensively discussed and agreed upon with the FDA in end of Phase II and PMDA meetings. And when it comes to safety we think we're going to have a complete packet both preclinical and clinical given the incidental and not chronic use of this drug. So we feel very confident that our package will be complete.

Very helpful. I have came [ph] with you. I have more questions but maybe give someone else the short. Thanks.

[Operator Instructions] Your next question comes from the line of Andrew Tsai from Jefferies. Please go ahead.

Hi. Thanks. Good afternoon. Thanks for taking my questions. The revenue guidance range is pretty wide, $30 million range despite us being two quarters in. So what exactly is your revenue guidance assuming for the type of quarterly sales growth for both PONVORY and Fanapt in second half 2024? What gets you to the high end of the guidance? Thanks.

I'll let Kevin take that.

Hey Andrew. Yes, so as we mentioned obviously with the launch of Fanapt and PONVORY happening now in the third quarter, and as you mentioned two quarters in. The trajectory of the launches and how quickly we begin to see results that, if we start to see results fairly quickly we think that we could end up at the top end of the range whereas if it takes a little bit longer time. For those results to translate into revenue, it could come later in the year and therefore, be closer to the middle of the range or somewhere else in the range.

I see. And in terms of the cash guidance, it seems like there will be some expected cash burn year-over-year exiting 2024. But as we exit 2024 and head into 2025, do you think you can be cash flow positive? Or should we be expecting increased investments in the launches and pipeline growth to more than offset the revenues you bring in?

Yes. So first on the cash guidance for this year is -- our communicated guidance is that will end the year between $360 million and $390 million. The high end of that range would be slight cash flow positive very slight. And the bottom end of the range would be a burn in the neighborhood of $25 million to $30 million. And therefore, the midpoint right is obviously a smaller number than that. If we end up at the top point of our revenue range then we could even see to be right around the cash breakeven number or maybe a little bit better a little bit worse, right? So that's just for the trajectory of this year. Obviously, we haven't provided guidance for next year, so you can only kind of speak to in the context of what we've communicated. But if we begin to see revenue growth as we hope for and anticipate on these two products and we continue to make the investments that we've articulated. Next year, we could see revenue growth that could necessitate additional investments or we could see it’d be kind of efficiently converted into positive EPS?

Okay. Thanks. And for tradipitant, let's just say it was approved later in September. Can you guys talk about your launch strategy?

Yes, absolutely. We actually have had quite a bit of time to work our launch plan and we feel well prepared. Of course, we depend on delabeling with the messaging. We understand well the target population. We have cultivated extensive relationships with key opinion leaders. So we understand the size of a sales force. We understand the effort and size of speakers program. And of course, we have early plans of what a direct-to-consumer campaign can do in this indication.

I see. And the last question is sales force is 3x larger than earlier in the year. How many sales reps did you have earlier in the year, so we can do the math here?

Yes. The sales reps in the early part of the year in the neighborhood about 50, and so with it being 3x larger we're a little north of $150 million.

Fair enough. Okay. Thank you. Congrats on the quarter.

Thanks, Andrew.

Thanks, Andrew.

[Operator Instructions] We have no more questions in queue. I will now turn the conference back over to Vanda management for closing remarks. Please go ahead.

Thank you very much for joining on our second quarter 2024 call and we hope to see you again soon.

This concludes the conference call. You may now disconnect.