Hello, and thank you for standing by. At this time, I would like to welcome you to the Q4 2024 Vanda Pharmaceuticals Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, I would now like to turn the conference over to Mr. Kevin Moran, Vanda's Chief Financial Officer. Go ahead, sir.

Thank you, Jerico. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' fourth quarter and full year 2024 performance. Our fourth quarter and full year 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. There 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. 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 Pharmaceuticals' fourth quarter and full year 2024 results. As we discussed in our press release earlier this afternoon, strong revenue growth for Fanapt is putting us on a significant growth trajectory for 2025 and beyond, supported also by the commercial performance of Hetlioz and Ponvory. The Fanapt long-acting injectable program, the new drug application for Vantrela, middle seperidone for bipolar disorder and schizophrenia, along with its development for major depressive disorder, have the potential to drive future growth in our psychiatry portfolio for many years to come. Vantrela's new drug application for motion sickness was filed with a potential approval this year while we are pursuing approval in gastroparesis and the development of Tradipitant to improve solubility of GLP-1 analog Wegovy. Our anti-inflammatory portfolio, anchored by Ponvory, was strengthened with the addition of imsidolimab from Anaptis, an IL-36 receptor inhibitor for the treatment of generalized pustular psoriasis. We plan to file a BLA later this year while we are exploring registration in Europe and Japan as well as the development of this novel drug for other inflammatory disorders with an unopposed action of the IL-36 system. In 2024, we returned to revenue growth driven by the commercial launches in bipolar disorder and multiple sclerosis and advanced our development pipeline with a number of projects at or near marketing applications. All this was achieved by the hard work, ingenuity, and efficiency of our organization and its wonderful people. I will now turn to Fanapt. Fanapt was approved in the second quarter of 2024 for the acute treatment of bipolar I disorder. Vanda initiated the commercial launch of Fanapt in this indication in the third quarter of 2024. In the fourth quarter, as compared to…

Thank you, Mihael. I'll first discuss the results for the full year 2024 before turning to the fourth quarter of 2024. Total revenues for the full year 2024 were $198.8 million, a 3% increase compared to $192.6 million for the full year of 2023. As Mihael mentioned, this increase was primarily due to increased Fanapt revenue as a result of the bipolar commercial launch and the introduction of Ponvory revenue following our acquisition of the product in December of 2023, partially offset by decreased Hetlioz revenue as a result of generic competition. Let me now break this down by product. Fanapt net product sales were $94.3 million for the full year 2024, a 4% increase compared to $90.9 million for the full year 2023. The increase in net product sales relative to the full year 2023 was attributable to increased volume and increased price net of deductions. Hetlioz net product sales were $76.7 million for the full year 2024, a 23% decrease compared to $100.2 million for the full year 2023. The decrease relative to the full year 2023 was the result of continued generic competition in the US. 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 as of March 31, 2023. For the remainder of 2023, although there was continued destocking at specialty pharmacy customers, inventory levels remained elevated relative to inventory levels prior to the entrance of generic competition and continue to remain elevated throughout 2024. Going forward, Hetlioz net product sales may reflect lower unit sales as a result of reduction of the elevated inventory levels at specialty pharmacy customers, or…

Thank you, Kevin. At this time, we'd like to answer any questions you may have.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Our first question comes from the line of Charles Duncan from Cantor Fitzgerald. Please go ahead.

Hey. Good afternoon, and team. Congrats on a good year of seeing the commercial turn as well as a ton of things going on with the pipeline. So lots of productivity. I had a question first on commercial and then pipeline. With regard to Fanapt, I guess, I'm wondering as you see that queue-on-queue growth, where do you think you're picking up traction and what types of prescribers? And then I wanted to ask you about that three hundred reps, the fifty percent growth in the Salesforce. I'm wondering if you think that'll be sufficient to, you know, I guess, compete with potentially larger pharma companies coming in and marketing, you know, obviously, Caplyta, but also perhaps changes in the future with Caplyta.

Yeah. Thank you very much, Charles. So in terms of where the growth is coming from, the prescribers that are coming to Fanapt are prescribers that have patients with bipolar disorder. And this is a difference from the smaller group of psychiatrists and psychiatric nurses that show schizophrenia patients. So it seems that the growth is exclusively coming outside of schizophrenia. In terms of the size of the sales force, as you know very well, this is a highly promotionally sensitive class of drugs. And we have very recent examples of successful commercialization from some of our peers. Whether this is the right size Salesforce, I would venture to say likely, it's gonna be on the lower side. But, certainly, you want to build rapidly but at the same time, don't jeopardize the quality and very important training of the Salesforce. Now we do see the potential competition by more deep-pocketed Big Pharma. Of course, BMS, with Caplyta at this time, they will be primarily focused on the only indication that they have, schizophrenia, and that is not our main focus. Now, in terms of J&J, if they complete the acquisition of Intracellular, certainly there's gonna be a lot of strength, but it seems that people there will be in patients with major depression if they succeed in securing the approval in that indication, which seems quite possible given the very nice data they have.

Eric, good. Mihael, that's helpful. It makes sense. With regard to the DTC that you started in January, I assume that's targeting then the bipolar patients. And do you think that those patients are amenable to picking up the messaging of the DTC and perhaps bringing that to their prescribers and talking about Fanapt?

Yeah. Thank you. Yes. The target is specifically for people with bipolar I disorder. And, certainly, we don't have to guess on the effectiveness. In that, before us, there have been others, almost every other drug recently in the category, they have advertised to DTC, which increases not just awareness, but also confidence of support of the drug among patients, but we're also finding it is actually intriguing to prescribers themselves. So we believe that is a very effective way to increase awareness. And I would point out that Vanda has a significant track record in efficiently launching a DTC campaign and buying media. And I think that's gonna become very important in the coming months. I would like to underscore Kevin suggested that, you know, at this time, do not give a cash guidance. And this is primarily driven by trying to gauge what is the right size direct-to-consumer, and you buy as you go. So we, unlike some large companies, we're not doing device. At this time, we buy on demand. And we're very carefully evaluating the return on our investment. So it is a measured approach, but we are prepared to make a significant investment provided a good ROI on the other side.

Thank you for that information. On Vantrela, if I could, ask a quick question. I'm intrigued with the one per day MDD study that you started towards the end of last year. I'm wondering if you have specific information on either Fanapt or Milsaperidone that suggests that it may have activity in MDD as well as perhaps depressed patients with bipolar. What is the kind of rationale behind that phase three?

Yeah. So of course, you know that we have a lot of experience on Fanapt, iloperidone, with twice a day, but we also have experience in the utilization across different doses. So our studies have been primarily done on the higher dose side, twelve milligrams a day divided dose, or twenty-four milligrams a day as a divided dose. But our observation so far suggests that a large number of patients have been prescribed a monthly dose which reflects a total in the day of approximately twelve milligrams on average. And we know that based on the pharmacokinetics and steady-state levels, that once a day twelve milligrams does not present any significant issues of peak to trough and tolerability. And the combination of all this suggested to us that a once-a-day administration of Vantrela will be a good approach in major depressive disorder. And as you can guess, it happens also to be likely more convenient than a twice-a-day dosing.

For sure. Look forward to that. Final question, Imsidolimab. Congrats on the recent in-licensing. I'm intrigued with that program. BLA later on this year, but I think Anaptis, and I'm not gonna ask you to defend Anaptis, but I think they spoke about a BLA as early as October 2023, as having already been filed. So I'm wondering if you have a sense of what the delay in filing and if a pre-BLA has been conducted, or is that all the kind of stuff that you'll do once you fully accept all the information from it.

Yeah. I cannot comment on the first part of the question, but a pre-BLA meeting with the FDA on the GPP indication has been conducted. And upon review of this information, we're confident that we have in hand what needs to be had for filing. So, of course, we're only a few days away. But I would say Anaptis is a great partner of this. Transition is ongoing quickly of materials. So we're confident we'll be able to file this BLA within this year. And I have to say, Charles, that maybe we get an opportunity at a future call. We are intrigued by the mechanism of action. And we believe that the IL-36 cytokine system is perhaps not fully explored therapeutically in a number of autoimmune inflammatory conditions. And of course, we understand the role in keratinocytes and generalized pustular psoriasis. As I pointed out in my discussion, GPP is caused by two bad genes, a recessive disorder. But, of course, there is a much larger portion of the population that are heterozygous carriers of a null mutation, which under some circumstances may lead to a relatively unopposed action of IL-36. And there are theories of what this population may be. There may be a class of people with atopic dermatitis or psoriasis, or actually other inflammatory conditions where IL-36 is important in monitoring intruders at barrier tissues. But, you know, more to be discussed in the future.

Big pipeline. Lots going on. Thanks for taking the questions. Congrats on the progress.

Thank you, Charles. Our next question comes from Raghuram Selvaraju from H.C. Wainwright. Please go ahead.

Hi. Thanks so much for taking my questions, and congrats on all the progress. First of all, I wanted to start with a question around your anticipated timing for the development of the iloperidone long-acting injectable. So specifically, I wanted to ask when you anticipate enrolling the first patient in that pivotal program and how long you expect enrollment to take, as well as if you can provide any kind of updated outlook on the competitive landscape given the fact that this appears to be changing quite rapidly, although it's obviously also reflective of a steadily expanding broader total addressable market. Thank you.

Yeah. Thank you very much for the question. And I, you know, I at the bottom, I would say agree with you that there appears to be a lot of need and large commercial opportunity around injectable antipsychotics, and especially new entrants of molecules that have not been translated from oral to a long-acting injectable, like Fanapt. In terms of the program, we are ready to go. And in fact, that program can be initiated imminently. The initial treatment period is about a twelve-week period of stabilization before we lead to the re-randomization relapse prevention. And what I mentioned, Ram, is that the question from the IRB was that they felt no one should be running placebo-controlled studies on a relapse prevention mode. You know, and they offer that, you know, placebo people may be at some risk. We disagree with that, but nonetheless, it is the IRB. And we are in total agreement with the FDA on what protocol is needed, and in fact, we are in agreement that this study, if successful, which we expect it to be, is the pivotal study required for registration. So we are actually waiting. We've launched this question to the FDA, and they're working, I guess, on their policy side to see what this shift in the IRB means, and what type of study may be required. But be this, it may, the placebo is the most involved study, and we could end up with a more simple design, where there is a bridging of sorts with the oral formulation. So no matter what it is, we can start the study very quickly. Now in terms of time into enrollment, as you know, that's hard to evaluate given the difficulty recruiting in general. But this study is a long study. Recruitment and large could take up to one year. And that means, I think we've discussed before, that we will not expect results but in sometime in 2027.

Okay. And then with respect to the guidance that you provided today on potential revenue in 2025, can you confirm that even the upper end of that guidance range does not actually include projected contribution from Tradipitant in any indication or Imsidolimab? Is that correct?

That is correct. The range guidance we're giving is solely based on the commercialized products today in the commercialized indications. And, of course, we could be pleasantly surprised towards the upper end, depending on the Fanapt trajectory and upon Ponvory gaining speed. On Hetlioz, given its generic contribution, we have more tamed expectations.

To what extent do you anticipate there to be a significantly larger number of generic competitors, generic purveyors of tasimelteon by the end of 2025 versus the end of 2024?

At this time, we do not expect that field to change outside of the three approved ones.

Okay. And then the last question is with respect to broader reimbursement changes, any specific developments of note that you anticipate taking effect in 2025 that could significantly impact gross-to-net?

Hey, Ram. It's Kevin. So on the main one, which we talked about in the scripted portion of it, is the introduction of the Medicare benefit redesign, which went into effect at the beginning of January. And the reminder there is previously where there was the donut hole concept and the manufacturer had a portion of that contribution until the patient had moved through the donut hole for the year. The benefit redesign has a different structure where for the catastrophic portion of the coverage, the manufacturer has a either ten or twenty percent contribution to that, with some exceptions for different types of manufacturers and different types of patient populations. So that went into effect at the beginning of January, as I mentioned, and was factored into our projections for 2025.

Okay. Thank you.

Thanks, Ram.

Our next question comes from the line of Andrew Tsai from Jefferies. Please go ahead.

Hey. Thanks. Good afternoon. I appreciate all the updates. First question is about the 2030 guidance. What exactly compelled you guys to provide that guidance today? And then within that one billion dollar guidance, of course, seven fifty is coming from psychiatry. How much of that seven fifty is based on products or indications that have yet to be approved, as opposed to currently approved products? Thanks.

Thanks, Andrew. Yeah. So maybe starting with the psychiatry portfolio first. Obviously, with Fanapt, you know, currently on the market, doing about a hundred million this year. And with the commercial investments we're making, hoping to see growth as we obviously head into next year and beyond. But then even beyond that, we noted that included in that 2030 projection is the approval of Vantrela for bipolar I disorder and schizophrenia hopefully next year. And then potentially a label expansion there in MDD beyond that. As well as the approval of Fanapt in LAI. So, you know, the and the one thing I also made note of in the script that's an important piece to that is that Milsaperidone is expected to have or Vantrela, rather, is expected to have very different economics than Fanapt currently has. And at a minimum, that's due to the price reset that we would experience under Medicaid with a new drug application being approved. So all of those obviously, we didn't provide kind of a breakout of the contributions of those individual factors, but hopefully, that gives you a sense of what contributions would go into the seven fifty from existing product indications, future product indications. And then on the balance, obviously, with Hetlioz and Ponvory on the market, Hetlioz, you know, as Mihael has mentioned, where our expectations are a bit more tamed at least on the short term. And with Ponvory, you know, growing and hopefully even more so in the years to come. And also the possibility that we mentioned of an additional three products being on the market next year, including Milsaperidone, but also Tradipitant and Imsidolimab. Those products also provide some of the bridge between the seven fifty and the billion.

Thanks. And when we think about your overall business, where or when should we think the trough year is in terms of revenue and your total cash balance? Said another way, do you think the trough year already happened, or could it be somewhere in 2025 or a little bit later?

Yeah. No. No. Thanks for the question there, Andrew. So, obviously, with our reported revenue for this year being growth from the year before. So, you know, we saw growth from about a hundred and ninety-three million up to about a hundred and ninety-nine million. In the most recent year and our midpoint of our guidance being two thirty, which would imply about a fifteen percent growth on 2024. You know, I would say that the trough year as you kind of expressed it is over the shoulder, and our expectation is that we're growing revenue from here both with the existing products indications, but obviously all the products and indications that we're planning on bringing to the market in the short term and the long term.

Okay. Thanks. And then last question is, for Hetlioz. If we stripped out the indications where generics you're facing generics, you know, how much sales are you generating from the other formulations or indications where Hetlioz is not facing genericization? So I guess the liquid formulation and the EU component. How much are those sales currently? Thank you.

Yeah. So, Andrew, we haven't gotten into a breakout by geography or by indication, so I can't provide any further kind of color to that.

Very good. Thank you.

Thanks, Andrew.

There are no further questions at this time. I'll turn the call back over to the team.

Well, thank you very much for joining us on this call. We'll see you on a future earnings call. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect.