Good day, everyone, and thank you for standing by. My name is Argee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2025 Vanda Pharmaceuticals, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Vanda's Chief Financial Officer, Kevin Moran. Please go ahead.

Great. Thank you, Argee. Good morning, and thank you for joining us to discuss Vanda Pharmaceuticals' Second Quarter 2025 performance. Our second quarter 2025 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. 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. Good morning, everyone. During the second quarter, we continued the expansion of the Fanapt sales force and also continued our broad awareness campaign. Fanapt revenue increased by 27% compared to the same period in the prior year, driven by the launch of the bipolar I indication. Fanapt is now promoted in the U.S. across all 50 states with a dedicated sales force of approximately 300 representatives. With the expansion of the sales force during the second quarter, we observed a significant increase in activity with the total number of calls growing by more than 40% as compared to the first quarter of 2025 and growing by over 400% compared to the second quarter of 2024. Since the bipolar launch, demand is measured by total prescriptions, TRx, new prescriptions, NRx and new-to-brand prescriptions and BRx reached new highs in the second quarter. The commercialization of Fanapt is also supported by a broad speakers program operating across the country that educates prescribers on the profile of Fanapt and how to use it. We're excited by the progress our commercial organization has made as we continue to support the commercialization of Fanapt, aiming for further growth in the coming periods. Total revenue from our 3 commercial branded products, Fanapt, HETLIOZ and PONVORY reached $102.6 million in the first 6 months of 2025. HETLIOZ continues to be the market share leader despite the availability of the generic products, a testament to the brand loyalty of our patient customers over the last 11 years. We're continuing to build out and train our dedicated PONVORY sales force team, addressing prescribers for multiple sclerosis. In the last quarter, we saw an increase in new prescriptions as we intend to higher our consumer and prescriber awareness programs. For the regulatory clinical updates, first,…

Great. Thanks, Mihael. I will begin by summarizing our financial results for the first 6 months of 2025 before turning to discuss the second quarter of 2025. Total revenues for the first 6 months of 2025 were $102.6 million, a 5% increase compared to $97.9 million for the same period in 2024. The increase was primarily due to growth in Fanapt revenue as a result of the bipolar commercial launch. Fanapt net product sales were $52.8 million for the first 6 months of 2025, a 21% increase compared to $43.7 million in the same period in 2024. This increase to net product sales relative to the first 6 months of 2024 was attributable to an increase in volume. Turning to HETLIOZ. HETLIOZ net product sales were $37.1 million for the first 6 months of 2025, a 4% decrease compared to $38.8 million in the same period in 2024. The decrease to net product sales relative to the first 6 months of 2024 was attributable to a decrease in volume, partially offset by an increase in price net of deductions. Of note, through the second quarter of 2025, HETLIOZ continues to retain the majority of market share despite generic competition for over 2.5 years. HETLIOZ net product sales continue to be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. 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 may be variable depending on when specialty pharmacy customers need to purchase again. Further, HETLIOZ net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. Additionally, the company constrained HETLIOZ net product sales for the first and second quarters of 2025 and…

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

[Operator Instructions] Your first question comes from the line of Ram Selvaraju of H.C. Wainwright.

Congratulations on all the progress made on multiple fronts so far this year. I wanted to, first of all, ask about the outlook for Bysanti commercialization, assuming an on-time approval next year. How quickly do you expect to be able to put all of the commercial preparations in place to launch this product? And what kind of sales and marketing infrastructure expansion do you think would be necessary to support the launch, assuming again an on-time approval?

Thank you very much for the question, Ram. So there are 2 key items for the launch of Bysanti. One is commercial product preparedness, and we believe that we'll be ready by the end of second quarter. So if the drug is approved by end of February, we would be ready to be able to launch in Q3. However, the other one is also strategic consideration of timing given where Fanapt is in its life cycle. So we're going to have to talk about that in future quarters as we're getting closer to that date. On your question of what else is needed. In fact, the investments we have been making and continue to make on the Fanapt sales force and awareness are all immediately transferable to Bysanti. So we expect upon launch of Bysanti, very little immediately additional commercial operation spend needed. But again, it's hard to put that right now, but it will be a product switch.

And then the second question is related to PONVORY. There are a couple of things here. Firstly, Kevin, you mentioned in your prepared remarks the existence of a dispute. And I just wanted to understand better what the nature of this dispute is and what the revenue amount related to PONVORY is that could conceivably be affected by or be the subject of this dispute? And then secondly, with respect to kind of where things are with PONVORY on the multiple sclerosis front. I was just wondering what your expectations are at this point for PONVORY revenues related to the on-label indication and if you anticipate meaningful acceleration of revenue growth for that product in the second half of 2025 based on the efforts made so far to position it optimally.

Yes. Mihael, I can take that one, and you can chime in. So on the first question, Ram, as you might expect, given the nature of the dispute, I can't comment extensively on dispute and/or litigation matters. But based on what we've disclosed, it relates to a gross to net item. And in terms of the quantification of it, what we've communicated is there's about $3 million, which is the same amount we disclosed last quarter that was included in revenue in 2024, where we have received the proceeds, but the gross to net adjustment is in dispute. On the second question around the expectations for PONVORY moving forward, as we previously communicated, the PONVORY and multiple sclerosis efforts, we believe there's a significant commercial opportunity there, but it is an opportunity that takes time to both build the relationships with the neurology prescribers in the space generate kind of the trust, both in the product and in the company. And then once prescription activity is generated for -- to work it through the hub reimbursement process. And so all of those things have been initiated, and we continue to see progress on that front with the commercial launch activities being initiated in the back half of last year and with the second quarter having the highest number of new patient prescriptions that we've seen since bringing the product over the wall to Vanda. So very encouraged by kind of the uptake of the product in the market and the trends that we're seeing, but I expect the growth to be more kind of steady rather than a rapid acceleration.

And just very quickly -- sorry, go ahead. Go ahead.

Yes, it's Mihael. Just to add a little more color. As Kevin explained earlier, we commercially launched PONVORY in the third quarter with a small sales force of about 25 to 30 people. And there are a lot of learnings and one of them is that the number of calls that are possible daily is small, given the format of these prescriber practices, large academic centers, et cetera. So we're in the midst of doing a reset in the sales force and further bolster the numbers with an emphasis to be able to address not only more prescribers, but with higher frequency. And the end results are very encouraging. As Kevin highlighted, we saw a significant increase in new prescriptions coming in. However, there is a lag given the specialty category of this drug between a script and a [indiscernible] script.

And then just very quickly. Thank you very much for that information. I wanted to ask about tradipitant and whether you anticipate between now and the end of this year, progress on the regulatory front with that candidate? And what you anticipate might potentially be how the scenario unfolds for that product candidate? And if you have a better line on when or if it might ultimately make it to the market in the U.S.?

Yes. So two-part answer on this. Tradipitant, first of all, has been developed for the indication gastroparesis, which you all know the FDA did not approve last September. And we since have gone through the option of requesting a hearing, and that hearing has not been granted yet. In fact, CDER, the review division of the FDA, is advising the commission not to have a hearing. And of course, we have explained that history shows that the FDA has avoided hearings for about the last 30 years. So we think it is important to have these hearings. Well, first of all, that's what the law says. And if we were to have a hearing with an independent group of people designed by the law presided by the commissioner, we think we'll succeed in that indication. Now on tradipitant motion sickness, the review is going on. We understand that the division -- the review division does not have any issues with efficacy data and that they will continue to review the adequacy of the preclinical and clinical safety data. And to remind you that there is a very large pocket of thousands of patients treated, some of them -- many of them up to 3 months. And the preclinical package we discussed extensively that it is multidimensional with thousands of animals, rats/dogs with no evidence of any issue. And also first in the industry, we have submitted a comprehensive pathophysiological system evaluation package with organ-on-a-chip micro [indiscernible] and also a [ 4 ] organ system. So all of these evaluations have provided no safety issues that would be of any concern. So having said all that, to answer your question, when would tradipitant be on the market, it could be on the market as early as January 1, 2026, if it is approved on December 30. But we're keen to see tradipitant at its full potential in the market, especially and first for the benefit of patients. And I remind you, Ram, and everyone that many patients experienced clinically significant effects affecting their quality of life and dozens of them, over 100 now have requested expanded access. And for the majority of them, the FDA has already granted expanded access. Our first patient has been on the drug for almost 5 years and quite a big number of them have been on the drug for over a year, and we share all the stories daily, which is a huge encouragement for us to keep trying to get this product on the market.

Your next question comes from the line of Olivia Brayer of Cantor Fitzgerald.

On Bysanti, are you able to characterize how your interactions with the agency are going so far with the review? And as we think about the commercial launch next year, how should we be thinking about margins and Medicaid impact for that product? Because assuming a similar WACC, I know we've talked about this in the past, but I'd imagine you'd start to see more upside to revenues just by capturing a similar number of patients that are already on Fanapt. So that's my first question. And then as a follow-up on Bysanti, just on MDD, can you remind us what the agency stance is on running one Phase III study versus needing two?

Thank you for the questions. I'll take the Bysanti regulatory and clinical, and I will let Kevin walk through the potential revenue benefit on Bysanti launch. First of all, regulatory, the review is ongoing. We have not received any hint of any major issues, just ordinary questions back and forth. And I remind everyone that the core clinical data come from the 2 bioequivalence pharmacokinetic studies that we have already published. And these studies were extensively discussed with the FDA, both at the design phase, but also the results of them in the course of the pre-NDA preparation, the pre-NDA meeting. So we are encouraged that the review will continue to be going well and that we'll have a good outcome there. You asked about the major depression FDA stands on one study. In general, the FDA's position has been that one study could be adequate, but the drugs that are for the first time on the market, they prefer to see two studies. Now we have a precedent here that the bipolar I indication that was just approved last year was based on one study. And I know there is a lot of question, especially on the investor and analyst side, whether one is enough or two are needed. And clearly, the bipolar is a good example that the FDA will approve for an indication depending on the strength and of the data, but also the size of the study. On the MDD study, this is a large study. And if successful without any basis or uncertainties, I'm sure that there is a very good chance that it can be adequate for approval. I'll let Kevin answer the revenue question.

Yes. Thanks, Mihael, and thanks, Olivia, for the question. So maybe just for a bit of background before answering it. When you look at the IQVIA data on payer mix for both Fanapt and the broader atypical antipsychotic market, there's 3 large payer segments between Medicaid, Medicare and commercial, with Medicaid generally being about 30% to 40% of the unit volume. And then for Medicaid, there is a statutory rebate that every product owes as a rebate as part of participating in Medicaid that begins at 23.1%, but can increase beyond that potentially significantly depending on certain factors, including price increases above inflation. Now specifically on Fanapt and Bysanti, given that Fanapt has been on the market for about 15 years and the inflation during that period compared to price increases taken both by Vanda but also by Novartis in the earlier days of the product, our price increases relative to that calculation results in essentially 100% rebate on our Medicaid business. So for Fanapt, where about 30% to 40% of our business is Medicaid. Given that Medicaid rebate, essentially, that contributes 0 net revenue. With the Bysanti approval, if we just assume for hypothetical a similar WACC and a similar payer mix, that 30% to 40% of revenue would be given a reset and will be subject to the 23.1% statutory rebate, but no additional rebate at launch. And so as you can see, that could result in a significant gross to net favorability between Fanapt and Bysanti, where we've typically spoken about the Fanapt gross to net being in the neighborhood of 50% and Bysanti could be meaningfully below that, potentially about half that number at 25% to 30%. So hopefully, Olivia, that helps characterize just given the significant price favorability that we could see on a Bysanti net revenue calculation compared to the current Fanapt net revenue calculation.

[Operator Instructions] our next question comes from the line of Andrew Tsai of Jefferies.

Appreciate the update. For my first question on Bysanti, my understanding is you filed a 505(b)(1) for the NDA as opposed to 505(b)(2). And so can you just remind us the justification of doing that? I would have thought bioequivalence is more related to 505(b)(2) and what exactly is included in your current data package?

Thank you, Andrew, for the question. So the justification is because the FDA asked us to do that. We were also a little confused whether it was a (b)(2) or (b)(1). And we asked them a couple of years ago, what would that be? And the rationale they gave is because it is a new molecule. So it is not the bioequivalence that drives. So the way it works is that it is a new molecule and the question is what evidence do you need to get this molecule approved. And in this case, the evidence that was needed was an evidence of bioequivalence. So that's why it is a (b)(1). And what is included are the studies we discussed, the pharmacokinetic bioequivalent studies, multiple doses -- multiple doses, both at a low dose and the highest dose to show bioequivalence and infer linearity. And these are studies that the FDA had requested and agreed. And the [indiscernible] preclinical and clinical trial is by reference to the NDA, and it has a unique CMC section for the new tablets, albeit these are at the strength which are the same with Fanapt. But of course, it is a new chemical molecule, and it is a new manufacturing package.

I see. And secondly, for milsaperidone and Bysanti again, Phase III MDD, the results are expected in 2026 as an adjunctive therapy. So what kind of efficacy delta versus placebo do you want to see to make you feel like you have a very compelling product over the other antipsychotics?

The protocol does not specify [indiscernible] it is a typical primary endpoint of statistical superiority of placebo and it is powered at the same power that all other risks that drugs have. Now you mentioned competitive. So what happens in this category is there's a lot of variability in the magnitude of, as you know, within even the same drug from study to study. That is the reason that the MDD studies are not that straightforward to do with variable placebo effect. So the determination of competitiveness is not done on the magnitude of changes compared to placebo but it is rather on the overall profile and tolerability of the drug. Having said that, the drug had a miniscule effect and it was very variable from study to study, there are questions of the efficacy overall. So -- but the simple question is those results will tell us superiority over placebo. And of course, we're going to gain to the margin of that response. But until we see that, we're not going to be able to discuss whether it's going to be comparable or not.

Understood. And then my last question to the commercial launches of Fanapt-PONVORY. You started a DTC campaign in Q1 and Q2. Can you remind us when that campaign ends or those campaigns? And once that ends, how do you expect sales to change from there?

Correct. The direct-to-consumer campaigns, which are -- include company brand awareness and PONVORY and Fanapt are ongoing. And we will continue to make investments in that in support of the commercial program. As hinting, campaigns don't go on forever, and they have a plateau effect of response that adjust these campaigns. We're not there yet, and we are continuing to evaluate daily the effectiveness of these campaigns.

That ends our Q&A session, and we appreciate your participation. I will now turn the call back over to Vanda management. Please go ahead.

Thank you very much, everybody, for participating on this call, and we look forward to seeing you in future calls. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.