Yep. Great. Well, happy to be here with the next session with Vanda Pharmaceuticals. We have Kevin Moran, CFO. A lot going on for you guys, so maybe we can just take your time, do an intro, an overview of kind of everything going on, and then we can jump into some Q&A.
Yeah, perfect. Well, first of all, thanks to James and to the entire Stifel team for having us. Very excited to be here today and to meet with folks. For just a bit of a table set with Vanda, for those who aren't familiar with it, we're a pharmaceutical company based in Washington, D.C., with more than 500 employees. We have five products approved, hopefully a sixth coming in the next month, across a wide range of therapeutic areas, and we have a very robust pipeline with a number of assets, including those that are approved and hopefully soon to be approved in development for other indications, and then a host of other assets beyond just those in development as well.
With the five products that we have on the market, we have two atypical antipsychotics, Fanapt, which is approved for schizophrenia and bipolar disorder, as well as Bysanti, which is also approved for schizophrenia and bipolar disorder. We have HETLIOZ, which is a circadian regulator approved for two orphan sleep indications here in the U.S., non-24-hour sleep-wake disorder and nighttime sleep disturbances in Smith-Magenis syndrome. That product is also approved in Europe for non-24-hour sleep-wake disorder as well, but not for nighttime sleep disturbances in Smith-Magenis syndrome. We have PONVORY, which is approved for multiple sclerosis, and was acquired from J&J a few years ago. In addition to that, we have the recently approved Nereus, which is approved for motion sickness and was approved towards the end of last year, and that's the five assets that are approved.
The sixth asset, which could be approved in December, where we have a PDUFA date, is imsidolimab, or Quimilza, which we in-licensed from Anaptys last year, and is under review by the FDA for generalized pustular psoriasis, GPP. We ended the third quarter with about $140 million in cash, and that's coming off the heels of ending last year with about $260 million in cash. Obviously, that's about a $120 million burn through the first three quarters of the year. What we've communicated about that is that over the course of the most recent quarters, we've been making significant investments in our late-stage clinical assets, where we've had four phase III readouts, most recently with our positive phase III results for Nereus and GLP-1.
We've been manufacturing commercial launch supplies for the two recently approved products, Nereus and Bysanti, as well as the hopefully third approved product, imsidolimab, as well as the commercial infrastructure that goes into those product launches. With that, we expected, coming off the second quarter, that we'd begin to see expenses moderate as soon as the fourth quarter and as we headed into next year, and we communicated that we expected our cash to be sufficient through at least 2027, if not longer. In a positive development, obviously, we saw the third quarter operating expense come in significantly below what we'd seen in the second quarter, a bit ahead of schedule in terms of the expense moderation as we head into the end of the year. From the kind of recent milestones and upcoming highlights, we had two products approved in the last 12 months.
We're hoping it's going to be three within a 12-month period, which is semi-unheard of, having a company of our size having three products approved in such a short period of time. We've had readout on three phase III trials in the late part of this year, including, as I mentioned, the GLP-1 phase III results. For Bysanti, in addition to that product launching by the end of the year, we've got upcoming phase III results for Bysanti in MDD, which obviously represents a very significant market opportunity in the atypical antipsychotic class, and so we're incredibly excited to hopefully read out on positive results there next year and move forward with potentially an sNDA for Bysanti.
Lots going on, lots of exciting things that have happened in the last 12 months with the FDA decisions that we've already seen and the clinical readouts that we've reported, and lots more to come in the coming quarters with another PDUFA date, another clinical trial readout next year, and the upcoming launch of Bysanti.
Yep. Great. So yeah, maybe we can just start with kind of Fanapt, Bysanti, and just kind of that sort of dynamics. I guess, as it relates to Fanapt and sort of what you've seen, what has been sort of the drivers of sort of within this atypical antipsychotic kind of category, and what's sort of the outlook at maybe more like a class level, and how you guys are going to position this sort of franchise?
Yeah. For a bit of background on Fanapt has been in the market for quite some time. Approved back in 2009, originally for schizophrenia. It was licensed to Novartis. Novartis originally commercialized it. We reacquired the rights in the 2014 timeframe and relaunched it under the Vanda bannerhead. As we clarified kind of the exclusivity period, we then launched a phase III program for bipolar disorder, which ultimately was successful and led to an FDA approval for that indication in 2024. When we got that positive response from the FDA and launched the commercial expansion around bipolar, Fanapt had been essentially flat from a revenue perspective for several years, and underneath that was that the units had been declining by a very small amount, 3%-5%, let's say, a year, and any kind of price favorability had offset that to kind of keep the revenue stabilized.
Since we launched in bipolar disorder, we have seen a very significant growth in prescription volume, over 30% last year, and on track for a similar performance this year. That is what has been driving the revenue growth, both not just beyond the existing volume that it was in 2024, but likely what was a declining volume. The area kind of above that declining curve, I would say, is all attributable to the bipolar indication. As part of that, we have significantly expanded our sales footprint from prior to that approval in the neighborhood of about 50 representatives, and first we went up to about 150, and then at about this time last year, we went up to 300, which is, I would say, competitive within the class, although still on the smaller side relative to some of the other competitors in the space.
Most of that growth that we are seeing is likely attributable to bipolar disorder and the significant expansion of targets that we began calling on with that indication expansion. The class itself, there is a highly genericized portion of the class, and then there is the branded portion of the class. The branded portion of the class is a several multi-billion dollar revenue opportunity, just to give you some sense of the scale there, and this is where you have got large players in the class that have done very, very well. Fanapt itself actually only represents about 2% of the branded market, and the silver lining to that, obviously, because we want that number to be as big as possible, is that in a class from a branded perspective where there is a handful plus of products, and we have 2%, that means there is significant room for growth, right?
As we have seen success in the last two years or so with our commercial expansion, we are optimistic that we could continue to see success both with our continued efforts around bipolar disorder, but also potentially with the label expansion in MDD. In the class itself, there has been some recent entrants with different new mechanisms, which are important to the class for patients and prescribers to have other options. We have also seen the proliferation of LAIs and those becoming a more important part of the class. But Fanapt, we think, has a very important treatment option for patients, for prescribers, and now in the neighborhood of 10,000 people a month are on Fanapt, just to give you some sense of how significant the patient population is. Now, where that kind of dovetails with Bysanti is that Fanapt's LOE is expected to be towards the end of 2027.
We're going to launch Bysanti before the end of this year, which means that we'll have about a year of overlap where both products are in the market under exclusivity. We've got a very well-built-out commercial infrastructure around our psychiatry sales force and commercial activities that we're going to be pivoting from solely Fanapt to both Fanapt and Bysanti, and likely over time, to primarily Bysanti. We feel very well prepared to launch that drug given the existing commercial infrastructure, the existing relationships that we have with prescribers in the broader community. We're very excited to get the product out there and hopefully begin to see success as we head into the end of this year and next year, and then again with the MDD data providing kind of another inflection point for potential growth in the not-too-distant future.
One other important dynamic about Fanapt and Bysanti is from a pricing perspective, Bysanti has significant favorability relative to Fanapt. On the Fanapt side, as I mentioned, it's been on the market for quite some time, just given kind of how that's evolved over the last 15 years. The gross-to-net on Fanapt is in the neighborhood of 50%, and the primary driver there is the Medicaid business, where the gross-to-net is actually over 100%. You actually lose money, lose revenue on, not even money, just lose revenue, on units sold through the Medicaid channel. With Bysanti, you get a reset on that calculation of the unit rebate amount, such that we expect the gross-to-net on Bysanti to be more in the mid-30s, relative to that 50%.
The revenue that we're able to derive from Bysanti units will be significantly higher than the revenue that we're able to derive from Fanapt units, and most specifically in the Medicaid segment, which is about 30%-40% of the Fanapt business, and in a similar range for the broader atypical antipsychotic market.
Yeah. Yeah, that's really helpful. Sort of like on that, is that sort of gross-to-net going to stay stable over time, or is that going to drift back towards like the 50% with Fanapt over time? How is that dynamic going to evolve?
Yeah. My expectation would be, some of the things that led it to be 50% do not really exist anymore, and what I am speaking to primarily there is the evolution in the Medicare space has actually taken away a lot of the incentives for products to have price increases. Because where in yesteryear, if you took a price increase, although it was not beneficial on Medicaid, it would be beneficial on Medicare and commercial. But with the IRA, your price increases on Medicare are capped at inflation, similar to what you see on the Medicaid space. It is a little bit different, but similar. Really, your only opportunity for price increases to actually benefit the bottom line beyond inflation is commercial.
Unless you have a product that is heavily skewed commercial, you are largely contained to an inflationary price increase, which means you will not see the unit rebate amount increase so significantly because you are not taking price increases above inflation. I would not expect that dynamic to continue, which is what has ultimately led to Fanapt's gross-to-net to be significantly higher. The other thing that could change the Bysanti gross-to-net over time, but I expect that it would be more if it were to come to pass, and I am not saying it will, if we were to get approved for MDD, which is a very competitive space as well, it could be something where we would consider commercial contracting, where we historically have not done much of that, and that could change the gross-to-net dynamics.
That would be something that we would evaluate at that time, and obviously the reason to do that is to increase access to patients and drive higher revenue.
Yeah.
It is a math exercise, and if that is not going to lead to more patients getting the drug and more revenue, then you will not do it. The only scenario there would be that you would be increasing your gross-to-net percentage for an increase in net revenue.
Yeah.
But
Yeah, makes sense. Is there any sort of like access dynamics or considerations in terms of switching people from Fanapt to Bysanti and pricing being different? Is that going to be a headwind at all to switching?
It is difficult to say with certainty, but what we see on the Fanapt side today is that if you looked at kind of the MMIT data, which is similar to IQVIA for script data, it is kind of the gold standard for access data. On the governmental side, you see access in the neighborhood of 80%-90%, which is actually very good. So if you are a governmental patient, 80%-90% chance you will be able to access Fanapt. The commercial coverage is lower, like below 50%, and that is with no contracting, right? Because of that, I think that is essentially that the payers are kind of limiting coverage to the extent they can because we are not one of the providers that is contracting for discounts, right? So our expectation is that Bysanti coverage will look similar. Again, it could be different.
There could be different hurdles that are put in place, but our kind of baseline expectation is that access between Fanapt and Bysanti will be similar. Now, when Fanapt goes generic, and there is the full loss of exclusivity in Europe, there could be different hurdles put in place by payers. But again, there are already many generics available in the class, as I mentioned kind of earlier when I was talking about it is 90% genericized. My expectation would be that Fanapt or iloperidone would just go on the list of, you must have tried and failed two of these 10 generic medications before you can get access to the brand. By the way, that is the same type of PA that you are seeing on all the other atypicals in the class.
I do not anticipate it being a significant headwind. Things could develop differently than kind of it appears now, but I think that we will see similar access for Bysanti that we currently see for Fanapt.
Yep. Okay. What is the right way to think about the pace in which switching is going to happen, and how are you guiding people to what to expect over the next year?
Yeah. There's a very interesting question, and there's a couple different dynamics there. One is that we're hoping that we're going to see Bysanti's volume grow from a host of different sources, right? This would be from patient sourcing off of another medication, which is what you tend to see in the class, right? Most of the new starts that you see within the atypical antipsychotic space are patients who are already diagnosed with a psychiatric disorder and are already taking a medication, and they're either switching to your medication or they're adding your medication to their broader treatment paradigm. We see a very significant amount of switches in the class. There's been papers that have said that as many as patients on average switch within six months, right? Unfortunately.
The part about this that's unfortunate is that none of these products are necessarily silver bullets, and so patients and prescribers are looking for the right medication for them or the right mix of medications for them. What we see kind of underneath the surface is, if there's about 10,000 patients on therapy, we see in the neighborhood of 800 - 1,200 starts in a given month.
But you're only growing by a much smaller number. Let's just say 100 to a couple hundred patients a month.
Which means you are losing 800 -1 ,000 patients per month, and that is the churn that you see.
Yeah
from patients switching, and it is not dissimilar from what you see in other products in the class. Now, the benefit to that in a switch strategy is because you see so much of your patient base churning in a period of time, it means that if you are looking to have patients switch from another therapy to Bysanti, there is ample opportunity to do so. So it is not like a very stable, static patient population where they are all on their medications and really kind of locked in. They are all moving around quite a bit. So that lends itself to, we think Bysanti seeing significant uptake fairly quickly throughout the first year.
The other thing I would say to that is when you see patients switch, you tend to see them switch, either their medication is not working at all and they need to switch immediately, or their medication is not optimal and the doctor will switch them when their refill comes up, right? So my expectation is that in the initial month or two of the launch, we may see slower, not a bolus kind of uptake.
It might be more of a stream getting started, and then you will kind of see a full effect, I think, of our efforts in months three, four, and beyond. So that is kind of how we envision it playing out, but we are very excited, obviously, that the product is about to be available in the market, and then we will begin to having our sales reps detail this to doctors and make them aware that it is availability.
Yeah. I guess, like, how important is switching the whole business before Fanapt goes generic? Do you need to make that happen? Then, like, basically if it becomes generic Fanapt, is it harder to then, like, make that switch, do you think?
Well, I think certainly we're happy to have this time window where both products are under exclusivity, where we're able to be focused on just commercializing Fanapt and Bysanti versus commercializing Fanapt and Bysanti in a competitive generic market.
Yeah.
But I think that we're very optimistic that Bysanti is going to be well received in the market. I think with some of the pricing dynamics that we see out there, we're optimistic that if we're able to be successful on Bysanti in this first year, we'll be in a good spot a year from now. Then we think the MDD potential label expansion, which coincides pretty closely with the potential loss of exclusivity and wouldn't be on the Fanapt label, or the iloperidone label, is obviously a significant advantage of Bysanti relative to many other products in the class, including iloperidone.
Yeah. Okay. I guess what's gating, if anything, to kind of getting the Bysanti launch up and running?
Yeah. What we've kind of communicated, the timing that we're talking about is consistent with the timing that we communicated when we had received approval. For those of you that aren't aware of this, Fanapt actually has seven commercial strengths, so there's a lot of flexibility for patients and prescribers. There's 1 mg, 2 mg, 4 mg, 6 mg, 8 mg, 10 mg, 12 mg. In addition to that, there's three commercial titration packs. So there's 10 commercial SKUs in the market, then there's six sample configurations. So we're making 16 different configurations.
We're also making sure that as we, this kind of goes into what I was mentioning about kind of our operating expense and spend trajectory, is because we're putting Bysanti in the market and we want to be prepared for a very significant response, we have made enough inventory to be able to support the Fanapt business.
with Bysanti. Because of that, it's a lot of inventory to make. So that's been the primary gating factor since we received approval was, hey, we need to make all this inventory and have it available before we launch.
When we communicated the time, we said it'll be available by the end of the year.
Yeah.
So very imminently going to be available. But yeah, there's more, not necessarily complexity, but volume and scale to making the product available than in the case of HETLIOZ, for example, where there's one SKU.
Yeah. Makes sense. On MDD, can you just kind of help frame sort of the setup there and your confidence on that study working?
Yeah. First, in kind of the first articulating kind of the study design. Study design is very similar to what you would expect from the other products that have been approved in the space, and we're not necessarily doing any kind of novel, creative study design here. This is one where it's a well-worn path. There's many other medications that have been approved for this indication with this mechanism, and so we're following that.
Similar to what we did with Fanapt on bipolar, where we did not have any earlier data to support the phase III, the class is shown to be effective in the indication, and so from that end, logic would hold that Fanapt also should be effective in bipolar. So we ran our one phase III for Fanapt bipolar, ran it very deliberately, meaning we thought it was a very high-quality study because we were running a singular, not that every study wouldn't be high quality, but when you're running two or three
phase IIIs because to account for mitigating any placebo effect that you see in these trials, you have a little bit more risk mitigation in running multiple studies. We ran a singular study, ran it very well, and showed very positive data, which ultimately supported the approval of Fanapt in bipolar on that one study with no prior data in bipolar. The logic here is very similar on Bysanti. Again, we don't have any previous data on Fanapt or Bysanti in MDD. The class is shown to be very effective in MDD, and so we again believe that there's a good chance that Bysanti also would be effective in that, hence our initiation of the phase III program. Again, a singular study, we think if it shows a significant effect size, should be supportive of an sNDA for Bysanti.
Yeah. How much does that change the potential Bysanti sort of trajectory?
Yeah. When you look, one, when you look across kind of in our predecessors in the class, when they've added an MDD label expansion, there's been a significant step change in their growth trajectory, which makes sense because when you look at both the patient population and the patient receptivity to commercial efforts, both go up significantly with the introduction of MDD. So first on the patient size or the TAM, schizophrenia is probably about 3 million people in the U.S. There's varying estimates on all these things. Bipolar, maybe 6 million, so about twice as big as schizophrenia. MDD, more like 20 million, right? So we take our current addressable population from less than 10 million up to more like 30 million, right? So very significant expansion in just in terms of the number of potential patients.
That also, kind of in a commensurate fashion, increases the number of targets as well because, and you start to, where we're primarily now going on psych with some primary care, the introduction of MDD brings a lot more primary care targets into the universe. Then from a patient receptivity perspective, as you look at schizophrenia, many of the marketing efforts on the schizophrenia side really are geared towards prescribers and caregivers, right? Just given the nature of the indication, the patients might not be the ones that are actually seeing those commercial efforts and responding to them. Whereas on kind of the other end of the spectrum, MDD patients are often the ones that you're actually reaching out to and saying, "Hey, we think this might be a medication that could help you. You should talk to your doctor." Right?
It is a much more accessible patient population for commercialization efforts as well. Think it represents a very significant potential inflection point for a host of reasons, including those.
Yeah. Yeah. Makes sense. Maybe on motion sickness now, maybe just sort of help frame up what that kind of initial launch has looked like and some of the key kind of dynamics there.
Yep. Again, just for kind of reminding us of kind of the history here. Nereus approved for motion sickness right around the end of last year, and launched in May. When we launched it in May, we made it available on a consumer website in a very unique way that we hadn't seen anybody else do, and this is where you can go in and buy the product directly for a significant discount from WAC. WAC for an individual pill is about $255, whereas for the cash pay model, it's $85, right? It's a 67% discount. Made it available via that path in May and began very select and deliberate DTC campaigns around the Memorial Day timeframe, right?
What we did over the late summer was we began having sales force promotion with our existing sales force teams promoting Nereus to their prescribers that they were already seeing. What we've seen over the course of the first quarter and a half now is that in a not unexpected way, the product is very promotionally sensitive, which is great actually.
When we run DTC campaigns, we see a very significant spike in activity on the website, in activity in terms of people looking at purchasing the medication, and then also in people actually completing the transaction and purchasing the medication.
The counter to that, though, is given the nature of the indication, the population is not a small population that you can kind of sub-segment DTC and directly target.
It's a much broader population, the general population in some ways. Because of that, you have to look for efficient ways to reach that audience, whereas other products that have a similar audience demographic may run hundreds of millions of dollars in DTC to quickly reach their audience. That's not something that we can do nor think we should do because we don't think it would be efficient, but we do need to figure out a way to find that audience in an efficient manner and make them aware of the medication because we do see such a good response from a promotional perspective, and we're continuing to do that and continuing to look to ways to optimize the efficiency there. Very excited about the response we've seen.
We think that the trajectory will take a little while to take off given the nature of the product and the patient universe.
But we are very excited about the possibilities given how responsive it is to DTC.
Yeah. Is cash pay like the bigger sort of like dynamic here versus-
It has actually been-
through prescription.
It has actually been a pretty good mix from both, actually. You have a lot more visibility into the cash pay model because it is via our hosted website, right? When you see products distributed through the wholesale channel, you have a lot less visibility into who is writing or who the patient is.
But we actually see a lot of demand coming through the wholesale channel, which is great because it also means it is likely being covered by insurance in many places, right?
Yeah.
We see decent coverage when folks are able to get it processed and reimbursed.
Yeah.
So it is a bit from both. We think as we continue forward that both will be significant components to the motion sickness commercial opportunity. We also think, though, that as we just read out again the very positive data on the vomiting in GLP-1, obviously the GLP-1 market has significant components from cash pay and from the insurance model. We are happy that our commercialization efforts have set this up in a similar function, that if we are able to be approved in that indication, we can kind of parallel path that with what folks have done there as far as making the GLP-1s available via cash pay and insurance where it is covered.
Yeah. Are you seeing people reuse the product, or are these kind of like one-off uses? Do you have a sense yet of how much sort of stickiness there is?
It's still very early. We have seen refills, but it's very early given that we launched in May, we started seeing volume in June, and we're now in November. When we reported results at the end of the third quarter, it had been about four months of activity. We've seen refills, but it's too early to say at kind of what clip they are. That was something that we communicated both as part of the original guidance, but also as I kind of spoke to on the third quarter call. When we launched guidance at the beginning of the year, there was a number of variables that we were saying, "Hey, we don't have real data.
We're looking at proxies and seeing how we think this thing might shake out, but the key variables here are going to be what's the responsiveness to DTC," which again, we've been very pleased with when we run DTC, what response rates we're seeing, what the fill rates are, and then what the number of pills per fill is, because folks could get, you only
take one or take two, or you could get 20 and have it for a couple uses over a month or two. Then what the refill rates are. We're starting to get some insights into those, but it is still very early to have kind of informed both our model, but also inform kind of like what we think the long-term implications of those might be.
Yep. Then maybe just on this GLP-1 study, obviously you mentioned it was positive. Maybe just sort of talk about timelines to approval, then also your confidence in approval and sort of alignment on the study design and sort of this indication.
Yep. So first on kind of the results themselves, by the way, so we had very positive results in the phase II trial about this time last year. Then the phase III basically confirmed the results that we'd seen in the phase II. So we were very pleased there, didn't see anything from a safety perspective that we hadn't, that was unexpected or new. So very pleased with the overall results and confirming the phase II. From a timeline towards an sNDA perspective, obviously we plan to move forward with discussions with the FDA, but we think that we've got a package that's sufficient for submission, and that could be sometime next year. We'd hope to move as quickly as possible towards that, and therefore a PDUFA date could be in 2028 sometime, depending on kind of that timeframe.
As far as the alignment with the FDA, we always are in communications with the FDA and factor their feedback into our plans. However, there's some times where the FDA may disagree with what we've done or what we plan to do in a clinical program. I would say we've been very successful in ultimately getting things approved with the two approvals in the last year, and hopefully a third in the next month. So, we feel like we do good science, and ultimately that generally prevails. The study design itself, though, is a challenge study design, where we've seen this used as a precedent in other indications with an NK1, primarily chemotherapy-induced nausea and vomiting, and we followed a similar design when we established this program and also in our motion sickness program.
So we think there's good precedent for it in obviously other indications, because this would be the first indication, first product approved in this indication. So we're hopeful that the regulators obviously will see it the same way as us. But we're very pleased with the data package and excited to move forward with those discussions and hopefully ultimately a submission.
Makes sense. In the last 30 seconds here, you mentioned runway through 2027. I guess how important are the Bysanti switch, the Fanapt growth, anything from the motion sickness launch? How important are those revenue assumptions to that guidance?
Yeah. Certainly they are. I mean, absent the two levers are really how much are you going to bring in and how much are you going to spend? On the spend side, we've already guided towards, hey, we think we hit a peak OpEx earlier this year, and now we're beginning to see moderation. Again, we went from $114 million to $93 million in between the second and the third quarter, and we expect further moderation going forward. But the other lever is revenue.
The continuation of our psychiatry franchise beyond 2027 is critical to our cash runway and our ability to properly fund our activity. So it certainly is very critical.
Yeah. Makes sense. Awesome. Great. Thanks, Kevin, and thanks for everyone joining.
Yeah. Thanks, James. Appreciate it.
Yeah.