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spk02: Good afternoon, ladies and gentlemen, and welcome to the Q4 2020 Vanda Pharmaceuticals, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kevin Moran, Vanda's Chief Financial Officer. Thank you. Please go ahead.
spk00: Thank you, Sadie. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceutical's fourth quarter and full year 2020 performance. Our fourth quarter and full year 2020 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. Mahalis Polymeropoulos, our president and CEO. Following my introductory remarks, Mahalis will update you on our ongoing activities. I will then comment on our financial results before opening the lines for your questions. Before we proceed, I would like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of federal securities laws. Our forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances, and uncertainties. These risks are described in the cautionary note regarding forward-looking statements, risk factors, and management's discussion and analysis of financial condition and results of operations, sections of our annual report on Form 10-K for the fiscal year ended December 31, 2019, 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. Additional factors may be set forth in those sections of our annual report on Form 10-K for the fiscal year ended December 31st, 2020, to be filed with the SEC in the first quarter of 2021. We encourage all investors to read these reports and our other SEC 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. Mahalis Palimoropoulos.
spk04: Thank you, Kevin. Good afternoon, everyone, and thank you very much for joining us. We're pleased with our financial performance as we navigated the pandemic this last year, and continue to drive strong growth during the year in line with our original forecast in February of 2020. Full year revenue for both projects was $248.2 million, a 9% increase compared to 2019. Despite a slowdown in late spring, since then we have seen a significant increase in new heftier scripts as the business has recovered and adapted to the new ways of promotion. This demand fueled Hetlio's growth in the fourth quarter and led us with positive momentum into 2021. Hetlio's fourth quarter revenue was 44.2 million, a sequential growth of 11%. Our forecast for 2021 is Hetlio's revenue of 180 to 200 million, a projected year-over-year growth of 12 to 24%. FNAP revenue in Q4 saw a 5% increase compared to the fourth quarter of 2019. Early in the summer, we launched a direct-to-consumer campaign with national television advertisement. While it is early in the campaign, the lead indicators of website visits and searches saw significant increase as compared to before the initiation of the campaign. In parallel, awareness for our Phenapt brand is entering the national stage. We remain optimistic that awareness will lead to new starts that will hopefully translate to an increase in the number of patients on Phenapt during 2021. As we announced on December 1st of 2020, the FDA approved oral, capsule, and liquid formulations of Hetlios for the treatment of nighttime sleep disturbances in Smith-Magenius syndrome for adults and children, respectively. Hetlius is the first FDA-approved medication for patients with SMS. SMS is a neurodevelopmental disorder caused by a genetic mutation of chromosome 17, which is a microdeletion in 90% of the patients, and a point mutation in the RAI gene, which is included in the microdeletion region in 10% of the patients. SMS affects 1 in 15,000 to 25,000 births, with an estimated U.S. prevalence of approximately 15,000 patients. The most common and most disruptive clinical expression is a sleep disorder that impacts the function of patients and consequently their families. Daniel has been working over the years in collaboration with the patient advocacy organization, PRISMS, to develop headless for SMS, and bring it now to patients. We're continuing our collaboration following the approval and expand our efforts to increase awareness of the disorder and of HETLIOS to the broader SMS patient population. While we're just at the beginning of the commercial launch of the HETLIOS capsule formulation for adult patients with SMS, we're encouraged by the early response. Specifically, more than 100 patient families have now been engaged and are at different states of discussing the treatment option with their physicians, while more than 20 have already received prescriptions. At this time, however, it's difficult to estimate a growth trajectory for the adoption of HETLIOS by SMS patients as we deploy different strategies to reach and inform the community of approximately 15,000 SMS patients of the therapeutic option that Headless brings. I'll turn now to tradipitant. The phase three study in gastroparesis is ongoing with over 65% enrolled, on track to complete enrollment in the first half and report results later in 2021. As we have previously communicated, we believe that the current phase three study can be the last efficacy study required for NDA filing. The response to our television ads for the gastroparesis study has been overwhelming, with more than 3,000 patients that have shown interest since late December, a testament to the significant unmet need for this disorder. In collaboration with the FDA, Almost all the patients that have requested expanded access to tradipitin for gastroparesis have now been approved for a period of six months, and the first completer of the six-month period has now been approved for a total of 12 months. The estimated prevalence of gastroparesis in the U.S. is over 5 million patients, the majority of whom remain undiagnosed. The only FDA-approved treatment for gastroparesis is metoclopramide, approved in 1979, which, due to its potential of severe side effects, carries a black box warning and limitations of use of no more than three months. Based on IQVIA data, there are over 3 million prescriptions for oral metoclopramide annually, given the highly limited treatment options and the safety and tolerability profile of metoclopramide we believe that a new therapy could achieve significant market share and can represent a substantial revenue opportunity for Vanda. Other Phase III tradipitin programs in motion sickness remain on pause until conditions allow us to resume and complete the pivotal Phase III study for this disorder. The Odyssey study of tradipitin in severely ill COVID-19 pneumonia patients is ongoing and continue to recruit patients following the first interim analysis in the summer. A scheduled interim analysis is expected to be completed in the first half of 2021. If the original analysis results are confirmed, the effects of Tredypsin may be of significant clinical benefit for patients as well as for public health. by decreasing the amount of resources employed in the treatment of patients with COVID-19 pneumonia and improving outcomes. Clinical programs for hetlias in delayed sleep phase disorder, or DSPD, and insomnia in autism spectrum disorder are in the process of finalization and begin to recruit patients this year. Clinical development programs for FNAP, include bipolar disorder, Parkinson's disease psychosis, and the long-acting injectable formulation in schizophrenia. All of them are in various stages of preparation and execution. The full-week phase three study of bipolar I disorder includes sites in both the United States and Europe. We have received approval for the ex-US countries, including Russia and the Ukraine. With these approvals, we plan to begin randomized patients in the U.S. and Europe shortly. On FNAP for Parkinson's disease varicosis, we're planning two studies. A phase two open-label study of two cohorts followed by a larger randomized placebo-controlled phase three study. Both studies will evaluate the efficacy of FNAP in the treatment of psychosis in Parkinson's disease. 20 to 40% of people with Parkinson's disease are reported to experience varying degrees of psychosis. There are almost a million people in the U.S. with Parkinson's disease. With only one approved treatment for Parkinson's disease, psychosis, and the significant burden that exists, the condition has on the patients and the caregivers, this remains an important unmet medical need. The Phase II cohort of 24-patient open-label study has now received approval to proceed by the FDA and is expected to commence this quarter. Our Cystic Fibrosis Transmembrane Conductance Regulator, CFTR activator, VSJ-110, is in development for the treatment of allergic conjunctivitis. The results from this Phase II study are expected in the first half of the year and will help us guide further development of ESA 110 to treat a variety of ocular inflammatory conditions, including dry eye disorder. For our CFTR inhibitor, BPO27, we have initiated a study at the Leiden Cholera Lab at Harvard University. This study is evaluating the ability of BPO27 to block cholera mortality using live vibrio stains in mice. To conclude, 2020 was an exceptional year for Vanda, and we're optimistic about the positive momentum we bring into 2021. The approval of for nighttime sleep disturbances in SNS patients provides an opportunity to continue our innovative and successful approach to identifying and treating patients with orphan disorders. We look forward to the results of our extradiputant gastroparesis study and are expecting NDA filing for this disorder later in the year. I will now turn the call back to Kevin to discuss our financial results for the year. And after that, I will be happy to address any questions you may have. Kevin.
spk00: Thank you, Mahalas. I'll begin by summarizing our full year 2020 financial results before turning to discuss the fourth quarter of 2020. Total revenues for the full year 2020 were $248.2 million, a 9% increase compared to $227.2 million for 2019. Tetleos net product sales of $160.7 million were the primary contributor and driver of our 2020 revenues and saw 12% growth compared to 2019. The year-over-year growth of the Hetlios business was driven by a combination of unit demand and net price favorability. FNAP net product sales of $87.5 million for the full year 2020 reflect 4% growth compared to 2019. For the full year 2020, Banner recorded net income of $23.3 million compared to net income of $115.6 million for 2019. Net income for the full year 2020 included an income tax provision of $8.3 million as compared to an income tax benefit of $86.5 million for 2019. As a reminder, the income tax benefit of $86.5 million reflected in the financial results for the full year 2019 includes the favorable impact of the release of Vanda's Deferred Tax Asset Valuation Allowance, which occurred in the third quarter of 2019. Vanda's cash, cash equivalents, and marketable securities, referred to as cash, as of December 30, 31, 2020, was $367.7 million, representing an increase of $55.6 million compared to December 31, 2019. Turning now to our quarterly results, total revenues for the fourth quarter of 2020 were $67.7 million, an 11% increase compared to $60.9 million for the fourth quarter of 2019. Hetlios net product sales were $44.2 million for the fourth quarter of 2020, a 14% increase compared to $38.6 million in the fourth quarter of 2019. As of December 31, 2020, the specialty pharmacy channel held under two and a half weeks of inventory on hand as calculated based on trailing demand and reflects an increase in value of $200,000 when compared to September 30, 2020. The specialty pharmacy inventory on hand at the end of the fourth quarter of 2020 was higher when compared to the fourth quarter of 2019. The value of this inventory change was approximately $2.5 million. FNAP net product sales were $23.5 million for the fourth quarter of 2020, a 5% increase compared to $22.3 million in the fourth quarter of 2019. As of December 31, 2020, wholesalers have lower inventory on hand, calculated based on trailing demand, when compared to September 30, 2020. The value of this inventory change was approximately $200,000. The wholesaler inventory on hand at the end of the fourth quarter of 2020 was higher when compared to the fourth quarter of 2019, The value of this inventory change was approximately $500,000. FNAP prescriptions in the fourth quarter of 2020, as reported by Equivia Exponent, decreased by less than 1% compared to the third quarter of 2020. The performance of the FNAP business during the last three quarters of 2020 was impacted by the pandemic and the related disruption of patient visits with their physicians and restrictions on physical access of our sales force to healthcare providers. Based on Equivia reported data for 2020, Other branded drugs in the atypical antipsychotic class also appear to have been negatively impacted by the pandemic. For the fourth quarter of 2020, Vanda recorded net income of $8.2 million compared to net income of $4.2 million for the fourth quarter of 2019. Net income for the fourth quarter of 2020 included an income tax provision of $2.7 million as compared to an income tax provision of $1.6 million in the same period in 2019. Operating expenses in the fourth quarter of 2020 were $57.2 million compared to $56.7 million in the fourth quarter of 2019. The $500,000 increase was primarily due to a combination of higher R&D expenses related to our late-stage clinical programs, partially offset by lower legal and corporate expenses. Operating expenses in the fourth quarter of 2020 increased by $4.6 million as compared to $52.6 million in the third quarter of 2020. The increase is primarily due to a combination of higher R&D expenses related to our late-stage clinical programs, higher commercial expenses related to FNAP marketing efforts, partially offset by lower legal and corporate expenses. Banda expects to achieve the following financial objectives in 2021. Net product sales from both Hetlios and FNAPs of between $270 and $300 million. Hetlios net product sales of between $180 and $200 million. FNAP net product sales of between $90 and $100 million. year-end 2021 cash of greater than $400 million. Of note, our Hetlios net product sales guidance is based on our currently approved FDA indications for non-24 and nighttime sleep disturbances and SMS. We expect first quarter 2021 Hetlios revenue to be impacted by the annual Medicare manufacturer contribution and the annual payer disruption linked to new plan years, plan changes, and reauthorizations, which we have seen in prior years. In regards to the launch of Hetlios and sleep disturbances and SMS, following the FDA approval in December 2020, we've engaged with over 100 patients from our SMS registry, and they are currently at different stages of discussing treatment options with their physicians. More than 20 patients have already received prescriptions for Hetlios and are working through the insurance reimbursement process. We expect the launch of Hetlios and SMS to have a progressive impact on our Hetlios net product sales through 2021. We do not anticipate differentiating our Hetlios net product sales between non-24 and SMS or providing incremental progress updates at this level of detail. We expect both R&D and SG&A operating expenses to rise in 2021 as compared to 2020 spending levels. However, this expectation continues to be highly dependent on developments in the pandemic and the extent to which it continues to impact our R&D and commercial activities. The primary contributors to the expected 2021 growth and spend include R&D activities, related to our late-stage clinical programs for Tredipedent, FNAPT, and HELIOS, and commercial programs for FNAPT and HELIOS. We expect to continue our trend of adding to our cash balance while advancing our portfolio of investments in support of patients. I'll now turn the call back to Mahal.
spk04: Thank you very much, Kevin. At this time, we'll be happy to answer any questions you may have.
spk02: Ladies and gentlemen, if you have questions at this time, please press star and the number 1 on your touchtone telephone. If your question has been answered or if you wish to remove yourself from the queue, please press the pound key. For our first question, it's from Chris Howerton from Jefferies. Chris, your line is open.
spk01: Great. Thank you very much. Congratulations on the quarter, and thanks for taking the questions. So I guess the first one from me would be on the expanded access program for tridipedent in gastroparesis. I don't know if I missed or if you didn't say, could you provide some information in terms of how many patients have been rolled over to that program would be the first question. And then a second question would be also on tridipedent in gastroparesis. You know, one of the questions that I've heard from investors is, you know, what's the risk of getting a refuse to file letter, even if you basically have, you know, at a high level an agreement with the FDA regarding kind of what the shape of the submission package might look like in the absence of a long-term toxicology study. So that would be question two. And then I guess question three is with respect to Phenaptin PDP. I find that very intriguing given that, you know, I do follow Acadia, so the competitor in this space. And so I guess, you know, how is it that you see FNAPT differentiating and certainly with respect to kind of the other atypicals that have been tried in that space? Thanks.
spk04: Yeah, thank you, Chris. I'll start off with the expanded access program. We're not given a specific number. It's only a few patients, and these are patients that all of them had experience with tradipitin, either in a randomized portion or open-label portion of the current study or prior studies. What is remarkable, however, is that the FDA paid a lot of attention as they always do for expanded access, to each individual patient. They were interviewed. Their doctors provided a lot of material and so did the company on behalf of these patients and the information we had on their clinical responses. And after this very thorough and quite lengthy review, now all patients that had applied for expanded access or almost all have so far been approved. And as I said, the initial duration of approval has been for each patient six months. And for one of these patients that completed the six-month portion, now they're extended another six months with the opportunity for approval. So it is very clear that these patients recognize unique benefit that they cannot receive from any other treatment they experienced in the past. And certainly, they put together a convincing thesis for the FDA who is appreciating that indeed, tradipitin for these individual patients is the only drug that provides substantial relief of their symptoms. I want also to point out that an expanded access program is not one that actively the company or any company is advertising. Expanded access is reserved for drugs that are not approved by patients and their physicians are requesting as a last resort. So with that, you know, again, I underscore this is not an advertised program, and that is why it is mostly patients that have come from the clinical studies. Of course, we're collecting longitudinal data for these patients, and this data will also be submitted to the FDA as part of a New Drug Application Review. The second question you asked is what is our conviction of the FDA filing our application upon submission. We actually feel very confident that we would be providing a complete both from the clinical but also the preclinical information that will allow substantial review. Of course, it is well discussed by the company and known that a discussion with the FDA on the requirement of yet an additional nine-month dog study is ongoing. This study is not being completed. Vandy has explained the reasons that we believe this study not to be necessary in this context. And we're continuing actively to discuss this appeal with the FDA. We believe that regardless of the conduct of this study, the NDA filing can proceed That means not only we submit, but the FDA files. And one of the circumstances that the FDA may consider is to limit the duration of treatment to the three-month duration which the clinical trials now are allowed to. It is our hope and we'll make the argument that this would not be necessary and certainly will provide arguments against that and at the right time of the NDA filing additional data and solutions towards that. So in summary, the company believes that the preclinical and clinical package will be complete for substantial review at the time of submission and we believe that the FDA would be amenable, point of view, to file this application and complete the review. The third part of your question was something that we are also very excited. The FNAP Parkinson's disease psychosis. And as many begin to know, and you're right, Acadia has done a lot of good work, not only bringing a a drug to the market for this indication, but also create an awareness among patients and their physicians for Parkinson's disease psychosis, which can be devastating in the face of an already debilitating disorder. We believe that FNAPT's profile may actually be quite competitive for two reasons. One, FNAPT is a well-established antipsychotic that treats psychosis associated with schizophrenia. And of course, we have experience treating patients for over 10 years now. But also, what we know about FENAP is that its receptor binding profile and its clinical profile as a result suggests a very mild effect on extrapyramidal symptoms. These are the Parkinson's-like symptoms. that many antipsychotics produce as a side effect. And you see with the approved drug, noplasid, of course they are neutral in creating any Parkinson's disease symptoms, EPS, but we believe FNAP can do so as well. And of course, You always need more than one solution for any disorder. The exact clinical profile and other competitive advantages of FNAPT will remain to be seen in the clinical program. But we believe we will have a place in the treatment of Parkinson's disease psychosis. We believe the profile with a 10-year experience of tolerability of FNAPT will be very important, and we believe will have a very good commercial standing for the treatment of PDP.
spk01: Okay. Well, that's very, very helpful. I appreciate the answers, Mahalas, and I guess I have other questions, but I'll hop back on the line and defer to my colleagues.
spk04: Sure, of course. Thanks, Chris.
spk02: For our next question, we have Joel Beattie from Citi. Joel, your line's open.
spk03: Great. Hi. Thanks for taking the questions, and congrats on the progress. First questions are on Hatlios. I guess there's two. One is, what do you see as the biggest driver for Hatlios sales for 2021 that will impact whether you hit the lower end or higher end of the range? I guess I'm curious to hear if it's you know, would be more related to the resolution of the impact of COVID or more related to, you know, ramping up the existing indication or Smith-McGinnis. So that's question one. And then question two would be, you know, now that you've gotten a couple of months ago the approval for Smith-McGinnis for Hetlios, what does the potential look like for adding on additional indications? and future label expansions. Thanks.
spk04: Thank you very much, Joel. So, first on the components of the revenue forecast of head use. As you know, in 2020, we continue to show growth in the use of head use in ON24 patients. remind our audience that we have just entered year seven since launch. And as many people know, it is extraordinary to continue to grow revenue and your patient base in any indication seven years after launch. which actually is another testament to the number of patients that are potentially out there untreated. So for this year, the forecast derives from a continuous small growth on non-24 patients, but also the addition of SMS patients of course, towards in the later part of the year. As we identify these patients, they meet with their physicians, and they go through the slow progress that we have seen with their responses. So a component would be the growth in non-24 and a growing component whose trajectory it's hard to fully predict right now is the addition, steady addition of SMS patients, but creating the bulk of the annual revenue towards the end of the year. You asked about additional indications. What we've learned from the non-24 experience, the SMS experience, and also the extensive a program that we run in phase advance related with the jetlag model is that hetlios has a significant potential in disorders where there is an abrasion of the circadian rhythm. And as I mentioned in the script, we're evaluating now two disorders and work actually is the clinical work has already started in one of them. That is delayed sleep phase disorder. As many know, this is a more common disorder which affects a significant percentage of people of the adolescent or early adulthood that still remains a common disorder in relatively common disorder in adults. The issue with the DSPD, the core issue, is difficulty falling asleep at the desired time with common expression where patients initiate sleep in the early morning hours. Once you fall asleep, you remain asleep for the duration of time that you need. So the... The potential of Hetlius to be a useful agent is high, given the technical understanding that Hetlius has already shown the ability to phase advance. We have not yet tested delayed sleep phase disorder patients, but this work is starting right now, and a clinical observation study, open-label study, is ongoing. The second indication that is very interesting is the insomnia in patients with autism. And then again, while the mechanism is not very well understood, there is insomnia of sleep initiation is one of the most common complaints for patients with autism disorder with about 80% of them reporting it and requiring treatment. There it is believed that a circadian deregulation may cause this difficulty with sleep latency. So that's a program that is in the late stages of protocol design and discussions with the FDA for initiation of clinical work, hopefully in the first half of this year.
spk03: Great. Thanks for those great details. If I could finish up by asking two questions about tridipendent. One would be, what do you think you need to show on efficacy for FDA to be agreeable to approval? Would it be a kind of standard 0.05 p-value on the primary endpoint, or is it a higher bar than that, given I think originally an additional Phase III study was planned that is no longer planned? And then the second question is, is regarding the nine-month non-rodent animal studies. I know those haven't been completed, but have they been started, or is there any way to start those before getting clarity from, you know, whether FDA will accept the filing or not, or if you're granted to refuse to file, would that begin a nine-month study at that time? Thanks. Thanks.
spk04: Yeah, I'll start with the last one. No, we're not conducting these studies now. We've been very clear with the FDA that this is not a study that we'll undertake. And this objection is fundamental that Vanda does not believe in that unnecessary animal studies, especially in dogs, should be conducted. And, you know, we're not alone. I think in that there is an entire movement of not conducting unnecessary animal studies. And part of this movement is the FDA themselves. And they're making a lot of progress trying to understand alternative technologies that can be used. But also the FDA understands the limitations of these studies that may not provide the information that is necessary for safe drugs. So I would say over the last couple of years, Vanda has developed a sophistication around the utility of such and other studies, as well as alternative studies that I will not be discussing today, but studies that Vanda is conducting. and will be providing information to the FDA for their review as well. The other part of your question was about study outcomes and expectations. So just to remind everybody that we have discussed that Vanda prior to initiation of this phase three study met with the FDA at the end of phase two meeting. and discuss the protocol design and the program forward. So we have an agreement with the FDA that this study with the FDA accepted design that we're following and the endpoints that we're studying and the population that includes both idiopathic and diabetic gastroparesis patients will be sufficient, if successful, as the pivotal registration-only study. And, you know, just a little more detail, what the primary endpoint is improvement in the symptom of nausea in patients with gastroparesis, while at the same time, the scale that measures all symptoms of gastroparesis along with global impression scales is being characterized. And we're looking, this study, to define the design, is a four-week screening leading to a 12-week treatment. And we will be looking at the effects of the drug in the latter part of the exposure weeks 11 and 12, and also at week 3 and 4, as we've done in the prior four-week study. So we feel very confident that if successful, this study will be the only study required.
spk03: Thanks again for all those helpful details. Maybe just one last point of clarification on the last point. All that said, it sounds like you have a fairly extensive agreement with FDA. Does that mean a p-value of around .05 is supportive of approval?
spk04: That has not been a point of discussion, but FDA guidance determines the thresholds as statistically significant in a predetermined endpoint. is a value of less than 0.05. So there's no additional discussion on that, and we expect that we will be held to the same standard. And just to remind this audience here that VANDE has certainly met and exceeded that statistical significance in the smaller Phase II study with similar endpoints.
spk03: Great. Thank you very much.
spk02: Thank you, Joel. Again, participants, if you would like to ask questions, press star 1 on your touch-tone telephone. I am showing no further questions at this time. I would like to turn the conference back to Vanda Management for the closing remarks.
spk04: Thank you, Operator. And thank you very much, all of you, for joining us. And we'll see you in future calls. Looking forward to an exciting year, both on the commercial and clinical front. Thank you very much.
spk02: Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.
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