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spk01: Good day and thank you for standing by. Welcome to the Vanda Pharmaceuticals, Inc. Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Kevin Moran, Vanda's Chief Financial Officer. Please go ahead.
spk00: Thank you, Joelle. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' second quarter 2021 performance. Our second quarter 2021 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, Chief Executive Officer, and Chairman of the Board. 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, 2020, 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 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. Mahalas Palamarapulas.
spk03: Thank you very much, Kevin. Good afternoon, everyone, and thank you for joining us. We're excited to share our second quarter 2021 performance and our upcoming clinical milestones. 2021 is supposed to be an exciting year for Vanda with several late-stage clinical programs that have potential for significant short-term value creation, as well as long-term advancement of the gold souvenir. In addition to our ongoing commercial launch of Hetlias for Smith-Mageni syndrome, we're looking forward to the completion of our Phase III gastroparesis study and reporting the top-line results by the end of the year. On commercial performance, we see continued growth year over year. In the second quarter of 2021, net product revenue for Tetlius and Fanapt was 67.9 million, a 9% increase compared to the second quarter of 2020. Net product revenue for set-use saw a 7% increase in the second quarter of 2021 compared to the second quarter of 2020, and net product revenue for FNAPT saw a 15% increase compared to the second quarter of 2020. Set-use demand by descriptions received continues to par-exceed the description field. But keen to improve access to patients and to present, we have engaged with a number of payers to discuss ways to improve patient access. Now, on the Smith-McManus syndrome nighttime sleep disturbances approval and launch. In December 2020, the FDA approved the oral calf emulation of hip years and they knew formulation, Hetlios-LQ, for the treatment of adults and children, respectively, with nighttime sleep disturbances in Smith-Mageni syndrome. While we're still in the early stages of the commercial launch of Hetlios-Capsulin, Ketlios-LQ liquid formulation, we're encouraged by the early results. We continue to connect with SMS families who are at various stages of discussing the treatment option with their physicians. We're now implementing the second phase of our commercial loan, which is intended to reach a larger number of diagnosed and undiagnosed individuals in a similar fashion to our non-24 efforts. We plan to reach patients and doctors with a combination of direct-to-consumer advertising and are specialized in personal health scores. While it is difficult at this time to estimate the trajectory for the adoption of head layers by SMS patients, we're excited about the urgent opportunity as we continue to deploy a number of strategies to reach and inform the community of approximately 15,000 SMS patients in the U.S. Given the genetic testing available for SMS, A significant number of patients are already diagnosed, and these are expected to be the first to come to treatment. It is estimated that between 80% to 100% of patients with SMS suffer from nighttime sleep disturbances, for which HEC-US is the only approved treatment. We expect that the number of SMS patients on treatment with HEC-US will continue to increase in the second half of the year, and that greater awareness will lead to adoption. The paper describing our study in Smith-Mageni syndrome, the largest of its kind, was published this week in the journal Genetics in Medicine. This study, the largest ever conducted in patients with SMS, enrolled genetically confirmed patients with SMS in a double-blind, two-period crossover study and demonstrated favorable effects of tazimeltin over placebo in a number of primary and secondary endpoints, including sleep quality and sleep duration measures. The results presented in this paper consisted of the mechanism of action of tazimeltin as a circadian regulator. As we're resuming activity in most of our clinical programs, I would like to highlight our progress in some of these key programs. First, the phase three study of Cladipta and Gastroparesis nearing completion with 95% of the target of 200 patients already enrolled. We expect results of this study by the end of the year. Following the completion of the study, we plan to meet with the FDA for a pre-MDA meeting and discuss our coming application. As we have previously communicated, we believe the current Phase III study will be the last efficacy study required for NDA filing. As a reminder, the ongoing Phase III study aims to enroll gastrointestinal patients with either idiopathic or diabetic etiology. The study is a 12-week double-line placebo-controlled study which will measure the effects of Tredipitin in improving the symptoms of cancer. This Phase III study follows the successful completion of a four-week Phase II randomized study in the same population. The results of that study were published in the journal Gastroenterology in January of 2021. Additionally, more than a dozen study participants are going to continue treatment with tradipitin post-completion of the clinical study through a expanded access program. We have worked in collaboration with these patients, their doctors, and the FDA to ensure that they can receive treatment with tradipitin. gastroparesis is a severe and medical condition with only one approved treatment option in the last few years. Our estimates for the size of the commercial opportunity for gastroparesis therapy are based on several key assumptions. One, the estimated prevalence of gastroparesis in the US is about 6 million patients, the majority of whom remain untapped. Second, At present, there are more than 600,000 patients estimated to have a confirmed diagnosis of gastroparesis. And finally, based on IQV data, there are 300,000 prescriptions of oral metoclopramide per month in the U.S. Given highly limited treatment options and the early response, as we witness the recruitment through direct-to-consumer advertising, to a dividend in gastroparesis, can achieve a significant market share, which we believe will create an opportunity for Vanda to address an important and medical need, and represents a potentially transformational commercial opportunity for the company. Going into the second half of the year, the completion of the gastropares study represents our most imminent and significant clinical milestone, however, There are a number of additional programs that present near-term value creation, and I will briefly discuss. First, on the headlifts. We have previously discussed our clinical programs with headlifts. We studied in delayed sleep phase disorder, or DSPD, autism spectrum disorder, and pediatric non-24-hour sleep-wake disorder, all of which are ongoing. The most advanced of these programs is the DSPD, which represents what is believed to be an important value creation opportunity for Uganda with a high probability of technical success. DSPD is likely the most prevalent sleep disorder affecting approximately 1% of the population and 7% of patients with disorders of initiating or maintaining sleep. The prevalence of delayed phase disorder is highest in adolescents and young adults, with rates estimated between 3% and 4% and some as high as 7%. We believe that head loss could have a significant benefit over classic insomnia drugs to treat this condition by addressing the underlying cause and aligning the internal clock and therefore improving sleep at the appropriate time. Tragic insomnia drugs provide a small sleep benefit with a number of side effects not addressing the underlying issue or initial line of skin and clock. The DSPD study has started randomizing patients in a number of clinical sites across the United States, and we will be able to provide greater detail on timelines as we understand the rate of recruitment over the next few months. An observational open-label treatment study of the effects of headlamps in patients with autism spectrum disorder and sleep disorders is scheduled to begin imminently. Sleep disruption is commonly seen in people with autism and is associated with increased burden of disease and impact on functioning. There is currently no FDA-approved treatment for sleep disturbance in autism. I will now turn on FNAPT. The ongoing clinical development programs for FNAPT, including bipolar disorder, Parkinson's disease psychosis, and the long-acting injectable formulation schizophrenia, are also in various stages of preparation and execution. The four-week phase of the study of bipolar I disorder with alloperidone includes sites in both the United States and Europe. The study has quickly started to randomize patients in the U.S., and we plan to begin randomized patients in Europe later this summer. On Parkinson's disease psychosis, we're applying two studies, a Phase II open-label study of two cohorts, followed by a larger randomized placebo-controlled Phase III study. These studies are trying to evaluate the efficacy and tolerability of FANAPT in the treatment of psychosis in Parkinson's disease. 20 to 40% of people with Parkinson's disease are reported to have brain disease or psychosis. There are almost a million people in the U.S. with Parkinson's disease. With only one approved treatment for Parkinson's disease or psychosis and the significant burden that these patients have on their caregivers, this remains an important unmet medical need. The phase two two-cohort open-label study of 24 patients has received approval to proceed by the FDA and is expected to commence soon. Studies with the long-acting injectable formulation Panapt are ongoing. They are expected to lead into 18 cases starting schizophrenia in 2022. In addition, the clinical pharmacology study of the active metabolite P88 of alloperidone is ongoing as well. On tradipitin and beyond the gastroparesis program, the Odyssey study for tradipitin based with COVID-19 pneumonia is growing, while the tradipitin motion sickness study is on hold due to pandemic-related travel restrictions. VQW-765. VQW-765 is an alpha-7 nicotinic albinist, which is currently in a program to be tested for the effects on performance anxiety. And that study is currently recruiting patients. The primary objective of the study is to evaluate the effect of a single autodose of 10 milligrams VTW65 relative to placebo in change of anxiety as measured by the destructive units of the stress scale, SODS, during a three-year social stress test, or PSST. The PSST is the standard for inducing acute psychosocial stress in a lab setting and has been accepted by the FDA for developing acute treatments for anxiety-related disorders. Subjective units of Distript-Cal or SADS, which is clinically validated self-assessment for acute anxiety, the score from 0 to 100, is used to measure the intensity of the stress during the TSS-T assessment. We'll be talking more about W765 and the performance anxiety study in future discussions. In conclusion, the second quarter of 2021 was another strong quarter for Vanda, and we're looking forward to a number of important milestones in the second half of the year. Lots of years where nighttime sleep disturbance in SMS is progressing well, and we're pursuing collaborations with payers to further facilitate access to shutters for our patients. We also continue to look forward to the results of our three different gastroparesis study later this year, and a number of life cycle management programs in our pipeline that are to continue value creation well into the future. I've come across these results that are approaching what we believe to be a transformational milestone with a significant revenue opportunity. I will now turn the call back to Kevin to discuss financial results for the second quarter. And after that, I'd be happy to address any questions you may have. Kevin?
spk00: Thank you, Mahal. I'll begin by summarizing our financial results for the first six months of 2021, before turning to discuss the second quarter of 2021. Total revenues for the first six months of 2021 were $130.6 million, a 9% increase compared to $120.2 million for the same period in 2020. Catlios net product sales of $83.9 million were the primary contributor and driver of our revenues for the first six months of 2021, and saw a 9% increase compared to the same period in 2020. SNAP net product sales of 46.7 million for the first six months of 2021 reflect an 8% increase compared to the same period in 2020. For the first six months of 2021, Vanda recorded net income of 18.3 million compared to net income of 9.2 million for the same period in 2020. Net income for the first six months of 2021 included an income tax provision of $4.7 million as compared to an income tax provision of $3.1 million in the same period in 2020. In this cash, cash equivalents and marketable securities, referred to as cash, as of June 30, 2021, were $396.5 million, representing an increase of $56.6 million compared to June 30, 2020. Turning now to our quarterly results. Total revenues for the second quarter of 2021 were $67.9 million, a 9% increase compared to $62.2 million for the second quarter of 2020. Ketlios net product sales were $44.5 million for the second quarter of 2021, a 7% increase compared to $41.6 million in the second quarter of 2020. Snap net product sales in the second quarter of 2021 were $23.4 million, a 13% increase compared to $20.6 million in the second quarter of 2020. SNAP net product sales in the second quarter of 2021 were essentially flat as compared to $23.3 million in the first quarter of 2021. SNAP prescriptions in the second quarter of 2021, as reported by Equivia Exponent, were increased by 1% compared to the first quarter of 2021. For the second quarter of 2021, Vanda recorded net income of $9.7 million compared to net income of $8.7 million for the second quarter of 2020. Net income for the second quarter of 2021 included an income tax provision of $3 million as compared to an income tax provision of $2.4 million for the same period in 2020. Operating expenses in the second quarter of 2021 were $55.5 million compared to operating expenses of $53 million in the second quarter of 2020. The $2.5 million increase was primarily driven by higher R&D expenses related to the late-stage Tredipedent, Hetlios, and FNAPS development programs, partially offset by lower SG&A expenses related to awareness and branded DTC campaigns. Vanda expects to achieve the following financial objectives in 2021. Net product sales from both Hetlios and FNAP 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 HEP-DOS net product sales guidance is based on our currently approved FDA indications for NON24 and nighttime sleep disturbances and SMS. With that, I'll now turn the call back to Mahalos.
spk03: Thank you very much, Kevin. At this point, we'd be happy to answer any questions. And I understand my audio may have not been great, but please let me know if you cannot hear me well.
spk01: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And our first question comes from Olivia Breyer with Bank of America. Your line is open.
spk02: Hi, guys. Congrats on the quarter, and thanks for the questions. My first one is around payer positioning now that we're several quarters into the SMS launch. I know getting on formularies has obviously been a hurdle for HELIOS in non-24, but are you seeing a similar level of pushback in SMS, or have there been any sort of advantages to being that second indication for HELIOS that could maybe help patients get faster access to therapy? And then I have one follow-up on tridipitin.
spk03: Yeah, Olivia, thank you very much for the question. First of all, I will say that we're very focused on patient access. We care a lot that every patient that is being prescribed gets a chance to try HETLUS and continue. I will answer briefly, and I will let Kevin elaborate a little bit. First, HETLUS is on the formulary of, I would say, most oral plans today. And that is for non .4. For SMS, it is a bit early, given the cycle of the P&E committees, which evaluate the inclusion, their utilization, management criteria. But so far, we do not find any particular strong resistance by payers on covering patients with Smith-McGenney's syndrome. we continue to see something we have reported in prior quarters, a significant resistance on non-24, where the demand is much higher than the script's field. And we're talking about on-label indications. There can be various reasons, but the most common one is the misperception with payers that the indication does not necessarily include non-24-sighted people. But that part has been settled with a lengthy 14-page document that the FDA published last January 2020 and signed by Dr. Woodcock, where actually it clarifies and confirms that the indication for hepatitis is non-24 without any qualifications on visual acuity. Having said all that, we are engaged with payers to find ways to improve access. And I will ask Kevin if you have anything to add to that.
spk00: Yeah. Thanks, Wallace. And just to reiterate, you know, very focused on improving patient access and reducing patient burden, you know, looking for ways to collaborate with the payers to increase that patient access. and just highlighting that our prescription demand is far in excess of our prescription field, which just means that this also represents an opportunity for patients to get access to the drug and for us to continue to look to grow the business.
spk02: Okay, great. Thanks, guys. And I know we're coming up, obviously, on the gastroparesis data and filing for tridipitant, but I do think there's a lot of interest around the expanded access program and, you know, how much of that patient data will eventually be looked at by the FDA. So I guess the question is, you know, how much of that EAP data could feasibly be included in the initial filing, and is there a certain minimum length of time on therapy to make the cut for that initial portion of the submission? And then maybe just as a quick follow-up on that, you know, is whether there are other opportunities, you know, through the review process in which you could add more safety data from that expanded access program, you know, as more patients take part in the program.
spk03: Yeah, thank you very much, Lydia. First of all, we're thrilled with the interest of patients who are concluding the three-month treatment, either in the double-blind randomized form of the study or the open label, and their interest to continue on the drug. And in the words of many of these patients, they're describing it as the experience is like faltering. Now, in terms of numbers, we have at least a dozen patients that have fully applied for the Expanded Assistance Program, and the majority of them have been already reviewed by the FDA and approved. The initial approval for each one of these patients is a period of six months, and several patients coming up to the six-month mark including patients that have been approved beyond that to extend to two years. And I believe our first patient will be completing the 12 months and seeking extended beyond the 12 months very shortly. In terms of the NDA application, we're collecting the data and we will be submitting all this data to the application. That would mean that at least for several of the patients, by the time of submission, we will have 12-month safety data. And certainly there is an opportunity within the middle of the NDA review to submit updated safety data. So we expect all the patients that are now the Expanded Access Program, and others that may come, will continue to produce safety data, which actually will bolster the safety data submitted to the agency.
spk02: Okay, great. Thank you very much.
spk03: Thanks.
spk01: Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Vanda Management for closing remarks.
spk03: Yes, thank you very much. Thank you for joining us, and we look forward to talking to you about our progress in future calls. Thank you.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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