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spk03: Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vanda Pharmaceuticals third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I would now like to hand the call over to Kevin Moran, Vanda's Chief Financial Officer. Kevin, you may begin your conference.
spk02: Thank you, Emma. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' third quarter 2022 performance. Our third quarter 2022 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. Additionally, we have Tim Williams, our general counsel, and Gunther Biersnix, our senior vice president of business development and R&D committee member. 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 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 31st, 2021, as updated by our subsequent quarterly reports on Form 10Q, current reports on Form 8K, 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. Mahalis Polymeropoulos.
spk04: Thank you, Kevin, and good afternoon, everyone. Thank you for joining us to discuss Vanda's third quarter 2022 results. Over the last quarter, Vanda continued to focus on enhancing performance of its current commercial products, advancing clinical programs, and leveraging innovation to position the company for long-term growth. I will discuss some highlights of our clinical and regulatory efforts, and Kevin will discuss our commercial progress. First on FNAPT, our clinical program pipeline is advancing with the recent completion of enrollment in the FNAPT Bipolar Mania Clinical Study. for which we expect results by the end of this quarter. Additionally, we have completed enrollment in our VQW-765 study in performance anxiety, for which also we expect results by end of this quarter. On tradipotent, preparation of the new drug application in gastroparesis is ongoing, with FDA submission expected in the first half of 2023. The submission will include results from two adequate and well-controlled studies in patients with idiopathic and diabetic gastroparesis, which provides substantial evidence of effectiveness in the indication. If approved, tradiptin would be the first treatment in more than 40 years approved by the FDA for people with gastroparesis. Additionally, a 400-patient open-label study of tradiptin in patients with gastroparesis is ongoing, which will provide further information on the safety and efficacy of tradipitin in gastroparesis. We recently presented results of the pooled analysis from studies VLY686-3301 and VLY686-2301, which included a total of 342 patients, 175 on tradipitin, 167 on placebo, which showed significant improvements in the clinical endpoints of change of nausea, percent nausea-free days, and the gastroparesis core symptom improvement scale, GCSI, at week four of treatment. In the subpopulation, which excludes non-protocol-compliant patients, as determined by PK analysis, a total number of 283 patients, Highly significant effects were seen in each of these parameters. Improvements were also seen across the other core symptoms of gastroparesis as well. This work was recently presented at the American College of Gastroenterology Conference and received the Presidential Poster Award. Tradipitence efficacy is also appreciated by patients who are participating in an expanded access program some already for over a year. Tridipitin in motion sickness. On tridipitin, we're also progressing with the clinical program in motion sickness with a pivotal study currently ongoing and expected to be completed in the first half of 2023. HETLIOS. Enrollment is ongoing in the clinical development programs of HETLIOS for the treatment of delayed sleep phase disorder, and for sleep disturbances in autism spectrum disorder. Additionally, we're preparing for the submission of a supplemental NDA for hetlias in the treatment of insomnia. The submission will include results of three adequate and well-controlled studies, one four-week study in people with primary insomnia, and two trans-insomnia studies. induced by phase advance of the sleep-wake cycle. These studies show that hetlius is effective in improving sleep onset difficulty in people with primary insomnia, with effect observed as early as the first night of treatment. This supplemental NDA of hetlius for insomnia is planned to be submitted to the FDA this quarter. VPO227 and cholera. We recently announced that the FDA has granted orphan drug designation for VPO227 for the treatment of cholera. Cholera remains a major public health challenge and recognized and met medical need despite decades-long public health efforts, and we're excited about the potential of VPO227 to treat patients that suffer from cholera. We expect to submit an investigational new drug application to the FDA for VPR227 in 2023. Finally, we recently announced a research and development agreement with OLIPAS of Korea to jointly develop a set of anti-sensory oligonucleotides, or ASOs, based on OLIPAS's proprietary modified peptide nucleic acids. This evolving discovery and development platform is intended to support VANDER's development of anti-essence oligonucleotide-based precision medicine therapeutics. Tim Williams, our general counsel, will now discuss highlights of our legal regulatory activities. Tim?
spk00: Thank you, Mahalis. I'd like to touch briefly on some key litigation activities, first in intellectual property. As you probably know, we had a trial last March in Delaware Federal Court asserting a family of Hetlios patents against several generic drug manufacturers. Patents in this litigation have ex-crees ranging from 2033 to 2035, so a positive victory on any single patent extends Hetlios exclusivity at least into 2033 and possibly all the way into 2035. We expect a decision from the court no later than the end of this year. I'll turn for a moment to our ongoing regulatory litigation. We continue to challenge regulators when we believe those regulators have ignored or violated law in a manner that harms our business or impacts our ability to help patients. A prime example of this is our lawsuit against CMS filed in April of this year. At the end of 2021, CMS issued a new rule that expanded the scope of products subject to certain rebate requirements. And it did so by reversing an agency interpretation that had been in place for over 10 years. Rather than getting greater authority from Congress to expand its rebate powers, CMS simply changed its longstanding interpretation of the law and issued the new rule. This new rule now subjects novel product formulations to expensive rebate requirements and has an immediate financial consequence for innovators like Vanda. It also negatively impacts the viability of future product development across the industry to the detriment of patients suffering with unmet medical needs. We are not the only company to challenge CMS on this rule in court. but we hope to be the first to prevail in striking it down. This is just one example of our efforts to advance Vanda's business by holding regulators accountable to the law. And our other efforts are more fully described in our public disclosures and publicly available court papers. With that, I'll turn it back to Mahalis.
spk04: Thank you very much, Tim. I'll turn now to Kevin to discuss our commercial progress and financial results.
spk02: Thank you, Mahalis. I will begin by summarizing our financial results for the first nine months of 2022 before turning to discuss the third quarter of 2022. Total revenues for the first nine months of 2022 were $189.9 million, a 5% decrease compared to $200.7 million for the same period in 2021. Hetlios net product sales of $119.6 million were the primary contributor and driver of our revenues for the first nine months of 2022 and saw an 8% decrease compared to the same period in 2021. The first nine months of 2022 reflect the continued reimbursement challenges for prescriptions for patients with non-24. Turning now to FNAPT, FNAPT net product sales of 70.3 million for the first nine months of 2022 reflect a 1% decrease compared to the same period in 2021. For the first nine months of 2022, Banda recorded a net loss of 600,000 compared to net income of 26.1 million for the same period in 2021. The net loss for the first nine months of 2022 included an income tax provision of $2.3 million as compared to an income tax provision of $7.7 million for the same period in 2021. Operating expenses for the first nine months of 2022 were $190.2 million compared to $167.1 million for the first nine months of 2021. The $23.1 million increase was primarily driven by both higher R&D expenses and higher SG&A expenses. The increase in R&D expenses was primarily driven by increases related to our late-stage clinical program for FNAPT, as well as a $3 million upfront fee expensed in the third quarter of 2022 in consideration for entering into the previously announced OLIPAS agreement. The increase in SG&A expenses was driven primarily by higher costs associated with legal support related to ongoing litigation, sales activities, commercial support, and other corporate activities. being as cash, cash equivalents, and marketable securities, referred to as cash, as of September 30th, 2022, was $454.8 million, representing an increase of $48.8 million in cash, or 12%, as compared to September 30th, 2021, and an increase of $22 million, or 5%, as compared to December 31st, 2021. Turning now to our quarterly results. Total revenues for the third quarter of 2022 were $65.3 million, a 7% decrease compared to $70.1 million for the third quarter of 2021. Hetlios net product sales were $41.3 million for the third quarter of 2022, a 9% decrease compared to $45.6 million for the third quarter of 2021. Consistent with the first nine months of 2022, net sales for the period reflect the continued reimbursement challenges for prescriptions for patients with non-24. Turning to Phenapt. Phenapt net product sales for the third quarter of 2022 were $24 million, a 2% decrease compared to $24.5 million for the third quarter of 2021. FNAP prescriptions for the third quarter of 2022, as reported by Equivia Exponent, decreased by approximately 2% compared to the second quarter of 2022. For the third quarter of 2022, Vanda recorded net income of $3.3 million compared to net income of $7.8 million for the third quarter of 2021. Net income for the third quarter of 2022 included an income tax provision of $2.2 million as compared to an income tax provision of $3 million for the same period in 2021. Operating expenses for the third quarter of 2022 were $61.4 million compared to $59.3 million for the third quarter of 2021. The $2.1 million increase was driven primarily by higher R&D expenses partially offset by a decrease in SG&A expenses. The increase in R&D expenses was driven primarily by costs associated with our late stage clinical programs for FNAPT and Tridipendent, and a $3 million upfront fee expense in the third quarter of 2022 in consideration of the previously discussed OLLI Pass Agreement. The decrease in SG&A expenses was driven primarily by a decrease in DTC awareness spending, partially offset by an increase in Salesforce expenditures. Operating expenses for the third quarter of 2022 were essentially flat as compared to $60.9 million for the second quarter of 2022, And again, the third quarter operating expenses included the $3 million upfront fee associated with the OLLI Pass Agreement. Vanda's cash balance as of September 30, 2022, again, was $454.8 million, representing an increase of $13.9 million, or 3% as compared to June 30, 2022. Vanda is providing an update to its prior 2022 guidance. Vanda expects to achieve the following financial objectives in 2022. Net product sales from both Hetlios and FNAP of between $240 and $270 million. This compares to prior guidance of between $240 and $280 million. Hetlios net product sales of between $150 and $170 million. This compares to prior guidance of between $150 and $180 million. FNAP net product sales of between $90 and $100 million. And year-end 2022 cash of greater than $450 million. This compares to prior guidance of greater than $440 million. With that, I'll now turn the call back to Mahalis.
spk04: Thank you very much, Kevin and Tim. At this point, we'll be happy to answer any questions you may have.
spk03: As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question today comes from the line of Chris Howerton with Jefferies. Your line is now open.
spk01: Hi, this is AJ here for Chris. Can you go over what led to your decision to file an SMDA for hetlias for insomnia now? Have you discussed your application with the FDA, and will you be using the 2008 study, or is there some new data that you're submitting?
spk04: First of all, just to clarify, we have not filed yet the SMDA, but we plan to file this quarter. And yes, the chronic insomnia four-week study is the 2008 study, and the two additional studies that will support this application are change in insomnia studies or phase advance that we have reported in the past.
spk05: Gotcha. Thank you.
spk03: There are no further questions at this time. I would now like to turn the call back over to Vanda Management for closing remarks.
spk04: Thank you very much for joining us for this call, and we'll talk to you in the future. Thank you.
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