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spk02: Good afternoon. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2023 Vanda Pharmaceuticals, Inc. 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 that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would like now to turn the call over to Kevin Moran, Vanda's Chief Financial Officer. Mr. Moran, you may begin your conference.
spk00: Thank you, Jeanne. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceutical's fourth quarter and full year 2023 performance. Our fourth quarter and full year 2023 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, and Tim Williams, our general counsel. 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 most recent annual report on Form 10-K, as updated by our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K, and other filings with the SEC. which are available on the SEC's editor 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.
spk01: Thank you very much, Kevin, and good afternoon, everyone. Thank you for joining us to discuss NANDA's fourth quarter and full year 2023 results. I will briefly discuss key updates, and then I will ask our general counsel, Tim Williams, to provide a brief update on litigation matters before turning the call over to Kevin Moran to discuss our financial results. We have significantly advanced our development pipeline, now with three PDUFA action dates in 2024, including our supplemental new drug application, or SNDA, for bipolar disorder in adults, with a PDUFA date in April of 2024, and our new drug application, or NDA, for gastroparesis, with a PDUFA date in September. On our supplemental NDA for head luce in the treatment of insomnia, as we previously communicated this week, our SNDA was accepted for filing and is under review by the FDA with a PDUFA target action date of March 4, 2024. Earlier this week, we announced that we had received a notification from the FDA stating that the FDA had identified deficiencies that preclude discussion of labeling and post-marketing requirements and commitments at this time. No deficiencies were disclosed by the FDA in the notification, and the FDA stated that the notification does not reflect a final decision on the information under review. However, frequently, such a communication from the FDA is followed by a complete response letter. Subsequent to that development on February 6, 2024, Vanda filed suit in the U.S. District Court for the District of Columbia challenging the FDA's conduct in reviewing the insomnia S&DA. Vanda is asking the DC District Court to compel the FDA to adhere to the legally mandated 180-day review period for S&DAs and to declare as unlawful and void the regulations the FDA relies upon to issue complete response letters. On FNAPT for bipolar I disorder, as previously discussed in December of 2022, we announced positive results in our Phase III clinical study of FNAPT in acute manic and mixed episodes with bipolar I disorder in adults. Our supplemental NDA for FNAPT in bipolar I disorder in adults has been accepted for filing by the FDA, and the target action date has been set as April 2nd, 2024. We believe that this potential label expansion represents a significant opportunity for the FNAF franchise, given the high prevalence of bipolar disorder in the United States. The estimated prevalence of bipolar disorder in the U.S. adult population is multiple times larger than the estimated prevalence of schizophrenia. Additionally, on tradipitant, for patients with gastroparesis, our new drug application has also been accepted for filing by the FDA, and the target action date has been set as September 18, 2024. The FDA package, supported by the results from clinical ethical studies 2301 and 3301, which we believe demonstrate substantial evidence of efficacy of tradipitin in this indication, as well as a safety database to support the tolerability of this drug. The expanded access program continues with multiple patients, have been treated for at least six months, and the longest-treated patient for more than three years. We're pleased with our revenue performance, despite the challenges of the at-risk launches of generic Catalios products. Over the course of this year, we have taken a number of actions intended to position the commercial business for continued success, both with respect to existing products and indications, as well as potential future products and indications. These include preparations for the potential near-term expansion of the FNAF franchise if we receive FDA approval for Bipolar I Disordered Adults. During the fourth quarter of 2023, we completed a transformative acquisition as we obtained the U.S. and Canadian rights to Ponvori, Ponestimod, from Actelium Pharmaceuticals Limited, a Johnson & Johnson company, for 100 million U.S. dollars. Ponvori is a once-a-day oral selected sphingosine 1-phosphate receptor 1 modulator approved by the FDA and Health Canada to treat adults with relapsing forms of multiple sclerosis. Additionally, Ponvori is a potential therapeutic candidate for the treatment of a diverse group of inflammatory and autoimmune disorders ranging from psoriasis to ulcerative colitis. Most recently, the US Patent and Trademark Office issued an Odds of Allowance for Punvori patent application 17962968, which when issued is anticipated to expire on October 10, 2042. On the clinical side, as previously reported, In May of last year, we announced positive results from the first Phase III study of tradipitin in the treatment of motion sickness. And subsequent to that, we initiated a second Phase III study, which is now already 50% enrolled. We plan to pursue FDA approval of tradipitin for motion sickness upon completion of the clinical development program. And outside of this update of the traductor motion sickness program, we continue to progress our robust clinical development pipeline, which includes multiple products across a wide range of therapeutic areas. With that, I will now ask Tim Williams, our general counsel, to provide a brief update on litigation matters. Tim.
spk03: Thank you, Mahalis. I'll provide a few litigation updates, starting with our Hetlios and the litigation. We filed a cert petition with the Supreme Court in January, asking the court to hear our case and clarify important aspects of patent obviousness law for the benefit of lower courts, including the Federal Circuit. The defendants, Teva and Apotex, have waived their opportunity to respond to our petition, and today the petition was distributed to chambers at the Supreme Court for consideration. We await their review. Next, I'll provide an update of our case pending in the U.S. Court of Federal Claims. In May of 2023, we sued the U.S. government for uncompensated taking of our trade secrets and confidential information. This suit alleges a pattern of FDA reviewers improperly disclosing proprietary information to generic companies as part of the review of generic versions of Phenapt and Hetlios. The U.S. government moved to dismiss the case. After a January hearing on the matter, the court denied the government's motions to dismiss, allowing us to proceed with fact discovery, which will include document production and depositions of FDA personnel involved in these matters. We've also had positive developments in our cases challenging other agency actions of the FDA. In September of 2022, we sued to compel the FDA to adhere to the procedural and timing requirements of the Food Drug Cosmetic Act with respect to our jet lag SNDA for Hetlios. In January, the court ruled in our favor by finding that the FDA violated the Food Drug Cosmetic Act and ordering the FDA to take action on our hearing requests by March 5th, more than four months earlier than FDA had originally proposed to the court. The court found the FDA's conduct to be both unlawful and unreasonable. Specifically, the judge noted that the law requires hearings to commence within 300 days after an SNDA is submitted by a sponsor. Yet our SNDA for jet lag has been pending for over 2,000 days, and it has been over 500 days since we requested a hearing. As I mentioned, the judge has demanded that FDA act on our hearing request by March 5th, and we await FDA's action by that date. Just yesterday, we filed an additional suit challenging FDA's unlawful conduct in reviewing our insomnia SNDA for hetlios. As disclosed earlier this week, we received a notification from the FDA stating that it had identified deficiencies that preclude discussion of labeling, even though no deficiencies were identified. This communication arrived more than 270 days after our submission, which is well beyond the 180 days prescribed by the statute. Further, by sending us this letter rather than taking the specific actions prescribed in the Food Drug Cosmetic Act, we believe the FDA is seeking to avoid final action that can be reviewed by a court of law. In our suit filed last night, we are asking the court to compel the FDA to adhere to the legally mandated 180-day review period and to declare as unlawful and void the regulations the FDA relies upon to avoid judicially reviewable final decisions. We continue to pursue additional litigation related to our Hetlios patents, generic competitors, interactions with regulators, and various Freedom of Information Act disputes. Details of all of our cases can be found in our disclosures and in publicly available court records. Back to you, Mahalas.
spk01: Thank you very much, Tim. I will now turn the call to Kevin Moran, our Chief Financial Officer, to discuss our financial results. Kevin?
spk00: Thank you, Mahalas. And as Mollis mentioned, I'll begin by highlighting the acquisition of the U.S. and Canadian rights to Penvori from Actillion Pharmaceuticals Limited, or Janssen, a Johnson & Johnson company, for $100 million that was completed in December of 2023 and where the transition is ongoing. Penvori is a once daily oral selective S1P1R modulator approved by the FDA and Health Canada to treat adults with relapsing forms of multiple sclerosis. During this transition period, Janssen will continue to operate the business pursuant to a customary transition agreement while Vanda and Janssen transition regulatory and supply responsibility for Pumbo Ray 2 Vanda. This acquisition represents a significant milestone for Vanda, expanding our commercial portfolio, diversifying our sources of revenue, and providing Vanda the opportunity to develop a potential therapeutic candidate for the treatment of a diverse group of inflammatory and autoimmune disorders, ranging from psoriasis to ulcerative colitis. Turning now to our financial results, I'll first discuss the results for the full year 2023 before turning to discuss the fourth quarter of 2023. Total revenues for the full year 2023 were $192.6 million, a 24% decrease compared to $254.4 million for the same period in 2022. Hetlios net product sales were $100.2 million for the full year 2023 and saw a 37% decrease compared to $159.7 million for the same period in 2022. The at-risk launch of generic versions of Hetlios had a significant impact on Hetlios' performance during 2023. The decrease to net product sales was attributable to a decrease in price, net of deductions, and a decrease in volume. Our Hetlios net product sales for the first quarter of 2023 reflected higher unit sales as compared to recent prior periods and has resulted in a significant increase of inventory stocking at specialty pharmacy customers, throughout 2023. Turning now to FNAPT. FNAPT net product sales of $90.9 million for the full year 2023 reflect a 4 percent decrease compared to $94.7 million for the same period in 2022. PINVORI net product sales were $1.6 million for the full year 2023. These net product sales reflect the revenue generated during the period between the product acquisition date of December 7, 2023 and the year end on December 31, 2023. For the full year 2023, VANDR recorded net income of 2.5 million compared to net income of 6.3 million for the same period in 2022. Net income for the full year 2023 included an income tax provision of 3.8 million as compared to an income tax provision of 5 million for the same period in 2022. Operating expenses for the full year 2023 were 206.6 million compared to 248.1 million for the same period in 2022. The $41.5 million decrease was primarily driven by lower R&D expenses, lower SG&A expenses, and lower cost of goods sold. The decrease in R&D expenses was primarily driven by decreases related to our late-stage FNAP development program, partially offset by increases related to our tradipident and VHX896, also referred to as PD8 development programs. The decrease in SG&A expenses was primarily driven by lower expenses associated with marketing, sales, and commercial support activities, for our commercial products. The lower cost of goods sold is due to lower Hetlios net product sales and the decrease in the royalty rate owed to BMS on Hetlios net product sales from 10% to 5% effective in December 2022. Vanda's cash, cash equivalents, and marketable securities, referred to as cash, as of December 31, 2023, was $388.3 million, representing a decrease of $101.6 million compared to cash as of September 30th, 2023, and a decrease of 78.6 million compared to December 31st, 2022. The change in cash during both the fourth quarter of 2023 and the full year of 2023 reflect the completed acquisition of Pinvory from Janssen for 100 million. Turning now to our quarterly results. Total revenues for the fourth quarter of 2023 were 45.3 million, a 30% decrease compared to 64.5 million for the fourth quarter of 2022. Total revenues for the fourth quarter of 2023 increased by 17% as compared to 38.8 million in the third quarter of 2023. Hetlios net product sales were 21.1 million for the fourth quarter of 2023, a 47% decrease compared to 40.1 million in the fourth quarter of 2022. Hetlios net product sales in the fourth quarter increased by 20% as compared to 17.5 million in the third quarter of 2023. The at-risk launch of a generic version of Hetlios continued to have a significant impact on Hetlios' performance during the fourth quarter of 2023. The decrease in net product sales relative to the fourth quarter of 2022 was attributable to a decrease in volume. Our Hetlios net product sales as reported for the first quarter of 2023 reflected higher unit sales as compared to recent prior periods. The higher unit sales during the first quarter of 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers throughout 2023. Hetlios net product sales during the fourth quarter of 2023 reflect lower unit sales as compared to the fourth quarter of 2022, which was partially attributable to the continued reduction of the elevated inventory levels at specialty pharmacy customers from the end of the first quarter of 2023. Turning now to Phenapt. Phenapt net product sales were $22.6 million for the fourth quarter of 2023, a 7% decrease compared to $24.4 million in the fourth quarter of 2022. FNAP net product sales in the fourth quarter of 2023 increased by 6% as compared to 21.3 million in the third quarter of 2023. FNAP prescriptions in the fourth quarter of 2023, as reported by Equivia Exponent, decreased by approximately 3% compared to the third quarter of 2023. PMVORI net product sales were 1.6 million for the fourth quarter of 2023. Again, these net product sales reflect the revenue generated during the period between the product acquisition date of December 7th, 2023 and year end on December 31st, 2023. For the fourth quarter of 2023, Vanda recorded net loss of 2.4 million compared to net income of 6.9 million for the fourth quarter of 2022 and net income of 100,000 in the third quarter of 2023. The net loss for the fourth quarter of 2023 included an income tax provision of 0.7 million as compared to an income tax provision of 2.8 million for the same period in 2022. and an income tax benefit of $0.3 million in the third quarter of 2023. Operating expenses in the fourth quarter of 2023 were $52.4 million compared to $57.9 million in the fourth quarter of 2022. The $5.5 million decrease was primarily driven by lower SG&A expenses related to spending on sales activities for our commercial products and legal expenses and lower cost of goods sold due to lower Hetlios net product sales and the decrease in the royalty rate owed to BMS on Hetlios net product sales from 10% to 5% effective in December 2022. Partially offset by higher R&D expenses related to our tributant program, including the NDA filing fee and the milestone payment made upon acceptance of the NDA for filing, and manufacturing expenses associated with our VHX 896 program. Operating expenses in the fourth quarter of 2023 increased by $7.6 million, as compared to $44.8 million in the third quarter of 2023. This increase is primarily driven by one-time expenses, including $2.4 million of expense recorded for the tridipendent NDA filing fee, $2 million for the associated NDA milestone payment to Eli Lilly, and $3 million of VHX 896 manufacturing costs. Given uncertainty surrounding the U.S. market for Hetlios for the treatment of NON24 as a result of the ongoing Hetlios patent litigation, and the at-risk launch of generic versions of Hetlios, Vanda is unable to provide 2024 financial guidance at this time. Vanda will continue to evaluate its ability to provide financial guidance in future periods. Hetlios net product sales will likely decline in future periods, potentially significantly, related to the at-risk launch of generic versions of Hetlios in the U.S. Additionally, the company constrained Hetlios net product sales for the full year 2023 to an amount not probable of significant revenue reversal. As a result, Helios net product sales could experience variability in future periods as the remaining uncertainties associated with variable consideration are resolved. With that, I'll now turn the call back to Mahalis.
spk01: Thank you very much, Kevin. At this point, we will be happy to answer any questions you may have.
spk02: Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. We will now pause to compile the Q&A roster. And your question comes from Andrew Tsai with Jefferies. Your line is open.
spk04: Hey, good afternoon. Thanks for taking my questions and a big congratulations on the acquisition of Ponvory. So maybe a couple of questions on that asset. First, what do you guys think you can do that J&J might not have been able to do in terms of driving sales growth at Ponvory? And then secondly, Why is this differentiated from the other multiple sclerosis drugs out there? What's the appeal here?
spk01: Thank you very much, Andrew. First of all, to give the background here for everyone, Punvori, Punesimil, belongs in the class of sphingosine 1P-phosphate receptor analogs. And their mechanism of action is by sequestering or preventing the egress of lymphocytes from peripheral lymph nodes so that they can have wide applications in disorders where you have autoimmune attack on a system or organ of the body. In the case of multiple sclerosis, this is central nervous system. As you also know, this class of drugs has several members. It started some years ago with Fingolimod or Zilenia, now generic, and has expanded with additional members in the class. We believe that Prunesimod, due to its receptor specificity, and quick reversibility of effect can play a critical role for the treatment of multiple sclerosis for many groups of patients, especially for those that require a specificity avoiding side effects and quick reversibility. It has been clear that this drug may be attractive, especially to women of childbearing age, as they contemplate family planning, in that the drug will come out of the circulation within a short period of time, in a matter of days. And the same is true about the recovery of the lymphocytes. So directly to your question, the increased specificity and quick reversibility, both in amount and lymphocyte counts, make this drug differentiated and attractive. Your second part of your question was, what can we do different from J&J? And the simple answer is we plan to market it. J&J, for their own business reasons, had decided to remove their marketing support of the product while they were in the process of identifying a partner to divest it to. So we believe there is a significant opportunity. both with neurologists and multiple sclerosis centers and consumers to be able to increase the awareness of the existence of this potentially quite useful product. And beyond that, as we have learned, This type of mechanism of action can be useful in an array of autoimmune disorders. In front of us, of course, are the examples of the effect in ulcerative colitis, and the BMS compound has been successfully addressed in that, as well as Pfizer's compound, interestingly not approved for multiple sclerosis and not pursued, but actually directly being approved now for ulcerative colitis. And we think our drug Ponvori is well positioned from the mechanism of action with very key similarities to the receptor binding effects that both the BMS compound and the Pfizer compound have, both of them successful in ulcerative colitis. to give us reasons to believe that could be successful in that indication. In addition, Actelion, a J&J company, had conducted a phase two large study in psoriasis, which was successful. And we are evaluating now a path to continue the development in that indication as well. And as I said, the opportunities around the once-day oral sphingosyn 1-phosphate analog-like punvori are just beginning to be realized, and likely they will be wide. We're developing our plans now. We're in the midst of the transition period, and we'll be able to talk more about these plans in the future.
spk04: Thanks. That's very helpful. Thank you for the color. And then shifting gears to the Hetlios for insomnia news, what would be the realistic scenario here? Do you start hiring the sales force or do you wait until approval? How does this all work out? Thank you.
spk01: Andrew, let me clarify. Are you asking about the insomnia in Hetlios or the bipolar and FNAP?
spk04: for insomnia.
spk01: Yeah. For head loss and insomnia, of course, we think given the negative letter by the FDA of deficiencies, although not named, preclude labor negotiations, we think the most historical likely outcome is that it will be followed by a complete response letter. We cannot, you know, imagine what the deficiencies are for this melatonin agonist now marketed for 10 years in circadian disorder indications and with a file that clearly and ambiguously supports the effect of the drug in sleep onset insomnia. We are not expanding the head clear sales force and we're not planning any immediate marketing plans there.
spk04: Got it. And then maybe just speaking of the Synapt for bipolar then, or as well as Tredividend for gastroparesis, my final question is, is your confidence in those applications the same despite the insomnia development? And second to that is, are you hiring ahead of the potential PDUVA decisions? Thank you.
spk01: Yeah. So just to talk about confidence, of course, we're optimistic because we believe in science and the robustness of our packages that we have already communicated with you all. But of course, the experience with the agency is that we are prepared for unpredictable results. And having said that, we're cautiously working towards being ready to expand the already existing FNAPTA sales force. And I will let Kevin give you a little more color of how we think about cadence of operational expenses there. And the same thing holds true for tradipita and gastroparesis. We have done work pre-launch to understand the market and develop a commercial plan. But, of course, we're quite a few months away from an agency action in September of 2018. And yet again there, we're proceeding very cautiously with the expenditures ahead of that decision. But I will let Kevin give you more comments.
spk00: Yep, and thanks, Andrew. On the FNAP side specifically, you know, as Mahalis mentioned, we have a very well-established commercial infrastructure given, you know, FNAP's history on the market and as well as Hetlios' history on the market and the supporting activities and infrastructure associated with those. That being said, we've certainly taken actions to be prepared to, you know, expand quickly on positive news. So I'd expect from a cadence perspective that there will be some preparation costs that we've you know, began to execute against in the first quarter, but more so it would be upon a positive development that we would see a kind of cadence change.
spk04: Okay, very good. Thank you all for the developments.
spk01: Thank you very much, Andrew. Thank you.
spk02: There are no further questions at this time. I will now turn the call back over to Vanda Management for closing remarks.
spk01: Thank you very much for joining us on this call. Thank you.
spk02: This concludes today's call. You may now disconnect.
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