Q2 2023 Vanda Pharmaceuticals Inc Earnings Call
Good afternoon. My name is Adrienne and I will be your conference operator today at this time I would like to welcome everyone to the Q2 2023 Vanda Pharmaceuticals, Inc. Earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you 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 Press Star one again.
At this time I'd like to turn the conference over to Kevin Moran Vanda as Chief Financial Officer. Please go ahead.
Thanks Andre.
Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals second quarter 2023 performance. Our second quarter 2023 results were released this afternoon and are available on the SEC's Edgar system and on our website Www Dot Vanda pharma dotcom.
We are providing live and archived versions of this conference call on our website.
Joining me on today's call is Dr. Mahalo, Cymer Atlas, our President Chief Executive Officer, and Chairman of the Board and Tim Williams, Our General Counsel.
Following my introductory remarks, well also update you on our ongoing activities I will then comment on our financial results before opening the lines for your questions.
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.
Ports on form 8-K, 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. Mcauliffe polymer Atlas.
Thank you very much Kevin and good afternoon, everyone. Thank you for joining us to discuss vanda.
During 2020 can be resolved.
Oh, he first discuss key highlights from our commercial projects.
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 to discuss our commercial and financial results.
Taking into account the challenging environment due to the at risk launch of genetic testing market.
We have had a strong first half of the year.
Over the last several months, we have taken a number of steps to position the business for continued success.
Reorganization of our sales force that has supported our calling commercial projects as well as the potential near term expansion of the Fanapt franchise, if we didn't see FDA approval.
We wanted to show it.
So let's begin with our results we have to use.
Despite me at least glass melting.
Our team delivered solid performance and continues to work tirelessly to support basin, So Becky and prescribe.
During the second quarter, we recorded to date greater another expenses done in the first court.
Turning to something that we're focused on driving growth.
In the case.
Yeah, and ensuring the napped is well positioned to capitalize on the bipolar market.
So it just gives you a premium market.
Okay.
This quarter, we recognize.
Right.
Right, Yeah, it'll be good growth. So it's a lot because your tenure, but we will look to build upon as we put into place in Houston is intended to drive bandwidth coordination among providers and patients.
Building on the previous strong clinical cloud results for bipolar disorder, we continue to pursue FDA approval for <unk> in this indication.
Heck, Yes, we also continue to pursue FDA approval.
We believe that headwinds.
Yeah could be.
Is that a meaningful commercial opportunity and provide an exciting therapeutic option with base.
We're also pursuing FDA approval for the defense and basis with gusto.
Yes.
In support of a new drug application towards the victim.
We submitted to the FDA.
There's also preclinical studies that we believe demonstrate that.
There's little evidence of that so Dixon and his indication as well as the safety database to support the Tolerability.
The expanded access program is ongoing with multiple basin has been depleted.
Six months in the long diffuse basin for more than three years.
In May we had.
So he said results.
Phase III studies.
Industry.
Motion sickness.
We are currently conducting additional studies and plan to apply for marketing approval. After the completion of the clinical program.
In addition to these.
Late stage programs, we also announced that the FDA granted orphan drug designation for VCA 894.
So you go nucleotide therapeutics for the treatment of company too.
So yes.
Yes.
Caused by acoustics variance with the I T H N G.
CMT is a rare subtypes.
J P peripheral neuropathy.
There is no available.
At this point I will ask Scott to move them. So Joe consul to provide a brief update on litigation matters.
Thank you Melissa.
I'll start with our intellectual property and related litigation.
As previously disclosed we appealed the negative decision and are heavily OS and litigation to the court of Appeals for the Federal circuit.
Back in May the Federal Circuit panel affirmed the lower court ruling and we then petitioned the full federal circuit court to rehear the case.
Earlier this month, the federal circuit requested that Kevin <unk> respond to our petition for rehearing by this Tuesday August one.
Separately, we have an additional patent infringement lawsuit pending in Delaware against Teva and Ametek's regarding our method of treatment patent for <unk> that was not litigated in the prior case.
And finally, we have a pending lawsuit against Teva in New Jersey for violations of Atlanta Act related to Teva is at risk launch of its generic version of <unk>.
We intend to vigorously pursue our interest in each of these matters.
I'll turn now to some of our recent regulatory challenges related to generic product approvals.
We continue to challenge the FDA for its approval of generic Hasnt Melton without braille lately.
We filed suit in federal court challenging Fda's approval of <unk> generic has an LTM.
And we filed citizens petitions challenging fda's approval of both Teva and epic Abbott, Texas generic <unk>, both of which were approved by the FDA without brand labeling.
The FDA responded to the citizens petition earlier this week rejecting our arguments.
We continue to believe that Fda's approvals are improper under law and we intend to continue vigorously pursuing these matters, including our pending litigation.
Separately, we continue to challenge other FDA actions undertaken during the review of generic applications.
We filed two citizens petitions challenging fda's approval of Teva and <unk> generic <unk> with what we believe to be inadequate and bioequivalence testing.
We have not yet received a response from the FDA on these petitions.
And last we filed a lawsuit in the court of federal claims seeking economic damages based on what we believe was fda's unlawful disclosure of our confidential information and trade secrets to generic Anda filers during the Fda's review of applications for the generic versions of both <unk> and Fanapt.
More detail on this and our other pending litigation matters can be found in our periodic filings and on public conducting systems.
With that I'll turn it back to you.
Okay.
Thank you very much I would now turn the DTA.
Cold too Kevin Moran to discuss our commercial progress and financial results Kevin.
Thank you Mark.
I'll begin by summarizing our financial results for the first six months of 2023 before turning to discuss the second quarter of 2023.
Total revenues for the first six months of 2023 or $108 6 million, a 13% decrease compared to a $124 6 million for the same period in 2022.
<unk> net product sales were $61 6 million for the first six months of 2023.
At 21% decrease compared to $78 2 million for the same period in 2022.
The at risk launch of a generic version of <unk> had a significant impact on <unk> performance. During the first six months of 2023.
The decrease to net product sales was attributable to a decrease in price net of deductions, partially offset by an increase in volume.
<unk> net product sales for the first quarter of 2023 reflected higher unit sales as compared to recent prior periods and resulted in a significant increase of inventory stocking at specialty pharmacy customers at the end of both the first quarter of 2023, and the second quarter of 2023.
Turning now to Fanapt.
Net product sales of $47 million for the first six months of 2023 reflect a 1% increase compared to $46 4 million for the same period in 2022.
For the first six months of 2023 Vanda recorded net income of $4 8 million compared to a net loss of $3 9 million for the same period in 2022.
Net income for the first six months of 2023 included an income tax provision of $3 3 million as compared to an income tax provision of 0.1 million for the same period in 2022.
Operating expenses for the first six months of 2023 or $109 4 million compared to $128 8 million for the first six months of 2022.
The $19 4 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 clinical program for Fanapt and our <unk> 765 development program, partially offset by increases related to our traditional activities and our early stage <unk> program.
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 <unk> net product sales and the decrease in the royalty rate owed to BMS on <unk> net product sales from 10% to 5% effective in December 2022.
<unk> cash cash equivalents in marketable securities referred to as cash as of June 32023 was $489 4 million, representing an increase of $48 5 million to cash compared to June 32022, and an increase of $22 5 million compared to December 31 2020.
Yeah.
Turning now to our quarterly results.
Total revenues for the second quarter of 2023 were $46 1 million or 28% decrease compared to $64 4 million for the second quarter of 2022.
<unk> net product sales were $22 million for the second quarter of 2023, or 47% decrease compared to $41 2 million in the second quarter of 2022.
Yeah at risk launch of a generic version of <unk> continued to have a significant impact on <unk> performance during the second quarter of 2023.
The decrease to net product sales was attributable to a decrease in volume and a decrease in price net of deductions, partially offset by the recognition of $4 8 million of net product sales related to a change in estimate on revenue constrained during the first quarter of 2023.
U S 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 at the end of both the first quarter of 2023 and in the second quarter of 2023.
<unk> net product sales during the second quarter of 2023 reflect lower unit sales as a result of the reduction of the elevated inventory levels and specialty pharmacy customers at the end of the first quarter of 2023.
Turning to <unk>.
Fanapt net product sales were $24 1 million for the second quarter of 2023, a 4% increase compared to $23 2 million in the second quarter of 2022.
Fanapt net product sales in the second quarter of 2023 increased by 5% as compared to $22 9 million for the first quarter of 2023.
<unk> prescriptions in the second quarter of 2023 as reported by <unk> exponent increased by less than 1% compared to the first quarter of 2023.
For the second quarter of 2023, Vanda recorded net income of $1 5 million compared to net income of $2 6 million for the second quarter of 2022.
Net income for the second quarter of 2023 included an income tax provision of $1 1 million as compared to an income tax provision of $1 2 million for the same period in 2022.
Operating expenses in the second quarter of 2023 were $48 9 million compared to $60 9 million in the second quarter of 2022.
$12 million decrease was primarily driven by lower SG&A expenses related to spending on marketing and sales activities for our commercial products lower R&D expenses related to our late stage development program and our <unk> 765 development program, partially offset by expenses related to our early stage ASO program.
And lower cost of goods sold due to lower <unk> net product sales and the decrease in the royalty rate owed to BMS net product sales from 10% to 5% effective in December 2022.
Operating expenses in the second quarter of 2023 decreased by $11 6 million as compared to $60 5 million in the first quarter of 2023.
The decrease was primarily driven by lower SG&A expenses related to ongoing litigation and other corporate expenses and lower R&D expenses related to our tradition and development program.
Given uncertainty surrounding the U S market for <unk> for the treatment of non 24 as a result of the ongoing patent litigation and the at risk launch of a generic version of Vanda is unable.
Unable to provide 2023 financial guidance at this time.
Vanda will continue to evaluate its ability to provide financial guidance as the year progresses.
<unk> net product sales will likely decline in future periods essentially significantly related to the at risk launch of a generic version of <unk> in the U S. Additionally, the company constrained <unk> net product sales for the first six months of 2023 to an amount not probable of significant revenue reversal as a result, <unk> net product sales could experience variability in future.
Her periods as the remaining uncertainties associated with variable consideration our results.
With that I'll now turn the call back to the house.
Thank you very much Kevin.
At this point, we will be happy to open the line to any questions you may have.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Take our question from Andrew Tsai with Jefferies.
Hi, everyone. Thanks, so much I.
Appreciate all the updates so the first question for Us is.
So existing sales just curious what were the organic sales in Q2 in terms of price and volume outside of inventory fluctuations. So I was just trying to gauge how much.
Inventory drawdown there was in Q2 or if there was a buildup and we're also trying to see whether Q2 Q3 sales could potentially increase quarter over quarter I'm assuming.
This quarter did see some type of inventory drawdown.
Yes, Thank you very much Andrew.
I will let <unk>.
Kevin answered his question.
Yes. Thanks for the question Andrew So there are a couple of different pieces, there and I will provide the detail where we provided it in the in the release. So what we saw in the second quarter was a drawdown of the inventory stocking or a portion of the inventory stocking that we saw in the first quarter, but inventory levels at the end of the second quarter.
We are still elevated.
Relative to recent prior periods, so not as high as the first quarter, but still higher than we've seen in recent prior periods.
There is still some inventory to work through before they would return to historic levels.
Very clear and so speak.
Speaking of the ongoing.
I guess litigation versus the generics I think.
It sounded like you've petition to rehear the case court case.
And I think you mentioned, China and the other party has until next Tuesday to respond to what would be the next steps after that and how quickly can we get a potential resolution.
Yeah.
Yes.
I would like to do.
Tim Williams handle this and maybe Tim you can discuss a little bit about.
The.
C J.
With the federal circuit.
Yes, happy to do that mahalo.
These petitions for rehearing can be decided by the federal circuit without any response from the other parties.
In certain instances.
The federal Circuit May request, a response, because one or more of the judge's sitting on the federal circuit are interested to learn a little bit more information about the case to hear from the other parties. So that's what occurred in this case.
And so theres really not a set procedure from here in terms of required next steps.
If the request from the court holds in terms of timing, then Teva and ametek's would need to file. This response with the court.
Mentioned on Tuesday of next week and after that we may have an opportunity to provide additional supply, but theres not a definite procedure around that the timing is likewise, there's no prescribed timing in the either the federal circuit Court rules or the rules of.
Appellate procedure, so it's a little bit unclear, what the timing would look like and what the resolution would be.
Got it very clear, though nonetheless.
Speaking about the pipeline as we think about the next six to 12 months, there does seem to be potentially a good.
Set of catalysts and so the question would be.
Have you filed the NDA or <unk> for <unk>, and insomnia, Japan for Gastroparesis Fanapt for bipolar and if not what are the gating steps to those filings.
Feel free to talk about your confidence on all three potential approval later in 2024.
Yeah.
We do not give specific details and updates.
Such as.
When we submitted with the FDA.
Trials and what it could do David.
But what we can tell you is that all three.
Applications are progressing.
Without this certainly tell you which ones have been.
Maybe filed or to be submitted.
But given where we are we expect.
A regulatory decision.
Should be able to be vendor in each one and all of them within the next 12 months.
Got it.
And.
Maybe one more question last one is just.
As we think about your existing cash of almost $500 million.
How do you foresee to spend that cash specifically asking in the context of business development.
Matt.
Are you open to that and secondly, if you are what kind of deal structure. What indication areas are you looking for are you looking to.
Goodbye immediate revenues or are you thinking about more about building out the earlier stage pipeline. Thank you.
Yes, hi.
Certainly.
Because we have.
The marginal profitability.
Allows us we had a lot of flexibility.
Look at potential business development opportunities from the outside.
And we have a number of them.
<unk>.
And in terms of types.
They focus confers did.
Diversify our revenue and support our commercial presence.
Yeah.
Our own organic pipeline.
As we discussed just a minute ago.
Is actually exceptional.
With factory new filings.
Corning.
So.
We believe that.
We can be definitely agnostic.
In the types of indications.
We're a compound with.
Maybe all the way to commercial presence.
Yes.
But we think.
Hi.
We are keen to understand opportunities that can be synergistic.
With our already existing commercial infrastructure.
But again were more agnostic on indications and more focused on.
AIDS.
And.
Pretence of diversification of revenue.
<unk>.
Got it.
Thank you very much.
Sure Andrew Thank you for your questions.
And that does conclude the question and answer session I would like to turn the conference back to Vanda management for closing remarks.
Yes, hi, Thank you very much and thank you all for joining this quarterly call looking forward.
Talk to you in the future.
Thank you.
And this concludes today's conference call. Thank you for your participation you may now disconnect.
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