Vanda Pharmaceuticals Inc. (VNDA) Earnings Call Transcript & Summary

Good afternoon and welcome to the second quarter 2026 Vanda Pharmaceuticals Incorporated Earnings Conference Call. I am Franz, and I'll be the operator assisting you today. 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 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. Thank you. I would now like to turn the call over to Vandes Chief Financial Officer, Kevin Moran.

Go ahead. Thank you, France. Good afternoon, and thank you for joining us to discuss Vanna Pharmaceuticals' second quarter 2026 performance. Our second quarter 2026 results were released this afternoon and are available on the SEC's EDGAR system and on our website, www.vandafarma.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 Daniel McGuire, our General Counsel. Following my introductory remarks, Mahalos will update you on our ongoing activities. I will then comment on our financial results before we open 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. 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 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. Mahalas Palimoropoulos. Thank you.

Good afternoon, everyone. Thank you for joining us today for Vanda Pharmaceutical's second quarter, 2026 earnings conference call. We're pleased with the continuous strong growth of FENAPT and the enthusiastic response to Nereus as it becomes available to patients. With Bisanti approved and on track for launch in the second half of 2026, a December 2026 PDUFA date for Quimilza or MC-Dolima, and multiple late-stage clinical trial results expected before year-end, we believe Vanda is well-positioned for meaningful commercial expansion and pipeline value creation. As our Phase 3 programs launch preparations in commercial supply manufacturing near completion, we expect operating expenses to begin moderating later this year and more significantly in 2027. We believe that our current resources, together with anticipated project revenues, provide a solid foundation to advance our objectives through at least the end of 2027. During 2025 and 2026, we have advanced multiple phase III programs and continued execution on the commercialization of Fanaft and Punvori and prepared for the commercial launches including manufacturing, commercial supplies of Nereus, Bisanti, and Quimilza. As these activities conclude, we expect operating expenses to begin decreasing by end of 2026 and more substantially through 2027. Based on our current cash position and anticipated revenues, we expect to have sufficient resources to fund operations through at least the end of 2027. FNAF show continued strong momentum in the second quarter of 2026 with total prescriptions, TRX, up 31% and new-to-brand prescriptions, NBRX, up 32% versus the second quarter of 2025. Since commercial expansion following the approval of bipolar I disorder, FNAPT has seen significant growth with TRX up 62% and BRX up 300% versus the second quarter of 2024. The site has received U.S. Food and Drug Administration approval for the treatment of bipolar 1 disorder and schizophrenia in the first quarter of 2026 and is expected to launch in the second half of 2026. Visante is protected by data exclusivity through February 20, 2031, and multiple patents, the latest of which expires on May 31, 2044. In May, 2026, the early commercial launch of Nereus was initiated with a direct-to-consumer offering via the web portal Nereus.us. Personal promotion is expected to commence later in 2026. VANDER's ongoing late-stage clinical studies are progressing rapidly and are expected to generate top-line results in 2026 or early 2027, including the phase three study of Nereus for the prevention of vomiting in patients receiving GLP-1 receptor agonist therapies with results expected in 2026. The Phase III study of VQW765 in the treatment of adults with social anxiety disorder with results expected in 2026. phase three study of HETLIOs in the treatment of delayed sleep phase disorder, DSPD, with results expected in 2026. Finally, the Phase III study of Vysanti is a one-stay adjunctive treatment for major depressive disorder with results expected in the first half of 2027. The Biologic License Application, BLA, for Quimilza in generalized postular psoriasis is under review by the FDA with a prescription drug user fee act, target action date of December 12, 2026. study were published earlier in April 28, 2026 in the New England Journal of Medicine Evidence. In May, 2026, we announced that Japan's Ministry of Health, Labor, and Welfare granted orphan drug designation to Quimilza for the treatment of GPP. In July, 2026, we announced that the Committee for Orphan Medicinal Products at the European Medicines Agency had adopted positive opinion recommending orphan drug designation for Quimilza for the treatment of GTP. In July, 2026, we announced that the FDA had granted rare pediatric disease designation for VCA894A, our investigational antisense oligonucleotide therapy for the treatment of Charcot-Marie-Tooth disease, axonal type 2S, or CMT2S, a rare, serious, and progressive inherited neurological disorder. We continue to progress the FDA formal hearing regarding head lures for the treatment of jet-lag disorder. The proceeding, a rare administrative hearing process, granted after the district circuit set aside the FDA's prior refusal to approve the application, is advancing according to schedule and is expected to culminate in a five-year hearing before the Administrative Law Judge in December of 2026. With that, I'll turn now to Kevin to discuss our financial results. Kevin?.

Thank you, Mahalis. I will begin by summarizing our financial results for the first six months of 2026 before turning to discuss the second quarter of 2026. Total revenues for the first six months of 2026 were 102.2 million, essentially flat as compared to 102.6 million for the same period in 2025. The first six months of 2026 included increased FNAPT revenue as a result of the continued commercialization efforts for FNAPT and bipolar 1 disorder, increased PONVORI revenue and revenue contribution from the newly launched Nereus, offset by decreased Hetlios revenue as a result of generic competition and timing of shipments to customers at the end of the second quarter of 2026. Total revenues for the first six months do not include approximately $7 million of Hetlios revenue for orders shipped on June 29, that arrived on July 1st, 2026. Let me break this down now by product. FNAP net product sales were 65.5 million for the first six months of 2026, a 24% increase compared to 52.8 million in the same period in 2025. This increase to net product sales relative to the first six months of 2025 was attributable to an increase in volume, partially offset by a decrease in price net of deductions. Turning to Hetlios. Hetlios net product sales were 21.5 million for the first six months of 2026, a 42% decrease compared to 37.1 in the same period in 2025. The decrease was attributable to a decrease in volume as a result of the continued generic competition in the U.S. and the timing of shipments to customers at the end of the second quarter of 2026. Hetlios net product sales for the first six months of 2026 do not include orders totaling approximately $7 million in revenue that were shipped on June 29th and arrived on July 1st. orders will be recognized as revenue in the third quarter of 2026. During the second quarter of 2026, there was destocking of inventory by certain of our specialty pharmacy customers, primarily as a result of the previously mentioned shipment issue. Of note, for the second quarter of 2026, Hetlios continued to be the leading product from a market share perspective, despite generic competition now for over three years. Turning to PONVORI. PONVORI net product sales were 14.1 million for the first six months of 2026, an 11% increase compared to 12.7 million for the same period in 2025. Of note, an amount of variable consideration related to PONVORI net product sales is subject to dispute of which approximately 3 million was recognized for the the three months ended December 31st, 2024. And finally, turning to Nereus. Nereus became commercially available in the US in May of 2026. Nereus net product sales were one million for the first six months of 2026. Nereus is sold using both the traditional wholesaler channel and also by prescription directly through the nereus.us website. Revenue recognized during the first six months of 2026 primarily related to units sold through the wholesaler channel. During the second quarter of 2026, there was an initial stocking of Nereus by wholesalers of 15.2 million. We constrain Nereus net product sales to an amount not probable of significant revenue reversal. The constrained revenue of 12.6 million relates to the uncertainties of patient demand and product returns related to the elevated levels of inventory on hand at wholesalers. As a reminder, Nereus launched commercially in the U.S. in the second quarter of 2026 with the direct-to-consumer offering via the web portal Nereus.us. Personal promotion using our existing sales force is expected to commence later in 2022. For the first six months of 2026, Vanda recorded a net loss of $111.1 million compared to a net loss of $56.7 million for the same period in 2025. The net loss for the first six months of 2026 included income tax expense of $0.3 million as compared to an income tax benefit of $15.6 million for the same period in 2025. 2025. As a reminder, the company recorded a one-time non-cash income tax charge in the fourth quarter of 2025 to establish a valuation allowance against all of Vanda's deferred tax assets. expense is expected to be nominal going forward until such time that evaluation allowance is no longer required. Operating expenses for the first six months of 2026 were $216.3 million compared to $182.82 million for the same period in 2025. The $34.1 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the continued commercialization efforts for FNAPT and Bipolar I disorder, and Pomvoria multiple sclerosis, the nearest commercial launch, and the upcoming Basanti commercial launch, and higher R&D expenses primarily related to our VQW 765, FNAPT, and Basanti programs, partially offset by lower expenses on our Chemilza or Imsedol-MOB program. The first six months of 2025 included an upfront payment to Enaptis for the exclusive global license agreement for the development and commercialization of mSdolimov. On the commercial side, starting in 2024, we commenced a host of activities as a result of the commercial launches of Phenaptin Bipolar I Disorder and Pomvoriom Multiple Sclerosis and, more recently, the launch of the Phenaptin Bipolar I Disorder and launch of Nereus and upcoming launch of Basanti. We maintain strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships with the goal of supporting long-term market leadership and future commercial launches. Vanda's cash, cash equivalents, and marketable securities referred to as cash as of June 30th, 2026, was 170 million, representing a decrease of 93.8 million compared to December 31st, 2025, and a decrease of $32.3 million compared to March 31st, 2026. The change in cash during the second quarter of 2026, as compared to the first quarter of 2026, was driven by the net loss in the second quarter of 2026, excluding the impact of non-cash charges such as stock-based compensation and amortization of our intangible and right-of-use assets, as well as timing of cash received from customers for revenue and related payments of rebates payers, and the timing of cash paid to third parties for services related to operating expenses and inventory production. The decrease compared to the balance as of December 31st, 2025 was also driven by the one-time milestone payment of 10 million made to Eli Lilly in the first quarter of 2026 for the approval of Nereus in the US. As a reminder, payments made in advance of production are capitalized as a prepaid expense. Commercial products are capitalized as inventory on our balance sheet after production, while pre-commercial products are generally expensed as incurred as research and development costs. The timing of production of pre-commercial products, including the IMSA Dolomite Program, may result in future variation of our R&D expense and cash payments. Turning now to our quarterly results. Total revenues were $50.5 million for the second quarter of 2026, a 4% decrease compared to $52.6 million for the second quarter of 2025, and a 2% decrease compared to $51.7 million in the first quarter of 2026. The decreases as compared to the second quarter of 2025 and the first quarter of 2026 were primarily due to decrease in Hetlios revenue as a result of the generic competition and the timing of shipments to customers at the end of the second quarter of 2026, partially offset by growth in FNAP revenue as a result of the bipolar commercial launch. Total revenues for the second quarter of 2026 do not include approximately $7 million of Hetlios revenue for order shift on June 29th that arrived on July 1st. Let me now break this down by product. FNAP net product sales were 36 million for the second quarter of 2026, a 23% increase compared to 29.3 million in the second quarter of 2025, and a 22% increase compared to 29.6 million in the first quarter of 2026. FNAP total prescriptions, or TRX, as reported by Equivia exponent in the second quarter of 2026 increased by 31% compared to the second quarter of 2025 and 11% compared to the first quarter of 2026. The increases to net product sales relative to the second quarter of 2025 and first quarter of 2026 were primarily attributable to increases in volume. FNAP new patient starts in the second quarter of 2026. of 2026 as reflected by new-to-brand prescriptions, or MBRX, increased by 32% compared to the second quarter of 2025 and by 10% compared to the first quarter of 2026. Historically, FNAPT inventory at wholesalers has ranged between three and four weeks on hand as calculated based off trailing demand. As of the end of the second quarter of 2026, FNAPT inventory at wholesalers was slightly above four weeks on hand, which was generally consistent with the level of inventory weeks on hand as of the first quarter of 2026 and the fourth quarter of 2025, but slightly above four weeks on hand. the historic range turning to at Leos Helios net product sales were 5.6 million for the second quarter of 2026 a 66 percent decrease compared to 16.2 million in the second quarter of 2025 and a 65 percent decrease compared to 15.9 million in the first quarter of 2026 the decrease in net product sales relative to the second quarter of 2025 was the first quarter in and the first quarter of 2026 was primarily attributable to a decrease in volume due to generic competition and timing of shipments to customers at the end of the second quarter. Hetlios net product sales in the second quarter of 2026 do not include orders totaling approximately $7 million in revenue that were shipped on June 29th and arrived on July 1st. These orders will be recognized as revenue in the third quarter of 2026. As mentioned in the discussion of results for the first six months of 2026, Hetlios net product sales continue to be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. During the second quarter of 2026, there was destocking of inventory by certain of our specialty pharmacy customers, primarily as the result of time of shipments. Going forward, HELIOS net product sales may reflect lower unit sales as a result of the reduction of the elevated inventory levels of specialty pharmacy customers or may be variable depending on when specialty pharmacy customers need to purchase again. Turning to POMVORI. POMVORI net product sales were $7.9 million for the second quarter of 2026, an increase of 12% compared to $7.1 million in the second quarter of 2025, and an increase of 27% compared to $6.2 million in the first quarter of 2026. The specialty distributor and specialty pharmacy inventory on hand levels during these periods were in line with normal ranges. Additionally, as we have previously discussed, an amount of variable consideration related to Ponvory net product sales is subject to dispute, of which approximately $3 million was recognized for the three months ended December 31, 2024. And finally, turning to Nereus. Nereus became commercially available in the U.S. in May 2026. Nereus net product sales were $1 million for the second quarter of 2026. NEARIUS is sold using both traditional wholesaler channel and also by prescription directly through the NEARIUS.us website. Revenue recognized during the second quarter of 2026 primarily related to units sold through the wholesaler channel. During the second quarter of 2026, there was an initial stocking of NEARIUS by wholesalers of 15.2 million. We constrained NEARIUS net product sales to an amount not probable of significant revenue. revenue reversal. The constrained revenue of 12.6 million relates to the uncertainties of patient demand and product returns related to the elevated inventory levels on hand at wholesalers. As a reminder, Nereus launched commercially in the U.S. in the second quarter of 2026 with a direct-to-consumer offering via the web portal, nereus.us. Personal promotion using our existing sales force is expected later in 2026. For the second quarter of 2026, Vanda recorded a net loss of 62.5 million compared to a net loss of 27.2 million for the second quarter of 2025. The net loss for the second quarter of 2026 included income tax expense of 0.1 million as compared to an income tax benefit of 7.7 million for the second quarter of 2025. Operating expenses in the second quarter of 2026 were 114.3 million, compared to 91.1 million in the second quarter of 2025. The 23.2 million increase was primarily driven by higher R&D expenses related to our VQW and NERIUS programs, and higher SG&A expenses related to spending on Vanna's commercial products as a result of the continued commercialization efforts for Phenaptin Bipolar 1 disorder and Pomphoria Multiple Sclerosis, the nearest commercial launch and upcoming Basanti commercial launch. On the commercial side, starting in 2024, we commenced a host of activities as a result of the commercial launches of Phenaptin Bipolar 1 disorder and Pomvoria multiple sclerosis and, more recently, the launch of Nereus and upcoming launch of Vasanti. We maintain strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships with the goal of supporting long-term market leadership and future commercial launches. With regards to the launches of Phenaptin Bipolar I Disorder and Pomvoria Multiple Sclerosis, as I mentioned, these launches were initiated in 2024, and we continue to enhance our commercial infrastructure through the second quarter of 2026, with the impact of these commercial efforts contributing to revenue growth for these products in 2026, and expected to continue to contribute to revenue growth for these products in coming periods. We have seen significant growth in our commercial activities, including the following. Several lead indicators suggesting a strong and continued market response to our commercial activities related to FNAP for bipolar one disorder. Total prescriptions or TRXs increasing by approximately 31% in the second quarter of 2026 as compared to the second quarter of 2025. In May of 2026, a weekly TRX number for FNAP reaching an 11-year high of over 2,700 prescriptions. patient starts as reflected by NBRX increased by 32% in the second quarter of 2026 as compared to the second quarter of 2025. Since the commercial expansion following the approval of bipolar 1 disorder, FNAFTA has seen significant growth, with TRX up 62% and MBRX up 300% as compared to the second quarter of 2024. Of particular note, FNAFTA is one of the fastest-growing atypical antipsychotics in the market throughout 2025 and into the second quarter of 2026, based on several prescription metrics. Our FNAP sales force expanded to approximately 300 representatives in the second half of 2025. This expansion has allowed us to significantly increase our reach and frequency with prescribers. To that end, the number of face-to-face calls in the second quarter of 2026 was more than 30% higher than the number of face-to-face calls in the second quarter of 2025. FNAP performance remains the focus of our commercial initiatives and encourages us to invest in this differentiated medicine and the franchise extending launch of Basanti in the second half of 2026. Before turning to our financial guidance, I would like to remind folks that with FNAP, Hetlios, Pomvori, and now Nerius already commercially available, and with Basanti recently approved for bipolar 1 disorder and schizophrenia, and a biologics license application for Impsidolemab, now under review by the FDA, being it could have six approved products by the end of 2026. Turning now to our financial guidance. Vanda is reiterating its full year 2026 total revenue guidance and expects to achieve the following financial objectives in 2026. Total revenues from FNAPT, Basanti, Hetlios, Pomvori, and Nereus of between 240 and 290 million. The midpoint of this revenue range of 265 million would imply revenue growth in 2026 of approximately 23% as compared to full-year 2025 revenue. FNAPT and Basanti net product sales of between $150 and $170 million. The midpoint of this revenue range would imply combined FNAPT and Basanti revenue growth in 2026 of approximately 36% as compared to full-year 2025 FNAPT revenue. Note that based on the expected launch timing of Basanti, we have included the Basanti revenue contribution in this guidance range. Other net product sales of between 80 and 90 million. And finally, nearest net product sales of between 10 and 30 million. Note that Nereus launched commercially in the U.S. in the second quarter of 2026 with the direct-to-consumer offering via the web portal Nereus.us. Personal promotion using our existing sales force is expected to commence later in 2026. As previously communicated, Vanda is not providing 2026 cash guidance at this time. However, it is likely that Vanda's 2026 cash burn will be greater than the cash burn in 2025. During 2025 and 2026, we advanced multiple phase three programs, continued execution on the commercialization of Phenaptin-Pombori, and prepared for the commercial launches, including manufacturing commercial supplies of Nereus, Basanti, and Imson Oil Mop. These activities resulted in significantly increased operating expenses in 2025 and 2026. As these activities conclude, Vanda expects operating expenses to begin decreasing by the end of 2026 and more substantially throughout 2027. Based on its current cash position of $170 million, million as of June 30th, 2026 and anticipated future revenues, Vanda expects to have sufficient resources to fund operations through at least the end of 2027. With that, I'll now turn the call back to Miles.

Thank you very much, Kevin. At this point, we would be happy to answer your questions. Thank you. And we will now begin the question and answer session.

If you would like to ask a question during this time, please press star one on your telephone keypad to join the queue. If you would like to redraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And your first question comes from Raghuram Ram Silvaraj from H.G. Wainwright. Please go ahead.

Hi, thank you for taking my question. This is Yonzi sitting in for Ram. I have two questions. The first is with respect to the nearest launch experience. So I'm curious, you know, with about three months of experience here, where are you seeing the biggest drop off in the patient funnel? And what metrics should investors watch to judge whether the 26th sales finished near the low or the high end of the $10 to $30 million range.

Yes, thanks for the question, Jan. So, as we look at the Nearest Launch, we're obviously very early in the launch phase here. We initiated our launch activities in May, first with the Nearest.US platform and DTC campaigns following that. As we head into the back half of the year, we're going to be initiating personal promotion with our sales force, which we expect to support the activities that we're seeing out there in the field. As far as metrics go for what folks should be looking for there, I think that as we continue to report going forward, the sales engagement and the visits that we see with doctors and the receptivity to the product in the market is going to be important to seeing what trends we see as far as revenue goes. And then similarly to what we discussed in the prior quarter call, some of the important levers here as far as the revenue trajectory and modeling it out will be the patient acquisition metrics as well as refill metrics and the pills per fill metrics, which obviously early in the launch year we're starting data but it's fairly minimal so we'll continue to be tracking that closely to determine kind of where in the revenue range we expect to fall in future periods.

Thank you so much. One more about Head Layoffs. So following the July 20th pre-hearing conference and the August 3 evidentiary disclosure deadline, what became clear about the hearing for that overall? And which issue is most likely to drive the outcome? Do you think it would be something like interpretation of sites from 3101 and 3107, endpoint validity, or something else?.

Yes, thanks for the question. We have our general counsel here, to explain a little bit about the process. The pre-hearing was more of a process call than actually looking at the facts.

Yes, that's right. And so obviously it's never a good idea to speculate about the outcome of litigation or litigation strategy. But, you know, we are confident in our ability to present our case to the administrative law judge, the process will continue throughout the year and we're hoping obviously for a favorable recommendation from the judge early in 2027.

Your next question comes from Madison from B Riley securities. Please go ahead.