VNDA - NASDAQ

Good afternoon. My name is Audra, 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. [Operator Instructions] At this time, I would like to turn the conference over to Kevin Moran, Vanda's Chief Financial Officer. Please go ahead.

Thanks, Audra. 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.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. Mihael Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board; and Tim Williams, our General Counsel. Following my introductory remarks, Mihael 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 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 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. Mihael Polymeropoulos.

Thank you very much, Kevin, and good afternoon, everyone. Thank you for joining us to discuss Vanda's second quarter 2023 results. I will first discuss key highlights from our commercial products and clinical pipeline, 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 commercial progress and financial results. Taking into account the challenging environment due to the at-risk launch of generic tasimelteon, 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, including the reorganization of our sales force that will support our current commercial projects as well as the potential near-term expansion of the Fanapt franchise if we pursue FDA approval for bipolar I disorder. Let's begin with our results for HETLIO

Thank you, Mihael. I'll start with our intellectual property and related litigation. As previously disclosed, we appealed the negative decision in our HETLIO

Thank you very much, Tim. I would now turn the call to Kevin Moran to discuss our commercial progress and financial results. Kevin?

Thank you, Mihael. 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 were $108.6 million, a 13% decrease compared sales were $124.6 million for the same period in 2022. HETLIO

Thank you very much, Kevin. At this point, we will be happy to open the line to any questions you may have.

Thank you. [Operator Instructions] We'll take our question from Andrew Tsai at Jefferies.

Hi, everyone. Thanks so much. Appreciate all the updates. So, the first question for us is on HETLIO

Yes. Thank you very much, Andrew. I will let, Kevin, answer this question.

Yes. Thanks for the question, Andrew. So, a couple of different pieces there, and I'll provide the detail where we provided it 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 were 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. So, there's still some inventory to work through before they would return to historic levels.

Very clear. And so, speaking of the ongoing, I guess litigation versus the generics, I think it sounded like you've petitioned to rehear the case, core case. And I think you've mentioned Teva and the other party has until next Tuesday to respond. So, what would be the next steps after that? And how quickly we do get a potential resolution?

Yes. I would like, Tim Williams, handle this. And maybe I think we can discuss a little bit about the procedure with the Federal Circuit.

Yes, happy to do that, Mihael. 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 judges sitting on the Federal Circuit are interested to learn a little bit more information about the case to hear from the other party. So, that's what occurred in this case. And so there's really not set procedure from here in terms of required next steps. If the request from the court holds in terms of timing, then Teva and Apotex would need to file this response with the court, like I mentioned on Tuesday of next week. And after that, we may have an opportunity to provide additional reply, but there is not a definite procedure around that. The timing is likewise there's no prescribed timing in the, either the Federal Circuit’s 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. So, speaking about the pipeline, as we think about the next six to 12 months, there does seem to be potentially a good set of catalyst. And so the question would be, have you filed the NDA or sNDA for HETLIO

Yes. We do not give specific details and interim updates, such as when we submit, when the FDA files and what they could do for data. But what we can tell you, it is that all three applications are progressing without necessarily telling you which ones have been submitted, filed or to be submitted. But given where we are, we expect that a regulatory decision should be able to be rendered 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, almost $500 million, how do you foresee to spend that cash. Specifically, I ask in the context of business development, 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 buy immediate revenues or thinking more about building out the earlier stage pipeline? Thank you.

Yes. Certainly, because we have the marginal profitability, allows us to have a lot of flexibility to look at potential business development opportunities from the outside. And we have a number of them ongoing. And in terms of types, we're very focused to first diversify our revenue and support our commercial presence, as our own organic pipeline as we discussed just a minute ago is actually exceptional with new filings ongoing. So, we believe that we can be generally agnostic in the types of indications where a compound with maybe already commercial presence exist, but we think we are keen to understand opportunities that can be synergistic with our already existing commercial infrastructure. But again, we're more agnostic on indications and more focused on late-stage and potential diversification of revenue sources.

Got it. Thank you very much.

Sure, Andrew. Thank you for your questions.

And that does conclude the question-and-answer session. I'd like to turn the conference back to Vanda management for closing remarks.

Yes. Thank you very much. And thank you all for joining this quarterly call. Looking forward to talk to you in future periods. Thank you.