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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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03-0491827
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2200 Pennsylvania Avenue, N.W., Suite 300 E
Washington, D.C.
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20037
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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o
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Emerging growth company
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o
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Page
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ITEM 1
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ITEM 2
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ITEM 3
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ITEM 4
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ITEM 1
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ITEM 1A
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ITEM 2
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ITEM 3
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ITEM 4
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ITEM 5
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ITEM 6
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•
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the ability of Vanda Pharmaceuticals Inc. (we, our, the Company or Vanda) to continue to commercialize HETLIOZ
®
(tasimelteon) for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) in the United States (U.S.) and Europe;
|
•
|
uncertainty as to the ability to increase market awareness of Non-24 and the market acceptance of HETLIOZ
®
;
|
•
|
our ability to continue to generate U.S. sales of Fanapt
®
(iloperidone) for the treatment of schizophrenia;
|
•
|
our dependence on third-party manufacturers to manufacture HETLIOZ
®
and Fanapt
®
in sufficient quantities and quality;
|
•
|
our level of success in commercializing HETLIOZ
®
and Fanapt
®
in new markets;
|
•
|
our ability to prepare, file, prosecute, defend and enforce any patent claims and other intellectual property rights;
|
•
|
our ability to complete the clinical development and obtain regulatory approval of tradipitant for the treatment of chronic pruritus in atopic dermatitis and the treatment of gastroparesis;
|
•
|
a loss of rights to develop and commercialize our products under our license agreements;
|
•
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the ability to obtain and maintain regulatory approval of our products, and the labeling for any approved products;
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•
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the timing and success of preclinical studies and clinical trials;
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•
|
a failure of our products to be demonstrably safe and effective;
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•
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the size and growth of the potential markets for our products and the ability to serve those markets;
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•
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our expectations regarding trends with respect to our revenues, costs, expenses, liabilities and cash, cash equivalents and marketable securities;
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•
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the scope, progress, expansion, and costs of developing and commercializing our products;
|
•
|
our failure to identify or obtain rights to new products;
|
•
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a loss of any of our key scientists or management personnel;
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•
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limitations on our ability to utilize some or all of our prior net operating losses and orphan drug and research and development credits;
|
•
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the cost and effects of litigation;
|
•
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our ability to obtain the capital necessary to fund our research and development or commercial activities;
|
•
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losses incurred from product liability claims made against us; and
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•
|
use of our existing cash, cash equivalents and marketable securities.
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ITEM 1
|
Financial Statements (Unaudited)
|
(in thousands, except for share and per share amounts)
|
September 30,
2018 |
|
December 31,
2017 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
60,778
|
|
|
$
|
33,627
|
|
Marketable securities
|
179,801
|
|
|
109,786
|
|
||
Accounts receivable, net
|
25,259
|
|
|
17,601
|
|
||
Inventory
|
887
|
|
|
840
|
|
||
Prepaid expenses and other current assets
|
12,082
|
|
|
8,003
|
|
||
Total current assets
|
278,807
|
|
|
169,857
|
|
||
Property and equipment, net
|
4,579
|
|
|
5,306
|
|
||
Intangible assets, net
|
24,922
|
|
|
26,069
|
|
||
Non-current inventory and other
|
3,629
|
|
|
4,193
|
|
||
Total assets
|
$
|
311,937
|
|
|
$
|
205,425
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued liabilities
|
$
|
19,046
|
|
|
$
|
20,335
|
|
Product revenue allowances
|
27,196
|
|
|
23,028
|
|
||
Milestone obligations under license agreements
|
—
|
|
|
27,000
|
|
||
Total current liabilities
|
46,242
|
|
|
70,363
|
|
||
Other non-current liabilities
|
4,278
|
|
|
3,675
|
|
||
Total liabilities
|
50,520
|
|
|
74,038
|
|
||
Commitments and contingencies (Notes 8 and 14)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value; 150,000,000 shares authorized; 52,400,709 and 44,938,133 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
|
52
|
|
|
45
|
|
||
Additional paid-in capital
|
607,873
|
|
|
492,802
|
|
||
Accumulated other comprehensive income (loss)
|
70
|
|
|
(34
|
)
|
||
Accumulated deficit
|
(346,578
|
)
|
|
(361,426
|
)
|
||
Total stockholders’ equity
|
261,417
|
|
|
131,387
|
|
||
Total liabilities and stockholders’ equity
|
$
|
311,937
|
|
|
$
|
205,425
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(in thousands, except for share and per share amounts)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Net product sales
|
$
|
49,135
|
|
|
$
|
41,336
|
|
|
$
|
140,077
|
|
|
$
|
120,807
|
|
Total revenues
|
49,135
|
|
|
41,336
|
|
|
140,077
|
|
|
120,807
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold excluding amortization
|
5,068
|
|
|
4,525
|
|
|
14,841
|
|
|
13,057
|
|
||||
Research and development
|
11,390
|
|
|
10,178
|
|
|
30,672
|
|
|
28,393
|
|
||||
Selling, general and administrative
|
26,047
|
|
|
31,124
|
|
|
80,829
|
|
|
92,792
|
|
||||
Intangible asset amortization
|
397
|
|
|
432
|
|
|
1,147
|
|
|
1,318
|
|
||||
Total operating expenses
|
42,902
|
|
|
46,259
|
|
|
127,489
|
|
|
135,560
|
|
||||
Income (loss) from operations
|
6,233
|
|
|
(4,923
|
)
|
|
12,588
|
|
|
(14,753
|
)
|
||||
Other income
|
1,030
|
|
|
396
|
|
|
2,440
|
|
|
1,073
|
|
||||
Income (loss) before income taxes
|
7,263
|
|
|
(4,527
|
)
|
|
15,028
|
|
|
(13,680
|
)
|
||||
Provision for income taxes
|
92
|
|
|
23
|
|
|
180
|
|
|
49
|
|
||||
Net income (loss)
|
$
|
7,171
|
|
|
$
|
(4,550
|
)
|
|
$
|
14,848
|
|
|
$
|
(13,729
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.14
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.30
|
|
|
$
|
(0.31
|
)
|
Diluted
|
$
|
0.13
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.28
|
|
|
$
|
(0.31
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
52,389,012
|
|
|
44,885,287
|
|
|
50,321,640
|
|
|
44,669,201
|
|
||||
Diluted
|
54,709,749
|
|
|
44,885,287
|
|
|
52,315,642
|
|
|
44,669,201
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Net income (loss)
|
$
|
7,171
|
|
|
$
|
(4,550
|
)
|
|
$
|
14,848
|
|
|
$
|
(13,729
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Net foreign currency translation gain (loss)
|
(2
|
)
|
|
5
|
|
|
(15
|
)
|
|
26
|
|
||||
Change in net unrealized gain (loss) on marketable securities
|
(7
|
)
|
|
57
|
|
|
119
|
|
|
(11
|
)
|
||||
Tax provision on other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other comprehensive income (loss), net of tax
|
(9
|
)
|
|
62
|
|
|
104
|
|
|
15
|
|
||||
Comprehensive income (loss)
|
$
|
7,162
|
|
|
$
|
(4,488
|
)
|
|
$
|
14,952
|
|
|
$
|
(13,714
|
)
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total
|
|||||||||||||
(in thousands, except for share amounts)
|
Shares
|
|
Par Value
|
|
|
|
|
|||||||||||||||
Balances at December 31, 2017
|
44,938,133
|
|
|
$
|
45
|
|
|
$
|
492,802
|
|
|
$
|
(34
|
)
|
|
$
|
(361,426
|
)
|
|
$
|
131,387
|
|
Net proceeds from public offering of common stock
|
6,325,000
|
|
|
6
|
|
|
100,864
|
|
|
—
|
|
|
—
|
|
|
100,870
|
|
|||||
Issuance of common stock from the exercise of stock options and settlement of restricted stock units
|
1,137,576
|
|
|
1
|
|
|
5,463
|
|
|
—
|
|
|
—
|
|
|
5,464
|
|
|||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
8,744
|
|
|
—
|
|
|
—
|
|
|
8,744
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,848
|
|
|
14,848
|
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
104
|
|
|
—
|
|
|
104
|
|
|||||
Balances at September 30, 2018
|
52,400,709
|
|
|
$
|
52
|
|
|
$
|
607,873
|
|
|
$
|
70
|
|
|
$
|
(346,578
|
)
|
|
$
|
261,417
|
|
|
Nine Months Ended
|
||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
||||
Cash flows from operating activities
|
|
|
|
||||
Net income (loss)
|
$
|
14,848
|
|
|
$
|
(13,729
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
||||
Depreciation of property and equipment
|
1,057
|
|
|
895
|
|
||
Stock-based compensation
|
8,744
|
|
|
7,683
|
|
||
Amortization of discounts on marketable securities
|
(1,386
|
)
|
|
(274
|
)
|
||
Intangible asset amortization
|
1,147
|
|
|
1,318
|
|
||
Other non-cash adjustments, net
|
153
|
|
|
399
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(7,686
|
)
|
|
2,089
|
|
||
Prepaid expenses and other assets
|
(3,936
|
)
|
|
1,023
|
|
||
Inventory
|
215
|
|
|
(896
|
)
|
||
Accounts payable and other liabilities
|
(3,182
|
)
|
|
4,552
|
|
||
Product revenue allowances
|
4,749
|
|
|
(8,509
|
)
|
||
Net cash provided by (used in) operating activities
|
14,723
|
|
|
(5,449
|
)
|
||
Cash flows from investing activities
|
|
|
|
||||
Acquisition of intangible asset
|
(25,000
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(346
|
)
|
|
(1,473
|
)
|
||
Purchases of marketable securities
|
(201,940
|
)
|
|
(109,396
|
)
|
||
Maturities of marketable securities
|
133,430
|
|
|
93,277
|
|
||
Net cash used in investing activities
|
(93,856
|
)
|
|
(17,592
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Net proceeds from offering of common stock
|
100,870
|
|
|
—
|
|
||
Proceeds from the exercise of stock options
|
5,464
|
|
|
5,170
|
|
||
Net cash provided by financing activities
|
106,334
|
|
|
5,170
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(14
|
)
|
|
34
|
|
||
Net change in cash, cash equivalents and restricted cash
|
27,187
|
|
|
(17,837
|
)
|
||
Cash, cash equivalents and restricted cash
|
|
|
|
||||
Beginning of period
|
34,335
|
|
|
41,256
|
|
||
End of period
|
$
|
61,522
|
|
|
$
|
23,419
|
|
•
|
HETLIOZ
®
(tasimelteon), a product for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24), was approved by the U.S. Food and Drug Administration (FDA) in January 2014 and launched commercially in the U.S. in April 2014. In July 2015, the European Commission (EC) granted centralized marketing authorization with unified labeling for HETLIOZ
®
for the treatment of Non-24 in totally blind adults. HETLIOZ
®
was commercially launched in Germany in August 2016. HETLIOZ
®
has potential utility in a number of other circadian rhythm disorders and is presently in clinical development for the treatment of jet lag disorder, Smith-Magenis Syndrome (SMS) and Pediatric Non-24.
|
•
|
Fanapt
®
(iloperidone), a product for the treatment of schizophrenia, the oral formulation of which was approved by the FDA in May 2009 and launched commercially in the U.S. by Novartis Pharma AG (Novartis) in January of 2010. Novartis transferred all the U.S. and Canadian commercial rights to the Fanapt
®
franchise to the Company on December 31, 2014. Additionally, the Company’s distribution partners launched Fanapt
®
in Israel in 2014. Fanapt
®
has potential utility in a number of other disorders. An assessment of new Fanapt
®
clinical opportunities is ongoing.
|
•
|
Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis and the treatment of gastroparesis.
|
•
|
VTR-297, a small molecule histone deacetylase (HDAC) inhibitor presently in clinical development for the treatment of hematologic malignancies.
|
•
|
Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors.
|
•
|
VQW-765, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
HETLIOZ
®
product sales, net
|
$
|
29,923
|
|
|
$
|
22,279
|
|
|
$
|
83,391
|
|
|
$
|
64,968
|
|
Fanapt
®
product sales, net
|
19,212
|
|
|
19,057
|
|
|
56,686
|
|
|
55,839
|
|
||||
|
$
|
49,135
|
|
|
$
|
41,336
|
|
|
$
|
140,077
|
|
|
$
|
120,807
|
|
September 30, 2018
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Market
Value
|
||||||||
(in thousands)
|
|
|
|
||||||||||||
U.S. Treasury and government agencies
|
$
|
67,449
|
|
|
$
|
—
|
|
|
$
|
(37
|
)
|
|
$
|
67,412
|
|
Corporate debt
|
91,158
|
|
|
98
|
|
|
(4
|
)
|
|
91,252
|
|
||||
Asset-backed securities
|
21,138
|
|
|
1
|
|
|
(2
|
)
|
|
21,137
|
|
||||
|
$
|
179,745
|
|
|
$
|
99
|
|
|
$
|
(43
|
)
|
|
$
|
179,801
|
|
December 31, 2017
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Market
Value
|
||||||||
(in thousands)
|
|
|
|
||||||||||||
U.S. Treasury and government agencies
|
$
|
60,681
|
|
|
$
|
—
|
|
|
$
|
(63
|
)
|
|
$
|
60,618
|
|
Corporate debt
|
49,168
|
|
|
12
|
|
|
(12
|
)
|
|
49,168
|
|
||||
|
$
|
109,849
|
|
|
$
|
12
|
|
|
$
|
(75
|
)
|
|
$
|
109,786
|
|
•
|
Level 1 — defined as observable inputs such as quoted prices in active markets
|
•
|
Level 2 — defined as inputs other than quoted prices in active markets that are either directly or indirectly observable
|
•
|
Level 3 — defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions
|
|
|
|
Fair Value Measurement as of September 30, 2018 Using
|
||||||||||||
|
September 30,
2018 |
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
(in thousands)
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|||||||||
U.S. Treasury and government agencies
|
$
|
87,269
|
|
|
$
|
87,269
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate debt
|
94,243
|
|
|
—
|
|
|
94,243
|
|
|
—
|
|
||||
Asset-backed securities
|
21,137
|
|
|
—
|
|
|
21,137
|
|
|
—
|
|
||||
|
$
|
202,649
|
|
|
$
|
87,269
|
|
|
$
|
115,380
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurement as of December 31, 2017 Using
|
||||||||||||
|
December 31,
2017 |
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
(in thousands)
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|||||||||
U.S. Treasury and government agencies
|
$
|
60,618
|
|
|
$
|
60,618
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Corporate debt
|
53,164
|
|
|
—
|
|
|
53,164
|
|
|
—
|
|
||||
|
$
|
113,782
|
|
|
$
|
60,618
|
|
|
$
|
53,164
|
|
|
$
|
—
|
|
(in thousands)
|
September 30,
2018 |
|
December 31,
2017 |
||||
Current assets
|
|
|
|
||||
Work-in-process
|
$
|
108
|
|
|
$
|
80
|
|
Finished goods
|
779
|
|
|
760
|
|
||
|
$
|
887
|
|
|
$
|
840
|
|
Non-Current assets
|
|
|
|
||||
Raw materials
|
$
|
87
|
|
|
$
|
87
|
|
Work-in-process
|
2,366
|
|
|
2,821
|
|
||
Finished goods
|
426
|
|
|
408
|
|
||
|
$
|
2,879
|
|
|
$
|
3,316
|
|
|
|
|
September 30, 2018
|
||||||||||
(in thousands)
|
Estimated
Useful Life
(Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||
HETLIOZ
®
|
February 2035
|
|
$
|
33,000
|
|
|
$
|
8,078
|
|
|
$
|
24,922
|
|
Fanapt
®
|
November 2016
|
|
27,941
|
|
|
27,941
|
|
|
—
|
|
|||
|
|
|
$
|
60,941
|
|
|
$
|
36,019
|
|
|
$
|
24,922
|
|
|
|
|
December 31, 2017
|
||||||||||
(in thousands)
|
Estimated
Useful Life
(Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||
HETLIOZ
®
|
May 2034
|
|
$
|
33,000
|
|
|
$
|
6,931
|
|
|
$
|
26,069
|
|
Fanapt
®
|
November 2016
|
|
27,941
|
|
|
27,941
|
|
|
—
|
|
|||
|
|
|
$
|
60,941
|
|
|
$
|
34,872
|
|
|
$
|
26,069
|
|
(in thousands)
|
Total
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
HETLIOZ
®
|
$
|
24,922
|
|
|
$
|
380
|
|
|
$
|
1,518
|
|
|
$
|
1,518
|
|
|
$
|
1,518
|
|
|
$
|
1,518
|
|
|
$
|
18,470
|
|
(in thousands)
|
September 30,
2018 |
|
December 31,
2017 |
||||
Research and development expenses
|
$
|
4,231
|
|
|
$
|
4,663
|
|
Consulting and other professional fees
|
3,351
|
|
|
3,961
|
|
||
Compensation and employee benefits
|
4,787
|
|
|
5,323
|
|
||
Royalties payable
|
4,752
|
|
|
4,394
|
|
||
Other
|
1,925
|
|
|
1,994
|
|
||
|
$
|
19,046
|
|
|
$
|
20,335
|
|
|
Cash Payments Due by Year
|
||||||||||||||||||||||||||
(in thousands)
|
Total
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
Operating leases
|
$
|
23,372
|
|
|
$
|
599
|
|
|
$
|
2,491
|
|
|
$
|
2,501
|
|
|
$
|
2,337
|
|
|
$
|
2,355
|
|
|
$
|
13,089
|
|
Purchase commitments
|
8,372
|
|
|
197
|
|
|
5,982
|
|
|
847
|
|
|
890
|
|
|
456
|
|
|
—
|
|
|||||||
|
$
|
31,744
|
|
|
$
|
796
|
|
|
$
|
8,473
|
|
|
$
|
3,348
|
|
|
$
|
3,227
|
|
|
$
|
2,811
|
|
|
$
|
13,089
|
|
(in thousands)
|
September 30,
2018 |
|
December 31,
2017 |
||||
Foreign currency translation
|
$
|
14
|
|
|
$
|
29
|
|
Unrealized gain (loss) on marketable securities
|
56
|
|
|
(63
|
)
|
||
|
$
|
70
|
|
|
$
|
(34
|
)
|
2006 and 2016 Plans
(in thousands, except for share and per share amounts)
|
Number of
Shares
|
|
Weighted Average
Exercise Price at
Grant Date
|
|
Weighted Average
Remaining Term
(Years)
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding at December 31, 2017
|
4,719,784
|
|
|
$
|
10.03
|
|
|
5.63
|
|
$
|
24,421
|
|
Granted
|
567,500
|
|
|
19.22
|
|
|
|
|
|
|||
Forfeited
|
(232,527
|
)
|
|
13.99
|
|
|
|
|
|
|||
Exercised
|
(616,457
|
)
|
|
8.86
|
|
|
|
|
5,059
|
|
||
Outstanding at September 30, 2018
|
4,438,300
|
|
|
11.16
|
|
|
5.56
|
|
52,343
|
|
||
Exercisable at September 30, 2018
|
3,419,995
|
|
|
9.92
|
|
|
4.67
|
|
44,550
|
|
||
Vested and expected to vest at September 30, 2018
|
4,290,127
|
|
|
10.93
|
|
|
5.43
|
|
51,589
|
|
2006 and 2016 Plans
|
Number of
Shares
Underlying
RSUs
|
|
Weighted
Average
Grant Date
Fair Value
|
|||
Unvested at December 31, 2017
|
1,357,838
|
|
|
$
|
12.72
|
|
Granted
|
704,086
|
|
|
18.85
|
|
|
Forfeited
|
(219,945
|
)
|
|
15.11
|
|
|
Vested
|
(521,119
|
)
|
|
12.64
|
|
|
Unvested at September 30, 2018
|
1,320,860
|
|
|
15.63
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Research and development
|
$
|
326
|
|
|
$
|
264
|
|
|
$
|
963
|
|
|
$
|
958
|
|
Selling, general and administrative
|
2,546
|
|
|
2,507
|
|
|
7,781
|
|
|
6,725
|
|
||||
|
$
|
2,872
|
|
|
$
|
2,771
|
|
|
$
|
8,744
|
|
|
$
|
7,683
|
|
|
Nine Months Ended
|
||||
|
September 30,
2018 |
|
September 30,
2017 |
||
Expected dividend yield
|
0
|
%
|
|
0
|
%
|
Weighted average expected volatility
|
58
|
%
|
|
57
|
%
|
Weighted average expected term (years)
|
5.90
|
|
|
5.89
|
|
Weighted average risk-free rate
|
2.68
|
%
|
|
1.97
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(in thousands, except for share and per share amounts)
|
September 30,
2018 |
|
September 30,
2017 |
|
September 30,
2018 |
|
September 30,
2017 |
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
7,171
|
|
|
$
|
(4,550
|
)
|
|
$
|
14,848
|
|
|
$
|
(13,729
|
)
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding, basic
|
52,389,012
|
|
|
44,885,287
|
|
|
50,321,640
|
|
|
44,669,201
|
|
||||
Effect of dilutive securities
|
2,320,737
|
|
|
—
|
|
|
1,994,002
|
|
|
—
|
|
||||
Weighted average shares outstanding, diluted
|
54,709,749
|
|
|
44,885,287
|
|
|
52,315,642
|
|
|
44,669,201
|
|
||||
Net income (loss) per share, basic and diluted:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.14
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.30
|
|
|
$
|
(0.31
|
)
|
Diluted
|
$
|
0.13
|
|
|
$
|
(0.10
|
)
|
|
$
|
0.28
|
|
|
$
|
(0.31
|
)
|
Antidilutive securities excluded from calculations of diluted net income (loss) per share
|
752,194
|
|
|
3,110,823
|
|
|
1,058,058
|
|
|
3,227,011
|
|
ITEM 2
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
HETLIOZ
®
(tasimelteon), a product for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24), was approved by the U.S. Food and Drug Administration (the FDA) in January 2014 and launched commercially in the U.S. in April 2014. In July 2015, the European Commission (the EC) granted centralized marketing authorization with unified labeling for HETLIOZ
®
for the treatment of Non-24 in totally blind adults. HETLIOZ
®
was commercially launched in Germany in August 2016. HETLIOZ
®
has potential utility in a number of other circadian rhythm disorders and is presently in clinical development for the treatment of jet lag disorder, Smith-Magenis Syndrome (SMS) and Pediatric Non-24.
|
•
|
Fanapt
®
(iloperidone), a product for the treatment of schizophrenia, the oral formulation of which was approved by the FDA in May 2009 and launched commercially in the U.S. by Novartis Pharma AG (Novartis) in January of 2010. Novartis transferred all the U.S. and Canadian commercial rights to the Fanapt
®
franchise to us on December 31, 2014. Additionally, our distribution partners launched Fanapt
®
in Israel in 2014. Fanapt
®
has potential utility in a number of other disorders. An assessment of new Fanapt
®
clinical opportunities is ongoing.
|
•
|
Tradipitant (VLY-686), a small molecule neurokinin-1 receptor (NK-1R) antagonist, which is presently in clinical development for the treatment of chronic pruritus in atopic dermatitis and the treatment of gastroparesis.
|
•
|
VTR-297, a small molecule histone deacetylase (HDAC) inhibitor presently in clinical development for the treatment of hematologic malignancies.
|
•
|
Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors. An early stage CFTR activator program is planned for the treatment of dry eye. In addition, an early stage CFTR inhibitor program is planned for the treatment of gastrointestinal disorders including cholera.
|
•
|
VQW-765, a Phase II alpha-7 nicotinic acetylcholine receptor partial agonist.
|
•
|
Enrollment in the clinical study of tradipitant in gastroparesis is complete. Results are expected by the end of 2018.
|
•
|
The Phase III study (EPIONE) of tradipitant in atopic dermatitis is ongoing.
|
•
|
Enrollment in the clinical study of HETLIOZ
®
in SMS is complete. Results are expected by the end of 2018.
|
•
|
Vanda submitted a supplemental New Drug Application (sNDA) to the FDA for HETLIOZ
®
in jet lag disorder and expects a filing date by the end of 2018.
|
•
|
In September, a HETLIOZ
®
driving studying demonstrated no impairment of next day driving performance.
|
•
|
A pharmacokinetic study of the long acting injectable (Depot) formulation of Fanapt
®
enrolled its first patient during October 2018.
|
•
|
The Phase I study (1101) of VTR-297 in patients with hematologic malignancies randomized its first patient in October 2018.
|
(in thousands)
|
Rebates & Chargebacks
|
|
Discounts,
Returns and Other
|
|
Total
|
||||||
Balances at December 31, 2017
|
$
|
20,229
|
|
|
$
|
7,357
|
|
|
$
|
27,586
|
|
Provision related to current period sales
|
43,712
|
|
|
17,096
|
|
|
60,808
|
|
|||
Adjustments for prior period sales
|
669
|
|
|
358
|
|
|
1,027
|
|
|||
Credits/payments made
|
(43,969
|
)
|
|
(17,168
|
)
|
|
(61,137
|
)
|
|||
Balances at September 30, 2018
|
$
|
20,641
|
|
|
$
|
7,643
|
|
|
$
|
28,284
|
|
|
Three Months Ended
|
|||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
Net
Change
|
|
Percent
|
|||||||
HETLIOZ
®
product sales, net
|
$
|
29,923
|
|
|
$
|
22,279
|
|
|
$
|
7,644
|
|
|
34
|
%
|
Fanapt
®
product sales, net
|
19,212
|
|
|
19,057
|
|
|
155
|
|
|
1
|
%
|
|||
|
$
|
49,135
|
|
|
$
|
41,336
|
|
|
$
|
7,799
|
|
|
19
|
%
|
|
Three Months Ended
|
||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
||||
Direct project costs (1)
|
|
|
|
||||
HETLIOZ
®
|
$
|
2,964
|
|
|
$
|
3,171
|
|
Fanapt
®
|
462
|
|
|
610
|
|
||
Tradipitant
|
5,113
|
|
|
4,845
|
|
||
VTR-297
|
390
|
|
|
389
|
|
||
CFTR
|
1,465
|
|
|
194
|
|
||
Other
|
174
|
|
|
141
|
|
||
|
10,568
|
|
|
9,350
|
|
||
Indirect project costs (1)
|
|
|
|
||||
Stock-based compensation
|
326
|
|
|
264
|
|
||
Other indirect overhead
|
496
|
|
|
564
|
|
||
|
822
|
|
|
828
|
|
||
Total research and development expense
|
$
|
11,390
|
|
|
$
|
10,178
|
|
(1)
|
We record direct costs, including personnel costs and related benefits, on a project-by-project basis. Many of our research and development costs are not attributable to any individual project because we share resources across several development projects. We record indirect costs that support a number of our research and development activities in the aggregate, including stock-based compensation.
|
|
Nine Months Ended
|
|||||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
Net
Change
|
|
Percent
|
|||||||
HETLIOZ
®
product sales, net
|
$
|
83,391
|
|
|
$
|
64,968
|
|
|
$
|
18,423
|
|
|
28
|
%
|
Fanapt
®
product sales, net
|
56,686
|
|
|
55,839
|
|
|
847
|
|
|
2
|
%
|
|||
|
$
|
140,077
|
|
|
$
|
120,807
|
|
|
$
|
19,270
|
|
|
16
|
%
|
|
Nine Months Ended
|
||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
||||
Direct project costs (1)
|
|
|
|
||||
HETLIOZ
®
|
$
|
9,009
|
|
|
$
|
10,863
|
|
Fanapt
®
|
2,018
|
|
|
1,599
|
|
||
Tradipitant
|
11,762
|
|
|
9,642
|
|
||
VTR-297
|
1,682
|
|
|
1,692
|
|
||
CFTR
|
2,764
|
|
|
1,521
|
|
||
Other
|
527
|
|
|
288
|
|
||
|
27,762
|
|
|
25,605
|
|
||
Indirect project costs (1)
|
|
|
|
||||
Stock-based compensation
|
963
|
|
|
958
|
|
||
Other indirect overhead
|
1,947
|
|
|
1,830
|
|
||
|
2,910
|
|
|
2,788
|
|
||
Total research and development expense
|
$
|
30,672
|
|
|
$
|
28,393
|
|
(1)
|
We record direct costs, including personnel costs and related benefits, on a project-by-project basis. Many of our research and development costs are not attributable to any individual project because we share resources across several
|
(in thousands)
|
September 30,
2018 |
|
December 31,
2017 |
||||
Cash and cash equivalents
|
$
|
60,778
|
|
|
$
|
33,627
|
|
Marketable securities:
|
|
|
|
||||
U.S. Treasury and government agencies
|
67,412
|
|
|
60,618
|
|
||
Corporate debt
|
91,252
|
|
|
49,168
|
|
||
Asset-backed securities
|
21,137
|
|
|
—
|
|
||
Total marketable securities
|
179,801
|
|
|
109,786
|
|
||
Total cash, cash equivalents and marketable securities
|
$
|
240,579
|
|
|
$
|
143,413
|
|
|
Nine Months Ended
|
||||||||||
(in thousands)
|
September 30,
2018 |
|
September 30,
2017 |
|
Net
Change
|
||||||
Net cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
14,848
|
|
|
$
|
(13,729
|
)
|
|
$
|
28,577
|
|
Non-cash charges
|
9,715
|
|
|
10,021
|
|
|
(306
|
)
|
|||
Net change in operating assets and liabilities
|
(9,840
|
)
|
|
(1,741
|
)
|
|
(8,099
|
)
|
|||
Operating activities
|
14,723
|
|
|
(5,449
|
)
|
|
20,172
|
|
|||
Investing activities:
|
|
|
|
|
|
||||||
Acquisition of intangible asset
|
(25,000
|
)
|
|
—
|
|
|
(25,000
|
)
|
|||
Purchases of property and equipment
|
(346
|
)
|
|
(1,473
|
)
|
|
1,127
|
|
|||
Net purchases of marketable securities
|
(68,510
|
)
|
|
(16,119
|
)
|
|
(52,391
|
)
|
|||
Investing activities
|
(93,856
|
)
|
|
(17,592
|
)
|
|
(76,264
|
)
|
|||
Financing activities:
|
|
|
|
|
|
||||||
Net proceeds from offering of common stock
|
100,870
|
|
|
—
|
|
|
100,870
|
|
|||
Proceeds from the exercise of stock options
|
5,464
|
|
|
5,170
|
|
|
294
|
|
|||
Financing activities
|
106,334
|
|
|
5,170
|
|
|
101,164
|
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(14
|
)
|
|
34
|
|
|
(48
|
)
|
|||
Net change in cash, cash equivalents and restricted cash
|
$
|
27,187
|
|
|
$
|
(17,837
|
)
|
|
$
|
45,024
|
|
|
Cash Payments Due by Year (1)(2)
|
||||||||||||||||||||||||||
(in thousands)
|
Total
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
Operating leases (3)
|
$
|
23,372
|
|
|
$
|
599
|
|
|
$
|
2,491
|
|
|
$
|
2,501
|
|
|
$
|
2,337
|
|
|
$
|
2,355
|
|
|
$
|
13,089
|
|
Purchase commitments (4)
|
8,372
|
|
|
197
|
|
|
5,982
|
|
|
847
|
|
|
890
|
|
|
456
|
|
|
—
|
|
|||||||
|
$
|
31,744
|
|
|
$
|
796
|
|
|
$
|
8,473
|
|
|
$
|
3,348
|
|
|
$
|
3,227
|
|
|
$
|
2,811
|
|
|
$
|
13,089
|
|
(1)
|
This table does not include potential future milestone obligations under our license agreement with Lilly for the exclusive rights to develop and commercialize tradipitant of $97.0 million, which consist of
$2.0 million
due upon the filing of the first marketing authorization for tradipitant in either the U.S. or the E.U.,
$10.0 million
and
$5.0 million
for the first approval of a marketing authorization for tradipitant in the U.S. and the E.U., respectively, and up to
$80.0 million
for future sales milestones.
|
(2)
|
This table does not include potential future milestone obligations under our license agreement with the University of California San Francisco for the exclusive rights to develop and commercialize a portfolio of CFTR activators and inhibitors under which we could be obligated to make potential future milestone payments of up to
$46.0 million
upon the achievement of regulatory and sales milestones.
|
(3)
|
This table includes minimum annual future payments under operating leases and subleases for a total of 43,462 square feet of office space for our headquarters office at 2200 Pennsylvania Avenue, N.W. in Washington, D.C. that generally expire in 2028, an operating lease for
2,880
square feet of office space for our European headquarters in London that has a noncancellable lease term ending in 2021, and
1,249
square feet of office space in Berlin under a short-term operating lease.
|
(4)
|
Purchase commitments include noncancellable purchase commitments for agreements longer than one year and primarily relate to commitments for advertising and data services. This table does not include various other long-term agreements entered into for services with other third party vendors due to the cancelable nature of the services. Additionally, this table does not include rebates, chargebacks or discounts recorded as liabilities at the time that product sales are recognized as revenue.
|
ITEM 3
|
Quantitative and Qualitative Disclosures about Market Risk
|
ITEM 4
|
Controls and Procedures
|
ITEM 1
|
Legal Proceedings
|
ITEM 1A
|
Risk Factors
|
ITEM 2
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
ITEM 3
|
Defaults Upon Senior Securities
|
ITEM 4
|
Mine Safety Disclosures
|
ITEM 5
|
Other Information
|
ITEM 6
|
Exhibits
|
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
10.41
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
101
|
|
The following financial information from this quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2018 formatted in XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017; (iii) Condensed Consolidated Statement of Comprehensive Loss for the three and nine months ended September 30, 2018 and 2017; (iv) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2018; (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017; and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
Vanda Pharmaceuticals Inc.
|
|
|
|
November 7, 2018
|
|
/s/ Mihael H. Polymeropoulos, M.D.
|
|
|
Mihael H. Polymeropoulos, M.D.
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
November 7, 2018
|
|
/s/ James P. Kelly
|
|
|
James P. Kelly
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Vanda Pharmaceuticals Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 7, 2018
|
|
/s/ Mihael H. Polymeropoulos, M.D.
|
|
|
Mihael H. Polymeropoulos, M.D.
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Vanda Pharmaceuticals Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 7, 2018
|
|
/s/ James P. Kelly
|
|
|
James P. Kelly
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
November 7, 2018
|
|
/s/ Mihael H. Polymeropoulos, M.D.
|
|
|
Mihael H. Polymeropoulos, M.D.
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
November 7, 2018
|
|
/s/ James P. Kelly
|
|
|
James P. Kelly
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)
|