What Does Fanapt’s Approval Mean for Vanda Pharmaceuticals Inc. (NASDAQ: VNDA)?


Vanda Pharmaceuticals Inc. (NASDAQ: VNDA) just picked up approval for its schizophrenia maintenance candidate. Here’s all you need to know about the drug, and what it means for the company going forward.

Imagine the trauma of you or a loved one losing touch with reality, feeling paranoid, experiencing auditory, visual, or tactile hallucinations, and receiving a diagnosis of schizophrenia. Now imagine the absolute necessity for finding the right treatment which not only safely and effectively reduces acute psychosis but offers a long term maintenance program designed to control inter-episode symptoms and prevent relapse.

Vanda Pharmaceuticals Inc. (NASDAQ: VNDA) is a biopharmaceutical company focused on the development and commercialization of drugs that treat central nervous system (CNS) disorders. The company just picked up an FDA green light for iloperidone (Fanapt) as a maintenance treatment for schizophrenia in adults.

The drug was originally approved for short-term schizophrenia treatment in 2009. The May 2016 approval was be based on the results from the REPRIEVE clinical study, which evaluated the long-term maintenance (regarding efficacy and safety) of the drug.

Here’s a look at the drug in question, and what it means for Vanda going forward.

Schizophrenia is “a long-term psychiatric disorder, involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation,” according to Oxford Dictionaries. Research has shown that its symptoms materialize due to an imbalance of certain chemicals in the brain. Sufferers from the illness often experience hallucinations, delusions, and paranoia. Although there is not yet a complete-cure, schizophrenia is treatable, most-successfully with a combination of counseling and a strong support system, paired with medication. Antipsychotic medications are the most commonly prescribed drugs to treat schizophrenia, they are grouped into two categories: typical and atypical antipsychotics. Fanapt is an atypical, second-generation antipsychotic, a medicine generally preferred because they pose a lower risk of serious side-effects in comparison to typical antipsychotics, specifically a lower risk for extrapyramidal symptoms (EPS) such as tardive dyskinesia. Antipsychotics, like all medications are accompanied by side effects. If severe, they can clearly negatively effect the patients’ quality of life and potentially their desire to continue with, and adhere to, therapy. Consequently, finding a medication that suits the patient and offers a lower risk of serious side effects is key.

So, let’s have a closer look at the science behind the drug. Fanapt is a psychiatric medication that, like other atypical antipsychotics, works by helping to restore the balance of chemicals in the brain. It is believed that many psychotic illnesses (such as schizophrenia) are caused by abnormalities in specific brain regions, which lead to abnormal communication between, and within, brain regions, which is why schizophrenia has been described as a disconnection syndrome. Nerves in the brain communicate with one-another through the production and release of chemicals called neurotransmitters. Neurotransmitters travel to other nerves and attach to the receptors on the nerves; the attachment of the neurotransmitters either stimulates or inhibits the function of these nerves. It is believed that iloperidone works by interfering with communication by blocking the receptors on nerves including: dopamine type 2, serotonin type 2, and alpha 2 adrenergic receptors, effectively altering the psychotic state.

So what did the FDA approve the drug based on?

The NDA was rooted in top-line results from the REPRIEVE trial – a long-term maintenance study for the efficacy of iloperidone in preventing or impending relapse in adult patients suffering from schizophrenia. The REPRIEVE trail was a randomized, double-blind, placebo-controlled study. As reported, 79.6% of test subjects treated with iloperidone remained relapse-free (compared to 36.6% of subjects treated with placebo).  Please see below the outlines of both the procedure utilized and results obtained from the REPRIEVE trials.

First was the stabilization phase, where the subjects received open-label iloperidone (titrated up to 12 mg/day). Next, the subjects were stabilized for a further 14 to 24 weeks with flexible-dose iloperidone (8 to 24 mg/day). Finally, subjects who remained clinically stable for at least 12 weeks entered the relapse prevention phase. Here subjects were randomly assigned to continue on the same flexible-dose regimen of iloperidone or to switch from iloperidone to placebo (in a double-blind fashion).

As for the numbers – of the 587 patients entering the stabilization phase, 195 (33%) met the criteria for the double-blind relapse prevention phase. Here, 99 subjects continued with iloperidone and 96 switched to the placebo. The study was stopped early after 68 events confirmed the hypothesis that iloperidone was more effective than placebo in preventing relapse. As noted above, the percentage of subjects who were relapse-free at the end of the double-blind relapse prevention phase was of 79.6% compared with 36.6% for placebo. The mean time to relapse was 139 days for iloperidone and 71 days for placebo. The following were the most prevalent treatment-emergent adverse events (in the stabilization phase, being greater than or equal to 5%): dizziness, somnolence, and dry mouth.

In regards to the original NDA, Fanapt’s efficacy was supported by 2 short-term (4 and 6 week) trials. These trials were randomized, double-blind, placebo-controlled studies, in which the subjects in both met the DSM (The Diagnostic and Statistical Manual of Mental Disorders) (III-IV) criteria for schizophrenia. Two instruments were used in assessing the subjects’ symptoms: The Positive and Negative Syndrome Scale (PANSS) and Brief Psychiatric Rating Scale (BPRS)- both tools used to evaluate the effects of drug treatment on symptoms of schizophrenia.

In the 6-week trail, Fanapt (at 12-16 mg/day or 20-24 mg/day) was compared to both placebo, and an active control – the antipsychotic drug risperidone. The primary endpoint was change from baseline using the total score on the BPRS at the end of treatment on day 42. In relation to the placebo, both dose-ranges of Fanapt were found to be superior on the BPRS total score. In relation to the active control (risperidone), though, Fanapt appeared to underperform for the first 2 weeks of the trail. Although this is explained by the more rapid titration that was possible for that drug, as the dosage of Fanapt was increased over the first 7 days, following a titration schedule. It was concluded that the subjects of this trial who remained on Fanapt for at least 2 weeks that the drug appeared to have comparable efficacy to this active control (risperidone).  Prescribers should know that the titration of Fanapt dosage is meant to help avoid orthostatic hypotension; (and, as the study proved) this may lead to delayed effectiveness (initially).

Like the 6-week trial, the 4-week trial also utilized a placebo, as well as a comparable titration schedule. But the 4-week trial, on the other hand, was comprised of just one fixed-dose of Fanapt (24 mg/day), and its active control was ziprasidone (an antipsychotic) not risperidone. The primary endpoint was change from baseline on the PANSS total score at the end of treatment, the 28th day. This 24 mg/day Fanapt dose was superior to placebo in the PANSS total score. In continuation, Fanapt appeared to have similar efficacy to the active control (which, unlike the 6-week trial and its use of risperidone) also needed a slow titration to the target dose.

Remember to consider that the trials discussed in the last three paragraphs were extensions from the previous trials for Fanapt regarding the initial NDA (2009). Vanda had hoped that these original results, paired with the results from the (more-recently completed) REPRIEVE trials, would showcase the drug’s potential for treating schizophrenia from a long-term perspective. In these REPRIEVE trials Fanapt’s efficacy was been proven for up to 28-weeks, results that Vanda hoped would mean approval for the drug come its May 27th 2016 PDFUA date. As things turned out, it did.

What about the market?

Today, there are an estimated 2.4 million Americans living with schizophrenia, a devastating disease with severe consequences for its sufferers and their family which impedes their ability to function independently in society. Putting an exact monetary cost on this illness is difficult. However, according to The National Center for Biotechnology Information (NCBI), in the U.S alone, the annual cost of schizophrenia treatment is estimated to be at least $62.7 billion. Broken down, this reflects an estimated $22.7 billion spent on excess direct health care costs, with: $7.0 and $2.8 billion respectively, spent on outpatient and inpatient treatment; $8.0 billion spent on long-term care, and $5.0 billion on medication. For our purposes, and considering the current arena/market and expenditure on medication to treat schizophrenia ($5.0 billion) Vanda and Fanapt have a huge potential to infiltrate the market. Effectively iloperidone (Fanapt) offers medical professionals and sufferers the opportunity to choose a new, researched based, effective, long term maintenance treatment for schizophrenia in adults.

In conclusion, setting emotional/patient centered thoughts aside and focusing purely on the potential fiscal implications for Vanda Pharmaceuticals Inc, let’s consider Vanda’s 2015 total revenues of $109.9 million. Iloperidone (Fanapt) provides an opportunity for Vanda to compete in a previously untapped $5 billion market which could undoubtedly offer tremendous potential regarding their stock growth post-PDUFA on May 27th 2016. Conservatively speaking, if Vanda can attain 30% of the market value, it would net an additional $1.5 billion, 15% of the market value means $750 million, and just 10% of the market value would net Vanda a respectable $500 million, increasing its revenues by upwards of 500%.

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.