Vanda Pharmaceuticals (VNDA) Q2 2026 earnings call transcript

Thank you, France. Good afternoon, and thank you for joining us to discuss Vanda 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. 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. Mahalas Palmyropoulos, our President, Chief Executive Officer, and Chairman of the Board, and Daniel McGuire, our General Counsel.

Following my introductory remarks, Mahalas 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 security 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. Mahalas Phymeropoulos.

Good afternoon, everyone. Thank you for joining us today for Vanda Pharmaceuticals' second quarter 2026 earnings conference call. We are pleased with the continuous strong growth of FANAPT and the enthusiastic response to Nileus as it becomes available to patients. With Vesanti approved and on track for launch in the second half of 2026, a December 2026 pidufa 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 III programs launch preparations and 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 product 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 FANAPT and PUNBORI, and prepared for the commercial launches, including manufacturing, commercial supplies of NERUS, BISANTE, and QUIMILSA. 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 we have sufficient resources to fund operations through at least the end of 2027.

FNAF showed 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, Phanapti has seen significant growth with TRX up 62% and BRX up 300% versus the second quarter of 2024. Bisanti 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.

Bisanti 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 NIRUS was initiated with a direct-to-consumer offering via the web portal nirus. us. Personal promotion is expected to commence later in 2026. Vanda's ongoing late-stage clinical studies are progressing rapidly and are expected to generate top-line results in 2026 or early 2027, including the 30th Phase III 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. The Phase III study of Hetlius in the treatment of delayed sleep phase disorder, DSPD, with results expected in 2026.

Finally, the Phase III study of Visanti is a once-daily 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 the Prescription Drug User FIAC, target action date of December 12, 2026. The results of the pivotal clinical 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 a positive opinion recommending orphan drug designation for Quimilza for the treatment of GPP. 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 Sarkot-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 Hedlius for the treatment of jet lag disorder. The preceding, a rare administrative hearing process, granted after the DC 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-day 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, Mahalas. 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 million essentially flat as compared to million for the same period in 2025 The first six months of 2026 included increased FNAF revenue as a result of the continued commercialization efforts for FNAF and bipolar 1 Thank you for orders shipped on June 29, 2026 that arrived on July 1, 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. These orders will be recognized as revenue in the third quarter of 2026. During the second quarter of 2026, there was de-stocking 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, Hetlio's 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 upon VORI 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 of 2026. Nereus net product sales were $1 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. Thank you. In the second quarter 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.

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. Tax expense is expected to be nominal going forward until such time that a valuation 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 phenapton bipolar 1 disorder and Pomvorium multiple sclerosis, The nearest commercial launch and the upcoming Basanti commercial launch and higher R&D expenses primarily related to our VQW 765, FNAFT, and Basanti programs, partially offset by lower expenses on our KeyMilza or IMSIDOLAMOV 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 IMSIDOLAMOV. 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 Pomvorium Multiple Sclerosis, and, more recently, the launch of Nereus and upcoming launch of Basanti. We maintained 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 30, 2026, was $170 million, representing a decrease of $93.8 million compared to December 31, 2025, and a decrease of $32.3 million compared to March 31, 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 to 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 31, 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 U. S. 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 IMSIDOLAMOD program, may result in future variability 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 a 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 FNAF 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 orders shipped 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, as reflected by new-to-brand prescriptions, or NBRX, increased by 32% compared to the second quarter of 2025 and by 10% compared to the first quarter of 2026.

Historically, FNAP's 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, FNAF 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 the historic range.

Turning to Hetlios. Hetlios net product sales were $5.6 million for the second quarter of 2026, a 66% decrease compared to $16.2 million in the second quarter of 2025, and a 65% 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 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 timing of shipments Going I going to turn the call over to management for prepared remarks And finally, turning to Nereus.

Nereus became commercially available in the U. S. in May 2026. Nearest net product sales were $1 million for the second quarter of 2026. Nearest is sold using both traditional wholesaler channel and also by prescription directly through the nearest. 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 Nearest by wholesalers of $15.2 million. We constrain Nearest 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 inventory levels on hand at wholesalers.

As a reminder, Nearest launched commercially in the U. S. in the second quarter of 2026 with a direct-to-consumer offering via the web portal, Nearest. us. Personal promotion using our existing sales force is expected to commence 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 Nereus programs, and higher SG&A expenses related to spending on Vanda's commercial products as a result of the continued commercialization efforts for Phenaptin Bipolar I disorder and Pomvorian Multiple Sclerosis, the Nereus 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 I disorder and Pomborium Multiple Sclerosis, and more recently, the launch of Nereus and upcoming launch of Visanti. 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 Pomborian 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 I 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. New 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 disorder, FNAF has seen significant growth, with TRX up 62% and NBRX up 300% as compared to the second quarter of 2024. Of particular note, FNAF 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 FNAF 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.

FNAF 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 Phenaps, Hetlios, Pomvori, and now Nereus already commercially available, and with Basanti recently approved for bipolar I disorder and schizophrenia, and a biologics license application for Ipsodolamob now under review by the FDA, Vanda 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 FNAPs and Basanti revenue growth in 2026 of approximately 36% as compared to full-year 2025 FNAP 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 million and $90 million.

And finally, nearest net product sales of between $10 million 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 III programs, continued execution on the commercialization of Phenaptin-Pombori, and prepared for the commercial launches, including manufacturing commercial supplies of Nereus, Basanti, and Imstendolamob.

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 as of June 30, 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 will be happy to answer your questions. Thank you.

Yeah, 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, you know, 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 and 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, you know, patient acquisition metrics as well as refill metrics and the pills per fill metrics, which obviously early in the launch year we're starting to get some data, but it's fairly minimal. So we 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 And one more about HEDLIOS So following the July 20th pre 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'd 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, DeGuire, to explain a little bit about the process. The pre-hearing was more of a process call than actually looking at the facts. Daniel?

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.

Yeah. Thanks, Madison. So first on the nearest launch site, as we've spoken about before, we have a sales force to support our FNAP franchise, you know, and soon to be Basanti franchise in the neighborhood of approximately 300 representatives, as well as a sales force in the neighborhood of 50 supporting our Pombori efforts. And so we'll be using some element of those two sales forces to be detailing, you know, nearest in the future. It's yet to be determined exactly kind of what the structure is, but we have sufficient resources between those two teams to reach the prescribers that we're looking to reach. On your second question around kind of what we're seeing from an expense trajectory perspective, you know, so as we've gone through 2025 and 2026, We now have, you know, four phase three programs set to readout either before the end of the year or early in 2027.

We have three potential launches with Nereus, Basanti, and hopefully in the future, Imsidolomob. And so, you know, obviously the cost of running those phase three programs is not insignificant, and the commercial production in order to make sure that we have sufficient supply for the launch of those products is also a significant investment. So as we now are reaching the end of those activities with the readouts of the clinical trials kind of right in front of us and the launch materials either made or being made shortly, those will be driving the most significant reductions in operating expenses as we head towards the end of 2026 and into 2027.

And, Madison, to the second part to your question there, the significant increase in R&D operating expenses during the period, again, was the ramp-up of those programs that have kind of reached their or are reaching their conclusion shortly. And also, for some of the products that are not yet approved, namely insidolamab, any of the production activities that are associated with making that inventory are expenses incurred to R&D, And that's just an accounting treatment of you can capitalize inventory once the product is approved, whereas generally prior to approval, you expense that as R&D and it would hit our R&D line item. So those are the significant drivers in the current period.

Thank you very much, Joel. I'm sorry.

Yeah, thank you for the question. The Phase 3 study that we're running now is similar in design with a Phase 2 study, with a similar setup and similar primary endpoint. And we have reported prior results there with two observations. One, a significant effect in reducing anxiety measures in that setting, but also understanding overdose response curve. So, this Phase III study, we believe, has been appropriately powered with the right number of patients that was informed by the Phase II study. So, again, minimal changes in the design, no change in the dose, but increase in the size of the study to be powered according to the learnings from the Phase II study. Great. Thanks so much. And then maybe one more if I can.

I'm wondering if you could possibly talk about your filing strategy or potentially timing for the GLP-1 induced vomiting for Nereus. And then just kind of second to that, have you aligned with the FDA on the phase three trial design? And then maybe just your latest and greatest on what you hope to see relative to the phase two findings? Yeah, so just to remind everyone on the call, last November we reported a positive study on the effects of Nereus in preventing vomiting in people that take GLP-1 analogs in the design of atmospheric Virgovia at one milligram, which is an advanced dose without any titration. And the results pretty much show that while 60% of the people on placebo approximately vomited in that design, only about 30% of the patients with neurose did so, showing a significant protection.

So the current design is a similar design where we aim to confirm the prior findings. We believe that this body of evidence, alongside with all the newest experiences for this approved product, would suffice for the filing of a supplemental NDA. We continue to communicate with the FDA on the statistical analysis plan on this study, and we will see how the results go, and we'll continue those Great. Thanks so much.

Yes. Thank you all for your questions, and thank you for joining this call. Thank you.