vnda-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34186

VANDA PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)


Delaware						03-0491827
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2200 Pennsylvania Avenue NW, Suite 300E

Washington, DC 20037

(202) 734-3400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Common Stock, par value $0.001 per share	VNDA	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of November 2, 2023, there were 57,531,999 shares of the registrant’s common stock issued and outstanding.

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Vanda Pharmaceuticals Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2023

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		Page
PART I – FINANCIAL INFORMATION

ITEM 1	Financial Statements (Unaudited)	5

	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	5

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	6

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022	7

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	8

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	10

	Notes to Condensed Consolidated Financial Statements	11

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	32

ITEM 4	Controls and Procedures	33

PART II – OTHER INFORMATION

ITEM 1	Legal Proceedings	33

ITEM 1A	Risk Factors	33

ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	34

ITEM 3	Defaults Upon Senior Securities	34

ITEM 4	Mine Safety Disclosures	34

ITEM 5	Other Information	34

ITEM 6	Exhibits	35

Signatures		36

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (Quarterly Report) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” “target,” “goal,” “likely,” “will,” “would,” and “could,” or the negative of these terms and similar expressions or words, identify forward-looking statements. Forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances and uncertainties. If the risks, changes in circumstances or uncertainties materialize or the assumptions prove incorrect, the results of Vanda Pharmaceuticals Inc. (we, our, the Company or Vanda) may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this Quarterly Report may include, but are not limited to, statements about:

•our ability to continue to commercialize HETLIOZ® (tasimelteon) capsules for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) in the United States (U.S.), in light of existing and potential generic competition, and Europe and HETLIOZ® capsules and oral suspension (HETLIOZ LQ®) for the treatment of nighttime sleep disturbances in Smith-Magenis Syndrome (SMS) in the U.S.;

•our ability to increase market awareness of Non-24 and SMS and market acceptance of HETLIOZ®;

•our ability to overcome the continued reimbursement and patient access challenges we face as a result of third-party payor coverage;

•our ability to continue to generate U.S. sales of Fanapt® (iloperidone) oral tablets for the treatment of schizophrenia;

•our ability to obtain approval from the FDA for Fanapt® beyond the currently approved indications;

•our ability to obtain regulatory approval for tradipitant from the U.S. Food and Drug Administration (FDA);

•the impact of public health crises, epidemics, pandemics or similar events on our business and operations, including our revenue, our supply chain, our commercial activities, our ongoing and planned clinical trials and our regulatory activities;

•our dependence on third-party manufacturers to manufacture HETLIOZ®, HETLIOZ LQ®, and Fanapt® in sufficient quantities and quality;

•our ability to prepare, file, prosecute, defend and enforce any patent claims and other intellectual property rights;

•our ability to maintain rights to develop and commercialize our products under our license agreements;

•our ability to obtain and maintain regulatory approval of our products, and the labeling for any approved products;

•our ability to obtain approval from the FDA for HETLIOZ® beyond the currently approved indications;

•our expectations regarding the timing and success of preclinical studies and clinical trials;

•the safety and efficacy of our products;

•regulatory developments in the U.S., Europe and other jurisdictions;

•limitations on our ability to utilize some or all of our prior net operating losses and orphan drug and research and development credits;

•the size and growth of the potential markets for our products and our ability to serve those markets;

•our expectations regarding trends with respect to our revenues, costs, expenses, liabilities and cash, cash equivalents and marketable securities;

•our ability to identify or obtain rights to new products;

•our ability to attract and retain key scientific or management personnel;

•the cost and effects of litigation;

•our ability to obtain the capital necessary to fund our research and development or commercial activities;

•potential losses incurred from product liability claims made against us; and

•the use of our existing cash, cash equivalents and marketable securities.

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All forward-looking statements in this report are expressly qualified in their entirety by the cautionary statements contained throughout this report. We caution you not to rely too heavily on such forward-looking statements. Each forward-looking statement speaks only as of the date of this Quarterly Report, and we undertake no obligation, and specifically decline any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We encourage you to read Management’s Discussion and Analysis of Financial Condition and Results of Operations and our unaudited condensed consolidated financial statements contained in this Quarterly Report. In addition to the risks described in Part I, Item 1A, Risk Factors, of our annual report on Form 10-K (Annual Report) for the fiscal year ended December 31, 2022, other unknown or unpredictable factors also could affect our results. Therefore, the information in this report should be read together with other reports and documents that we file with the Securities and Exchange Commission from time to time, including on Form 10-Q and Form 8-K, which may supplement, modify, supersede or update those risk factors. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

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Part I — FINANCIAL INFORMATION


ITEM 1			Financial Statements (Unaudited)

VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


(in thousands, except for share and per share amounts)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	183,186	$	135,029
Marketable securities	306,672		331,830
Accounts receivable, net	29,272		33,512
Inventory	1,006		1,194
Prepaid expenses and other current assets	16,436		17,727
Total current assets	536,572		519,292
Property and equipment, net	2,128		2,573
Operating lease right-of-use assets	7,428		8,400
Intangible assets, net	17,428		18,565
Deferred tax assets	67,772		74,039
Non-current inventory and other	10,277		11,378
Total assets	$	641,605	$	634,247
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	32,595	$	45,551
Product revenue allowances	52,242		45,885

Total current liabilities	84,837		91,436
Operating lease non-current liabilities	7,472		8,813
Other non-current liabilities	6,196		6,800
Total liabilities	98,505		107,049
Commitments and contingencies (Notes 8 and 13)
Stockholders’ equity:
Preferred stock, $0.001 par value; 20,000,000 shares authorized, and no shares issued or outstanding at September 30, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value; 150,000,000 shares authorized; 57,529,499 and 56,783,764 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	58		57
Additional paid-in capital	697,001		686,235
Accumulated other comprehensive loss	(967)		(1,193)
Accumulated deficit	(152,992)		(157,901)
Total stockholders’ equity	543,100		527,198
Total liabilities and stockholders’ equity	$	641,605	$	634,247

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended				Nine Months Ended
(in thousands, except for share and per share amounts)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenues:
Net product sales	$	38,815	$	65,318	$	147,369	$	189,900
Total revenues	38,815		65,318		147,369		189,900
Operating expenses:
Cost of goods sold excluding amortization	3,063		6,320		11,336		18,044
Research and development	16,600		24,857		52,484		67,316
Selling, general and administrative	24,767		29,854		89,270		103,703
Intangible asset amortization	380		379		1,137		1,137
Total operating expenses	44,810		61,410		154,227		190,200
Income (loss) from operations	(5,995)		3,908		(6,858)		(300)
Other income	5,875		1,553		14,858		1,987
Income (loss) before income taxes	(120)		5,461		8,000		1,687
Provision (benefit) for income taxes	(257)		2,191		3,091		2,273
Net income (loss)	$	137	$	3,270	$	4,909	$	(586)
Net income (loss) per share:
Basic	$	0.00	$	0.06	$	0.09	$	(0.01)
Diluted	$	0.00	$	0.06	$	0.09	$	(0.01)
Weighted average shares outstanding:
Basic	57,519,031		56,574,503		57,329,969		56,397,805
Diluted	57,595,344		56,969,033		57,512,225		56,397,805

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net income (loss)	$	137	$	3,270	$	4,909	$	(586)
Other comprehensive income (loss):
Net foreign currency translation loss	(18)		(37)		(6)		(83)
Change in net unrealized gain (loss) on marketable securities	(109)		(24)		301		(1,594)
Tax benefit (provision) on other comprehensive income (loss)	25		7		(69)		367
Other comprehensive income (loss), net of tax	(102)		(54)		226		(1,310)
Comprehensive income (loss)	$	35	$	3,216	$	5,135	$	(1,896)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
(in thousands, except for share amounts)	Shares	Par Value
Balances at December 31, 2022	56,783,764	$	57	$	686,235	$	(1,193)	$	(157,901)	$	527,198

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	657,228	—		—		—		—		—
Stock-based compensation expense	—	—		4,351		—		—		4,351
Net income	—	—		—		—		3,252		3,252
Other comprehensive income, net of tax	—	—		—		938		—		938
Balances at March 31, 2023	57,440,992	$	57	$	690,586	$	(255)	$	(154,649)	$	535,739

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	55,921	—		—		—		—		—
Stock-based compensation expense	—	—		3,249		—		—		3,249
Net income	—	—		—		—		1,520		1,520
Other comprehensive loss, net of tax	—	—		—		(610)		—		(610)
Balances at June 30, 2023	57,496,913	$	57	$	693,835	$	(865)	$	(153,129)	$	539,898

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	32,586	1		(1)		—		—		—
Stock-based compensation expense	—	—		3,167		—		—		3,167
Net income	—	—		—		—		137		137
Other comprehensive loss, net of tax	—	—		—		(102)		—		(102)
Balances at September 30, 2023	57,529,499	$	58	$	697,001	$	(967)	$	(152,992)	$	543,100

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) (Continued)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
(in thousands, except for share amounts)	Shares	Par Value
Balances at December 31, 2021	55,900,855	$	56	$	669,223	$	(175)	$	(164,176)	$	504,928

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	585,857	—		—		—		—		—
Stock-based compensation expense	—	—		4,778		—		—		4,778
Net loss	—	—		—		—		(6,430)		(6,430)
Other comprehensive loss, net of tax	—	—		—		(1,153)		—		(1,153)
Balances at March 31, 2022	56,486,712	$	56	$	674,001	$	(1,328)	$	(170,606)	$	502,123

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	65,750	1		124		—		—		125
Stock-based compensation expense	—	—		3,830		—		—		3,830
Net income	—	—		—		—		2,574		2,574
Other comprehensive loss, net of tax	—	—		—		(103)		—		(103)
Balances at June 30, 2022	56,552,462	$	57	$	677,955	$	(1,431)	$	(168,032)	$	508,549

Issuance of common stock from the exercise of stock options and settlement of restricted stock units	36,086	—		4		—		—		4
Stock-based compensation expense	—	—		3,888		—		—		3,888
Net income	—	—		—		—		3,270		3,270
Other comprehensive loss, net of tax	—	—		—		(54)		—		(54)
Balances at September 30, 2022	56,588,548	$	57	$	681,847	$	(1,485)	$	(164,762)	$	515,657

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended
(in thousands)	September 30, 2023		September 30, 2022
Cash flows from operating activities
Net income (loss)	$	4,909	$	(586)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property and equipment	715		933
Stock-based compensation	10,767		12,496
Amortization of premiums and accretion of discounts on marketable securities	(7,053)		(1,160)
Loss on sale of marketable securities	655		—
Intangible asset amortization	1,137		1,137
Deferred income taxes	6,198		713
Other non-cash adjustments, net	2,772		1,612
Changes in operating assets and liabilities:
Accounts receivable	4,129		2,982
Prepaid expenses and other assets	1,333		(9,583)
Inventory	(344)		(3,349)
Accounts payable and other liabilities	(14,315)		15,070
Product revenue allowances	5,630		2,303
Net cash provided by operating activities	16,533		22,568
Cash flows from investing activities

Purchases of property and equipment	(130)		(416)
Purchases of marketable securities	(457,628)		(344,949)
Sales and maturities of marketable securities	489,485		319,862
Net cash provided by (used in) investing activities	31,727		(25,503)




Cash flows from financing activities
Proceeds from exercise of stock options	—		129
Net cash provided by financing activities	—		129
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(103)		82
Net change in cash, cash equivalents and restricted cash	48,157		(2,724)
Cash, cash equivalents and restricted cash
Beginning of period	135,498		52,590
End of period	$	183,655	$	49,866

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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VANDA PHARMACEUTICALS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Business Organization and Presentation

Business Organization

Vanda Pharmaceuticals Inc. (the Company) is a global biopharmaceutical company focused on the development and commercialization of innovative therapies to address high unmet medical needs and improve the lives of patients. The Company commenced its operations in 2003 and operates in one reporting segment.

The Company’s commercial portfolio is currently comprised of two products, HETLIOZ® for the treatment of Non-24-Hour Sleep-Wake Disorder (Non-24) and nighttime sleep disturbances in Smith-Magenis Syndrome (SMS) and Fanapt® for the treatment of schizophrenia. HETLIOZ® is the first product approved by the United States Food and Drug Administration (FDA) for patients with Non-24 and patients with SMS. In addition, the Company has a number of drugs in development, including:

•HETLIOZ® (tasimelteon) for the treatment of jet lag disorder, insomnia, delayed sleep phase disorder (DSPD) and pediatric Non-24;

•Fanapt® (iloperidone) for the treatment of bipolar I disorder and a long acting injectable (LAI) formulation for the treatment of schizophrenia;

•Tradipitant (VLY-686), a small molecule neurokinin-1 (NK-1) receptor antagonist, for the treatment of gastroparesis, motion sickness and atopic dermatitis;

•VTR-297, a small molecule histone deacetylase (HDAC) inhibitor for the treatment of hematologic malignancies and with potential use as a treatment for several oncology indications;

•Portfolio of Cystic Fibrosis Transmembrane Conductance Regulator (CFTR) activators and inhibitors, including VSJ-110 for the treatment of dry eye and ocular inflammation and VPO-227 for the treatment of secretory diarrhea disorders, including cholera;

•VQW-765, a small molecule nicotinic acetylcholine receptor partial agonist, for the treatment of performance anxiety and psychiatric disorders;

•VHX-896, the active metabolite of iloperidone; and

•Antisense oligonucleotide (ASO) molecules.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Vanda Pharmaceuticals Inc. and its wholly-owned subsidiaries and have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K (Annual Report) for the fiscal year ended December 31, 2022. The financial information as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 is unaudited, but in the opinion of management, all adjustments considered necessary for a fair statement of the results for these interim periods have been included. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet data as of December 31, 2022 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period.

2. Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in the Annual Report.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Management continually re-evaluates its

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estimates, judgments and assumptions, and management’s evaluation could change. Actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

For purposes of the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows, cash equivalents represent highly-liquid investments with a maturity date of three months or less at the date of purchase. Cash and cash equivalents include investments in money market funds with commercial banks and financial institutions, and commercial paper of high-quality corporate issuers. Restricted cash relates primarily to amounts held as collateral for letters of credit for leases for office space at the Company’s Washington, D.C. headquarters.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the total end of period cash, cash equivalents and restricted cash reported within the Condensed Consolidated Statements of Cash Flows:


(in thousands)	September 30, 2023		September 30, 2022
Cash and cash equivalents	$	183,186	$	49,397


Restricted cash included in non-current inventory and other	469		469
Total cash, cash equivalents and restricted cash	$	183,655	$	49,866

Revenue from Net Product Sales

SEC Form 10-Q filed by Vanda Pharmaceuticals Inc.