Document

DEF 14A 1 vnda-20210422xdef14a.htm DEF 14A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant x Filed by a Party other than the Registrant o

Check the appropriate box:


o						Preliminary Proxy Statement

o						Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x						Definitive Proxy Statement

o						Definitive Additional Materials

o						Soliciting Material Pursuant to §240.14a-12

Vanda Pharmaceuticals Inc.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)

Proposed maximum aggregate value of transaction:

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Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

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Form, Schedule or Registration Statement No.:

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Date Filed:

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Vanda Pharmaceuticals Inc.

2200 Pennsylvania Avenue, Suite 300E

Washington, D.C. 20037

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 10, 2021

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders (the "Annual Meeting") of Vanda Pharmaceuticals Inc., a Delaware corporation (the "Company"). The Annual Meeting will be held on June 10, 2021, at 9:00 a.m. Eastern time. In light of the ongoing COVID-19 pandemic, for the safety and well-being of all our stockholders, directors and employees, and taking into account the various federal, state and local guidance that have been issued, we have determined that the Annual Meeting will be held in a virtual meeting format only via webcast on the Internet, with no physical in-person meeting. You will be able to attend and participate in the virtual Annual Meeting online by visiting the meeting website at www.virtualshareholdermeeting.com/VNDA2021 and entering your 16-digit control number included on your proxy card or Notice of Internet Availability of Proxy Materials. We are committed to ensuring, to the extent possible, that stockholders will be afforded the ability to participate at the virtual meeting like they would at an in-person meeting. We intend to resume our historical practice of holding an in-person meeting when it becomes possible to do so. Additional details on how to participate in the Annual Meeting can be found in the Questions and Answers section below. The Annual Meeting is being held for the following purposes:

1.To elect Mihael H. Polymeropoulos, M.D. and Phaedra Chrousos to serve as Class III directors until the 2024 annual meeting of stockholders;

2.To ratify the selection by the Audit Committee of our Board of Directors of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2021;

3.To approve on an advisory basis the named executive officer compensation;

4.To approve an amendment to the Company's Amended and Restated 2016 Equity Incentive Plan ("2016 Plan") to increase the aggregate number of shares authorized for issuance under the 2016 Plan; and

5.To conduct any other business properly brought before the Annual Meeting or any adjournments or postponements thereof.

The record date for the Annual Meeting is April 15, 2021. Only stockholders of record at the close of business on that date may vote at the Annual Meeting or any adjournment thereof. A complete list of such stockholders will be available for examination at our offices in Washington, D.C. during normal business hours for a period of ten days prior to the date of the Annual Meeting.

Your vote is important. Whether or not you plan to attend the virtual Annual Meeting webcast, please vote by telephone or over the Internet, or by completing, signing, dating and returning your proxy card or voting instruction form so that your shares will be represented at the Annual Meeting. Instructions for voting are described in the Company's Proxy Statement for the Annual Meeting, Notice of Internet Availability of Proxy Materials or proxy card.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON June 10, 2021:

The Company's Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2020 are available at www.proxyvote.com.


By Order of the Board of Directors,

Timothy Williams
Senior Vice President, General Counsel and Secretary
Washington, D.C.
April 22, 2021

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TABLE OF CONTENTS


			Page
202 1 PROXY STATEMENT - SUMMARY			1

QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING			3

PROPOSAL 1: ELECTION OF DIRECTORS			9

CORPORATE GOVERNANCE			12

PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			21

AUDIT COMMITTEE REPORT			22

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			23

EXECUTIVE OFFICERS			26

COMPENSATION OF EXECUTIVE OFFICERS			27

COMPENSATION COMMITTEE REPORT			37

PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION			47

PROPOSAL 4: AMENDME NT TO AMENDED AND RESTATED 2016 EQUITY INCENTIVE PLAN			48

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			57

NO INCORPORATION BY REFERENCE			59

OTHER MATTERS			60

CONTACT FOR QUESTIONS AND ASSISTANCE WITH VOTING			61

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2021 PROXY STATEMENT - SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement and does not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting.

GENERAL INFORMATION

Meeting: 2021 Annual Meeting of Stockholders

Date: June 10, 2021

Time: 9:00 a.m., Eastern Time

Location: www.virtualshareholdermeeting.com/VNDA2021

Record Date: April 15, 2021

Record Date Shares Outstanding: 55,562,214

Stock Symbol: VNDA

Exchange: Nasdaq Global Market

Transfer Agent: American Stock Transfer & Trust Company

Website: www.vandapharma.com

ANNUAL MEETING AGENDA

(Board Recommendations)

Election of two Class III Directors ("FOR")

Ratification of selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the year ending December 31, 2021 ("FOR")

Approval, on an advisory basis, of the compensation for our named executive officers ("FOR")

Approval of an amendment to the amended and restated 2016 Equity Incentive Plan to increase the aggregate number of shares authorized for issuance under such plan ("FOR")

Conduct other business properly brought before the Annual Meeting or any adjournments or postponements thereof

2020 BUSINESS HIGHLIGHTS

Total revenue of $248.2 million for the full year 2020; 9% growth over 2019.

HETLIOZ® net product sales of $160.7 million for the full year 2020; 12% growth over 2019.

Fanapt® net product sales of $87.5 million for the full year 2020; 4% growth over 2019.

2020 year-end cash, cash equivalents and marketable securities of $367.7 million, as compared to $312.1 million at the end of 2019.

Income before taxes of $31.7 million for the full year 2020; compared to $29.0 million for 2019.

HETLIOZ® (tasimelteon)

•The U.S. Food and Drug Administration (FDA) approved the HETLIOZ® capsule and liquid formulations (HETLIOZ LQTM) for the treatment of adults and children, respectively, with nighttime sleep disturbances in SMS.

•Clinical development programs for HETLIOZ® in delayed sleep phase disorder and sleep disturbances in autism spectrum disorder advanced.

Fanapt® (iloperidone)

•Development program for long acting injectable (LAI) formulation of Fanapt® advanced.

•Clinical development programs for Fanapt® in bipolar disorder and Parkinson's disease psychosis advanced.

Tradipitant

•Phase III clinical study of tradipitant in gastroparesis continued enrollment.

•Phase III clinical study of tradipitant in COVID-19 pneumonia initiated.

•Clinical development programs for tradipitant in atopic dermatitis and motion sickness advanced.

EXECUTIVE COMPENSATION HIGHLIGHTS

Say on Pay Vote: We hold an annual say on pay vote. Approximately

85% of votes cast at the 2020 Annual Meeting of Stockholders approved, on an advisory basis, the compensation of our named executive officers.

CORPORATE GOVERNANCE HIGHLIGHTS

Independent Compensation Committee. Our Compensation Committee, comprised solely of independent directors, approves all compensation for our named executive officers.

Annual Say on Pay Vote. We hold annual say on pay advisory votes regarding our executive compensation.

Stockholder Engagement. We are committed to open and regular communication with our stockholders and take the opportunity to engage with them to understand their perspectives on a wide range of topics related to our business. After issuing our Proxy Statement in 2020 we engaged with 6 holders of approximately 38% of our outstanding shares at the time (none of whom were our employees or directors) to discuss a number of topics, including corporate governance matters and our compensation philosophy and program and to listen to their feedback.

Response to Stockholder Feedback. In response to feedback received, both during our investor outreach and informed by proxy advisor assessments that guide the voting decisions of many of our stockholders, our Compensation Committee has made a number of changes in recent years to better align our compensation program with the interests of our stockholders, including revising our compensation philosophy in February 2019 to consider, among other things, the median compensation paid to similarly situated named executive officers at our peer group companies in determining our executive team's base salaries, total cash compensation and total equity compensation.

Pay for Performance. We pay annual bonuses based on the achievement of Company goals, individual performance and contribution in achieving those goals. We do not have guaranteed annual bonus payouts.

Formulaic Cash Incentive Award Program. A substantial majority of the value of our annual bonuses are tied to the achievement of pre-specified objective criteria, such as revenue targets, clinical study metrics and regulatory filing timelines.

Executive Officer Clawback Policy. In 2020, we updated our previously instituted clawback policy on equity-based compensation for our named executive officers to include cash incentive compensation.

No "Single-Trigger" Change of Control Benefits. We offer named executive officers a change of control severance package triggered upon a change of control followed by termination of the executive without cause or resignation for good reason, as discussed in "Employment Agreements" below.

No Enhanced Executive Benefit Programs. We do not provide our management with pensions or any other enhanced benefit programs beyond those that are typically available to all other employees or as appropriate in foreign jurisdictions.

In 2019, our Board of Directors adopted a comprehensive anti-hedging / anti-pledging policy that applies to all our employees and Directors.

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No Option Repricing. We are not permitted to reprice stock options without stockholder approval.

No Evergreen Provisions. Our equity compensation plan does not contain any "evergreen" provisions to increase shares available for issuance as equity awards.

Annual Risk Assessment. We conduct an annual company-wide compensation program risk assessment.

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Vanda Pharmaceuticals Inc.

2200 Pennsylvania Avenue, Suite 300E

Washington, D.C. 20037

PROXY STATEMENT

FOR THE 2021 ANNUAL MEETING OF STOCKHOLDERS

June 10, 2021

This Proxy Statement is furnished in connection with the solicitation of proxies to be voted at the 2021 Annual Meeting of Stockholders (the "Annual Meeting") of Vanda Pharmaceuticals Inc. (sometimes referred to as "we," the "Company" or "Vanda"), which will be held on June 10, 2021, at 9:00 a.m. Eastern time in a virtual meeting format via webcast, with no physical in-person meeting.

We are making this Proxy Statement and our annual report on Form 10-K for the year ended December 31, 2020 (the "Annual Report") available to stockholders at www.proxyvote.com. On or about April 22, 2021, we will begin mailing to certain of our stockholders a notice (the "Notice") containing instructions on how to access and review this Proxy Statement and the Annual Report at that website. The Notice also instructs you how you may submit your proxy over the Internet or via telephone. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting those materials included in the Notice.

QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING

Why am I receiving this Proxy Statement and proxy card?

You have received these proxy materials because you owned shares of Vanda common stock as of April 15, 2021, the record date for the Annual Meeting (the "Record Date"), and our Board of Directors (the "Board") is soliciting your proxy to vote at the Annual Meeting. This Proxy Statement describes matters on which we would like you to vote at the Annual Meeting so that you can make an informed decision.

Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?

Pursuant to rules adopted by the Securities and Exchange Commission (the "SEC"), we are permitted to furnish our proxy materials over the Internet to our stockholders by delivering the Notice in the mail. As a result, only stockholders who specifically request a printed copy of the Proxy Statement will receive one. Instead, the Notice instructs stockholders on how to access and review the Proxy Statement and the Annual Report over the Internet at www.proxyvote.com. The Notice also instructs stockholders on how they may submit their proxy over the Internet. If a stockholder who received a Notice would like to receive a printed copy of our proxy materials, such stockholder should follow the instructions for requesting these materials contained in the Notice.

Why is the Annual Meeting being held as a virtual, online meeting?

In light of the COVID-19 pandemic, the meeting will be a virtual meeting of stockholders where stockholders will participate by accessing a website using the internet, and there will not be a physical meeting location. We have designed the virtual Annual Meeting to provide the same rights and opportunities to participate as stockholders would have at an in-person meeting, including the right to vote and ask questions through the virtual meeting platform. We intend to return to holding an in-person annual meeting in when possible to do so.

How may I vote at the Annual Meeting?

You are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply follow the instructions below to submit your proxy via telephone or on the Internet. If you received a printed set of materials, you may also vote by mail by signing, dating and returning the proxy card.

To access the virtual Annual Meeting, you will be asked to provide your 16-digit control number. Instructions on how to attend and participate via the Internet are posted at www.virtualshareholdermeeting.com/VNDA2021. If you hold shares beneficially in "street name" (i.e., through a bank, broker or other nominee), you may only vote at the virtual Annual Meeting if you obtain a legal proxy and control number from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.

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When you vote, regardless of the method used, you appoint Dr. Mihael H. Polymeropoulos, M.D. and Mr. Timothy Williams as your representatives (or proxyholders) at the Annual Meeting. They will vote your shares at the Annual Meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the Annual Meeting.

Who is entitled to vote at the Annual Meeting?

Stockholders of record at the close of business on the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there were 55,562,214 shares of the Company's common stock outstanding. All of these outstanding shares are entitled to vote at the Annual Meeting (one vote per share of common stock) in connection with the matters set forth in this Proxy Statement.

If you are a beneficial owner of your shares, you have the right to direct your nominee on how to vote the shares held in your account, and your nominee has enclosed or provided voting instructions for you to use in directing it on how to vote your shares. However, the organization that holds your shares is considered the stockholder of record for purposes of voting at the meeting. Because you are not the stockholder of record, you may not attend or vote your shares at the meeting unless you (i) request and obtain a legal proxy giving you the right to vote the shares at the meeting from the organization that holds your shares and (ii) register to attend the Annual Meeting.

A list of stockholders entitled to vote at the meeting will be available during the Annual Meeting by following the instructions on the Annual Meeting website and will be accessible for ten days prior to the date of the Annual Meeting at our principal place of business, 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037, between the hours of 9:00 a.m. and 5:00 p.m. local time.

How do I vote?

If on the Record Date your shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, then you are a stockholder of record. Stockholders of record may vote by using the Internet, by telephone or (if you received a proxy card by mail) by mail as described below. Stockholders also may attend the virtual meeting webcast and vote via the virtual meeting interface. If you hold shares in "street name" (i.e., through a bank, broker or other nominee), please refer to your proxy card, Notice or other information forwarded by your bank, broker or other nominee to see which voting options are available to you.

•You may vote by using the Internet. The address of the website for Internet voting is www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on June 9, 2021. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.

•You may vote by telephone. The toll-free telephone number is noted on the Notice and your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on June 9, 2021. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.

•You may vote by mail. If you received a proxy card by mail and choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope.

The method you use to vote will not limit your right to vote at the Annual Meeting if you decide to attend the virtual meeting webcast. Instructions for voting during the virtual meeting will be available on the meeting website. If you hold your shares in street name, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote during the virtual meeting.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:

•You may submit a subsequent proxy by using the Internet, by telephone or by mail with a later date;

•You may deliver a written notice that you are revoking your proxy to the Secretary of the Company at 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037; or

•You may attend the virtual Annual Meeting webcast and vote your shares electronically. Simply attending the virtual Annual Meeting webcast without affirmatively voting will not, by itself, revoke your proxy.

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If you are a beneficial owner of your shares, you must contact the bank, broker or other nominee holding your shares in street name and follow their instructions for changing your vote.

We urge you to vote your shares by completing, signing and returning the enclosed proxy card, or following the instructions on the enclosed proxy card to submit your proxy via telephone or on the Internet. Changing your vote prior to the Annual Meeting is most easily accomplished if you submit your proxy via telephone or on the Internet, as your vote may then be changed by simply submitting a new vote via telephone or on the Internet.

How many votes do you need to hold the Annual Meeting?

A quorum of stockholders is necessary to conduct business at the Annual Meeting. Pursuant to our Fourth Amended and Restated Bylaws (the "Bylaws"), a quorum will be present if a majority of the voting power of outstanding shares of the Company entitled to vote generally in the election of directors is represented in person (virtually) or by proxy at the Annual Meeting. On the Record Date, there were 55,562,214 shares of common stock outstanding and entitled to vote. Thus, 27,781,108 shares must be represented by stockholders present at the Annual Meeting or represented by proxy to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you attend the virtual Annual Meeting webcast and vote on the meeting website. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present for the transaction of business. If a quorum is not present, the holders of a majority of the votes present at the Annual Meeting may adjourn the Annual Meeting to another date.

What proposals will be voted on at the Annual Meeting?

Proposal

Board
Recommendation

Vote Required

Broker
Discretionary
Voting
Allowed

Proposal 1: Elect Mihael H. Polymeropoulos, M.D. and Phaedra Chrousos to serve as Class III directors until the 2024 annual meeting of stockholders.

FOR

Majority Votes
Cast

Proposal 2: Ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the year ending December 31, 2021.

FOR

Majority Votes
Cast

Yes

Proposal 3: Approve on an advisory basis the named executive officer compensation.

FOR

Majority Votes
Cast

Proposal 4: Approve an amendment to our Amended and Restated 2016 Equity Incentive Plan to increase the aggregate number of shares authorized for issuance under the Amended and Restated 2016 Equity Incentive Plan.

FOR

Majority Votes Cast

Majority Votes Cast means that a proposal that receives an affirmative majority of the votes cast will be approved. Abstentions and broker non-votes will not be counted "FOR" or "AGAINST" the proposal and will have no effect on the proposal. Broker Discretionary Voting occurs when a broker does not receive voting instructions from the beneficial owner and votes those shares in its discretion on any proposal on which it is permitted to vote.

Could other matters be decided at the Annual Meeting?

Vanda does not know of any other matters that may be presented for action at the Annual Meeting. Should any other business come before the Annual Meeting, the persons named on the proxy card will have discretionary authority to vote the shares represented by proxies in accordance with their best judgment. If you hold shares in street name as described above, they will not be able to vote your shares on any other business that comes before the Annual Meeting unless they receive instructions from you with respect to such other business.

What happens if a director nominee is unable to stand for election?

If a nominee is unable to stand for election, our Board may either:

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•reduce the number of directors that serve on the Board or

•designate a substitute nominee.

If our Board designates a substitute nominee, shares represented by proxies voted for the nominee who is unable to stand for election will be voted for the substitute nominee.

What happens if I submit my proxy but do not provide voting instructions?

If you submit a proxy via telephone, the Internet or return a signed and dated proxy card without indicating instructions with respect to specific proposals, your shares will be voted as follows:

•Proposal 1: "FOR" the election of Mihael H. Polymeropoulos, M.D. and Phaedra Chrousos to serve as Class III directors until the 2024 annual meeting of stockholders.

•Proposal 2: "FOR" the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2021.

•Proposal 3: "FOR" the approval, in an advisory manner, of the compensation of our named executive officers as set forth in this Proxy Statement.

•Proposal 4: "FOR" the approval of an amendment to the Amended and Restated 2016 Equity Incentive Plan to increase the aggregate number of shares authorized for issuance under the Amended and Restated 2016 Equity Incentive Plan.

If any other matter is properly presented at the Annual Meeting, the proxyholders for shares voted on the proxy card (i.e. one of the individuals named as proxies on your proxy card) will vote your shares using their best judgment.

Who is paying for this proxy solicitation?

The accompanying proxy is being solicited by the Board. In addition to this solicitation, directors and employees of the Company may solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. In addition, the Company may also retain one or more third parties to aid in the solicitation of brokers, banks and institutional and other stockholders. We will pay for the entire cost of soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What happens if the Annual Meeting is postponed or adjourned?

Unless the polls have closed or you have revoked your proxy, your proxy will still be in effect and may be voted once the Annual Meeting is reconvened. However, you will still be able to change or revoke your proxy with respect to any proposal until the polls have closed for voting on such proposal.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results are expected to be announced at the Annual Meeting. Final voting results will be reported on a Current Report on Form 8-K filed with the SEC no later than the fourth business day after the Annual Meeting.

How can I find Vanda's proxy materials and annual report on the Internet?

This Proxy Statement and the Annual Report are available at our corporate website at www.vandapharma.com. You also can obtain copies without charge at the SEC's website at www.sec.gov. Additionally, in accordance with SEC rules, you may access these materials at www.proxyvote.com, which does not have "cookies" that identify visitors to the site.

How do I obtain a separate set of Vanda's proxy materials if I share an address with other stockholders?

In some cases, stockholders holding their shares in a brokerage or bank account who share the same surname and address receive only one copy of the Notice. This practice, called "householding," is designed to reduce duplicate mailings and save printing and postage costs as well as natural resources. If you would like to have a separate copy of the Notice, the Annual Report or this Proxy Statement mailed to you or receive separate copies of future mailings, please submit your request to the address or phone number that appears on your Notice or proxy card. We will deliver such additional copies promptly upon receipt of such request.

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In other cases, stockholders receiving multiple copies of proxy materials at the same address may wish to receive only one copy. If you would like to receive only one copy, please submit your request to the address or phone number that appears on your Notice or proxy card.

Can I receive future proxy materials and annual reports electronically?

Yes. This Proxy Statement and the Annual Report can be found in the Investors section of our website located at www.vandapharma.com. Instead of receiving paper copies in the mail, stockholders can elect to receive an email that provides a link to our future annual reports and proxy materials on the internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business, will reduce the environmental impact of our annual meetings and will give you an automatic link to the proxy voting site.

May I propose actions for consideration at next year's annual meeting or nominate individuals to serve as directors?

Yes. The following requirements apply to stockholder proposals, including director nominations, for the 2022 annual meeting of stockholders:

Requirements for Stockholder Proposals to be Considered for Inclusion in Vanda's Proxy Materials

Stockholders interested in submitting a proposal (other than the nomination of directors) for inclusion in the proxy materials to be distributed by us for the 2022 annual meeting of stockholders may do so by following the procedures prescribed in Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). To be eligible for inclusion in Vanda's proxy materials, stockholder proposals must be received at our principal executive offices no later than the close of business on December 23, 2021, which is the 120th day prior to the first anniversary of the date that we released this Proxy Statement to our stockholders for the Annual Meeting. To be included in our proxy materials, your proposal also must comply with the Bylaws and Rule 14a-8 promulgated under the Exchange Act regarding the inclusion of stockholder proposals in company-sponsored proxy materials. If we change the date of the 2022 annual meeting of stockholders by more than 30 days from the anniversary of this year's Annual Meeting, stockholder proposals must be received a reasonable time before we begin to print and mail our proxy materials for the 2022 annual meeting of stockholders. Proposals should be sent to Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037, Attn: Secretary.

Requirements for Stockholder Nomination of Director Candidates and Stockholder Proposals Not Intended for Inclusion in Vanda's Proxy Materials

Stockholders who wish to nominate persons for election to the Board at our 2022 annual meeting of stockholders or who wish to present a proposal at our 2022 annual meeting of stockholders, but who do not intend for such proposal to be included in the Company's proxy materials for such meeting, must deliver written notice of the nomination or proposal to the Company's Secretary at our principal executive offices no earlier than February 6, 2022, which is the 75th day prior to the first anniversary of the date we released this Proxy Statement to our stockholders for the Annual Meeting, and no later than March 8, 2022, which is the 45th day prior to the first anniversary of the date we released this Proxy Statement to our stockholders for the Annual Meeting. However, if we change the date of our 2022 annual meeting of stockholders by more than 30 days from the anniversary of this year's Annual Meeting, such nominations and proposals must be received no later than the close of business on the later of (a) the 90th day prior to our 2022 annual meeting of stockholders and (b) the 10th day following the day we first publicly announce the date of our 2022 annual meeting of stockholders. The stockholder's written notice must include certain information concerning the stockholder and each nominee and proposal, as specified in the Bylaws. If the stockholder does not also satisfy the requirements of Rule 14a-4 promulgated under the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the 2022 annual meeting of stockholders. Such nominations or proposals should be sent to Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037, Attn: Secretary.

Copy of Bylaws

You may request a copy of the Bylaws at no charge by writing to Vanda's Secretary at 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037. A current copy of the Bylaws also is available at our corporate website at www.vandapharma.com. To access the Bylaws from the main page of our website, click on "Investors" at the top of the page, then click on "Learn More" under "Corporate Governance" and then click on "Amended and Restated Bylaws."

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What if I have difficulty accessing the virtual meeting?

If you encounter any difficulties accessing the virtual meeting webcast during the check-in or meeting time, please call the technical support number (800) 586-1548 (US) or (303) 562-9288 (Outside the US). This number will also be posted on the 2021 Annual Meeting log-in page. Technical support will be available beginning at 8:45 a.m. Eastern time on June 10, 2021 and will remain available until the meeting has ended.

Whom should I call if I have any questions?

If you have any questions, would like additional Vanda proxy materials or proxy cards, or need assistance in voting your shares, please contact Investor Relations, Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037 or by telephone at (202) 734-3400.

Important Notice Regarding the Availability of Proxy Materials

for the Meeting to be Held on Thursday, June 10, 2021:

This Proxy Statement and the Annual Report are available on-line at www.proxyvote.com.

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PROPOSAL 1

ELECTION OF DIRECTORS

Under the Bylaws, our Board is divided into three classes of equal size. The members of each class are elected to serve a three-year term with the term of office of each of the three classes ending in successive years. Pursuant to the Bylaws, the Board has fixed the current number of directors at six. Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos are the two Class III directors whose terms expire at the Annual Meeting. Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos have been nominated for election by our Board to serve until the 2024 annual meeting of stockholders or until their successors are elected (or until their earlier death, resignation or removal).

Directors are elected by a majority of the votes cast at the Annual Meeting. Pursuant to the Bylaws, a majority of votes cast means that the number of votes cast "FOR" a director's election exceeds 50% of the votes cast with respect to that director's election. For this purpose, votes cast shall exclude abstentions and broker non-votes. Because the election of directors is not a matter on which a bank, broker or other nominee is generally empowered to vote, broker non-votes are expected to exist in connection with this matter.

Shares represented by signed proxy cards will be voted on Proposal 1 "FOR" the election of Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos to the Board at the Annual Meeting, unless otherwise marked on the card. If any Vanda director nominee becomes unavailable for election as a result of an unexpected occurrence, shares represented by proxy will be voted for the election of a substitute nominee designated by our current Board, unless otherwise marked on the card. Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos, Vanda's director nominees, have each agreed to serve as a director if elected. We have no reason to believe that Mihael H. Polymeropoulos, M.D. or Phaedra S. Chrousos will be unable to serve if elected.

Pursuant to our Amended and Restated Corporate Governance Guidelines, Mihael H. Polymeropoulos, M.D. and Phaedra S. Chrousos have each tendered an irrevocable, conditional resignation that will be effective only upon both (i) the failure to receive the required vote at the Annual Meeting for reelection and (ii) our Board's acceptance of such resignation. If either Mihael H. Polymeropoulos, M.D. or Phaedra S. Chrousos fails to receive the required vote for reelection, the Nominating/Corporate Governance Committee of our Board will act on an expedited basis to determine whether to accept such director's resignation, and it will submit its recommendation for prompt consideration by our Board. The Nominating/Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.

Nominees for Election as Class III Directors at the Annual Meeting

This year's nominees for election to the Board as our Class III directors to serve for a term of three years expiring at the 2024 annual meeting of stockholders, or until their successors have been duly elected and qualified or until their earlier death, resignation or removal, are provided below. The age of the directors as of the Record Date is set forth below.

Name

Age

Positions and Offices Held with Company

Director Since

Mihael H. Polymeropoulos, M.D.

Director

2003

Phaedra S. Chrousos

Director

2019

The following is additional information about the nominees as of the date of this Proxy Statement, including their business experience, public company director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating/Corporate Governance Committee and the Board to determine that the nominees should serve as two of our directors.

Mihael H. Polymeropoulos, M.D. co-founded Vanda and has served as President, Chief Executive Officer and a Director since May 2003. Prior to joining Vanda, Dr. Polymeropoulos was Vice President and Head of the Pharmacogenetics Department at Novartis AG from 1998 to 2003. Prior to his tenure at Novartis, he served as Chief of the Gene Mapping Section, Laboratory of Genetic Disease Research, National Human Genome Research Institute, from 1992 to 1998. Dr. Polymeropoulos is the co-founder of the Integrated Molecular Analysis of Genome Expression Consortium. Dr. Polymeropoulos holds a degree in Medicine from the University of Patras. We believe that Dr. Polymeropoulos' qualifications to sit on the Board include his executive experience at Novartis, his expertise in the fields of psychiatry and pharmacogenetics, his extensive knowledge of central nervous system disorders and his long history with the Company.

Other public directorships held by Dr. Polymeropoulos within the past five years: None.

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Phaedra S. Chrousos has served on the Board since October 2019. Ms. Chrousos has served since November 2018 as the Chief Strategy Officer of The Libra Group, where she leads a wide range of strategic initiatives spanning technology transformation to operational development. Headquartered in New York and London, The Libra Group is a diverse, international business group that is active in 35 countries and focused on six business areas: aviation, energy, hospitality, real estate, shipping and diversified investments. Immediately prior to being appointed Chief Strategy Officer, Ms. Chrousos served as the group's Chief Innovation Officer from October 2016 to October 2018. Previously, Ms. Chrousos served as a political appointee for the Obama Administration from June 2014 to July 2016 in various roles, including as an Associate Administrator for the General Services Administration. In this capacity, Ms. Chrousos led the Office of Citizen Services and 18F, a digital services team that implemented online service delivery projects and open data initiatives at more than a dozen agencies, including NIH, HHS and the VA. Prior to her departure from the Administration, Ms. Chrousos helped found the Technology Transformation Service, which serves as a foundation for the government's ongoing digital transformation; she served as its Founding Commissioner. Prior to entering public service, Ms. Chrousos co-founded and led two companies, including HealthLeap, a health tech company that reimagined the way doctors and patients communicate. HealthLeap was acquired by Vitals.com 10 months after its launch. Ms. Chrousos served as HealthLeap's President from September 2009 to December 2010 and Vitals.com's Vice President responsible for HealthLeap from December 2010 to November 2011. She also has several years of consulting experience with The Boston Consulting Group and The World Bank. Ms. Chrousos sits on several non-profit boards, including that of a maternal mental health foundation, and was twice named one of the Federal Government's '50 Women in Technology' by FedScoop and one of Greece's '40 under 40' by Fortune Magazine. Ms. Chrousos holds a B.A. from Georgetown University, an M.S.C. from The London School of Economics and Political Science, and an M.B.A. from Columbia Business School. We believe that Ms. Chrousos' qualifications to sit on the Board include her consumer healthcare experience and entrepreneurship, extensive executive experience in a variety of industries and her leadership experience within the federal government.

Other public directorships held by Ms. Chrousos within the past five years: None.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE THE PROXY

CARD "FOR" THE ELECTION OF MIHAEL H. POLYMEROPOULOS, M.D. AND PHAEDRA CHROUSOS

Continuing Directors Not Standing for Election

Certain information about those directors whose terms do not expire at the Annual Meeting is furnished below, including their business experience, public company director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating/Corporate Governance Committee and the Board to determine that the directors should serve as one of our directors. The age of each director as of the Record Date is set forth below.


Name	Age	Positions and Offices Held with Company	Director Since
H. Thomas Watkins	68	Director and Chairman of the Board	2006
Stephen Ray Mitchell	69	Director	2020
Richard W. Dugan	79	Director	2006
Anne Sempowski Ward	49	Director	2019

Class I Directors (Terms Expire in 2022)

H. Thomas Watkins has served as Chairman of the Board since March 2014 and has been a member of the Board since September 2006. Mr. Watkins served as the President and Chief Executive Officer of Human Genome Sciences, Inc. and as a member of its board of directors from 2004 until August 2012, when Human Genome Sciences, Inc. was acquired by GlaxoSmithKline. Prior to his tenure at Human Genome Sciences, Inc., Mr. Watkins served as President of TAP Pharmaceutical Products, Inc. Mr. Watkins previously held a series of executive positions over the course of nearly twenty years with Abbott, the most recent of which was as Vice President, Diagnostics Operations, Asia/Pacific based in Tokyo. Mr. Watkins also serves on the board of directors of Horizon Pharma plc. Previously, Mr. Watkins was on the board of directors of the Biotechnology Innovation Organization ("BIO") from 2011 until 2019, where he served as chair from June 2011 until April 2013. He holds a B.B.A. from William and Mary and an M.B.A. from the University of Chicago Graduate School of Business. We believe that Mr. Watkins' qualifications to sit on the Board include his executive experience in the pharmaceutical industry, his experience with late-stage product development, his knowledge of in-licensing and other partnering strategies, his business degree and his experience on other public company boards.

Other public directorships held by Mr. Watkins within the past five years: Horizon Pharma plc.

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Stephen Ray Mitchell has served on the Board since February 2020. Dr. Mitchell currently serves as the Joseph Butenas Professor and Dean for Medical Education at Georgetown University School of Medicine, a position he has held since August 2002. Prior to that, Dr. Mitchell served as Associate Dean for Clinical Curriculum at Georgetown University School of Medicine from 1998 to 2000 and as Senior Associate Dean for Academic Affairs from 2000 until 2002. Previously, Dr. Mitchell served as Program Director for Internal Medicine at Georgetown University School of Medicine from 1992 until 1997, and as Founding Program Director Med-Peds at Georgetown from 1995 until 1999. He served as a member of the Liaison Committee for Medical Education (the "LCME"), the national accrediting body for Medical Schools in the United States and Canada, between 2013 and 2019. Since 2018, he has held the role of Chair of the LCME, where he chaired the Standards subcommittee, and now serves as a member of the Governing Council of that body. Dr. Mitchell is a veteran of the United States Air Force, and has served as author and invited external reviewer on Studies by the Institute of Medicine on Chronic Multi-symptoms illness in Gulf War veterans. Dr. Mitchell received his B.A. in Psychology and his M.D. from the University of North Carolina at Chapel Hill, and his Global Executive M.B.A. from The McDonough School of Business at Georgetown University. We believe that Dr. Mitchell's qualifications to sit on the Board include his extensive experience in the medical field and leadership positions at leading medical institutions.

Other public directorships held by Dr. Mitchell within the past five years: None.

Class II Directors (Terms Expire in 2023)

Richard W. Dugan has served on the Board since December 2005. Mr. Dugan served as a Partner with Ernst & Young, LLP from 1976 to September 2002, where he served in a variety of managing and senior partner positions, including Mid-Atlantic Area Senior Partner from 2001 to 2002, Mid-Atlantic Area Managing Partner from 1989 to 2001 and Pittsburgh Office Managing Partner from 1979 to 1989. Mr. Dugan retired from Ernst & Young, LLP in September 2002. Mr. Dugan previously served as a director of two publicly traded pharmaceutical companies, Middlebrook Pharmaceuticals, Inc. and Critical Therapeutics, Inc., and a privately owned pharmaceutical company, Xanthus Pharmaceuticals. Mr. Dugan holds a B.S.B.A. from Pennsylvania State University. We believe that Mr. Dugan's qualifications to sit on the Board include his more than 25 years as a Partner with Ernst & Young, LLP, his long history with the Company, his status as a financial expert under The Sarbanes-Oxley Act of 2002 and his experience on other public company boards.

Other public directorships held by Mr. Dugan within the past five years: None.

Anne Sempowski Ward has served on the Board since October 2019. Ms. Ward currently serves as the Chief Executive Officer and board member at CURiO Brands, a consumer goods company that manufactures and sells personal care and home fragrance products. Prior to CURiO Brands, Ms. Ward served as the Chief Executive Officer of The Thymes, LLC from April 2012 until January 2016 when it merged with DPM Fragrance to become CURiO Brands. In July 2008, Ms. Ward co-founded The FORWARD Group, a consulting firm focused on growth strategies for mid-sized companies and key executives, and served as its Chief Executive Officer until April 2012. Previously, from October 2007 until July 2010, Ms. Ward was with Johnson Publishing Company, serving as the President and Chief Operating Officer of its Ebony, Jet and Fashion Fair Cosmetics business units. Prior to that, Ms. Ward served as an Assistant Vice President for The Coca-Cola Company from September 2006 until September 2007 and held various positions with Procter & Gamble between May 1994 and August 2006, most recently as Associate Marketing Director, Beauty. Ms. Ward currently also serves on the board of directors of Spectrum Brand Holdings, Inc. and SPS Commerce Inc. Ms. Ward holds a B.S. in Mechanical Engineering and Material Science from Duke University and an M.B.A. from Duke University's Fuqua School of Business. We believe that Ms. Ward's qualifications to sit on the Board include her executive experience with consumer goods companies and her extensive marketing and brand management for a number of companies across multiple sectors.

Other public directorships held by Ms. Ward within the past five years: Spectrum Brand Holdings, Inc. and SPS Commerce Inc.

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CORPORATE GOVERNANCE

Independence of the Board

As required under Nasdaq listing standards, a majority of the members of a listed company's board of directors must qualify as "independent," as affirmatively determined by the board of directors. Consistent with these regulations, after review of all relevant transactions or relationships between each director, or any of her or his family members, and the Company, its senior management and its independent registered public accounting firm, the Board has determined that all of our directors are independent directors within the meaning of applicable Nasdaq listing standards, except for Dr. Mihael H. Polymeropoulos, our Chief Executive Officer.

Information Regarding the Board and its Committees

As required under Nasdaq listing standards, our independent directors meet in regularly scheduled executive sessions at which none of our officers or other employees are present. Mr. Watkins, Chairman of the Board, presides over these executive sessions.

The Board has an Audit Committee, a Compensation Committee and a Nominating/Corporate Governance Committee. The following table provides membership and meeting information for each of the Board committees during 2020:

Committee

Chairman

Members

Number of Committee
Meetings in 2020

Audit Committee

Richard W. Dugan

Michael F. Cola(1)
Phaedra S. Chrousos Anne Sempowski Ward

Compensation Committee

H. Thomas Watkins

Richard W. Dugan
Anne Sempowski Ward

Nominating/Corporate Governance Committee

H. Thomas Watkins Michael F. Cola(2)

Phaedra S. Chrousos Stephen Ray Mitchell(3)

(1) Mr. Cola resigned from the Board effective February 14, 2020. Ms. Ward was appointed by the Board to replace Mr. Cola as a member of the Audit Committee effective February 14, 2020.

(2) Mr. Cola resigned from the Board effective February 14, 2020. Mr. Watkins, who had been serving as a member of the Nominating/ Corporate Governance Committee until Mr. Cola's resignation was appointed by the Board to replace Mr. Cola as the Chair of the Nominating/Corporate Governance Committee effective February 14, 2020.

(3) Dr. Mitchell was appointed by the Board to the Nominating/ Corporate Governance Committee effective June 11, 2020.

Below is a description of each committee of the Board. The Board has determined that each member of the Audit, Compensation and Nominating/Corporate Governance Committees meets applicable rules and regulations regarding "independence" and that each such member is free of any relationship that would interfere with her or his individual exercise of independent judgment with regard to the Company.

Audit Committee

The Audit Committee of the Board oversees the quality and integrity of the Company's financial statements and other financial information provided to the Company's stockholders, the retention and performance of the Company's independent accountants, the effectiveness of the Company's internal controls and disclosure controls, the Company's information security program, and the Company's compliance with ethics policies and SEC and related regulatory requirements. For these purposes, the Audit Committee, among other duties and powers, (1) approves audit fees for, and selects and reviews the performance of, the Company's independent accountants, (2) reviews reports prepared by management, and attested by the Company's independent accountants with respect to the financial statements contained therein, assessing the adequacy and effectiveness of the Company's internal controls and procedures, prior to the inclusion of such reports in the Company's periodic filings as required under the rules of the SEC, (3) reviews the Company's annual and quarterly reports, and associated consolidated financial statements, with management and the independent accountants prior to the first public release of the Company's financial results for such year or quarter, (4) reviews with external counsel any legal matters that could have a significant impact on the Company's financial statements, (5) establishes and maintains procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters, and (6) reviews reports prepared by management regarding the Company's information security program. Our Audit Committee charter can be found in the Corporate Governance section of our corporate website at www.vandapharma.com. Three directors comprised the Audit

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Committee as of December 31, 2020: Mr. Dugan (the Chairman of the Audit Committee), Ms. Chrousos and Ms. Ward. The Audit Committee met eight times during 2020.

The Board annually reviews the Nasdaq listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent (as independence is currently defined in applicable Nasdaq listing standards and Rule 10A-3 promulgated under the Exchange Act).

Compensation Committee

The Compensation Committee of the Board reviews and approves the design of, assesses the effectiveness of, and administers our executive compensation programs, including equity incentive plans. For these purposes, the Compensation Committee, among other duties and powers, (1) reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other Company executive officers, (2) reviews and approves the terms of offer letters, employment agreements, severance agreements, change in control agreements, and other material agreements between the Company and its executive officers, (3) approves any material changes to the Company's 401(k) plan, and (4) reviews and approves the Compensation Discussion and Analysis included in this Proxy Statement. In accordance with Nasdaq listing standards and our amended and restated compensation committee charter, our Board has granted our Compensation Committee the authority and responsibility to retain and obtain the advice of compensation consultants, legal counsel and other compensation advisers, the authority to fund such advisers, and the responsibility to consider the independence factors specified under applicable law and any additional factors the compensation committee deems relevant. Our Compensation Committee charter can be found in the Corporate Governance section of our website at www.vandapharma.com.

Three directors comprised the Compensation Committee of the Board as of December 31, 2020: Mr. Watkins (the Chairman of the Compensation Committee), Mr. Dugan and Ms. Ward. The Compensation Committee met seven times during 2020.

The Board has determined that all members of the Compensation Committee are independent (as independence is currently defined in the Nasdaq listing standards). In addition, each of our directors serving on our Compensation Committee satisfies the heightened independence standards for members of a compensation committee under Nasdaq listing standards and each member of this committee is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under Exchange Act (the "Code").

Certain of our executive officers, including our Chief Executive Officer, Chief Financial Officer, General Counsel and Secretary, and Chief People Officer often participate in the Compensation Committee's meetings. None of them participate in the determination of their own respective compensation or the compensation of non-employee directors. However, Dr. Polymeropoulos does make recommendations to the Compensation Committee regarding the amount and form of the compensation of the other executive officers and key employees, and he often participates in the Compensation Committee's deliberations about their compensation. No other executive officers participate in the determination of the amount or form of the compensation for our executive officers or directors.

The Compensation Committee has retained Willis Towers Watson, a national compensation consulting firm, since November 2006. In December 2020 Willis Towers Watson presented a new executive compensation assessment to the Compensation Committee. Willis Towers Watson provided the Compensation Committee with data about the compensation paid by our peer group of companies and other employers who compete with the Company for executives, updated the Compensation Committee on new developments regarding proxy advisory firms' evaluation processes and market trends, and advised the Compensation Committee regarding matters related to its equity compensation program. Willis Towers Watson serves at the pleasure of the Compensation Committee rather than the Company, and the consultant's fees are approved by the Compensation Committee. In 2020, our Compensation Committee evaluated and considered the independence of Willis Towers Watson pursuant to applicable SEC rules and Nasdaq listing standards and concluded that the work of Willis Towers Watson has not raised any conflict of interest.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is or has ever been an officer or employee of the Company or has any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. No executive officer of the Company serves as a member of the board or compensation committee of any other entity that has one or more executive officers who served as a member of our Board or our Compensation Committee in 2020.

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Nominating/Corporate Governance Committee

Our Nominating/Corporate Governance Committee identifies, evaluates and recommends nominees to our Board and committees of our Board, conducts searches for appropriate directors and evaluates the performance of our Board and of individual directors. Our Nominating/Corporate Governance Committee is also responsible for reviewing developments in corporate governance practices, evaluating the adequacy of our corporate governance practices, reporting and making recommendations to the Board concerning corporate governance matters and overseeing the Company's progress on environmental, social and governance ("ESG") initiatives and policies. The oversight of ESG initiatives was adopted by the Board in March 2020 in order to provide for an ESG governance framework for greater oversight of stakeholder engagement to enhance and potentially redefine value around corporate sustainability and citizenship. Our initial efforts have included, but are not limited to, initiatives to promote human-relevant safety studies instead of wasteful animal testing in drug development, carbon footprint reduction initiatives with the Company's salesforce, evaluation and tracking efforts of current employee composition and pay equity across the Company, and revisions to human capital policies and programs, such as acute knowledge-based trainings, unlimited paid time off and innovative paid parental leave.

Our Nominating/Corporate Governance Committee charter can be found in the Corporate Governance section of our corporate website at www.vandapharma.com. Three directors comprised the Nominating/Corporate Governance Committee as of December 31, 2020: Mr. Watkins (the Chairman of the Nominating/Corporate Governance Committee), Ms. Chrousos and Dr. Mitchell. The Nominating/Corporate Governance Committee met four times during 2020.

The Nominating/Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements and having a general understanding of the Company's industry. The Nominating/Corporate Governance Committee also considers other factors it deems appropriate given the then-current needs of the Board and the Company, including, but not limited to:

•the candidate's relevant expertise and experience upon which to offer advice and guidance to management;

•the candidate having sufficient time to devote to the affairs of the Company, including the number and nature of other board (and committee) memberships held;

•the candidate having a proven track record in his or her field;

•the candidate's ability to exercise sound business judgment;

•the candidate's commitment to vigorously represent the long-term interests of our stockholders;

•whether or not a conflict of interest exists between the candidate and our business;

•whether the candidate would be considered independent under applicable Nasdaq and SEC standards;

•the current composition of the Board; and

•the operating requirements of the Company.

In conducting this assessment, the committee considers gender, diversity, age, skills and such other factors as it deems appropriate given the then-current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability. While diversity and variety of experiences and viewpoints represented on the Board should always be considered, the Nominating/Corporate Governance Committee believes that a director nominee should neither be chosen nor excluded solely or largely because of race, color, gender, national origin or sexual orientation or identity.

In the case of incumbent directors whose terms of office are set to expire, the Nominating/Corporate Governance Committee reviews such directors' overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors' independence.

When there is a vacancy on the Board, the Nominating/Corporate Governance Committee uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems it appropriate, a professional search firm. The Nominating/Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board, and seeks to include diverse candidates in any director search (which may include specifically requesting diverse candidates from any professional search firm if deemed appropriate at the time requested). The Nominating/Corporate Governance Committee meets to discuss and consider such candidates' qualifications and then selects a nominee for recommendation to the Board by majority vote.

Pursuant to our Amended and Restated Corporate Governance Guidelines, which can be found in the Corporate Governance section of our corporate website at www.vandapharma.com, the Board shall nominate for election or reelection as director only

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candidates who have tendered, in advance of such nomination, an irrevocable, conditional resignation that will be effective only upon both (i) the failure to receive the required vote at the next stockholders' meeting at which such person faces reelection and (ii) the Board's acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with the Amended and Restated Corporate Governance Guidelines.

Under the Amended and Restated Corporate Governance Guidelines, if an incumbent director fails to receive the required vote for reelection, the Nominating/Corporate Governance Committee will act on an expedited basis to determine whether to accept the director's resignation, and it will submit its recommendation for prompt consideration by the Board. The Nominating/Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director's resignation.

The Nominating/Corporate Governance Committee will consider director candidates recommended by stockholders and evaluate them using the same criteria as candidates identified by the Board or the Nominating/Corporate Governance Committee for consideration. If a stockholder of the Company wishes to recommend a director candidate for consideration by the Nominating/Corporate Governance Committee, the stockholder recommendation should be delivered to the Secretary of the Company at the principal executive offices of the Company pursuant to the terms and conditions of the Bylaws. The stockholder recommendation must, among other things, set forth:

•for each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A promulgated under the Exchange Act, and such person's written consent to serve as a director if elected;

•as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner, (2) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner and a representation that the stockholder will notify the Company in writing of the class and number of such shares owned beneficially and of record as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (3) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Company's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company's voting shares to elect such nominee or nominees and (4) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such stockholder with respect to stock of the Company and whether any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock) has been made by or on behalf of such stockholder, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk of stock price changes for, such stockholder or to increase or decrease the voting power or pecuniary or economic interest of such stockholder with respect to stock of the Company;

•any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Company or otherwise (a "Derivative Instrument") directly or indirectly owned beneficially by such stockholder and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company and a representation that the stockholder will notify the Company in writing of any such Derivative Instrument in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed;

•a description of any agreement, arrangement or understanding with respect to the proposal of business between or among such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing and a representation that the stockholder will notify the Company in writing of any such agreements, arrangements or understandings in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed;

•a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business; and

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•any other information that is required to be provided by the stockholder pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder in such stockholder's capacity as a proponent of a stockholder proposal.

In addition, the Bylaws require that the stockholder recommendation shall set forth as to each person whom the stockholder proposes to nominate for election or reelection as a director (1) the name, age, business address and residence address of the person, (2) the principal occupation or employment of the person, (3) the class, series and number of shares of capital stock of the Company that are owned beneficially and of record by the person, (4) a statement as to the person's citizenship, (5) the completed and signed representation and agreement described above, (6) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Exchange Act, (7) such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected, (8) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person with respect to stock of the Company and whether any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock) has been made by or on behalf of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk of stock price changes for, such person or to increase or decrease the voting power or pecuniary or economic interest of such person with respect to stock of the Company, and (9) a written statement of the person such stockholder intends to nominate, that such person, if elected, intends to tender, promptly following such person's election or re-election, an irrevocable resignation effective upon such person's failure to receive the required vote for re-election at the next meeting at which such person would face re-election and upon acceptance of such resignation by the Board of Directors, in accordance with the Company's Amended and Restated Corporate Governance Guidelines.

We believe that each of our directors and nominees brings a strong background and set of skills to our Board, giving the Board, as a whole, an appropriate balance of the knowledge, experience, attributes, skills and expertise. In addition, five of our six directors are independent under Nasdaq standards (Dr. Polymeropoulos, our Chief Executive Officer, being the only exception as he is an employee) and our Nominating/Corporate Governance Committee believes that all six directors are independent of the influence of any particular stockholder or group of stockholders whose interests may diverge from the interests of our stockholders as a whole. We believe that our directors have a broad range of personal characteristics including leadership, management, pharmaceutical, business, marketing and financial experience and abilities to act with integrity, with sound judgment and collegiality, to consider strategic proposals, to assist with the development of our strategic plan and oversee its implementation, to oversee our risk management efforts and executive compensation and to provide leadership, to commit the requisite time for preparation and attendance at board and committee meetings and to provide required expertise on our Board Committees. As described above, the Nominating/Corporate Governance Committee has recommended the members of our Board for their directorships. In evaluating such directors, our Nominating/Corporate Governance Committee has reviewed the experience, qualifications, attributes and skills of our directors and nominees, including those identified in the biographical information set forth above in the section entitled "Election of Directors." The Nominating/Corporate Governance Committee believes that the members of our Board offer insightful and creative views and solutions with respect to issues facing the Company. In addition, the Nominating/Corporate Governance Committee also believes that the members of our Board function well together as a group. The Nominating/Corporate Governance Committee believes that the above-mentioned attributes and qualifications, along with the leadership skills and other experiences of the members of the Board described in further detail above under the section entitled "Election of Directors," provide the Company with the perspectives and judgment necessary to guide the Company's strategies and monitor their execution.

Separation of CEO and Chairman of the Board Roles

Our Board separates the positions of Chairman of the Board and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board recognizes the time, effort, and energy that the Chief Executive Officer is required to devote to the position in the current business environment, as well as the commitment required to serve as our Chairman of the Board, particularly as the Board's oversight responsibilities continue to grow. We believe that having separate positions and having an independent outside director serve as Chairman of the Board is the appropriate leadership structure for the Company at this time.

Meetings of the Board of Directors

The Board met eight times during 2020. Each director attended 75% or more of the aggregate of the meetings of the Board and of the committees on which she or he served that were held during the period for which she or he was a director or committee member.

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Director Attendance at Annual Meetings of Stockholders

Directors are encouraged, but not required, to attend our annual stockholder meetings. All of the then-serving directors attended our 2020 annual meeting of stockholders.

Stockholder Communications with the Board of Directors

Stockholders may communicate with the Board, including the independent members of the Board, by sending a letter to Vanda Pharmaceuticals Inc., 2200 Pennsylvania Avenue, Suite 300E, Washington, D.C. 20037, Attn: Secretary. Each such communication should set forth (1) the name and address of such stockholder, as they appear on the Company's books and, if the shares of the Company's stock are held by a nominee, the name and address of the beneficial owner of such shares, and (2) the number of shares of the Company's stock that are owned of record by such record holder and beneficially by such beneficial owner. The Secretary will review all communications from stockholders, but may, in his sole discretion, disregard any communication that he believes is not related to the duties and responsibilities of the Board. If deemed an appropriate communication, the Secretary will submit a stockholder communication to a chairman of a committee of the Board, or a particular director, as appropriate.

Code of Ethics and Business Conduct

The Company has adopted the Vanda Pharmaceuticals Inc. Code of Ethics and Business Conduct that applies to all directors, officers and employees. This code is available in the Corporate Governance section of our corporate website at www.vandapharma.com. If we make any substantive amendments to this code or grant any waiver from a provision of the code to any applicable executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

Risk Oversight

Our Board oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. The general categories of risk overseen by our Board include, without limitation, operational risk, commercial risk, clinical trial risk, capital risk, credit risk, earnings risk, liquidity risk, market risk, price risk, legal/compliance risk and reputational risk. Our Board performs this oversight role by using several different levels of review. In connection with its reviews of the operations and corporate functions of our Company, our Board provides oversight to address the primary risks associated with those operations and corporate functions. In addition, our Board reviews the risks associated with the Company's business strategies periodically throughout the year as part of its consideration of undertaking any such business strategies.

Each committee of our Board also oversees the management of the Company's risk that falls within the committee's areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. Our Chief Financial Officer reports to the Audit Committee and is responsible for identifying, evaluating and implementing risk management controls and methodologies to address any identified risks. In connection with its oversight role, our Audit Committee meets privately with representatives from our independent registered public accounting firm and our Chief Financial Officer.

The oversight of risk within the Company is an evolving process requiring the Company to continually look for opportunities to further embed systematic enterprise risk management into ongoing business processes within the Company. The Board encourages management to continue to drive this evolution.

In connection with the recent COVID-19 outbreak, the Board, together with the Audit Committee, Compensation Committee and management, has overseen our efforts to mitigate financial and human capital management risk exposures associated with the outbreak.

Employee Compensation Risks

As part of its oversight of the Company's executive compensation program, the Compensation Committee considers the impact of the Company's executive compensation program, and the incentives created by the compensation awards that it administers, on the Company's risk profile. In addition, the Company's human resources, finance and legal staff review the Company's compensation policies and procedures for all employees, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether such policies and procedures are reasonably likely to have a material adverse risk on the Company. The Compensation Committee has considered such review and has determined that, for all employees, our Company's compensation programs are not reasonably likely to have a material adverse effect on the Company.

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Compensation of Directors

Our Board initially adopted a non-employee director compensation program in connection with our initial public offering and subsequently amended and restated such policy in June 2017. The table below sets forth the provisions of our current non-employee director compensation program.


Term						Compensation
Annual Cash Retainer(1)						$45,000
Chairman of Board(1)						Additional annual retainer of $25,000
Chair of Audit Committee(1)						Additional annual retainer of $20,000
Chair of Compensation Committee(1)						Additional annual retainer of $17,500

SEC Form DEF 14A filed by Vanda Pharmaceuticals Inc.