Vanda Needs to Make a Move

VNDA: Shares of Vanda Pharmaceuticals closed down by forty one cents on Tuesday after releasing news of a Novartis (NVS) licensing agreement for schizophrenia drug Fanapt on Monday evening. Questions were raised by many investors as to why the share price would drop after the company released what should be construed as good news.

Part of the reason, in my opinion, is that some investors were probably disappointed that Vanda was not purchased and viewed the licensing agreement as somewhat negative - if only because they would rather have seen the company be purchased so that they could reap the immediate gains of a buyout. Because the licensing agreement consisted of an up-front payment and additional future royalties, many investors looking for significant short term gains probably moved on when VNDA became more of a long term hold.

Additionally, VNDA had 3.85 million shares sold short as of 10 September, according to the Yahoo stats, and those shorts will need to cover at some point. Since it became known that Fanapt will not be commercially launched until January, it allows for more time for short covering.

While I believe that TTNP.PK is still the better play, I do think that the potential sales of Fanapt will eventually catch up with the VNDA stock price and, as time draws closer to the Fanapt launch, I think it will approach $20 at some point next year.

In my opinion, the most interesting aspect of Vanda surviving as a stand alone company is that there really is no pipeline outside of Rest-of-World Fanapt sales and a Phase II sleeping disorder drug, a product candidate for a very saturated market. If Vanda suddenly has a whole lot of cash on hand, and if the company rakes in even more as a result of Novartis 'power-housing' Fanapt onto the market in strong fashion, then you have to wonder if Vanda will make a play to purchase a pipeline, whether it be through purchasing a specific product or two or a smaller company.

Of cousre, this is purely my speculation, but Vanda is going to need to make a move here, in my opinion, and that next move will decide how much upside this stock has.

Disclosure: No position.

Comments

[domenick:]

VNDA do not give the shorts a cheap way out, hold better days are comming

Oct 20 10:39 AM