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Vanda Pharmaceuticals (NASDAQ:VNDA) received a downgrade from Madison Williams last week to "reduce" from "buy."

Analyst David Moskowitz cited a physicians survey conducted by Madison Williams as the reason behind the downgrade, according to publicly released information. The survey of psychiatrists concluded that Novartis (NYSE:NVS) was doing an "abysmal" job at handling Fanapt's commercial launch, which took place earlier this year.

With the downgrade, Madison also lowered their price target for VNDA to $7 from $19.

While not discounting this "survey" entirely, it sounds a bit bogus to me since the $21 million in sales posted by Novartis in the quarterly report is hardly an "abysmal" number, especially considering that Fanapt was not on the market for the full first quarter. As for the psychiatrists questioned in the survey, I'd have to wonder if it was a random scientific poll of opinions, or just a smattering of phone calls and emails to contacts in the rolodex sitting on David Moskowitz's desk.

I've never been a fan of surveys or polls, especially this type where the public has no idea who or what was asked and in what pretense.

The price target to seven dollars is also a questionable target, in my opinion, based on the fact that Vanda is sitting on over $200 million in the bank and has just turned its first-ever quarterly profit.

It's also hard to judge the potential of Fanapt based on just one quarter (that wasn't a full quarter) of sales numbers, especially when Novartis is involved - it's not like these guys are new to the game. I'd put more faith in the seven dollar number if the sales numbers don't grow to much more than the $21 million number over the next quarter or two, but even then it'll be too premature to call it a dead-beat drug.

The timing of this downgrade is curious as well, as it seemed to coincide with a rise in the number of shares sold short, as if those "in the know" knew it was coming.

The one piece of information that became apparent from Vanda's quarterly report that could have scared off some investors is the royalty number of ten percent that Novartis pays to Vanda - roughly in line with what Titan Pharmaceuticals (TTNP.pk) will receive.

Other than that, to see shares of VNDA trading for just over eight dollars when things are picking up for the company just doesn't add up - unless you're of the mind that a 'tree shake' is taking place and someone wants your shares.

This is one of those opportunities where the shorts will play their games and the small investor has a chance to take advantage of those games by buying-in for an attractive price.

What's even more attractive right now, however, is OTCQB:TTNP falling to $1.20 - and in a similar fashion to VNDA-- there's real no reason for that drop either, other than it looks like someone else wants to pick up as many shares as they can while dropping the price.

Of course, this is all just my opinion - each investor should do his or her own DD.

Disclosure: Long TTNP, no position VNDA.
Source: Vanda Pharmaceuticals Downgrade: Why I Don't Buy It