Vanda: Acquisition in the Works?

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Includes: TTNP, VNDA
by: VFC's Stock House

Vanda Pharmaceuticals announced on Monday that it had filed a shelf registration with the SEC that would allow the company to sell up to $50 million worth of common and/or preferred stock, as well as debt securities and warrants in one or more future offerings.

The registration is not yet active, but according to a press release Monday, the intent of the filing is to allow Vanda "greater flexibility to take advantage of acquisition, financing and other business opportunities when and if such opportunities arise."

The key take-away from the above quote is the mention of an acquisition.

Since Vanda is already tied to Titan Pharmaceuticals (NASDAQ:TTNP) in the way of an 8-10% royalty rate that Titan grabs from Fanapt sales, speculation has it that Vanda is possibly looking to offer a buyout of Titan that would net Vanda not only the royalty rate on Fanapt sales, but also the pipeline prospects of Probuphine and the ProNeura drug delivery technology.

The fifty million outlined in the SEC filing is not nearly enough for Vanda to consider a buyout of any company, let alone Titan, but Vanda is still sitting on a chunk of cash from the $200 million up-front payment that Novartis (NYSE:NVS) shelled out in 2009 for the US and Canadian rights to Fanapt.

The shelf offering could supplement the cash on hand for a buyout of Titan, which would put first estimates at an offering price of right around $3/share - roughly double where Titan trades today.

Any link between Monday's announcement by Vanda and a possible Titan buyout is purely speculation at this point, but a binding deal to consumate a marriage between the two companies does make sense, hence the speculation.

It's also commonly believed that Titan has been aligning itself more as a buyout candidate than as a stand-alone company, which only adds fuel to the speculative fire.

A recent run looked a lot like a methodical accumulation of the TTNP stock before a retracement off the high took place, but shares were trading 10% higher on Monday, with no news - from Titan, at least - having been released.

Whether it's Vanda or not, I still see a buyout of Titan in the works, although three dollars / share would be a little on the cheap side of an offer given the assumed success of Probuphine, but at the same time, you can't argue with a double as a premium.

TTNP isn't disappointing as a 'Stock to Watch' this week, and there may be more to come.

Disclosure: Long TTNP, no position VNDA.