Vanda Receives Orphan Status for Sleep Drug, But Is It a Money Maker?

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

Vanda Pharmaceuticals (NASDAQ:VNDA) announced on Tuesday that the European regulatory agency has granted Orphan Drug status for its sleep drug, tasimelteon.

The drug is currently being tested in Phase III trials to treat the sleep cycle for blind people with no light perception and the Orphan status will provide the company with possible tax breaks, incentives and an extended period of market exclusivity.

The news regarding tasimelteon is definitely good news for the company's for the company's only pipeline product, other than the already-approved schizophrenia drug Fanapt, but the long term potential of the sleep order drug is considered questionable by many who see the real value of Vanda in the expansion of Fanapt distribution.

Any drug that can potentially treat an unmet medical need should be given every opportunity to make it to market, if only for ethics' sake, but it'll be Fanapt that makes or break this company.

Sales are increasing in the United States at a decent pace, although maybe not at the pace previously expected by the company and some investors, and there's significant potential to bring the product to market overseas. The overseas piece is significant because Vanda will reap the profits from those sales on a much larger scale than on sales in the United States, due to the licensing agreement with partner Novartis (NYSE:NVS).

Of note, Titan Pharmaceuticals (NASDAQ:TTNP) receives between 8-10% royalty rate on all sales of Fanapt due to a pre-existing licensing agreement.

Vanda's sleep aid could bring in a decent revenue stream for the company, but even the most optimistic estimates of the product's market potential (about half a billion dollars world-wide according to some reports) won't be enough to take Vanda to the next level, but Fanapt can - as the schizophrenia drug market brings in about $20 billion on an annual basis.

So, the orphan drug designation for tasimelteon is nice ancillery news, but eyes should still be on the expansion of Fanapt and the potential merger or acquisition that could be in the works for Vanda Pharmaceuticals.

That could be the real money maker for investors of this company.

Disclosure: I am long TTNP.OB.