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Vanda Pharmaceuticals (NASDAQ:VNDA) announced this week that a Phase I trial has been initiated by licensing partner Novartis to evaluate the effectiveness of Fanapt in a long-acting injectable formulation.

The depot version of the schizophrenia drug, while still a ways away from late stage trials or a commercial launch, add some decent long term value to Vanda Pharmaceuticals, as patients may find it preferable to use ae long-lasting injectible option over the oral pills.

Those who suffer from schizophrenia often cease taking the medication on a whim, and a depot version would take that option away and possibly keep a patient stable over the long run.

That said, the only value that this trial adds to Vanda over the short term is as additional acquisition material, since the monetary benefits won't be seen for a while. The potential value of the depot version, however, could boost Vanda's value in the eyes of a potential buyer.

The near term catalyst will be a boost in Fanapt sales, and it's worth keeping an eye out for the first quarter earnings report. Shares of both Vanda and Titan Pharmaceuticals (OTCQB:TTNP) will benefit if Fanapt continues making headway into the billion-dollar-plus schizophrenia market.

Another catalyst could be an update on the status of international approvals.

I still like TTNP.OB as the better buy between the two, mainly because Titan has Probuphine in the final stages of development, but VNDA also holds some long term value at the current prices, in my opinion, as well as being a possible takeover candidate.

It could be Novartis (NYSE:NVS) was just waiting to see how much penetration Fanapt would attain before pulling the trigger on a deal.

Disclosure: Long TTNP

Source: Vanda: Growth Potential With Fanapt Depot Formulation Now in Trial