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Today I'm talking about Vanda Pharmaceuticals (NASDAQ:VNDA), which I think has a little bit of everything for investors. What does that mean? Well, its a short candidate, a long candidate, a trade possibility, an investment possibility, or even an option play. How, you say? i'll get into that in a later. In this post, I'll talk about the company's drugs.

Vanda is a development-stage small cap biotech that has three drugs currently in its pipeline. Its lead drug Iloperidone, is being tested to treat schizophrenia and bipolar disorder, VEC-162 is being tested for insomnia and depression, and VSF-173 is being tested for excessive sleepiness.

The markets
Vanda is attempting to penetrate some big markets with some very well known drugs already in them. Anti-psychotic drugs, which treat schizophrenia among other diseases, are a some $18 billion market according to data firm IMS Health. And there are some blockbuster drugs in the area that you've probably heard of, such as Abilify and Seroquel.

The insomnia market is estimated at $4.5 billion, with around 11 million people worldwide receiving treatment. There are some heavy-hitters already is this space too, such as Ambien and Lunesta.

The depression market is about $19 billion, however most of the big drugs have already expired their patents, which means most of this market is filled by generic drugs.

Lastly, the excessive sleepiness market is around $500 million, but is the least competitive.

The drugs
Iloperidone, Vanda's lead candidate, has completed its Phase III trials for schizophrenia and the company plans on filing a New Drug Application by the end of 2007. The drug has shown very positive results in its clinical trials and the effectiveness of the drug does not appear to be a problem in getting FDA approval. However, FDA approval probably hinges on whether or not the FDA deems the drug as safe enough. The Motley Fool takes a Closer Look at Vanda here. The company believes that iloperidone is actually safer than its competitors with less side effects and low weight gain.

VEC-162, which treats insomnia and depression, will enter its second Phase III trial in the fourth quarter and is currently in Phase II trails for depression. The second Phase III trial is a safety and efficacy trial for chronic insomnia. The company has already completed a phase III trial for transient insomnia, which had very positive results. The drug could probably enter the market by 2010.

VSF-173 is currently in Phase II testing for excessive sleepiness. There is limited competition is this area, as Cephalon's Provigil commands most of the market. The Motley Fool's Brian Lawler thinks that if VSF-173 shows a suitable efficacy and safety profile, there "would be a big market."

Disclosure: I have no position in VNDA.

Source: Vanda Pharmaceuticals' Pipeline Nearing FDA Stage