Fanapt First Quarter Sales Bode Well for Vanda, Novartis

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

Vanda Pharmaceuticals (NASDAQ:VNDA) and marketing partner Novartis (NYSE:NVS) announced the commercial launch of Vanda's schizophrenia drug Fanapt in early January, and this week Novartis released first quarter sales results for the product that at one point was issued a non-approvable letter from the FDA.

According to a Novartis media release dated April 20th, Fanapt raked in a total of $21 million for the quarter, a solid start for a new drug entering a $14-$20 billion market.

While the VNDA share price went largely unchanged on the news, the $21 million in Fanapt revenue generated by Novartis should come as an encouraging sign for things to come, because it puts a projected first year of $100 million well within reach. That wouldn't be too bad a take for first year sales at all and would beat a lot of skeptical market sentiment about the potential of the product.

It's also conceivable that the powerhouse influence of the Novartis name, combined with the fact that many schizophrenia patients switch medications often, could even have Fanapt surpass the $100 million mark in first year sales.

Due to an existing marketing agreement, Vanda will receive a cut of the Fanapt revenue from Novartis, while Titan Pharmaceuticals (NASDAQ:TTNP) will also receive an 8% take on all sales up to $200 million and a 10% take on sales above that mark.

As the milestone payments and royalty revenues start rolling in for Vanda, the company looks to submit its sleep-aid drug Tasimelteon for FDA marketing approval at some point in 2011.

With Fanapt sales underway at a respectable pace and with the company holding a notice of allowance from the US Patent Office regarding an injectible form of Fanapt, the future looks brighter every day for Vanda Pharmaceuticals. A share price of close to twenty dollars is highly likely at some point during this year, in my opinion, especially if Novartis can build on the existing momentum of first quarter Fanapt sales.

An outright buyout of Vanda by a larger pharma is also possible-- in my opinion-- most likely by Novartis, who has already invested a significant amount in Vanda Pharmaceuticals and Fanapt.

Disclosure: No positions.