^^^ You have proven right in the past, but I missed out. I was going to do it with an old stock pick, but then forgot.
This time, I have bought just a bit when you mentioned Vanda the other day and will buy a little more.
Looked briefly into their financial and saw a big dip in earnings recently. Did not look further to see what that was about, because my purchase is too small to put too much time in it. I do believe that the market is somewhat efficient, and whatever bad news have already been baked in.
Wasn't really meaning to turn this into a Vanda thread but since you pulled my arm...
Vanda at $14.15 ($800M market cap, easy round number).
Revenue past 5 years:
2017 $165M
2018 $193M
2019 $227M
2020 $250M
2021 $280M (estimate, middle of low and high)
Cash on hand (including short term inv.)
2017 $143M
2018 $257M
2019 $312M
2020 $368M
2021 $415M (estimate)
Both drugs, Fanapt for treating schizophrenia, and Hetlioz for treating non-24 sleep disorder have good life left, 2027 earliest generic for Fanapt and 2035 earliest generic for Hetlioz. These two drugs are also in mid and late stage studies for other indications, including a big one, bipolar disorder, which would also extend sales and life of drug.
So the revenue stream *should* continue to grow, even slowly based on just those two drugs, which I believe if you did a NPV based on $800M market cap, $415M in cash and $60M a year in FCF would get you nice numbers by itself.
Then you have Tradipitant, which has just finished up a 12 week treatment phase III study for gastroparesis, which is currently treated by a 40 year old drug with a black box label (pretty serious side effects) called Metoclopramide. Vanda seemed pretty confident late in 2021 that they would be filing a NDA for this in early 2022 if the study turned out well (the phase II study was positive). There are currently a dozen people in the study who requested and received special permission from the FDA to continue receiving treatment beyond the 12 weeks of the study, which seems to be a positive to me. The CEO has said that commercializing Tradipitant would be "transformative" for the company. It is licensed exclusively to Vanda for development from Lily, with some small payment on approval ($15M) and a larger milestone payment ($80M) on meeting some sales goal. Royalties are said to be in the low double digits. Since Metoclopramide is prescribed to 300,000 people per month, there should be a ready market if Tradipitant has similar or better efficacy and a safer profile. It is also in a paused study to treat motion sickness (COVID put a pause on trials because of travel restrictions doing studies on boats and such). I assume they will eventually resume a phase III trial on motion sickness.
They did get into a tiff with the FDA over the need for animal safety trials for long term use (chronic condition) of Tradipitant. Vanda argued that the trials were not needed based on past studies of this drug and it would be cruel to animals, and actually sued the FDA with the typical result you get when you sue the government. This was probably the biggest reason for the drag on the stock as the FDA is like the IRS, you don't piss them off. They are going now instead for the 12 week duration and hope to expand treatment later after that is approved.
So there is risk obviously. Aside from the risk of a drug being recalled, there is risk they will not be able to grow revenue if the future drug trials on new indications for their existing approved drugs flop and there is risk that Tradipitant fails in the current phase III study in that the placibo has a similar improvement on nausea and vomiting (it didn't in the phase II study, but that was only 4 weeks, not 12 weeks). Maybe the drug initially helps but the effects wear off on continued use (this was addressed in a conference call and the CEO said this was not likely). They were supposed to be shooting for release of the phase III prelim data by end of 2021 but it has not happened yet. This has me a tiny bit worried but I hope it is just a holidays (they were shut down for a week or two) thing. Now I wonder if they will hold off releasing the data until Feb earnings.
Anyway, that was probably more info than you wanted, but that is what I have. I like the risk/reward here at $14 and change. I would actually buy quite a bit more if Tradipitant is delayed for some reason like COVID and the stock spikes down to $11...it would be steal at that level if there are no real issues with the pipeline. On approval I expect Vanda will return to the $20 area and as sales start coming in it should easily reach $30 a share.
So downside from $14 is about $3, maybe as much as $4, and upside is $10 to $16. My guess.