Vanda Pharmaceuticals, Inc. Leaps After Regaining Drug Rights From Novartis AG

Published: Dec 24, 2014

Vanda Pharmaceuticals Leaps After Regaining Drug Rights From Novartis
December 24, 2014
By Jessica Wilson, Breaking News Staff

Vanda Pharmaceuticals Inc. announced on Monday that it has reached a settlement agreement with Novartis in the arbitration proceedings regarding the schizophrenia drug Fanapt, also known as iloperidone. In the wake of the announcement, its share price leapt 14 percent to $14.63 in midday trading.

Both companies agreed to dismiss the arbitration and to release each other from claims related to the proceedings. As part of the settlement, Novartis will transfer to Vanda all US and Canadian rights to Fanapt and will grant Vanda an exclusive worldwide license to AQW051, a phase II alpha-7 nicotinic acetylcholine receptor partial agonist. On a conference call, Vanda CEO Mihael Polymeropoulos said AQW051 had failed in a Phase II study to treat schizophrenia, but may yet have potential in a more specific patient population.

In addition, the Swiss drugmaker will invest $25 million in Vanda by purchasing 1.8 million shares in the company for $13.82 per share.

“We are happy to have reached agreement with Novartis to settle our dispute, allowing us to focus on developing therapeutic solutions for our patients,” Polymeropoulos said in a statement. “The addition of the US and Canadian rights for Fanapt to our commercial portfolio, which includes Hetlioz for the treatment of Non24, has the potential to be transformational for our company."

While the company is optimistic about this announcement, the stock price is currently in the middle of its yearly range. Shares reached their peak in April 2014, when they topped out at $19.25, according to InvestorGuide .

Vanda and Novartis signed an agreement in 2009 whereby Novartis would pay $200 million upfront to license Fanapt and would make milestone payments up to $265 million, reports InvestorGuide. In July 2014, however, Vanda announced in its quarterly report that the company had filed a claim against Novartis seeking $539 million, after which Novartis filed a counter claim. In August, when asked about the arbitration proceedings during the company’s conference call regarding its second quarter earnings, Polymeropoulos did not elaborate on the specifics of the arbitration because, according to him, all arbitration proceedings are private.

Fanapt is currently approved in the U.S. for the treatment of schizophrenia in adults and has patent coverage through two key patents, a new chemical entity (NCE) patent set to expire in November of 2016 and a method of treatment patent set to expire in 2027. Fanapt is also approved and marketed in Israel and Mexico.

In addition to Fanapt, Vanda is also developing Tasimelteon, a treatment for sleep and mood disorders.

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