Vanda reported research and development (R&D) expenses in the third quarter of 2008 of $3.8 million, compared to $5.5 million in the second quarter of 2008 and $13.9 million in the third quarter of 2007. The decrease in R&D expenses in the third quarter of 2008 relative to the second quarter of 2008 is primarily attributable to lower costs in the Phase III tasimelteon (VEC-162) chronic primary insomnia clinical trial for which Vanda announced top-line results in June of 2008. The decrease in R&D expenses in the third quarter of 2008 relative to the third quarter of 2007 is attributable to lower clinical trial costs in 2008 compared to costs from trials conducted in 2007, and the $5.0 million milestone charge recorded in the third quarter of 2007 resulting from the submission of the New Drug Application (NDA) for iloperidone.
Net loss was $10.9 million for the third quarter of 2008, compared to $13.5 million for the second quarter of 2008 and $21.9 million for the third quarter of 2007. Net loss per common share for the third quarter of 2008 was $0.41, compared to $0.51 for the second quarter of 2008 and $0.82 for the third quarter of 2007.
As of September 30, 2008, Vanda's cash, cash equivalents, and marketable securities totaled approximately $51.7 million. As of September 30, 2008, Vanda had a total of approximately 26.7 million shares of common stock outstanding.
OPERATIONAL HIGHLIGHTS
On September 10, 2008, Vanda met with the U.S. Food and Drug Administration (FDA) to discuss the not-approvable action letter that the FDA issued to Vanda on July 25, 2008 regarding iloperidone. The FDA asked Vanda to provide a complete response to the not-approvable letter highlighting arguments made during the meeting. Vanda expects to submit the complete response within the next few weeks. The timing or outcome of any FDA review of the response is uncertain at this time.
Vanda has suspended all commercial and development activities pending further review. Vanda has also reduced its cash burn and is reviewing a number of options to further reduce expenses and cash burn.
FINANCIAL DETAILS
Operating Expenses. Third quarter 2008 R&D expenses, primarily consisting of salaries and related costs of R&D personnel, stock-based compensation, and the costs of consultants, materials and supplies associated with clinical trials and research initiatives, totaled $3.8 million, compared to $5.5 million in the second quarter of 2008 and $13.9 million in the third quarter of 2007. The decrease in R&D expenses in the third quarter of 2008 relative to the second quarter of 2008 is primarily attributable to lower costs in the Phase III tasimelteon chronic primary insomnia clinical trial for which Vanda reported top-line results in June of 2008. The decrease in R&D expenses in the third quarter of 2008 relative to the third quarter of 2007 is primarily attributable to lower clinical trial costs in the third quarter of 2008 compared to the costs from trials conducted in the third quarter of 2007 and the $5.0 million milestone charge recorded in the third quarter of 2007 resulting from the submission of the NDA for iloperidone.
-- General and administrative (G&A) expenses totaled $7.4 million in the third quarter of 2008, compared to $8.5 million in the second quarter of 2008 and $9.6 million in the third quarter of 2007. The decrease in G&A expenses in the third quarter of 2008 relative to the second quarter of 2008 is primarily due to lower iloperidone pre-commercial launch expenses. The decrease in G&A expenses in the third quarter of 2008 relative to the third quarter of 2007 is primarily due to lower employee stock-based compensation expense and lower iloperidone pre-commercial launch expenses.
-- Employee stock-based compensation expense recorded in the third quarter of 2008 totaled $3.6 million. Of these non-cash charges, $0.5 million was recorded as R&D expense and $3.1 million was recorded as G&A expense. In the second quarter of 2008 and the third quarter of 2007, total stock-based compensation was $4.0 million and $5.2 million, respectively. The decrease in stock-based compensation in the third quarter of 2008 relative to the second quarter of 2008 and the third quarter of 2007 is primarily due to the lower fair market value of options granted in 2008.
-- Net loss for the third quarter of 2008 was $10.9 million, compared to a net loss of $13.5 million for the second quarter of 2008 and $21.9 million for the third quarter of 2007.
-- Net loss per common share for the third quarter of 2008 was $0.41, compared to $0.51 for the second quarter of 2008 and $0.82 for the third quarter of 2007.
-- Cash and marketable securities decreased by $13.9 million during the third quarter of 2008. Changes included $10.9 million of net losses, decreases in accrued R&D expenses and accounts payable of $5.2 million, net increases in prepaid expenses of $0.9 million, fixed asset purchases of $0.5 million offset by $3.7 million in non-cash depreciation, amortization, and stock-based compensation expenses and net increases in other working capital of $0.1 million.
-- Vanda's cash, cash equivalents, and marketable securities as of September 30, 2008 totaled approximately $51.7 million, compared to approximately $93.2 million as of December 31, 2007.
FINANCIAL GUIDANCE
Net loss for the year is expected to be approximately $56 million, or approximately $2.10 per share. Non-cash charges for 2008, consisting primarily of stock-based compensation expense and depreciation and amortization, are expected to total approximately $16.5 million. The total cash balance at December 31, 2008 is expected to be approximately $44 million.
Fourth quarter cash expenditures, consisting primarily of administrative overhead, personnel costs, costs to complete ongoing carcinogenicity studies, costs to complete stability studies for iloperidone, regulatory consulting fees, and commercial discontinuation costs, are expected to total approximately $7.5 million. To reduce expenses, Vanda has taken the following actions:
-- Reduced headcount from 52 full-time employees as of June 30, 2008 to 44 full-time employees as of October 30, 2008. In addition, Vanda has eliminated four full-time contract commercial positions. -- Discontinued all commercial activities. -- Suspended all non-essential manufacturing and pre-clinical activities.
As a result of these initiatives, Vanda expects its operating cash burn to decrease to approximated $3.6 million per quarter beginning in the first quarter of 2009. These expenditures will consist primarily of administrative overhead, personnel costs, costs to complete an ongoing carcinogenicity study and regulatory consulting fees.
Vanda is also evaluating its development pipeline and a number of options to further reduce expenses and cash burn. Vanda will provide additional guidance as soon as its plans are more definitive.
ABOUT VANDA PHARMACEUTICALS INC.:
Vanda Pharmaceuticals Inc. is a biopharmaceutical company focused on the development and commercialization of clinical-stage product candidates for central nervous system disorders. For more on Vanda Pharmaceuticals Inc., please visit http://www.vandapharma.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Various statements in this release are "forward-looking statements" under the securities laws. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," and "could," and similar expressions or words, identify forward- looking statements. Forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. Vanda is at an early stage of development and may not ever have any products that generate significant revenue. Important factors that could cause actual results to differ materially from those reflected in the company's forward-looking statements include, among others: delays in the completion of Vanda's clinical trials; a failure of Vanda's product candidates to be demonstrably safe and effective; Vanda's failure to obtain regulatory approval for its products or to comply with ongoing regulatory requirements; a lack of acceptance of Vanda's product candidates in the marketplace, or a failure to become or remain profitable; Vanda's inability to obtain the capital necessary to fund its research and development activities; Vanda's failure to identify or obtain rights to new product candidates; Vanda's failure to develop or obtain sales, marketing and distribution resources and expertise or to otherwise manage its growth; a loss of any of Vanda's key scientists or management personnel; losses incurred from product liability claims made against Vanda; a loss of rights to develop and commercialize Vanda's products under its license and sublicense agreements and other factors that are described in the "Risk Factors" section (Part II, Item 1A) of Vanda's quarterly report on Form 10-Q for the quarter ended June 30, 2008 (File No. 000-51863). In addition to the risks described above and in Part II, Item 1A of Vanda's quarterly report on Form 10-Q, other unknown or unpredictable factors also could affect Vanda's results. There can be no assurance that the actual results or developments anticipated by Vanda will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Vanda. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.
All written and verbal forward-looking statements attributable to Vanda or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein. Vanda cautions investors not to rely too heavily on the forward-looking statements Vanda makes or that are made on its behalf. The information in this release is provided only as of the date of this release, and Vanda undertakes no obligation, and specifically declines any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
