Vanda's Fanapt, Pipeline Getting In Rhythm With Hetlioz; Jefferies Assumes At Buy

While Vanda Pharmaceuticals Inc. VNDA have appreciated 38 percent since the favorable U.S. Fanapt IP ruling on August 25, Jefferies’ Matthew J. Andrews believes that there could be potential for long-term upside to the stock.

Andrews initiated coverage of the company with a Buy rating and price target of $23.

Long Term Upside

The analyst expects the stock to see long-term upside from “1) continuing improvement in U.S. Fanapt sales/scrips, 2) steady growth of Hetlioz in the U.S./EU-5, and 3) pipeline contributions from Hetlioz in Jet Lag Disorder (JLD) and tradipitant in gastroparesis starting in 2019/2021.”

Andrews also believes that 2017 would be a crucial year for Vanda, given that readouts on four Phase II/III trials are expected.

Hetlioz

The analyst expects steady growth going forward for Hetlioz, with average annual growth of 26 percent through 2021.

“While the EU-5 launch will run through 2018 and poses some potential challenges with drug pricing and DTC headwinds, we expect the region to contribute meaningfully,” Andrews stated, while estimating revenue of $587 million for Hetlioz in 2033.

Fanapt

Following the positive ruling on the Fanapt IP, the analyst now believes that its revenue runway extends to May 2028.

Andrews expects Vanda to invest in the business in 2017, “by doubling sales reps to 100, that it realizes at least a 2x return on this investment by 2020, and sales grind up to $140M+ by 2028.”

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