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Vanda Pharmaceuticals, Inc.’s stock price increased almost 96% when the U.S. Food and Drug Administration (FDA) released upbeat briefing documents ahead of the review by its Peripheral and Central Nervous System Drugs Advisory Committee meeting. The FDA panel is scheduled to review the New Drug Application (NDA) for Vanda’s Hetlioz (tasimelteon) on Nov 14, 2013. Shares touched a 52-week high on the news.

The company is looking to get Hetlioz approved for the treatment of non-24-hour disorder in the totally blind. Hetlioz has been granted priority review and a response from the FDA is expected by Jan 31, 2014.

What Does the Briefing Document Say?

The briefing document basically recommends the approval of Hetlioz. The overall benefit-risk analysis revealed that Hetlioz’ benefits are higher than the risks associated with the use of the drug in blind patients suffering from non-24-hour disorder.

Hetlioz demonstrated significant improvement in nighttime sleep and lowered daytime nap duration. The data on Hetlioz support its use for the treatment of circadian rhythm disorders in blind patients with non-24-hour disorder. Additionally, the fact that studies on Hetlioz revealed no major safety issues associated with the use of the candidate was also considered.

Our Take

Hetlioz, if approved, has the potential to generate worldwide peak sales of $500 million taking into account that no FDA approved treatment for non-24-hour disorder is currently available. Hetlioz enjoys orphan drug status in both the U.S. and Europe. Vanda estimates approximately 65,000 to 95,000 individuals in the U.S. suffer from non-24-hour disorder.

We note that the company is already working on access and reimbursement for Hetlioz.

At present, Vanda’s sole approved product is schizophrenia drug, Fanapt. Vanda has licensed the U.S. and Canadian commercial rights to Fanapt to Novartis (NVS - Analyst Report). In the third quarter of 2013, Vanda recorded Fanapt royalty revenues of $2 million.

Vanda carries a Zacks Rank #1 (Strong Buy). Companies like Actelion Ltd. (ALIOF) and Jazz Pharmaceuticals (JAZZ - Analyst Report) also appear to be well placed with a Zacks Rank #1.

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