Vanda Pharmaceuticals: Commentary

(added 7/28/08)

Today's nonapprovable letter for Fanapta was not overly surprising. As was discussed in our June review of Vanda Pharmaceuticals:

"Fifteen years and four owners later, iloperidone does not look anywhere as promising as it did in the 1990's. Novartis had partnered with Titan on Hoechst's iloperidone back in 1996, but a huge Phase III program had one arm that failed to show efficacy, and the big problem was that iloperidone was eventually found to have QTc issues nearly identical to, if not worse than, Geodon's. Novartis gave up on it, and licensed the drug to a Novartis alumnus, who founded Vanda. Phase III efficacy results were comparable to Geodon's, but Vanda's aspiration to genomically steer likely responders towards iloperidone, and those likely to have QT problems away from it, have not been reified, at least as of yet. Thus far, the only test that is operational assesses the presence of two versus one intact CNTF-expressing (Ciliary Neurotrophic Factor gene) genes, and thereby parses out the 75% of patients with two intact copies, who are more likely to respond to atypicals (including but no limited to iloperidone) from the 25% with one intact copy, who are treatment-responsive, but not as much. This test is useless in its current form. Based on the data thus far, iloperidone appears to be very similar to Geodon in all respects, other than it appears more prone to rare but worrisome QTc outliers, patients with more pronounced QTc changes, and less prone to akathisia. As is the case with paliperidone, this is another test of the FDAís self-appointed role as guardian against me-too irrelevancy. The question is no longer whether a first-tier marketing partner will eventuate--we doubt that one will--the question is whether iloperidone will even receive marketing approval."

The conference call held by Vanda this morning confirmed that the company does not have the money to carry out the additional clinical trials required by the FDA. Even if they had the money, they do not have the two years needed. The CEO's forthrightness was again on the line when he was asked if there had been any hint of a change in the FDA's requirements vis-a-vis active comparators--stating that Geodon did not need an active comparator trial. That was 2001. If the CEO would care to look at more recent data, the aforementioned lack of FDA enthusiasm for paliperidone is somewhat more pertinent. Vanda has close to $65 million, but a dead lead program in iloperidone, and and lackluster prospects for tasimelteon. Our major question now is how long it will take Vanda to decide that they need to use their cash to acquire/partner something beyond the scant dregs in their pipeline, and whether CEO Polymeropoulos will remain in charge of making that decision.

We would note that at the time of this addendum, the share price for Vanda was US$0.90/share, even though they have US$2.43 per share in cash. While this may make Vanda an appealing trading play, it speaks volumes about the credibility that has been lost by Vanda's management. We suspect that if Vanda has any future as a redesigned/repositioned company, it will be with a change at the top.

(from July/August 2008) (added 7/9/08)

Vanda Pharmaceuticals' announcement that they are partnering with LabCorp on what they describe as "a series of diagnostic tests for genetic markers identified by Vanda in the course of its clinical development of Fanapta" brings us back to a topic we raised in the February issue: When is a test so utterly lacking in discriminatory power that it is nonviable commercially--or perhaps the question should be rephrased as: When is a test so lacking in discriminatory power that it would be unethical to sell it?

There can be no doubt that, while Vanda has become quite constrained in its public comments about the first test in this potential "series", that this test has been framed as if it is specific to Fanapta/iloperidone itself, possibly to be used by prescribers to identify likely responders to Fanapta. But that is not the case. That first genetic test assesses the genes expressing the neurotrophic factor CNTF, and as was reported in a paper published in Pharmacogenomics back in March, patients with two genes expressing intact rather than truncated forms of CNTF did significantly better on Fanapta than did those with one gene expressing a truncated form. This would seem the basis for a pharmacogenomic test directing a genetic subgroup to Fanapta. But, as we discussed at the time, there are some huge caveats here that essentially disembowel the personalized medicine aspect of this test:

1) 75% of the population carries two intact CNTF-expressing genes. Thus 3/4 of the population (the research does not make clear whether there is any divergence in the proportion of individuals with the schizophreniform phenotype that have this genotype from this overall population prevalence) would be given a 'go' signal for Fanapta based on this test. That in itself is unimpressive, only one of four patients would be excluded based on these results.

2) However, the paper also reported that the other 25% also showed improvement from baseline, both on Fanapta and on placebo. The authors referred to this group showing an 'enhanced placebo response', but that remains to be seen. It would be convenient to deem this group to be Fanapta nonresponders, but they did improve, and the placebo option is not available in clinical practice. Thus, based on these data, a prudent prescriber would give Fanapta to all schizophrenic patients regardless of how they did on the test. Which would be good news for Vanda, trying to market Fanapta, but it would beg the question of what the test actually did for the treatment decision-making process, other than attenuate prescriber optimism.

3) But the fact that Vanda discovered this CNTF link while evaluating Fanapta's efficacy does not in itself demonstrate that the test only predicts Fanapta's utility. Vanda as of last year had never run tests assessing whether other antipsychotics also have their efficacy predicted via this CNTF criterion, and at that point indicated they were not planning to run such tests. A perfectly understandable decision from a commercial perspective, though it rests on mushier ethical and scientific ground. If they have done so since, they have yet to make those findings public. There is nothing known publicly that would provide any reassurance that this test would not also provide this same, vague 75/25 discrimination of likely response to other antipsychotics. Whether it would apply equally to all, or just atypicals, or just atypicals that are similar to Fanapta in some fashion (e.g. Geodon), can only be established via testing. In our view, the null hypothesis, that there would be no difference vis-a-vis other antipsychotics, would have to be assumed unless and until shown to be invalid.

The bottom-line is that Vanda appears to be setting the stage to market a genetic test in some association with their hoped-for launch of Fanapta/iloperidone. It is highly unlikely that anything about the test will be on the label, but one can imagine a sales force trying to differentiate Fanapta from the antipsychotic crowd via the implication that this test is on the vanguard of personalized medicine. But it is not. Indeed, in terms of its discriminatory power and ability to provide evidence-based direction of treatment in a specific direction, one might as well use an astrological chart.

(from January 2008)

No one has stepped up to partner iloperidone, not surprising, given that it offers little more than Geodon does, save lower akasthisia scores. In December 2008, we'll know whether the FDA is applying the same higher standard to follow-on schizophrenia drugs as it is now doing with insomnia drugs. Speaking of insomnia, Vanda has initiated Phase III for their melatonin agonist VEC-162. Their wakefulness drug, VS-173, failed to hit its endpoint in a Phase IIa trial, though Vanda claimed that it did show some benefit the next day, and that Provigil had some similar problems early in its development. Based on the later-entrant discrimination we are hypothesizing, that may not be good news. Late in the year, Vanda made an ugly misstep when they announced plans to raise $100 million, only to withdraw the plan the next day, citing market conditions. The net result is that this telegraphed a negative signal regarding iloperidone partnering, dropping the stock price, without gaining Vanda a nickel. There was a lot of headshaking around the industry at that faux pas

(online comment) (added 5/22/07)

Vanda today announced that it had presented data at the American Psychiatric Association meeting showing that iloperidone has a "favorable" akasthisia profile compared to Risperdal. It was an amusing example of pharma spin:

Take iloperidone, compare it to high doses of risperidone (6.8mg qd, compared to optimal dosing of 4mg qd*) and placebo. Conclude that iloperidone is less likely to precipitate akasthisia than excessive doses of the atypical antipsychotic known to have the highest rate of akasthisia--not a hard thing to accomplish. Even more interesting is the finding that the patients on placebo had the same incidence of akasthisia as patients on risperidone (!) Perhaps they should have found a placebo with less D2 binding.

This study is many years old, done by Novartis in 2000-1(?)....If this was the best thing Vanda could find to announce about iloperidone at APA, they shouldn't have bothered. Vanda's VEC-162 for insomnia actually has some potential--they should put more effort and attention on that program rather than spending money on a press release that bears the scent of desperation.

(from J. Psychopharmacology 2006) <<Graphs plotted using these data strongly suggest that doses of around 4 mg daily are optimal. A dose of 2 mg daily consistently produced a lower level of efficacy. Doses of 6 mg or greater produced no additional benefit and doses tend to be less efficacious at 10 mg daily and above. Frequency of extrapyramidal adverse effects increased with dose. The optimal dose of risperidone in relapsed schizophrenia is 4 mg daily. Higher doses are unlikely to improve efficacy and may reduce it. Adverse movement disorders become more common.>>

(online comment) (added 12/7/06)

Just in time for the Christmas season, one has an Easter-type event: iloperidone seemingly rising from the dead. NI has followed iloperidone's journey for more than a decade: from Hoechst Marion Roussel to Titan to Novartis to Vanda. Novartis had fallen just short of NDA status, and then decided iloperidone was not worth adding to the $150 million already spent on it. NI wrote it off, but Vanda's CEO, Novartis alumnus Mihael Polymeropoulos, decided to run an other Phase III. This morning Vanda Pharmaceuticals released preliminary data from the just-completed, 604pt Phase III trial. Unlike Novartis, who first named the iloperidone program ZEUS, then REALIZE, Vanda did not have a clever acronym for its program. Based on what we heard this morning, FLOOZIE (Forward LOOking Zeal In spite of Evidence) comes to mind as a possibility. First, we will review the data as presented:

1) Iloperidone's efficacy "mimicked" the active comparator, which apparently was Pfizer's Geodon

2) loperidone's mean effect upon QTc intervals--the cardiac issue that dogged Geodon for so long, was 11.4 msec. Geodon's average QTc effect is 10msec (smaller numbers are better here). For all practical purposes, the same.

3) Vanda made much of two pharmacogenomic tests given to the test population: The first was a test for a liver function subset which Vanda states affects iloperidone metabolism--the subset with poorer metabolism had a higher mean QTc change, 15.4 msec. Vanda suggests that vulnerable patients can thus be prescreened for this liver function--though we suspect that, even if this subgroup is parsed out, iloperidone's QTC effects will still look a lot like Geodon's. The fact is, its not the mean that might be important (these levels are unlikely to mean anything clinically other than to already cardiac-compromised patients)--its the proportion and extent of outliers. 20% of Geodon patients show more than a 60msec effect--Vanda would only say that what they saw was what they expected....We'd bet it is no better than Geodon's, otherwise they would have said so.

But it's the second pharmacogenomic test that really has juicy implications. Vanda claims that they have identified a gene polymorphism associated with "the pathophysiology of schizophrenia", and states it is seen in 70% of schizophrenics. That in itself would be major news, since researchers have found a panoply of genes with modest association with schizophrenia--a gene associated with that great a majority would be big news--especially since the reference to "pathophysiology" infers a possible causal role. The problem is --this would be huge news in the genetics world, and no one else has heard anything of this gene--and Vanda refuses to identify it.

Vanda takes this a couple of steps further. They state that the 70% of patients with this genetic signature respond "20%" better to iloperidone than does the population as a whole--and that this could be used by psychiatrists to preidentify potential iloperidone responders. Interestingly, when asked whether this polymorphism might also predict response to other antipsychotics in a nonspecific fashion, the CEO stated that this would probably not be the case, due to the different receptor binding profiles of the different drugs. However, Vanda states that they have never tested it with other drugs. If it was our drug, and our test, we would have.

Bottom Line: Iloperidone is looking pretty much identical to Geodon in terms of efficacy and QTc effects. Vanda claims that it could be given once-daily, but their tests were twice-daily, so that remains to be seen. The main avenue to differentiating iloperidone would seem to be the predictive 'responder' testing. The issue here is--Vanda has not provided any information that would assure us that this test has construct validity--that the genotype is actually related to the schizophrenic phenotype. They have also not established specificity, that even if the genotype were pertinent, that the polymorphism would not predict response to any antipsychotic drug similar to iloperidone. And iloperidone is not all that different from its peers--certainly not enough to account for 70% of the population being labeled as differentially responsive to iloperidone. Vanda has indicated that they are not planning to run any trials confirming the predictive validity of their responder test until approval--Yet their stated intent is to market iloperidone on their own (!)--emphasizing the added utility of the responder test. If they haven't established basic validity and specificity for the test, they will not be allowed by the FDA to market iloperidone on that basis.

Which means that the competitive raison d'etre for iloperidone as presented today rests upon a marketing plan that as yet has no established scientific basis, and would thus be illegal unless tests affirming the validity and specificity of that pharmacogenomic distinction are completed. Since they are unlikely to have approval until the end of 2008, and they will not start such trials until then, that means that the marketing plan as defined could not be implemented until...2010. And Vanda would thus be going up against major pharmas like Lilly, JNJ, AstraZeneca, BMS, and Pfizer in the very crowded antipsychotic market, with what they describe as their own "small sales force." This is absolutely nonsensical--unless it is an attempt to set the tone for negotiations--we believe credibility would be a better starting-place.

(from July 06) Vanda was able to float its IPO, albeit for about two-thirds of they had been looking for in January we had predicted they would have to settle for $50 million instead of $75 million, they ended up netting $53 million. Their prospects for now are largely predicated upon the iloperidone Phase III program which will finish during 1H:07. They have brought their BMS-sourced melatonin agonist (VEC-162) into a 400pt Phase III trial for transient insomnia. In a 37 pt PhII for this melatonin agonist, there was a non-dose related improvement in sleep onset (the lowest dose was best), They are optimistic that it might better Rozerem, since it appeared--in that small trial--to enhance both sleep induction and maintenance. Data will be available early in 2007; they hope that will be sufficient to generate a partnership, but would run another trial--and perhaps a pilot trial in depression--if necessary.