What happened
Shares of Vanda Pharmaceuticals (VNDA 5.17%), a commercial-stage biotechnology company, jumped in response to the company's second-quarter earnings call. Investors happy about what management had to say drove the stock 26.8% higher on Thursday.
So what
In the first quarter, Vanda reported a steep revenue drop, and investors were glad to see sales are back on track. In the second quarter net sales of Hetlioz, a treatment for non-24-hour sleep-wake disorder, came in 24% higher than during the first quarter. Vanda's schizophrenia drug, Fanapt, rose 13% compared to the first quarter.
Image source: Getty Images.
From the beginning of 2019 through yesterday this stock lost half its value, thanks to a partial clinical hold slapped on a motion-sickness candidate earlier this year by the Food and Drug Administration. The FDA is in a huff because the company failed to include required animal studies, and the stock sank after Vanda announced it would take legal action against the FDA, instead of just meeting the usual requirements for non-rodent animal studies.
Management tried to get investors on board by telling them the sacrificing of dogs is cruel and unnecessary, which doesn't jibe with standard drug development practices. Dogs have blood-brain barriers that are a lot more permeable than ours; the FDA wants to know that an experimental new drug doesn't show up in dog brains, so the agency can be relatively certain that it won't harm humans either.
Now what
Compared to the previous-year period, net revenue rose 25% in the second quarter to $59.1 million. Thanks to a very small outlay for research and development, operations were able to squeeze out a respectable $9.9 million profit.
At the end of June, Vanda's balance sheet had $280 million in cash and securities. While that's more than enough to complete the animal studies the company tried to skip, its very lean operation means this pile will probably continue growing.
