Q1 2023 Vanda Pharmaceuticals Inc Earnings Call
Participants
Kevin Patrick Moran; Senior VP, CFO & Treasurer; Vanda Pharmaceuticals Inc.
Mihael H. Polymeropoulos; Founder, President, CEO & Chairman of The Board; Vanda Pharmaceuticals Inc.
Timothy Williams; Senior VP, General Counsel & Secretary; Vanda Pharmaceuticals Inc.
Presentation
Operator
Good afternoon. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Q1 2023 Vanda Pharmaceuticals Inc. Earnings Conference Call. Today's conference is being recorded. (Operator Instructions) I'd now like to turn the call over to Vanda Pharmaceuticals' Chief Financial Officer, Kevin Moran. You may begin your conference.
Kevin Patrick Moran
Thank you, David. Good afternoon, and thank you for joining us to discuss Vanda Pharmaceuticals' first quarter 2023 performance. Our first quarter 2023 results were released this afternoon and are available on the SEC's EDGAR system and on our website, www.vandapharma.com. In addition, we are providing live and archived versions of this conference call on our website. Joining me on today's call is Dr. Mihael Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board; and Tim Williams, our General Counsel.
Following my introductory remarks, Mihales will update you on our ongoing activities. I will then comment on our financial results before opening the lines for your questions. Before we proceed, I would like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of federal securities laws. Our forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances and uncertainties.
These risks are described in the cautionary note regarding forward-looking statements, risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other filings with the SEC, which are available on the SEC's EDGAR system and on our website.
We encourage all investors to read these reports and our other filings. The information we provide on this call is provided only as of today, and we undertake no obligation to update or revise publicly any forward-looking statements we may make on this call on account of new information, future events or otherwise, except as required by law. With that said, I would now like to turn the call over to our CEO, Dr. Mihales Polymeropoulos.
Mihael H. Polymeropoulos
Thank you very much, Kevin, and good afternoon, everyone. Thank you for joining us to discuss Vanda's first quarter 2023 results. I will first discuss key highlights from our clinical programs. And then I will ask our General Counsel, Mr. Tim Williams, to provide a brief update on litigation matters before turning the call over to Kevin to discuss our commercial progress and financial results. The first quarter has been both, busy and challenging. The at-risk launch of generic tasimelteon had a significant impact on the performance of HETLIOZ and the services to our patients as well as on our operations as a whole.
We expect the challenges to continue, and we await the decision on our patent litigation from the Federal Circuit Court of Appeals. Nonetheless, we are committed to serving our patients and prescribers for both FDA approved HETLIOZ indications. This quarter has been exceptionally busy on the research and development front. Following the highly positive results for Fanapt in bipolar I disorder, we're working on the submission of a supplemental NDA for the addition of the bipolar indication to the Fanapt label.
We believe that expansion of the Fanapt label will potentially allow us access to a large commercial opportunity as the number of patients with bipolar disorder far exceed that for patients with schizophrenia. For HETLIOZ, we expect to request a label expansion to include the treatment of patients with insomnia who experienced difficulties following the slip. In support of this application, we're including 3 studies, including a 4-week study in patients with insomnia and 2 (inaudible).
We believe that HETLIOZ has a potentially compelling profile for treating patients with this type of insomnia and could represent a significant clinical advance as well as a significant commercial opportunity. In addition to these 2 supplemental NDAs, we are preparing the submission of a new drug application for tradipitant in gastroparesis. In support of this application, we'll be submitting to the FDA, results of 3 clinical studies that we believe demonstrate substantial evidence of efficacy of tradipitant in this indication as well as the safety database to support the tolerability of this drug.
The expanded access program is ongoing with multiple patients treated for at least 6 months in the (inaudible) more than 2 years. We expect to complete our submission in the coming months. In addition to these 3 planned regulatory submissions, we're expecting the results of our pivotal motion sickness study with tradipitant by mid-2023. Besides these late-stage advances, we're also proceeding with early-stage programs, including the study of social performance anxiety with VQW-051.
As we are focused in the short term on our 3 regulatory filings, we're also diligently pursuing a broader regulatory strategy aimed at increased transparency and accountability of our regulatory agency that is designed to facilitate an (inaudible) innovation in the service of people's happiness. With that, I will turn over the call to our General Counsel, Tim Williams. Tim?
Timothy Williams
Thank you, Mihales. I'll provide a brief recap of our ongoing litigation efforts, all of which are currently matters of public record, starting with our actions regarding HETLIOZ intellectual property and generic competition. In our HETLIOZ ANDA litigation, the Federal Circuit held an oral argument in March reviewing the Delaware District Court's ruling. As Mihales mentioned, we're awaiting the Federal Circuit's decision. In the meantime, we continue to pursue multiple causes of action involving the manufacturers of generic tasimelteon, including Teva and Apotex.
The first of these is a patent infringement suit currently pending in Delaware relating to a HETLIOZ method of treatment patent that was not part of our 2022 trial. Second is a citizen's petition and related lawsuit challenging the FDA's approval of Teva's generic tasimelteon, which does not contain (inaudible), representing a safety risk to those patients who have come to rely on the (inaudible) packaging included with HETLIOZ since its launch in 2014.
Third, we have sued Teva for violations of aducanumab act based on problematic aspects of Teva's at-risk launch of generic tasimelteon. And fourth, we have filed a citizen's petition with the FDA, challenging the approval of Teva's generic tasimelteon based on inadequate bioequivalent testing. I'll shift now to our other regulatory litigation efforts. We continue to pursue a variety of regulatory actions in an effort to hold regulators, particularly the FDA, accountable to the law.
For example, we recently discovered what we believe to be a systematic improper misuse of our confidential information by the FDA to assist generic manufacturers in their ANDA approvals of both, HETLIOZ and Fanapt. We filed a complaint earlier this week in the court of federal claims, seeking monetary recovery for damages caused by this misconduct. Separately, over the last year, we filed 6 (inaudible) lawsuits against the FDA. These suits arise from (inaudible) requests made to the FDA, many of which have gone unacknowledged or unanswered for longer than 1 year.
In one of these cases, the D.C. District Court recently ruled in our favor and ordered the FDA to provide us with the medical and statistical reviews of our unapproved sNDA for HETLIOZ and [jetlag.] This was a significant victory for the principle of transparency and FDA decision making, and we intend to continue demanding this type of transparency from the FDA. Finally, we are continuing our other ongoing cases against regulators. First is our case against the FDA for improper denial of our Fast Track designation for tradipitant in gastroparesis.
Second is our case against the FDA, compelling it to meet the (inaudible) requirements of the Food Drug and Cosmetic Act with respect to an administrative hearing for the denial of our jetlag sNDA for HETLIOZ. And last, we have appealed to the Fourth Circuit Court of Appeals, the recent adverse ruling in our lawsuit against CMS, challenging the line extension rule. We intend to continue holding regulators accountable to the law and protect the interest of Vanda shareholders and the patients we serve. With that, I'll turn it back to you, Mihales.
Mihael H. Polymeropoulos
Thank you very much, Tim. I will ask now Kevin to discuss our commercial progress and financial results. Kevin?
Kevin Patrick Moran
Thank you, Mihales. I will begin by summarizing our first quarter 2023 financial results. Total revenues for the first quarter of 2023 were $62.5 million, a 4% increase compared to $60.2 million for the first quarter of 2022. HETLIOZ net product sales were $39.6 million for the first quarter of 2023, a 7% increase compared to $37 million in the first quarter of 2022. The at-risk launch of a generic version of HETLIOZ had a significant impact on HETLIOZ performance during the first quarter of 2023. HETLIOZ net product sales for the first quarter of 2023 reflect higher unit sales as compared to recent periods.
The higher unit sales during the first quarter of 2023 resulted in a significant increase of inventory stocking at specialty pharmacy customers. HETLIOZ net product sales will likely decline in future periods, potentially significantly related to the at-risk launch of a generic version of HETLIOZ in the U.S., including the reduction of the elevated inventory levels at specialty pharmacy customers at March 31, 2023. Turning to Fanapt. Fanapt net product sales were $22.9 million for the first quarter of 2023, a 1% decrease compared to $23.2 million in the first quarter of 2022. Fanapt net product sales in the first quarter of 2023 decreased by 6% as compared to $24.4 million in the fourth quarter of 2022.
The Fanapt prescriptions in the first quarter of 2023 as reported by (inaudible) decreased by approximately 1% compared to the fourth quarter of 2022. For the first quarter of 2023, Vanda recorded net income of $3.3 million compared to a net loss of $6.4 million for the first quarter of 2022. Net income for the first quarter of 2023 included an income tax provision of $2.3 million as compared to an income tax benefit of $1.1 million for the same period in 2022. Operating expenses in the first quarter of 2023 were $60.5 million compared to $67.9 million in the first quarter of 2022.
The $7.4 million decrease was primarily driven by lower SG&A expenses related to spending on marketing activities and support of our commercial products and ongoing litigation and lower R&D expenses related to the late-stage Fanapt development program, partially offset by expenses related to the late-stage (inaudible) development program and our early-stage ASO program. Operating expenses in the first quarter of 2023 increased by $2.6 million as compared to $57.9 million in the fourth quarter of 2022.
This increase was primarily driven by higher SG&A expenses related to ongoing litigation and other corporate expenses, partially offset by lower spending on marketing activities in support of our commercial products and lower cost of goods sold due to the decrease in the royalty rate owed to BMS on HETLIOZ net product sales from 10% to 5%, which was effective in December of 2022. Vanda's cash, cash equivalents and marketable securities, referred to as cash, as of March 31, 2023, were $501.5 million, representing an increase of $66.3 million or 15% compared to March 31, 2022, and an increase of $34.6 million or 10% as compared to December 31, 2022.
Given uncertainties surrounding the U.S. market for HETLIOZ for the treatment of NON-24 as a result of the ongoing HETLIOZ patent litigation and the at-risk launch of a generic version of HETLIOZ, Vanda is unable to provide 2023 financial guidance at this time. Vanda will continue to evaluate its ability to provide financial guidance as the year progresses. With that, I'll now turn the call back to Mihales.
Mihael H. Polymeropoulos
Thank you very much, Kevin. At this point, we'll be happy to answer any questions you may have.
Operator
(Operator Instructions) I'll now turn the call back over to Vanda management for any additional or closing remarks.
Mihael H. Polymeropoulos
Thank you very much. And thank you all for joining.
Operator
This concludes today's conference call. You may now disconnect.
