Vanda Pharmaceuticals Reports Second Quarter 2008 Results

ROCKVILLE, Md., Aug. 5 /PRNewswire-FirstCall/ -- Vanda Pharmaceuticals
Inc. (Nasdaq: VNDA), a biopharmaceutical company focused on the development
and commercialization of clinical-stage product candidates for central nervous
system disorders, today announced financial and operational results for the
second quarter ended June 30, 2008.
Vanda reported research and development (R&D) expenses in the second
quarter of 2008 of $5.5 million, compared to first quarter of 2008 R&D
expenses of $11.1 million and second quarter of 2007 R&D expenses of $10.2
million. The decrease in R&D expenses in the second quarter of 2008 relative
to the first quarter of 2008 is primarily attributable to lower costs in the
Phase III tasimelteon (VEC-162) chronic primary insomnia clinical trial for
which Vanda announced top-line results in June of 2008. The decrease in R&D
expenses in the second quarter of 2008 relative to the second quarter of 2007
is attributable to lower clinical trial costs in 2008 compared to costs from
trials performed in 2007.
Net loss was $13.5 million for the second quarter of 2008, compared to
$19.2 million in the first quarter of 2008 and $16.0 million in the second
quarter of 2007. Net loss per common share for the second quarter of 2008 was
$0.51, compared to $0.72 in the first quarter of 2008, and $0.60 in the second
quarter of 2007.
As of June 30, 2008, Vanda's cash, cash equivalents, and marketable
securities totaled approximately $65.6 million. As of June 30, 2008, the
company had a total of approximately 26.6 million shares of common stock
outstanding.

OPERATIONAL HIGHLIGHTS

iloperidone
On July 28, 2008, Vanda announced the receipt of a not approvable letter
from the U.S. Food and Drug Administration (FDA) in response to its New Drug
Application for iloperidone, an investigational atypical antipsychotic that
was reviewed for the treatment of schizophrenia.
Vanda has put on hold all iloperidone-related activities pending further
review.
Tasimelteon (VEC-162)
On June 26, 2008, Vanda reported positive top-line results for its
tasimelteon Phase III chronic primary insomnia clinical trial. This Phase
III, multi-center, placebo-controlled, 4-week trial evaluated 322 patients
with chronic primary insomnia.
FINANCIAL DETAILS
-- Operating Expenses. Second quarter 2008 R&D expenses, primarily
consisting of salaries and related costs of R&D personnel, stock-based
compensation, and the costs of consultants, materials and supplies associated
with clinical trials and research initiatives, were $5.5 million, down from
$11.1 million in the previous quarter and down from $10.2 million in the
second quarter of 2007. The decrease in R&D expenses in the second quarter of
2008 relative to the first quarter of 2008 is primarily attributable to lower
costs in the Phase III tasimelteon chronic primary insomnia clinical trial for
which Vanda reported the top-line results in June of 2008. The decrease in
R&D expenses in the second quarter of 2008 relative to the second quarter of
2007 is primarily attributable to lower clinical trial costs in the second
quarter of 2008 versus the costs from trials conducted in the second quarter
of 2007.
General and administrative (G&A) expenses totaled $8.5 million in the
second quarter of 2008, down from $9.0 million in the first quarter of 2008,
and up from $7.4 million in the second quarter of 2007. The decrease in G&A
expenses in the second quarter of 2008 relative to the first quarter of 2008
is primarily due to lower employee stock-based compensation expense. The
increase in G&A expenses in the second quarter of 2008 relative to the second
quarter of 2007 is primarily due to increased pre-launch commercial activities
for iloperidone.
Employee stock-based compensation expense recorded in the second
quarter of 2008 was $4.0 million. Of the total $4.0 million of non-cash
charges, $0.7 million was recorded in R&D expenses and $3.3 million was
recorded in G&A expenses. For both the first quarter of 2008 and the second
quarter of 2007, total stock-based compensation was $5.1 million. The decrease
in stock-based compensation from the second quarter of 2008 compared to the
first quarter of 2008 and the second quarter of 2007 is primarily due to the
lower fair market value of options granted in 2008.
-- Net loss for the second quarter of 2008 was $13.5 million. This
compares to a net loss of $19.2 million in the first quarter of 2008, and
$16.0 million in the second quarter of 2007.
-- Net loss per common share for the second quarter of 2008 was $0.51
compared to $0.72 in the first quarter of 2008 and $0.60 in the second quarter
of 2007.
-- Cash and marketable securities decreased by $11.4 million during the
second quarter of 2008. Changes included $13.5 million of net losses and
decreases in accrued R&D expenses and accounts payable of $0.9 million, net
increases in prepaid expenses of $0.9 million, fixed asset purchases of $0.3
million offset by $4.1 million in non-cash depreciation, amortization, and
stock-based compensation expenses and net decreases in other working capital
of $0.1 million.
-- Vanda's cash, cash equivalents, and marketable securities at the end of
the second quarter of 2008 totaled approximately $65.6 million, compared to
approximately $93.2 million as of December 31, 2007.
FINANCIAL GUIDANCE
The company has placed on hold all iloperidone-related activities and is
undertaking steps to minimize its cash burn. The company is also evaluating
all options for its development pipeline and will provide guidance as soon as
its plans are more definitive.
CONFERENCE CALL
The company has scheduled a conference call for today, Tuesday, August 5,
2008 at 10:30 AM ET. During the call, Mihael H. Polymeropoulos, M.D.,
President and CEO, and Steven A. Shallcross, Sr. Vice President and CFO, will
discuss quarterly results and other corporate activities. Investors can call
1-800-259-0251 (domestic) and 1-617-614-3671 (international) prior to the
10:30 AM start time and ask for the Vanda Pharmaceuticals conference call
hosted by Dr. Polymeropoulos. A replay of the call will be available Tuesday,
August 5, 2008, at 12:30 PM ET and will be accessible until Tuesday, August
12, 2008, at 5:00 PM ET. The replay call-in number is 1-888-286-8010 for
domestic callers and 1-617-801-6888 for international callers. The access
number is 98529573.
The conference call will be broadcast simultaneously on the company's Web
site, http://www.vandapharma.com. Investors should click on the Investor
Relations tab and are advised to go to the Web site at least 15 minutes early
to register, download, and install any necessary software. The call will also
be archived on the Vanda Web site for a period of 30 days, through September
4, 2008.
ABOUT VANDA PHARMACEUTICALS INC.:
Vanda Pharmaceuticals Inc. is a biopharmaceutical company focused on the
development and commercialization of clinical-stage product candidates for
central nervous system disorders. For more on Vanda Pharmaceuticals Inc.,
please visit http://www.vandapharma.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Various statements in this release are "forward-looking statements" under
the securities laws. Words such as, but not limited to, "believe," "expect,"
"anticipate," "estimate," "intend," "plan," "targets," "likely," "will,"
"would," and "could," and similar expressions or words, identify forward-
looking statements. Forward-looking statements are based upon current
expectations that involve risks, changes in circumstances, assumptions and
uncertainties. Vanda is at an early stage of development and may not ever
have any products that generate significant revenue. Important factors that
could cause actual results to differ materially from those reflected in the
company's forward-looking statements include, among others: delays in the
completion of Vanda's clinical trials; a failure of Vanda's product candidates
to be demonstrably safe and effective; Vanda's failure to obtain regulatory
approval for its products or to comply with ongoing regulatory requirements; a
lack of acceptance of Vanda's product candidates in the marketplace, or a
failure to become or remain profitable; Vanda's inability to obtain the
capital necessary to fund its research and development activities; Vanda's
failure to identify or obtain rights to new product candidates; Vanda's
failure to develop or obtain sales, marketing and distribution resources and
expertise or to otherwise manage its growth; a loss of any of Vanda's key
scientists or management personnel; losses incurred from product liability
claims made against Vanda; a loss of rights to develop and commercialize
Vanda's products under its license and sublicense agreements and other factors
that are described in the "Risk Factors" section (Part II, Item 1A) of Vanda's
quarterly report on Form 10-Q for the quarter ended March 31, 2008 (File No.
000-51863). In addition to the risks described above and in Part II, Item 1A
of Vanda's quarterly report on Form 10-Q, other unknown or unpredictable
factors also could affect Vanda's results. There can be no assurance that the
actual results or developments anticipated by Vanda will be realized or, even
if substantially realized, that they will have the expected consequences to,
or effects on, Vanda. Therefore, no assurance can be given that the outcomes
stated in such forward-looking statements and estimates will be achieved.
All written and verbal forward-looking statements attributable to Vanda or
any person acting on its behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to herein. Vanda cautions
investors not to rely too heavily on the forward-looking statements Vanda
makes or that are made on its behalf. The information in this release is
provided only as of the date of this release, and Vanda undertakes no
obligation, and specifically declines any obligation, to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.

VANDA PHARMACEUTICALS INC.
(A Development Stage Enterprise)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007

Revenues from services $- $- $- $-

Operating expenses:
Research and
development 5,480,909 10,193,825 16,583,574 20,785,884
General and
administrative 8,454,985 7,449,375 17,414,199 13,682,924
Total operating
expenses 13,935,894 17,643,200 33,997,773 34,468,808

Loss from
operations (13,935,894) (17,643,200) (33,997,773) (34,468,808)

Interest income 441,012 1,659,781 1,306,762 3,093,435
Total other
income, net 441,012 1,659,781 1,306,762 3,093,435

Loss before tax
provision (13,494,882) (15,983,419) (32,691,011) (31,375,373)

Tax provision - 1,604 - 2,410

Net loss $(13,494,882) $(15,985,023) $(32,691,011) $(31,377,783)

Basic and diluted
net loss per share
attributable to
common stockholders $(0.51) $(0.60) $(1.23) $(1.21)

Shares used in
calculation of basic
and diluted net loss
per share attributable
to common
stockholders 26,649,439 26,567,160 26,648,892 25,978,437

VANDA PHARMACEUTICALS INC.
(A Development Stage Enterprise)

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

June 30, 2008 December 31, 2007

ASSETS
Current assets:
Cash and cash equivalents $56,503,815 $41,929,533
Marketable securities 6,564,684 43,243,960
Prepaid expenses, deposits and
other current assets 2,030,329 1,781,881
Total current assets 65,098,828 86,955,374

Marketable securities, long-term 2,557,411 7,979,331
Property and equipment, net 2,021,374 1,345,845
Deposits 150,000 150,000
Restricted cash 430,230 430,230
Total assets $70,257,843 $96,860,780

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,825,757 $2,988,069
Accrued expenses 3,856,127 9,789,738
Total current liabilities 9,681,884 12,777,807

Long-term liabilities:
Deferred rent 490,776 354,042
Total liabilities 10,172,660 13,131,849

Stockholders' equity:
Common stock 26,653 26,653
Additional paid-in capital 266,674,962 257,600,368
Accumulated other comprehensive
income (loss) (15,155) 12,176
Deficit accumulated during the
development stage (206,601,277) (173,910,266)
Total stockholders' equity 60,085,183 83,728,931

Total liabilities and
stockholders' equity $70,257,843 $96,860,780

VANDA PHARMACEUTICALS INC.
(A Development Stage Enterprise)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended
June 30, June 30,
2008 2007

Cash flows from operating activities:
Net loss $(32,691,011) $(31,377,783)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 259,707 293,660
Stock-based compensation 9,074,594 9,323,664
Loss on disposal of assets 211 -
Accretion of discount on investments (195,911) (859,296)
Changes in assets and liabilities:
Prepaid expenses and other current
assets (247,729) (1,354,085)
Accounts payable 2,425,921 (183,682)
Accrued expenses (5,979,353) (33,290)
Other liabilities 136,734 (13,661)
Net cash used in operating
activities (27,216,837) (24,204,473)

Cash flows from investing activities:
Purchases of property and equipment (479,581) (202,683)
Purchases of marketable securities (2,081,121) (93,239,541)
Proceeds from sales of marketable
securities 4,875,076 -
Maturities of marketable securities 39,460,000 23,025,000
Net cash provided by (used in)
investing activities 41,774,374 (70,417,224)

Cash flows from financing activities:
Proceeds from exercise of stock options
and warrants - 79,587
Proceeds from issuance of common stock,
net of issuance costs - 111,254,850
Net cash provided by financing
activities - 111,334,437

Effect of foreign currency translation 16,745 (10,678)

Net increase in cash and cash equivalents 14,574,282 16,702,062

Cash and cash equivalents, beginning
of period 41,929,533 30,928,895

Cash and cash equivalents, end of period $56,503,815 $47,630,957

SOURCE Vanda Pharmaceuticals Inc.

Steven A. Shallcross, Senior Vice President, Chief Financial Officer of Vanda
Pharmaceuticals Inc., +1-240-599-4500, steven.shallcross@vandapharma.com