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Exclusive: Vanda Pharmaceuticals prepares to explore a sale - sources

(Reuters) - Vanda Pharmaceuticals Inc VNDA.O, a U.S developer of medicines for the central nervous system, is preparing to consider strategic alternatives including a potential sale, according to people familiar with the matter.

The move illustrates how Vanda is seeking to capitalize on an anticipated wave of deal making in the sector. Advances in treating several serious neurological diseases have attracted interest and resources from major drug makers.

Vanda is holding conversations with investment banks about appointing a financial adviser to help it review its options, the people said this week. Vanda has explored selling itself in the past, and there is no certainty the latest move will result in any deal, the people cautioned.

The sources asked not to be identified because the deliberations are confidential. Vanda declined to comment. The company’s shares jumped as much as 16 percent on the news and ended trading on Thursday up 7 percent at $16.62, giving Vanda a market capitalization of $719 million.

Washington, D.C.-based Vanda makes two neurological drugs, Hetlioz and Fanapt, which treat sleep disorders and schizophrenia, respectively. Together, they brought in about $100 million in revenues in 2015.

Vanda is researching wider indications for Hetlioz, including its potential use in treating sleep disturbances associated with Smith-Magenis syndrome, a rare genetic disorder.

Vanda is also working on a drug that has the potential to treat a severe form of dermatitis. It is in phase two clinical trials.

Earlier this summer, a court ruled in favor of Vanda in its lawsuit against Roxane Laboratories Inc, a generic drug maker that challenged Fanapt’s patent protection. Vanda now enjoys patent protection for Fanapt through 2027.

In a sign that deal making in the sector is picking up, Arbor Pharmaceuticals acquired XenoPort Inc, a developer of neurological drugs, in July for $467 million, a 60 percent premium to the closing price of its shares before the deal was signed.

Several other central nervous system drug makers have attracted takeover interest in recent weeks, including GW Pharmaceuticals Plc GWP.L, which has a drug that promises to treat rare forms of epilepsy, Reuters reported earlier this month.

Depomed Inc DEPO.O, whose drug Nucynta treats pain, is also preparing to explore a sale, Reuters reported last week.

In recent months, Allergan Plc AGN.N, one of the biggest players in the central nervous system sector, has been seeking to deploy around $20 billion in cash gleaned from a recent deal with Teva Pharmaceuticals TEVA.TA.

Reporting by Carl O’Donnell in New York; Editing by Alan Crosby and Chizu Nomiyama

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