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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Surprising Approval for Vanda's Fanapt

Stocks in this article: VNDA

Updated from 10:24 a.m. EDT

Hell froze over Wednesday night, right before a squadron of flying pigs took to the sky. These things must be true because the U.S. drug regulators also approved Vanda Pharmaceuticals' (VNDA) treatment for schizophrenia.

The surprising -- some would say shocking -- approval of Vanda's drug Fanapt by the Food and Drug Administration sent shares of the company leaping more than 800% in Wednesday's after-hours trading session to just under $10 a share.

And no, that's not a typo. 800%. You read that correctly.

Wall Street had long ago left Fanapt for dead after the FDA rejected the drug in July 2008. The "not approvable" letter issued by the FDA at that time raised concerns about the efficacy of Fanapt and asked Vanda to conduct a new clinical trial and collect additional safety data.

Vanda didn't run a new clinical trial for Fanapt, choosing instead to resubmit the drug to the FDA last November with additional data from its existing clinical trials.

To say that investors considered this strategy to be long shot would be an understatement. Vanda's stock price fell well below $1, which valued the company at less than its cash on hand. Analysts either dropped coverage or downgraded the stock to a sell. The company was forced to lay off employees and cut back on other drug research programs.

On top of all that, activist hedge fund Tang Capital Partners bought up 3.96 million Vanda shares, or just under 15% of the company, and started a proxy fight for board seats in order to force Vanda to shut down and liquidate the remaining assets back to shareholders.

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