Surprising Approval for Vanda's Fanapt

Vanda has been resisting Tang's efforts, but after Wednesday, the proxy fight seems moot. Vanda has an approved drug for schizophrenia that will compete in a $23 billion market for antipsychotic drugs, according to IMS Health.

And Tang, instead of fighting for Vanda table scraps, gets to enjoy the whole meal with an extra dessert now that its stake in the company has risen in value exponentially.

Also benefiting from Wednesday's Fanapt approval was RA Capital. The Boston-based hedge fund owns 1.54 million shares of Vanda, or 5.8% of the company, according to Securities and Exchange Commission filings. RA Capital was hit hard last week by the steep drop in the value of genetic test maker Sequenom(SQNM).

It will be interesting to see if Vanda can sustain the stunning gains made in its stock price Wednesday night given what might be a tough competitive sales environment for Fanapt.

The FDA's approval of the drug was based on two studies in which Fanapt performed better than placebo, but the drug doesn't stack up as well against existing schizophrenia treatments, including Johnson & Johnson's (JNJ) Risperdal and Pfizer's(PFE) Geodon.

Risperdal is now sold in a generic form, which means Fanapt faces a low-priced competitor at a time when the recession is forcing patients to cut back on drug spending. And the drug was never compared against AstraZeneca's(AZN) Seroquel, the leading antipsychotic drug used to treat schizophrenia.

Vanda shares rose 625.9% to $7.84 in Thursday trading.

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