Vanda Ripe for Picking, or Dead on the Vine?

The bulls-eye view of Vanda Pharmaceuticals(VNDA Quote): The company's newly approved schizophrenia drug Fanapt will prove to be an irresistible acquisition target for a larger drug company seeking to tap into the $15 billion U.S. antipsychotic drug class.

And from the bears: Potential buyers will sniff at Fanapt but pass because health care reform, the looming threat of cheaper generics and the high cost of marketing a schizophrenia drug all conspire to make Fanapt a money-losing product.

Two divergent opinions of Vanda, each from a health care hedge fund analyst who spoke to me last week. Neither of them is allowed to be quoted publicly.

The first analyst, the bull, is buying Vanda's stock at current prices because he thinks an acquisition of the company is coming and the stock could double from here.

The bearish analyst is shorting Vanda's stock because he believes there will be no acquisition, forcing the company to raise cash dilutively in order to sell the drug on its own. Which it won't do very successfully, he says.

For those not yet aware, Vanda is the Cinderella story of 2009 after the U.S. Food and Drug Administration approved Fanapt on May 6 -- a decision that shocked and surprised just about everyone. Since then, Vanda shares are up 1,094%, closing Friday at $12.90.

But now Vanda must figure out how to market Fanapt, which as a schizophrenia drug will compete against similar drugs from Eli Lilly(LLY Quote), AstraZeneca(AZN Quote) and Pfizer(PFE Quote), among others.