Bullish Case for Vanda Loses Steam

ROCKVILLE, Md. (TheStreet) -- In June, I spoke with two health care hedge fund analysts who laid out the bull and bear case on Vanda Pharmaceuticals(VNDA Quote) after the company surprised everyone by receiving regulatory approval for its schizophrenia drug Fanapt.

The big debate back then -- and still today -- is whether Vanda will be acquired by a large drug company seeking an easier path into the competitive but lucrative schizophrenia treatment market.

Well, it's been three months since I wrote that story. At the suggestion of a reader, I contacted the same two analysts again to see if their respective bull and bear positions in Vanda had changed, and if so, why.

Sure enough, "Mr. Bull" sold his position in Vanda and is no longer as bullish.

"I simply can't understand why they [Vanda] have not been bought at this point. Seems that if it hasn't happened by now, it's not going to happen, particularly at a huge premium," he told me, via email.

"Mr. Bear" is still growling, although he covered his short position. Which means he growls from the sideline, I guess.

"I'm not short anymore, but I still feel the same away. Fanapt is a me-too drug with no differentiation that will not do well in this [schizophrenia treatment] market," he told me during a recent phone call.

If he's so sure, why not remain short Vanda?

"We covered because I heard talk of Novartis(NVS Quote) being interested in Vanda, but that was back in July," he said, adding that since that time, he's become reasonably confident that Novartis has decided against buying Vanda and he doesn't believe it has any other suitors.