4. Vanda Pharmaceuticals (VNDA - Get Report) has an unusual model for biotech. Rather than licensing internal research to larger pharmaceutical companies, it in-licensed two pipeline candidates from established peers. Fanapt, an anti-schizophrenia drug, was approved in May 2009 by the Food and Drug Administration. Thus, Vanda's strategy has worked so far, but it must pay hefty royalties on approved drug Fanapt to partner Novartis. Its other candidate, Tasimelteon, is for sleep and mood disorders, with potential applications for insomnia and depression.
Morningstar is less optimistic about Tasimelteon's potential than it is about Fanapt's. And Fanapt is entering a heavily contested anti-psychotic drug market. Nevertheless, prescriptions continue to strengthen on a month-over-month basis.