Vanda Pharma Sinks on FDA Rejection - TheStreet

Vanda Pharmaceuticals

(VNDA) - Get Report

said Monday that the Food and Drug Administration rejected its lead drug, iloperidone, and will require another clinical trial and more safety data before it can approve the antipsychotic drug.

Shares plummeted $2.11, or 62.8%, to $1.25.

Specifically, the FDA was concerned about the drug's efficacy in schizophrenia patients relative to

Johnson & Johnson's

(JNJ) - Get Report

Risperdal, a standard drug used comparatively to gauge efficacy. The agency wants a trial comparing the iloperidone to placebo and an active comparator such as

Eli Lilly's

(LLY) - Get Report

Zyprexa or J&J's Risperdal.

The agency also said it would require Vanda to obtain more safety data on iloperidone, marketed as Fanapta, for patients at a dose range of 20 to 24 mg per day.

Some Street speculators, including

TheStreet.com

senior writer and

RealMoney.com

contributor Adam Feuerstein, were skeptical about the drug's prospects of getting approved on the first try without more data. "I base my skepticism on the existing clinical data, which to me, show Fanapta to be a me-too drug on efficacy and a mixed-to-worse side-effect profile," Feuerstein wrote in his

July 18 Biotech-Stock Mailbag

.

However, the "non-approvable" letter still hit some as a surprise. "Based upon Fanapta's clinical package as we understand it, we believe a non-approvable letter is extremely unlikely," wrote Natixis analyst Corey Davis in a note to investors last week. "In our view, final approval is actually not out of the question but first-pass approvals are exceedingly rare, thus we have always conservatively assumed that Fanapta will get an approvable letter."

Vanda's shares were

shaken in June

when the company reported a late-stage study on insomnia drug tasimelte met its main goal but didn't demonstrate statistically significant improvements in secondary endpoints, the measure of sleep duration called total sleep time (TST) and wake after sleep onset (WASO), a sleep-maintenance measurement.

Vanda said Monday that as of June 30 its cash, cash equivalents and marketable securities totaled about $65.6 million.

The company is holding a conference call at 10:30 a.m. EDT to discuss the news.