ROCKVILLE, Md. ( TheStreet) -- Vanda Pharmaceuticals' ( VNDA) schizophrenia drug Fanapt gets rough treatment this week from the expert authors of the newly updated psychiatrists' bible.

A negative-leaning summary of Fanapt's clinical data in schizophrenia is included for the first time in the seventh edition of the Manual of Clinical Psychopharmacology, published this week by the American Psychiatric Association.

The authors of the manual raise concerns about Fanapt's dosing, side effects and high cost compared to other drugs used to treat patients with schizophrenia.

"It is unclear to us exactly where iloperidone is going to fit in the treatment of schizophrenia," the manual's authors conclude, using the scientific name for Fanapt.

A conclusion like that in an influential psychiatric reference book is not likely to help Novartis ( NVS) as it tries to sell Fanapt to doctors who have ample choices in the hyper-competitive schizophrenia drug market.

Novartis did not respond to a request for comment on the Fanapt summary in the Manual of Clinical Psychopharmacology.

Vanda developed Fanapt and got the drug approved in May 2009. In October 2009, Novartis paid Vanda $200 million for the right to sell Fanapt in the U.S. The drug was launched in January. Doctors have been slow to prescribe the Fanapt, however, according to IMS prescription tracking data.

Novartis announced first-quarter Fanapt revenue of $21 million, but wholesaler inventory stocking accounted for most of that amount. Novartis did not break out Fanapt's end-user sales from inventory stocking in its first-quarter financial report. David Moskowitz, drug analyst at Madison Williams, estimates that Novartis only sold about $1 million of Fanapt to schizophrenia patients in the first quarter based on his analysis of the IMS data.

Like Vanda, Titan Pharmaceuticals ( TTNP.PK) also receives royalties based on Fanapt sales so it is similarly affected by the outcome of drug's commercial push.

The Manual of Clinical Psychopharmacology, first published in 1986, is the standard drug reference guide used by psychiatrists. The manual is written by three noted psychopharmacologists to provide clinical reviews and practical advice for the use of drugs in the treatment of psychiatric disease.

The manual's discussion of Fanapt, which belongs to the class of drugs known as second-generation antipsychotics (SGA), is not all kind.

The FDA approved Fanapt in 2009 "unexpectedly" after first rejecting the drug in 2007 due to efficacy and safety concerns, the authors state. The Fanapt entry notes two, phase III studies established Fanapt's efficacy, but then follows with a lengthy discussion of the drug's side effects and dosing issues.

"There are at least two disadvantages of iloperidone Fanapt over other SGAs at this time," the manual entry states. First, patients are required to start treatment with Fanapt at low doses, gradually building up to the maximum dose, in order to avoid problems with low blood pressure. Second, Fanapt has been shown to cause irregular heart rhythm, according to the manual's summary of Fanapt.

The authors of the manual conclude, "It is unclear to us exactly where iloperidone is going to fit in the treatment of schizophrenia. It is not going to be a first-line agent because of the dosing and QTc issues. Iloperidone is going to be more expensive than either first-generation drugs or generic SGAs. Patients who cannot tolerate or respond to other SGAs might be a candidate for iloperidone."

Adds Madison Williams analyst Moskowitz, "The manual's commentary on Fanapt isn't any different from what we're finding in our own research and conversations and surveys with doctors. The safety of these drugs is the first consideration, more than efficacy, so commentary like this will give doctors pause."

Moskowitz downgraded Vanda to "reduce" from "buy" last month and cut his Fanapt sales forecast due to evidence suggesting that Novartis' launch efforts were failing.

Jefferies analyst Corey Davis retained his buy rating on Vanda but cut his price target from $20 to $15. "With Fanapt launching slowly, and reorganization at Novartis, we're a bit more cautious," he wrote.

Fanapt isn't the only new schizophrenia drug to launch in recent months. Merck ( MRK) is also now selling a drug known as Saphris. Both Fanapt and Saphris compete against existing schizophrenia drugs from Johnson & Johnson ( JNJ), Pfizer ( PFE) and AstraZeneca ( AZN), as well as low-cost generics.

Vanda shares are down 3% to $7.93 in recent trading.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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