WASHINGTON, D.C. ( TheStreet) -- Vanda Pharmaceuticals ( VNDA) tells a pretty compelling story about the development of tasimelteon for the treatment of a rare sleep-pattern disorder that affects blind people. Dig into the company's clinical work on tasimelteon, however, and you'll find a disturbingly large number of irregularities and red flags which should ring alarm bells for any investor betting on the drug's approval. Tasimelteon belongs to the melatonin family of compounds which helps regulate the 24-hour sleep-wake cycle, also known as circadian rhythm. For some people who are totally blind, having no light perception at all knocks the normal, 24-hour circadian rhythm off kilter. Their sleep patterns start to shift -- less sleep at night, more during the day. The medical term for this condition is "non-24 sleep-wake disorder" (non-24) and there are no drugs approved to treat it. Ordinary, over-the-counter melatonin works for many non-24 sufferers (so does an alarm clock) but FDA classifies melatonin as a nutritional supplement, not a drug. Based on results from two phase III studies, Vanda believes tasimelteon is the first drug shown to "entrain" non-24 patients back into a normal circadian rhythm. Tasimelteon also improves sleep performance, the company says. In May, Vanda submitted a U.S. approval application for tasimelteon to treat non-24 disorder. The U.S. Food and Drug Administration has not yet accepted the tasimelteon submission for review or set an official approval decision date. This is where Vanda's tasimelteon story runs off the rails.
Let's dig into these Vanda red flags in more detail. But first, I'll note Vanda executives chose not to respond to questions about tasimelteon's clinical development. The company arranged an interview with Stephen Lockley, a Harvard professor and sleep expert who oversaw the tasimelteon clinical trials. On Tuesday, hours before the interview with Lockley was to take place, a Vanda spokeswoman emailed to say Lockley was called away by an emergency and would be unavailable. Moreover, Lockley was unable to reschedule because he was traveling through the middle of July. If you're intending to seek FDA approval for a drug to treat patients who can't sleep when they should (at night) and sleep too much when they shouldn't (during the day), designing a clinical trial that measures improvement in total sleep time at night makes a lot of sense. Vanda's original study design did just that. Go back to July 2010 when Vanda first started enrolling patients in the phase III "SET" study: Patients diagnosed with non-24 were to be randomized to treatment with either tasimelteon or a placebo. The study's primary endpoint was a comparison of average "nighttime total sleep time" between the two arms. Secondarily, the study was designed to assess tasimelteon's ability to improve other measures of sleep performance, including reductions in day time sleep and overall patient quality of life. In 2012, Vanda's investor presentation began to include a change in the tasimelteon study. Entrainment -- defined as the "the ability to reset the body clock and maintain a 24-hour clock" -- was listed as a co-primary endpoint of the phase III "SET" study along with nighttime total sleep. The change in the tasimelteon study design to include co-primary endpoints was "under discussion with the US FDA," according to Vanda's investor slides, despite the study being underway for two years. In June 2012, entrainment was listed as the sole primary endpoint of the tasimelteon "SET" study. Nighttime total sleep was deleted entirely. In November of the same year, the tasimelteon study design was changed again to analyze co-primary endpoints: 1) entrainment; and 2) a measure of response defined as a "significant improvement... in key clinical measures." This final change was put in place one month before the "SET" study results were analyzed and announced by Vanda in December 2012. The timing of the changes to the tasimelteon study in the middle of 2012 were pushed through at the same time Vanda already had data in hand from the study suggesting the original primary endpoint -- improvement in night time total sleep -- was likely to fail. In mid-2012, Vanda conducted an analysis of 161 blind people with self-reported sleep problems who participated in screening for the phase III "SET" study. Of these patients interested in enrolling into the tasimelteon study, 107 were found to have non-24 and would therefore be eligible, while 54 had "normal" circadian rhythms and therefore could not participate. Sleep performance data, including night time total sleep, was collected for all the patients. The design of Vanda's primary phase III study changed numerous times, including a complete replacement of the primary endpoint just one month before study results were announced. The replacement primary endpoint installed to assess tasimelteon's benefit was created by Vanda and has never been used before in sleep-drug clinical trials, nor was it endorsed by the FDA. Vanda was forced to cut in half the patient enrollment into the tasimelteon clinical trials because totally blind patients with non-24 could not be identified. Even then, Vanda was only able to enroll patients by stretching the clinical definition of non-24. Tasimelteon was only able to demonstrate a benefit for non-24 patients by combining data from two phase III studies. Despite Vanda's claims to the contrary, the phase III studies may have actually failed on their own.