In the first quarter, Vanda Pharmaceuticals (VNDA) spent $15 million on an "awareness campaign" for non-24 sleep disorder and Hetlioz. If you listen to the radio, particularly sports radio, you've no doubt heard the non-24 ads. In the second quarter, Vanda is spending another $15 million on Hetlioz advertising. Total operating expenses in the first quarter totaled $36 million. For the full year, operating expenses will be in the $110-120 million range.
I'm reminding you of the massive amount of money Vanda is spending to launch and market Hetlioz because it's important perspective when thinking about the revenue being generated in return. Of the 220 Hetlioz scripts written to date, half have been filled. If we assume (generously) that Vanda is getting full price for these filled scripts, sales total $9 million on an annualized basis. Of course, Vanda won't get full price for Hetlioz because of discounts, rebates and the need to fund patient access programs.
It's not unusual for upfront costs to swamp revenue generated at the beginning of a new drug launch. (Except if you're Gilead Sciences (GILD) and the drug is Sovaldi.) Still, before you get excited about the 220 Hetlioz scripts written, keep in mind the acquisition cost for those scripts is really high and Vanda has offered no evidence yet to suggest that it can rein in expenses and continue to grow Hetlioz scripts or revenue. Vanda says it will end 2014 with $20-30 million in cash, which doesn't give the company much room to continue funding non-stop non-24 radio and TV ads.
Has my bearish opinion of Vanda changed at all? Nope, not yet.