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Vanda Pharmaceuticals Reports Fourth Quarter and Full Year 2008 Results
Date:2/11/2009

ROCKVILLE, Md., Feb. 11 /PRNewswire-FirstCall/ -- Vanda Pharmaceuticals Inc. (Nasdaq: VNDA), a biopharmaceutical company focused on the development and commercialization of clinical-stage product candidates for central nervous system disorders, today announced financial and operational results for the fourth quarter ended December 31, 2008.

Vanda reported a net loss of $7.5 million for the fourth quarter of 2008, compared to $10.9 million for the third quarter of 2008 and $20.7 million for the fourth quarter of 2007. Total expenses for the fourth quarter of 2008 were $7.7 million, compared to $11.2 million for the third quarter of 2008 and $22.0 million for the fourth quarter of 2007. Research and development (R&D) expenses for the fourth quarter of 2008 were $3.6 million, compared to $3.8 million for the third quarter of 2008 and $12.6 million for the fourth quarter of 2007. The decrease in R&D expenses in the fourth quarter of 2008 relative to the third quarter of 2008 is primarily due to the decrease in stock-based compensation expense for R&D personnel due to the cancellation of unvested options. The decrease in R&D expenses in the fourth quarter of 2008 relative to the fourth quarter of 2007 is attributable to lower clinical trial costs in 2008 compared to costs from trials conducted in 2007. For the full year of 2008, total expenses were $52.8 million, compared to $80.0 million for 2007. Total 2008 R&D expenses were $23.9 million compared to $47.2 million during 2007.

As of December 31, 2008, Vanda's cash, cash equivalents, and marketable securities totaled approximately $46.5 million. As of December 31, 2008, a total of approximately 26.7 million shares of Vanda common stock were outstanding. Net loss per common share for the fourth quarter of 2008 was $0.28, compared to $0.41 for the third quarter of 2008 and $0.78 for the fourth quarter of 2007.

OPERATIONAL HIGHLIGHTS

On November 6, 2008, Vanda submitted a Complete Response to the not approvable action letter that the Company received from the U.S. Food and Drug Administration (FDA) on July 25, 2008 regarding iloperidone. The FDA has indicated that it has accepted the Complete Response for review and has set a new target action date of May 6, 2009.

Pending a response from the FDA, Vanda is concentrating its efforts on the design and evaluation of clinical development options for tasimelteon, its compound for sleep and mood disorders. Results of prior phase II and III clinical trials for tasimelteon were published in the December 2008 issue of The Lancet.

On December 16, 2008, Vanda announced a workforce reduction of 17 employees, including two officers.

FINANCIAL DETAILS

  • Operating Expenses. Fourth quarter 2008 R&D expenses, primarily consisting of salaries and related costs of R&D personnel, including $0.6 million of severance expense and the costs of regulatory consultants, totaled $3.6 million, compared to $3.8 million for the third quarter of 2008 and $12.6 million for the fourth quarter of 2007. The decrease in R&D expenses in the fourth quarter of 2008 relative to the third quarter of 2008 is primarily due to the decrease in stock-based compensation expense for R&D personnel due to the cancellation of unvested options in connection with the workforce reduction. The decrease in R&D expenses in the fourth quarter of 2008 relative to the fourth quarter of 2007 is primarily attributable to lower clinical trial costs in the fourth quarter of 2008 compared to the costs from trials conducted in the fourth quarter of 2007. For the full year of 2008, total R&D expenses were $23.9 million, compared to $47.2 million for the full year of 2007. Lower R&D expenses resulted from the lower clinical trial costs and related manufacturing costs incurred in 2008.

General and administrative (G&A) expenses totaled $4.1 million for the fourth quarter of 2008, compared to $7.4 million for the third quarter of 2008 and $9.5 million for the fourth quarter of 2007. The decrease in G&A expenses in the fourth quarter of 2008 relative to the third quarter of 2008 is primarily due to lower iloperidone pre-commercial launch expenses and the decrease in stock-based compensation expense for G&A personnel due to the cancellation of unvested options in connection with the workforce reduction offset by $1.0 million of severance expense. The decrease in G&A expenses in the fourth quarter of 2008 relative to the fourth quarter of 2007 is primarily due to lower employee stock-based compensation expense and lower iloperidone pre-commercial launch expenses. For the full year of 2008, total G&A expenses were $28.9 million, compared to $32.8 million for the prior year. The year-over-year decrease in G&A expenses is primarily due to decreased stock-based compensation expense and decreased business and commercial development expenses.

Employee stock-based compensation expense recorded in the fourth quarter of 2008 totaled $0.7 million. Of these non-cash charges, $0.6 million was recorded as a reversal R&D expense and $1.3 million was recorded as G&A expense. For the third quarter of 2008 and the fourth quarter of 2007, total stock-based compensation was $3.6 million and $5.2 million, respectively. The decrease in stock-based compensation in the fourth quarter of 2008 relative to the third quarter of 2008 is the result of the net effect of stock-based compensation for the period for existing employees reduced by the reversal of stock-based compensation charges resulting from the cancellation of unvested options in connection with the workforce reduction. The decrease in stock-based compensation in the fourth quarter of 2008 relative to the fourth quarter of 2007 is primarily due to the lower fair market value of options granted in 2008 and the reversal of cumulative amortization of deferred stock-based compensation related to the cancellation of unvested options in connection with the workforce reduction. For the full year of 2008, total stock-based compensation was $13.4 million, compared to $19.5 million for the prior year.

  • Net loss for the fourth quarter of 2008 was $7.5 million, compared to a net loss of $10.9 million for the third quarter of 2008 and $20.7 million for the fourth quarter of 2007. For the full year of 2008, net loss was $51.1 million, compared to $74.1 million for the full year of 2007.

  • Net loss per common share for the fourth quarter of 2008 was $0.28, compared to $0.41 for the third quarter of 2008 and $0.78 for the fourth quarter of 2007. For the full year of 2008, net loss per common share was $1.92, compared to $2.81 for the full year of 2007.

  • Cash and marketable securities decreased by $5.2 million during the fourth quarter of 2008. Changes included $7.5 million of net losses, decreases in accrued R&D expenses and accounts payable of $0.6 million, offset by decreases in prepaid expenses of $1.7 million, $0.8 million in non-cash depreciation, amortization, and stock-based compensation expenses and net decreases in other working capital of $0.4 million.

  • Vanda's cash, cash equivalents and marketable securities as of December 31, 2008 totaled approximately $46.5 million, compared to approximately $51.7 million as of September 30, 2008 and $93.2 million as of December 31, 2007.

FINANCIAL GUIDANCE

Vanda expects its operating cash spend to be approximately $3.8 million for the first quarter of 2009, including $0.8 million for severance payments. The projected $3 million of non-severance costs include administrative overhead, personnel costs, costs to complete an ongoing carcinogenicity study and regulatory consulting fees.

ABOUT VANDA PHARMACEUTICALS INC.:

Vanda Pharmaceuticals Inc. is a biopharmaceutical company focused on the development and commercialization of clinical-stage product candidates for central nervous system disorders. For more on Vanda Pharmaceuticals Inc., please visit http://www.vandapharma.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements in this release are "forward-looking statements" under the securities laws. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," and "could," and similar expressions or words, identify forward-looking statements. Forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. Vanda is at an early stage of development and may not ever have any products that generate significant revenue. Important factors that could cause actual results to differ materially from those reflected in the company's forward-looking statements include, among others: delays in the completion of Vanda's clinical trials; a failure of Vanda's product candidates to be demonstrably safe and effective; Vanda's failure to obtain regulatory approval for its products or to comply with ongoing regulatory requirements; a lack of acceptance of Vanda's product candidates in the marketplace, or a failure to become or remain profitable; Vanda's inability to obtain the capital necessary to fund its research and development activities; Vanda's failure to identify or obtain rights to new product candidates; Vanda's failure to develop or obtain sales, marketing and distribution resources and expertise or to otherwise manage its growth; a loss of any of Vanda's key scientists or management personnel; losses incurred from product liability claims made against Vanda; a loss of rights to develop and commercialize Vanda's products under its license and sublicense agreements and other factors that are described in the "Risk Factors" section (Part II, Item 1A) of Vanda's quarterly report on Form 10-Q for the quarter ended September 30, 2008 (File No. 000-51863). In addition to the risks described above and in Part II, Item 1A of Vanda's quarterly report on Form 10-Q, other unknown or unpredictable factors also could affect Vanda's results. There can be no assurance that the actual results or developments anticipated by Vanda will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Vanda. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

All written and verbal forward-looking statements attributable to Vanda or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein. Vanda cautions investors not to rely too heavily on the forward-looking statements Vanda makes or that are made on its behalf. The information in this release is provided only as of the date of this release, and Vanda undertakes no obligation, and specifically declines any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

                          VANDA PHARMACEUTICALS INC.
                       (A Development Stage Enterprise)

            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


                              Three Months Ended            Year Ended
                            Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,
                              2008         2007         2008         2007
    Revenues from
     services                   $-            $-            $-            $-

    Operating expenses:
     Research and
      development        3,559,543    12,574,735    23,935,541    47,234,867
     General and
      administrative     4,095,118     9,472,938    28,909,580    32,803,508
       Total operating
        expenses         7,654,661    22,047,673    52,845,121    80,038,375

    Loss from
     operations         (7,654,661)  (22,047,673)  (52,845,121)  (80,038,375)

    Interest income        150,642     1,299,076     1,780,880     5,907,219
    Other income                 -             -             -        71,345
       Total other income,
        net                150,642     1,299,076     1,780,880     5,978,564

    Loss before tax
     provision          (7,504,019)  (20,748,597)  (51,064,241)  (74,059,811)
     Tax provision               -          (191)            -         9,879

    Net loss           $(7,504,019) $(20,748,406) $(51,064,241) $(74,069,690)

    Basic and diluted net
     loss per share
     attributable to
     common stockholders    $(0.28)       $(0.78)       $(1.92)       $(2.81)

    Shares used in
     calculation of basic
     and diluted net loss
     per share
     attributable to
     common
     stockholders        26,652,187   26,644,540    26,650,126    26,360,177



                      VANDA PHARMACEUTICALS INC.
                   (A Development Stage Enterprise)

           CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


                                        December 31,  December 31,
                                            2008          2007
    ASSETS
      Current assets:
        Cash and cash equivalents       $39,079,304   $41,929,533
        Marketable securities             7,378,798    43,243,960
        Prepaid expenses, deposits
         and other current assets         1,287,400     1,781,881
          Total current assets           47,745,502    86,955,374

      Marketable securities, long-term            -     7,979,331
      Property and equipment, net         1,758,111     1,345,845
      Deposits                                    -       150,000
      Restricted cash                       430,230       430,230
          Total assets                  $49,933,843   $96,860,780


    LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities:
        Accounts payable                   $512,382    $2,988,069
        Accrued expenses                  2,898,417     9,789,738
          Total current liabilities       3,410,799    12,777,807

      Long-term liabilities:
        Deferred rent                       502,770       354,042
          Total liabilities               3,913,569    13,131,849

      Stockholders' equity:
        Common stock                         26,653        26,653
        Additional paid-in capital      270,988,157   257,600,368
        Accumulated other
         comprehensive income (loss)        (20,029)       12,176
        Deficit accumulated during
         the development stage         (224,974,507) (173,910,266)
          Total stockholders' equity     46,020,274    83,728,931
          Total liabilities and
           stockholders' equity         $49,933,843   $96,860,780



                           VANDA PHARMACEUTICALS INC.
                       (A Development Stage Enterprise)

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Unaudited)


                                                            Year Ended
                                                    December 31, December 31,
                                                        2008          2007

    Cash flows from operating activities:
      Net loss                                    $(51,064,241) $(74,069,690)
      Adjustments to reconcile net income to net
       cash used in operating activities:
        Depreciation and amortization                  530,805       571,586
        Stock-based compensation                    13,387,789    19,622,814
        Loss on disposal of assets                        (173)       28,713
        Accretion of discount on investments          (235,163)   (1,571,905)
        Changes in assets and liabilities:
          Prepaid expenses and other current assets    495,200       168,987
          Deposits                                     150,000             -
          Accounts payable                          (2,475,697)      204,029
          Accrued expenses                          (6,892,577)    3,465,028
          Deferred grant revenue                             -      (147,464)
          Other liabilities                            148,728        86,644
            Net cash used in operating activities  (45,955,329)  (51,641,258)

    Cash flows from investing activities:
      Purchases of property and equipment             (943,659)     (279,433)
      Proceeds from sales of property and
       equipment                                             -       200,179
      Purchases of marketable securities           (14,786,080) (138,953,879)
      Proceeds from sales of marketable securities  11,258,094     3,577,859
      Maturities of marketable securities           47,560,000    86,695,000
            Net cash provided by (used in)
             investing activities                   43,088,355   (48,760,274)

    Cash flows from financing activities:
      Proceeds from exercise of stock options and
       warrants                                              -       148,640
      Proceeds from issuance of common stock, net
       of issuance costs                                     -   111,254,850
            Net cash provided by financing activities        -   111,403,490

      Effect of foreign currency translation            16,745        (1,320)

    Net increase (decrease) in cash and cash
     equivalents                                    (2,850,229)   11,000,638

    Cash and cash equivalents, beginning of period  41,929,533    30,928,895

    Cash and cash equivalents, end of period       $39,079,304   $41,929,533


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SOURCE Vanda Pharmaceuticals Inc.
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