HC Wainwright Sees Value in Vanda Pharmaceuticals (VNDA), Initiating Coverage with a ‘Buy’ Rating
Investment firm HC Wainwright has initiated coverage on Vanda Pharmaceuticals (VNDA), a commercial-stage biopharmaceutical company specializing in neurological and neuropsychiatric disorders, with a ‘Buy’ rating and a price target of $18. This bullish stance stems from HC Wainwright’s assessment of Vanda’s strong commercial portfolio, which includes multiple line extensions and life cycle management (LCM) opportunities across its three key franchises: Fanapt, Hetlioz, and Ponvory.
The analyst emphasizes the promising pipeline of Vanda’s programs, highlighting the potential for numerous significant clinical and regulatory milestones over the next 6 to 18 months. Vanda’s current valuation is deemed surprising by the analyst, as it trades at a nearly 30% discount to its cash reserves, resulting in a negative enterprise value. This, despite the company’s robust sales and projected profitability runway through late 2026, even if only a portion of its clinical and commercial projects succeed.
Navigating Challenges and Opportunities
While Vanda’s value proposition is undeniable, it has been somewhat obscured by ongoing generic competition within its sleep disorder portfolio centered around Hetlioz (tasimelteon) and a recent FDA Complete Response Letter (CRL) for tradipitant in gastroparesis. While Hetlioz is projected to generate approximately $75 million in sales in 2024, its sales are expected to decline after 2028. However, ongoing litigation could potentially slow generic entry, and Vanda is exploring expanding tasimelteon’s indications.
M&A Interest and Undervaluation
Vanda has been the subject of recent M&A interest. In October 2023, Cycle Pharmaceuticals submitted a proposal to acquire Vanda for an all-cash consideration of $8.00 per share, which Vanda declined. Earlier in the year, Future Pak withdrew its offer to purchase the company. These past offers, according to HC Wainwright, underscore Vanda’s intrinsic undervaluation and suggest that it could become an attractive M&A target for one or more mid-size pharmaceutical firms if its near- and medium-term pipeline and product portfolio initiatives prove successful.
A Positive Outlook
Despite the challenges, HC Wainwright maintains a positive outlook on Vanda. The analyst highlights the company’s negative enterprise value, despite the continued traction of its marketed products and the risk-mitigated nature of its pipeline and LCM initiatives. This, according to the analyst, makes it difficult to envision substantial downside risk from current levels.
Vanda’s Stock Performance
On Friday, VNDA stock closed up 0.87% at $4.69.
This news follows closely on the heels of reports surrounding Apple’s satellite connectivity provider, Globalstar (GSAT), which saw its stock surge after an extension of its deal with Apple.
