Vanda Pharmaceuticals could have a December to remember thanks to another positive data readout yesterday, its second this month. This time around the success was in the developmental disorder Smith-Magenis syndrome, concerning Hetlioz, a drug already approved for treating non-24-hour sleep wake disorder.
However, the win was not unequivocal, the study having missed one of two co-primary endpoints. This, together with concerns over the size of the opportunity and Vanda’s already bloated $1.5bn valuation, resulted in a muted 4% share price increase on Nasdaq yesterday.
The disconnect between a stock that has nearly doubled this year and reality is obvious: in its approved use Hetlioz generated sales of just $90m last year, and sellside consensus is for 2024 revenues to hit $373m, which EvaluatePharma computes as giving the asset an NPV of $839m.
Still, Stifel analysts said their interaction with key opinion leaders suggested a real opportunity in Smith-Magenis syndrome (SMS), a behaviour disorder that affects children and can persist into adulthood. They assume a 2020 approval and $445m in peak SMS sales, and said Vanda should have been up 25% on the data.
In the trial Hetlioz, a melatonin receptor agonist, generated a statistically significant improvement over placebo in improvement in sleep quality, measured over baseline in the worst 50% of sleep and based on a daily diary kept by patients’ parents.
However, it missed significance on its second primary, improvement in sleep duration, also in the worst 50% of sleep. Because of this miss the statistical relevance of other endpoints yielding p values below 0.05 is not entirely clear, and Vanda said these were not adjusted for multiplicity.
The group was careful to call these other improvements “significant”, but on a call yesterday stated that the primary endpoints were “not co-primary ... If you won on either one that would actually suggest that you won your prespecified primary endpoint.”
|Vanda sleeping better at night with Smith-Magenis data (NCT02231008)|
|Endpoint||Placebo-adjusted improvement||P value||Statistically significant?|
|Sleep quality (scale 1-5)|
|DDSQ worst 50%*||0.4||0.0139||Yes|
|Sleep duration (mins)|
|DDTST worst 50%*||18.5||0.0556||No|
|DDTST overall||21.1||0.0134||Not clear|
|Actigraphy TST worst 50%||19.9||0.0309||Not clear|
|Actigraphy TST overall||18.2||0.0218||Not clear|
|*Primary endpoint. Source: Vanda Pharmaceuticals.|
Impaired sleep is a symptom of SMS, contributing to cognitive and behavioural issues. The Hetlioz trial also measured aberrant behaviour, but no significant effect was seen here, likely owing to the relatively short four-week duration of this study.
Last week Vanda reported positive phase II data in gastroparesis with a separate project, tradipitant (One down, one to go for Vanda’s year-end data blitz, December 4, 2018).
Sleep medications are sometimes used to treat SMS, but Hetlioz has won FDA orphan drug designation, which should help Vanda gain approval, not to mention patients after launch. The company hopes to submit a US application next year, but admits that it has yet to consult the FDA regarding the appropriateness of its dataset.
The SMS trial was originally to have enrolled 48 subjects and measured improvement according to a different measure, the CGI-S scale. This proved impossible to run, partly because of parents’ reluctance to take children off current medication and risk receiving placebo.
Vanda ultimately ended up running the study using a crossover design, whereby 25 subjects got active treatment as well as placebo, with a one-week washout in between. The fact that it took the group four years to run this study had led to investor concerns that there was no market for SMS.
On the call Vanda stressed how difficult it was to run any trial in SMS, let alone one that it hailed as “the largest placebo-controlled study ever conducted demonstrating significant sleep improvements in patients with SMS”.