Shares of Vanda Pharmaceuticals fell 73 percent yesterday to its lowest level since going public two years ago after the Rockville company said the U.S. Food and Drug Administration rejected its schizophrenia drug, known as iloperidone.
In a letter to the company, the FDA said it would require two additional clinical trials for approval, one to test iloperidone's efficacy in conjunction with another drug and one to gather more safety data. During a conference call yesterday, Vanda Chief Executive Officer Mihael H. Polymeropoulos said that would be impossible.
"Under the capital available to the company today, we will not be able to conduct both, I can tell you that," Polymeropoulos said, adding later that the company is examining possible partnerships and divestitures. For now, all iloperidone activity is suspended.
"I would say first things first," he said. "Over the next few weeks we need to understand the content of this letter."
Vanda plans to meet with FDA representatives to discuss its options. The company's shares dropped $2.46 to close at 90 cents yesterday on the Nasdaq.
The company also is developing a drug to treat insomnia.
In 2006, Vanda was pointed to as a success story in the biotech world. Its shares soared 155 percent that year after opening at $10 apiece during its April 12 initial public offering. Its biggest boost came in December 2006 when the company announced positive clinical trial results for iloperidone, sending the stock price up 68 percent in a single day.
Days later, Vanda insiders and a venture capital firm connected to the company's chairman sold more than $63 million worth of stock, according to Bloomberg News. The news wire pointed out that the company did not disclose that iloperidone had previously been "cast aside by three drugmakers" and that it isn't more effective than "the least successful of the latest class of schizophrenia medicines on the market."
Since then, Vanda's shares briefly topped $30 in early 2007, but they've remained under the $10 mark since November.
If the company were to raise the money to conduct the required trials, they could take as long as two years to complete, Polymeropoulos said.
"We're at a time in the company's life where some potentially difficult decisions are going to have to be made," said pharmaceutical analyst Frank Pinkerton, of Banc of America Securities.