Ebb & Flow

What a difference a product approval makes. Activist investor Kevin Tang terminated his threatened proxy battle with Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) and withdrew his proposal to liquidate the company after FDA approved the biotech's Fanapt iloperidone to treat schizophrenia last week.

FDA had issued a not approvable letter in July 2008, which the company had initially expected would require an additional two years of testing to address.

On Thursday, Vanda gained $6.76 (626%) to $7.84. The stock finished the week up $7.38 (690%) to $8.45. That is nowhere near the high of $19.34 on Oct. 16, 2007, which followed the original NDA submission in September 2007. But the $225 million market cap the company finished with last week is far better than the $19 million Vanda was valued at when Tang began his battle in February.

At May 6, Tang held 4 million shares (14.9%). Last week's gains pushed the value of his holding from $4.2 million to $29.5 million. Another major holder is Palo Alto Investors, which held 1.8 million shares (6.9%) at Dec. 31, 2008.

Vanda's situation looked bleak when it received the not approvable letter. At the time, the company said the agency wanted an additional trial comparing the serotonin (5-HT2) and dopamine D2 receptor antagonist to placebo and an active comparator such as Zyprexa olanzapine from Eli Lilly and Co. (NYSE:LLY) or Risperdal risperidone from Johnson & Johnson (NYSE:JNJ).

FDA also requested additional long-term exposure data for the 20-24 mg/day dose range. Vanda said the efficacy study would take at least 18 months, while the safety requirement would take two years (see BioCentury, Aug. 4, 2008).

However, after meeting with Vanda, the agency accepted a complete response in November based on the original data.

Moving on

Vanda expects to launch Fanapt this year. In an SEC filing, the company said it planned to market the drug on its own or with commercial partners in the U.S. and through partners outside of the U.S.

In 2004, the biotech got rights to Fanapt from Novartis AG (NYSE:NVS; SIX:NOVN); which had licensed it from Titan Pharmaceuticals Inc. (Pink:

TTNP). The pharma will receive a $12 million milestone payment on the approval and a

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