Stifel starts Vanda Pharma at buy; PT $30

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Stifel initiated coverage of Vanda Pharmaceuticals (NASDAQ:VNDA) with a “buy” rating and $30 price target. The stock closed at $18.45 on Sept. 12.

“We like the near-term catalyst path for Vanda shares as we believe continued base business (Hetlioz [Non-24] and Fanapt [schizophrenia]) acceleration and readouts from two meaningful clinical programs offer investors upside potential,” writes analyst Derek Archila.

“We believe Vanda's Hetlioz to psychiatrists initiative is still in its infancy and, based on our diligence and physician checks, we are confident with our above consensus, out-year forecasts for Hetlioz in Non-24,” he added.

Hetlioz is the first and only medication to treat people with Non-24, a chronic sleep-wake disorder that disrupts a person's circadian rhythms.

Mr. Archila said investors continue to under-appreciate the company's pipeline, which “we believe currently receives little-to-no credit at the stock's current level.”

He suggested there is a solid proof-of-mechanism argument for both tradipitant in gastroparesis and for Hetlioz in Smith Magenis and “would expect shares to inflect on results later this year.”

The risk/reward profile is favorable heading into these clinical catalysts, Mr. Archila said, and he estimates a floor valuation of the base business, excluding pipeline, of about $21 a share.

Stephen Kilmer