HC Wainwright initiated coverage on Vanda Pharmaceuticals, Inc. (NASDAQ:VNDA), a commercial-stage biopharmaceutical firm primarily focusing on neurological and neuropsychiatry disorders.

HC Wainwright sees Vanda as having a well-established commercial portfolio, with multiple line extensions and life cycle management opportunities across its three key franchises: Fanapt, Hetlioz, and Ponvory.

The analyst notes a pipeline of promising programs with numerous opportunities for significant clinical and regulatory milestones expected over the next 6 to 18 months.

Vanda trades at a nearly 30% discount to its cash reserves, giving it a negative enterprise value—a surprising valuation given its strong sales and projected profitability runway through late 2026, even if only some of its clinical and commercial projects succeed.

HC Wainwright initiates with a Buy rating with a price target of $18.

Vanda's value proposition, however, has been obscured by the ongoing generic competition within its sleep disorder portfolio centered around Hetlioz (tasimelteon) and a recent FDA Complete Response Letter (CRL) for tradipitant in gastroparesis, the analyst notes.

Hetlioz, while forecast to bring in about $75 million in 2024 sales, is assumed to decline post-2028; however, ongoing litigation could slow generic entry, and Vanda may expand tasimelteon's indications.

In October, Cycle Pharmaceuticals reaffirmed its proposal to acquire Vanda Pharmaceuticals for an all-cash consideration of $8.00 per share.

However, Vanda declined to accept the offer.

Earlier this year, Future Pak withdrew its proposal to purchase the company.

The analyst says past M&A offers indicate that Vanda is intrinsically undervalued and may 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 are successful.

"Given the negative enterprise value at which Vanda trades despite the continued traction of its marketed products and the risk-mitigated nature of its pipeline and LCM initiatives, we find it difficult to visualize substantial downside risk from current levels," HC Wainwright says.

Price Action: VNDA stock is up 0.87% at $4.69 at the last check on Friday.

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