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Hawk’s Nest

Bull Spread Targets Upside Ahead of Key Gastric Trial Data

by | Nov 17, 2021

Vanda Pharma (VNDA) unusual size trading on 11/17 with the January $18/$24 call spread bought 5000X to open for $1.70. VNDA action was more than 230X average and more than 2X call open interest in the name. VNDA shares ran strong up to $21.50 in early November before pulling back to a big volume node and 200-MA. A move back above $18.50 in focus for a return higher out of this big volume node with upside to $25. The $1B biotech trades 16.8X earnings, 3.77X sales, and 18X FCF with over $8.75/share in cash on hand. VNDA focuses on CNS plays with two marketed products currently, Fanapt and Hetlioz, across non-24-hour sleep-wake disorders and schizophrenia. VNDA is already profitable and is now transitioning to a multi-product pipeline play with products in development for jet lag disorder, smith-magenis syndrome, pediatric Non-24, autism spectrum, and delayed sleep phase disorder. They expect to file an NDA in early 2022 for tradipitant in gastroparesis after Phase 3 results later this year. Gastroparesis is seen as a significant unmet need with the last treatment approved in 1979 and impacting nearly 6M people in the US. Analysts have an average target for shares of $24. BAML starting coverage at Buy in May with a $22 PT. The firm likes their overall profile with six phase 3 programs ranging from label expansions and newer pipeline products that should be a turning point in the story from company plagued by regulatory issues. Citi with a $18 PT citing their sizable cash position and discipline around keeping expenses controlled. Short interest is 9%. Hedge fund ownership rose 1.5%. Soleus Capital a buyer of stock while Palo Alto Investors a top holder.