Vanda Pharmaceuticals announces its agreement with Novartis Pharma AG

Vanda Pharmaceuticals Inc. (Nasdaq: VNDA) announced today that it has entered into an agreement with Novartis Pharma AG to commercialize and develop Fanapt(TM) (iloperidone), Vanda's anti-psychotic, in the U.S. and Canada. Fanapt(TM) was approved by the U.S. Food and Drug Administration on May 6, 2009 for the acute treatment of schizophrenia in adults. Fanapt((TM)) is a mixed dopamine D2 / serotonin 5HT2A receptor antagonist. The U.S. anti-psychotic market is approximately $14 billion.

Under the terms of the agreement, which amended and restated a prior agreement among the parties, Novartis will have exclusive commercialization rights to Fanapt(TM) for the U.S. and Canada. Novartis will be responsible for the further clinical development activities in these territories, including the development and commercialization of a long-acting injectable (or depot) formulation of Fanapt(TM). Vanda will retain rights to commercialize Fanapt(TM) oral and depot formulations outside the U.S. and Canada. At Novartis' option, the parties will enter into good faith discussions relating to an agreement for the co-commercialization of Fanapt(TM) outside of the U.S. and Canada or, alternatively, Novartis will receive a royalty on net sales.

Under the agreement, Vanda will receive an upfront payment of $200 million and will be eligible for additional payments totaling up to $265 million upon the achievement of certain development and commercial milestones for Fanapt(TM) in the U.S. and Canada. Vanda will also receive royalties on the U.S. and Canadian net sales of Fanapt(TM). The consummation of the transaction is subject to the receipt of customary regulatory approvals, which are expected by the end of 2009.

"I am very excited about our agreement with Novartis, as we now have one of the premier pharmaceutical companies in the world to commercialize the oral formulation and further develop and commercialize the depot formulation of Fanapt(TM) in the U.S. and Canada," said Mihael H. Polymeropoulos, M.D., Vanda's Chief Executive Officer. "This agreement allows Vanda to utilize current and future data generated by Novartis on the oral and depot formulations to pursue regulatory approvals outside the U.S. and Canada."