Vanda Pharmaceuticals: Heavily Undervalued

Vanda Pharmaceuticals (VNDA) is making a stunning come back this year as FDA finally approved its schizophrenia drug Fanapt. But the story is far from over, and there is every reason to believe VNDA is still heavily undervalued and has huge upside potential. This is a potential giant market for Vanda if it can steal market share, and also makes Vanda a likely takeover target for large pharma. At more than a $15 billion market in 2007 and growing faster than many other markets, if Vanda can steal just 10% of this market, it makes for $1.5 billion in sales, and with 26.7 million shares outstanding, Vanda would price around $56, $28 if it takes just 5% of sales.

Currently, based on Vanda's website, it is not recruiting any salesforce. Also, there is no news that the company is raising money from investors. Apparently, it is looking for partnership or to sell the company outright. This does not come as a surprise, as in Feb, 2007, when its share price was still in mid-30s, Vanda already hired JP Morgan to find a partner for its experimental drug or to sell the company.