After our first quick take on Vanda Pharmaceuticals (NASDAQ: VNDA), we wanted to provide a deeper insight into the development of tasimelteon, the company’s dual MT1/MT2 melatonin receptors agonist.

Vanda is expected to report data from two phase III studies by this year’s end in a condition called Non 24-hour sleep wake disorder (N24). Additionally, at some point during the first half of 2013, a Phase III clinical trial in Major Depressive Disorder (MDD) will read out.

N24 is a chronic disorder of the circadian rhythm. People suffering from this disorder see their sleep and wake times delayed by 1 or 2 hours every day. This results in an unbalanced sleeping schedule that makes it hard for these people to cope with their daily life activities such as going to work or school. This condition affects approximately half of blind people although the disorder is also seen in sighted people in a much lower proportion. An estimated 65,000-95,000 people in the US suffer from N24.

Tasimelteon has been tested in several clinical trials over the last few years, mainly in circadian rhythm sleep disorders (CRSDs) and insomnia associated with CRSD, along with the aforementioned disorders of N24 and MDD.

Insomnia

In a Phase III trial performed during 2006-2007 in 412 patients with transient insomnia, the drug met the primary endpoint of improvements in Latency to Persistent Sleep (LPS), a measure of sleep onset, at all doses, compared to placebo. Tasimelteon also improved Latency to Non-Awake (LNA), another measure of sleep onset, Wake After Sleep Onset (WASO), a measure of sleep maintenance, and Total Sleep Time (TST), over placebo.

These results, along with another placebo-controlled Phase II in 39 patients, were reported in an issue of the journal The Lancet in December 2008 . The patients treated were healthy, but they were induced transient insomnia. After a period of regular 8-hr sleep time, their bedtime was advanced by 5 hours with respect to habitual bedtime resulting in an abrupt shift of the sleep and wake cycle.

It must be noted that these studies didn’t include patients with CRSDs. Also, as the authors of the Lancet article pointed out, performance and mood during daytime should be tested as some studies have shown increased sleepiness after melatonin administration. All in all, these first studies suggest that tasimelteon could be an effective drug for the treatment of transient insomnia associated with circadian rhythm sleep disorders such as jet-lag and shift-work disorders.

Since the physiology of primary chronic insomnia and CRSD is different, it’d be interesting to test the drug in this indication.

And so Vanda did. A Phase III trial in 322 patients with primary insomnia (experienced for more than one month, which can be defined as chronic insomnia), reported positive results in June 2008. It met the primary endpoint associated with improvements in sleep onset (LPS). However, there were some mixed results in some of the measures that were part of the secondary endpoints. For instance, the 50 mg group didn’t show a statistically significant improvement compared with placebo in TST at nights 22 and 29 of treatment and tasimelteon wasn’t better than placebo at any dose in WASO.

The SET and RESET studies

Let’s have a closer look at the ongoing Phase III trials:

– The RESET trial is evaluating the maintenance effect and safety of 20 mg tasimelteon versus placebo in around 20 blind tasimelteon responders suffering from N24. In January 2012, data from 4 patients were reported demonstrating that tasimelteon was able to reset the body clock and align it to a constant 24-h day. The company didn’t provide any specific data on its PR. The study is listed on clinicaltrials.gov as still being recruiting participants.

– The SET trial is another randomized, double-blind, placebo-controlled study in blind subjects with N24. The trial was planned to recruit 160 patients initially, but the number has been lowered to 84. It began in Aug 2010 with data expected in Q42011 which have been delayed until the end of this year.

There’s another ongoing Phase III safety study in patients who have been enrolled in previous tasimelteon trials whose primary completion date is January 2014. (NCT01429116).

Tasimelteon in Major Depressive Disorder.

The Phase III MAGELLAN trial is expected to enroll 500 patients with MDD and test 20 mg of tasimelteon to compare the change from baseline at week 8 using the Hamilton Depression Rating scale. According to the company, the trial will read-out in the first half of 2013. Clinicaltrials shows the primary completion date as December 2012, so results may follow shortly thereafter. There are no previous efficacy data of the drug in MDD.

Our take

We see that while tasimelteon has proved to be efficacious in previous trials using models of transient insomnia, there is scarce data that supports this profile in a situation close to the real world. The SET and RESET studies will demonstrate if the drug lives up to the expectations it has raised in previous trials. Compared with other melatonin agonists, tasimelteon has been tested at fairly high doses ranging from 10 mg up to 100 mg over short periods of time. The company has chosen the 20 mg dose to forge ahead with the current trials. We consider the company may have deemed it as a more balanced profile between efficacy and safety although publicly available information point to the drug having a placebo-like side effect profile over short periods of time. Therefore, since tasimelteon is being tested in a chronic sleep disorder such as N24, it’ll be interesting to learn the outcome of the longer term safety study mentioned before (NCT01429116). Another question that arises is how come the company didn’t go ahead with these results and filed for regulatory approval. The answer could be in the tough financial conditions the company was facing at the end of the 2000s.

While tasimelteon showed good results in the insomnia model, data from the Phase III trial run in 322 patients should be taken with caution. Given the mixed results in the secondary endpoints, and the little or almost no data presented form the RESET trial and the delays in enrolling in the SET trial, we remain cautious about the outcome of these studies.

Another commercial caveat comes up with regards to the commercial opportunity of a melatonin agonist. Melatonin itself has a short half-life in the patient’s body, however, long-release versions such as Circadin have made it to market over the past few years. There remains to be seen how much of a competition these forms of melatonin can be to tasimelteon. Another competitor, ramelteon, developed by Takeda had sales of 81M in 2011 and is expected to reach peak sales of $125M by 2015. In any case, competition in the form of branded and generic drugs is growing higher in this field.

The MDD indication is more challenging as there are no Phase II efficacy data and the potential of tasimelteon in treating MDD is to date largely based on preclinical studies and some phase I results. Other melatonin agonist named agomelatine is marketed for MDD. However, the anti-depressant effect attributed to agomelatine is largely believed to be caused by its inhibitory effect of 5-HT 2C. The drug has been launched in Europe and China by Servier, however, partner Novartis discontinued its development in the US after two Phase III trials failed, so even in this case, it’s not clear either whether this mechanism of action may actually provide a benefit in depressive disorders.

We think that Vanda’s shares are cheap due to a lack of optimism on the outcome of its ongoing clinical trials. While the drug has demonstrated its potential to reset the body’s clock after an induced shift change and improve sleep onset in insomniac patients, the drug’s ability in maintaining sleep and its long term safety remain to be demonstrated. In addition, we are concerned that the mechanism of action of tasimelteon may not be sufficient to show a significant improvement in MDD symptoms.