Pill for schizophrenia from Vanda Pharmaceuticals is due out in 2010

Early next year, if all goes according to plan, doctors will be able to prescribe a new antipsychotic drug for patients with schizophrenia. When that happens, investors in a local pharmaceutical firm will surely breathe a sigh of relief.

While it's almost certain that the compound known as Fanapt will reach pharmacy shelves, the drug's future was anything but clear for most of its 13-year existence. Rockville-based Vanda Pharmaceuticals toiled for years on its development, even after larger drugmakers lost interest and the Food and Drug Administration gave the product a thumbs-down.

"Last year at this time, nobody believed in the company, and nobody believed in the compound," said Mihael H. Polymeropoulos, Vanda's president and chief executive. Today, the company has a deal for Fanapt worth nearly half a billion dollars.

Shareholders fled the company in droves last year after a negative ruling from the FDA, and Polymeropoulos says he doesn't blame them. He founded Vanda after earlier careers, mostly in Washington, in the health-care industry. He'd never heard of a case in which the FDA reversed a decision on a drug, but that's what happened after Vanda told the agency that it had misinterpreted some data.

Polymeropoulos says he never wavered in his belief that Fanapt could help people.

"People in my field hold the belief that there are scientific truths to be found, and once you solve the problems they can impact health care," he said. "It is that conviction that allows people to commit themselves for a long period of time despite adversity."

In any case, the chief executive said, it's the prospect of helping schizophrenic patients and not the lure of potential profit that serves as the company's driving force. "My belief is you don't build companies to make money just like a bank," he said. "A health-care company's mission is to develop treatments for people."

Fanapt, like other antipsychotic drugs, controls the way information is carried from one nerve cell to another and reduces the activities of some brain activity associated with schizophrenia. The compound blocks a different combination of neurotransmitters than earlier-generation antipsychotic drugs, Polymeropoulos said. The company says Fanapt targets a more relevant set of neurotransmitter receptors, so that patients are likely to suffer fewer side effects than with other medications.

Polymeropoulos has worked on the drug's development for 10 years, including during his earlier career as head of the Novartis pharmacogenetics unit. The giant drugmaker owned the drug early in its development but sold it when it was streamlining its product pipeline. Polymeropoulos and his start-up acquired the rights.

Today, Novartis is back in the Fanapt business. Under the terms of a deal announced last month, Vanda will receive an upfront payment of $200 million from Novartis for rights to commercialize Fanapt in the United States and Canada. As long as Vanda meets certain development milestones, the company will be eligible for additional payments totaling up to $265 million. Not bad for a company that lost $12.4 million during its second quarter this year, and faced shrinking cash resources of under $30 million.

Fanapt's somewhat arduous path to the marketplace isn't unusual, said Sunil Bhonsle, president of Titan Pharmaceuticals, a company that owned the rights to Fanapt before Novartis and will receive royalty payments for the drug when it goes on sale. It is not uncommon for companies to end up with too many products under development, he said, and for some of those products to go to smaller firms for development.

"There tends to be a pattern where smaller companies do a lot of the innovation, then the larger companies acquire them at a certain point," he said.

Even during a tough economic climate that has most sectors tightening belts, the pharmaceutical industry is on the lookout for potentially lucrative experimental drugs to invest in. Older drug products eventually go off-patent and face new competition from cheaper, generic versions.

According to a recent report by Dealogic Revenue Analytics, the dollar value of acquisitions by pharmaceutical and biotechnology firms is up 23 percent this year. Across all industries, by comparison, that figure is down 35 percent -- at $1.7 trillion, compared with last year's $2.6 trillion.

Vanda is one of the first Washington area firms to benefit from an ongoing global spending spree in this industry, and there are periodic rumors about an acquisition of Rockville-based Human Genome Sciences. As recently as August, HGS's stock jumped 14 percent on speculation that the company's sometime partner GlaxoSmithKline intended to buy the firm. HGS has a potential hit with an experimental drug to treat Lupus.

If other Washington area companies have yet to spark that sort of speculation, it might be because they don't have a product far enough along to tempt buyers, some say.

"In Maryland, our companies are not mature enough yet," said John Holaday, who has started three biotech companies. "We don't have a lot of companies that have products in late-stage trials or products that are already in the marketplace."

Polymeropoulos said his work with Fanapt isn't done yet. The company's next task is to help Novartis launch the drug, in tablet form, to pharmacies starting early next year. After that, he and his firm intend to create a version of the drug that patients will receive as a once-a-month injection.

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