This month, Vanda Pharmaceuticals (VNDA) will report Phase II data in atopic dermatitis with chronic pruritus. Jefferies analyst Matthew Andrews believes chronic pruritus conservatively represents a $530M market for the company’s Tradipitant, which could add $10-$15 per share.

DATA IN ATOPIC DERMATITIS: In September, Vanda Pharmaceuticals is expected to report Phase II data in atopic dermatitis with chronic pruritus. According to Jefferies’ Andrews, this is the first of five key data read-outs through 2018, with positive data being key to advancing a third product to market in 2020 and beyond, Vanda receiving credit for its pipeline, and potentially being viewed as a biotech.

TRADIPITANT: Vanda’s Tradipitant is an oral drug which binds NK1 receptors in the periphery and CNS, thus blocking Substance P, a key mediator of the itch signal, the analyst explained, adding that some see NK1R antagonists as promising due to their mechanism, benign safety, limited drug-drug interactions, and positive proof of concept data for NK1R’s aprepritant and serlopitant. Vanda is developing Tradipitant for moderate-to-severe chronic pruritus, a U.S. market of over 350K, with few safe/effective drugs.

POTENTIAL SUCCESS: Jefferies’ Andrews pointed out that prior Phase II data indicate robust lowering in the Visual Analog Scale of 41mm over four weeks. However, there was a strong placebo effect and Trapiditant’s once daily pharmacokinetics were not optimal with a waning of efficacy over 12 hours post-dose, he noted. Andrews pointed out that there are some important changes in this Phase II, including increased size for better study powering, extended dosing to eight weeks that could diminish placebo effect, and a change in dosing. In September data, the analyst expects low discontinuation rates and a similar adverse effect profile to prior NK1R data, and believes positive Tradipitant results may enable investors to begin evaluating the company as more of a true biotech with an under-appreciated pipeline. Additionally, Andrews pointed out that he sees share upside of about 15%-25% on positive data, and grinding higher thereafter as investors start to focus more on the pipeline. He reiterated a Buy rating and $21 price target on the shares.