Iloperidone is an atypical antipsychotic compound that would compete against other atypicals like Eli Lilly's
Vanda has tested iloperidone as a treatment for schizophrenia in only one phase 3 study, but the drug has a colorful history, having been passed along from one drugmaker to the next, and has been involved in a whopping 35 clinical trials and tested in more than 3,000 patients.
In its one phase 3 study, Vanda was able to show that iloperidone was effective because the drug did reduce the symptoms that schizophrenics experience. But the issue that could hold up its approval is that several patients experienced a prolongation of the QTc interval (irregular heartbeat) after taking the compound.
A prolonged QTc interval is an extremely worrisome safety issue at the Food and Drug Administration, and the approvals of numerous drugs have been held up or denied after it was found that they caused this, because it can lead to complications -- including heart attacks.
Vanda is taking a novel route to help reduce the QTc interval issue sometimes associated with iloperidone (and other atypical antipsychotics, for that matter), using pharmacogenetic testing to identify patients likely to suffer from this issue when taking the drug.
Genetic testing is widely used to identify which cancer patients will respond best to certain therapies and was also recently instituted as a recommendation for warfarin, but it's unclear how the FDA will respond to Vanda's data on genetic testing for schizophrenics. With so many other atypicals already on the market, Vanda is likely to get a 10-month standard review on its New Drug Application, so it looks like we'll find out the answer to this question in about a year.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Eli Lilly is an Income Investor pick. Pfizer is a selection of the Inside Value newsletter. The Fool's disclosure policy has a marketing application pending with the FDA.