Shares of Vanda Pharmaceuticals (VNDA) are under pressure after Aurelius Value disclosed a short position in the stock, stating in a report published earlier today that a recently unsealed whistleblower complaint includes "detailed allegations that Vanda has engaged in a series of fraudulent schemes, some personally orchestrated by [CEO Mihael] Polymeropoulos himself, to defraud government payors." Contacted by The Fly, the company denied the allegations.
SHORT VANDA PHARMACEUTICALS: In a newly published report, Aurelius Value said it is short Vanda Pharmaceuticals. The report noted that while Vanda shares surged to all-time highs in recent months, detailed but anonymous "allegations of illegal sales practices and outright criminality" quietly gathered steam on an industry message board named CafePharm, as Vanda experienced a mass exodus of employees, with authority over key departments reportedly being transferred to the CEO's children and new hires lacking experience. "Now, a 150 page Qui Tam lawsuit filed by a whistleblower was recently unsealed with detailed allegations that Vanda has engaged in a series of fraudulent schemes, some personally orchestrated by [CEO Mihael] Polymeropoulos himself, to defraud government payors. The allegations describe illegal off-label promotion of both of Vanda's drugs, Vanda's participation in a fraud involving doctors writing hundreds of 'fake prescriptions' and pocketing cash using Vanda-issued copay cards, falsified documents in internal systems, and resignations of senior executives who refused to participate in illegal activity," the report read. Further, Aurelius Value argued that the new allegations amplify the findings from his own months-long investigation, which yielded "evidence in private calls who described off-label promotion, suspect business practices, and internal turmoil that continued well after the whistleblower's departure." At a current valuation of around 5 times trailing sales, Vanda investors are "paying a significant 'blue sky' premium for projected future growth," the short seller contended, adding that it believes investors "fundamentally misunderstand the true nature of Vanda's activities" and therefore sees significant downside potential in the shares.
VANDA DENIES ALLEGATIONS: Contacted by The Fly following Aurelius Value's report, the company said that, "On February 4, 2019, a qui tam lawsuit against the company was unsealed. Vanda denies the allegations and we are pleased that the U.S. Government has declined to intervene."
PRICE ACTION: In afternoon trading, shares of Vanda Pharmaceutical have dropped about 6% to $17.90.