Vanda Pharmaceuticals (NASDAQ:VNDA) is a Speculative Buy

If you’re looking to speculate in the biotech market, you have to understand that it’s all about clinical studies. It’s all about how well the company’s projects or prospective products are doing in the clinical study phases. The further along a product is in the clinical phase studies, the more attractive the company is.

Well, it looks like orphan-drug biotech company Vanda Pharmaceuticals’ (NASDAQ:VNDA) stock took a beating recently when its Phase II proof of concept for Tradipitant as a potential treatment for chronic pruritus didn’t meet expectations. Although the improvement made possible by Tradipitant is highly significant and dubbed “clinically meaningful,” the drug didn’t exhibit a statistically meaningful difference from the effects of a placebo. The interesting thing about this study is that based on a later analysis of samples across all patients in the clinical study, there were significant and clinically meaningful outcomes from individuals who were exposed to Tradipitant for a longer period of time. It remains to be seen what will be the long-term effect of this setback for Vanda Pharmaceuticals. It was down 5.3% on the news.

Since I’ve always been a firm believer in the old investor adage of buy on bad news, sell on good news, this is a good time to buy this highly speculative biotech stock now that its price has been beaten up a quite a bit. Why? It has a sleep disorder drug, Hetlioz, which was launched in April of last year for the treatment of non-24-hour-sleep-wake disorder. This drug is already in the US market, and it’s currently undergoing regulatory review in the European Union. If this gets approved, and the decision is supposed to come in the third quarter of this year, expect this stock to climb up. In fact, in terms of options activity, this stock is exhibiting some favorable signs of positive attention from speculators.

This is a highly speculative stock so you definitely need to do your homework. But if you’re looking for a long shot to make an impact your portfolio value, you might want to take a look at Vanda Pharmaceuticals.