Summary of VANDA PHARMACEUTICALS INC.

Item 1.01. Entry into a Material Definitive Agreement.

On October 12, 2009, Vanda Pharmaceuticals Inc. ("Vanda") announced that it had entered into an Amended and Restated Sublicense Agreement (the "Agreement") with Novartis Pharma AG ("Novartis"). The parties had originally entered into a sublicense agreement on June 4, 2004 (as amended, the "Original Agreement") pursuant to which Vanda obtained certain worldwide exclusive licenses from Novartis relating to a compound known as iloperidone. On May 6, 2009, the U.S. Food and Drug Administration ("FDA") granted marketing approval of the oral formulation of iloperidone for the acute treatment of adult patients with schizophrenia pursuant to Vanda's New Drug Application (the "NDA").
Pursuant to the Agreement, Novartis will have exclusive commercialization rights to all formulations of iloperidone ("Fanapt™") in the United States and Canada (the "Territory"). Except for two post-approval studies started by Vanda prior to the execution date of the Agreement, which Vanda is obligated to complete, Novartis will be responsible for the further clinical development activities in the Territory, including the development and commercialization of a long-acting injectible (or depot) formulation of Fanapt™. In connection with such rights, Vanda granted Novartis an exclusive license to all know-how owned or licensed by Vanda that may be necessary or useful in the development or commercialization of Fanapt™ for the Territory, as well as an exclusive license to the trademark Fanapt™ for use in the Territory. In addition, Vanda assigned the NDA to Novartis and agreed that all future regulatory interactions with the FDA would be the exclusive responsibility of Novartis.
Pursuant to the terms of the Agreement, Vanda will be entitled to an upfront payment of $200 million and will be eligible for additional payments totaling up to $265 million upon the achievement of certain commercial and development milestones for Fanapt™ in the Territory. Vanda will also receive royalties, which, as a percentage of net sales, are in the low double-digits, on net sales of Fanapt™ in the Territory. In addition, Vanda will no longer be required to make the future milestone and royalty payments that were contemplated in the Original Agreement with respect to sales of Fanapt™ in the Territory. Vanda retains exclusive rights to Fanapt™ outside the Territory and Vanda will have exclusive rights to use any of Novartis' data for Fanapt™ for developing and commercializing Fanapt™ outside the Territory. At Novartis' option, the parties will enter into good faith discussions relating to the co-commercialization of Fanapt™ outside of the Territory or, alternatively, Novartis will receive a royalty on net sales of Fanapt™ outside of the Territory.
The Agreement is subject to customary regulatory approvals.