Shares in Vanda Pharmaceuticals are likely to soar once trading starts across the Atlantic after the firm got the green light from regulators there for its schizophrenia treatment Fanapt.

The US Food and Drug Administration has approved Fanapt (iloperidone), a mixed dopamine D2/serotonin 5HT2A receptor antagonist. The approval was supported by two Phase III studies comparing Fanapt to placebo and safety data from more than 3,000 patients.

The news is somewhat surprising given that the FDA issued a not-approvable letter last year over concerns of efficacy compared with an established atypical antipsychotic, Johnson & Johnson's Risperdal (risperidone). Indeed there are a number of similar drugs that have already been approved but Vanda believes that its mild safety profile means there is a place for the treatment in a crowded market.

The company quoted Peter Weiden, professor of psychiatry at the University of Illinois at Chicago as saying that Fanapt is an effective antipsychotic “with an excellent side effect profile across a wide range of major tolerability problems associated with other antipsychotic therapies”. Weight gain was mild, and the overall increase across all studies was 2.1 kg.

Vanda noted that Fanapt was not associated with any medically important elevations in glucose, triglycerides or cholesterol and only modest increases of prolactin as compared to larger elevations seen with some other drugs in this class. The drug has a low incidence of extrapyramidal symptoms and a placebo-like rate of akathisia.

News of the FDA approval came through after the markets closed but in after-hours trading Vanda shares shot up to almost $10.00, having closed at $1.08. The company acquired the rights to iloperidone from Novartis in 2004 and the Swiss major will receive royalties “in the mid-twenties”. In turn Novartis will make payments to Titan Pharmaceuticals who had licensed the drug to the Basel-based group.