Sec Form 4 Filing - PROSPECT VENTURE PARTNERS II LP @ Vanda Pharmaceuticals Inc. - 2006-11-03

FORM 4 Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940

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1. Name and Address of Reporting Person PROSPECT VENTURE PARTNERS II LP 2. Issuer Name and Ticker or Trading Symbol Vanda Pharmaceuticals Inc. [ VNDA] 5. Relationship of Reporting Person(s) to Issuer (Check all applicable) _____ Director X __ 10% Owner _____ Officer (give title below) _____ Other (specify below) (Last) (First) (Middle) C/O PROSPECT VENTURE PARTNERS, 435 TASSO STREET, SUITE 200 3. Date of Earliest Transaction (MM/DD/YY) 11/03/2006 (Street) PALO ALTO, CA94301 4. If Amendment, Date Original Filed (MM/DD/YY) 6. Individual or Joint/Group Filing (Check Applicable Line) _____ Form filed by One Reporting Person __ X __ Form filed by More than One Reporting Person (City) (State) (Zip)

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned 1.Title of Security (Instr. 3) 2. Transaction Date (MM/DD/YY) 2A. Deemed Execution Date, if any (MM/DD/YY) 3. Transaction Code (Instr. 8) 4. Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5) 5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4) 6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4) Code V Amount (A) or (D) Price Common Stock 11/03/2006 J( 1 ) 907,332 D $ 0 1,459,323 I By Prospect Venture Partners II, L.P. ( 1 ) Common Stock 11/03/2006 J( 2 ) 13,817 D $ 0 22,223 I By Prospect Associates II, L.P. ( 2 )

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned ( e.g. , puts, calls, warrants, options, convertible securities) 1. Title of Derivative Security (Instr. 3) 2. Conversion or Exercise Price of Derivative Security 3. Transaction Date (MM/DD/YY) 3A. Deemed Execution Date, if any (MM/DD/YY) 4. Transaction Code (Instr. 8) 5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4, and 5) 6. Date Exercisable and Expiration Date (MM/DD/YY) 7. Title and Amount of Underlying Securities (Instr. 3 and 4) 8. Price of Derivative Security (Instr. 5) 9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4) 10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4) 11. Nature of Indirect Beneficial Ownership (Instr. 4) Code V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares

Reporting Owners Reporting Owner Name / Address Relationships Director 10% Owner Officer Other PROSPECT VENTURE PARTNERS II LP C/O PROSPECT VENTURE PARTNERS 435 TASSO STREET, SUITE 200 PALO ALTO, CA94301 X PROSPECT ASSOCIATES II L P C/O PROSPECT VENTURE PARTNERS 435 TASSO STREET, SUITE 200 PALO ALTO, CA94301 X PROSPECT MANAGEMENT CO II LLC C/O PROSPECT VENTURE PARTNERS 435 TASSO STREET, SUITE 200 PALO ALTO, CA94301 X SCHNELL DAVID 435 TASSO STREET SUITE 200 PALO ALTO, CA94301 X BARKAS ALEXANDER E 435 TASSO STREET SUITE 200 PALO ALTO, CA94301 X HIRSCH RUSSELL C 435 TASSO STREET SUITE 200 PALO ALTO, CA94301 X Signatures PROSPECT VENTURE PARTNERS II, L.P., /s/ Dave Markland, Attorney-In-Fact 11/07/2006 Signature of Reporting Person Date PROSPECT ASSOCIATES II, L.P., /s/ Dave Markland, Attorney-In-Fact 11/07/2006 Signature of Reporting Person Date PROSPECT MANAGEMENT CO. II, LLC, /s/ Dave Markland, Attorney-In-Fact 11/07/2006 Signature of Reporting Person Date /s/ Dave Markland, Attorney-In-Fact for David Schnell, M.D. 11/07/2006 Signature of Reporting Person Date /s/ Dave Markland, Attorney-In-Fact for Alexander E. Barkas, Ph.D. 11/07/2006 Signature of Reporting Person Date /s/ Dave Markland, Attorney-In-Fact for Russell C. Hirsch, M.D., Ph.D. 11/07/2006 Signature of Reporting Person Date

Explanation of Responses:

( 1 )Represents in-kind distribution by Prospect Venture Partners II, L.P. without consideration to its limited partners and general partner. ( 2 )Represents in-kind distribution by Prospect Associates II, L.P. without consideration to its limited partners and general partner.

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.

* If the form is filed by more than one reporting person, see Instruction 4(b)(v).

** Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).

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