Good day, everyone. Thank you for joining the 23rd Annual Needham Healthcare Conference. My name is Joseph Stringer, and I'm one of the biotech analysts at Needham & Company. It's my great pleasure to introduce our next presenting company, Phathom Pharmaceuticals. Joining us today from the company is President and CEO, Terrie Curran, CFO, Molly Henderson, Chief Operating Officer, Azmi Nabulsi, and we also have Chief Commercial Officer, Martin Gilligan. For those of you joining on the webcast, if you wish to ask a question, please do so at any time. You can submit a question using the chat box at the bottom of your screen. So members of the Phathom team, thank you so much for joining us today.
Thanks, Joey. It's great to be here.
Well, let's start with the VOQUEZNA launch. Of course, approved in the fourth quarter last year in the U.S. for Erosive GERD and H. pylori infection. Can we get your high-level commentary on the launch so far? In particular, on your most recent earning, earnings call, you reported some initial launch metrics. Can you review these key metrics?
Sure. Thanks, Joey. Yeah, the launch of VOQUEZNA represents a significant milestone for Phathom and the millions of patients suffering from acid-related disorders. It's been really rewarding to now be commercializing VOQUEZNA into this very large prescription category that has not seen any innovation in more than three decades. And while the launch is very early, we're highly encouraged by the launch dynamics, including lead indicators. So the KPIs that we see as being leading indicators are the total prescriptions or total demand, prescriptions that have been filled, number of prescribers, and then the commercial lives covered, which all of these, we believe, will ultimately drive revenue. And it's very clear to us that the demand is there, and clinicians and patients alike find the rapid, potent, and durable profile very compelling.
As you mentioned, as of the end of quarter one, we had 14,000 total prescriptions being written, and of those, 3,800 were filled. One of the, as I mentioned, one of the leading KPIs we're monitoring closely and working on at the moment is the number of commercial lives covered, as this is a leading indicator of unlocking the potential and converting total demand to filled scripts. Currently, there are approximately 38% of commercial lives covered, and we anticipate this will increase over Q2 and Q3.
You reported the 3,800 TRx filled since launch. Wanna ask a question on the BlinkRx program and what that ratio is to BlinkRx relative to IQVIA. We get a lot of investor questions on how this ratio is expected to evolve over time, say, the next 12 months. But first, maybe to level set everyone, can you just describe what BlinkRx is and what data are captured in IQVIA versus BlinkRx? Excuse me, and I have a follow-up question to this.
Sure, Martin.
Okay. Yeah, so I'll take this, Joey. So first, you wanted me to cover, to remind everyone what BlinkRx is.
Correct, yes.
It's a patient support that we're offering. So we actually have two patient support programs. The first one is co-pay support as low as $25 for commercially covered patients, which can be enacted at any pharmacy. The other option is if a physician sends a prescription to Blink Rx, and now this gets to your question, is: how does that flow? So if this prescription goes to Blink Rx, which by the way, is on every physician's e-prescribing prescription pad, the script goes there. Blink Rx does two things. First, they identify if it's a commercially covered patient, and so that's kind of step number one. And if, or excuse me, a commercial patient. Let me back up. They identify if they're a commercial patient.
If, in fact, they're a commercial patient, then one of two things happens. If, in fact, they do not have coverage yet, then they are offered a price, a discounted cash price, that is an offering of $50, that's 50, which will then get that patient VOQUEZNA until they have reimbursement. And that patient is not captured in the IQVIA data. If the patient is a commercial patient, and they do have coverage, it immediately is shifted over to one of their retail partners. It's all digital based.
Mm-hmm.
It goes over there, and they're treated like any other retail patient, and that patient is picked up by IQVIA. So I do just wanna, comment on-
Sure
... why we went with BlinkRx, because two things: one, if the doctor took the effort to write the prescription, we wanna make sure that that patient has the best chance to get the prescription. And then we also wanna make sure, as every time that patient comes back for a refill, and if they're under patient support, they could be quickly moved to the retail setting.
Got it.
So it is kind of the best thing for the patient and the physician, and quite frankly, the best thing for us.
Makes sense. You reported, as I mentioned, the 3.8 TRx filled. The prescription data is available in IQVIA, but you also, we can imply this, calculate this ratio. It was about one-to-one BlinkRx.
Right
... IQVIA. So I guess my question is: how do you anticipate that ratio kind of changing over time? And do you think it would skew more in favor of IQVIA relative to Blink, you know, those prescriptions get transitioned from Blink to the retail channel and filled at a retail pharmacy?
... Yeah, so the quick short answer is yes, we see it evolving more towards the IQVIA or let's call it really the retail channel.
Yeah.
That was 3,800 prescriptions. I just wanna remind everyone that that was data as of February 23rd, and at that point, we had only just announced the formulary coverage of Express Scripts National Formulary.
Right.
So, and going back to my comments earlier, what was the intent of BlinkRx or what is the intent? It's to support patients who don't have coverage. So you can imagine as more, as we have more formulary coverage, such as BlinkRx and other plans that might come on board, they'll be less reliant on the patient support that comes through BlinkRx. So yeah-
Yeah.
We'll definitely see shifting, but I wanna remind you, we're only a quarter into launch.
Yeah.
As you know, with all the launches you cover, things fluctuate, right? So it will move onwards to more prescriptions being picked up by IQVIA, but it's early in launch, so we will see that shift over time.
Okay, that's helpful. And do you think that Blink Rx will ever go away entirely, or do you see it reaching sort of a steady state, as the launch sort of matures here?
Yeah, yeah. So I'll say, I don't wanna be, you know, very absolute, but I'll say we'll always, we'll always employ a patient support.
Yeah.
We will always identify as much as we can support patients through that. Blink Rx is working. It's doing what it needs to do in terms of getting patients who are actually covered patients, getting into the retail setting, and patients who are not covered, offering them product. So, you know, for right now, I can say Blink Rx is working for us, and it's-
Mm-hmm
... more importantly, it's working for our customers. So, you know, we see right now continuing with them.
Somewhat related to your comments earlier, Martin, you at the last update, you of course had mentioned that around 14,000 scripts had been written, around 3,800 had been filled. So can you help reconcile for us what that 10,000 or so script difference between the written and the filled scripts? Who are these patients? What types of patients are these? And-
Yeah
... you know, as a follow-up, maybe walk us again through why these scripts are not being picked up either through Blink or IQVIA?
Yeah, so I'll take the last part first. No, no one in general, in terms of reporting or reported out by IQVIA, picks up those patients who have a prescription that goes and then ultimately gets, you know, doesn't get product.
Yeah.
That data is there, and companies have access to it, but it's not something that's typically displayed on, you know, as we had done.
Yeah.
So I think, you know, one of the things we did was we were really transparent in sharing that 14,000 number, and maybe you don't see that in many companies. So when we look at that 14,000, it tells us that the demand is there, physicians see the value in the product, and they wanna get their patients on product. That 3,800, that's actually a really good percentage. As you can imagine, getting ready for launch, we looked at analogs to see how much gets through the system.
Yeah.
So that 3,800 number compared to the 14,000 is a really strong number. We would anticipate over time that that gap would close. Obviously, both numbers will increase over time, but the gap between them should close, and that'll be driven by more reimbursement. And that kind of gets to the debate, the root of your question. Those patients are, the large part, patients who went to the pharmacy, not to BlinkRx, but their script went to a pharmacy and didn't have coverage. And again, as we-
Got it
... have more formulary, coverage coming on board, you would start to see the gap close.
I see. And that kind of leads into my next question on sometimes we get investor questions on, you know, say, a scenario where a doc writes the script, writes a VOQUEZNA script to a patient who doesn't have coverage yet, but they, the doc doesn't go through BlinkRx for whatever reason. What happens to the script then? I mean, it doesn't get filled. It seems unlikely that it would.
Yeah. Yeah, and we're like every other launch that once that patient goes and the pharmacist, you know, pings the coverage, and if it's not covered-
Yeah
... that script at that moment is, is lost. So that's why we always tell physicians, "Your best opportunity to get the script filled is to go to Blink Rx." What I will say that's a little bit unique for us is, you know, there's been no new mechanism for 30 years. We have superiority. It's a big change in the marketplace. That patient really has nowhere else to go except to go to another PPI, and if history, if history tells us, those patients will continue to circle through their PPI or adding on OTCs. So, you know, we'd like to think that that patient temporarily isn't with us, but at some point, as coverage comes on board, there's a really good shot for them to be put on VOQUEZNA and get that filled.
Okay. What impact do you think, if any, does the Change Healthcare cyberattack that's been in the news the last several weeks-
Yeah
... how do you think that will impact the launch and, and in particular, the script count? And possibly, when, when would you expect this to resolve?
Yeah. So, like everyone, it was a surprise. And like everyone, it took us a few days to tease through exactly what was going on.
Yeah.
What we did really fast is, again, we worked with our while the overall industry pharmacy was trying to find workarounds, you know, we were able to work with BlinkRx to find workarounds via Change Healthcare. So, we were really on top of it. But like the industry, I think we all saw, over a couple week period, a reduction in number of claims that were even going to pharmacies. Prescriptions were going there, but they just weren't even being picked up. So I think the entire industry saw that. So I'm not saying we were any more isolated than anyone else. We worked really hard to get ahead of it. I think we did a great job getting through it.
You know, I'd like to see from Change Healthcare that this is really, truly over and gone.
Yeah.
But we feel that we have some workarounds in place, and even with our co-pay, I think that got very little pick-up by the press. But almost all co-pay programs across the industry had issues that lingered for a little bit, but again, we had a workaround. And so we feel that, you know, the worst is behind us.
Got it. Very helpful. Now, of course, you haven't guided yet for VOQUEZNA sales. You're early in the launch. But just wanted to point out that current sell-side consensus estimates for 2024, I think it's around $45 million the last time I checked. Is this a number that you feel comfortable with based on some of the early launch data that you're seeing?
I'll take that, Joey. Yeah, we remain comfortable with the consensus based upon the encouraging demand that we're seeing, the early access we've achieved. Martin did mention that the access that we achieved with ESI is just one step through a generic PPI, which is right on strategy, and we expect that coverage to expand with other payer contracts over Q2 and Q3, as we secure additional coverage. And then we also have the additional catalyst of the approval of NERD, non-erosive, anticipated in Q3, which will drive demand. So we remain confident. We're also hearing very positive anecdotal stories from the field-
Yeah
... regarding physicians' experience with the product, and they're speaking about, you know, its rapid onset of action and the durability of the product, as well as healing the erosion, so remain very confident.
Great. Now kind of a bigger picture market question here, U.S. versus ex-U.S. What does the market look like for combined Erosive GERD and NERD, U.S. relative to ex-U.S., in particular Europe? What are your thoughts on an ex-U.S. partnership for VOQUEZNA?
Yeah. So the ex U.S. is obviously much smaller than the U.S. market opportunity. And you know, the number of markets that we'd need to invest in there in the core five, our base case is that we'll partner in Europe. And we're currently in active discussions with a number of partners there. But we've made the decision not to file in Europe until that partner has been identified.
Mm-hmm.
The reason for that is that the exclusivity begins from the time of approval in Europe, and so we'd want, we'd want to file with a partner, understanding their strategic approach to Europe.
We want to get into the NERD indication, of course, but just from a competitive landscape perspective, can you give us your thoughts on the competitive threats from other P-CAB programs? There are a couple out there, linaprazan's in phase III. Sebela has another one that's also in phase III, erosive GERD, et cetera. Won't get into the exact details of that, but maybe comment from a high level, these competitor programs that are moving through late-stage trials.
Yeah, I can, I can take that. So I just want to point out in the beginning that we will be at least two years into our launch before any of the competitors come to the market, so that's, that's solid. As you mentioned, there are two that are active in late-stage development in our regions. One is Sebela Laboratories. They're in phase III. Currently, they are conducting studies that are very similar to our studies in EE and daily NERD, non-erosive. And we expecting that they will report sometime later this year, second half to later this year, and file after that, obviously. Now, their profile from the studies we've seen from Korea is very much PPI-like.
So we will see what their results in the U.S. will be, but that's their profile that's been seen from multiple studies in Korea. And now, as for the other molecule, which is the Cinclus molecule, its parent compound, linaprazan, was developed and discontinued after phase II in Europe by AstraZeneca because of liver effects. So there is a lot of questions actually about what to come in relation to dosing. The phase II was BID. They need to figure out the regimen dose, safety database, to confirm that they don't have the issues we represent. So there's a lot to come on that molecule, but they have announced that they'll be moving to phase III. So we're very comfortable from distance-wise, where we are today from them, but also profile-wise.
Linaprazan, as we have seen in multiple studies, has really demonstrated that it is potentially the best P-CAB out there.
Switching now to the NERD indication, you have an upcoming U.S. approval decision for VOQUEZNA for the daily dosing, in NERD PDUFA date in July. Can you outline the label that you're seeking here, and what do you think the market opportunity is relative to, say, erosive GERD?
I'll comment on the label and then leave market opportunity to Martin. So we are waiting the approval. So far, the review going very well, as expected from where we should be at this point in relation to the PDUFA date of July 19th. The label will be essentially largely is the erosive GERD label. The only thing that will be added to it is the indication of use in non-erosive patients with the dosing regimen for that, and then the clinical trial data that are relevant to that indication. So we have the core, so the level of change and potential discussion, negotiation with the FDA will be really limited. So we're very optimistic that the label will remain very strong-
Mm-hmm
... representing the additional data that we obviously are seeking, the indication based on. Martin?
Yeah, so, you know, we see, you know, one of the things we've talked about in the past, Joey, is the just incredible size of the GERD market. So what we see is, that for the market will be growing to about overall, when you add non-erosive in, 22 million patients who have diagnosed GERD, whether erosive or non-erosive, and are treated by a physician with a prescription, and that by far is PPIs.
Yeah.
So it's just a really big market opportunity, and we feel, as you just asked about the label, we'll have a strong label to promote off of.
Mm-hmm. What is a typical patient journey like in NERD? Are they still cycling through PPIs? And then maybe as a follow-on to that, how much would you be able to leverage your existing commercial footprint that's in place for erosive GERD for the NERD indication?
Yeah, you know, it's really interesting. It's nearly identical, and they're two different diseases, really, non-erosive-
Yeah
... and erosive. They're coded differently, you know, they're different diseases. However, the patient journey is like... it's identical, right? So they've got the same symptoms. They start on OTCs, then they go to a doctor, which, guess what, is a primary care doctor. And then, as you said, that's where the circling, or gastroenterologists call it the PPI merry-go-round. They're either adding on OTCs, they're changing their PPIs, because the symptom comes back. They're not sleeping at night, they're not eating as they normally would. And this, as Terry mentioned earlier, our access coverage, and we have Express Scripts, and this is why it just fits so well with our strategy.
Yeah.
That is, if the patients are moving and they've had no alternative other than a PPI, and even if they're at a gastroenterologist, at that point, here enters VOQUEZNA, and it's one step through a PPI. So the vast majority of the market has already met that criteria.
Mm-hmm.
And the other really nice thing about the Express Scripts formulary is, it's a 130-day look-back. But if for some reason, and that means a look-back at the pharmacy, that the patient has received a PPI prescription in that timeline, but if they have not, with Express Scripts, if the doctor just simply attests that the patient has been on an OTC, they're a candidate for reimbursement for VOQUEZNA. So a really-
Yeah, that's a big, that's a big deal, because oftentimes, yeah, that's-
Yeah
Yeah.
Not only, not only is the coverage a big deal, but how it's executed is a big deal.
Right
... 'cause it's just picked up electronically at the pharmacy. So it's really simple for the physician and the patient. So the journey's the same, the doctors they see, the treatment's the same, and yet the market's moving, and that's the opportunity-
Yeah
... for VOQUEZNA.
And this is more of a market dynamic, or, sorry, excuse me, a market access question, in particular from a payer perspective. When you're looking at the Erosive GERD launch and a potential launch in NERD, you obviously are in talks with payers securing coverage for the bottle, right?
Yes, yes.
So is it... It's not a separate negotiation for the NERD indication, to my understanding, but maybe can you provide a little bit more color on that?
Yeah, we would expect the coverage to carry forward, 'cause in general, for the most part, you know, overwhelmingly, coverage is for presentation, SKU, whatever you wanna call it, in this case, for the bottle. It's very difficult for payers to do.
Yeah
... indication-based coverage.
Yeah.
So we would expect in an example of Express Scripts that that formulary coverage and the way it appears and the way it's executed would continue with the non-erosive approval. That would be our expectation.
Okay. How would you see the potential launch of NERD impacting the IQVIA prescription data, number one, from a prescription trend?
Yeah.
And then number two, from that, a BlinkRx IQVIA ratio, would there be a meaningful impact there?
Yeah, so we have a couple catalysts, and maybe this is the base of your question, you know, for the business. One is continued growth in the number of commercial lives, meaning more formulary access, and then also the non-erosive approval. So I just think overall, having more patients as non-erosive that we have ability to achieve in the marketplace, that will change our, you know, prescription patterns. But I would say overall, going back to your ratio of the BlinkRx versus the IQVIA, I don't think we see non-erosive playing a role in that. It's really gonna be driven in terms of reimbursement.
Yeah.
Right, so the overall volume of patients should grow-
Yeah
... but how they flow will really be driven by reimbursement.
Okay, great. That makes sense. Very helpful. Any updates on the planned phase III on-demand NERD trial, what are the main sticking points with FDA, and when could we see this trial start?
Yeah, so, there are actually no sticky points with the FDA. I'm, I'm pleased to let you know that, we have agreement with the FDA on the design of the study now. That's fully, fully, agreed upon. And, so we, we, you know, this is, this is, unique because it's FDA never granted this indication before. So we worked throughout all of the details that necessary to ensure that the phase III study will be the path to approval for that, dose regimen, and we have that with the FDA. They're very eager, actually, for us to do that study for very good reasons. And, now upon us is, is just the executional element and operational element for this study, which we're working on.
So the plan is to start this study later this year, and we have a clear path to do that, so it's mainly operational at this point.
Okay, a few questions on the earlier stage pipeline. Potential label expansion opportunities for vonoprazan, you've got it for phase II start in EoE in 2024. Just curious, wanted to get your thoughts on why, why this indication? There are other drugs in development, Dupixent approved. There are some other different mechanisms out there, S1P, et cetera. What, what gives you the confidence or the, that the, the P-CABs mechanistically would, would be effective in, in EoE?
Yeah. So there are a couple of approvals that, as you stated, in this field. And however, PPIs remain actually the first-line therapy for treating EoE, and they're not approved in that indication. Actually, they have not done controlled randomized clinical trials to support such an indication either. The data we have on vonoprazan, one is that in Japan, a number of small studies have been run in Japan that showed either similar efficacy in EoE between PPI and vonoprazan, or actually, in some cases, vonoprazan did better job efficacy-wise. Now, mechanistically, it's not really well known how PPIs work. It could be just the acid suppression. It could be some immune modulation.
It could be both, and we believe vonoprazan, based on that general mechanistic thinking, but also the data from Japan, that we have a sort of proof of concept that we like to test in a phase II. So we're taking a broad population in that direction to understand the efficacy. Now, it is important because neither of the products that approved actually is convenient or suitable for long-term use. I think vonoprazan will be the intent of that will be to replace PPIs as the first line-
Mm-hmm
... of go-to for-
Yeah
... EoE.
In terms of plans for vonoprazan and EoE, what could a phase II program look like? You know, key endpoints and things like that.
Yeah, we are in the final stages in discussion with the FDA on that design. I prefer to hold the answer to that question and the details-
Sure
... till we have that, and then would be happy to share the full design with you. But the discussion is going well. Again, the FDA is, for the reasons that PPI are used without being labeled as such, is very eager for us to do that study, and we're working very collaboratively to get that study started this year as-
Yeah, that sounds very interesting label expansion opportunity. Last couple of questions from us, mostly financial related. What's your current cash position, and what are your current cash runway expectations?
Sure. So we ended 2023 with $380 million cash on hand. We have another 160 million available under our debt facility, and we have indicated that gets us runway through 2026.
In terms of the debt facility and the term loan, do you have any limitations to access this, and what are those terms?
Sure. So of the $160 million that's available, $60 million is available at our discretion in 2024. The remaining $100 million is available in 2025 and 2026, based upon hitting certain revenue thresholds, which we certainly feel comfortable with at this point. And maybe just from a term perspective or a rates perspective, currently, we're at 9.85%. It is a prime-based variable rate, but it is capped at 10.35%. Another key element to the term facility is it's interest-only until the end of 2027. And I think those are kind of really the key piece. There's also a small PIK at 2.15%, but those are really the key terms.
In terms of, you mentioned—you touched on it a little bit earlier with your cash runway, but in terms of OpEx spend trends, how should investors think about OpEx as the launch progresses here? Couple that with the potential label expansion to NERD coming online this year. If you look at, say, 2023 OpEx, $168 million as a guide, what are reasonable trends in OpEx that we should expect going forward?
Yeah. So if you look to your point, if you look at our trend, specifically Q4 of 2023 as the basis, what we've indicated is the sales force of about 320 sales reps represent about $100 million in incremental spend. So that would be additive to that 2023 and the 2023 run rate. And then the other key component that we've talked about in the past is DTC. As you know, we recently launched our DTC campaign, so we'll continue to invest in DTC throughout the rest of this year and certainly going in 2025 and beyond. So those are really the key elements to add into the OpEx model.
To your point on the R&D side, and as Azmi mentioned, we'll initiate the 302 study, which is the on-demand, later this year. So we'll anticipate some type of increase in spend for that study at the end of this year and into 2025. But other than that, you could pretty much assume somewhat of a steady state.
Great. Very helpful. Last question from us. I know you're early in the launch, but what does the path to profitability look like for Phathom?
Yeah, we haven't provided that specific guidance on the timing, but what we have said is, we anticipate peak sales could be in excess of $3 billion. If you take a typical ramp curve to peak, for many companies, it's five to six years. So certainly, at that level, I would certainly anticipate that we could be a profitable company.
Great. Well, thank you so much, Terrie and the rest of the Phathom team, for participating. It was a great discussion.
Great.
Thanks, Joey.
Thanks, Joey. Thanks, everyone, for joining on the webcast. Everyone, have a good day and a good rest of the conference.
Thank you.