All right, great. Welcome back, everyone. I guess we'll get started then. My name is Matthew Caulfield. I'm a senior biotech analyst here at H.C. Wainwright, and we're very excited to be joined by Phathom Pharmaceuticals and Steven Basta, President and CEO.
Thank you.
Thank you for joining us. To maybe start off, you could tell us a little bit about the gastroesophageal reflux disease, or GERD, space and how lead commercial product VOQUEZNA can help address some of the present unmet need for those patients.
Thank you very much for the opportunity to join you today. I appreciate the time. You know, as we think about the GERD market, obviously the standard of care for decades has been PPIs, and PPIs work well for the majority of patients. There is a sizable population of GERD patients that are still experiencing significant heartburn, still experiencing significant pain, even when they're on PPIs, even when they double the dose of PPIs or switch between two or three, they are still experiencing significant pain. It is that population of patients that is sort of the early opportunity for us. Obviously it grows from there as physicians become even more comfortable with this product and with the profound benefits.
What I keep on hearing from physicians who prescribe our product, from patients who take our product, from our sales reps who are talking to physicians every day, is just across the board, the unanimous feedback that we get, the consistent feedback is patients who've been experiencing pain associated with their reflux, as soon as they start VOQUEZNA, they feel better, and they feel profoundly better to a degree that they hadn't expected. It is that delight and that extraordinary patient experience that is the foundation for the adoption of this product by physicians.
That's very exciting. Thinking commercially, VOQUEZNA is approved for both erosive and non-erosive patients. We saw about $55 million in sales the first full year, 2024, and over $28 million in sales for first quarter, 2025. What can you tell us about the commercial progress to date for VOQUEZNA?
We've been getting really nice adoption consistently with new writers initiating scripts of the product, and that's both in the GI and the primary care space. In fact, the company has been making sort of broad initiatives to pursue both GI and primary care writers. We're shifting that balance a little bit, and we're going to be putting a little bit more time into going deeper in the GI category, where we're clearly seeing significant adoption, but the opportunity is so many-fold what we're already experiencing. You know, there's the potential for this to be a billion-dollar-plus product just within GI and then to be expanding into primary care significantly beyond that.
Our opportunity to both expand the number of gastroenterology writers, while clearly we're still growing within the primary care community, but I think there's sort of more of an early adopter community within the specialty, and there's a higher need state within the specialty patients because patients who are being referred to a gastroenterologist, almost by definition, they're being referred because they're experiencing pain.
Right.
A GERD patient who's making it to a GI needs our product. They are, by definition, a patient who is not adequately served with PPIs. We're finding that when we convert a gastroenterologist, they write more scripts, and we've got an opportunity to grow that more fully and robustly. It's a really big opportunity, starting with the specialty and then growing from that into primary care. One of the easy opportunities in the context of the relationships between the two is that when we convert patients in the GI environment, a gastroenterologist who sees a patient who's experiencing significant pain still, their GERD, they're waking up at night with heartburn.
Sure.
They start them on VOQUEZNA. As they're feeling better, they send them back to their primary care physician. That's now a patient who's raving to his primary care physician about how much better he feels. That's our opportunity to then expand into the primary care environment as well.
Kind of reversing it back to the primary care.
You get both the value of the detail call from the sales rep calling on them, but also the value of the patient who's being referred back, who is the patients who are on our product are not quiet about how much better they feel. They are clear with conviction about just how much better they feel.
Sure. And then when most patients are going from primary care to GI, are they getting an endoscopy typically, or is that not always the case?
Not always the case, but often. Often, because one of the things that a gastroenterologist is going to want to see is, is this reflux actually resulting in any erosions? Is it resulting in some more serious condition, Barrett's or other sequelae that can come from the reflux phenomenon? For many of those patients, they will get scoped. Whether they actually are seeing erosions or not seeing erosions, either way, they're still experiencing significant pain. Either way, the physician is going to be wanting to find a treatment for them that's going to help alleviate the pain that they've not been able to resolve with their PPIs.
Labeling is for erosive and non-erosive.
Exactly. Both are on label for us.
Right. Can you just tell us a little bit about the market sizing for that patient group that's gone from primary care to the GI? They're still having breakthrough heartburn on the PPIs.
As we look at it, as we think about the number of physicians who are writing today and the frequency, and as they are stepping up in frequency of writing, it's clearly just within the GI community, it's north of a billion-dollar opportunity easily. It's a multi-billion-dollar opportunity when you think about broadening it, you know, beyond the GI space, but even just within the GI space, there's room for us to be growing for many years in the context of the kind of penetration that we can get. We are still, even though we've got a fair number of gastroenterologists who have written scripts, we still haven't gone to the depth that we can within their practice.
Right.
The frequency of writing can be amplified, and we're, you know, still at less than 50% of GIs that have written in total. We've got an opportunity to grow both in numbers of physicians writing, but then also in the frequency of writing.
That's very helpful. Another point I wanted to make was the mechanism is very differentiated. There hasn't been innovation in the space for decades.
Right.
VOQUEZNA works as a potassium-competitive acid blocker, or PCAB.
Right.
It's an oral tablet form, which is, you know, readily used by patients. Can you tell us a little bit more about the context of the novel mechanism compared to PPIs, conventional antacids, sort of how this is really a nuanced approach in the space?
The best way to describe the differentiation is less mechanistic and more effect-based. What, and this just sort of, this is the core messaging when we talk to physicians as well as when we talk to investors. Treatment with VOQUEZNA provides rapid, potent, and durable improvement for patients. All three of those are important dimensions of why somebody chooses this product. It is more rapid in its onset of effect than a PPI. If you're experiencing significant pain and you take omeprazole, you're not going to get immediate relief. If you're experiencing significant pain and you take VOQUEZNA, you might feel relief in 30 minutes, might be 60 minutes, but you're going to get significant, very rapid relief of your pain. That is going to be a fundamental improvement that causes the patient to get the positive reinforcement that this is fundamentally different.
It's also more potent. Our ability to raise pH in the stomach above four and to maintain it over a 24-hour period provides both potent effects. Above four, you're starting to get really meaningful clinical improvement in the acidity in the stomach and therefore reduction of pain associated with the reflux. The durability of maintaining that over a 24-hour period becomes critical. One of the reasons that many patients will go in and seek additional treatment is because they're getting nighttime heartburn.
Right.
Their PPI might be working for them, but the effect may be waning after six or eight or 12 hours, and they're not getting relief at night. We're providing 24 hours of benefit. The fundamental benefits of this molecule with this new mechanism of action is really threefold. It's a rapid response. Patients feel better quickly. It's a potent response. It maintains pH above four in the stomach for a significant period of time. It's a durable response.
Is there ever a point where a patient sort of graduates from therapy where they don't need it anymore, or is this kind of a chronic therapy for a chronic condition?
It will vary from patient to patient.
Yeah.
There are some patients where if they had erosions, they may feel better after their erosions. For many of those patients, the reflux that caused the erosions is still going to happen if you stop therapy.
Sure.
Some patients may be able to taper their therapy over time. Some patients may need to be on therapy chronically. That's been true with PPIs as well.
Yeah. I understand.
Many patients are on therapy chronically.
Okay. There were some updates I wanted to go through. The company did recently go through some significant changes, including management, obviously, timing of the DTC campaign, temporary streamlining of the pipeline and the workforce. How would you best characterize the near-term goals for these strategic initiatives?
It's actually really simple. This is the conversation we're having internally on a regular basis. We've got two primary objectives this year. One is to maintain the revenue ramp, and we've committed to this in the context of the recent earnings call as well, that we need to continue driving revenue growth. In order to do that, even with the restructuring that we just took, we've maintained our sales organization so that we can maintain the footprint, maintain the same level of time and intensity in physician offices. In fact, to some degree, by reallocating time a bit in our call points, we're going to be able to go deeper into GI and drive even faster penetration there. Objective number one is to maintain our revenue ramp and potentially accelerate the revenue ramp.
Then objective number two is to get our cost structure in line to get to profitability. We have publicly committed that we are going to have our OpEx number below $55 million by Q4, excluding some non-cash stock comp charges and such. If we can get our spend below $55 million at our current revenue ramp, that allows us to have revenue cross past the OpEx line. We have also indicated we expect to convert to profitability sometime in 2026.
Right.
The path to profitability comes from both maintaining or accelerating the top line growth number and holding the line on expenses. Now, not at a crazy low level. It's meaningfully lower than we had been spending, but we're still spending robustly with a robust sales organization to drive our revenue ramp. And that positions us to have a depth of relationships with every gastroenterologist and have capacity to go beyond that into primary care.
That makes sense. I know we've spoken about this, but can you comment a little bit on the strategy in terms of dialing back the DTC at the current time frame?
Yeah. So we just weren't seeing much return from the DTC program.
Interesting.
My own interpretation of it, it's hard to test this hypothesis, but my own hypothesis around it is it was just too early. We don't yet have broad enough awareness in the primary care community of the drug, of what the drug does, of this new mechanism of action, how to prescribe it. If we are activating a patient and sending a patient into a primary care physician who hasn't yet developed comfort with or knowledge of this product, they're likely to just prescribe them a PPI.
Sure.
Now, that might be different in a year or two years after we have had a significant number of patients on the product. Those patients, even if they were being prescribed the drug in the GI environment, are being sent back to their primary care physician, telling their primary care physician how fabulous they feel. In an environment where primary care physicians have heard from five or six patients how fabulous they feel on this drug, now a new patient coming in asking for it is much more likely to get it. There is going to be a time and a place when DTC makes sense, but I think we're just too early.
Yeah.
We have been able to pare back that spend. We're still going to do some digital DTC that we were seeing work. We weren't seeing significant returns from the broadcast and streaming, some of the more significant spend categories.
Got it.
It provides an opportunity for us to streamline expenses and to get to that profitability objective without harming revenue because we just were not seeing the uptake from that revenue. What is driving revenue? The thing that is clearly driving revenue is our sales rep walking in, teaching the physician about the product, sampling the product, allowing the physician to have their patients try the product and tell them how fabulous they feel. We do not actually really have to sell the product. We just have to convince a physician to allow their patients who are in pain to try it. As soon as they do, the patient sells the product for us.
And understand.
It's like as soon as the physician allows their patient to experience VOQUEZNA, they tell them how much better they feel. They say things like, "Doc, I haven't felt this good in 10 years." When a physician hears that, they are motivated to write the script and to deal with the prior authorization and work through the process.
Right. Do you want to speak to that a little bit? The pre-authorization or patients kind of having to go through the PPI or have failed the PPI.
Right.
How that plays into the prescribing.
We've got excellent market access penetration with 82% of commercial covered lives that have access to this product. The access almost always involves a step associated with having used prior PPIs. Sometimes it's a specific PPI, sometimes it's any PPI. For virtually all of the commercial payers, they are requiring that you use the inexpensive generic PPI first. That's not such a burdensome step because virtually every patient has tried a PPI. If you've had heartburn, at some point in time, a physician told you to use omeprazole or esomeprazole or one of the standard care PPIs. By the time you're going back to your physician telling them that you're waking up at night with heartburn, you've already been on that script. You've already met that requirement. It's just completing the prior authorization to document it.
Got it. There's also on label, non-inferiority and superiority to lansoprazole.
That's right.
Yeah.
We've compared in erosive esophagitis in particular, we've compared and demonstrated superiority. And sorry.
You're a ventriloquist , I guess.
We've got some, you know, comments from the recordings in the back. All good. No, so we've demonstrated in certain indications superiority to PPIs and other indications. The trials were done either against placebo or short comparability. What is in the label demonstrates superiority in certain key metrics against PPIs. What happens in real-world experience cements it for physicians. It is much more profound than to see a slightly higher number in a bar chart that says, "Oh yeah, the product is better." When you give it to a patient, when you give this product to a patient who has been on a PPI and has been experiencing breakthrough heartburn, breakthrough reflux pain, and they start VOQUEZNA, they feel so much better. That conversation is so compelling for a physician, particularly when it is reinforced patient after patient after patient. That is exactly the experience they have.
That becomes the compelling driver to adopt this broadly.
Right.
That's how we're going to continue to grow. We're going to continue to grow by converting new physicians. We're going to continue to grow by virtue of educating physicians who are already prescribing the product about the other kinds of patients in which they can use the product. We're going to continue to grow by virtue of the feedback that physicians get from their patients that is going to cause them to want to prescribe it more often. All three of those drivers are going to have a profound impact.
That makes a lot of sense. Another important topic on investors' minds is the upcoming FDA clarity this June regarding the citizen petition and the patent timing for VOQUEZNA. Can you give us a high-level overview of the possible scenarios and why the citizen's petition is relevant kind of for the near term?
Right. This has been an area of significant focus for investors because clearly having a longer runway creates significant additional value. I actually think we're going to create significant value for shareholders in either timeline. Obviously, better to have the longer timeline. The distinction for folks is that with the Hatch-Waxman extension on our current patent exclusivity period, we would have exclusivity for this molecule through 2030. With the citizen's petition that is outstanding, we're requesting that we get the same 2032 exclusivity date applied to VOQUEZNA that is right now applied to our H. pylori treatment packs. Under the GAIN Act, we got 10 years of exclusivity for the H. pylori packs.
We are seeking to have that same exclusivity date then applied to the base molecule because it's the same molecule that's in the treatment packs and therefore should have that same exclusivity for every indication. That's the premise of the request we're making to the FDA in that process. We could get one of three responses, and it's hard to predict which of these responses will come, any of them possible. We could get a simple yes because we think that our arguments on their merits regarding the legal precedent that we have the 10 years of a GAIN Act exclusivity, it's standard practice within the FDA to apply their umbrella policy that the same exclusivity date should apply to all indications for a drug. That combination of the statute and policy should lead to application of that umbrella policy to our drug. We should get 2032.
We think we've got the stronger argument. FDA could come back with a simple yes, we agree, which would be great. They could come back indicating, no, we don't agree, in which case we will then figure out the next step. The next step could be litigation. It could be other possible venues. We'll determine that based upon the nature of the FDA response and exactly what's indicated in that response. We could get some communication from them that they need more time.
Right.
That's an indeterminate answer because obviously there's been some turmoil at FDA over the last six months, and it's possible that they come back indicating they need more time for that process.
Right. But no indications at this stage that the June time frame has been altered in any way or?
We don't have any reason to believe that we won't hear on the time frame, but I don't know which of these things we will hear.
Okay.
It could be any one of those responses.
That's very helpful. I also want to briefly touch on the future pipeline. There's been plans for VOQUEZNA development in both eosinophilic esophagitis or EoE and also on-demand as-needed therapy, which would be specifically relevant, as you mentioned, because PPIs are not covered or not approved for on-demand therapy presently. What type of read-through do you believe exists for VOQUEZNA if and when these programs can continue?
One of the things that we have done in the context of the current financing climate and the need to get to profitability is we have slowed down clinical development programs. As you indicate, in addition to reducing DTC spend, reducing some third-party vendor spends, one of the areas of savings is that we have deferred certain clinical trials. I believe both of those are of value. Both the EoE indication and the on-demand therapy indication would be of value. The relative timing of those and the relative timing of the investment and does the investment make sense in terms of our timeline for exclusivity are all important variables. EoE, for example, there's a question just around the duration of the trials. It takes two to three years to do each round of trials.
If you have to do a phase II trial and then a phase III trial, if we've got the extended runway of a positive decision in the citizen's petition, that consideration is different than if we don't have that extended runway. What we've chosen to do on the EoE trial is just suspend that study until we have that determination, and then we'll reevaluate what's the timeline, what is the relative size of this market, and the relative return on that investment. We'll make that judgment call on the investment at that time.
Understood. So I know we only have a minute or two left here, but I did want to ask you, what are you looking for? What are you most excited about over the coming quarters? Obviously, continuing to watch VOQUEZNA's progress, but what are you most interested in seeing in the next couple of quarters?
Let me take that beyond the next couple of quarters to the next couple of years as well.
Sure.
The next couple of quarters, to answer the first half of it, the next couple of quarters are really straightforward. It's interesting. One of the pushbacks that we got from investors when we had our earnings call was, you know, you're indicating to us you're going to take a significant amount out of OpEx, but you're still going to hit your revenue ramp. To some degree, there's sort of a sort of prove it to me kind of mindset, which is understandable that investors would have that question. What we're going to need to do in the next two or three quarters is prove to the investment community that we can do that.
What is incumbent on us as a management team is that we need to execute the revenue ramp and deliver the revenue ramp that people are expecting and continue solid execution in that regard and bring down our operating expenses so that we can demonstrate to the street what a clear path to profitability looks like. That's the focus for the next couple of quarters.
Okay.
When you think about the focus for the next couple of years, as we get to profitability in 2026, we then need to think about how do we build a durable, sustaining, leading GI company on the leverage of the kinds of relationships that we're going to have with gastroenterologists delivering a product that so profoundly delights their patients that we get access to those offices and we get to build relationships with physicians in ways that I think are going to be deep and able to be leveraged for future product launches and future trials. We are going to be thinking about how do we bring additional assets in as well as looking at new indications, as well as looking at life cycle extension strategies and building out a strategy that goes beyond the 2032 timeline to building out a sustainable GI company. That's not a two-quarter activity.
That's a two, three, four-year activity where you'll see us bring in assets and build a sustainable company.
That makes sense.
It's going to be built on the cash flow from our lead product because we've got rockstar lead product that is going to be a huge success in this space.
Yeah, absolutely. I appreciate that. And then any specific points that you feel are the most underappreciated by the markets presently about VOQUEZNA or just the Phathom story overall?
I think that the market overhang of uncertainty around the exclusivity date, whether it's 2030 or 2032, has focused many people on that question, and that often loses sight of the fact that on either timeline, we can create significant value. There is significant value to be created on either timeline. I'm not trying to signal in any way that we don't believe we're going to get the 2032 timeline, but I don't think that that binary outcome drives whether or not we can create value for shareholders. Obviously, we can create more if we've got a longer runway, but our mandate as a management team is to build a successful company in either scenario and also to make that happen to get the extra timelines.
Understood.
We are on that path to execution. We are executing to grow revenue. We are executing to get to profitability. You'll see us over the coming years executing to build a pipeline that creates a sustainable leading GI company.
Great. Very exciting times. It's been great to watch VOQUEZNA's progress. With that, thank you, Steven, and thank you to Phathom Pharmaceuticals.
Thank you.
Thanks.
Pleasure. Thanks for the opportunity to be here.
Thank you.