All right, welcome back everyone to HC Wainwright's Global Investment Conference. My name is Matthew Caulfield, I'm a Senior Biotech Analyst here at HC Wainwright, and we're grateful to be joined by Phathom Pharmaceuticals and Stephen Vostak, President and CEO of Phathom.
Matthew, thanks so much for the invitation to be here.
Absolutely, it's great to have you. Stephen, maybe to start things off, you could tell us about the high-level progress the team has made for VOQUEZNA regarding the treatment of erosive and non-erosive GERD patients.
We're delighted with the momentum that we've been seeing over the course of just the first year and a half of our launch at this point.
Mm-hmm.
We did $55 million in revenue last year. We've guided to $165 to $175 million this year, which reflects very significant growth. We saw significant growth from Q1 to Q2 with a $39 million plus quarter in Q2, reflecting the fact that we are seeing uptake of this product broadly among physicians. One of the things that we've recently done is shifted much more to a GI focus. I'm sure we'll get into that through the course of this discussion, but it's a really good drug. Patients feel the difference. Physicians are recognizing that their patients feel the difference, and that's driving the success.
Excellent. No, I definitely look forward to getting a little more in the weeds today. A key point for VOQUEZNA's commercial progress has been its novel mechanism as a potassium-competitive acid blocker, PCAB, oral tablet. What do you view as the key differentiators for VOQUEZNA in the context of traditional proton pump inhibitors or over-the-counter antacids, for instance?
I think there are several fundamental advantages. Our sales mantra is really super simple. It's rapid, potent, durable. That reflects the distinction with this drug and why this drug has significant uptake. It has more rapid onset of action. A patient who is feeling significant heartburn could take the drug. We've demonstrated in our clinical trials within two hours. In fact, many patients will tell us within 30, 45 minutes, even an hour, they're seeing significant, they're feeling significant benefit. That's rapid effect. It's potent. It elevates pH more than a PPI. In comparative direct head-to-head studies, you can see that baseline pH for the stomach is around two to three, depending upon food intake, et cetera. PPIs have demonstrated that they can elevate pH to a pH of about four, not for the full day, but for parts of the day. We can elevate pH to five or six.
Within the first day, we can average a pH north of four. You can get much higher pH elevation. That's potent. It raises gastric pH more. Durable, we've got a long half-life drug that provides good 24-hour coverage. We can elevate pH for the entire 24-hour period. That's what it takes to treat a patient. If you think about a patient who's experiencing significant GERD symptoms, it's the fact that the drug provides fast onset of action, but more importantly, a high pH elevation and durable coverage for 24 hours.
Absolutely. I mean, as you kind of alluded to, I think the superiority to PPIs is even within the label in some capacity.
Right. Particularly in the context of healing erosions in the esophagus, if the acid reflux in the stomach is actually causing erosions to the esophagus, we've shown a higher rate of healing in erosive esophagitis patients as compared with a PPI. You can actually see it on scopes. You can see the healing of the erosions, and the healing is clearly superior with this drug. Patients can also feel the difference. Unlike a hypertension med or an LDL lowering med, which you might think about, where a patient really can't feel the difference, here the patients can feel the difference, and they will provide feedback to their physicians about how much better they feel. That has a huge positive impact.
No, that's great. One thing is the team has discussed focusing on growth-oriented profitability anticipated in 2026.
Right.
Strategic cost reductions included redirecting efforts from the direct-to-consumer campaign and primary care physicians to prioritize the high-value gastroenterology prescribers that we mentioned. How have these strategies advanced this year? How have they kind of?
We just announced the change in strategy in our earnings call in May. We have started that implementation, but the implementation happens in stages. We are in the midst of that process of pivoting the salesforce focus from a broader strategy. Early on, the easiest way to think about this is the company's strategy initially at launch had been focused on breadth, which is let's try to get as broad a prescriber base as possible. What we are now doing is really focusing on depth within the prescribers who are most likely to need this drug and who are already demonstrating a higher propensity to prescribe. That is gastroenterologists as compared to primary care physicians. While we were successful in getting a significant number of primary care physicians to write, they just don't write this as frequently. They haven't adopted it as quickly.
That's so true of so many drug launches. The playbook that we're running is basically a standard drug launch playbook. The highest need patients exist within the specialist practice. The early adopters of a new drug exist within the specialist practice.
We're simply reallocating salesforce time to focus on the specialist, in this case, the gastroenterologist, who has patients who are significantly in pain, who has patients with erosions in their esophagus, who has patients who have failed PPIs. That's why they're being referred to them. They're patients that need to switch to a more potent med. As we get conversions in GI, that's going to create a new standard for here's how you deal with a patient who is not satisfied with PPI therapy. You need to escalate them to PCAB therapy, and you need to escalate them to VOQUEZNA. That's going to translate into primary care adoption and implementation, but that's over the next two or three years.
Right.
For the next 18 months, we're going to focus heavily on GI, and then sometime probably in the 2027 timeframe, we're thinking about how do we go back broadly into primary care.
With the DTC campaign.
It really happens at the same time.
Yeah.
It temporarily happens at the same time as you go into primary care if it's delayed somewhat. One of the challenges with our DTC campaign is it just was run too early. We were running a DTC campaign to activate patients who would then ask a primary care physician who hadn't yet written scripts, and we weren't getting script conversions. Once we have broad awareness of this drug within the primary care audience, a DTC campaign can be much more productive because you're sending a patient into a physician who knows and will prescribe the drug.
That has a much better return at that point in time.
Right. I mean, if you think we're still just at kind of the tip of the iceberg commercially, is there a sense of what proportion of GERD, either non-erosive or erosive GERD patients there are that are with a GI specialist? Like, are most of those patients still working with their primary care physician?
I think about it slightly differently than you're describing. It's not as though there's a population of patients that's in primary care and there's a population that's in GI.
That have sort of escalated.
It's actually more that there's a continuum and a flow. You have a patient who is primarily cared for by a primary care physician. They're not primarily cared for by a gastroenterologist, although in some cases, if you have Barrett's or EOE, you might be primarily cared for by GI. Most of these patients who need our drug are primarily cared for by their primary care physician. When they're experiencing significant pain, they've come in, the primary care physician's put them on omeprazole a few years ago, they come back and they're like, "Doc, I can't sleep. I'm having heartburn every night.
Mm-hmm.
They double their dose of omeprazole or they put them on b.i.d. dosing. Patient calls up a month later, they're like, "Doc, I tried this. It's still not working. I still can't sleep. I've got lots of heartburn." They're being sent to a gastroenterologist for assessment. Now they're landing in a gastroenterologist's office. That's a patient who is in significant pain, needs our drug. They're getting scoped, they're getting assessed, their treatment is being changed.
Mm-hmm.
Once their treatment is improved, they've been put on VOQUEZNA, now they're doing better, they're going back to their primary care physician. It's a continuum. It's not that there's a body of patients that resides here and a body of patients that resides here. It's that the journey of the patient starts within primary care, goes to GI, goes back to primary care. That's part of our path to converting primary care. We capture the patients now when they're in GI, they're going back to primary care next year. That's going to soften the primary care market.
Understood. No, that's very helpful. For the quarter, the team had reported 36% sequential prescription growth over Q1 and approximately 173,000 VOQUEZNA prescriptions filled. What are the most important metrics to quantify that growth remains on course for reaching the anticipated profitability during 2026?
In the pharmaceutical industry, there's this interesting phenomenon where all of our numbers weekly are public information.
Right.
IQVIA. This is not actually hard for people to track. It's relatively easy to look at the IQVIA trend numbers, which is a pretty good proxy for how we're doing in terms of covered scripts. The script volume is maintained on track through July and August in the public IQVIA numbers.
Mm-hmm.
Those are a pretty good proxy for how we're doing.
Understood. One important point also from the quarter was that approximately 70% of all filled VOQUEZNA prescriptions had come from GI specialists, as we've spoken about. How would you characterize this type of patient and whether they've, I guess you've kind of covered, they've tried a proton pump inhibitor most likely, maybe through their primary care channel. Have they tried other prescriptions at this point?
It's interesting in our market research, we've asked physicians what sorts of patients are appropriate for VOQUEZNA.
Mm-hmm.
When you look at the listing of all of the different responses, they're all characteristics of patients who are still experiencing symptoms and primarily pain, even though they're on a proton pump inhibitor. They're patients who have double dosed their PPI. They're patients who are doing b.i.d. dosing of PPI. They're patients who are doing PPIs plus H2 receptor antagonists. They're patients who are doing PPIs plus they're taking antacids every time they have breakthrough heartburn.
They're patients who are, you know, swallowing a bunch of Prevacid before they go to bed because they're doing that to augment their PPIs. You've got patients who are using a variety of strategies to manage the fact that they've got breakthrough heartburn symptoms, even though they're on a PPI.
Right.
All of those patients basically are describing the same thing. You're on a PPI and you're still having pain. That's who needs our drug. You're on a PPI, you're still having symptoms. You need something better. That's when you need our drug. You need something better. That's 30% to 40% of the GERD population.
Mm-hmm.
A number of studies have said that about 30% to 40% of patients who are on chronic PPI therapy are still having breakthrough symptoms. Those are patients who need our drug.
That makes a lot of sense. Maybe taking a step back for a second, what do you consider the greatest overall hurdles to getting VOQUEZNA adoption, considering the relatively entrenched presence of traditional proton pump inhibitors, H2 blockers among prescribers? Those have been around for decades.
I think our greatest hurdle is just habit and inertia.
Yeah.
It's the fact that physicians have been prescribing PPIs for 30 years.
Right.
They're used to it. They're comfortable with it. It's easy to prescribe them. It goes through without any prior authorization, without any work. It's just like every time a patient comes in, they've got GERD, I give them PPI.
Mm-hmm.
What changes that habit and overcomes the inertia is feedback from patients about how much better they feel. The more that we can get a physician to sample the product or to do initial scripts for patients who are in pain, and the more feedback they get from their patients about how much better they feel, the more compelled they are to switch more of their patients. That's where the incremental growth comes in. Basically, the pivot in strategy that we implemented, instead of going broad to try to get new physicians to write their first script, is to capture those physicians who have already been writing, but now get them to write three, four, five times a week because they've heard from their patients how much better they feel, and there are more of their patients that need this solution.
Mm-hmm.
Our greatest hurdle really is just 30 years of physician inertia.
Right.
As we get them to realize this really is a better solution, it really does help my patients feel better. That's why physicians became physicians, to help patients feel better. That's their motivation.
Yeah, of course. I think along those lines, about 68% of this past quarter of the prescriptions were filled through the retail pharmacy channel, and then the remainder came through the cash pay BlinkRx. How do you see that balance evolving over the next couple of quarters with the focus on GI specialists?
It's interesting. We don't actually try to evolve it in a conscious way in terms of the balance. We really try to grow each of the channels simultaneously.
Mm-hmm.
What we really try to do is grow script volume with an intent that if we can direct physicians to prescribe to Blink, send their scripts in, the outcome gets optimized for the patient. Blink is going to submit it for coverage. They'll provide a nudge for the physician to remind them to do the PA, which accelerates that process. If the patient's script gets covered by their commercial insurance, that optimizes for the patient because they have a $25 copay. If the patient's script doesn't get covered, we offer them a $50 cash pay price.
Mm-hmm.
Now, we're much more profitable, obviously, on the covered scripts because we're getting a much higher whack on all of those covered scripts. We're getting a much smaller revenue per script on the cash pay, but we want to try to do several things in this process. One is we want to make it just as easy as possible for the doc. If they send as many of their scripts as possible to Blink, they don't have to worry about trying to figure out whether or not the patient's insurance is going to cover it.
Right.
Whether I send it based upon what coverage they get, Blink is going to do that for them.
Mm-hmm.
That makes it really easy for the physician. It makes it really easy for the patient. They always get best outcome.
They either get a $25 copay or a $50 cash price, whatever's better for them, they get the best outcome.
Mm-hmm.
It optimizes for us because a patient might have a high deductible plan. They might be paying cash for the first few months of the year, and then once they work through their deductible, now their insurance is going to cover it, and we actually capture the incremental revenue of getting a cash pay covered, or getting that cash pay script now converted to insurance coverage. It optimizes for all parties because we can have a much more thoughtful approach to the triaging of those scripts.
Sure, it builds that familiarity.
We don't think about it like we want the ratio to be X, or we want the ratio to be a little bit more than X. We want to drive as much adoption as possible within physicians' offices, drive as much behavior change as possible, that every time your patient is in pain and isn't adequately served on a PPI, you want to be switching them, and then you want to send your script here so we can get them the best outcome.
That will organically grow both. It will organically grow covered scripts, and it will also grow the number of patients who are getting cash pay. If that ratio shifts over time, it shifts over time.
That is an efficient process for all parties.
It also achieves the best health outcomes. It achieves the best patient interest outcome. We're in the healthcare business. We're trying to improve patient outcomes. We want as many patients as possible to get access to this.
Sure. Kind of separately regarding the potential for label expansion, there's the planned phase two trial initiation in fourth quarter for VOQUEZNA in eosinophilic esophagitis or EOE.
What can you tell us about this opportunity and the current unmet need there?
EOE provides several upside opportunities for the broader community of physicians, for the patients who are afflicted with it, and for us as a company.
Mm-hmm.
If we think about, you know, physician utilization, EOE is increasing in diagnostic prevalence with the advent of new therapies. Dupilumab just got clearance for EOE, and there's a greater drive to screen patients and identify patients with EOE. That trend is happening that drives the need for new therapies.
Mm-hmm.
Current first-line therapy for EOE is PPI.
Mm-hmm.
If you manage acid, you reduce the inflammation induced by acid impact on the esophagus, and you reduce the severity of EOE. We potentially represent with vonoprazan with VOQUEZNA a better first-line therapy. It could be ultimately a replacement for PPI as a first-line therapy. It could be ultimately a second-line therapy if someone isn't adequately treated on PPI. We'll see how the treatment guidelines evolve. This is a more potent acid-suppressing agent, which may have an even better effect on these patients. We're going to see that in the phase two study.
Mm-hmm.
It represents a meaningful advancement in the sense of treating these patients and a meaningful clinical advancement potentially for these patients. A meaningful advancement for physicians if there's now a new early-stage therapy that would be helpful for patients and broadly helpful. An advance for us in several contexts. One, the EOE market by itself represents tens of millions, if not more, in terms of incremental revenue opportunity, with potentially a million PPI scripts a year going into that market. It's a meaningful opportunity. It's not as large as the broader GERD market. It's a smaller population, but still meaningful. The other big economic driver for us is under the FDA guidance document from 2023, in order to get six months of exclusivity extension for a pediatric indication, you need to test a product in a new indication of interest in a pediatric population.
The FDA has also indicated to us that EOE would qualify for that potentially. If our phase two study demonstrates efficacy, we potentially can get a request from FDA for a phase three study that would grant us an extra six months of exclusivity. If we've got a $1 billion or $2 billion or $3 billion drug, that represents a very significant economic opportunity to extend our exclusivity.
Sure, absolutely. Kind of along those lines, there was recently the citizen petition to the FDA seeking correction of VOQUEZNA's exclusivity expiration in the Orange Book listings. With the new chemical entity exclusivity now confirmed, can you clarify how this translates to protection into 2033 and the focus on commercial execution?
Right. So the clarification, we're certainly pleased with the FDA's decision. The noise that had existed around our exclusivity period related to the application of the GAIN Act to the new chemical entity exclusivity as you're describing, we prevailed in the citizen's petition. We got the decision we wanted from FDA. They've confirmed in the Orange Book a May 2032 date for exclusivity protection. The way that exclusivity protection works is that's the earliest date that an ANDA filing is allowed to be made. That's the submission date for an ANDA, which then typically is on a first round review, 10 months. If an ANDA requires a second round review, you add another 8 months to that. Likely that goes to February 2033, maybe to late 2033, depending upon whether it's one or two or more rounds of review for an ANDA submission.
There may be multiple ANDA submissions that get made. We're expecting that the earliest launch date under those timelines due to that protection would be in 2033. Per the conversation we were just having on EOE, if we get 6 months of extension, that would extend that May 2032 restriction by 6 months. It could move out the earliest launch date for a generic by another 6 months.
Excellent. That's very helpful. Maybe just in our last minute or so here, I wanted to ask you, what should investors have top of mind as we continue to watch VOQUEZNA's progress into the second half of 2025 and 2026, and then maybe more specifically considering the anticipated path to profitability and the timing of impact from the strategic shifts that we've discussed?
We will take that question in multiple parts.
Okay.
First, financial metrics. You know, we think about a really straightforward path to profitability. When we say profitability, what we've communicated is sometime during 2026, we expect to go EBIT positive.
Mm-hmm.
Excluding stock comp, just because it's really hard to calculate stock comp because it varies based upon our stock price. I don't know how to do the 2026 calculation yet on that. The way we think about getting to profitability is, not surprisingly, how do we continue top line growth and how do we manage expenses? What we've communicated publicly is guidance for this year that we will deliver $165 to $175 million in revenue this year. Analyst numbers have us coming out of this year north of $50 million in Q4. We've not provided quarterly granularity, but just sort of looking at the analyst consensus numbers. We've also guided on an expense side that we're bringing down our OpEx number to below $60 million in Q3 and below $55 million in Q4. That is OpEx excluding stock comp, so that's really the cash OpEx.
When we think about, on an operating basis, operating profitably on a cash basis relative to our cash OpEx, it's how do we get revenue next year north of that $55 million number, north by enough that it covers cost of goods and, you know, some royalty expense, et cetera. It's got to be meaningfully north of that, but it's consistent with what analyst projections are for next year, that we would get to that level of revenue and hold expenses. That $55 million quarterly run rate becomes our new baseline. It'll go up a little bit just because of inflation and, you know, cost of living, et cetera, and it'll go up a little bit because we're adding the clinical trial expense on top of it, but it's not going to go up much.
On a percentage basis, you'll see some increment next year on the OpEx line, and our revenue then needs to be enough north of that that it gets to profitability. We think we're going to hit that sometime next year. We haven't guided exactly when that'll be. We'll give you more granularity as we get into 2026, but we think sometime during 2026 we cross over to the point where we're starting to show an EBIT positive report.
Excellent. With that, on time, I'd like to thank Stephen and Phathom Pharmaceuticals. It's been great to watch VOQUEZNA's progress and continued progress.
Thanks so much for the support.
Thank you.
Appreciate the opportunity to be here today.
Thank you.