Hello, and welcome to the Jefferies Healthcare Conference. My name is Dennis Ding, biotech and spec pharma research analyst here at Jefferies. I have the wonderful pleasure of having Phathom Pharmaceuticals here. We have CEO Steven Basta and CFO Sanjeev Narula. Welcome.
Thank you, Dennis. Thanks for the invitation.
Yeah, for sure. Before we go into Q&A, would love to hand it over to you, Steve, to just give a high-level overview around the company and the tremendous progress you guys have made over the last 12 months, and maybe also remind us about the outlook this year.
Terrific. Dennis, thanks again for the invitation and the opportunity to be here. We'll keep this at a really high level in terms of Phathom. For those who are new to the stock, we have launched the first PCAB into the gastroesophageal reflux market opportunity. PCABs represent the next generation of therapy for gastroesophageal reflux. VOQUEZNA is the product that we've launched. It is growing rapidly, capturing significant attention in the gastroenterology community as a meaningful improvement on prior therapy for gastroesophageal reflux. We have approval for both erosive esophagitis and non-erosive reflux. We posted $175 million in revenue last year, have guided this year to $320 million-$345 million in revenue. One of the things that was important through the course of last year was we fundamentally pivoted the core strategy of the business to focus heavily on gastroenterologists as the core early adopters of this therapy.
When we look at the overall gastroesophageal reflux market, there are north of 100 million prescriptions every year for proton pump inhibitors. 20 million of those are written by gastroenterologists or related care providers, and the majority of patients in the gastroenterology office are patients who have failed prior PPI therapy and got referred to a gastroenterologist because they're still in pain. That's our core market opportunity. If we're able to get to 20%-30% of that market opportunity in terms of converting 20%-30% of the prescription volume in gastroenterology for acid reflux therapy, that represents a $1 billion in revenue.
We think that there's a path to $1 billion in revenue in GI and potentially another $1 billion in revenue in primary care, and I'm sure we'll have an opportunity to talk more about that through the course of this process, but we're on a really nice growth path with the VOQUEZNA launch, transitioning to profitability second half of this year and positive cash flow next year.
Perfect. Why don't I ask about your sales force strategy to go after GI, and how that has changed over the last year. What are some kind of early indicators of progress and demand that that shift is bearing fruit?
We're actually looking at several different indicators of the progress. As you described, early on in our launch, actually, there was a very broad call point set, which included gastroenterologists and a significant number of primary care physicians in the launch. One of the early metrics that we looked at, and I joined about a little bit over a year ago, and as I came in, I was looking at the metrics from our own launch, and what we found was it took fewer sales calls to convert a gastroenterologist to first writing for VOQUEZNA. When they did write, they wrote twice as many scripts per physician as compared to primary care physicians.
That just intuitively makes sense also because the patient base that a gastroenterologist sees are patients who have been referred from a primary care physician because the patient was still in pain despite standard of care therapy. A patient would typically be put on omeprazole or esomeprazole. They'd be put on a PPI. If that resolved their GERD symptoms, great. You don't need a referral. It's only the patients that were failing that needed the referral. In fact, the patients who the gastroenterologist sees need our product more. That's why the early metrics suggested that's where we should go. What we did last year was we actually pivoted the sales force target lists, and then we realigned sales force geography to enable our sales reps to spend upwards of 70% of their time in gastroenterology practices. That's bearing fruit. It's bearing fruit in several ways.
We are seeing trends toward prescribing volume on average from our gastroenterology writers growing every quarter-over-quarter. That happened consistently through 2025. We also see growth in the percentage of new-to-brand conversions that are happening to VOQUEZNA among patients that a gastroenterologist is seeing for whom they're switching therapies. Now in our top 300 writers, and in fact in our top 3,000 writers, our top 300 writers, we're seeing almost one out of every two patients where they're switching therapy because their prior therapy was inadequate. They're switching them to VOQUEZNA. In the top 3,000 writers that we're spending a lot of time with, one out of every three patients where they switch therapy for reflux, they're switching those patients to VOQUEZNA.
That's a fundamental change in behavior in those gastroenterologists, where their writing propensity for VOQUEZNA is going up, and we see that happen repeatedly as we get time and frequency of calls on those physicians.
Sure. T hat's great color. I think it's great that you do have, what's essentially a leading indicator, right, for those high prescribers, so you do have that visibility. For the doctors outside of that top 300, I guess, what is the gating factor that would prevent them from writing it more? Is it perhaps experience with VOQUEZNA? Is it just purely timing of patient visits, coming to the office, or is there anything else?
I don't think that there's a gating limitation. I think there's rather an evolution and a change in behavior away from a 30-year ingrained habit. If you're a gastroenterologist treating patients with gastroesophageal reflux, you've been writing PPI scripts for the last 20 or 30 years. You're just so comfortable doing that it takes repetition in message, multiple visits, to prompt a physician to start thinking away from the habitual practice of, "I'm always writing a PPI script" to, "I really need to be thinking about something that's going to work even better for this patient.
Naturally, what happens is they start with their most severe patients. They start with the patient who's failed four prior PPIs, and they just don't have a solution. They've doubled their dose. They've gone to BID dosing. The patient's still in pain. Their erosions aren't healing. They switch them to VOQUEZNA. As they see that the product works in that patient, our sales representative's having a conversation with the physician about all of their erosive esophagitis patients. Now they're not going to switch all of their erosive esophagitis patients, but maybe they'll switch all of their Grade C and D patients, their most severe patients. When they see that the product is working to heal erosions in those patients, then you're having a conversation about how do you switch all of your erosive esophagitis patients.
In each of those conversations, you're broadening the population of patients that the physician considers to be appropriate for what is clearly a best-in-class therapy. That growth trend, there's not a specific impediment other than ingrained habit and familiarity and ease of writing PPI scripts, and we are educating physicians about the breadth of patients and gradually growing their perception of the breadth of patients in whom VOQUEZNA is going to provide a meaningful benefit above PPI.
Yeah, exactly. It's not really an impediment with the product. It's more about getting familiar.
We see it in our data. We see reach and frequency makes a really big difference. Frequency of call makes a really big difference in physician behaviors. When we say frequency of calling a physician, it's not actually just calling on the physician. We're calling on the physician, we're calling on the nurse practitioner, we're calling on the physician assistant, we're calling on the medical assistants. We're calling on everyone who is touching the patient and touching the prescription and processing the prescription on how do you get this thing through to ultimately get the product to your patient. It's a whole office call to build those relationships and build comfort and familiarity with prescribing VOQUEZNA. We're seeing it paying dividends. We are seeing growth in each of our accounts. We're seeing growth across the entire GI universe.
We're seeing growth both in the number of writers and in the frequency of writing in those practices. That's exactly what the strategy is intended to pursue.
Do you think having around 300 sales reps is enough to capitalize on that opportunity?
Yes. We are calling on every gastroenterologist whose office we can get into, with frequency that is having an impact in growing those offices. We're actually going beyond that. 70% of our sales calls are targeted to gastroenterology practices. We are still calling on the top decile of primary care physicians and on primary care physicians who have previously adopted the product, where we already have traction, already have familiarity, and we can grow those practices. In the future, there will naturally be an expansion of the call point to more primary care physicians, but that will come over time. The core initial focus, our focus in 2026, likely in 2027, is going deep in GI and driving greater and greater new-to-brand conversion frequency in GI.
Have you started to see that drift of awareness from GIs to PCPs? Is it still fairly early in the process?
We have. We can see them in several ways. One, is we do see growth in PCP writers on whom we're calling. We see growth in writing frequency. We see that this is a promotion-sensitive market. As we call on physicians, we grow their utilization. In addition, I apologize, I've got a bit of a cough. In addition to that growth on those primary care physicians we're calling on, we're starting to see increasing frequency of new prescriptions coming from physicians we've never called on. That's actually a core part of our strategy and what that looks like, and this is a core part of the GI focus strategy. We recognize that the greater perceived need is in GI. That's where we get more traction for our sales call. The patient who is in the GI office got referred from a primary care physician.
They're treated in a GI. If they have erosions, they're treated until those erosions have healed. If they have non-erosive reflux, they're treated until their pain is well managed. The patient is going back to their primary care physician for their next annual physical, and in many cases, is going back to their primary care physician asking for a refill of VOQUEZNA. That patient now is the product advocate in the primary care office. The primary care physicians, we believe that many of the primary care physicians who are writing the product today are writing refills for patients that came back from GI and are product advocates. That sets the stage for a future expansion back into primary care. I talked earlier about, we think that there's a billion-dollar revenue opportunity in GI and potentially another billion-dollar revenue opportunity in primary care.
Well, the billion-dollar revenue opportunity in GI is really simple. 20 million scripts, if we can convert 20% - 30% of those scripts in GI, and those are patients who are highly in need and highly symptomatic with their GERD symptoms, that's a path to a billion-dollar of revenue in GI. All of those patients, if we convert 1 million patients, we've got 1 million advocates going back into primary care physicians, educating primary care physicians about how good this drug is. That lays the groundwork for an expansion of our sales organization in the future into primary care and driving the second billion-dollar opportunity in primary care as those physicians are educated about our product by their patients.
Do you have any initial thoughts on when that could happen, that critical mass to actually invest into [crosstalk]?
It's definitely not happening this year. It's possible, but probably not next year. Certainly, by 2028 or so, we might be thinking about an expansion to some degree, and we haven't modeled out e xactly how big is it. It's going to depend upon key metrics that we're tracking. We look, for example, at NBRX per sales call, and that drives efficiency. How many new-to-brand patients are we getting out of a prescriber based upon the number of sales calls that we're making in those offices? We're seeing growth in our NBRX per sales call metric in every category, in gastroenterology, in gastroenterology APPs, in primary care physicians, and primary care physician APPs. As those metrics improve, it's certainly a positive ROI investment today for us to put time and effort into gastroenterology practices.
As the metrics improve in primary care, it's going to become clear at some point that there's a positive ROI opportunity to do an expansion of primary care, and that drives the growth opportunity in primary care.
How would you approach that primary care segment in terms of sales force build-out?
We haven't defined that yet. That will be an evaluation that we make over the coming years.
Could that be a potential partnership sort of situation?
Could be. Could be a collaboration to reach primary care, could be we build out our own sales organization. It could be a more moderate sales organization build along with very heavy non-personal promotion marketing activities. It could have a DTC component. There are a number of strategic elements that one could build into that. Now, this is two or three years out, but as we get to significant positive cash flow from the GI focus opportunity, there's an opportunity to reinvest some of that in driving even faster growth in primary care. There are several different dimensions. We will be looking at the TRX impact of each of those different investment propositions and the ROI of each of those and figure out the right mix to drive that profitability.
Can you talk a little bit about the persistency of a patient on VOQUEZNA, and on average, how many refills they get? If they do, for some reason, stop VOQUEZNA, what was the major reason?
We looked at a cohort of patients. We've talked about this in some of our earnings calls as well. We looked at a cohort of patients in 2025 to track persistence over a 12-month period. That cohort of patients, the average number of scripts filled was north of six for that entire cohort on our persistency calculation, which is patients who are getting continuous script fills with no more than a 60-day gap. Interestingly, 18% of the patients that actually were counted as not having maintained their script persistence because they had a 60-day gap ultimately filled additional scripts later in the year. You get additional script fills beyond that six target. You get additional script fills from those patients that restart.
One of the things that we know is impacting patients, and we see this in Q1 with the seasonality every year, is even though we were seeing significant continued growth in new-to-brand conversions in Q1, our overall script number fell because our refills fall off somewhat in Q1 because of the standard plan resets. One of the contributing factors, clearly, to that interruption in prescriptions is that some patients, if you're on a high-deductible health plan, you may have a $25 copay on your VOQUEZNA scripts through December, and then in January, because your plan reset, our patient assistance program doesn't bring your copay price down to the same levels. You might have a higher copay, might not fill the script in January, you might not fill the script in February.
You might wait a month or two. As soon as you're experiencing pain again, you're going to go back to your physician and say, "Doc, I want to figure out how to get on this product." At the point where you've worked through your deductible, you're now covered again at the $25 copay level. You do see some of that plan reset phenomenon that creates some interruption in Q1 and possibly some lingering effect in Q2. More of those patients come back on drug in the second half of the year.
Okay. It seems like patients typically stop therapy because of these resets right at the beginning of the year.
I think that's probably one of the major contributing factors. There could be other factors. Patients change physicians, they go back on their PPI for a variety of reasons because their erosions were resolved. There might be other contributing factors, but certainly, we see very good persistence. One of the very encouraging signs is not only do you see persistence of patients after their initial script, but you see recurrence of patients starting VOQUEZNA therapy again. I think that phenomenon, we haven't actually done enough research with those patients to understand exactly what's driving that because we obviously don't have patient identifier information. We can look at the numbers in aggregate.
What my intuition tells me is driving that is patients go back to their PPIs because they got some and they had a high copay. When they're in pain again, they know VOQUEZNA resolves their pain, they go back on VOQUEZNA.
Yeah. Okay.
We would expect that restart is a very positive signal also to their physicians that that patient sees that this is a significant improved therapy for them.
How do you think awareness has been tracking at this point among physicians, perhaps, but then also patients?
We are not focused today on driving patient awareness. That's not a metric that we track. That's not a significant investment we're making. There will come a time in the future when we do more of that. Our focus is on driving physician awareness and particularly gastroenterology community awareness. We have 100% awareness within the gastroenterology community. Everybody knows about this drug. I haven't talked to a gastroenterologist in the last six months who doesn't believe this is the best gastroesophageal reflux treatment available. That's a universal view among every physician that I've spoken with. I can't speak for every gastroenterologist, but it's that broad-based. It was interesting when I was at DDW in 2025, there were still physicians who were hemming and hawing about whether or not they really needed to use this drug. We're not sure how much better it is than a PPI.
In 2026, there's none of that. 100% of the docs that I spoke with were convinced this is the best available treatment for my patients. The next part of the education process is, "Doc, it's easy to get for your patients," because they're still not sure. It's a branded therapy in a generic market. They're not sure what the copay is going to be. They're not sure how much work it's going to be. That's our next education point. The education around clinical efficacy and utility, absolutely universal within the GI community that physician awareness is really high regarding the effectiveness of this drug.
As you go into 2027, and I'm sure you're aware, but there's going to be another private competitor with another PCAB that's launching. They had some data at DDW. Perhaps just help us understand how you're framing that data relative to VOQUEZNA's data, especially once they launch in January of 2027. That could be something that needs to be worked out, in terms of detailing and counter-detailing, things like that.
Yeah. To be clear, we're not framing that data in the context of our conversations with physicians. It rarely comes up in conversations with physicians. When it does, there are a few physicians who have heard the data, but that's just not an issue. There's no noise in the physician community about this drug. There's certainly some noise within the investor community that there are conversations. We've looked at their data. I don't want to minimize this in any way. PCABs are much better than PPIs. The tegoprazan data indicates that it works better than a PPI. Get that. It works almost as well as our drug. It will be a second entrant into the market, and just for context, the primary endpoint in the erosive esophagitis trials is healing at eight weeks. In our erosive esophagitis trial, 93% of patients with erosions were completely healed at eight weeks.
In the competitive product trial, 85% of erosions were healed at eight weeks. That's pretty good. It's not 93%. When the drug launches, we're going to have a really simple conversation with every physician, which is, "Doc, you've been using vonoprazan for three years. You've been using VOQUEZNA for three years. 93% of your erosive esophagitis patients heal within eight weeks. Is there any other product you've seen that produces better than 90% healing?" There is no other data in the market that shows better than 90% healing. I think we've got the best healing rates in the market, and that is what physicians are trying to do for their patients.
The objective, if you're a gastroenterologist, you've scoped a patient, they have erosions on their esophagus, you want to give them the product that gives them the best probability of healing. Our data suggests that that's vonoprazan. That's VOQUEZNA. Our drug.
Do you believe that with the launch of a second PCAB, that it could actually be a tailwind for you as there's going to be a shared voice out there talking with gastroenterologists?
Absolutely. Yeah, I think that's a really helpful framing that we should all sort of keep in mind. Often what happens when a second drug launches in a category, it changes the conversation around the first drug. From today, physicians are thinking about, "Do I need to use VOQUEZNA, or are the PPIs that I've been using for 30 years okay?" It's really sort of a single product conversation. In the future, when a second product launches, it's now there's a new class of drugs, and I need to think about how do I integrate PCABs into my practice. It moves away from being a product to being a category, and we have a three-year lead and we'll be the clear market leader in that new category.
I think that creates an uplift in category awareness and category perception, and candidly, will move some physicians along the continuum of thinking about, "I got to get on this train and start using this new category of products." Ours will be the product with which they are most familiar, around which there is the most awareness in the market.
Okay. Maybe just contextualize how big that market is in terms of how many patients are on PPIs, how many of them or what proportion of them fail and are technically eligible for PCABs?
There are approximately 60-65 million patients with GERD. Some 22 million are on prescription PPIs. There's another very broad population of tens of millions of patients who are on OTC PPIs. Various published reports have indicated that upwards of 40% of patients on a PPI are still experiencing meaningful heartburn symptoms. That's an enormous opportunity in the tens of millions of patients. For example, 7 million patients are estimated to have erosive esophagitis. Those patients are almost all on a PPI, but they're still having erosions in their esophagus. That is a very significant unmet need population. That is the core target opportunity for us. When we think about the market, we don't think about the overall PPI prescription market.
That's not what we're trying to convert. We're only going after patients who have failed to achieve adequate symptom control on a PPI, and that's about 40% of the total PPI dosing market.
Okay, how many patients have you treated so far?
We've treated on the order of about 250,000- 300,000 patients so far. It's a very small portion of that market. It's a significant opportunity for us to increase the penetration. Again, one way of thinking about this, and part of the way we think about it, is we don't really think about demographics of the overall population, because we're not going out trying to convert 10% of the population. What we're trying to convert is a significant portion of the patients who are in a GI office.
The relevant market that we think about is 20 million PPI scripts per year. That's the portion of scripts being written by a GI, and virtually all of those patients got to the GI practice because they were still having symptoms when they were in their primary care office. That's why they're being referred. They're not being referred just because on a whim somebody wants a patient to get scoped. They're being referred because they complained to their physician that they're still having pain, and that's what's causing them to be referred to a GI. That 20 million scripts is scripts that are being written for patients who are still symptomatic on a PPI. That's our available market. If we convert 4 -6 million of those scripts out of the GI practice, that's a billion-dollar revenue run rate.
Our path to $1 billion in revenue is to convert 20%-30% of that PPI script volume. Notably, in our top 3,000 accounts, we're already at 30% new-to-brand scripts. We're already hitting that 30% metric among the patients that they're switching. Over time, the total script volume approaches the % penetration of the new-to-brand conversions. Our early indicator of, is it possible for us to get 20%-30% of that 20 million script volume? We're already at 30% of new-to-brand patients in 3,000 docs. That's, I think, a significant signal that we can get there.
Perfect. Last, and maybe like a housekeeping question, just on gross to net, and just the trajectory or just the shape of that through the year. Maybe give a little bit of color on what that looks like.
Sanjeev, do you want to take that?
Yeah. I'll take that. Gross to net, Dennis, we gave a range at the beginning of the year of 55%-59%. We came at the lower end of the range in the first quarter. It's a function of two things. One is the book of business, and certainly as the cash pay business is higher in the first quarter, the gross to net tends to be lower because there's no gross to net attached to that. During the subsequent quarters, it's going to move around a little bit, but it's going to stay within the range. It's going to depend on which quarter you've got a higher business for what kind of a book of business. Expect it to stay within the range, first quarter being unique because of the cash pay business.
Should we, in terms of the shape, should we use last year as sort of a good example?
I can't give you quarter-to-quarter gross to net guidance, but I think it's safe to assume it'll follow. Again, recognize the range is given because the book of business changes in every quarter.
Okay. In the last two minutes, would love to hear your thoughts on BD. You guys do have around 300 reps in GI. At what point does that become a real consideration? Where do you feel there would be an urgency to go out and diversify away from VOQUEZNA to leverage that GI sales force?
Yeah, I think that's a really helpful direction to start thinking for our investors. How do we build beyond our exclusivity date? We will have exclusivity for this product before generic entry until 2033 or 2034. That creates an opportunity for us to generate significant positive cash flow in the billions of dollars of positive cash flow over the period of time over the next seven years. One of the key leverage points, exactly to your comment, is we are building relationships with every gastroenterologist, every gastroenterology APP in the country. As we build those relationships, that provides an opportunity very efficiently to launch additional products through that sales organization.
We're starting conversations with companies, more typically with companies that are sort of at phase II and thinking about, how do we fund our phase III program and how do we get to launch? Now, it's possible that we would do something later in the coming years on a commercial product, but more likely that in the next one to two to three years, we bring in one or two assets that are in clinical trials, have proof of concept in humans, have a defined clear phase III path to get to launch before our 2033 key target date, and that allows us to launch one, two, three additional GI products within the window of time that we are building our presence in GI and build durable revenue that leverages our infrastructure.
We would expect to fund those programs entirely out of operating cash flow. We do not want to do something that involves dilution for our shareholders. We're going to be generating significant positive cash flow starting next year.
Got it. Last question real quick. Curious why the focus on a phase II or something in the clinic rather than something that's already commercial where you could get immediate accretion. Is it mainly because those are relatively more expensive?
Well, I think it's relatively more expensive, and there are big opportunities that one can get in phase II or ready to go into phase III that represent much bigger inflection points. If we were to acquire a modest revenue product, it's going to be only a modest revenue product, unless there's some key leverageable advantage because of our sales organization we can grow it substantially.
That's right.
I'm certainly open to looking at that.
Yeah.
There are those opportunities as well. Products that have been launched but under-resourced commercially, and that would be a really interesting kind of opportunity as well. I'm not eager to do that in 2026 or possibly 2027 because I don't want to distract our sales organization from growing VOQUEZNA.
Sure. Makes sense.
By 2028 or 2029, does it make sense? Could certainly make sense to add something to our bag. Once we've got the deep leverage and penetration with VOQUEZNA growth in GI. I don't want to do anything today that interrupts the path from here to a $1 billion in GI revenue. This is all about frequency of conversation with every gastroenterologist, with every gastroenterology APP about the breadth of patients for whom they should be using VOQUEZNA.
Our balance sheet would support that timeframe, so to be able to meet those obligations.
Right.
Yeah.
Perfect. Well, I think that's all the time that we have today. Thank you so much for joining us and hanging out with us. Have a great conference.
Thank you.
Thank you.