Executive Summary / Key Takeaways

• Differentiated Technology Driving Market Disruption: VOQUEZNA, a novel potassium-competitive acid blocker (P-CAB), offers rapid, potent, and durable acid suppression, positioning it as a superior alternative to traditional PPIs for millions of inadequately treated GERD patients.
• Strategic Pivot to Profitability: Phathom has implemented aggressive cost reduction initiatives, including halting broad direct-to-consumer (DTC) advertising and a 6% workforce reduction, alongside a focused sales strategy targeting high-potential gastroenterologists, aiming for profitability in 2026 without further equity financing.
• Strong Commercial Momentum & Outlook: VOQUEZNA sales are accelerating, with Q2 2025 revenue growing 39% sequentially to $39.5 million. The company projects full-year 2025 revenue between $165 million and $175 million, driven by increased prescriber depth and patient persistence.
• Extended Exclusivity Enhances Long-Term Value: The FDA's confirmation of New Chemical Entity (NCE) exclusivity for VOQUEZNA tablets through May 3, 2032, with generic entry likely no earlier than 2033, significantly de-risks and enhances the product's net present value.
• Pipeline Expansion for Sustained Growth: Strategic investments in a Phase II trial for eosinophilic esophagitis (EoE), an orally disintegrating tablet (ODT) formulation, and evaluation of an OTC switch aim to broaden VOQUEZNA's market and extend its intellectual property runway.

A New Era in GI Treatment: Unlocking VOQUEZNA's Potential

Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) is a biopharmaceutical company dedicated to transforming the treatment landscape for gastrointestinal (GI) diseases. At the heart of its mission is VOQUEZNA (vonoprazan), a groundbreaking oral small molecule potassium-competitive acid blocker (P-CAB). This technology represents a significant leap forward, being the first gastric anti-secretory agent from a novel class approved in the U.S. in over three decades.

VOQUEZNA's core technological differentiation lies in its mechanism of action: it directly and reversibly blocks the proton pump, leading to rapid, potent, and durable acid suppression. This contrasts sharply with traditional proton pump inhibitors (PPIs), which require activation in an acidic environment and irreversibly bind to the pump. The tangible benefits of VOQUEZNA's P-CAB technology are profound for patients. It offers rapid onset of action, providing quick heartburn relief, and maintains potent acid control for a full 24 hours, addressing the critical unmet need of 30% to 40% of GERD patients who still experience symptoms despite PPI therapy. Clinical trials have demonstrated its superiority as a single agent in Erosive GERD and in combination with antibiotics for H. pylori infection. This differentiated profile is foundational to Phathom's strategy, creating a strong competitive moat and enabling it to challenge the entrenched, genericized PPI market.

The market opportunity for such an innovation is substantial. Tens of millions of patients in the U.S. suffer from GERD, many inadequately treated by existing options. The Non-Erosive GERD segment alone represents approximately 22 million U.S. adults. Beyond this, the company is exploring the potential of VOQUEZNA in eosinophilic esophagitis (EoE), a growing chronic inflammatory condition, and even a long-term over-the-counter (OTC) switch, tapping into a $3 billion annual market for acid control. Phathom's overarching strategy is to disrupt this massive market by leveraging VOQUEZNA's superior efficacy and establishing it as a leading treatment option.

From Inception to Commercial Momentum: Phathom's Journey

Phathom Pharmaceuticals was incorporated in January 2018, laying the groundwork for its focused approach to GI diseases. A pivotal moment came in May 2019 with an exclusive license agreement from Takeda (TAK), granting Phathom rights to vonoprazan in the U.S., Canada, and Europe. This strategic in-licensing formed the bedrock of its product pipeline.

The company achieved significant regulatory and commercial milestones in 2023 and 2024. In October and November 2023, the FDA approved VOQUEZNA TRIPLE PAK and DUAL PAK for H. pylori, and VOQUEZNA tablets for Erosive GERD, initiating commercial launches in Q4 2023. A major expansion occurred on July 17, 2024, with FDA approval of VOQUEZNA 10 mg tablets for Non-Erosive GERD, significantly broadening its addressable market. Concurrently, Phathom diligently built market access, securing broad commercial coverage for VOQUEZNA, reaching over 120 million commercially insured lives by Q3 2024, including a key formulary placement with CVS Caremark (CVS). These achievements were supported by strategic financing, including a Loan and Security Agreement with Hercules Capital (HTGC) (expanded to $300 million) and a Revenue Interest Financing Agreement, complemented by a $130 million equity follow-on offering in August 2024, which signaled investor confidence.

A critical regulatory hurdle was successfully cleared in June 2025. Phathom's Citizen Petition to the FDA resulted in the Orange Book being updated to reflect 10 years of New Chemical Entity (NCE) exclusivity for VOQUEZNA tablets through May 3, 2032. This decision, stemming from the QIDP status of its combination packs, provides a robust intellectual property runway, with generic entry now anticipated no earlier than 2033. This extended exclusivity significantly enhances the long-term value proposition of VOQUEZNA.

Strategic Pivot: Driving Focused Growth and Profitability

In April 2025, Steven Basta assumed the role of President and CEO, initiating a significant strategic reorientation. This pivot, driven by the realities of current capital markets, prioritizes achieving profitability in 2026 without the need for additional equity financing. This does not diminish the belief in VOQUEZNA's blockbuster potential but rather refines the path to get there through disciplined execution.

A key component of this strategy is aggressive cost control. In May 2025, Phathom implemented an organizational restructuring, including a 6% workforce reduction (28 employees) and executive transitions. Critically, the company halted its broad broadcast cable and streaming television promotional programs by the end of Q2 2025. Management assessed these programs as "run prematurely," yielding a low return on investment as they activated patients to physicians not yet familiar with the product. Instead, Phathom will maintain digital promotion activities with higher ROI and focus on fiscal discipline across third-party vendor contracts.

Concurrently, Phathom is refining its commercial strategy. The sales force, which remains at full strength, has been realigned as of July 2025 to prioritize gastroenterologists (GIs). GIs currently account for approximately 70% of all VOQUEZNA prescriptions and write more than twice the prescriptions per month compared to primary care physicians (PCPs). This shift from driving new writer conversions to increasing "depth and frequency of writing" among high-potential GI specialists is expected to accelerate revenue growth within the next two to three quarters. This targeted approach leverages the higher return on investment from GI calls, building a strong foundation of consistent prescribers.

VOQUEZNA's Performance and Market Penetration

VOQUEZNA's commercial performance reflects strong market acceptance and growing momentum. By July 25, 2025, over 580,000 prescriptions had been filled since launch, representing a 49% growth in just 14 weeks. In Q2 2025 alone, approximately 173,000 prescriptions were filled, a 36% increase over Q1 2025. This growth is supported by broad commercial access, with over 80% of U.S. commercial lives covered, often requiring only a single step-edit through a generic PPI.

The company's patient support program, BlinkRx, plays a crucial role, offering a $50 cash pay option for Medicare patients and a $25 co-pay for commercially insured patients. This has facilitated access and instilled confidence among healthcare providers. In Q2 2025, 68% of prescriptions were filled through retail channels, with the remainder via cash pay, a slight shift attributed to the new Medicare cash pay option. The prescriber base continues to expand, with over 29,300 unique HCPs writing prescriptions by mid-July 2025. Notably, patient persistence is strong, with approximately 70% of Q4 2024 scripts filled by repeat patients. Preliminary analysis of patients initiating therapy in Q2 2024 showed an average of 3.5 prescriptions filled over six months, aligning with PPI usage patterns (140-160 days/year). This indicates that VOQUEZNA is being adopted as an early alternative, with over 80% of patients having been on one PPI or less before starting therapy.

Financial Health and Outlook

Phathom's financial trajectory is now firmly aligned with its strategic pivot. For Q2 2025, the company reported net revenues of $39.5 million, a robust 39% sequential increase over Q1 2025. Gross profit for the quarter stood at $34.5 million, maintaining a strong gross margin of 87%. The gross-to-net discount rate remains within the expected 55% to 65% range.

The impact of cost reduction initiatives is already evident. Q2 2025 non-GAAP operating expenses saw a $12 million reduction compared to Q1 2025, despite including $6 million in one-time restructuring charges. This was achieved by eliminating approximately $15 million in pre-committed DTC advertising and $7 million in project costs. Looking ahead, Phathom projects Q3 2025 non-GAAP operating expenses to be below $60 million and Q4 2025 expenses below $55 million, including costs for the upcoming EoE trial. The full-year 2025 non-GAAP operating expense guidance has been lowered to $290 million to $305 million.

As of June 30, 2025, Phathom held approximately $150 million in cash and cash equivalents. Management is confident that this cash balance, combined with anticipated revenue growth and rigorous cost control, will be sufficient to fund operations through the point of achieving profitability in 2026 without requiring additional equity financing. While the company has an accumulated deficit of $1.4 billion and expects to incur operating losses for the foreseeable future, the current strategic reorientation provides a clear path to sustainable operations. The company does not anticipate drawing additional tranches from its debt facility, further underscoring its commitment to financial independence.

Competitive Landscape: Disrupting a Mature Market

Phathom's competitive positioning is defined by VOQUEZNA's novel P-CAB technology, which offers a significant advantage in a market dominated by older PPIs. This technology is the first new gastric anti-secretory agent in over 30 years, providing a distinct competitive moat. VOQUEZNA's rapid, potent, and durable acid suppression directly addresses the limitations of PPIs, particularly for the 30-40% of GERD patients who experience inadequate symptom relief. This positions VOQUEZNA as a superior option, potentially even a first-line treatment in indications like EoE, where PPIs are currently used off-label.

Direct competitors include established pharmaceutical giants like Takeda, AstraZeneca (AZN), Pfizer (PFE), and AbbVie (ABBV). Takeda, Phathom's licensor, markets vonoprazan (Takecab) outside the U.S. While Takeda's potential entry of another P-CAB could increase overall category awareness, Phathom benefits from its first-to-market status in the U.S. and established physician experience with VOQUEZNA. Large players like AstraZeneca, Pfizer, and AbbVie possess immense scale, diversified revenue streams, and extensive R&D budgets, allowing for broader market coverage and cost advantages. However, Phathom's strength lies in its focused innovation in P-CABs and exclusive regional rights for vonoprazan, directly targeting the unmet needs in GI.

Phathom's strategic pivot to prioritize gastroenterologists leverages the higher return from specialists who are more attuned to novel mechanisms and treat patients with greater unmet needs. This allows Phathom to build a strong, loyal prescriber base before a broader push into primary care, where larger competitors have deep penetration. While Phathom currently lags in overall scale, profitability, and cash flow generation compared to its diversified rivals, its focused strategy and technological edge aim to capture significant market share by offering a demonstrably better product. Indirect competitors, such as generic PPIs and OTC antacids, pose a pricing challenge, but VOQUEZNA's superior efficacy and potential for an OTC switch in the long term offer avenues for sustained differentiation and market capture.

Long-Term Value Creation: Exclusivity and Pipeline Expansion

Beyond its current commercial success, Phathom is actively building long-term value through strategic pipeline expansion and intellectual property protection. The confirmed NCE exclusivity for VOQUEZNA tablets through May 3, 2032, with generic entry expected no earlier than 2033, provides a robust foundation for future revenue streams. This extended exclusivity "clearly enhances the NPV of VOQUEZNA."

The company plans to initiate a Phase II clinical trial for vonoprazan in eosinophilic esophagitis (EoE) in Q4 2025. This program holds significant promise as a potential first-line treatment for EoE and may also provide a path to extend VOQUEZNA's exclusivity by an additional six months through future pediatric evaluation. Furthermore, Phathom is developing an Orally Disintegrating Tablet (ODT) formulation of VOQUEZNA, which could offer new intellectual property and a more convenient administration method for patients with swallowing difficulties, common in EoE, pediatric, and elderly populations. The company is also evaluating the substantial $3 billion OTC acid control market for a potential VOQUEZNA OTC switch, aiming to create a durable, long-term revenue stream. These initiatives, coupled with exploring the impact of GLP-1 users on GERD symptoms, demonstrate Phathom's commitment to maximizing VOQUEZNA's market potential and ensuring sustained growth.

Conclusion

Phathom Pharmaceuticals is undergoing a profound transformation, strategically reorienting its operations to capitalize on the blockbuster potential of VOQUEZNA. The company's differentiated P-CAB technology, offering superior acid suppression, is proving to be a game-changer in a market ripe for disruption. With a clear path to profitability in 2026, underpinned by rigorous cost controls and a focused commercial strategy targeting high-value gastroenterologists, Phathom is demonstrating disciplined execution.

The recent confirmation of regulatory exclusivity through May 2032, coupled with a robust pipeline targeting EoE, ODT formulations, and a potential OTC switch, solidifies VOQUEZNA's long-term value proposition. While challenges remain in a competitive GI market dominated by larger players, Phathom's technological leadership and strategic agility position it to capture significant market share and deliver sustained growth. Investors should closely monitor the acceleration of VOQUEZNA's revenue ramp and the progress of its pipeline initiatives as key indicators of its journey towards becoming a profitable, leading force in GI therapeutics.