Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) is a biopharmaceutical company focused on developing and commercializing novel treatments for gastrointestinal diseases. The company's lead product, VOQUEZNA, is a first-in-class potassium-competitive acid blocker (PCAB) that has demonstrated significant clinical benefits over the current standard of care in the treatment of erosive gastroesophageal reflux disease (Erosive GERD) and Helicobacter pylori (H. pylori) infection.

Business Overview

Phathom was founded in 2018 and has devoted substantial resources to organizing and staffing the company, business planning, raising capital, in-licensing its initial product candidate vonoprazan, meeting with regulatory authorities, managing the clinical trials of vonoprazan, preparing for commercialization, and providing other selling, general and administrative support. In May 2019, the company in-licensed the U.S., European, and Canadian rights to vonoprazan from Takeda Pharmaceutical Company Limited.

In 2021, Phathom reported positive topline data from two pivotal Phase 3 clinical trials for vonoprazan: one for the treatment of H. pylori infection, and a second for the treatment of Erosive GERD. These data, combined with the extensive existing clinical data generated by Takeda, formed the basis for the company's new drug applications (NDAs) for vonoprazan combination products for the treatment of H. pylori infection, which were approved by the FDA in May 2022.

Subsequently, in November 2023, the FDA approved vonoprazan as a treatment for adults for the healing of all grades of Erosive GERD, maintenance of healing of all grades of Erosive GERD, and relief of heartburn associated with Erosive GERD, as well as in combination with antibiotics for the treatment of H. pylori infection. Phathom initiated the commercial launch of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK in the fourth quarter of 2023.

Financials

For the full year 2023, Phathom reported annual revenue of $682,000 and a net loss of $201,592,000. The company's annual operating cash flow was -$137,580,000, and its annual free cash flow was -$139,214,000.

In the first quarter of 2024, Phathom reported net revenues of $1.9 million, a significant increase from the prior year period. Gross profit for the quarter was $1.5 million, representing a gross margin of 78%. The company's non-GAAP R&D expenses decreased by 16% year-over-year to $8.2 million, while non-GAAP SG&A expenses increased by over 330% to $57.6 million, primarily driven by the build-out of the commercial infrastructure and marketing activities to support the launch of VOQUEZNA.

Phathom reported a non-GAAP adjusted net loss of $64.8 million, or $1.11 per share, for the first quarter of 2024. As of March 31, 2024, the company had $322 million in cash and cash equivalents, and an additional $150 million remains available under its term loan facility, subject to the achievement of certain revenue milestones.

Launch Progress and Outlook

Phathom's commercial launch of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK is off to a strong start. As of April 26, 2024, the company has reported over 43,000 prescriptions written and over 17,500 prescriptions filled since launch. These prescriptions were written by more than 3,800 unique prescribers, and the company is seeing a high degree of repeat prescribers, with over 50% of VOQUEZNA prescribers having written multiple times.

The company has made significant progress in securing broad commercial coverage for VOQUEZNA, with approximately 72 million, or an estimated 48%, of U.S. commercial lives now having access to the product. This includes the addition of VOQUEZNA to the Cigna Healthcare Formularies in the first quarter of 2024.

Phathom has also elevated its direct-to-consumer (DTC) efforts, launching a new campaign titled "VOQUEZNA can kick some acid" in late March 2024. The company believes patient requests are a major driver of the prescribing decision, and the new DTC campaign is aimed at motivating consumers to ask their doctors for VOQUEZNA.

Looking ahead, Phathom is anticipating a potential label expansion for VOQUEZNA to include the treatment of non-erosive gastroesophageal reflux disease (Non-Erosive GERD) in the second half of 2024. This indication represents a significantly larger patient population than Erosive GERD, with an estimated 15 million U.S. adults diagnosed and treated annually. The company believes the similar commercial dynamics between the two indications will allow its current sales force to effectively communicate the Non-Erosive GERD promotional messages upon potential approval.

In parallel, Phathom is advancing the development of vonoprazan for additional indications. The company plans to initiate a Phase 3 trial evaluating an "as-needed" dosing regimen of vonoprazan for the treatment of episodic heartburn in patients with Non-Erosive GERD later this year. Additionally, Phathom intends to initiate a Phase 2 trial evaluating vonoprazan as a treatment for eosinophilic esophagitis (EoE) in adult and adolescent patients.

Risks and Challenges

While Phathom's launch of VOQUEZNA has shown promising early results, the company faces several risks and challenges going forward. The competitive landscape in the GERD and H. pylori treatment markets remains intense, with well-established proton pump inhibitor (PPI) therapies. Phathom will need to continue to effectively communicate the clinical differentiation of VOQUEZNA to drive adoption and displace these incumbent treatments.

Additionally, the company's ability to secure and maintain broad commercial coverage for VOQUEZNA will be crucial to its success. Phathom must continue to negotiate favorable terms with payers and manage the gross-to-net discounts associated with the product.

The company's future growth and profitability will also depend on the successful execution of its pipeline development strategy. Delays or setbacks in the clinical trials for vonoprazan in Non-Erosive GERD or EoE could impact the company's long-term prospects.

Lastly, Phathom's financial position, while currently strong, will require careful management of its cash resources and continued access to capital markets or other financing sources to fund its ongoing operations and development activities.

Conclusion

Phathom Pharmaceuticals has made significant strides in the early stages of the commercial launch of VOQUEZNA, demonstrating strong demand, expanding access, and elevating brand awareness. The company's ability to capitalize on the blockbuster potential of VOQUEZNA will hinge on its continued execution across multiple fronts, including driving physician and patient adoption, securing favorable payer coverage, and advancing the clinical development of vonoprazan for additional indications.

With a robust pipeline, a strong financial position, and a seasoned management team, Phathom appears well-positioned to navigate the challenges ahead and deliver on the promise of its innovative PCAB technology. As the company continues to execute on its strategic priorities, investors will closely monitor its progress in displacing incumbent PPI therapies and establishing VOQUEZNA as a new standard of care in the treatment of gastrointestinal diseases.