Yahoo Finance Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) Q1 2024 Earnings Call Transcript
Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) Q1 2024 Earnings Call Transcript May 11, 2024
Phathom Pharmaceuticals, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to Phathom Pharmaceuticals First Quarter 2024 Earnings Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. With that, I would like to turn the conference call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.
Eric Sciorilli: Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom First Quarter 2024 results. This morning's presentation will include remarks from Terrie Curran, our President and CEO; Martin Gilligan, our Chief Commercial Officer; and Molly Henderson, our Chief Financial Officer. Azmi Nabulsi, our Chief Operating Officer, will also be joining the team during the Q&A portion of today's call. Just a couple of logistical items before we get started. Earlier this morning, we issued a press release detailing the results we will be discussing during the call. A copy of that press release can be found under the News Releases section of our corporate website. Further, the recording of today's webcast can be found under the Events and Presentations section of our corporate website.
Before we begin, let me remind you that we will be making a number of forward-looking statements throughout today's presentation. These forward-looking statements involve risks and uncertainties, many of which are beyond Phathom's control. Actual results can materially differ from the forward-looking statements, and any such risks can materially adversely affect the business, the results of operations and trading prices for Phathom's common stock. A discussion of these statements and risk factors is available on the current safe harbor slide as well as in the Risk Factors section of our most recent Form 10-K and subsequent SEC filings. All forward-looking statements made on this call are based on the beliefs of Phathom as of this date, and Phathom disclaims any obligation to update these statements.
With that, I will now turn the call over to Terrie Curran, Phathom's President and CEO, to kick us off. Terrie?
Terrie Curran : Thank you, Eric, and thank you to all those joining us on today's call. I'm excited to report on the great progress we've made since the start of 2024. Throughout our first full quarter of launch, our team continued to deliver on our 3 main launch goals, communicating VOQUEZNA's clinical superiority versus a PPI, driving brand awareness and building access to commercial patients. Most importantly, the increased enthusiasm surrounding VOQUEZNA is clear. I'm pleased to share that they are now upwards of 43,000 prescriptions written and launched to date. A notable increase relative to the number we reported just 2 months ago. Its latest demand metric is evidence of how our teams have been successfully executing.
I'll now share more on the progress we've made on each of our launch goals. Beginning with communicating superiority versus the PPI, our sales force has made great strides to inform target positions of the clinical differentiation that VOQUEZNA can offer patients, with each incremental sales call, we see our promotional messages resonating. Physician excitement and feedback continues to be overwhelmingly positive in part due to real-world patient experiences. On several occasions, we received unsolicited comments from both patients and doctors telling us how VOQUEZNA has delivered improved symptom relief. Patients are describing life-changing effects, especially for those that have suffered from this condition for many years. We're proud to be able to help these patients and we know these types of testimonials encourage physicians to expand their prescribing behaviors.
From the outset, we've been determined to drive brand awareness with both physicians and consumers. At the end of March, we expanded these efforts in a significant way, launching a new direct-to-consumer or DTC campaign titled VOQUEZNA can kick some asset. Our market research indicates that patient requests are major driver of the prescribing decision. So we crafted a television commercial aimed at motivating consumers to ask the doctor for VOQUEZNA. Later in the call, Martin will share more about the campaign and the early positive receptivity we're hearing from the marketplace. On the access front, we announced the addition of VOQUEZNA to the Express Scripts or ESI National Formularies midway through Q1. This early outcome validated the belief that our access strategy would resonate with large payers.
Now midway through Q2, I'm proud to share that VOQUEZNA was recently added to the Cigna Healthcare Formularies with a single step edit similar to ESI. As a result, approximately 72 million commercially insured lives now have access to VOQUEZNA. We continue to negotiate coverage with other major payers with the aim to expanding commercial access throughout 2024. Earlier, I touched on how delivering our strategy has generated growth in total demand. I'm equally happy to report that filled VOQUEZNA prescriptions, many those that reach the hands of patients have also significantly increased. We recorded over 17,500 VOQUEZNA prescriptions being filled launched to date. These volume metrics are very exciting early indicators. With anticipated expansion in commercial coverage, ongoing rollout of our DTC efforts and a potential approval of nonerosive GERD, we remain steadfast in our belief of the blockbuster opportunity for VOQUEZNA.
Focusing now more closely on nonerosive GERD. We're anticipating this potential label expansion to be an important catalyst in the second half of 2024. This indication represents the largest subcategory of GERD, more than doubling that of its erosive counterpart with an estimated 15 million U.S. adults diagnosed and treated for the disease annually. Despite the difference in the population size, the patient journey from symptom onset to receiving treatment is largely identical. More importantly, the doctors providing care are the same for both indications. We believe that this means our sales force is appropriately sized and already building relationships with these prescribers. If approved, our goal is for our current commercial team to be able to communicate nonerosive GERD promotional messages within days of the FDA's decision.
With a July 19 PDUFA target action date, we're excited to soon be able to offer a potential new treatment option to these patients. In parallel with our launch journey, we continue to advance development opportunities for vonoprazan. Later this year, we are planning to initiate a Phase III trial for as-needed dosing in nonerosive GERD. We believe that this study will build on the positive results we reserve from our previous Phase II trial. Additionally, we are planning to initiate a Phase II trial for eosinophilic esophagitis, or EoE, later this year. Subject to trials success, vonoprazan could be positioned as a first-line replacement of PPIs, which is the current standard of care. Vonoprazan rapid, potent and durable acid suppression profile is the foundation for exploring these GI conditions.
Our aim for both programs is to further differentiate but not present from PPIs, which are not approved for either of these indications. If approved, both label enhancements would further expand the total addressable market for the VOQUEZNA products. On the financial side, Molly will further detail our first quarter 2024 results later in the call, for which we reported revenues of $1.9 million and ended with $322 million in cash. We remain confident that our strong balance sheet will enable us to continue delivering on our launch and development strategies. As you've likely heard me say, the key elements of a potential blockbuster launch are present in this market. It now comes down to execution and in this first quarter of 2024, our teams have continued to deliver.
This launch is still in its infancy. The end of March marked only our first full quarter of launch, yet the progress we've made is impressive. We will continue to promote superiority in Erosive GERD and leverage our full-scale DTC efforts to reach the millions of patients suffering from this condition. In tandem, we're working diligently to pair awareness with broad commercial coverage, which we expect to expand throughout the remainder of 2024. These tactics in conjunction with the anticipated launch of nonerosive GERD give us confidence that VOQUEZNA's launch ramp is only just beginning. I'll now turn the call over to Martin to dive deeper into recent commercial updates. Martin?
Martin Gilligan : Thanks, Terrie, and hello, everyone. Let me first echo that we believe the launch of VOQUEZNA is off to a great start. Our sales team continues to share positive feedback from their conversations with physicians, the breadth and depth of their outreach among high-volume prescribers increases daily. And beyond the doctors, the sentiment among patients is also very positive. We're now seeing some of the early users of VOQUEZNA come back for refills, further signaling their positive experiences. At the end of March, we significantly elevated our DTC efforts with the goal of increasing brand awareness among consumers and empowering them to request VOQUEZNA. We've also made progress on the commercial coverage front to best ensure those who want VOQUEZNA can get VOQUEZNA.
I'll dive into each of these items in more detail, but let me start by providing an update on our most recent launch metrics. Today, we're reporting our latest available written and filled prescription data as of April 26, which is just 9 weeks removed from our previously reported data. In roughly 2 months, the number of VOQUEZNA prescriptions written has grown by 207% to over 43,000, while the number of filled prescriptions has grown by 361% to over 17,500. As you've heard us say, it takes time to disrupt long-established behaviors, but these latest metrics are an exciting testament to the willingness to physicians and patients to try something new and different. Looking more closely at the over 17,500 prescriptions filled, we're also seeing notable growth on a monthly basis.
In fact, filled VOQUEZNA prescriptions for each month of the first quarter increased sequentially by more than 100%. Keep in mind that these figures reflect prescriptions flowing through retail pharmacies, which are captured by IQVIA as well as those flowing through our $50 cash pay assistance program, which are captured by BlinkRx. Within Q1, we recorded roughly 9,500 filled VOQUEZNA prescriptions, of which approximately 60% were filled through retail pharmacies and captured by IQVIA. In tandem with growing volume, the number of physicians writing VOQUEZNA has also increased. As of April 19, upwards to 3,800 physicians have written a VOQUEZNA prescription that has been filled. This reflects a growth of over 215% relative to what we previously reported as of mid-February.
This includes writing by a mix of our target specialties, favoring GIs more heavily during these early phases of launch. Importantly, our latest data shows a strong degree of repeat writers. Over 50% of VOQUEZNA prescribers have written multiple times, which we see as an encouraging lead indicator. Doctors are witnessing the impact of healing and 24-hour heartburn relief on patients' lives, which we believe bolsters their intent to prescribe. We anticipate this early breadth and depth of our prescriber base will grow the increasing brand awareness and further engagement by our sales force. Beyond filled VOQUEZNA prescriptions, I mentioned earlier that over 43,000 total prescriptions have been written by physicians. This is a strong gauge of the existing and growing total demand in the marketplace.
Recall that the metrics we shared during our last earnings call did not yet reflect any impact from the addition of VOQUEZNA to ESI's National Formularies. With that coverage in place, we are now starting to see a narrowing of the proportional gap between written and filled prescriptions. As commercial coverage is secured, we anticipate closing the gap further, therefore, realizing more and more of the revenue opportunity associated with this level of total demand. On that note, we continue to make good progress on our goal of securing widespread access for patients with commercial insurance. I'm happy to expand upon Terrie's earlier Cigna update. As of May 1, VOQUEZNA was added to Cigna Formularies, which provides coverage to over 9 million commercially insured people.
Importantly, we were successful in negotiating access subject to a single step edit exactly as intended. With this inclusion, approximately 72 million commercial lives now have access to VOQUEZNA. As we move deeper into 2024, we anticipate that an increasing number of plans will initiate VOQUEZNA coverage, including other major payers with which we are actively negotiating. While access is a key driver of converting fill prescriptions, our promotional efforts are essential to increasing overall demand. In March, we rolled out our full scale direct-to-consumer campaign, which you heard Terrie mention. The VOQUEZNA can kick some acid campaign, initially went live across several consumer-facing platforms, most notably in the form of a television commercial on popular streaming services such as Hulu and Prime.
We're extremely proud of this effort, which tested very well, while in development with target audiences. Consumers told us the campaign is different, memorable and motivating. Our intent with the commercial is to raise awareness that VOQUEZNA is the first and only treatment of its kind, help seal erosions and maintain healing and provides 24-hour heartburn relief. Between the unique approach and strong messaging, we aim to motivate consumers to ask their physician for VOQUEZNA. The end-market feedback thus far has been tremendous, and we're excited to announce that the commercial is now airing more broadly across major television networks as of late April. The first quarter of 2024 included several meaningful steps in the launch of VOQUEZNA.
Our progress on the marketing and promotional front was significant. We saw notable increases in total demand generated and the number of prescriptions filled. The ramp of commercial coverage was strengthened by the addition of VOQUEZNA to Cigna Formularies and remains on track with positive inflection points anticipated throughout the remainder of this first year of launch. We believe the pairing of expanded coverage and widespread promotional efforts, plus the nearing potential entry into the nonerosive GERD market serve as fundamental drivers of continued growth. With each additional building block, we get closer to our goal of displacing PPIs and realizing the blockbuster opportunity for VOQUEZNA. I'll now pass it off to Molly to walk through our financial results.
Molly?
Molly Henderson : Thanks, Martin, and hello to everyone on the call. I'm happy to share our first quarter 2024 financial results with you today. As you've heard from Terrie and Martin, we've made important progress related to the launch of VOQUEZNA in such a short period of time. Before going into the numbers, I'd like to note 2 items. First, during this call and similar to last quarter, we will not be providing financial guidance regarding projected revenues, spend or earnings as we are still early stages of launch. Additionally, I will be commenting on both GAAP and non-GAAP financial measures. Supporting schedules with detailed reconciliations between non-GAAP measures and their most directly comparable GAAP measure will be discussed later in my section and can be found in this morning's press release.
Now turning to the numbers. For the first quarter of 2024, we reported net revenues of $1.9 million. Keeping in mind that this was our first full quarter of launch, this represents a 180% sequential quarterly increase. Growing demand in filled prescriptions led the way to inventory restocking by wholesalers. Although it's difficult to estimate stocking behaviors this early into launch, we anticipate being able to get a better sense of stocking patterns over the next couple of quarters. On the gross to net discount front, we would like to flag that our gross to net discount this quarter was better than expected. This resulted from a 3-week period during the first quarter where our patient co-pay savings card was unavailable due to the Change Healthcare cyber attack.
For the quarter ended March 31, 2024, we reported gross profit of $1.5 million, which equates to a gross margin of 78%, a sequential quarterly increase of about 220 basis points. Moving down the P&L to our operating expenses. We reported non-GAAP R&D spend of $8.2 million for the first quarter of 2024, which represents 16% reduction in spend compared to the first quarter 2023. The decrease in R&D expenses was primarily related to lower clinical trial costs associated with the wind down of activities related to our Phase III nonerosive daily dosing trial, which we read out last year. As for SG&A, we reported non-GAAP expenses of $57.6 million for the first quarter of 2024. This represents an increase over 330% relative to the same period in 2023.
The increase was largely driven by the build-out of our commercial infrastructure and marketing activities in support of the commercial launch of VOQUEZNA. Most notably, the first quarter of 2024 includes nearly a complete quarter of costs related to our full strength sales force. Additionally, this quarter's SG&A expenses included advertising costs, which approximated $6.8 million and were primarily related to the initiation of our VOQUEZNA can kick some acid DTC campaign. For both spend categories, the most significant reconciling item between GAAP and non-GAAP operating expenses for these periods was noncash stock-based compensation. Other non-GAAP reconciling items include noncash interest on our revenue interest financing liability and noncash interest expense related to amortization of debt discount.
Turning to EPS. We reported non-GAAP adjusted net loss of $64.8 million for the first quarter 2024 or $1.11 loss per share compared sequentially to $46 million or $0.80 loss per share for the fourth quarter of 2023. As of March 31, 2024, cash and cash equivalents were $322 million, up to an additional $150 million remains available via our debt facility, of which $50 million is available this year, and $100 million is available next year, subject to achievement of certain revenue milestones. We believe that we are in a solid financial position and reaffirm our expectation that we have cash runway through the end of 2026 based on our current operating plan, expected product revenues and funds available under our term loan. Overall, our first full quarter of launch yielded results that were in line with our expectations.
We saw a proportional increase in field scripts and a better-than-expected gross to net discount due to certain onetime events. We continue to diligently manage our spend while ensuring we invest appropriately to enable brand awareness and commercial access for patients in need of VOQUEZNA. With notable milestones on the horizon, we're excited about continuing to meet our goals for the rest of 2024. With that, I'll now turn the call back over to Terrie for closing comments. Terrie?
Terrie Curran : Thank you, Molly, and thank you again to everyone joining us on today's call. When VOQUEZNA was approved, I share this slide to outline our perceived path to a potential blockbuster opportunity. Now 6 months into our journey, we have delivered according to the plan. Our first quarter results demonstrate that Phathom is off to a strong start in 2024. We've made significant progress in growing demand, accelerating filled prescriptions and expanding brand awareness. Our launch metrics are proof that the power of VOQUEZNA is resonating with both physicians and consumers. In upcoming quarters, we'll look to continue our efforts on all of these fronts with an acute focus on establishing widespread commercial coverage throughout 2024.
Simultaneously, we're nearing closer to the potential approval and label expansion of VOQUEZNA from the daily dosing of nonerosive GERD. We believe the large patient population in this indication and similar commercial dynamics with Erosive GERD create an important catalyst. Internally, when we think about the potential for the VOQUEZNA, our bar is high and we're committed to realizing this opportunity. We remain focused on our goal of displacing PPIs in a very large market and we look forward to sharing our progress throughout the remainder of the year. Thank you for joining us today. We appreciate your continued interest and support. I'll now turn it over to the operator to facilitate a 10-minute question-answer session, operator?
See also
20 Largest Publicly Traded Financial Companies in the US and
20 Wealthiest Countries in Asia.
To continue reading the Q&A session, please click here.
