Phathom Pharmaceuticals Inc Aktie

Good afternoon, and thank you for joining us for this session. I'm Paul Choi, and I cover the mid-cap biotech sector here at the firm. It's our pleasure to have Phathom Pharmaceuticals here joining us for this session. I think what we'll do is what we've done in prior sessions. I'll turn it over to Steve to my immediate left, to kick it off with maybe some high-level comments talk about what are Phathom's strategic priorities for the remainder of the year going into 2027. We'll bring Sanjeev in also for Q&A later. And maybe after that, we'll go into questions.

Perfect. Thank you. Paul, thanks so much for the invitation to be here. It's a pleasure. Just a really high-level overview of the company, what we've done over the past year and where we're headed this year. So Phathom has commercialized VOQUEZNA, which is the first-to-market PCAB to treat gastroesophageal reflux. We have approval for both erosive esophagitis and for non-erosive reflux disease. VOQUEZNA represents the next generation of treatment for gastroesophageal reflux. Obviously, there were initially H2 blockers and PPIs. PPIs has been the standard of care for the last 30 years. But one of the things that has emerged over the last couple of decades, is about 30% to 40% of patients who are on chronic PPI therapy are still having breakthrough heartburn.

They're still having pain. They're having breakthrough symptoms, some on a quite frequent basis. So that 30% to 40% of the GERD population that's on a PPI still having pain, that's our target market opportunity. I joined the company just over a year ago in April of '25, the product was launched late 2023. So that will be 1.5 years into the launch. And one of the things we did at that point in time as we assessed what's working and what's not in our core strategy at launch, is we were getting really good adoption within gastroenterology offices as we went into GI practices, slower adoption in primary care. That's actually to be expected in this sort of a product, you often will see the specialists adopt the product faster.

Those are the higher need patients. So we reoriented our sales strategy during 2025 to focus heavily on gastroenterology. We are today delivering 60% to 70% of our sales calls going into the gastroenterology marketplace with a core focus of growing and penetrating the GI community and growing adoption in GI, we're still making calls on high decile primary care and primary care physicians that have already called. Our target for this year is to deepen that GI adoption pattern, we are making significant strides with our top 3,000 gastroenterologists already prescribing VOQUEZNA more than 1 in 3 -- approximately 1 in 3 times that they are switching a patient on their acid suppression therapy. So about 1 out of every 3 new-to-brand switches that's happening in the top 3,000 GI practices is going to VOQUEZNA. We are continuing to grow that every quarter. We are growing the base of prescribing.

We today have 16,000 of the 24,000 GI prescribers already writing VOQUEZNA and we're continuing to expand that as well as going deeper in GI. That's the focus for 2026. And then in the future, we will be expanding back into primary care. But I'm sure we'll talk about that through the course of the Q&A. We did $175 million in revenue last year. So $55 million in the first year of launch, $175 million in revenue last year. We've guided to $320 million to $345 million this year. We're on a steady growth trajectory for the product at a really nice pace.

And Paul, if I can just add one other thing we did beginning of the year. We look at our cap structure and then realized that we needed to have some modification in the cap structure to have more sustainable availability of funds. So we did that. We did a capital raise successful. We adjusted our debt. We paid down some part of the debt. And then now we have lowered the interest cost and now we have matched the repayments of our debt with the cash flow of the company and then we made sure we have enough cash on the balance sheet to meet all our obligations for the cash hold and the future repayments of debt. So that issue, which was there in the minds of a lot of people is behind us.

Yes. And a last point on sort of the financial evolution for any investors who are new to the story, in addition to that capital restructuring and our growth from $175 million to the $320 million to $345 million this year, we have indicated to our investors that Q3 will be our first positive operating profit quarter. So we're converting profitability and 2027 will be a positive cash flow year. So we are at a fundamental inflection in the company's evolution from being -- investing in the early stage launch to really starting to harvest the positive cash flows next year from this product.

Great. Thanks, Steve and Sanjeev. Maybe as you talk a little bit about the commercial strategy, you talked about focusing on going deeper with your existing and growing the GI prescriber base. Can you maybe talk a little bit more about what specific things that you have directed the sales team to do to accomplish this? Does that include thinking about new messaging, any other additional data points that you're focusing on? And just how does that grow over time?

So we're doing several things. One is, we have realigned all of our sales territories in Q4 of last year to rebalance the territories related to gastroenterology offices. That has allowed more efficiency in our sales calls to GI practices. We've also sized the organizations as we added additional reps in Q1 of this year to get to a sales organization of 300. That is allowing us frequency of calls on GIs that allows us to not just work with the physicians, but we're also working with all of the nurse practitioners and PAs in the office. And with the medical assistants who are driving the prior authorization process, so that we are able to do a total office call and drive depth of awareness within the entire GI practice regarding VOQUEZNA where it fits, how it works.

One of the outcomes of the time that we've invested in the GI practice, you can palpably feel in the context of the conversations that we're having with gastroenterologists. When I joined in 2025 and went to DDW, which is the big GI meeting each year. It's interesting. The conversations at DDW in 2025 had the flavor of, well, I get the VOQUEZNA works, but I'm not sure how much better than a PPI it is. And I'm not sure if I really need to adopt this to my practice. There was still a learning curve regarding the clinical efficacy of this product how much of an improvement it would make for patients. In 2026, every gastroenterologist that I spoke with the DDW had clear conviction around the fact that VOQUEZNA provides meaningfully better treatment alternative than PPIs for their patients who aren't adequately treated with PPIs, this is the next step that they need to go to.

They're 100% convinced on clinical efficacy and the power of this product and the fundamental improvement. What we now need to educate the entire office around is ease of access. The physicians are still not certain what does it take to get the prior authorization through? Will my patient be able to get access to the product. And so we've come up the clinical confidence curve, we are in the process this year of educating physicians on the market access confidence that we need to help them gain confidence that when you write a script, the patient will get the product. They're either going to get a $25 co-pay because of our co-pay buydown if their script, they're going to be offered a cash pay prices that is accessible for the patient who prescribes VOQUEZNA to know with high confidence that their patient is going to get the product.

And it's that confidence build that is the process of not just educating physician but the nurse practitioner and the medical assistant and everyone in the office that the patient can, in fact, get the product. So we've already successfully come up with clinical confidence curve. We are in the process of coming up the access confidence curve, and that's going to continue to grow utilization.

Great. Steve, you mentioned earlier that you've sized the sales force now at about 300 people. Sanjeev earlier in the past quarters, you went through a bit of a rightsizing the organization. Do you feel like you're at the optimal point now for the revenue trajectory. You also talked about sort of matching cash flows to the debt schedule. And just sort of how are you thinking about the infrastructure right now versus sort of your longer-term aspiration.

Yes. So as Steve pointed out, once we did the territory realignment last year, we went through careful planning, but what would it take to maximize throughput from each territory. And that's how we came to this number. And that's how territories got remapped. So the number that we have about roughly 300, that's the right size that gives us coverage at GIs, top decile primary cares and we have strategic coverage wherever we needed to do that. So that's what is reflected. That's what is reflected in our budget. What you saw in the first quarter, by the end of first quarter, we had all territories filled. So almost everybody there. First quarter, we were hiring some people. So you can see the second quarter spend that might be a little bit going up because some people came on board in the middle of the quarter. But we feel we have the right size, that's all reflected in our guidance for this year.

Great. On the point of guidance here, you mentioned it earlier. And so how should we think about, I guess, now that you've had a few quarters under your belt with this new -- the sales force alignment, any changes in terms of how the growth comes either sequentially, seasonally. And what should we be focusing on in terms of the launch for the remainder of the year.

So we don't give a quarterly guidance, Paul. So what we've said is our business is going to be back loaded like last year, right? There is no -- that's kind of how the trajectory of the business is -- and all that kind of business, but it's going to be a trajectory, how sales force is executing. We feel very comfortable about where we are in terms of the trajectory of the business and how each quarter is going to perform.

And one of the hallmarks of our business, our business is remarkably predictable is you've got patients who are on therapy on a long-term basis, the refill volume is consistent. So a significant portion of our business each quarter is a carryover from quarters. And then it's really incremental new patient starts that we're driving, which is why one of the -- on our earnings call recently, we started talking about NBRx numbers because looking at the NBRx penetration in GI offices is a predictor of what our future TRx volume is going to be. One of the interesting characteristics in that regard is we look at the PPI volume in gastroenterology as a proxy for our core target market. The patients who, in primary care are being referred to gastroenterology with gastroesophageal reflux are typically being referred because they're in pain.

So patient goes to their primary care physician, if you get on a PPI and you're fine, there's no reason to have another conversation. If you're having another conversation, it's because you're still having heartburn, you're being referred to the GI for the assessment, that GERD patient in the GI practice is generally refractory to PPIs. That's our opportunity. There are about 20 million prescriptions per year for PPIs out of gastroenterology practices. If we can convert 4 million to 6 million of those 20% to 30% of that 20 million prescription volume, that would represent about $1 billion in revenue per year coming out of GI practices. We are already at that 30% level not in terms of TRxs, but in terms of NBRxs within our top 3,000 accounts.

Now obviously, we need to get to that level within the broader universe of 16,000 gastroenterologists plus the APPs that are in their practices, but we're already there for the top 3,000. If we can get to that depth of penetration throughout the GI community, then over the next 3, 4 years, the TRx number trends toward the NBRx number. So if you're converting that number of new-to-brand prescriptions or new-to-brand patients, the TRx volume is going to grow in those practices.

You've thrown out some metrics here, but maybe one, I think investors focus on is the mix of cash pay versus covered scripts. Can you tell us how that's evolved in recent quarters? And another metric, I think you've also talked about is the new-to-brand share that's been growing, and you said you're in the 30% vicinity in your sort of key targeted accounts. And how does that look in terms of your current prescriber mix versus repeat prescribers?

Do you want to take the TRx?

Yes. So Paul, I think this is the -- obviously, the question is important from an investor and modeling perspective. I think our job is to maximize the prescription, right, into patients coming in, they need to get. And then the second part of that is we need to optimize to make sure the covered prescriptions covered patients who have the insurance get into the covered and the cash patient get into the cash. So our job is to maximize. So far, what we've seen, about a 1/3 of our business comes into cash, right? 2/3 is the covered script. And that trend continued. It goes up a little bit in the first quarter because of the deductible reset and the insurance plan changes, but I expect that to be in the range.

And the good news there is, as the entire business is growing so will cash in absolute number and the covered percentage shouldn't change a lot. And that's kind of what our strategy is not to reduce one and to increase the other, optimize where is -- what's the best way for patient and for us.

Great. Right. And then on the new-to-brand versus repeat prescriber mix, how has that changed over time, Steve?

So we've not seen the relative percentages change dramatically, but you will gradually see a growing base of patients who are getting refills. So the basic premise for our growth path is every quarter we're going to be adding new patients in terms of new-to-brand conversions, but building on an ever larger base of core patients who are receiving VOQUEZNA, who are pleased with the product. And I would expect that, that refill base just continues to grow over time. And then as you get to $1 billion in revenue, you've got a significant population of patients who are just chronically on therapy. And so we're going to see that continue to grow.

One of the things that is important in terms of the mix of cash versus covered patients is just as investors are looking at our IQVIA numbers, the IQVIA numbers really are a good proxy for those covered scripts. Cash scripts don't show up, the cash scripts through Blink don't show up in the IQV numbers, those are on top of that. But we do see both grow. And that actually serves a really important function and actually there are several really important functions. I mean first, as a health care company, our goal is to treat as many patients as possible and be a service to as many patients as possible. And so if a patient has insurance coverage, whether it's on a commercial plan or on a Medicare Part D plan that covers VOQUEZNA we want to get that script covered.

And that is economically the driver of our business in terms of the revenue driver. The cash business doesn't drive our core economics, but we want to make the product accessible to patients who don't have coverage or his insurance plan doesn't cover it. So first thing is just from a health care perspective, we want to offer it to those cash pay patients. But there are 2 other advantages to offering that cash pay alternative. And one of the reasons that we want to continue growing the total number of patients, both covered and cash that are receiving the product. One is the offering of the cash pay program to physicians imparts confidence to the physicians that their patient is going to get access to the product. If they send the script to Blink, if it gets covered, the patient is going to get typically a $25 co-pay. If it doesn't get covered, they're going to be offered the cash pay price. But either way, a very high percentage of patients whose script gets sent to Blink will get the product. So a physician can prescribe VOQUEZNA with confidence that their patient is going to get the product.

That becomes a core part of our conversation with every gastroenterologist that you can you can prescribe this product with confidence your patient is going to get it. The other advantage that comes all of those patients, whether they're covered or cash, who get converted within the GI practice. Those patients are going to go back to their primary care physician and request the refill. That is part of our long-term strategy. We think that there's an opportunity to generate $1 billion of revenue out of the GI practices that 20 million scripts we were talking about earlier. There's another $1 billion of potential revenue that we can get in primary care.

And one of the keys to unlocking that potential is all of those patients are being converted in GI going back to primary care, requesting a refill, educating the primary care physician around VOQUEZNA, that's going to be happening over the next 1 or 2 or 3 years, we're building that awareness within primary care, and that's going to lay the groundwork for our sales organization to then go into those primary care offices after 3, 4, 5 patients have spoken with the primary care physician about VOQUEZNA, is just a much easier sales call at that point in time where the physician already knows the drug, knows that they can prescribe the drug, knows what the patient response has been just how much better their patients feel and knows that the product gets covered.

Once a physician has had that experience of prescribing it 4, 5, 6 times, the ability to then talk to them about prescribing it much more frequently is a much higher ROI sales call.

Steve earlier, you talked about increasing comfort with the clinical data and then more recently, making the experience frictionless for people in the practice to get a prescription approved or dispensed ultimately. But sort of curious now that these trends have been developing. Can you comment on any changes in prescriber behavior, how more likely is the prescriber to go reach his pad for a script or I guess, more in this day and age an EMR for writing a VOQUEZNA script based on these actions you've been pursuing here.

So it's partly based upon our actions and partly based upon their own experience and their own feedback from patients. So one of the ways of sort of understanding the trends is to look at some of our earliest adopters. So if we look at some of the physicians who had adopted this product first and look at their prescribing pattern, the proxy for that is we look at our top 300 prescribers and sort of what's happened to their prescribing volume over time, every quarter, every quarter, we see their total prescriptions rising consistently. Obviously, there's a little bit of variability from quarter-to-quarter, but the long-term trends are very clear that their TRxs are growing and their NBRxs are growing. So even if we see a flat quarter in Q1 because of the seasonality, you still see NBRxs going up. And in fact, those early adopters, those 300 physicians are now at a point where nearly 1 out of every 2 new to brand switches, if they're switching acid suppression strategy.

So they have a patient coming to them who's on a PPI or maybe on double dose or even double dose BID PPIs, and it's still not getting adequate relief or not healing their erosions, 1 of 2 times that they're switching their acid suppression strategy, they're switching to VOQUEZNA. That is a fundamental shift from where they were 2 years ago. Again, we just launched 2 years ago. So we're just less than 2.5 years into the launch. And what we're seeing is significant growth in that prescribing behavior. So that's a fundamental behavior change that's happened gradually over time that comes partly out of repetition of sales calls, being in there often frequently having conversations.

First, about their most severe erosive esophagitis patients then broadening to all of their erosive esophagitis patients then talking about the patients maybe with non-erosive reflux who are still having significant heartburn or having nighttime reflux broadening the population of patients where they can use the product. So there's multiple sales calls drive that penetration, confidence that they can get the product covered drives that penetration, feedback from their patients drive that penetration.

As they hear from patients how much better they feel, and this is one of the hallmarks of this category, VOQUEZNA enables patients who are significantly in pain to feel relief very quickly. That feedback becomes reinforcing for the physician, why is it worth the effort to prescribe a branded drug rather than prescribing a simple generic because your patient feels better. All of those things are synergistic. The multiple sales calls, the confidence and access, the confidence that comes from seeing in a scope the erosion healing, the confidence that comes from your patients telling you how much better they feel that confluence of multiple reinforcing variables is how a physician grows their utilization over time.

And that's one of the -- if you look at our top users, it's taken 2 years to get to this volume in their practice. Now there are many more physicians that we've converted over the past 6 months it's going to take 1 or 2 years for them to grow their utilization, but that utilization pattern and that penetration is going to grow over time through the multiple reinforcing factors that we're describing.

You talked about longer-term growth from your top 300 prescribers. Can you maybe update us on where you are in terms of penetrating your sort of top few deciles, where are you in sort of that pyramid of target prescribers ultimately? And where do you think you might be exiting in '26?

So we don't provide generally the granularity by decile. The way we've described it that might be helpful in this regard if our top 300 GI prescribers about -- in Q1, about 45% of their new-to-brand conversions for acid suppression strategies were to VOQUEZNA. So almost 1 out of 2. Our top 3,000 prescribers, that's a meaningful portion of the GI community, we are at about 30% of their new-to-brand conversions are to VOQUEZNA. Now that's not true for the entire population of gastroenterologists. We've got about 16,000 gastroenterology writers, that is either gastroenterologists or the APPs in their practice. So we are 2/3 penetrated in the entire GI community in terms of first writing, we are highly penetrated in the top 3,000 in terms of percentage of their practice.

What we need to do is get all 16,000 up to that 30% of new prescriptions are going to VOQUEZNA and continue converting the remainder of the GI prescribers. If we're able to do that in terms of new-to-brand conversions, over time, their total prescription for their TRx volume will start to approach their NBRx conversion volume. It doesn't happen immediately. It takes 2, 3 years for that conversion to happen. But again, the target of getting to $1 billion in revenue or out of GI is converting 20% to 30% of that 20 million prescriber volume, we take significant encouragement as an early signal that we're already at the 30% level in terms of NBRx penetration in several thousand accounts.

Great. I want to touch a little bit on sort of patient behavior here. And what's sort of -- first, stickiness are you seeing in terms of patients staying on VOQUEZNA, particularly after they get symptomatic relief, are they sort of understanding that this can be a maintenance drug that may or may not be chronically dosed. And then I'm also curious, are you seeing patients asking for this or using it in frontline use, whether it's through cash pay or potentially through paid scripts? Just sort of curious sort of what sort of frontline utilization you've been seeing?

So we are -- so I'll take the second half of that first. We're not yet seeing this being a first-line therapy. Again, partly, that's because we are primarily focused on the gastroenterology call and partly it's because of our market access structure. So to get coverage, to get insurance coverage for this product, virtually every patient needs to go through a step edit of having had a prior PPI use. So physicians will normally start a patient on a PPI. And then only if they are failing on a PPI will they switch to VOQUEZNA. The other contributing factor to that is PPIs have been ubiquitous for the last 30 years. The drugs have been around forever. You can walk into a CVS and buy omeprazole and so there are very few patients who talk to gastroenterologists. It is the rare patient that they see this PPI naive. Everybody has tried. So this is really a second-line therapy to patients who are refractory to PPIs. In terms of the broader adoption patterns, we're seeing very significant uptake. I apologize. What was the first part of the question.

Patient stickiness -- persistence. Yes. So we looked at the cohort of patients carefully to look at the persistence curve. This was a cohort of patients converted in 2024, looked at 12 months of utilization. We saw north of 6 refills during that 12-month period, which is a good starting point. Now there may be several reasons that a patient may stop therapy even if they want to stay on therapy. They might have a high deductible plan. They hit the January resets. Their co-pay goes up and they may take a gap for some period of time before they finish their deductible and restart therapy. So the way the persistence curves work if you have a gap of 60 days or longer than you're counted as having halted therapy.

We did, in fact, see that an additional significant percentage of patients who officially halted for 60 days, restarted therapy. So any patient who stops VOQUEZNA, goes back to their PPI. If they were experiencing heartburn when they're on their PPI, they start to experience heartburn again, they're going to come back and start using VOQUEZNA again. But we're seeing very good persistent -- on VOQUEZNA.

Patient's interview anecdotal evidence suggests a very, very high degree of satisfaction from patients and doctors about the drug -- to take an immediate effect and relief, and that's what we hear all across.

Yes. And in terms of physician satisfaction with the product, I was traveling with one of our sales reps last week who walked into a physician's office, we spoke with the lead nurse practitioner in the practice because often, the gastroenterologists will do the scoping and then the patients will come back and see either the physician's assistant or the nurse practitioner to get their care plan for -- if they have erosive esophagitis, how [indiscernible] erosions, this is what therapy we're recommending. So the nurse practitioners and the PAs are prescribing high volumes of VOQUEZNA. And one of the questions that I asked her was, what's your experience been with VOQUEZNA? What do you do if a patient fails on VOQUEZNA. She just looked at me dumbfounded, said, I've never had a patient fail on VOQUEZNA. That's the level of satisfaction that they get is this product raises pH in the stomach, to a degree that the satisfaction level of the patients who are on this therapy is enormously high.

Patients feel better, their clinicians hear from them that they feel better on this drug and the satisfaction level of this therapy is extraordinary.

Great. I want to turn to life cycle management. And one of the areas Phathom is focused on is exploring vonoprazan and EOE and can you maybe update us on the status of your Phase II study? And my second question on this is can you walk us through the clinical rationale of sequencing a PCAB potentially post a PPI, but prior to a biologic in terms of utilizing a PCAB in this population.

So the standard of care today for EOE, as you were alluding to in the question, standard of care today is the first-line therapy is acid suppression. So first-line therapy for most DRE patients is that you put them on a PPI. PPIs have never actually been tested for EOE. That's an off-label use of PPIs but has become commonplace in the GI community because there is a volume of data, mostly case studies that have shown that acid suppression therapy can reduce eosinophil counts. That's the underlying premise for our Phase II trial is the body of data regarding both PPIs and significant case reports that have come out of Japan. Obviously, VOQUEZNA was first introduced, vonoprazan was first introduced in Japan.

So there are several case reports that have come out of Japan that have shown reduction of eosinophil counts with the application of vonoprazan, the API VOQUEZNA to EOE patient. That body of data drove the design of our Phase II trial. We're currently conducting that Phase II trial, which will be the first well-controlled study of an acid suppression strategy in the EOE. If the study is successful, we would expect to have a conversation with FDA about doing a Phase III trial. And ultimately, if approved, we believe that this may commonly be used as first-line therapy for EOE patients because, in fact, PPIs aren't on label for. So if you have an on-label acid suppression therapy would demonstrated clinical benefit as a clinician, you would want to use the therapy that has demonstrated clinical benefit because you know the magnitude of effect that you can expect.

And so I'm not actually sure that it would follow the pattern that you're describing where PPIs are used first, it is very possible that VOQUEZNA actually would be used as first-line therapy. It's also a much more cost-effective therapy than the oral steroid therapies or DUPIXENT, which is obviously a significantly much more expensive treatment for the EOE patients. So it's much more cost effective to use VOQUEZNA as a first-line therapy. That represents a meaningful market opportunity and grows our revenue potentially in EoE. The other significant value proposition for our shareholders in the context of doing the EOE program is the potential to extend our exclusivity so this is part of our LOE strategy. If we demonstrate benefit in the Phase II trial, we would expect to have a conversation with FDA in order to get a written request that we include adolescent patients in the Phase III program.

With that written request, if we can invest that Phase III trial, along with completing all of our other pediatric requirements, we would qualify for a 6-month extension of our exclusivity period. And obviously, if we think this product can get to a $2 billion revenue level, we think, again, we can do $1 billion in GI and potentially another $1 billion in primary care, if this product potentially is $2 billion in revenue, adding 6 months is adding $1 billion of revenue, adding significant value for our shareholders.

Great. And can you maybe remind us when this Phase II study might potentially read out or top line?

So we expect that we'll have that data by Q4 of this year or Q1 of next year.

Great. Maybe in our closing minute here, I'll talk a little bit about your rate of investment going forward. How much of your Phase II program and EOE, potential pivotal trial is sort of in the plan already and funded for as you think about both growing the top line and transitioning to operating profitability and positive cash flow over the coming years.

Yes. They are fully funded EOE trial and that we have this year and anything else we want to do. We've talked about that we are considering an on-demand study as well. We haven't made a decision, but that's all included in our thinking, and that's when we say we're going to be turning operating profit second half of the year and then cash flow that's all part of that equation.

Great. Well, we're coming up on time. So Steven, Sanjeev thanks for joining us, and thanks for Phathom for participating.

Paul, thanks so much.

Thank you.

Hello, and welcome to the Phathom Pharmaceuticals First Quarter 2026 Earnings Results Call. [Operator Instructions]

Please be advised that today's call is being recorded. With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's first quarter 2026 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer.

A couple of notes 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 and the slides we'll be reviewing can also be found on our corporate website under the Events and Presentations section.

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 may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the 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.

Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation.

As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release.

With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve?

Thank you, Eric, and thank you, everyone, for joining our call this morning. Let me start with a few highlights and a bit of perspective on the quarter.

We more than doubled revenue from Q1 2025 to Q1 2026. We believe we're on track to potentially achieving $1 billion in annual revenue from gastroenterology prescriptions with the potential for a second $1 billion from primary care prescriptions as patients cycle back to share their VOQUEZNA experience with their PCP and we evolve our sales and marketing focus to include this segment in the future.

In 2025, we set our strategy to focus on building toward that first $1 billion target in GI. We're executing that strategy. In Q1 of this year, we expanded our sales team with nearly 50 new sales representatives trained and deployed into the field in recent months.

Our sales force alignment to enable high-frequency calls on gastroenterologists is complete. We have more than 290 reps in place to start Q2.

In parallel, we're rolling out enhanced HCP marketing programs with several initiatives in the works to support the sales team. Our primary sales and marketing focus is on increasing depth of writing among gastroenterologists and associated providers. We're encouraged by the impact we're already having.

There are approximately 20 million PPI prescriptions written annually from gastroenterology HCPs. And we believe that 20% to 30% market share among this group should get us to the first $1 billion in annual revenue. We previously discussed that as we look at our top 300 gastroenterology writers, they are already averaging about 20% TRx share compared to PPIs.

Importantly, when we look at new-to-brand or NBRx writing among these early adopters, our market share is even stronger.

In Q1, VOQUEZNA achieved approximately 45% NBRx market share compared to PPIs among this group of 300 writers. This means that our top 300 gastroenterology writers were selecting VOQUEZNA for their patients nearly 1 out of every 2 times as they switch their patient therapy to a new product.

In fact, even as you look as deep as our top 3,000 gastroenterology writers in Q1, cumulative NBRx or new-to-brand prescription market share remains north of 30% in that population of physician writers compared to PPIs.

We believe new-to-brand conversions drive future TRx growth as we expect that many of these patients who are converted to VOQUEZNA will elect to remain on VOQUEZNA.

While Q1 TRx numbers showed expected seasonality, the underlying trends in prescribing behaviors and particularly new-to-brand switching to VOQUEZNA reinforce our view that our strategy of going deeper in gastroenterology is starting to show early positive indicators. We've transitioned the strategy and profile of this business and we believe the effects of those changes are still getting underway.

I'd like to briefly discuss key financial highlights for the quarter and then Sanjeev will provide further commentary during his portion of the call with more detail.

Net revenues were $58.3 million for Q1 compared to $28.5 million for the same quarter last year. We believe we're seeing similar early year revenue patterns compared to last year with late March and early April prescription trends indicating the growth going into Q2. We are thus maintaining our revenue guidance for the year.

Cash operating expenses, excluding stock-based compensation, were $56.2 million for Q1. Our team continues to exercise fiscal discipline in our operations. And lastly, our net cash usage for Q1 operations was approximately $15 million.

A few quick notes on commercial metrics for Q1. Through April 17, about 1.35 million VOQUEZNA prescriptions have been filled. Covered prescriptions increased about 5% during the most recent 4-week period compared to the prior 4-week period, signaling that growth that I previously described in recent weeks going into Q2.

Of the approximately 268,000 prescriptions that were filled in Q1, about 168,000 were covered prescriptions, representing approximately 63% of the total, while about 100,000 were filled with cash pay.

The incremental IQVIA reporting gap mentioned on our previous call was resolved by mid-March and the TRx numbers we are reporting today include the prescriptions that IQVIA has not captured.

On a year-over-year basis, covered prescriptions grew about 91% and total prescriptions filled grew about 115%. The higher growth in total prescriptions reflects the impact of introducing the cash pay option for Medicare patients as of April 2025.

Weekly TRx in March approached the previous December highs. And now as we begin Q2, we've seen 2 of the first 3 weeks in April reach new all-time prescription highs for covered prescriptions.

I mentioned earlier that we view NBRx prescription growth as an early indicator of how our strategy is playing out. We believe NBRx writing is the leading signal for our growing patient base as it represents a patient being switched to VOQUEZNA prescriptions for the first time.

Ultimately, many of these new-to-brand prescriptions progress to consistent refill prescriptions in future quarters, thus driving growth. In Q1, we saw covered NBRx grow approximately 11% over Q4 of 2025, signaling that we are continuing to see a solid rate of new patient starts on VOQUEZNA.

The proportion of NBRx being written by gastroenterologists versus other specialties has increased over the last few quarters, indicating the early effect of our strategy focus on gastroenterology. Introducing more new patients with GERD VOQUEZNA is the first step to drive durable growth. Persistent refills for these patients then contribute to growth in future quarters.

Among the cohort of patients that started VOQUEZNA in 2024, we saw an average of approximately 6 bottles worth of VOQUEZNA dispensed over a subsequent 12-month period. One note on this analysis is that the analysis may actually understate persistence to some degree as an additional 18% of the patients who had stopped VOQUEZNA through that analysis actually restarted therapy within 12 months of their original prescription.

Lastly, we've recently been hearing questions from investors about a possible new P-CAB entrant into the U.S. market. Internally, we're preparing for a potential second P-CAB approval in the U.S. in 2027.

Last week, 2 Tegoprazan abstracts related to the erosive esophagitis Phase III trial for this product were released ahead of this year's DDW conference, where the data will be presented next week.

The abstracts provide a preliminary summary of the data. As anticipated, the Tegoprazan results support the effectiveness of P-CABS as a class. While cross-trial comparisons have inherent limitations and the studies were not a head-to-head evaluation, it may be helpful to our investors to note that in our VOQUEZNA Phase III erosive esophagitis trial, approximately 93% of patients in all categories of erosive esophagitis achieved healing of their erosions by 8 weeks.

In the separate recently reported Tegoprazan study, approximately 85% of patients in all categories of erosive esophagitis achieved healing of their erosions by 8 weeks. We continue to feel confident in VOQUEZNA's robust clinical data profile and are executing our commercial strategy in the current market.

Overall, we remain confident in our outlook for 2026. Our foundation is strong. The sales force is implementing our gastroenterology-focused strategy and new patients continue to start therapy. We are fully in execution mode as we continue to work to drive TRx and sales growth.

I'll now turn the call over to Sanjeev to take you through our financial updates.

Thank you, Steve, and hello, everyone. We have a lot to cover, so let's jump right into our Q1 results. Revenues for quarter 1 were $58.3 million, reflecting year-on-year growth of 104% and a sequential growth of 1% over Q4 2025.

Our Q1 2026 revenue was somewhat light compared to our internal expectation due to market access seasonality and other factors like winter storm and deployment timing of new sales force team members. However, with recent weekly prescriptions demonstrating growth relative to early Q1 and our expanded sales force in place, we remain confident in our outlook for VOQUEZNA in 2026.

Our gross to net discount for Q1 came in at the lower end of our 55% to 59% guidance range because of channel mix for [ Cordis ] prescription. Our gross margin was in line with our guidance at approximately 80% for quarter 1.

As described during last quarter's call, this now reflects certain third-party fulfillment costs being accounted for as cost of goods sold instead of gross to net adjustments.

Q1 cash operating expenses were about $56.2 million, reflecting continued disciplined expense management. The sequential step-up was anticipated and tied to 3 main drivers: expansion of our sales force, our annual national sales meeting in February and the ramp-up of our Phase II EoE trial.

In fact, I'm pleased to report that the EoE trial is enrolling ahead of schedule. And as a result, we are anticipating top line data by late Q4 2026 or early Q1 2027.

Importantly, we continue to demonstrate expense discipline across the organization with year-on-year cash operating expenses down about 43% compared to Q1 2025. We reported a loss from operations, excluding stock-based compensation of approximately $9.9 million.

We ended the quarter with about $181 million in cash and cash equivalent, which reflects roughly $15 million used in Q1 after netting out the flows from our equity raise and debt amendment. The increase in cash usage compared to Q4 2025 was driven by the timing of our annual corporate bonus payout and changes in the working capital due to timing of certain payments.

We anticipated these dynamics and remain confident in our path to operating profitability and cash flow positivity.

Overall, our balance sheet remains strong and as a result of our operations and the deliberate capital structure enhancement we did at the start of the year. Based on our current operating plan, we believe our cash on hand, along with the anticipated future cash generated from operations will be sufficient to invest in our business, satisfy all outstanding debt obligations at all time without the need for another debt or equity raise.

Now let me speak about our financial guidance for 2026. We're maintaining all guidance ranges and estimates provided during last quarterly call. We continue to anticipate 2026 net revenue between $320 million to $345 million.

We continue to believe our gross to net discount will be within the 55% to 59% range and gross margin will be approximately 80%. As for spend, we anticipate that cash operating expenses, excluding stock-based compensation, will be between $235 million to $255 million.

As we think about cadence, we continue to believe revenues will be more heavily weighted towards the back half of the year. We expect expenses to modestly step up in Q2, reflecting full quarter's worth of cost of the expanded sales force.

Lastly, we continue to anticipate achieving operating profitability, excluding stock-based compensation by Q3 and for full year 2026 with positive cash flow in 2027. We remain focused on executing with discipline and we feel confident in our ability to deliver on our GI focused strategy. We ended the quarter with a strong balance sheet and believe we will strengthen our financial position as revenues grow.

In summary, our priorities remain clear. First, drive efficient growth towards achieving $1 billion from GI prescriptions. Second, support strategic investments where needed while continuing to be disciplined on spend.

As we look ahead, I am encouraged by the efforts and dedication of our commercial and R&D teams. We're energized by the opportunity in front of us and we believe our internal metrics show the momentum is building.

With that, I will now turn the call back to Steve for his closing remarks. Steve?

Thank you, Sanjeev, for the detailed financial review. With an expanded and trained sales force executing our gastroenterology-focused strategy and continued expense discipline, we believe we have a clear path to strengthening the revenue trajectory and achieving operating profitability in the months ahead.

Thank you to our team and our investors for your continued dedication and support. We look forward to continuing to serve the patients in need of VOQUEZNA.

Operator, please open the line for Q&A.

[Operator Instructions] Our first question or comment comes from the line of Yatin Suneja from Guggenheim.

Congrats on good performance. So 2 questions for me. First one is on the competition. Steve, I think you just mentioned a little bit about how you see their product.

I'd love to understand from a market dynamic perspective, what do you expect? Like, so you are right now the only branded that is doing the heavy lifting. Should we -- do you expect the market to expand or them to take some share? Just love your articulation there.

And then maybe second for Sanjeev. I think you touched a little bit on the gross to net dynamic. So I understand, I think there was a better gross to net yield. But your guidance for 55% to 59% still stays. So is there some room there for an upside as we go into second quarter or third quarter because generally they tend to be a little bit better?

Yes. Thanks so much for both of the questions and the kind sentiments. The -- yes, as you sort of described, we are, in fact, tracking the evolution of Tegoprazan sort of as they start to build awareness.

It's awareness is at a pretty low level in the market right now because they don't have a current commercial organization. So they're in the NDA review process.

Certainly, we expect that as a second P-CAB entrant comes to market, there's a shift in sentiment from Vonoprazan or VOQUEZNA is a new product and I have to learn about a new product to now there's a new category and I have to learn about the new category and think about how to integrate this new category into my treatment.

That helps to build awareness within the gastroenterology community and generally what prior market experience for a number of products have shown is that the first mover in that space gets the lion's share of the market, but there's a growth in awareness of a category as a second entrant comes in and we're certainly optimistic in that regard.

The other thing is that as we look at the data, there's just no compelling reason for anyone to switch a patient from VOQUEZNA to -- from Vonoprazan to Tegoprazan. The data doesn't suggest that the patient is going to do better. And so we think that the market share that we've won and the presence in the market that we've won is really quite solid.

We are going to be continuing to grow our presence in the market. We've got very strong market share among several thousand gastroenterologists and that expands every month as the sales force spends more time. So we've got at least another year to be building that depth of awareness and building the habit among gastroenterologists around prescribing VOQUEZNA. I think that all positions us very nicely. And we think growing awareness of this category will just help build it.

Yes. And Yatin, on your question about gross to net. As we said in our prepared remarks, it came in at the lower end of our guidance and the guidance at 55% to 59%. I think what happens in our business or any business, there is a channel mix that go on quarter-to-quarter and that could change the gross to net percentage.

And in first quarter, we see a higher proportion of cash scripts. And what that does is that drives gross to net to be a little lower because cash scripts don't have any gross to net item.

So I don't expect us to deviate from our range, but it's going to be within the range. And every quarter could be different because of different dynamics that are going on. But for the full year, that's how we're maintaining our gross to net range at 55% to 59%.

Our next question or comment comes from the line of Umer Raffat from Evercore ISI.

I wanted to touch up just broadly on your observations commercially with the readjusted commercial focus and what the feedback is and how much of a follow-through you guys are continuing to expect with the turnaround we're seeing on IMS already?

And secondly, as we think about sort of the path for the company forward in terms of heading towards sort of better than breakeven, et cetera, would it -- what are the priorities from a potential M&A perspective? And I'm not talking large deals. I'm just saying to enable the OpEx to be levered across a larger sales base in the areas you're already operating in?

Thanks so much for both of the questions. So thinking about first, the commercial focus and what we're seeing, we are feeling and hearing from the field the same kinds of things that you can see in the IQVIA or the IMS numbers in recent weeks and that is there is growing activity, growing momentum in the adoption pattern.

We've got territories regularly seeing all-time highs in terms of the new prescription volume that is happening. And one of the reasons that we spent a little bit of time today talking about NBRx trends rather than just TRx trends because the easy thing to look at from IQVIA numbers is sort of look at the TRx trend.

But what we think about as a forward indicator of that commercial momentum is how effectively are we converting new patients because those new patient starts are really where we can have an impact. When a sales rep is in an office working with the gastroenterologists about thinking about what kinds of patients are appropriate for VOQUEZNA, they're not changing the established base of patients that are already getting PPIs under the office. The only patients they can switch are the patients that they're seeing in the office at that time.

So that's really the new-to-brand volume and that's where we move the needle first and then that foretells the future momentum. So we expect that the momentum on new-to-brand conversions predicts that we're going to have continued momentum on TRx growth and that should show up in the future quarters.

And we're quite enthusiastic about that feedback and that dynamic in all of our conversations with physicians and with our field personnel. And our field team is feeling pretty solid about that.

And then sort of path forward in terms of M&A priorities and the kinds of things. There's not urgency for us to bring a second thing in. We are starting outreach to identify other GI assets that would be complementary to bring into our sales force.

And those could be commercial products or they could be Phase II or Phase III products that we could launch before our LOE date, 2033 or 2034. So we've got a few years to identify those assets and bring them in.

There's not a great urgency to do so right now because, quite honestly, I don't want to distract the field. Our team is focused on conversations around VOQUEZNA with accounts and there is still a lot of education and market depth to build in terms of all of those conversations. So we're starting to evaluate those programs. There's nothing imminent, but we are looking at really interesting things and also looking at new applications for VOQUEZNA.

We're doing the EoE Phase II trial. We've been evaluating the potential to look at as-needed dosing of VOQUEZNA. There's lots of interesting talk around potential synergy of using VOQUEZNA when patients are on GLP-1s associated with the GERD that arises in the context of GLP-1 use.

There are a number of really interesting opportunities that could be expansion opportunities for us just within the VOQUEZNA opportunity set.

And Umer, just to look at the cash flow opportunity in the company, as you pointed out, with the strategy in place and the -- us generating the positive cash flow next year and the cap structure we enhanced at the beginning of the year, I think that gives us the flexibility to meet, obviously, our obligation, but we'll have the flexibility of additional cash to invest as we expand VOQUEZNA potentially in a couple of years, maybe to primary care and maybe combine that with the DTC.

So we'll have the resources and the cash flow to be able to do that. So we feel pretty good about what the trajectory is and we're going to take best use of the opportunity.

Our next question or comment comes from the line of Kristen Kluska from Cantor Fitzgerald.

Congrats, everybody, on all the great growth you've seen, especially when looking at the trends from last year. So as the breadth and depth of your GI interactions are increasing, how are physicians understanding in a real-world scenario, the additive benefits of VOQUEZNA?

And how do these measures and the patient feedback they get then translate to them potentially recommending the product to other patients they have?

So Kristen, thank you. And thanks for the context on both physician understanding and the importance of patient awareness and patient advocacy because both become really important components in how this product grows.

What we're seeing is as we have time in the market, I mean, we're now a couple of years into the launch and so the physicians who have adopted VOQUEZNA as a meaningful part of their practice are having the opportunity to get feedback from patients about the significant improvement that VOQUEZNA provides.

And it's interesting, we just did a round of market research where we were doing interviews with a significant number of physicians and a significant number of patients. And one of the interesting findings from that research was -- and often there are clinical trials and you see a clinical outcome and then the physician doesn't really know whether or not they can measure that clinical outcome.

That's not the case here. The case here is what we see in our clinical trials, which is better outcomes with VOQUEZNA, certainly in erosive esophagitis patients, but also significant alleviation of pain and sort of an increase in the heartburn-free experience for patients with non-erosive reflux, physicians are seeing that from their patients.

They are hearing from their patients how much better they feel. And every one of those feedback points, every time a physician talks to a patient who then comes back and says, "Doc, I've not felt this good in years," that conversation is a reinforcing conversation that cements in the mind of the physician, this really is a transformative experience for my patients.

And that's part of what drives growth. So part of what drives growth is our sales and marketing activities and the time spent in the office educating the physicians, but a large part of what drives growth is physician experience and feedback from their patients that then causes them to want to prescribe it in more patients.

The other thing that happens is not only do patients understand the benefit and have that conversation with their physician, but this becomes the passage to our future expansion back into primary care. Those same patients who are telling their gastroenterologists how much better they feel are going to go back to their primary care physician for their annual physical next year.

They're going to be having exactly that conversation with their primary care physician who referred them to the GI. And it's going to naturally ask how did that go? How are you feeling? Are you still having the pain that you're experiencing? That conversation leads to an education of the primary care community and positions us in future years to expand meaningfully in primary care and positions us for possible future initiatives to broaden the outreach.

Okay. And as the database for patients that have been treated with VOQUEZNA continues to increase, particularly maybe some more severe patients as you do more work with GIs, are you collecting any -- again, not -- understanding this is in a clinical trial setting, but are you collecting any anecdotes to give you any clues as to where this therapy could potentially be studied for in the future?

And then if you were to expand into other indications in the future, are there ways to also strengthen the IP around those opportunities as well?

So absolutely, we are learning from physicians about the breadth of use. And again, in the context of some of the recent market research, we're starting to evaluate this. So we're starting to look at a number of different indications.

How would physicians think about using a product on an as-needed basis on a long-term basis for patients who may not require daily therapy, but PPIs can't really be used that way. So that becomes an opportunity to switch a different population of patients and grow utilization.

I mentioned earlier to one of the questions that there is an increasing prevalence of gastroesophageal reflux symptom severity in patients who are on GLP-1s. That becomes an increasing prevalence conversation.

I've been having a series of dinner conversations with gastroenterologists in recent weeks and it's come up several times that they are now starting to see patients who they're having to have conversations with them about whether or not to titrate their GLP-1s because of the side effect profile of the reflux and the heartburn that they're experiencing and patients really don't want to reduce their GLP-1s if they're losing weight, but they're having significant GERD. So that becomes a significant opportunity.

Certainly, in patients who are having severe consequences and a lot of patients with erosive esophagitis, they may progress to Barrett's and progress to having the risk of esophageal cancer and there are a number of potential sort of broadening thoughts that physicians have around how do I consider what patients I'm using this product for those conversations are evolving as we are learning about the breadth of use that physicians want to have.

Oh, and then your other question was on potential IP. I apologize, I didn't touch that. I'm going to probably just pass on answering questions about what potential IP we might have around what future products or indications. We'll evaluate that as we get there.

Our next question or comment comes from the line of Paul Choi from Goldman Sachs.

Congrats on the good quarter. To the degree you guys have insight from either the prescription data or physician feedback, can you maybe help us understand or break down how much of the incremental prescription growth is driven by NERD versus GERD? That would be very helpful for clarification.

And my second question is, as you think about the potential entrance of a second P-CAB into the category, over the intermediate term, do you envision the category becoming more managed? And if that is the case, do you think PPIs would be an appropriate analog here given that the category eventually had multiple entrants?

So, Paul, thanks for the questions. And in terms of the relative use, so we don't always have visibility on the underlying diagnosis that drove the specific prescription for every one of our TRxs, whether it's a NERD patient or an EE patient or a half EE patient because you may have a patient that had erosive esophagitis and now is having symptoms again, may not have erosions, but the physician is concerned that they might get erosions. So there are patients that sort of cross over between the 2 categories.

What we see is generally, a gastroenterologist will start by putting their most severe patients on VOQUEZNA and then they will grow their utilization over time. So often, the starting point is the erosive esophagitis patient who has severe erosions who's failed multiple rounds of PPIs, has failed BID PPIs and there's just no other alternative, they don't have any other way to help this patient, they need to help them heal, that's the patient with which a gastroenterologist may start.

When they see success with that patient, they see that VOQUEZNA has actually enabled that patient's erosions to heal, then the conversation that our representative is having in the office is about how the physician can start using it more broadly, maybe it's to all of their Grade C and D erosive esophagitis patients.

And then as they see success in those patients, broaden it to all of your erosive esophagitis patients. And then as they're seeing success in those patients, why not broaden it to your patients that have non-erosive reflux but are still having significant pain and are still having nighttime heart burn, not able to sleep or not able to tolerate certain foods.

And so there is a natural evolution in a physician's adoption that starts from the more severe patients to the less severe patients, starts with erosive esophagitis and then moves to non-erosive reflux. That's just the natural cadence with which a gastroenterologist tends to adopt this product.

And so we see that evolution. There's some skew probably toward more erosive esophagitis patients in the early adoption years and we continue to see those patients being converted, but then expand into non-erosive reflux patients.

And then in terms of how the market evolves with a second P-CAB entrant, I mean, there are so many examples where there has been a category where multiple entrants came in over the course of time and the category continued to grow substantially, we would -- as I commented earlier, I think we just expect to see the category of P-CAB adoption grow as physicians become ever more familiar with this mechanism, ever more familiar with the efficacy of these products.

And we have a product with really terrific outcomes in which physicians have really significant confidence.

Our next question or comment comes from the line of Joseph Stringer from Needham & Company.

Just a follow-up on a previous answer you gave on the primary care setting. I know this is part of your future expansion plans. But just curious if you have any early quantitative metrics on the patients that cycle from primary care through a specialist back to primary care, for example, what's the recapture rate from the initial patient referral, those patients coming back to the PCP?

And how is that evolving over time? Presumably, that's already occurring to some extent, but just curious if you had any early color here or commentary, that would be helpful.

Joseph, thanks for the question. I think that's going to be a really important element for us to track and evolve in our understanding over the next couple of years.

It's not one where we have significant metrics yet because we're still in early days. We've made the GI pivot just about 12 months ago. And so with that GI pivot a year ago, we haven't had enough time for a significant number of those patients to make it back to their primary care physician to then start getting scripts in their primary care physician.

Anecdotally, I would tell you, it was interesting one of the observations from our analytics team is that we are starting to see primary care physicians writing scripts for VOQUEZNA whom we've never called on. That's an indication of exactly that pattern.

What we're seeing -- the only way that a physician we've never called on is writing a script for VOQUEZNA is a patient came back to them and asked for it. And that's exactly the pattern that we want to see. But as to the breadth of those metrics and exactly how we track that, it's still early days and we don't have all of those worked out.

Our next question or comment comes from the line of Annabel Samimy from Stifel.

So wondering if there's anything that you can share about the dynamics between the cash pay and the covered patients. Do you see any increasing usage of the cash pay market as you're moving into more Medicare populations?

And then separately, I guess it's great to see the EoE trial enrolling so quickly. Is that an indication that there could be bigger demand than off-label PPIs would suggest? Can you just give us a little color around what's driving that?

So on the dynamics for cash pay versus covered, I'll start and then, Sanjeev, if you have additional insights, feel free to jump in on this. But we saw a little bit of a bump up in the percentage of patients who received a script on a cash basis rather than a covered basis in Q1.

We fully expect that every Q1 because there will be patients who with their health plan resets are going to have a high deductible plan and where they had coverage with a low co-pay. Our co-pay buy-down programs don't bring them down to a low enough price, so they would end up opting for the cash pay price.

We think that's a Q1 phenomenon. And then going forward, I would expect it to normalize more consistently with historic levels in terms of the ratio of cash pay to covered. But we don't try to manage that number precisely.

What we try to do is really maximize prescriptions and then maximize how many of those prescriptions can get coverage and that number will evolve over time. But I think there's a little bit of a Q1 bump that we experienced.

And we already -- Annabel, we're already seeing that number starting to moderate in the script data after Q1 to Steve's point. So I think that's a natural phenomenon of what happens in quarter 1.

Yes. And then for EoE, what I can describe is what we've heard from the clinical sites, but I can't really extrapolate it out to the entire market yet, but we're certainly seeing the fast enrollment of this trial reflects significant interest in a first-line therapy that doesn't have the significant burden of some of the immunologic changes that more aggressive therapies would have.

I mean, if a patient progresses to Dupilumab, for example, that's a more advanced patient and first-line treatment standard of care for many EoE patients is, in fact, today, PPI therapy. But this is the first big study of acid suppression therapy as a treatment modality in a well-controlled clinical trial.

There was a high level of interest among the physicians in the clinical trial to enroll patients, lots of enthusiasm for it. And obviously, we're enrolling ahead of schedule.

So certainly pleased with that. We haven't done enough market research on it to predict exactly how broadly that's going to suggest the market opportunity is in EoE when we commercialize it. We'll do that after we see the data from this trial as we're planning on our Phase III trial.

Our next question or comment comes from the line of Denise Ding from Jefferies.

Congrats on a great quarter. Can you talk a little bit more about the shape of gross to net throughout the year? Should we expect it to worsen towards the top end of 55% to 59% like it did last year as the percentage of cash pay comes down?

And then secondly, Steve, you've talked on a broadening category on a new P-CAB entrant, but curious on your thoughts more specifically for VOQUEZNA. How do you see a new competitor impacting the sales trajectory in 2027 and beyond? Do you expect any sort of pressure from payers that would erode price?

So on the first one, the shape of gross to net, I would stay short of making a prediction about the quarter-to-quarter number. That's the reason we give a range because as you know very well, this is entirely based on the mix of business in each quarter.

Clearly, quarter 1 gets impacted by -- a little bit by the cash scripts. But in the subsequent quarter, there are so many other dynamics that go on. So it's kind of hard to say one quarter what percentage is going to be. That's why we want to stay within the range as we did last year.

Yes. And then your second question around sort of the shape of the market in the context of a new competitor entry, I don't think we've got enough specifics yet on how the second product may come to market, what their positioning is going to be. And so it's really hard for us to predict what their market strategy is going to be and therefore, what our response will be.

What we are very confident about is the momentum that we're building within the gastroenterology community, the conviction that physicians have around this product.

I mean, again, our top 3,000 writers -- now 1 out of every 3 new patients that they are switching acid suppression therapies, they're switching them to VOQUEZNA. That's an enormous share of mind that we have with a broad population of the gastroenterology community.

And in fact, that is broadening. And we've got another year at least before second entrant comes in to be building that market share and to be building that mind share that I think will position us really well in the context of the competitive dynamic in the future.

Our next question or comment comes from the line of Mr. Matthew Caufield from H.C. Wainwright.

Are there any further insights into the weighting for revenue growth expected between first half and second half? And then additionally, are there thoughts on how we can best expect OpEx trends to continue for the year? I believe there was mention of the OpEx being up in 2Q.

Yes. So Matt, thank you for your question. So I think it's safe to say the revenue trajectory will follow similar trends as last year. I don't want to get into the percentage because if I do that, then I'm actually giving you guidance for a quarter, next quarter, which I don't want to do that.

So I think it's fair to say -- I said in my prepared remarks, it's going to be second half-weighted business, which is what happened last year and I don't see that changing this year as well. So that's number one.

Number two, on the OpEx. I think a couple of things will happen. Quarter 2, we'll see a slight bump in the expenses from quarter 1 and that's precisely for 2 reasons. One is the EoE trial is ahead of schedule and that's a good news.

So there may be a little bit more expense timing-wise in quarter 2 than we had earlier thought about. And number two is the sales force is fully in place. In quarter 1, we were still hiring and that hiring is now complete and the sales force is fully on board. That impact will also reflect in quarter 2. But that's going to be marginal. And after that, I expect our operating expenses to be more or less stable.

Our next question or comment comes from the line of Martin Auster from Raymond James.

There was some pretty interesting data about new-to-brand prescription share amongst the top 300, top 3,000 GIs. Curious if you could give us a little bit more context around that snapshot in terms of sort of how much progress has been made since the new GI-focused strategy has come in? And then if you have a sense of sort of what's a realistic ceiling for higher prescribers in terms of new-to-brand Rx?

So Martin, I mean, the growth to -- thank you for the commentary. I share your enthusiasm that the new-to-brand data actually is a really strong clarifying indicator for where we expect the business is evolving.

And it's a metric that we use internally in our forecasting and in a lot of our planning activities is how those trends are going.

What we have seen in every category of physician that we call on, whether it's a gastroenterologist or a gastroenterology APP or primary care physician or primary care physician APP as well, as we look at the new-to-brand prescription trends and one of the metrics we use is new-to-brand prescriptions per sales call, those numbers continue to go up.

They've been going up for the last 2 years. They continue to go up. On a quarter-over-quarter basis, we are driving increasing effectiveness in those categories.

And obviously, now we're focusing on GI and GI APPs as the core call point. But those haven't capped out. Those are continuing to improve and we would expect to continue to improve those over time.

And so that I don't have a clear sense for where a cap is in that process. It is encouraging that we are already at the 45% level. I don't know if it caps out at 50%, 70%, 90% of their new-to-brand prescriptions get converted.

But one of the other things that happens is as we convert more new-to-brand prescriptions and those patients stay on, the underlying TRx percentage in those offices continues to grow because more -- higher and higher percentage of their patients are already on VOQUEZNA and we're continuing to convert to new patients.

So you'll see the TRx percentage grow toward the NBRx percentage. So where right now, we've got 20% penetration in TRx volume in the top 300 accounts, we've got 45% penetration in NBRx, which suggests that we're going to be growing that 20% number toward the 45%.

The 2 may never completely match up, but one drives the other. And that's part of why we're focusing on that as a core growth metric and one of our core effectiveness and efficiency metrics in our call strategies and the call allocations.

It was really helpful incremental context and hope it's a metric you'll periodically revisit in the future with us.

Yes. I don't know that we'll do it every quarter, but we will certainly provide periodic updates.

[Operator Instructions] Our next question or comment comes from the line of Chase Knickerbocker from Craig-Hallum.

Maybe just one quick one for me. And sorry for it to be on competition again here. But Steve, I just wanted your thoughts on one thing specifically.

So the way that the potential competitor, the next P-CAB potentially or the way that study was constructed, there's a chance that there might be a couple more superiority claims at launch. So to what extent do you think that matters?

And then kind of compare and contrast to how you think the first-mover advantage that you've built up with the 1 million-plus prescriptions since launch and the clinical experience here kind of pairs that?

So I don't have complete visibility on exactly how this competitor is going to launch or what kind of sales force they're going to build. And so it's hard to predict exactly what happens in that marketplace.

But as for the data, when we look at the core data from the abstract that's available from -- or the abstracts that are available from DDW and we think about what's important to a physician, again, we were talking earlier about the natural pattern of adoption, the natural pattern of adoption for a physician considering switching patients to a better acid suppression strategy if their prior PPI strategy wasn't working, is that they start their adoption curve with their most severe patients.

And then as they see a product work, they move into a broader population of patients. What we see with our data is when you put erosive esophagitis patients on VOQUEZNA, 93% of them heal their erosions within 8 weeks. That's exactly what a physician wants to see.

Every physician who is seeing that today and every physician who sees that over the next year as they put erosive esophagitis patients on VOQUEZNA is going to see that their erosions are healing and this product clearly works and it clearly produces really good outcomes.

And they're having clear conversations with their patients about how much better they feel because their pain is substantially relieved almost immediately, literally within hours and on the first day and I'll tell you the patient, the first day that I took VOQUEZNA, I felt a whole lot better. It's just really quick how this product works.

And so what the physician experience is with VOQUEZNA is enormously satisfying and enormously positive. They see their patients heal. They see -- they hear feedback from their patients that they feel better and they grow their utilization over time.

That doesn't get disrupted at all because someone has some statistics measure in some other clinical trial when you know you've got a product that's going to produce 93% healing rates and really good outcomes for your patients. So I just don't see that having any impact in the market in any meaningful context.

I'm showing no additional questions in the queue at this time. At this time, I would like to thank everyone for participating. Thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.

All right. I think we're ready to go. Welcome to the last presentation of the day at the Barclays Miami Healthcare Conference. My name is Jenna Davidner. I'm one of the analysts on the specialty pharmaceuticals team here. And on the stage with me, I have Phathom Pharmaceuticals and representing the company is the CEO, Steve Basta; and the CFO, Sanjeev Narula. Thank you both for joining us.

Jenna, thanks for the invitation.

So let's start. There's a lot of things that has happened at the company over the past couple of years. And specifically, both of you are very new to the company. Sanjeev is even more recent. So starting with you, Steve, just talk us through what attracted you to this opportunity? And maybe when you got on board, what were some of the biggest initiatives that you undertook from day 1?

So thank you again for the invitation to join you today. I joined about a year ago, almost a year ago now. And first context of what attracted me to Phathom is this is an extraordinary product. First principles, if we're delivering a really good therapy that improves quality of life for patients, that's why we're in the health care business is to make a really big difference for patients.

And when I first looked at this and started to do a little bit of research in the gastroesophageal reflux space, what you very quickly realize is even though there have been therapies available for 30 years or more for these patients, there is still an enormous population of patients that is experiencing significant pain, significant symptoms that are inadequately treated with current therapies and the opportunity to improve care for those patients is a fundamental improvement.

And so what interested me first and foremost, was it's a great therapy that is a best-in-class treatment opportunity for patients. We can improve the lives of millions of patients. And then fundamentally, looking at the core of the business, revenue is growing really nicely. There was clear enthusiasm on the part of physicians to adopt the product.

What we needed to do was bring a little bit more financial discipline to how we were launching the product so that we could reduce spend and get to profitability sooner and create really attractive returns for our investors. which enables the success that we're having in terms of growing the product.

Awesome. So in terms of some of these cost initiatives and your commercial strategy and just the trajectory of revenue through the year since you started, just talk about what those key efforts that you did, whether on the DTC or just maybe rightsizing the infrastructure and then layering on top of that, you've been able to maintain this growth rate. And it's worth commenting that if you think about Phathom spending in the first half of the year, the run rate versus the second half of the year is materially different.

And so I just wanted to emphasize a little bit all that has gone on and yet ending the year a little bit above what even your guidance was. And so just maybe walk us through that and before we focus on the exciting things in '24.

Thank you. That's very helpful. 2025 really was a transformational year for us. When I came into the company, first thing I did was spend time with every group in the organization to understand what's working, what's not working, where are there opportunities in our business, where there are opportunities in our market and where can we find greater focus and efficiency.

What became exceedingly clear even in the first few days, particularly with every conversation that I had with our sales team, and I met with each of the regional managers, met with each of the areas together, the consistency of commentary from the field was when we call on gastroenterologists, they really need our product. They want our product.

They need it for their patients. It makes a big difference. They immediately see the logic. When we call on primary care physicians, they're slower to adopt. They're not sure whether or not their patients need an improved therapy. And so there's a greater perception of immediacy of need in the GI community. And then when you actually looked at our numbers, that was reflected in our numbers. 30% of our sales calls at launch for the first year of launch were going into gastroenterology, but 70% of our prescriptions were coming out of gastroenterology.

So we were getting, in essence, a 4x return, meaning 4x the efficiency for every sales call that was going into GI practices versus every sales call that was going into primary care. That created the opportunity for a pivot and a focus to gain much greater efficiency. So what we were able to do was pivot the organization to focus on gastroenterology. It originally had been skewed much more toward a focus on primary care. We haven't eliminated primary care, but we're now -- we're getting close to 70% of our sales calls going into gastroenterology accounts, which is our more productive segment.

Those sales calls in gastroenterologists are what drive growth. That is what is driving our business. So we maintained the strength of our sales organization. We maintained the focus on how do we grow our gastroenterology practices and their writing habits and frequency of writing, but we significantly reduced spend on numerous things that weren't driving revenue. So we had started the DTC program. It was actually a pretty broad expensive broadcast television DTC program.

It was just too early. The call to action was ask your doctor about VOQUEZNA, but most primary care physicians hadn't yet adopted the product. So we were spending a significant amount of money trying to activate patients to go to primary care physicians who didn't yet know if they needed the product. Now there will come a day when that makes sense, where in the future, there's much more broad uptake in primary care, and there is an opportunity for us to drive growth in the business, but it was premature.

So it was not providing a significant return on investment. So we were able to turn off significant spend that wasn't providing a positive ROI, double down on the key activity that was driving growth, and that's how we were able to deliver growth that exceeded even our internal plan and do so while cutting operating expenses by quite literally 50%. From the first half of the year to the second half of the year, we reduced operating expenses by 50% on a quarterly basis.

And in terms of kind of improving different aspects of the company, I wanted to turn this one to Sanjeev. And Sanjeev joined even more recently from last -- I was working with you, you were at a very large pharmaceutical company. So you bring a lot of very good experience. And earlier this year, there was the $130 million equity raise and people have been focused a little bit on the balance sheet and some of your debt obligations. So I just wanted to give you a chance to talk about that -- those proceeds and how you plan to deploy them and how that maybe increases your overall financial flexibility.

Thank you. Thank you, Jenna, for having me. Again, before I answer that, what attracted me, you asked that to Steve. One of the reasons that -- all the reasons that Steve mentioned about attracted me. I think there was another point company was at an inflection point. It still is an inflection point, where we're obviously helping a lot of patients, but we believe where a company could go with near-term sight on the profitability.

And I could feel that I could make an impact on the company. That's one of the reasons that attracted me to come here. To talk about your question about the capital raise, that was a plan of a well-thought-out strategy that we worked on in terms of taking care of our cap structure and making a cap structure, which is sustainable and cost effective for the company for years to come. So what we did, we did a series of steps.

We did a capital raise, which was obviously oversubscribed. And then what we've used those proceeds in a couple of ways. We've obviously strengthened the balance sheet, and we modified our term debt. The term debt, which is now modified to $175 million, we were able to push back the maturity to '29 and being able to pay that from the cash flow of the company.

And the third thing we did is we have enough cash now on the balance sheet to take care of all our debt obligations and investing back in the business. So we have now a very sustainable cost-effective cap structure, which is going to help us to focus on the business, invest in the business and meet our obligations for all times to come.

Perfect. And as a culmination of all of these efforts and initiatives you guys have given at least for the first time at Phathom, a full year outlook at the beginning of the year. And so I just -- and I'll talk about it first, excluding the reclassification, just so we can look at it on an apples-to-apples basis. So in 2025, you were able to generate an incremental $120 million in revenue. And this year, excluding the reclassification, you're expected to add about $140 million at the midpoint. So what is giving you that confidence? And just walk us through like your philosophy on your company's first guidance.

So well, I'll answer the first pass of it, and then Sanjeev might add more in terms of sort of guidance philosophy. But what gives us the confidence that we can drive better growth on an absolute basis in 2026 versus 2025 is exactly what we were talking about earlier in terms of the refocus. We know that every sales call that we make on a gastroenterologist is more productive in terms of driving new-to-brand conversions, that is patients who are on a PPI converting them to VOQUEZNA.

We convert more patients per sales call in gastroenterology than we do per sales call in primary care. So if you just do the simple math, in the first half of last year, the majority of our sales calls were going into primary care, which means they were going to the less productive segment. We are now going to be allocating much more of our sales force time in gastroenterology into more productive calls, which should lead to more new-to-brand conversions and therefore, more total prescription growth over the course of the year.

So fundamentally, what drives our economics and our thinking about the absolute revenue growth is how many physicians are we able to grow in terms of their prescribing behavior and how many new-to-brand conversions do we drive? Because once we convert a patient, they tend to stay on the drug for a significant period of time. This drug has terrific persistence because it fundamentally reduces pain. That motivates a patient to want to stay on the therapy for a significant period of time. And that increased [indiscernible] that drives our confidence in the growth numbers.

And Jenna, the philosophy is very straightforward. How we measure internally ourselves is what we give guidance externally. So the guidance that is based on is achievable internal plan that you see that guidance is based on. It's not aggressive. It's not conservative. It is the plan that we believe and we're likely to achieve is how we look at it. And we provide transparency for that on the online items that we provided that.

Perfect. And a couple more on the guidance. So I got a few questions about the reclassification. And can you just talk about that decision and just how that benefits you or just what the rationale and what the change that's being made, like how we should think about that flowing through the model?

So it's no benefit to anybody. Economically, it's got absolutely 0 value. It is more a presentation change. When you were a small company, you look at these things, all of our cost was going into gross to net line. At the end of the year, we looked at that at the beginning of when we're making the budget, we realized certain costs, which are what I call it, fulfillment cost or a consignment fee they're more classified, they're better classified in cost of goods sold.

So it's a line change from gross to net to cost of goods sold, 0 impact on the gross margin from an absolute purposes. So what you see, our revenue will go up slightly. Our COGS will go up slightly with no impact on gross margin, and we provided that transparency. It does not benefit anybody. Economically, there's no change. There is no change in the fundamentals of the business.

It's just better classification and a more appropriate classification for a company of our size as we go forward. We felt appropriate to do this in the beginning of the year, so we can provide transparency in the guidance, which we already did.

Perfect. And then I just wanted to talk about the cadence a little bit because -- and you aren't alone, companies that are launching still in the earlier phases of launches, we get stuck in these weekly script numbers. And typically, the first quarter is a little bit light and then you also layer in some weather disruptions in -- at multiple points.

And so I just think there was some elevated volatility around that. And I think you guys did a great job addressing on the call, just talking about 1Q. And then maybe can you also help us with the rest of the year? Like are there any other seasonal quarters, pretty stable sequential increases or anything you'd be willing to share?

So we were -- actually, when we gave the guidance at the end of January, we didn't anticipate any storms or anything like that. What we told you is exactly the normal cadence of the business. The way the business operates for us is approximately 40% of our business top line revenues in the first half, 60% in the second half approximately and first half being the slowest because of all the reasons that large brands go through when there is an insurance reset, deductibles reset from that perspective. And that's what we're seeing is playing out.

What you're seeing in the scripts, we don't watch week-to-week, but they are in line with how our expectations are. And then clearly, as we go into March, April, May onwards, we'll expect the uptick to happen. This is what happened last year. This is what we expect to happen this year as well.

And then another important milestone that's happening this year is the transition to operating profitability. And so Steve, you kind of mentioned before just weighing, you scaled back DTC. It's not ruled off the table in the future. The expense run rate was cut in half in the second half of the year. So just thinking about the revenue outlook, and you've talked about $1 billion in peak sales for this product. Just how do you think about where you are in your expense journey and how that may -- how does that fit in with the long-term growth? And what will -- what would you expect like as you.

Let me take the first part.

Why don't...

Let me take the first part and then you can add in the future. But so if you think about last 2 quarters of last year, the company's expense base because of all the reasons that Steve mentioned about it earlier is, give or take, $50 million. It came in better than what we had preannounced results, $51 million to $53 million came in better. That's the going-in run rate to run this business with approximately 300 people field force.

That's kind of how it is, and we've established that. What's going to happen is in 2026, a couple of things. It's going to be slightly higher than $50 million for 3 reasons. One, we're hiring some field force. We hired at the end of quarter 4. There is going to be a full year impact of that. Second, you'll see EoE trial, Phase II trial that we started in Q4. You're going to see a full year impact of that.

Third is some marketing programs that we are doing. We're experimenting. There is going to be impact of that. But fundamentally, the expense level of the company is exactly going to be what we laid out in our guidance. The other thing we should keep in mind is we're not running to actually hold the expense level. We're running to make an optimum expense level. If we tomorrow feel there is a need to invest and that's going to drive the top line, we will be absolutely happy to do that from that perspective as long as it gives us the return.

Awesome. Yes. It just seems like with the opportunity, you have the core infrastructure that you need and maybe over time with different things like DTC, it might be more incremental depending on what you're seeing in the market as opposed to some big material change with your commercial.

Yes, I think that's right. I think the incremental discipline that we're bringing to how we think about spend is we will make additional marketing investments when we identify that they are positive ROI investments and positive ROI within the fine time frame. So if we determine that there's a $3 million investment in marketing that's going to generate $6 million of incremental revenue, we'll do that the next day.

But that's a really straightforward conversation and because not only do we generate that $6 billion of revenue that year, but the patients you've converted stay on therapy and so it compounds over the course of multiple years. So you get significant advantage from it. So one of the things that we've built into our projection for this year is that we can pilot test several different ideas that enable us then to have much more predictability in thinking about our 2027 numbers and our 2028 numbers to know what incremental investments are going to drive growth in future years. So all of that work informs how we think about the next 2, 3, 4 years guidance, and that's built into our operating model for this year.

And we have the financial flexibility to dose those things without impacting, and that's what the cap structure provides us to do that.

And sticking on this $1 billion number, I also wanted you to frame the PPI and what some of those brands were at their peak because in the very beginning of this conversation, you talked about the efficacy of VOQUEZNA, and this is a very differentiated asset. I think it's the first time in -- at the time of approval, it had been a decade since anything new really came into this market.

I think actually several decades a significant period of time, you're quite right. So if you think about the PPI market, at peak, the PPI market is about $12 billion a year. Now that's at a much lower price point than today's price points for -- so this is an enormous market opportunity in terms of the patient population. There were 3 different PPIs simultaneously that were north of $3 billion in revenue.

It's a significant market size. We're not going after the entire PPI market. Our target population is the 30% to 40% of patients who are on PPIs were still in pain. That's a multibillion-dollar opportunity. One way that we frame this for -- to make it easy for investors to get their head wrapped around how do we get to the first $1 billion in revenue. And I think there's potentially a second $1 billion in revenue beyond GI when we go back into primary care.

And I'll talk to you about a little bit about that evolution. But in GI alone, when I think about in GI, that is gastroenterologists and the EPPs, the nurse practitioners and the PAs that practice out of gastroenterology practices. That universe represents 24,000 HCPs. Collectively, they write 20 million PPI scripts per year. If we can convert 20% to 25% of those scripts, that's $1 billion of revenue. So our opportunity to reach $1 billion of revenue just in prescriptions coming out of gastroenterology is can we convert 20% to 25% of those prescriptions. And we're never going to convert 70% or 80%.

That's unrealistic. But is it realistic for us to convert 20% -- our top 300 writers today in GI, the early adopters who picked up this product 2 years ago and have been growing steadily quarter-over-quarter, they're already at that 20% level. So we know it's not 5 or 10 physicians, 300 physicians who are already converting 20% of their PPI scripts. They are still growing. They're going to get to 30% or 40% on their growth trajectory in future quarters.

Can we expand that to a much broader population of the gastroenterology prescriber base to get to something that looks like 20% or 25%. That's 4 million to 5 million prescriptions per year for VOQUEZNA. We are annualizing today in Q3 and Q4 at about 1 million prescriptions per year, annualizing at about a $250 million run rate. So 4x that, 4 million to 5 million scripts per year gets you to $1 billion in GI. Here's the second billion opportunity. Second billion comes from the fact that patients who are prescribed VOQUEZNA in the GI practice don't stay in the GI practice.

The patient who's having significant pain from GERD and is inadequately treated with a PPI in a primary care practice gets sent to a GI to get scoped just to assess, do they have Barrett's, do they have erosions? Do they have something that needs more aggressive treatment? Many of those patients are going to be converted to VOQUEZNA in order to manage their reflux. When they're adequately managed, when any erosions that they might have had a heal, they're going to be sent back to their primary care physician.

Their future refills are going to come from a primary care physician. So that 20 million PPI prescription volume in GI, it's not a static group of patients. It's the patients that are circling that are cycling through GI practices and then they cycle back to primary care and the refills are coming out of primary care. That's also a way to educate primary care physicians about VOQUEZNA, make it much easier for them to write and convert additional patients, and that's the second $1 billion in revenue.

And just between the 2 indications that we focus on the most, the erosive and non-erosive are -- like how do you differentiate between the 2 in this growth trajectory. And I'm just curious on the non-erosive side, are those patients like if you're moving to that second billion, are doctors in the primary care setting seeing more on the NERD side? Or just help us understand how these 2 indications are trending.

So a primary care physician doesn't actually know whether their patient has erosion or not.

That's true.

I think that they're seeing a patient, they just know that a patient has GERD. They will try omeprazole first. They'll try [indiscernible]. If they're not adequately treated with a PPI, they may double their dose. They may add an H2 blocker, they're adequately treated, great. That's probably where that ends. If they're not adequately treated, they're still in pain. That's when they're going to be sending a patient over to a gastroenterologist. We also would like to have the primary care physician think about that's when you're actually switching them to VOQUEZNA at that point in time.

That's not a conversation that's yet happening today. What's happening today is they get sent through a GI and it's at the GI that we're converting most of our patients. In the future, as primary care physicians become more comfortable with it, once you get out to 2027, '28, '29 and primary care physicians have a bolus of patients coming back, telling them how much better they feel when they're on VOQUEZNA, we're going to have an easier conversation converting primary care physicians to adopt much more broadly.

But the conversion today is happening specifically within GI. The early starting point tends to be for a GI to start this product on their patients with erosive esophagitis. They then grow into using it in non-erosive reflux patients because the easy compelling need is those patients with the greatest severity need the most aggressive treatment. But once you start hearing from a patient how much better they feel, it's an easier conversation for us to open the conversation to your other patients that are still experiencing pain on a PPI, why aren't you offering VOQLIZNA to them? How do we broaden that thought process? And as they get more comfortable with the product, they broaden the population of patients with which they use this product. That's the natural cycle.

And this is a good thing and -- that we haven't touched on this yet, but I wanted to just ask one question on the LOE. The way the LOE situation unfolded, everything kind of worked out in the best case scenario with the 2032. And so just my question with the NCE dates and the GAIN Act exclusivity to 2032 just so investors have on their radar because at a certain point, a window opens up for ANDA filers. When would you see that window opening for a potential ANDA filing?

So the 2032 date was a very important date. That's actually when a first ANDA filing is permitted. That actually means that we're going to have exclusivity into 2033 or '34. Typical ANDA review time lines are 10 months on a first round review, 8 months for subsequent rounds. So the earliest realistic date for a generic launch would be first half of 2033. It's very possible if the generic filings that go in, the ANDA filings that go in require 2 or 3 rounds of review, you could easily be into 2034 before a generic launches. So when we think about our LOE date, that 2032 date is first filing. We actually know that we've got exclusivity into 2033 and maybe 2034.

Awesome. And then I guess to close things out, I wanted to get your take on -- we mentioned the volatility early in the year. There's been some really positive changes in the past 12 months and starting 2026 off on a very strong foot with this guidance that did better than people were thinking, implying very strong growth with your more targeted commercial strategy. So just in your mind, what do you view as the most dislocated aspect of the story relative to the fundamentals you're seeing and how confident you are in the outlook versus maybe how the stock has been trading to start off this year?

So I'm always cautious as a CEO in commenting on stock trading. Investors are allowed to make the decision as to when they want to buy and when they want to sell stocks. That's an investor call. Our obligation is to drive the business and get to profitability. I do think that there's an opportunity for us to create significant shareholder value over the coming years. I think that the transition to profitability is going to be a significant inflection point.

The transition in 2027 to positive cash flow generation is going to be a significant value creation point and us demonstrating the continuity of our growth trajectory that not only -- there were questions last year was we were cutting expenses, would that harm our growth rate. I think we proved to folks that we could grow right through that. I think continuing that growth trajectory is going to give you more confidence in the story, and that should play out positively, but I will stop shy of predicting when.

We are focused on execution, but everything will sort itself out.

Awesome. And we'll leave it with that. Thank you very much.

Thank you.

Thank you very much.

Hello, and welcome to Phathom Pharmaceuticals Fourth Quarter and Full Year 2025 Earnings Results Call. [Operator Instructions] Please be advised that today's call is being recorded.

With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's fourth quarter and full year 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer.

A couple of notes before we get started. Earlier this morning, we issued a press release detailing the results we'll 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 and the slides we'll be reviewing can also be found on our corporate website under the Events and Presentations section.

Before we begin, let me remind you that we'll 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 may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the 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.

Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release.

With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve?

Thank you, Eric, and thank you to our investors and analysts for joining our call this morning. Thank you even more to the Phathom colleagues for your diligence and dedication throughout 2025. It was a transformational year for the company, and we're now set to execute our growth and profitability plan.

Let me start by summarizing the key points Sanjeev and I will be discussing today. We had a successful Q4. We delivered on expectations for both revenue and cash operating expense levels, coming in at the better end of our guided ranges. We've taken key steps in the recent 2 months to enhance our capital structure, reduce our interest expense and modify our outstanding term loan obligations.

As a result, we believe our cash on hand, along with anticipated future cash generated from operations will be sufficient to satisfy all obligations under both our term debt and our revenue interest financing agreements. We're on track in guiding to operating profitability beginning in Q3 of this year and for full year 2026.

Our $320 million to $345 million revenue guidance for 2026 reflects our operating expectation of continued solid growth from our GI-focused strategy and includes an accounting-related classification change, which Sanjeev will cover in more detail.

Our sales organization is positioned to deliver, and we're seeing clear signs that our GI strategy is working. I'm very proud of what our team accomplished in 2025. We believe we've set ourselves up for success, both financially and operationally.

Beginning the update today with our financial highlights for Q4 and full year 2025, our results are in line with our preannounced estimates from January and incrementally a bit better on expenses and on cash usage. We've delivered on the plan we set forth on our May earnings call and reiterated in our earnings calls in August and in October.

Net revenues were $175.1 million for the full year 2025, representing 217% year-over-year growth. Q4 sequential quarterly growth was solid during a period of sales force alignment as we had discussed in our October call. In August, we guided to $165 million to $175 million for 2025 revenue. We updated that in October to $170 million to $175 million, narrowing it to the top half of the range. And ultimately, we delivered at the high end of that range. Our Q4 revenue was $57.6 million, in line with our pre-released January estimate of $57 million to $58 million.

Cash operating expenses, excluding stock-based compensation, were $50.3 million for Q4, better than both the less than $55 million target we guided to and to our preannounced range of $51 million to $53 million. We delivered solid growth through the last 3 quarters of 2025 while cutting quarterly cash operating expenses by nearly 50%. Our net cash usage for Q4 of 2025 was approximately $5 million. That's 64% lower than Q3 and consistent with our expectations of reaching operating profitability beginning in Q3 2026 and cash flow positivity in 2027.

We've taken significant steps to enhance our capital structure. Our goals were: one, to reduce any financing overhang or potential risks stemming from repayment obligations or cash covenants; and two, to reduce our interest expenses. In 2025, we got the fundamentals of our business in order, growing revenue and reducing expenses. That improved financial profile, enabled us to complete a successful equity offering in January and to renegotiate our debt terms as we announced today.

We have modified our term loan agreement to extend the maturity date, which had previously been December of 2027, we've extended it to February 2029. And we've reduced our interest expense obligation and reduced the total outstanding principal amount. As a result of these capital structure enhancements, we believe our current cash plus the cash that we expect to generate from operations in the coming years will be sufficient to meet all obligations under both our term loan and our revenue interest financing agreements. Sanjeev will provide further details on these items and take you through our 2026 guidance.

I'm very proud of our operating and financial progress these last 12 months. The entire Phathom team is dedicated to our objectives of growing revenue while being disciplined on expenses. We're exhibiting strong momentum, which we expect to carry forward throughout 2026.

A few quick notes on our commercial progress. I said before how fortunate we are to be able to positively impact the lives of so many patients. Through February 13, over 1.1 million VOQUEZNA total prescriptions have been filled to more than 230,000 patients. We believe we're just starting to penetrate an enormous market. About 65 million patients have gastroesophageal reflux, of which 40% experienced inadequate symptom relief from PPIs.

About 273,000 prescriptions were filled in Q4 alone. 174,000 of these were covered prescriptions growing 21% quarter-over-quarter and representing approximately 64% of the total prescriptions filled in Q4, while 99,000 were filled as cash pay prescriptions.

Covered prescription volume drives our revenues while cash pay prescription volume improves physician perception of access and makes it easier for physicians to prescribe VOQUEZNA with confidence that their patients will be able to get the drug. Most importantly, both paths enable us to help patients in need of VOQUEZNA. Additionally, in November, we turned on a GoodRx offering, providing an alternative payment option for patients filling VOQUEZNA prescriptions sent to retail pharmacies.

Looking forward, we have confidence in 2026 growth. We just completed our national sales meeting and the sentiment from the field is terrific. We start March with more than 285 of our 300 sales positions currently filled, a nearly full-strength sales organization. Our strategy to drive depth and frequency of calls to gastroenterologists is solid, and we believe it will ramp utilization and writing frequency among GIs treating GERD. 2026 will be an important year for us as we drive sales growth and transition to profitability.

Overall, we continue to deliver as we guided on each of our previous earnings calls. Our 2025 results ended at the better end of our revenue and cash operating expense guidance ranges we communicated, and we believe we're on track to transition operating profitability beginning in Q3 of this year and to reach cash flow positivity in 2027.

We've taken important steps to enhance our capital structure and mitigate any covenant or repayment concerns. The sales force is nearly full strength and energized following our national sales meeting. We're well positioned to execute and deliver on our strategy in 2026.

I'll now turn the call over to Sanjeev to take you through our detailed financial updates.

Thank you, Steve, and hello, everyone. I'm pleased to report our Q4 and full year 2025 results today. I'm encouraged by the changes we've made throughout 2025 and excited about what's on the horizon for '26 and beyond.

We have a lot of important updates on the financial front, so let me get right into it. Steve provided some top-level highlights for the quarter, and I'll provide additional color commentary.

Our revenues for Q4 of $57.6 million were consistent with pre-release and demonstrated 16% sequential quarterly growth. Aligned with the full year, the quarter also came in at the very top end of our guidance. As always, covered script volume primarily drive our revenue, while contribution from cash scripts and inventory dynamics remain minimal and consistent.

Our gross to net for Q4 came in at the high end of 55% to 60% range we provided last quarter as a result of shifting rebating mix. Our full year gross to net was within our expectations. Our gross margin remained consistent in Q4 and full year at approximately 87%. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation of approximately $320,000, a 95% improvement compared to Q3. As you can see, this is a meaningful change in the operating profile of our company. As always, please refer to this morning's press release for a reconciliation between non-GAAP measures and their most directly comparable GAAP measures.

Q4 cash operating expenses were about $50 million, notably favorable than the less than $55 million guidance we set forth earlier last year due to continued expense discipline. Similarly, our full year cash operating expenses of approximately $284 million came in at the low end of the range we provided on our Q3 call. We ended the year with about $130 million in cash and cash equivalents, which roughly reflects a $5 million cash usage in Q4 and signals a very clear path to operating profitability this year.

Now let me turn to the enhancement in our capital structure. In January, we improved our capital structure via an oversubscribed equity offering. And today, we're announcing a modification of our term debt. As a result of these deliberate steps, we believe we now have a cost-effective and sustainable capital structure to meet our business needs and all of our debt obligations. The offering raised $130 million in gross proceeds, which brought our cash balance just north of $250 million at the start of the year.

I'm pleased to announce today that we have successfully modified the terms of our outstanding term facility, which we believe will greatly benefit the company going forward. We reduced the remaining principal to $175 million outstanding and paid certain end of term fees and accrued paid-in-kind amounts from the original agreement. In total, we used approximately $56 million of our cash balance to streamline the facility. Additionally, we were successful in lowering the interest rate from 12% to 9.85%.

Lastly, we extended the loan maturity date from December 2027 to February 2029. Partial monthly repayments will begin in 2028, which are anticipated to reduce the outstanding principal as well as our interest expenses. We expect we will be generating positive operating cash flow beginning in 2027 in advance of these repayment obligations.

Overall, these modified terms reduce our interest expense, remove near-term payment hurdles and provide greater financial flexibility. Following our capital structure enhancement, we believe our cash on hand, along with anticipated future cash flow from operations will be sufficient to invest in our operations as needed and to satisfy all liquidity covenants and repayment obligations.

For complete clarity on our covenant, we expect our highest cash flow requirement between now and September 30, 2027, will be approximately $130 million. The cash flow requirement is derived from our covenant in our revenue interest financing agreement, which becomes effective for the first time on October 1, 2026.

All cash flow requirements relating to our term debt are substantially lower than those from our revenue interest financing agreement. Beginning October 1, 2027, we expect revenue interest financing agreement covenants will require that we temporarily hold a modestly higher cash balance, which will decline thereafter as revenues increase and we make additional royalty payments.

To be clear, the cash flow covenants between the term debt and revenue interest financing agreements are not additive. We manage our liquidity to whichever covenant is the highest at any given point in time. Rest assured, for all these periods, we believe our cash on hand of approximately $190 million following our term debt modification and our anticipated cash generated from operations beginning in 2027 will be sufficient to satisfy all covenants at all time.

We refer you to our 10-K filed earlier this morning for more information. While on the topic of our 10-K, I'd like to flag that in this year's document, we updated the business section and risk factors to reflect the company's transition to a primarily commercial entity. While the comparison against prior years will show significant tax changes, I want to be clear that we believe important updates are being covered during this earnings call and in this morning's press release.

Now I'd like to move to our 2026 guidance. With our GI-focused strategy taking hold and our financial position enhanced, we're ready to deliver in 2026. Today, we are issuing guidance on several financial metrics, which reflect that sentiment.

Before I get into the numbers, I'd like to provide clarity on the accounting-related explanatory note you saw in this morning's press release. Beginning January 1, certain third-party charges will be included in cost of goods sold instead of gross to net adjustments. All things equal, net revenue will be higher as a result of costs moving from gross to net adjustments to cost of goods sold, leading to a mostly net neutral effect on our gross profit line in our P&L. Importantly, this change is simply a different classification of these costs and does not impact the underlying operations of our business. We are estimating an approximately $17 million to $20 million shift in 2026 between 2 line items, which is reflected in following guidance.

We anticipate 2026 net revenue will be $320 million to $345 million, including the estimated effect of the classification change I just described. As for gross to net, we believe the discount will be between 55% to 59%. We anticipate gross margin will be approximately 80%. As for spend, we are anticipating cash operating expenses, excluding stock-based compensation of $235 million to $255 million, which at midpoint reflects a 14% decrease compared to 2025 results.

Now a few comments about the cadence of these items over the course of 2026. We believe revenue will exhibit a similar pattern to last year with approximately 40% being achieved in first half and approximately 60% being achieved in second half, with quarter 1 being the soft quarter due to typical seasonality. We expect expenses will be relatively stable on a quarterly basis, but will reflect a modest step-up from where we exited Q4 2025, accounting for nearly full strength sales team, new marketing initiative and full year cost of our EoE Phase II trial.

Based on anticipated revenue, gross profit and cash operating expenses, we anticipate achieving operational profitability, excluding stock-based compensation by Q3 and in total for full year 2026. And finally, we believe we will achieve cash flow positivity in 2027.

In summary, our financial profile has transitioned meaningfully, and I'm excited for this next phase. This quarter results were strong, coming in at the better end of our guidance we previously provided. Our operational momentum is solid, which gives me confidence in our 2026 revenue trajectory. I feel confident in our financial position and believe we have the resources we need to execute the plan and deliver on the guidance ranges we set forth today.

With that, I'll now turn the call back to Steve for his closing remarks. Steve?

Thank you, Sanjeev, for the detailed financial review. I would like to extend my thanks to everyone at Phathom for their extraordinary efforts throughout 2025. I was able to meet many of our sales team members during our recent national sales meeting, and I'm heartened by their dedication and exceptional talent. Our transition to focus on gastroenterologists and to reach operating profitability is well underway. Thank you also to our shareholders for your support and confidence. We're dedicated to delivering value to reward your investment.

Operator, please open the line for questions.

[Operator Instructions] Our first question or comment comes from the line of Kristen Kluska from Cantor Fitzgerald.

Congrats on a really strong end of the year and the work you were able to do around the interest, definitely very favorable here. So the question I have for you this morning is just recognizing it's still very much early days. What can you tell us about the early signals that you're seeing from this strengthened sales force and strategy, especially coming out of that meeting? Are you seeing that more of the GIs that were new to your strategy are converting? And are you also seeing some early signals of growth within those current GIs where you added more touch points?

Kristen, thanks so much for the kind thoughts and for bringing us to what I think is the most important topic actually, which is the core focus on our GI call point is the fundamental element of our growth strategy, and we are seeing consistent signs of momentum.

It's interesting as you characterize the 2 different paths of sort of converting new writers versus growing existing writers. Virtually all gastroenterologists, not quite all, but a very high percentage of gastroenterologists have already written a script for VOQUEZNA. So we've got broad penetration within the gastroenterology community, both among physicians and among APPs with high conversion success already.

What we focus on all of our sales force messaging in the context of our national sales meeting, in the context of the conversations that the regional managers are having with the territory sales representatives is all about how to grow writing frequency. We have what we refer to as an adoption ladder where physicians try the product and then we are trying to improve their consistency of writing and they become consistent writers and then we try to improve their consistency of writing and then they become adopters and so on. And as we grow in terms of the frequency of the physician writing an NRx for VOQUEZNA. And what we are seeing is very clear trends on those adoption letters associated with physicians moving up in category.

So a tried physician will only have written 2 NRxs in the last quarter, a consistent physician will have written 6 or more weeks in the last quarter, et cetera. And we are seeing physicians move from one category to the next consistently, where on one of the metrics, we'd only had 400 or 500 physicians last summer that were in the upper categories. Now we've got well north of 2,000 physicians in the upper categories. So we're seeing that adoption rate among not just the highest frequency writers, but very broadly within the GI community increasing. And that's the focus of all of our sales force conversations. That was the focus of our national sales meeting is how do we take physicians through that adoption ladder. It's the focus of each of our coaching conversations, and we're seeing clear evidence of it in our writing pattern.

One of the metrics that I find to be helpful as we think about the long-term opportunity for this product is what is the rate of adoption we've achieved among the top few hundred writers. And there, we're already seeing that we're now passing on average 20% penetration in terms of their PPI volume being converted to VOQUEZNA. And when we get to 20% conversion across the broader GI community, that's where we're approaching $1 billion of revenue potentially in GI. And that's clearly where we're headed over the next few years.

Our next question or comment comes from the line of Annabel Samimy from Stifel.

And just following on from that comment. In the territories that you already have been pretty well aligned as far as the focus on GIs, do you have any sense yet of the dynamic of patients transitioning back to primary care, if you're starting to see pull-through in some of those more mature accounts? Just curious to see if that dynamic or if you've seen any pickup in the primary care area organically from that effort. And when everything -- everyone is on board and humming, do you expect an inflection? Or is this just a steady growth throughout the year?

So Annabel, that's a really important component of the long-term growth path is building beyond just GI to capture the return of patients to primary care and the growth there. Just candidly, we've not looked at it, at least I've not looked at it. I know our sales team is doing much more granular work on a physician-by-physician basis at the specific referral patterns for specific gastroenterologists to see their referring physicians and how they've adopted.

I've looked at it much more broadly for the entire universe of primary care physicians, and we are seeing an uplift in primary care prescribing volume on a broad basis. The granularity that you're describing is very much an analysis that over time, we will do much more frequently.

The near-term focus is on that core gastroenterology conversion point. And the expectation exactly to your point, is over the next 6, 12, 18 months, we're going to see those patients returning to primary care and see those growing, and we'll be looking at that metric more precisely. But what we are seeing on a broad basis when we look at the total prescribing in GI and the total prescribing and primary care is an uplift in both. Even though the majority of our sales force time is going to GI, that uplift broadly in primary care prescribing volume would suggest that we are seeing exactly that effect.

So was there a second half of your question? Or did that capture it?

Expectation for any inflections once everyone is on board...

The inflection point question. Yes. So we don't map out -- we don't model out a specific inflection point. It's very hard to predict when does the slope change. What we are driving toward is consistent growth month-over-month, quarter-over-quarter because we're not trying to do a sea change kind of strategy at this point going forward.

2025 was very much a year of fundamentally shifting the strategy. We were changing call points. We realigned sales territories. We went through some pretty significant change. 2026 is just going to be a year of heads down execution. It is making sure that we are doing all of the right things. We're getting into the right offices. We're calling on gastroenterologists with the right frequency. We are delivering really good messages every time we call in gastroenterologists. We're helping them with all of their access needs. We are working through the process of enabling them to write VOQUEZNA scripts more frequently. And that drives our growth.

So we don't need to inflect at any one point to a specifically different strategy. What we need to do is just execute this playbook and execute it well quarter-over-quarter. It's hard for me to predict exactly what the slope looks like on a quarter-by-quarter basis. I do expect that we're going to get steady growth, might accelerate at some point in time. It's really hard to predict that. What we're seeing is all the right signs of incrementally significant adoption among physicians and incremental success that our sales reps are having in each of these offices.

Our next question or comment comes from the line of Dennis Ding from Jefferies.

This is Anthea on for Dennis. Congrats on the quarter. First on Q1, do you expect sequential quarterly growth given the deployment of the expanded sales force? Or are you seeing that seasonality plus the winter storms will still be headwinds here? And is there a plan to seek broader Medicare coverage for VUQUEZZA this year and if that's baked into guidance?

So Anthea, let me -- I'll briefly address the first part, and then I'll offer Sanjeev the opportunity if he wants to add more color on the seasonality in this process. We're clearly seeing the typical seasonality that occurs and the winter storms are clearly having some effect as well. We've seen slow weeks whenever the entire country is shut down because of an ice storm that has an impact.

The -- it's -- we don't guide to revenue on a quarter-by-quarter basis with that granularity. So while we clearly acknowledge that Q1 is the weakest of the 4 quarters during the year, whether it's flat or up or down, we just -- we don't provide that quarterly guidance. What we've provided is full year guidance, but the underlying metrics that we're seeing in terms of our sales call activity the prescribing behavior of physicians, the growth patterns that we've been describing, all give us confidence in terms of where we're going to be on a full year basis.

And so Sanjeev, if you want to chime in at all on seasonality?

Yes. I think you pointed out, Steve, that we don't provide quarterly guidance. But I think what I said this time, if you look at in our kind of prepared remarks that we said earlier, if you look at the cadence of our business on a full year basis, we'll be roughly kind of same trajectory as we experienced in 2025. 40% of our top line revenue will be in the first half of the year, approximately 60% in the second half. And I said Q1 is going to be the slowest quarter because of typical seasonality. So I think that's kind of what we see, what the exact number is going to be. Obviously, you will hear that in the first quarter call that we talk about it. But clearly, it is the slowest to softest months because the typical seasonality.

And then the second half of your question, Anthea, I think, was related to Medicare. So we're not anticipating a fundamental change in broad Medicare coverage where we get coverage for all Medicare patients. What we are seeing is incremental Medicare prescriptions being covered either through medical appeals processes or through specific Medicare Part D plans. So as different Medicare Part D plans become more familiar with seeing VOQUEZNA prescriptions being submitted, they are beginning to cover those more frequently.

And so we may see over time some increase in the number of Medicare scripts that are actually being processed and being covered, but it's not a broad coverage decision nor do we anticipate that there's going to be any broad fundamental change in a broad coverage decision on a system-wide basis for the entire population of Medicare patients.

Our next question or comment comes from the line of Joseph Stringer from Needham & Company.

Just wanted to follow up on the previous question. Looking at the IQVIA prescription data and the impact of seasonality, is the magnitude of the seasonality effect this cycle in line with your expectations, I guess, all things considered? And maybe another way of asking is, are there any nuances about the launch now with the refocused effort that would make it more or less sensitive to seasonality?

So thank you for the question. It's really hard to characterize magnitude of seasonality one year versus another. What we're seeing is very similar to the pattern that we saw last year in terms of January being particularly light and then February is also light. And then by March last year, it started to pick up. So we would hope that, that same pattern -- not just hope, we actually expect that, that same pattern is going to come to fruition because you get several uplifts in March.

We're coming off of the national sales meeting. Everybody is energized. We're going to have a full strength sales organization and physicians have had time to work through their plans. Patients who have switched plans now have time to figure out how they're going to get the drug covered. So all of those things that create noise in January as everybody is switching to a new health plan gets worked out in the first month or 2. So that effect just is there every year for a branded product, and we -- the specific magnitude of it varies by product. So we're starting to see what that pattern looks like for us. We're not seeing anything that's unusual in that regard.

One thing that we have observed is the IQVIA reported numbers seem to be somewhat greater underreporting versus our internal numbers than historic norms. We think we've identified the cause of that, and that that's going to work itself out. But there may be a little bit of extra softness or delta in the IQVIA reported numbers versus what we're actually seeing. But the softness is real in January and February, and we think it starts to improve meaningfully in March.

The other phenomenon that you cite is a real phenomenon as Anthea's question also had suggested that winter storms clearly not just had an effect on us, had an effect on a whole bunch of companies in the context of the slowdown for a week in January and slowdown for a week in February on the Northeast. So I don't want to overstate those -- that is I think the dominant effect is just the annual seasonality that we would expect to see every year.

Our next question or comment comes from the line of Paul Choi from Goldman Sachs.

This is Daniel on for Paul. So we're curious about like if you could provide color on the proportions of prescriptions that are now filled to BlinkRx versus the new GoodRx that came online? And how is the economy of the channels versus the more traditional dispensary?

So there are several different parts to that. So let me take GoodRx first. GoodRx, we just turned on in November. And what that is, is -- I mean, already GoodRx had coupons on it for our co-pay support program. So if someone is at a pharmacy with a retail script and they need to get co-pay support because their insurance co-pay is high, they can go to GoodRx, they can get our co-pay card and in many cases, bring down the co-pay amounts significantly and in some cases, down to $25, which is our target co-pay where possible.

The other thing that we turned on with GoodRx is the opportunity to do a cash pay purchase through GoodRx, which actually still would get reported into the IQVIA script numbers because it would be dispensed from a retail pharmacy, but there's a $199 option for a patient to purchase that. That's intended really for a patient who either can't access the co-pay card because they're on a government plan or for whom the co-pay would still be too high or would still be above $199 that it gives another alternative to a patient.

Those numbers are still relatively small. It's a very small percentage of the overall number. It just got turned on in November. We'll give you a sense in future quarters. If that grows to be a meaningful number, we'll give some color on that. But at this point, it's a really small number. It's not a driver of anything, but don't want anybody to be surprised that, that option now exists.

So we're trying to provide multiple ways for a patient in different reimbursement circumstances and different access environments to be able to know that they're going to be able to get access to the product as reasonably priced as possible.

The percentage of scripts that are going through Blink, and I want to be sort of clear to distinguish between 2 things in this process. More than half of our prescriptions now in total are going through the Blink network to then be routed either as covered scripts to a pharmacy or as cash pay scripts to be dispensed directly through the Blink network.

If -- when a physician sends a prescription -- designates a prescription to go to Blink, Blink will first adjudicate whether or not the script is going to get covered. If it gets covered, it shows up in the IQVIA numbers. It doesn't show up in our Blink cash numbers, even though Blink is an intermediary facilitated that process. So about half of our scripts in total go to Blink. They get routed. If they get covered, they show up in the IQVIA numbers. If they don't, they show up in our cash numbers. And as we described, something on the order of 36% of our prescriptions now are Blink dispensed cash scripts.

So that's where the 2 different numbers are. That delta is scripts that are getting covered after they originally got sent to Blink.

Matthew, does that address your question? Or was there a second part of that?

Our next question or comment comes from the line of Chase Knickerbocker from Craig-Hallum.

Just a quick one. Steve, what inning do you think we are in as far as kind of getting reps to full productivity or kind of where you expect them to be after kind of shifting the focus in the fall, but also kind of changing the lines of like some of the geographical lines of a lot of these territories in the fall as well? Where do you think we are as far as the inning there?

Just to clarify, Chase, what inning of sales force transition?

Full productivity, Steve, as far as full productivity kind of with that transition in the fall.

Yes. So I think full productivity for a sales rep comes several months after the sales rep is on board because there is a training process, there's a learning process. It takes a month or 2 to get to know the accounts in your territory and to have scheduled all of the launch events. So we had a number of sales training classes that came in January and then our national sales meeting in February.

By March, April, all of those folks are hitting the ground. I mean they're hitting the ground immediately after their training program. But within a month or 2, they've met most of the accounts in their territory, and they've got their launches scheduled and they've got momentum within each of those accounts and you start to see the real impact.

So I would think we are to use the baseball analogy at the seventh or eighth inning of that 9-inning process of sort of the sequence of events where the sales force gets to be fully effective.

And sort of since that shift to focus in GI, have you seen kind of the increase in productivity that having more kind of condensed patient base at these prescribers would indicate? Or do you think there's kind of additional efficiency that we'll continue to kind of harvest over the course of this year?

Well, it's interesting. Even if the sales force is fully effective, you don't see the effect that day or that week or even that month in terms of sales because the majority of our prescriptions come from prior patients who have been prescribed the product who are getting refills, physicians who have previously already adopted the product who are prescribing it to an incremental physician.

So what we are really doing is just moving the incremental adoption rate. So if you've sort of got a base 70%, 80% volume that's happening, you're really only impacting that 20%. Now if you become 30% more effective, that 20% goes to 26%, but it's 26% on top of a base 80% that already exists there.

So when you see it, you don't see -- when you see greater effectiveness in our sales activities, you don't see an immediate change in revenue in a month. What you see is incremental effectiveness, but that incremental effectiveness is cumulative over time because the increased conversions of patients in that month aren't just scripts that month. They are refill in the next month and refill the next month and refill the next month and the incremental scripts in the next month, refill every month thereafter. So you see a cumulative growing effect. You don't have a sales force's activity turn into a sea change in revenue in that next month of revenue. If that makes sense as to sort of how these consistent use products end up building over time.

Our next question or comment comes from the line of Min Lee from Guggenheim Partners.

Congrats on the data. One quick question for me. What is the company's long-term vision beyond VOQUEZNA? I mean given that you guys have established this GI network, do you guys plan to utilize this network to consider maybe future partnership with companies that have already commercially ready GI assets? Or do you guys plan to maybe pursue any other indications beyond EoE?

So Min, thank you for the question. So at this point, the only new indication that we're pursuing actively is EoE for VOQUEZNA. There are other indications and other populations that are of interest that we're evaluating. We've made no decisions. For example, we did a Phase II trial for as-needed use, haven't made a decision yet about whether or not we wish to pursue that in a Phase III program, but there are other populations that also could be of interest.

Our long-term growth plan, as we have indicated, is to build a GI company that will bring in additional assets. This year is very much a year of consolidating our execution plan building deep relationships at every gastroenterology office. The 300-person field force is going to have those deep relationships and is going to be fostering them and build a leverageable base that we could bring a second product into.

We are also starting BD activities to explore what other products would make sense either to bring in a commercial product potentially or very possibly a Phase II or Phase III clinical stage product that could launch in a 2030, '31, '32 time frame before we get to our LOE date so that we're launching not just probably a product, but 2 or 3 products over the course of the next 4 or 5 years that would build out a GI pipeline.

So we're starting those conversations. We have had people bring us several ideas that are interesting. I don't feel any urgency that we need to distract our sales force to the second product right now. We just need to grow VOQUEZNA. We need to just execute on our core activity set, but we are actively thinking about what products would make sense to bring in to launch over the next 2- to 5-year period of time, and that could mean products at various stages from commercial down to Phase II stage. But it has to be launchable within the next 2 to 5 years, so that's launched before our LOE date in 2033 or '34.

Our next question or comment comes from the line of Martin Auster from Raymond James.

Congratulations on the successful 2025 and in particular, the recent steps you guys have taken to strengthen the balance sheet. I'm going to maybe follow up on one of the earlier questions on -- I appreciate your comments you guys made on Q1 seasonality. I guess I was curious if the plan resets and other factors that kind of contribute to seasonality, does that drive an uptick in the rate of cash pay patients you'd expect to see in the quarter? And then also on the gross to net guidance that Sanjeev provided, curious if there's any trends that are assumed within that 55% to 59% range or if that metric is expected to be pretty steady overall throughout the year?

So thanks, Martin. Appreciate the kind thoughts on the questions. I'll take the first half, which is around cash pay and the second half, I'll give to Sanjeev in terms of GTN and sort of expectations.

We would expect that we'll see some uptick in the amount of cash pay patients. I don't have any guidance on how much that is. I don't think it's going to be too significant in that process. But you'll see some patients who have a high deductible plan where they will be able to get access to the product on a cash basis from Blink. And then as they work through their deductibles, they would then be able to get it covered at some later period. And so you may see some movement in cash pay percentage in the early months of each year. That's not just this year, that would just be in general as a pattern in this process. We don't provide guidance on what that mix is going to be on a quarter-to-quarter basis, but that would be a typical feature of the seasonality patterns that one might expect.

Separately, in terms of GTN and patterns and trends on GTN. Sanjeev, do you want to take that?

Yes. Yes, I'll take that, Steve. Thank you. So Martin, as you saw like in 2025, so we kind of narrowed the guidance, if you recall, in our Q3 call to 55%, 60%. And right through the last year, we were kind of operating within that range. Quarter-to-quarter, there are variations because your planned business may change from one quarter to the other. But overall, it was very consistent and stable. And that's kind of what I expect in the guidance that we gave early this morning, 55% to 59%. Overall, for the full year, we'll be within that guidance. Quarter-to-quarter, there could be changes depending on how the plan flows and the business flows from that perspective.

[Operator Instructions] Our next question or comment comes from the line of Matthew Caufield from H.C. Wainwright.

We had one question on the landscape that came up from investors. There's a separate private company with later-stage clinical development in non-erosive reflux disease and erosive esophagitis based on the P-CAB formulation. And just curious on your longer-term thoughts on any prospective entrants into the P-CAB space later into the future and maintaining VOQUEZNA's positioning.

Matthew, thanks so much for the question. I apologize I muted for a second to cough. I just had a little bit of cold. But -- the -- I think you're likely referring to Sebela, which is a company that has tegoprazan in development. There is actually an additional P-CAB that's in development that's many years out.

So we clearly track competitive developments, all of the P-CABs. And tegoprazan is a good product. We expect that it will go through the NDA process, and they filed their NDA in January, reasonable to expect they may be approved by early 2027, but it's not really for us to predict exactly what that time frame is or what questions might arise.

One of the things that we think about is how does this market evolve as a second entrant in the P-CAB space comes in. And it's interesting there's one framework where sort of a question can arise are 2 P-CABs going to compete against each other. There's a different question, which is we're competing in a space of 110 million PPI prescriptions per year. And we've only done 1.1 million prescriptions overall since launch. So we're tracking now at a run rate that's running about 1 million prescriptions a year. So we're at 1% of the PPI market.

If a second entrant comes in, they're not going to be trying to take prescriptions. We're both going to be growing the P-CAB awareness in the context of the market where patients are on PPIs and are significantly in pain on PPIs. The entry of a second product in a new category actually does have a tendency to change the mindset of physicians where it's no longer do I need to pay attention to this product if you're the first entrant, but it's -- do I need to pay attention to this category. And that increase in category awareness, I actually think will accrue to our benefit that the majority of prescriptions tend to go to the first entrant that has more history with which physicians are more comfortable that already has broad access.

So the second entry tends to grow the category broadly and tends to grow revenue for both parties in that process. So we're actually thinking that it has a net positive effect on the P-CAB adoption broadly to have a second sales force out talking about P-CABs and how much value they can bring to a patient who is still in pain on a PPI.

So we're looking forward to that broadening and that shift in mindset of physicians that you really do need to adopt PPIs. We think we've got great product. We think that physicians have been -- we know physicians have been really pleased with the effect that this has to their patients and patients who take this product love it. All of that is going to reinforce the fact that the lead product in the category gets the biggest uptick.

Congrats again on VOQUEZNA's trajectory. It's great to see.

I'm showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Hello, and welcome to the Phathom Pharmaceuticals' Third Quarter 2025 Earnings Results Call. [Operator Instructions] Please be advised that today's call is being recorded.

With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's third quarter 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer. Robert Breedlove, our Principal Accounting Officer, will be joining for the Q&A portion of today's call.

A couple of notes 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 and the slides we'll be reviewing can be found on our corporate website under the Events and Presentations section.

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 may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the 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.

Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically, in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release.

With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve?

Thank you, Eric, and thank you to everyone joining us today. I'll start with an overview of our financial and commercial highlights this quarter and then provide commentary on our shift to a greater gastroenterology focus and our current operating priorities.

First, I wish to welcome 2 new Phathom leadership team members. Joining me on the call today is Sanjeev Narula, our new Chief Financial and Business Officer. Sanjeev brings to Phathom a proven track record of building successful profitable pharmaceutical businesses of significant scale. His experience and insights will be important to driving our growth. I'm delighted to have Sanjeev as a partner in building Phathom.

I'm also pleased to announce that Nancy Phelan has recently joined Phathom as our new SVP of Marketing and Analytics. Nancy brings a wealth of experience in technology-driven marketing, tactical implementations of marketing to integrate with sales activities and both HCP and consumer promotion in the pharmaceutical industry. Nancy has successfully led marketing for several successful drugs.

We have a solid commercial and financial team in place. Starting today with our financial highlights for Q3. Really pleased to report at the end of Q3, we've delivered 25% growth this quarter while reducing operating expenses by 43% and therefore significantly reducing our cash usage. We beat expectations on the revenue and on the operating expenses, and we're executing effectively throughout the organization on the plan that we set out 6 months ago.

Net revenue for Q3 was $49.5 million, which represents 25% growth quarter-over-quarter. This is ahead of expectations of approximately $47 million and is in line with our revenue guidance for the year. As a result of the strength this quarter, we are narrowing our full year guidance to the top half of the previously communicated range.

While growing revenue significantly, our cash operating expenses were $49.3 million this quarter, which is meaningfully better than our previously stated target of getting below $60 million in cash OpEx for Q3.

You may recall in May, we set a target for the year of bringing our operating expenses on a quarterly basis below $55 million by Q4 of 2025. I'm pleased to report that we've achieved that milestone early in Q3. We've cut our cash OpEx by nearly 50% since Q1 while growing revenues ahead of expectations. We're quite pleased with the performance that the entire team has delivered through the course of the past 6 months.

Our cash usage was less than $15 million for Q3. That's down 77% versus the Q2 cash usage number. One note for Q4. Our operating expenses for Q4 will be somewhat higher than in Q3, primarily due to the start of the EoE Phase II trial. But we do still expect to operate at below $55 million cash OpEx as we've previously stated, even with the additional clinical trial expense.

My sincere thanks go to the entire Phathom team for their dedicated efforts to deliver both our continued revenue growth and our operating expense discipline throughout this period. I'm most impressed every day by the extraordinary talent and dedication of our team.

A few notes on commercial performance for the quarter that might be helpful for folks. Launch-to-date, we have 790,000 filled prescriptions as of October 17. That's approximately 36% growth since our Q2 call. In Q3, we had 221,000 filled prescriptions. Of these 221,000 prescriptions in Q3, 144,000 were covered scripts, which grew approximately 23% quarter-over-quarter. For everyone who looks at our financials, recall this is the growth category that drives our revenue.

We also had 77,000 cash prescriptions that were filled, growing approximately 38% quarter-over-quarter. The growth here includes the impact of having turned on Medicare patient availability on a cash-pay -- for the cash-pay program as of April. As we've previously noted, 70% of our prescriptions launched to-date have come from gastroenterologists.

During the recent quarter, we are seeing stable payer coverage and expect that moving forward for VOQUEZNA. We've pivoted in the last 6 months to focus on gastroenterology target prescribers as our core growth strategy. The intent of this shift is to really target depth rather than breadth of writing. That is we want to get physicians who adopt VOQUEZNA to write prescriptions more and more frequently and grow their utilization of our product as the clear path to driving our growth.

In alignment with that strategy, we have communicated that and have taken several steps over the past 6 months to align our sales activities to enable that greater focus on the gastroenterology customer.

In May, we announced the strategic shift. Step one, which actually occurred in May as well in Q2, was to adjust our incentive compensation plan for our sales reps to more reasonably balance and focus on gastroenterologists who were previously had been focused on the primary care call point.

Step 2, which we implemented in July, was to reset the sales territory target list to include all of the gastroenterology customers and take out unproductive primary care physicians from those target lists. That allowed the sales force to start spending more time in gastroenterology practices.

We also implemented in July a modified incentive comp plan, which focused on growth of total prescriptions rather than focusing on growth of the new writer base. So it really is aligned with that strategy of driving depth rather than breadth of writing.

Step 3, which we just implemented in October, just in the last couple of weeks, is a realignment of our sales territory geographies to enable better balance and better focus on our gastroenterology target call point. Let me describe that evolution for you a little bit in terms of the sales force structure.

Prior to our October restructuring, we had approximately 280 sales representatives in place. But they were situated in territories that had been mapped at launch around total PPI volume, which is basically mapping them around primary care PPI volume because that was our prior strategy prior to the restructuring in May.

As of 2 weeks ago, what we've done is we have realigned the base territory maps so that we consolidated territories that did not have enough gastroenterologists to focus the reps' time appropriately on those customers, and we created new territories where there was a high concentration of gastroenterologists. The transition of territories does create a bit of disruption in the field during this quarter.

At full strength by Q1 when we filled the open territories, we expect to have approximately 300 sales representatives in place. The net effect at the end of this transition is to create territories that are better balanced to enable us to call on every target gastroenterologist with the desired frequency.

This realignment in the sales force territories could have some temporary impact in Q4, which we've considered in updating our revenue guidance for this quarter and setting our updated guidance for the year. We believe the sales force realignment can accelerate our growth during 2026. It may take some time to see the full impact of the sales force realignment activity.

The gastroenterology opportunity for VOQUEZNA includes a target universe of approximately 24,000 gastroenterology writers. And that includes 17,000 physicians and about 7,000 affiliated nurse practitioners and physicians' assistants. Collectively, those 24,000 GI targets write about 20 million PPI prescriptions every year. That's our opportunity set.

At our current prescription run rate in GI, we believe we've converted approximately 3% of the GI PPI prescribing market opportunity of 20 million prescriptions a year. If we are able over time to convert 20% to 30% of that 20 million prescription volume, we believe that that penetration could potentially reach or exceed $1 billion in revenue per year within the gastroenterology target universe alone.

Obviously, there's a much bigger opportunity than that, and that opportunity resides in primary care. And we do believe that in future years, our expansion back into more depth and time in primary care clinics could potentially drive revenue to an even higher number, possibly reaching $2 billion or more in revenue.

A quick update on our clinical program. We have recently initiated our Phase II clinical trial in Eosinophilic Esophagitis. Screening of patients is currently underway in that study. So we've initiated study sites. We've initiated screening patients with the first subject enrolled in the study expected in Q4, as we previously communicated.

Just as a quick reminder, the rationale for this study is twofold. First, in terms of market opportunity, PPI therapy is currently first-line therapy for EoE patients. There is an opportunity for VOQUEZNA, therefore, to play an important role in EoE treatment, potentially displacing some portion or a meaningful portion of that PPI usage in EoE patients if the trial is successful and if the program overall is successful.

Second, if this Phase II study is successful, we believe that we have an opportunity or may have an opportunity to receive a written request from the FDA to conduct a Phase III study that includes pediatric patients, and that creates the potential for us to extend our regulatory exclusivity by an additional 6 months. That will be determined at the end of the Phase II trial as we have conversations with FDA at that time. We expect to report top line results from this study in 2027.

As we're on the topic of regulatory exclusivity, just a quick reminder for everyone. We've updated the Orange Book or FDA rather, has updated the Orange Book to indicate that we have exclusivity through May of 2032. The mechanics of how that works actually provides us exclusivity into 2033 because an ANDA filing is not permitted until that May of 2032 date. So with a 10- to 18-month typical ANDA review timeline, we believe generic entry is unlikely until 2033.

A note on the VOQUEZNA TRIPLE PAK update that we've previously discussed. We've had good progress here working with our supplier of the TRIPLE PAKs. You may recall from our update in August that there has been some risk of disruption to the availability of the clarithromycin component in our TRIPLE PAK from the supplier of that product. We have not to-date experienced any disruption in TRIPLE PAK availability and based upon recent communications, do not anticipate any near-term interruption, although there is still some uncertainty in this area. We will continue to monitor this closely and provide any updates that are needed.

We are executing at Phathom with discipline and momentum to implement our GI-focused strategy. The financial picture of the company is in order with solid execution on our plan. We have a talented and engaged team throughout Phathom driving our revenue growth.

I'll turn it over at this point to Sanjeev to provide more detail on the financials and the outlook for the year.

Thank you, Steve, and hello, everyone. I wanted to begin by saying how privileged and excited I am to be part of Phathom Pharmaceutical at this critical inflection point for the company. As I thought about my next chapter, I focused on 3 questions. Does the work matter for patients? Can I help build something durable? And is the dream truly aligned with the mission? At the heart of it, I wanted to join a company where work being done has the potential to directly improve patients' life. Phathom and VOQUEZNA checked all 3 boxes for me. That's what drew me here.

Early conversation with Steve made the strategy clear: sharper on focus and execute with discipline. The company is on a solid footing and the plan, growing the top line while being disciplined with expense management resonates with me. I'm especially aligned with the best among GI writers' commercial approach. I've seen the specialist-led bill playbook work for -- worked in my prior experience, and I believe it's the right fit for VOQUEZNA.

My first weeks here have only strengthened that conviction. We are all in in our goal to become a profitable, durable GI company. The foundation is strong and I'm excited to help this team build on existing momentum.

Before I dive into the results, I would be remiss if I did not thank Robert Breedlove for his effort during the transitionary phase while Phathom was searching for a CFO. Robert will continue to serve as our Principal Accounting Officer and as an important leader in our organization.

With that, let me turn to results. We are pleased with our solid financial results for third quarter for 2025 and feel that clearly demonstrate the progress being made as a result of shift in our strategy. As Steve mentioned, we reported top line net revenue of $49.5 million in quarter 3. In connection with our strong quarter and year-to-date results, we're updating our full year revenue guidance to $170 million to $175 million.

Q3 revenue represents a 25% increase compared to prior quarter, driven almost entirely by covered prescription, which grew approximately 23% during the quarter. Cash-pay prescription and changes to wholesale inventory had minimal impact to our quarterly results.

For third quarter 2025, our gross to net came in towards the lower end of previously guided 55% to 65% range. Based on these results and our expectation for rest of the year, we're tightening our quarter 4 gross to net range to between 55% to 60%.

Our gross profit for the quarter were approximately 87%, in line with our expectation. This margin, which includes product cost as well as licensing royalties, continues to be consistent compared to previous quarter. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation, of only $6 million. This is an 88% improvement compared to previous quarter. Overall, we believe our revenue results today reflect the progress of ongoing commercial efforts to focus on GIs.

Now let's turn to operating expenses. As a reminder, in the scope of this discussion, when we refer to operating expenses, we will be referring to non-GAAP form of this measure, which excludes noncash stock-based compensation. For quarter 3, we reported operating expenses of $49.3 million, which excludes $9.3 million of stock-based compensation.

Compared to the same period in 2024, this represents a decrease of 38%. The year-over-year decrease primarily reflects a reduction in personnel costs and a sharper focus on commercial activities that we expect to materially drive VOQUEZNA adoption. We believe these results demonstrate our commitment to disciplined cost management while it continue to grow revenues.

In fact, we also achieved a meaningful reduction in spending this quarter compared to quarter 2 and quarter 1 of 2025. Our quarter 3 operating expenses reflect a $36.8 million or 43% decrease from quarter 2 2025 and $48.8 million or 50% decrease from quarter 1 2025. Importantly, this quarter, cash operating expenses were well within our previous guidance of below $60 million.

For additional context, the main driver for decreasing spend between Q3 and Q2 were a reduction of approximately $19 million in advertising spend, primarily DTC was turned off as of June 30, $10 million in headcount and restructuring-related spend and $8 million in vendor costs.

Looking forward to Q4, we expect expenses to be somewhat higher than Q3, primarily related to the initiation of Phase II EoE trial. Even with EoE included, we reiterate our previous guidance for fourth quarter operating expenses being below $55 million, excluding stock-based compensation.

Based on our Q3 results and anticipated Q4 targets, we're refining our full year 2025 non-GAAP operating expenses to $280 million to $290 million. We believe our results clearly show a path towards operating profitability in 2026, excluding stock-based compensation.

Net revenue this quarter have already begun to outpace cash operating expenses, and we believe gross profit will follow suit. In this event, we expect the operating profit generated to organically strengthen our balance sheet and provide an opportunity to further investment in our business.

As of September 30, 2025, our cash and cash equivalents totaled approximately $135 million, reflecting only a $14 million reduction in net cash. This net cash usage reflect a significant 77% reduction compared to last quarter of approximately $63 million.

Based on our current revenue outlook and operating forecast, we reiterate our belief that current cash balance can support operations through the anticipated point of achieving operating profitability in 2026, excluding stock-based compensation, without the need for additional equity financing.

I feel very confident in our financial position and our path forward. We believe we have brought down expenses to a point that materially improves financial profile of the business in concert with anticipated revenue growth. With this improved financial profile, we expect to have the ability to modify or refinance our existing debt to provide greater flexibility.

I'm excited to be at Phathom at such pivotal point in the company's journey. Our strong results this quarter are encouraging, and we remain confident in our ability to execute on our strategy for the remainder of 2025 and into next year.

With that, I will now turn the call back to Steve for his closing comments. Steve?

Thank you, Sanjeev, for the helpful financial update. To wrap up, I'll just reiterate a couple of key points. And I realize we've already said some of this, but just in summary. We're really pleased with the way the third quarter went. Revenue was up 25%. Cash operating expenses were down 43% versus Q2 and cash usage was down by 77%. We are executing on the strategy that we laid out approximately 6 months ago on our May call.

Our strategy to concentrate on our gastroenterology call points is being executed crisply. And with the momentum, both financially and operationally throughout the organization, we believe we are well positioned moving forward.

My sincere thanks to our Phathom team members for their extraordinary dedication and diligence throughout this year and on an ongoing basis, and to the physicians and patients who trust in our products every day, and to our shareholders joining us on this call and all of our shareholders for your continued support.

I'll now turn the call over to the operator for any questions.

[Operator Instructions] Our first question comes from the line of Umer Raffat of Evercore.

Congratulations on Sanjeev. I have 2 questions, if I may. First, if I look at your prescription growth over the last couple of quarters, it looks like you're tracking at about 48,000 in additional prescriptions in 2Q and 3Q. And per guidance, even if I take the high end of guidance, it looks like the guidance is baking in only 35,000 prescriptions in 4Q. And I guess that's my question, is that what you're baking in, that prescription -- that growth steps down in 4Q?

Which leads me to the second question, which is the cost cuts and the discipline coming through is solid right now. The cost cut and discipline is very solid right now. But my question is, from those advertising cuts that Sanjeev spoke to, do you anticipate any impact as we head into 1Q and 2Q next year because they may not show right away?

Umer, thanks so much for dialing in. This is Steve. Appreciate the questions. First, on the growth, we are continuing to see really positive traction with all of our gastroenterology accounts in the context of the strategy to go deeper within gastroenterology.

Our guidance for the full year was, in fact, narrowed to the upper end of the range. But we're trying to balance both the momentum that we're going to gain in the gastroenterology accounts with the fact that in Q4, we are going through the sales force transition. And so those 2 variables have somewhat offsetting effects, and we wanted to guide appropriately to something that we had significant confidence in.

And Umer, to your second point about the expenses, I think the management has been very disciplined. The expenses that have been kind of streamlined were not driving the top line per se. I think that's the key point to note here. And we've been obviously very mindful of watching the script trends, watching the return on the investment, and we feel comfortable with the level that we have is sustainable.

Obviously, Umer, our job as a management team is to make sure we maximize the top line, and we'll continue to watch the expense level. But right now, we feel we're not going to have any impact from the DTC that we paused at the end of second quarter, but we'll continue to watch as we go forward.

Our next question comes from the line of Kristen Kluska of Cantor.

So with the strategy, I wanted to ask how much you are still focusing on those PCPs that you were having success with initially. I believe about 30% of the scripts you were seeing prior to this new alignment were on PCP. So was that mix from several PCPs? Or did you find that there were some that were higher responders?

So Kristen, that's -- thank you for the really important point that a large part of the PPI market has come from primary care. We are not ignoring that opportunity at all, and we are continuing to call on the customers that have already written scripts for VOQUEZNA. The PCPs that we took out of the call pattern during Q3 were primary care physicians who had not yet written a script. So anyone who had written a script stayed in the call targeting list.

And what we're trying to do is shift time toward GI, but it's not 100%. So ultimately, where we want to get to is that 70% or more of our sales force time is being spent in gastroenterology practices. Now that leaves 30% of our sales force time to continue calling on the top decile primary care physicians, that is the primary care physicians who write the most PPI scripts and included in that call pattern set is the primary care physicians who have already adopted the product because naturally, a physician who's already adopted is an opportunity for meaningful growth.

I do think in future years, you're going to see us, after we have deep penetration within GI, think about how do we grow our penetration in primary care. But for the coming quarters, certainly through 2026, our focus is going to be with an emphasis on GI, not excluding at all the PCPs that are adopting and growing.

Okay. Last question for me. You mentioned that there were new territories created where there was a higher concentration of GIs. I'm curious if these were doctors that the team was not visiting or perhaps they were outside of the main area, so they were still potential customers. They just weren't getting as much face time with them since that territory didn't exist before?

That's right. That's right. It's not that we have GI customers that we couldn't see at all. We couldn't see them with the frequency that we wanted to create the depth of adoption that we wanted. And so we had some territories that had 80 gastroenterologists in them. And if you think about the call pattern and the frequency that we want to achieve in order to really drive growth, that is a heavy call load that made sense to split some of those territories to be able to put 2 reps into that geography. We had other territories where they only had 10 gastroenterologists and they just can't spend that much time in 10 offices. And so that's where the realignment needed to take place.

Our next question comes from the line of Paul Choi of Goldman Sachs.

Congrats on all the progress. With regard to the opening up of the Medicare access and the cash-pay component of it, could you maybe just comment on how you think the mix of cash-pay as a mix of covered prescriptions and so forth will be evolving over the next few quarters? Any color on that would be great.

And then my second question is with regard to repeat prescribers, particularly in the GI channel. Are you seeing any evidence of an increase in the number of repeat prescriptions that your existing prescriber base is offering now? Any quantification there would be helpful.

Paul, thank you. I appreciate the questions on both of those points. Let me first take the sort of cash and Medicare versus covered prescription mix question because we don't actually try to actively manage the mix or the ratio. And you'll see in the way that we presented the slides and the way that we've revised how we're talking about this, it's not about talking about total script numbers and what percentage is where, but rather the growth specifically in the covered scripts and the growth specifically in the cash scripts.

And what we're attempting to do is drive growth in prescribing behavior, recognizing that both of those categories are going to grow. And we're not actively trying to manage in any way what that ratio is, whether it's 30% or 35% in a given quarter. That's not a part of the conversation set that we have with any physician. The conversation that we have with physicians is about what patients are most appropriate for them to consider starting VOQUEZNA and how they make that decision and how they evolve their prescribing patterns.

So I think what you're going to expect to see is growth in covered scripts and growth in cash scripts, and we're not attempting to actively forecast that ratio. We want to drive continued growth in both on an aggressive basis.

I think the other important point, Paul, to note is, as Steve mentioned in his prepared remarks, is our top line revenue is driven by the covered scripts, which is what grew 23% this quarter. And clearly that has got a direct relationship. And the other thing I keep in mind is you shouldn't think about that one is cannibalizing the other. Both are growing depending upon where the patient is right fit based on all the coverage that doctor and the patient decides.

Yes. I think that last point is a really important one. In no way does our cash script volume cannibalize our covered script volume that the incremental patient on Medicare who gets a cash script was never going to get coverage. So that's not lost revenue in any way. When that patient gets added, that's just a positive additional impact in terms of the patients being satisfied with the product, the physician being satisfied that their patient gets access to the product and the physician being more willing to adopt.

So we actually think getting that extra Medicare patient started on VOQUEZNA increases the propensity of that physician to prescribe our product for their covered patients as well. The growth in one actually drives growth in both. So that's a part of the reason for turning on that opportunity.

The second part of the question on sort of the repeat prescribing behavior and evidence for increase. We're not providing specific metrics, but you can imagine we are, in fact, tracking the metrics internally. What we've done is we have evolved our selling model and our coaching model for the sales territories around what we are referring to internally as the adoption ladder. And that is how do we grow physicians from trialing the product, using the product a few times every quarter to prescribing the product on average every other week to -- as an NRx to prescribing the product on a weekly basis to really making this a core part of their practice. And we are tracking physician growth up that adoption ladder. We're tracking it on a territory-by-territory basis. We're tracking it on a physician-by-physician basis.

This is the coaching conversation that our regional sales managers are having with their territory managers as they are working through each conversation about each of their customers, and we are seeing evidence that we're growing utilization, we're growing more and more physicians into that regular prescribing adopter category, and we're doing that on a monthly basis. We're just not giving the metrics because there are so many different metrics and so many different ways of looking at it that it gets complex.

One other sort of broad perspective is overall, as we described, the 20 million prescription opportunity in gastroenterology, we had 140,000 prescriptions in gastroenterology -- in the gastroenterology segment in -- as an estimated number during Q3. So annualize that and you get to something on the order of $600,000. You get to 3% of that $20 million run rate on an annualized basis. That's our growth opportunity.

If we want to get to 10x, the current revenue in gastroenterology, we need to get to 30% rather than 3% of those 20 million scripts. That's the focus in every conversation, and we are starting to see evidence of that growth pattern on an account-by-account basis.

Our next question comes from the line of Yatin Sunjea of Guggenheim.

Can you hear me?

Yes.

Congrats on pretty good execution. Maybe just 2 questions from me. As you are sort of trying to go more deeper into the GI community, can you just talk about the type of patients you are seeing right now? Can you also talk about the penetration you might be seeing in NERD versus GERD population? And how should we think about the duration of treatment that is playing out right now?

And Sanjeev, congratulations on the new opportunity. Maybe if you can maybe help us understand how should we think about 2026 as the sales ramp up? How should we think about the OpEx there?

Okay. I'll let Sanjeev take the OpEx question at the end. Let me just jump into the types of patients that we're seeing and sort of NERD versus GERD within GI. The typical patient with either erosive esophagitis or non-erosive reflux, but the typical reflux patient that is landing in a gastroenterology practice has already been having conversations with their primary care physician for some time around their reflux.

Almost always, they will be started on a PPI because they're complaining about heartburn to their primary care physician. Most typically, they'll be started on 20 milligrams of omeprazole. They might then be escalated within the primary care practice to twice a day omeprazole or to 40 milligrams of omeprazole every day or they might be adding Tums or other therapeutic modalities to their PPI whenever they have breakthrough heartburn. And it's when that patient is still experiencing significant pain and the physician has tried a couple of things and has not been able to resolve the heartburn, that's when they get the referral to gastroenterology.

So the type of patient who lands in a gastroenterology practice is often a patient who has either tried BID dosing or has cycled through a couple of PPIs or has doubled their dose of PPI or is adding an H2 blocker or is adding antacids to their PPI and they're still having significant pain.

So the patients who land in the gastroenterology practice and are being evaluated for their reflux are exactly the patients that should be switching to VOQUEZNA because they need more significant acid suppression. And we're hearing that in every conversation. I was just at ACG for a few days having a number of conversations with gastroenterologists over these past few days. And the commonality of the story that every patient who's landing in their office has already been on a PPI. Often they've been on it for years, often they've double dosed it. That's who they're seeing, and that's who they're switching. And that's why we think that we can capture a very meaningful percentage of that PPI volume in gastroenterology practices because that PPI volume is being prescribed to exactly the patients who need our drug.

We don't have as clear a distinction on the breakout between non-erosive reflux and erosive esophagitis patients because physicians for a patient who is experiencing significant heartburn might prescribe 20 milligrams for patients in both categories. Our indication is specifically that the 20 milligrams should be for erosive esophagitis and 10 milligrams is the approved dose for non-erosive reflux, but it's really at the physician's discretion how they use one or the other. And one of the things we also see is that many patients who start on 20 milligrams never switched to 10 milligrams. They just maintain their treatment on 20 milligrams because if the patient is doing well, they just continue on with the treatment that's working for them.

Which gets to the duration of therapy question, we are looking at that on an ongoing basis in an analysis that we did early on in the first 12 months of launch. We saw that we were getting 6 or 7 prescriptions from -- within a year for patients that converted. We are continuing to look at that on an ongoing basis to see whether or not that evolves in a meaningful way over time, and that analysis is ongoing. I would expect that we're going to get pretty good persistence over years with patients who are experiencing this level of heartburn because they get the positive reinforcement that when they take this drug, they feel better. That's going to cause someone to want to continue using it, but it's hard to predict exactly numerically how that evolves.

Yes. And Yatin, thank you for your question. And obviously, we can't give you like 2026 financial guidance right now. We'll do that at the beginning of the year. But let me tell you a little bit qualitatively how we're thinking about next year.

So let me start with the first on the top line. So obviously you saw strong quarter 3 with 25% revenue growth. You saw in Q2 we had a 39% revenue growth with the pivoting strategy go deeper in GI. We'll continue to see more prescriptions coming, very effective calls. So that percentage of revenue growth will continue. Obviously, it will moderate as the base becomes bigger and bigger, but you should expect that the top line will continue to grow next year quarter-by-quarter.

Number two, I don't expect significant change in gross to net because we got a good coverage. And on where things are, there are going to be pushes and pulls, but I don't expect fundamentally a significant different gross to net, which will kind of give us a steady path to gross margin next year.

Now coming in terms of the operating expenses, I think the way to think about that is in 2 kind of ways. One is what is the operating expense to run the base company with the indication and the strategy that we've gotten so far, which means pivoting to GI and going after the top decile primary care. I think we've reached that point with the expense level that we reached in this quarter or quarter 4. I think you will kind of see that, and that will continue in next year as we go forward.

As a management team, obviously we'll be looking at all other investment opportunities which are revenue enhancing and have a payback. And then obviously we'll consider those. But all of this put in together, you've got one thing in -- we said that in the beginning of the discussion was we expect ourselves to be operating profit -- in operating profit position next year. And that's kind of what we are of course striving to.

With the cash usage that we have of $14 million this quarter, I mean that goal is near to us. But again, we will be providing all that beginning of the year when we give the guidance. But I feel very good about what the momentum is right now where we are entering into quarter 4 and then entering into next year with a solid set of financials.

Our next question comes from the line of Joseph Stringer of Needham & Company.

Just 2 from us, kind of a follow-up question, just given the backdrop of the 3Q print here where revenue came in higher than consensus and OpEx a bit lower. So in terms of hitting your goal of sustainable non-GAAP profitability in '26 without the need for additional capital, you've been pretty consistent in that messaging. So I guess what's your confidence in hitting that goal now to say, compared to your confidence level maybe last quarter or in the quarters past?

And then secondly, with the -- curious to get your thoughts on the new marketing analytics hire. What have they seen? Or what are some of the initial insights or takes from looking at the analytics or what the analytics are telling you about the VOQUEZNA launch and the strategy there? Was there any area outside of some of your prepared remarks that surprised you or that could be optimized or areas where you could really drive uptake or growth going forward?

So Joe, thanks so much for both of the questions. First, in terms of sort of our confidence in getting to positive cash flow operations next year or positive EBIT as we've described it, we have remained consistent since May in the indication that we believe that that's achievable. And I think what we've done this quarter is just demonstrate that we are exactly on that path. So it's one more quarter of clear demonstration of exactly the path that we set out in May, which is we're going to continue to grow revenue.

The thing that continues to drive revenue growth is sales force time in gastroenterology practices and driving growth and depth of adoption in GI practices. That remains unchanged. That's what we saw when we looked at the metrics back in May. That's what was working. That's what was driving our revenue. We've done more of that. We're continuing to drive revenue. My confidence that as we do more of that, we're going to continue to drive revenue is high.

Similarly, as Sanjeev just mentioned a moment ago, we've brought down expenses we believe to a sustainable level in terms of our base operations and we might, on a discretionary basis, choose to make additional investments in certain areas if we want to do certain clinical trials or if we want to run a program. So we're not guiding on this call to what the expense level is going to be in 2026. We'll provide that guidance as we get towards 2026.

But we are clearly vigilant about maintaining the expense level at a level where we can get to operating cash flow profitability next year and reaching operating profitability. And we wouldn't have said it if we didn't mean that we were going to try to work very diligently doing that and that we didn't believe we could do it. We absolutely do believe we can do it.

From a marketing and analytics perspective, Nancy just started a couple of weeks ago. So I'm not going to speak for her as to what she's seen already, but our whole analytics team is spending a lot of time doing a deep dive on exactly how do we see detailed patterns, how can we direct the sales force time and marketing programs ever more efficiently and effectively. That's something that's not a 1- or 2-week exercise. That is something that is going to be months and, in fact, years of work on an ongoing basis.

But I've just been delighted working with Nancy over the last couple of weeks, delighted working with Sanjeev over the last few weeks. And we've got a really solid team that is being very thoughtful as they work through the plan.

Our next question comes from the line of Dennis Ding of Jefferies.

This is Anthea on for Dennis. Congrats on the quarter. I wanted to ask on the sales territory realignment. When do you expect that to complete? And as you ramp up the additional 20 reps, when do you expect to see their productivity reflected in the top line?

And then second, in terms of expansion back into PCPs, what is the gating factor there? Or what would you want to see to consider taking that on again?

So Anthea, thanks so much for the questions. Two quick things on sort of thinking about the territory realignment. We've already executed the territory realignment. So all of the territory maps have been changed. All of the reps have their new territories. They are in their new territories calling on their new customers. But in the course of that, it does create some vacancies. We are actively recruiting for all of those positions. But obviously hiring doesn't happen in a week or 2. Hiring takes months. So we will be bringing folks on through the course of this quarter and next to fill the open positions.

As we indicated on the call, I expect that by Q1, as we fill all of the open territories, we will get to a sales force strength of 300. But I actually feel really good about where we are already today that as the significant sales force strength that we already have is in the right territories, calling on the right customers, we're going to start to see that traction. But we'll see incremental impact as we fill those territories through Q1. And that should play out through 2026. And as I communicated, I think you're going to see an acceleration in growth through 2026 as we get more and more of that traction.

The other element of sort of what drives us back into the primary care market, there's an organic phenomenon that's going to happen, and it's going to turn into revenue, it's going to turn into metrics that then drive when we make the decision.

So one of the key metrics that we look at is NBRx per sales call. And that is how many new patient conversions are we getting relative to the amount of time that we're spending in a physician's practice. NBRx per sales call is much higher today for us in gastroenterology versus primary care, which is why we're driving sales force time into gastroenterology practices. NBRx per sales call is going to go up over time in primary care because primary care physicians will become more familiar with VOQUEZNA as more of their patients who've been converted on to VOQUEZNA and GI practices go back into the primary care office and talk to their physician about how much better they feel.

Primary care physician had a patient in pain, sent them to a GI, came back. Their first question is naturally going to be in the next visit, well, how are you doing? How did that referral go? When the conversation goes to VOQUEZNA and they feel a whole lot better and a physician has heard from 5, 8, 10 patients, that's when that becomes a much softer target call for us to be able to drive conversions, and we'll see that NBRx per sales call number go up. At some point, that becomes really profitable to make an investment in growing in that space.

Now I don't think that's a 2026 thing. I think that's '27 or '28. But at some point, when that metric works and we're getting positive ROI for that incremental investment, you'll see us expand into more time in primary care as well.

Our next question comes from the line of Annabel Samimy of Stifel.

I think you guys have covered a lot already. But clearly you have a great opportunity within the GI community. Maybe you can, just on the flip side, talk about some of the reasons why physicians have not yet adopted. Is it a matter of awareness or one of reimbursement? And it seems like there is high-end awareness. So for the GI -- the new GI doc, what is the average number of calls that you need to convert these docs? I guess what I'm asking is, at some point, do you expect some inflection point in sales with this critical mass that you've now focused on GI docs? So that's my question.

Annabel, thanks so much for the question. And I agree, we do have a terrific opportunity within GI and that's an opportunity to get to really significant revenue. So there's not actually an impediment to first adoption within GI. In fact, the vast majority of gastroenterologists have already written prescriptions for VOQUEZNA. What we need to do is change behaviors to frequency of writing. And that happens gradually.

The major impediment candidly is 30 years of habit. They've been prescribing PPIs for 30 years. They're comfortable with them. It's their sort of first inclination. It's the easy thing to do. And what we are trying to do is shift practice patterns away from ingrained 30-year habits that are easy and comfortable and familiar to a new product that provides a meaningfully better outcome for their patients.

Their patients when they're on VOQUEZNA feel a whole lot better. And what it takes to change that is repetition of conversation, repetition of experience, feedback from actual patient experience. So we might get a physician to start writing, but only for the patients that have failed everything else. They switched them to between 3 PPIs, they switched them to double dose BID PPIs. And now they finally switch them to VOQUEZNA because there's nothing else to do.

Soon if that patient tells the doc that they're feeling better, there's an opportunity for the sales rep to have a conversation about, doc, why are you waiting to switch through 3 PPIs before you use the product? Why don't we start using it on anybody who's coming into your practice who looks like this patient characteristic but doesn't need to go through all of that difficulty and challenge, you can get them started sooner.

Maybe they start with their erosive esophagitis grade C and D patients because we've got clear clinical evidence of superior healing in those patients. And then after they see the significant healing, we start talking to them about their grade B erosive esophagitis patients and patients where they think they might not heal well enough on a PPI and they ought to convert. And as they get more experience, they grow their utilization. And then eventually, we're talking to them about patients that are having nighttime heartburn even though they have non-erosive reflux and how do you think about those populations.

So it's really about growing the adoption pattern. It's not enough to get a first adoption. It's about changing patterns in broad categories of patients that happens incrementally with multiple sales calls. And we are seeing that happen. There's not an impediment to first writing. There's really just a habit change process that comes from reinforcement, multiple calls, multiple patient feedback experiences. And that's happening today, and it's happening organically.

Okay. That's great to know. So just one more question maybe for Sanjeev. So it's great that you turn on Medicare. And it's interesting that the average gross margins come down at the same time, while the cash-pay business seems to, I guess, come back up to about 35%. So is that -- I guess, if you are guiding gross to net to the bottom end of the range, is that suggesting that commercial will continue to grow faster than cash-pay? Are we understanding these impacts? Like I just want to understand what gives you confidence on the gross margin -- gross to net being at the lower end of the range with some of these dynamics going on?

Yes, Annabel, thank you for the question. So actually gross margin, if you look at last 3 quarters, have been very consistent within the range and lower end of the range. I think this quarter as well, when I looked at the results, it came at the lower end of the range. And when I find comfortable with the 3 quarters in hand that we could tighten the guidance for fourth quarter from that perspective.

As regard to cash-pay, the way the gross margin is calculated and everything, that does not have a material impact on our gross to net percentages. So as those percentages continue to grow, they will all be reflective of that because our bigger part of the gross to net is impacted by the covered script. And I don't expect that to change significantly between this year and next year.

Our next question comes from the line of Chase Knickerbocker of Craig-Hallum.

A lot has been asked, but maybe just to stay on the topic of gross to net. Just as we think about it longer term, I mean should we think about that kind of tighter range as kind of the right way to think about medium- to long-term gross to net? Should we continue to see some improvement even potentially going closer to 50% from the bottom end of the range now? I mean, where do you think kind of gross to net ultimately mature to as your business matures over the medium to long term?

And then, Sanjeev, just maybe any low-hanging fruit that you see on the gross to net to maybe continue to drive some improvement there from your past experiences?

Yes, Chase, thank you for the question. So we obviously are very kind of focused on gross to net as every other line item. So I'd say -- I think one thing I'd say, I've seen very consistency. I think management has done a good job in getting access and managing all the contracts. And the 3 quarters results have been very consistent and they give me the confidence we can tighten this for this quarter.

Going forward, Chase, I don't expect a significant change in how we look at it. Obviously, we look at it at the right time what kind of guidance we want to give. Maybe it will be a little bit tighter than what we had before, but we'll come back to that when we give the guidance. I -- there would be obviously pushes and pulls as you think about it. There is a potential for price increase. There are obviously rebates in the government sector that we got to be mindful of and everything else.

But also we have things like DSA. As the company gets matured, we have opportunities for renegotiation some of those things. So there are pushes and pulls that are going to happen. We'll manage it. But I don't expect on an overall basis to be a significant change in our gross to net trajectory as we've seen thus far for 3 quarters this year.

Our next question comes from the line of Matthew Caufield of H.C. Wainwright.

And welcome to Sanjeev. I wanted to ask, is there a sense of the proportion of patients that may be getting lost between having their script written by their GI, not being covered and then the patient not subsequently following up for BlinkRx, for example, and how that may be evolving or ideally improving?

So Matt, thanks so much for the question. I don't think we've ever disclosed specific numbers on the number of prescriptions that weren't filled. We obviously are tracking abandonment rates and looking at that pattern, actually overall are pleased that we're doing better than industry norms on some of the metrics. But one of the key advantages of offering the Blink service is that it improves that pattern.

So if a patient goes to a retail pharmacy and their product isn't -- and their script isn't covered by their insurance, for example, and they get a higher-than-expected co-pay, they may walk away and not fill that script. If the patient goes to Blink and they are getting covered, they will get a $25 co-pay. And if they are not getting covered, they will be offered a $50 cash price.

So that methodology enables us to significantly minimize that process. And as we're educating physicians about the fact that there's an advantage to sending their patients to Blink, it can just -- we can manage that cycle to reduce that walk away from a prescription to minimize the co-pay and minimize at all times the patient out-of-pocket payment so that you have the best likelihood of a patient getting access to the product.

And one of the advantages of doing that is even if they end up with getting access to the product on a cash-pay basis, for example, if they've got a high deductible plan and their plan isn't going to covered or their payment is going to be too high early in the year, at some point several months later, they may actually get their script covered and we want to be resubmitting it and switch that patient to a covered category patient. And that advantage -- that whole process is streamlined and works better through Blink and through a retail pharmacy typically.

Thank you. Ladies and gentlemen, that does end the Q&A session and conclude Phathom Pharmaceuticals' call for today. Thank you for participating. You may now disconnect.

Hello, and welcome to the Phathom Pharmaceuticals Second Quarter 2025 Earnings Results Call. [Operator Instructions] Please be advised that today's call is being recorded.

With that, I'd like to turn the call over to Eric Sciorilli, Phathom’s Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom’s Second quarter 2025 results.

This morning's presentation will include remarks from Steve Basta, our President and CEO; and Robert Breedlove, our VP of Finance and Principal Accounting Officer.

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 and the slides we'll be reviewing 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 may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the trading prices of 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 Steve Basta, Phathom’s President and CEO, to kick us off. Steve?

Thank you, Eric, and thank you to everyone joining us on the call today. I'm pleased to share our second quarter results, which reflect the first step in our mission to build a growth-oriented and profitable GI company. We believe this quarter marks a meaningful inflection point for Phathom.

Let's begin with the key performance metrics. Launch through July 25, over 580,000 VOQUEZNA prescriptions have been filled, 49% growth in 14 weeks since our last report. In Q2, approximately 173,000 prescriptions were filled, reflecting 36% growth over Q1. Commercial access remains north of 80% of lives covered with more than half of those requiring only a single step edit or less. BlinkRx continues to be a resource for both patients with coverage and for patients denied coverage who are then offered a cash pay option.

Approximately 68% of Q2 VOQUEZNA prescriptions were filled through the retail channel. This slight decrease in retail proportionality this quarter is due to the rollout of a cash pay option for Medicare patients through BlinkRx. This has brought in incremental new patients and helps to instill confidence among HCPs as more patients have positive access experiences. Importantly, both covered and cash pay segments are growing at healthy rates.

Through July 18, more than 29,300 unique HCPs have written a filled VOQUEZNA script, approximately 24% more than at the time of our Q1 report. Although we expect the number of total writers to continue growing, our focus beginning in Q3 of this year has shifted to driving more depth and frequency of writing more than to driving new writer conversions.

We recently refreshed our sales force target list to prioritize gastroenterologists. Of note, about 70% of all VOQUEZNA prescriptions written to date have come from GIs. Even though we've actually been spending more than 60% of our sales time in the last 12 months on primary care physician calls, we are clearly seeing, therefore, a higher return from our sales calls on GIs. Likely, this is because a greater percentage of PPI patients treated by GI still experience GERD symptoms and need a new treatment option.

In Q2, gastroenterology writers on average, wrote more than twice the prescriptions per month as compared to primary care physician writers, which illustrates that our GI sales calls are more productive than our PCP sales calls. We believe that more time spent driving GI adoption will translate to accelerated revenue growth.

Starting in July, our new sales target list now includes nearly all gastroenterologists. We've removed from the target list more than 20,000 PCP targets who had not yet started writing. The net effect of now including all gastroenterologists and removing of unproductive PCP targets is to free up our reps’ time to focus on GIs and to increase call frequency with these high potential writers. This is a deliberate move to drive depth over breadth and to move prescribers up the adoption ladder from trialists to consistent writers to daily adopters.

In making these changes, we are not discounting the significant future opportunity that exists with PCPs. Rather, we anticipate phased growth. Step one, GIs are the core writers with high awareness of VOQUEZNA today, delivering a greater return per sales call. Focusing on GIs is a clear and efficient path to our goal of growth and profitability. In time, primary care physicians will hear from their GERD patients how much better they feel on VOQUEZNA as they return from GI referrals.

We believe that our reps will then be able to more efficiently convert and grow PCP adoption. We expect transitioning sales targets will take time to show benefit in our sales ramp. It takes several calls over months to move the needle with new physicians. I expect that we may start to see an acceleration of revenue within the next 2 to 3 quarters as we are able to call on GIs multiple times, leading to greater writing frequency in our core customer segment.

Two notes on our reported metrics may be helpful. First, as we spend more time with existing customers to go deeper, our rate of converting new writers in future quarters will not be as high a priority. We may elect, therefore, to report different metrics in the future rather than writer counts due to this change in focus.

Second, regarding the prescription numbers we've reported, IQVIA has implemented 2 recent restatements. All weekly Rx data from launch through July 4 have been revised. The launch to date and Q2 TRx numbers that we are reporting today, therefore, incorporate IQVIA's weekly restatements and some internal estimates of monthly data. The restatements have no impact on our actual revenues, which are not derived from the IQVIA numbers.

Turning for a moment to exclusivity. We were pleased that we achieved a positive resolution to our citizens petition in early June. The FDA has now officially updated the Orange Book to reflect exclusivity for the VOQUEZNA 10-milligram and 20-milligram tablets through May of 2032.

It's important to clarify regarding timeline that this date of May 2032 marks the earliest point at which a generic ANDA can be filed, assuming that we do not have an Orange Book listed patent 1 year prior to that date. Therefore, we believe that the actual entry point of a generic vonoprazan competitor should be no earlier than 2033, assuming a typical ANDA review cycle.

Pediatric exclusivity, potential future IP and multiple rounds of ANDA review for generic filers could potentially extend our exclusivity window even further. Confirming exclusivity into 2033 clearly enhances the NPV of VOQUEZNA.

Following the Citizens petition decision, we have also revisited our development plans and near-term priority clinical studies. We've recently decided to move forward with a Phase II trial in eosinophilic esophagitis, or EoE, which we expect to begin Q4 of this year.

We believe VOQUEZNA has the potential to be a first-line treatment in this indication for which PPIs are commonly used today despite not being indicated for EoE. Additionally, the EoE program may provide a path to extend exclusivity by 6 months with future pediatric evaluation in this indication.

Robert will provide more detailed financial update shortly. But first, I'll highlight some key recent financial progress. We reported $39.5 million in revenue for Q2, which represents 39% growth over Q1 revenue. We started to implement our cost savings initiatives mid-quarter in Q2 and have already shown a $12 million reduction in Q2 non-GAAP OpEx compared to Q1.

We ended the quarter with approximately $150 million in cash. Based on our operating plan, with anticipated continued revenue growth and rigorous cost control efforts, we believe our current cash can be sufficient to reach profitability without requiring additional equity financing.

Analyst consensus revenue for 2025 currently sits at approximately $160 million. We expect that we can achieve revenue north of current analyst estimates and are providing revenue guidance of $165 million to $175 million for full year 2025.

We're also on track with our expense reduction activities. We expect Q3 expenses to be below $60 million for the quarter and our Q4 expenses to be below $55 million, including the incremental costs associated with starting the EOE trial in Q4.

Recall that this guidance is intended to reflect only cash operating expenses that excludes stock-based compensation and other noncash items. These expense reduction targets reflect our disciplined approach to spending while continuing to invest aggressively in key areas driving revenue growth.

As a final note, we communicated last quarter that there could be a supply disruption in the VOQUEZNA triple pack. The triple pack represents approximately 1% of our total revenue. The supply issue pertains specifically to the clarithromycin tablets in the triple pack.

We are in ongoing discussions with our supplier for these tablets and continue to actively monitor this situation. We have not experienced any commercial disruption to date. The VOQUEZNA bottles and the VOQUEZNA dual packs are not impacted as they do not include clarithromycin. We are prepared to quickly shift our H. pylori marketing emphasis fully to the dual pack if needed.

Q2 was a strong quarter for Phathom. We're executing on our strategy, delivering results and laying the foundation for long-term growth. We believe we're on track to reach profitability in 2026.

Importantly, 30% to 40% of GERD patients still have symptoms while on PPIs or other common treatments. VOQUEZNA's rapid, potent and durable acid suppression profile provides a meaningful treatment option for these patients. We received numerous testimonials about the benefits of VOQUEZNA and how it's providing significant improvement in care for patients with GERD.

It's a privilege to be part of a team that is making a significant difference for many thousands of patients today and potentially millions more patients in the years to come.

I'll now turn the call over to Robert to walk through the financials in more detail.

Thanks, Steve, and hello, everyone. I appreciate you joining us today. We are pleased with our results for the quarter and the progress we have made both in terms of our revenue growth and cost savings.

This morning, I'll be walking through our financial results for the second quarter of 2025, and I'll be commenting on both GAAP and non-GAAP financial measures. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release and will also be discussed later in my remarks.

As Steve mentioned, we reported net revenues of $39.5 million for Q2 2025, which represents a 39% increase compared to the prior quarter. This revenue growth was driven entirely by the increased adoption of VOQUEZNA, reflecting the success of our ongoing commercial efforts. As of quarter end, wholesaler inventory levels remain consistent with historical norms, averaging approximately 2 weeks of supply.

Based on prescription trends and our revised sales strategy, we are providing full year 2025 revenue guidance of $165 million to $175 million. Our gross to net discount rate for the quarter was within our expected range of 55% to 65%, and we expect the discount rate to remain within this range for the remainder of 2025.

Now turning to operating expenses. For Q2, we reported non-GAAP research and development expenses of $7.4 million and non-GAAP selling, general and administrative expenses of $78.7 million. Compared to the same period in 2024, these represent increases of 23% and 11%, respectively. This year-over-year increase in R&D was primarily due to onetime personnel-related restructuring charges, while the increase in SG&A reflects continued commercial investment in support of the VOQUEZNA launch.

As part of our previously communicated cost-saving efforts, we achieved a meaningful reduction in spending this quarter compared to Q1 of 2025. Total non-GAAP operating expenses for Q2 2025 were $86.1 million, which is a $12 million decrease from Q1 2025. This decrease was driven by $18 million in savings, partially offset by approximately $6 million in onetime restructuring-related costs.

We are encouraged by this early progress, and we anticipate more substantial reductions in the second half of the year. To give some context, our Q2 non-GAAP operating expenses included approximately $15 million in pre-committed direct-to-consumer advertising spend, $7 million in project costs that could not be discontinued before Q3 and the aforementioned $6 million in onetime restructuring charges.

We expect the reduction or elimination of spend in these areas to drive our continued cost-saving efforts. Accounting for these items, we expect Q3 non-GAAP operating expenses to be below $60 million and Q4 non-GAAP operating expenses to be below $55 million.

As a reminder, these projections reflect non-GAAP operating expenses, which excludes stock-based compensation and certain other noncash items. We encourage our analysts and investors to account for this nuance in their modeling.

Based on our Q2 results and anticipated second half targets, we are lowering the upper range of our full year 2025 non-GAAP operating expense guidance by $15 million to $290 million to $305 million. For the quarter ended June 30, 2025, we reported gross profit of $34.5 million, which equates to a gross margin of 87%, consistent with last quarter. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation of $51.7 million. That is a 30% improvement compared to the previous quarter.

Our non-GAAP adjusted net loss for Q2 2025 was $56.5 million or $0.79 per share compared to a loss of $73.3 million or $1.25 per share for the same period in 2024 and a loss of $77.1 million or $1.07 per share for the first quarter of 2025. As with past quarters, reconciling items between GAAP and non-GAAP results included noncash stock-based compensation, noncash interest related to our revenue interest financing liability and noncash interest expense related to the amortization of debt discount.

Lastly, as of June 30, 2025, our cash and cash equivalents totaled approximately $150 million. Based on our current revenue outlook and operating forecast, we expect our current cash balances can support operations through the point of achieving profitability in 2026, excluding stock-based compensation and without the need for additional equity financing.

We are encouraged by our results and remain confident in our ability to deliver strong revenue growth and maintain disciplined expense management through the second half of 2025.

With that, I'll now turn the call back over to Steve for his closing remarks. Steve?

Thank you, Robert, and thank you again to everyone for joining us today.

As you've heard throughout the call, we are executing with discipline and momentum. VOQUEZNA continues to demonstrate growth, and we believe our strategic pivot to focus on gastroenterologists will enable an acceleration of that growth. This targeted approach will deepen engagement with our highest value prescribers and create an opportunity for increased adoption.

At the same time, we are delivering on our commitment to financial discipline. We believe we have a clear path to profitability in 2026. We are building a business that is not only growing but growing responsibly. With exclusivity anticipated into 2033 and our EoE Phase II trial set to begin later this year, we believe we are laying the groundwork for long-term value creation.

To our patients, our team and our shareholders, thank you. Your trust fuels our mission. We remain focused on our goal of delivering meaningful value through disciplined execution and durable growth.

I'll now turn it over to the operator to facilitate a Q&A session. Operator?

[Operator Instructions] Our first question comes from Kristen Kluska with Cantor Fitzgerald.

Congrats on a great quarter and for your victory in the citizen petition. Good to put this behind you now.

So, in terms of the ways that you're going to drive more depth and frequency of writing prescriptions, can you give us a little bit more color about how the sales force will target that? And how much of real-world practice right now is some of these physicians trying it in a few of their patients first, hearing how well it is and then recommending it to more patients under care?

Kristen, thanks so much for joining us, and thanks for starting us off with what I think is actually the core topic for the transition that we're making, which is the focus on gastroenterology and the focus on depth and frequency of writing.

It's actually really sort of quite simple and straightforward how we are targeting the sales reps. We've realigned all of the sales territories as of early July. So Q3, all of our sales reps now have a new target list that is different from the target list on which they've been operating over the past several quarters.

That drops out north of 20,000 primary care physicians that we were calling on that just hadn't converted and hadn't written. Now we've obviously got a significant number of primary care physicians who have converted, but we were spending a lot of time trying to drive first adoption from physicians that would then write slowly.

What we're seeing instead as we look at our metrics is that there is a very strong correlation between call frequency and frequency of prescribing within the gastroenterology community. We had previously only been calling on sort of the top half of the gastroenterology community decile based upon prescribing. We've now added all gastroenterologists into the call pattern and into the target list for the sales reps.

And we are driving multiple sales calls per month into the key gastroenterology accounts. That allows our sales team to spend enough time in the offices to get to know every prescriber in that office to build comfort, build awareness, build experience with the product through sampling and through education of physicians that allows for an evolution of writing habits to much higher frequency writing.

Our internal metrics, when we look at what happens as we spend more time in physicians' offices clearly indicate that's a strategy that works. that the tactics of spending time, building those relationships, providing that education grows utilization.

Even in our top gastroenterology accounts, we are still a moderate percentage of their overall GERD patient volume. There is still growth even among the top accounts. And then in the broader gastroenterology community where there's been some adoption, there isn't yet daily or weekly writing practice among all of those physicians, we're going to be able to achieve that by spending more time in those offices.

So, it's time and relationships that drives depth and frequency. And the real-world impact on that is as physicians get more comfortable with the product, they prescribe it more often. As they prescribe it more often, it's a self-reinforcing positive psychology that emerges because they hear from their patients how much better they feel, and that creates an acceleration.

We also think that there's going to be a bit of a broad community-based effect within gastroenterology that as we get more gastroenterologists to write, they talk to more of their colleagues who also have positive experiences, and that creates an uplift within that entire community.

Our next question comes from Joseph Stringer with Needham & Company.

Congrats on the quarter. Just given your 2025 revenue guide of $165 million to $175 million and your comments on anticipated acceleration of revenue over the next few quarters, given your focus and traction with GI specialists, is that acceleration already baked into the current revenue guide? Or do you think this could be a driver to the upside?

I think absolutely, long term, it's a driver to the upside. What is hard to predict is how quickly it comes into our revenue numbers. And what I'm describing there is just as we add a significant number of new gastroenterology targets to the sales force, they start making sales calls, but we know that it can, in some cases, take 7, 10, 12 sales calls before a physician starts writing.

And then it takes another several calls for them to start changing habits and to grow their habits. Now that timeline is different for every physician. And for some of these physicians, they've already had a fair number of sales calls.

So, what I expect that we're going to see is that it may take 1 or 2 or 3 quarters before the new targeting strategy really starts to show a consistent acceleration in growth in revenue. But I think, again, our own metrics would suggest that that is going to happen, but it doesn't happen with the first sales call. It happens with multiple repeated visits to the office that happen gradually over a period of months.

So, in terms of our revenue guidance, I mean, the reason that we've provided guidance in a range that is above where analysts currently are, that's my expectation is that we're going to be in that $165 million to $175 million range. And I do believe that longer term, we're going to get acceleration, whether the acceleration comes within this time frame of the next 2 quarters or it's early in 2026, it's very hard for us to predict the date at which this new strategy really drives traction.

Our next question comes from Annabel Sammy with Stifel.

Thank you for the details on how you're targeting the GI docs. I guess my question is, and it makes total sense that you're focusing on the prescribers and at some point, that transitions into primary care writers. But I am curious, the gas -- the acid control market became blockbuster category, I believe, through the primary care market.

So, do you have any sense at what is the tipping point between the frequency of writing of the gastros and when that starts tipping into the primary care, what does that transition to get prescribing started in the primary care setting? So, I guess that's the first question. At what point that sort of -- is there an inflection point that switches over to the primary care being the primary writers there.

And maybe secondly, I did notice that you started this program to tap into the Medicare, Medicaid population. Is that going to, over time, impact your gross to nets more? How much is going to start having to go through Blink? I guess I'm trying to understand the longer-term dynamics of tapping into that market.

So in thinking about sort of the evolution from GI to primary care, in your question, there's almost a presumption that we have to be in primary care for this to be a blockbuster product. I don't actually think that's true. I think that there is well north of $1 billion revenue potential in GI alone.

And that's also built on the precedent of the PPI experience that -- there are multiple PPIs who reached north of $1 billion of revenue in GI before they made a broadening push into primary care. So, there is sort of past history in the reflux market that adoption first in GI has been a well-worn strategy that multiple products have used, and that's driven the broader adoption. And the GI market is a meaningful market in and of itself.

It's also where there is the greatest concentration of need for our product. So, if you think about the broad population of patients in a primary care office, the portion of patients who are experiencing the most discomfort from their heartburn, who are experiencing the most pain, get referred to GI. So, the distribution of patients in GI needing a more potent reflux treatment is higher and is going to drive faster acceleration.

So, my expectation is this becomes a blockbuster product in GI alone. And then the PCP market is meaningfully additive. We have significant revenue potential and significant runway in GI. So, I don't perceive GI as a starting point and then it transitions to a primary focus on PCP. I view GI as a constant growth driver and then PCP to be meaningfully additive and expanding the market to add significant revenue on top of the GI opportunity.

The second question regarding Medicare, we're really viewing Medicare as not the future revenue driver population because we still get a low percentage of Medicare patients that achieve coverage. The majority of Medicare scripts that go through end up being cash pay scripts that run through the Blink program.

The intent of creating the cash pay alternative for those Medicare patients that don't have coverage is really around both supporting patients that there are patients who need our drug and this provides them access to it and supporting physicians to make it easier for a physician to prescribe the product and to be agnostic as to whether their patient is on commercial insurance or Medicare.

We don't want the physician to have to think twice about, is my patient going to get this product covered? Do I want to prescribe it? We want them to just adopt the habit of prescribing. And for every patient that they perceive needs it, go ahead and prescribe it, go ahead and send it through to Blink. If it's a commercial patient and they get covered, then that's a covered script. And if it's a Medicare patient and they need the cash pay option, Blink can provide the cash pay option. So, it just makes it easier for an HCP to adopt the product and to do so broadly in their practice.

Our next question comes from Yatin Suneja with Guggenheim.

Congratulations, very nice quarter. And I must add impressive above consensus guide because it's really helpful for us in light of all the cost cutting that you're doing.

So, the question from me is twofold. Number one, where exactly are you cutting costs? And how might that impact growth trajectory, if any? And then when you talk about the $55 million cash OpEx in 4Q, should that be considered a steady state as we go into 2026? Or maybe just help us understand how should we think about that? Because if that's the number, we think you could become profitable when the sales reach somewhere in the $70 million to $75 million range. So, I just wanted to check if we are in the right ballpark there.

Terrific. Yatin, thanks for the questions. I think those are going to be helpful in clarifying to a number of folks as they're thinking about modeling this for the future.

So first, where we're cutting costs to get to the $60 million in Q3 and the $55 million in Q4 comes from several categories. The first and the biggest cost savings is actually eliminating our direct-to-consumer promotional program. That becomes a big line-item savings.

And for context there on sort of how we're doing that and not impacting revenue is my own assessment of that program and our internal metrics would suggest that program was just run prematurely that we ran that program at a time when there is not yet broad adoption in the primary care community. And if a DTC program is to work, -- it is intended to activate patients to drive them to primary care, but we don't have enough primary care physicians who are yet writing scripts.

And so, we were driving patients to physicians who don't know the drug and weren't writing and we just weren't getting a return on it. So, by reducing that spend, we're not expecting an adverse impact on revenue. We actually think that instead, we're going to see more uplift in revenue because of the retargeting strategy on GIs, which improves sales force productivity. So that's the first sort of most significant area.

We did do a small restructuring, a modest sort of percentage of total headcount restructuring that will provide some savings as well. There are a significant number of savings that come from third-party vendor contracts that we are adjusting. And just across the board, we're creating fiscal discipline in how we are driving third-party spend.

So, whether it's a marketing-related vendor that is developing marketing materials where we can do things more cost effectively using AI or using internal resources rather than using outside vendor, there's significant savings in that process. So just across the board in a number of areas, we've identified primarily third-party vendor costs that could be reduced and not adversely impact revenue. So we are seeing that already take effect.

As Robert described, we effectively reduced costs by $18 million from Q1 to Q2 in terms of OpEx. Now that was offset by restructuring charges of $6 million that we took in, but you see already from Q1 to Q2, a significant operating reduction recognized. Those operating savings were implemented mid-quarter.

So, we're already at that substantially toward that reduced run rate because we realized those cost savings for the second half of the quarter. We've got clear line of sight visibility to get to the $60 million in Q3 and to get to the $55 million target in Q4 with rigorous investment still in our core sales tactics strategy.

The second element of your question on sort of how to think about the $55 million in Q4 and the go forward. We haven't yet forecasted or published a 2026 OpEx run rate. You should expect that our 2026 OpEx run rate will reflect the significant cost savings that we've had, but there may be some incremental investments that we choose to make in 2026.

So we're not committing that we're going to hold exactly to the $55 million number. There could be some things that we choose to do that either are revenue-enhancing activities or the clinical trial activities. Obviously, we're starting our EoE study in Q4. That's built into the $55 million number. But that obviously will also have expenses into next year.

So there may be some things that we add. The 2026 number might be a slightly higher run rate than that $55 million. We haven't communicated exactly what that magnitude is because we haven't built out our operating plan in that level of detail yet for 2026. But it will be substantially below where the company had been over past quarters.

Our next question comes from Paul Choi with Goldman Sachs.

Congratulations on all the progress. It's good to see you guys going back into the clinic as well for EoE. Can you maybe comment just a little bit on what physician feedback is in that sort of space between generic PPIs and other conventional therapies and the transition into biologics and just sort of what physicians would look for, for an intermediate therapy potentially such as vonoprazan there?

And my second question is, can you maybe just sort of comment on how you're thinking about the timing for the pediatric study? It's been sort of something that's been in there in the background. I'm just wondering if that's something you would consider starting in 2026.

I'm sorry, which study was that you're asking about, Paul, the second one?

Pediatric to get the additional exclusivity period,

Yes. Got it. Okay. So, the -- so in thinking about the EoE opportunity, I think you've hit upon both elements of thinking strategically about the EoE opportunity. There's one element of it, which is the EoE market in and of itself represents an incremental revenue opportunity for us. There's a second element of it, which is that the EoE strategy potentially provides us a path to a written request and the pediatric exclusivity strategy.

So, the first part of it in terms of the market opportunity, today, PPI therapy is first-line therapy in EoE patients. Even though there isn't a large clinical trial that has demonstrated efficacy, there are enough case reports or are enough published experience studies. There is enough experience on the part of physicians and mechanistic data that shows that modifying acid in the stomach has a beneficial impact on EoE, both the histology and the symptoms in that condition that standard PPI therapy has become standard of care first-line treatment.

There is a meaningful opportunity to disrupt that and have vonoprazan potentially become the first-line treatment rather than PPIs with meaningful clinical data that represents a significant large data set that shows efficacy shows the magnitude of improvement. There are case reports from Japan that show significant improvement in histology with vonoprazan.

That underlying data set supports the thesis that we are going to be able to have a fundamental positive impact on these patients through vonoprazan therapy. And there's a possibility that this is, as you described, an intermediate step that first-line therapy is PPIs and then patients graduate to vonoprazan.

There's also a possibility that this becomes the first-line therapy and changes the nature of the treatment paradigm over time as we get clinical data that it actually gets adopted more broadly. But that's to be determined down the road as we get the clinical data from those studies. But that represents a meaningful upside revenue opportunity.

The second half of the value proposition of EoE is, as you described, the pediatric exclusivity extension. This first trial is going to be in adults-only. So this is not going to provide the pediatric exclusivity extension, but it is intended to lead to an end of Phase II meeting and a conversation with FDA about a written request in our past conversations with FDA, they've indicated this could be a potential pediatric indication that would warrant that discussion.

And so there -- we're making no commitments about it because we don't have a commitment from the FDA in this regard, but we have had conversations where there's a possibility of getting a request associated with the Phase III program for EoE that would provide that 6-month exclusivity extension. So that path will be determined at the end of this Phase II trial.

Our next question comes from Umer Raffat with Evercore ISI.

This is Jyhhaw on for Umer. Two questions, if I may. The first question is on ex U.S. strategy. I think the drug pricing letter was sent to a selected 17 companies, not the broad industry. And the scope looks like it's going to be limited within just Medicaid. So we don't know if this will change later, but at least for now, the impact on your business is likely very small. So how are you thinking about your strategy in the ex U.S. market?

And secondly, when I was looking at some of the historic data presented at the medical conferences, there were about 22% patients cycle through 2 lines of PPI and another 14 to 17 cycle through more than 3 lines of PPI. I guess my question is, is this a result of the requirement on the step edits? Or is this just a pattern of how the doctors are prescribing VOQREZNA? And is it going to change when -- where more and more patients switch to VOQUEZNA after just one line of?

So let's take each part of that separately. So the first part on the ex U.S. strategy, at the current time, we're just focused on the U.S. market. We are not spending a significant amount of time thinking through what our launch strategy would be in Europe or in Canada.

We have rights to vonoprazan for 3 territories for the U.S., for Europe and Canada. All of our commercial activities are focused on the U.S., all of the sort of focus of how do we drive our business focused on U.S. The European and Canadian opportunities represent potential upside opportunities, but they also come with the complications of the current market that you described, which is all of the issues around most favorite nations, pricing, et cetera.

And so we're just not, at this point, anticipating any near-term activities in terms of our own launch in the European market. We have, in the past, had conversations with potential European partners around a potential launch. We might elect to do that at some point in time, but that's not the current strategy, but always a possibility that we might explore.

The sort of second half of your question around sort of whether patients fail 1 PPI, 2 PPIs or 3 PPIs prior to getting vonoprazan, that evolves over time as physicians get more and more comfortable with this therapy. So what you're seeing in terms of patients who have been on 2 PPIs or 3 PPIs, it's actually just a reflection of the fact that 30% to 40% of patients on PPI therapy are still experiencing pain.

So it's interesting when we do market research and we look at what physicians report about who the patients are that are appropriate for vonoprazan, some of them indicate a patient who's failed 1 round of PPI therapy. Some indicate patients who failed 2 rounds of PPI therapy.

Some indicate a patient who's on PPI therapy and also adjunct acids. Some indicate a patient who's on PPI therapy and now is double dosing. All of those are manifestations of exactly the same phenomenon, which is a patient who's been on PPI therapy and is still experiencing heartburn. That's our core patient.

All of those strategies are different things that physicians have tried or have recommended to patients that they try to manage their ongoing heartburn, but the phenomenon is exactly the same, which is you've got a patient who's on a PPI who's not adequately resolving their heartburn and they need something more, they need something better. That's the patient we're going to try to switch. And it will just vary by physician practice as to whether they have been through 2 or 3 PPI therapies over the time.

Over time, where I think that goes is it gravitates toward when you fail 1 PPI, why am I switching you from omeprazole to esomeprazole . That's not going to really do anything. If you're failing on omeprazole, you should be switching to our drug. That evolution and thinking is going to come over the course of the coming years of physician experience with this drug.

Our next question comes from Matthew Caufield with H.C. Wainwright.

Congrats on the progress. So it was helpful to see the 68% retail pharmacy filled prescriptions with the remainder coming through the BlinkRx cash pay. So I was wondering, at this point, what is your sense of the steady-state balance between those 2? And can you also comment on the current average BlinkRx cash pay amount?

So it's hard for us to predict what the future steady-state average will be. Obviously, we are seeing both channels growing -- and so retail -- and by the way, some of the retail filled scripts actually have gone through Blink and then went to retail pharmacy. So we're seeing both the covered retail scripts growing and the Blink cash pay scripts growing.

We don't try to manage the business to manage what that ratio is. We try to grow all scripts and both channels will continue growing. And so our conversations with physicians are around driving prescription growth. And the guidance to a physician is if you just send it to Blink, it will be easy.

If it's a commercial script and it gets covered, they'll help you with the PA, they'll run the process to try to make sure that this can run through smoothly. And so it streamlines the process for getting a patient the script if it gets covered, and it also streamlines the process for getting the patient the option to pay cash if it's not covered. And so that's a win-win for the physician and for the patient.

So we're just trying to drive overall script volume, and we don't try to manage to a ratio. We just try to grow both. And we don't consciously say we're growing cash pay or we're growing prescription or growing covered, we are growing scripts and then allowing the best outcome for the patient and for insurance coverage in that process. So there's not an active attempt to try to adjust those.

Was there a second half to your question that I missed in that process?

No, that was very helpful. Yes, the second part was just if there's a sense of the average BlinkRx cash pay amount that patients could be paying in that category.

So Blink, the standard cash pay amount that they pay is $50.

Got you. Okay.

So a patient will be offered a $25 co-pay if they get insurance coverage so that they have a lower co-pay if they're covered. But if their insurance plan is not covering the product, then they're offered the $50 cash pay option.

And I'm not showing any further questions in the queue. And as such, this does conclude today's presentation. We thank you for your participation. You may all disconnect, and have a wonderful day.

Okay. We'll continue with the next session. Good morning, everyone. I'm Paul Choi, and I cover the Biotech sector here at Goldman Sachs. It's my pleasure to have Phathom Pharmaceuticals here for our next session and Steve Basta, CEO, to my immediate left. Maybe what we'll do is kick it off by letting Steve kind of introduce himself, maybe provide a little bit of background. There has been some changes at Phathom recently. And so maybe we'll start with that.

Perfect. Paul, thanks so much for the invitation to join you and to participate in the conference. It's been a really good couple of days of meetings [indiscernible]. It's a pleasure to get a chance to introduce the company to many of the investors who may be dialed in. I joined Phathom a couple of months ago in the context of sort of thinking about how do we accelerate our revenue ramp, and really accelerate uptake of what is an extraordinary breakthrough product in the concept of acid-related disorders and how do we help patients with reflux be substantially more comfortable than they have been in the past. We are in the midst of the launch of VOQUEZNA, which is a transformative product in this space.

We're seeing nice uptake, and there's an opportunity as we focus more on going deeper within the gastroenterology community to be able to drive and accelerate even faster uptake, and we'll talk about that through the course of the day today. But my own background is 30 years in the life science space running a series of pharmaceutical and medical device companies in different commercial spaces and bringing a renewed energy to the commercial launch.

Okay. Great. Thanks, Steve. Maybe we'll start with maybe what's most topical. And obviously, you had a little bit of news this week in regard to the FDA granting your Citizen petition. Can you now that you have the luxury of being able to do this, can you maybe walk us through as you thought about and what's happened with the FDA and your interactions and the process over the past few months, there was a disclosure at the -- after third quarter earnings that you seemed to come to a logger heads in terms of how you're thinking about the exclusivity. You filed the citizens' petition, and now it was granted to you just the other day. And so I guess in terms of the conversation and discussions, sort of how are you able to convince the FDA after what had been seeming an extended period where you had odds and disagreeing about how to think about exclusivity there?

So obviously, I've only been with the company for a couple of months, don't have visibility on all of the past interactions, although all of the characterizations that I've heard in the context of the conversations with FDA would suggest a very different character of the interactions that you're describing. There's no loggerheads. There was simply an interpretation that the company believed was appropriate and FDA took some time to deliberate it and consider carefully what was the right interpretation of the guidelines. What we had proposed to the FDA was that the right exclusivity period for the molecule would apply 2 distinct rules at FDA. One is the GAIN Act exclusivity period; and two is the Umbrella policy. So the GAIN Act provides an extra 5 years of exclusivity on top of the natural 5 years of exclusivity that comes for an NCE on first approval.

The umbrella policy says the same exclusivity period should apply to the same chemical entity across all indications. This was the first time to our knowledge that the GAIN Act exclusivity period, which is related to an anti-infective use of a product would be applied to the same product being used in non-anti-infective uses. And so it was a new policy that FDA had to consider carefully, and they wanted the time to consider it carefully. We provided them the time. We provided them the forum through the CP to be able to do that evaluation, and they came to exactly the same answer we did, which is that these 2 rules do both apply. And if they both apply, you naturally apply the 10-year extension. So I actually would characterize it very differently than you are in that context. I think it's a time of careful deliberation on the part of the FDA through this process, and they came to exactly the right conclusion.

And we're really pleased with where we came out. The simple answer for all of our investors, past history is sort of past history, and I realized that there were some noise around the communications of the fact that those ongoing discussions were happening. Where we are today is we have a clear exclusivity runway so that we have exclusivity through the 2032 timeline that we had requested.

Great. Let's turn to the commercial piece. And the company has expanded commercial coverage quite a bit since the end of 2023. But can you maybe just sort of update us on what progress has been made more and more recently and just sort of what work needs to be done there? And then secondly, where are sort of reauthorization trends -- rates trending right now?

So in terms of progress on the commercial ramp, we are continuing to see new writers adopting the product. We are continuing to see nice refill momentum. Once a patient starts using VOQUEZNA, they feel better. The simple reason why we've got a successful product and why we've got a successful launch is the patients who are on this drug feel meaningfully better than they do when they're not on this drug. And that drives several good phenomena. One, it drives solid refill rates. Two, it drives feedback to the physician who prescribed that reinforces why they should be prescribing this product to more of their patients because that feedback loop when it happens, when a patient is telling a physician, "Hey, by the way, doc, I feel so much better than I did before, that has enormous momentum. And then over time, and this is one of the areas that we are focusing in a bit more, is we are putting more and more emphasis on our GI outreach in the coming months.

We're just in the midst of making that pivot right now to rebalance the amount of time that we're spending in primary care and the amount of time that we're spending in the GI community. And the rationale for that is several fold. One is I believe GIs will be faster adopters than primary care physicians on a new product that has application to multiple indications in the GI space. Two is they have a population of patients that has a higher need state for a product to reduce pain than does the primary care population. So if a patient is in a primary care office and has gastroesophageal reflux, if they're still in pain, they're often referred to a GI. So the percentage of patients in the GI practice with reflux we're still experiencing pain is pretty high. And so their patient population has a high need state for the product. So our focus -- our increasing focus on GI is really around the fact that they've got patients that need this product, they're going to see the benefit by virtue of the patients providing the feedback.

And when that patient goes back to primary care, that's our pathway to convincing a primary care physician because that patient is going to be referred back to their primary care physician for long-term monitoring. And if they come back with a VOQUEZNA script, they're going to feel really significantly motivated to want to offer that to more of their patients. So I think that the path through GI gets us not only GI penetration, but ultimately, primary care penetration. As to how the launch has been going, really pleased with the first few quarters. And I think there's an opportunity to accelerate the ramp. I think that this increased focus on the GI community over the coming quarters is an opportunity to even accelerate the ramp further.

Can you remind us, are there any major insurers or plans that remain to adopt or add VOQUEZNA to their list? And then also just in terms of where you are in thinking about potentially expanding Medicare and/or Medicaid coverage, can you just sort of update us on those coverage plans?

So our focus has really been on commercial coverage rather than Medicare or Medicaid and the vast majority of our reimbursed scripts are commercial scripts. We've got north of 80% of commercial covered lives that have the kind of coverage that we want. Typically, it's a single step edit that a patient needs to have tried and passed through the use of a PPI. And typically, the patient who is getting VOQUEZNA is the patient who's had a PPI, often, had a PPI for many years, sometimes tried more than one, but they are still experiencing significant pain from their reflux despite use of the daily PPI. That fits perfectly with the step edit that's required for most of our insurance coverage.

And again, we're north of 80% coverage. I don't think we ever anticipate that we're going to get to 100%. And so while we continually work on that number, we're in a pretty good place in terms of our broad commercial coverage and the majority of our revenue comes from the commercial covered patients. We have a relatively low coverage within Medicare and Medicaid.

Just on that last point, is it just that the -- as you think about sort of net pricing in the government channel being just sort of relatively unfavorable versus your commercial coverage, is that sort of the primary determination?

Not so much net pricing. It's just most Medicare patients don't end up getting the product reimbursed. So one of the things that we have done recently, and this is really around serving several interests. One is making the product accessible for patients. Two is making the product easy for a physician to prescribe. We've introduced through Blink, who is one of our key partners in this process, we've introduced the opportunity for a Medicare patient who doesn't get coverage because most Medicare claims get denied on this product, they have an opportunity to purchase the product on a cash pay basis. Now it's at a price point of $50 a month. So we don't make much money on it. So the majority of our revenue comes from the reimbursed commercial payments, but we want to enable a patient who's having significant pain to still get access to the product.

It's the right thing to do for patients. So if a Medicare patient doesn't have coverage, they can still access our product through the cash pay price point. It also enables the physician to have a broader patient base on the product and to not have to think twice when they're prescribing the product. They don't have to think about is this patient commercial or is this patient Medicare, they can just prescribe the product, and the patient can get access to it. And if it's commercial, we can potentially get it covered. And if it's Medicare and it's not covered, we can give the patient access on a cash pay basis.

Great. As we on the sell side and the investor community sort of track the scripts and as we look at the data, anything you would comment on sort of the trends to date this quarter through May, either in terms of the data that's publicly available? Or what can you say sort of on sort of the prescriber growth versus the last set of numbers you updated the market with first quarter earnings?

So I won't provide anything that's not already publicly available. We'll just stick to the publicly available information. But if you look at the IQVIA numbers, I think you're seeing a nice uptick in Q2 versus Q1, and that is Q1 was basically flat to Q4 of last year. That is the normal seasonality that you get all the Q1 pressures, patients with new health plans with new deductibles, all of that transition from Q4 to Q1 is pretty standard in the industry, and I know for a number of branded drugs, Q1 was light in that context, we're now seeing a return to growth in Q2 and certainly pleased with that process. And you can see that in the IQVIA trends. The IQVIA trends are a really good indicator of the momentum that we're getting in commercial coverage.

Okay. Great. Maybe just as you as you think about given the sort of limited data set that investors have and thinking about seasonality and just is that something you would expect on the forward in future years, just sort of that Q1 pattern? Is that -- do you think in your mind that's going to be typical?

Yes. I think we experience a Q1 softness every year. The magnitude of it is something that could vary from year-to-year. And one of the things that we will be investigating is, is there a difference in primary care versus GI? And is there a way that our growth rate enables us to grow through that process. But whatever we do to try to accelerate growth in Q1, there's still going to be the natural seasonality. There is still going to be the softness. There are still going to be patients who are on new plans, who have new deductibles who, therefore, are not receiving as much coverage, and that pattern is always going to be there.

Okay. Great. As is often the case with new company leadership, leadership often takes a look at the existing strategy, put some things on pause, accelerates on some other things. I think you've done that to some degree with the marketing strategy. And so can you maybe comment on what sort of metrics or impact you're seeing so far and some of the changes you've implemented? And maybe just remind us where you've implemented these changes, whether what aspects of DTC, digital and so forth and just sort of what your early assessment of these changes are?

Yes. So I think that's really helpful. We are clearly shifting. And the shift comes from a change in the underlying hypothesis that drives our commercial programs. So there had been in our launch, a broader belief that a broader population of the PPI scripts could be converted. And that led to sort of an equal balancing of GI and primary care opportunities. So a gastroenterologist or a primary care physician who wrote an equal number of scripts would get an equal weight in our call patterns. And that presumption there was every PPI script could be converted. I bring a different thought process to it, which is our total available market is not all PPI scripts can be converted. It's really the PPI scripts in patients who are still experiencing pain. That's who's going to be motivated.

The patient who is not in pain is going to be adequately served with a generic PPI, they're going to be fine. So if you take that different vantage point that what we're trying to do is we're trying to convert PPI patients who are still experiencing significant pain. More of those patients are in gastroenterology communities on a percentage basis. So the same -- 2 physicians who prescribe the same number of PPI scripts, one is a primary care, one is a GI. The population of patients in the GI office got referred there because they were experiencing significant pain. They complain to their primary care physician that they were having discomfort. They sent them over to get scope to make sure that there's not some other problem. So the percentage of patients in the GI office who are still experiencing pain is higher than the percentage of patients on PPIs in the primary care office. What that says is you're going to get a better hit rate by spending more time calling on GIs than by calling on primary care physicians.

So we are shifting that pattern. Now that doesn't happen overnight. That takes 1 or 2 quarters to start to really play out because you call on more physicians, you have to call on a physician multiple times to get them to write the first script. You have to call on them multiple times to really get them to go deep to start getting into the habit of writing every week, writing twice a week, writing 3 times a week, eventually writing every day. That evolution happens through multiple sales calls. You're going to see that play out in our growth pattern over the next 1 or 2 or 3 or 4 quarters. As we go deeper into customers, we are also going to be spending more time going deeper into the customers that have already written. That will turn into fewer new writers potentially every quarter. So that may not be as helpful a metric because, in fact, we're shifting sales force time to go deeper with the physicians that are already writing.

There's an opportunity to get physicians who have adopted this product, who believe in this product writing every day because they're seeing patients every day who are experiencing significant pain. But that tactical execution, particularly of shifting some time to GI versus primary care reflects that underlying thought that it's really the patients who are still in pain that are our target and where are those patients. But that also gets to the DTC program and what is the return that we're seeing on the DTC program. And I think the DTC program, just the broadcast and streaming DTC as opposed to digital. We are getting some returns on the digital activities. But on broadcast and streaming, we're not seeing a significant return partly because what I believe is happening, and there's not enough data yet to verify exactly what the pattern is. But what I believe is happening is we are activating patients to go to primary care physicians who are then prescribing a PPI because the average heartburn patient is going to get a PPI first.

And in fact, that's how our access works is you need to get a PPI first. Where we have an opportunity to switch patients is more -- those patients that are in more discomfort that are in the GI practice. That's not really DTC sensitive, that's sales force promotion sensitive. So what we've done in terms of our cost reductions that accelerates our path to profitability is we are reducing spend on those things that are not driving revenue, and we are maintaining our spend on those things that are driving revenue, which is namely our sales force activity. That's what's really driving our conversions of customers and our growth rate.

And we are looking at how do we make the sales force call patterns even more effective and efficient. That should accelerate revenue despite the fact that we're saving a significant amount of money in OpEx. And that should accelerate our path to profitability. So we've communicated to the Street a very clear expense target for Q4. If we continue our revenue ramp, we're going to have clear visibility by the end of this year as to the timeline to profitability. And we've communicated our expectation is to go profitable in 2026.

Okay. Maybe a few follow-ups on that. First, the DTC campaign was out for somewhat of a short time. Maybe do you feel like it just needed a little more time to sink in with the public in terms of receptivity versus -- to early.

I think it's too early. I just -- I don't think it's going to work today. I think it will work in 1 or 2 or 3 years. And it will work -- we were talking earlier about what's that pattern in the GI office. So imagine a patient who's on omeprazole is getting nighttime heartburn. More and more nighttime heartburn, it's eventually getting them to the point where they're waking up at 3:00 in the morning, they're significant discomfort. They go to their primary care physician, doc, I'm still in pain. So they've tried omeprazole, maybe they double their dose. They're still having nighttime heartburn; they're sending them over to the GI. That's a patient we should be switching. We should be switching them in the GI practice.

They come in for their annual physical next year. The doc has in their record, you were having a lot of nighttime heartburn. How are you doing these days? Doc, you know what, when you send me over to that other guy, he put me on VOQUEZNA, and I feel amazing. Close that loop over the course of a year or 2 with primary care physicians hearing back from their patients how fabulous they feel and the softness within the primary care community to convert those physicians to prescribing. So the next time they have somebody come in with nighttime heartburn, they know this is the drug they need to give them because they've heard from their patient.

At that point, we get significant receptivity to a DTC program because we send patients into physicians' offices, they've heard from their own patients how fabulous this drug is, that's where we're going to get significant penetration. We're just too early in the cycle. Where we need to be in this cycle is we need to get deep adoption within the specialty first, from the specialty those patients are going to be going back to primary care, convincing the primary care physician that this drug is meaningfully different. And it feels very different than being on a PPI. And that's when the market is going to be receptive to a DTC campaign.

Okay. Great. Maybe as a second derivative question to that is with the sort of change in the sales call point strategy, can you maybe comment on what has that done to sort of receptivity of BlinkRx as a potential option for?

So we're seeing trends that are very positive in the context of continued adoption of Blink. I think as we spend more time within a specialty office, it's easier with greater depth and penetration within that office to train everybody in the office to be sending the prescriptions to Blink because we actually just have a better pathway through Blink. They will do more rigorous follow-up to make sure that the prior authorization gets completed. They will do more rigorous follow-up with the patient to make sure that the patient gets their refills. It's just a better commercial channel overall to be able to support both the physician and the patient to get access to the product. And where the product isn't covered, Blink has a very efficient system for allowing the patient to get access on a cash pay basis if they're not getting coverage.

So if a patient is getting the product covered through insurance, they're getting a $25 co-pay. If they are not getting coverage, they're having the opportunity to get the product at $50 per prescription on a cash pay basis. So it's a win either way for the patient as a physician realizes that this is a win for their patient, they are sending more of their scripts over. And as we spend more time going deep in terms of the relationships with those offices, more and more offices are sending the scripts to Blink. And that's exactly where we want them to go. That wins for everybody in the system.

Great. Can you maybe just remind us how many of those are historically, at least in the last quarter were converted successfully to a covered one? And then on the forward, how are you thinking about Blink as sort of the steady-state mix of your prescription drivers versus sort of regular normal way prescription filling?

Right. So when we talk about Blink, there are 2 different definitions that the investment community [indiscernible] and they sometimes get a little bit convoluted. So operationally, when we think about a prescription going to Blink, we think about the prescription going to Blink and sometimes it's covered and sometimes it's cash pay. I know that the way that some of the investment community has been modeling this, they really think about Blink as a proxy for cash pay and think about IQVIA as being the reimbursement scripts and Blink is the cash pay scripts. Yes, that is true except that a whole bunch of the IQVIA scripts actually went to Blink. They became -- or came from Blink, right? So the script originally went to Blink, it got submitted, it got covered. And if it gets covered, it goes into the IQVIA numbers.

So the proxy for our revenue that's really helpful is to look at the IQVIA numbers. On top of that, there's a cash pay portion at Blink, but it doesn't generate that much revenue for us because it's low dollars per script. So it doesn't change the dollar revenue number significantly. It does change total filled scripts, but the filled scripts that are reported through IQVIA are the ones that are getting covered. And those are the ones that actually contribute more disproportionately to our revenue numbers.

Okay. Great. I want to ask maybe as you think about sort of next steps and monitoring your commercial strategy, when are you going to start to think about what metrics make sense to you in terms of what you've done and sort of thinking about ROI and just when do you feel like the investment community or in terms of either sales numbers, prescription numbers and so forth, we'll be able to see a tangible change and/or inflection here?

Well, so I think the investment community is going to simply use our TRx numbers as well as our revenue numbers as the key metrics for our ramp. Now internally, we are going to be looking at a number of things that aren't visible to the outside community regarding our sales call effectiveness, our ability to go deep within prescribers, the number of scripts we're getting per prescriber and sort of working through a number of other metrics that are just operational execution metrics that we're going to be tracking that we're going to be trying to drive growth and trying to really drive depth. I want to get every gastroenterologist in the country prescribing this product. We've got a significant number of them, but we're expanding our call pattern to basically every GI, they should all be prescribing this product. They all have patients that have this product.

And then they should be prescribing this product daily. And then they should be prescribing this product multiple times per day because they're seeing multiple patients a day that need this drug. So how do we really go deep within that community and how do we create that depth and those growth patterns within that specialty call point. We're going to be working very tactically at how do we do that. What's going to be meaningful to the investment community, and I'm sure what you're going to be tracking is overall script numbers and overall writers. We've already communicated that we think the analyst consensus estimate for this year, which is around $160 million is sort of a reasonable estimate. We don't actually officially provide guidance, but I think it's helpful to at least give the directional context that, hey, that's a reasonable number for the year.

We're going to keep on working to accelerate the ramp, but I do get that with this tactical repositioning of sales force time to call on -- to go deeper within GIs, that should pay off, but it could take 1 or 2 or 3 quarters to really start to pay off. So you may not see it immediately in the call trends, but a quarter out, 2 quarters out, you're going to start to see some impact, 3 quarters out, even more impact because we're going to be getting more and more traction. And so that's what you should hold us accountable to is are we going deeper in the GI community? Are we getting penetration in all of GIs? Is this becoming a staple product in the GI community? And then we'll be having a conversation about in 2026, 2027, when do we start expanding into primary care more effectively? And what do those growth patterns look like to make this $1 billion drug? What does that look like to make this thing a really big successful product? And we are on a path to do that in a meaningful way.

I want to talk a little bit maybe on a different subject, which is extracting the maximum potential value out of the molecule here over the coming years. And we've been following sort of life cycle management plans, but it seems like some of these plans have been put on pause for a little bit. And so things like EoE had been discussed as a potential next opportunity or indication for vonoprazan. So can you maybe just update us now that you're in the C-suite, just how you're thinking about potentially reapproaching that -- those life cycle management plans? Is EoE still a focus? Or should we think about other programs being sort of top of mind with you?

So I think EoE is a significant opportunity. It's a significant unmet need state. It's an indication for which the first-line therapy today, even though they're not indicated for the indication, it's a population for which first-line therapy today is PPIs. Well, if mitigating acidity in the stomach is already the first-line therapy, and we've got an agent that mitigates acidity in the stomach better, this should become first-line therapy in that population. So it clearly would be a market expanding opportunity for us. There are a number of those opportunities. There are a number of other indications as well where there are market expanding opportunities.

Now that we've got clarity on the timeline, it reopens the question of which indications and when do we do that trial -- do we do that trial. We had announced in our earnings call that we paused it. And one of the factors in pausing it was we had uncertainty about exactly where the CP decision would come out. So if we had uncertainty as to whether we had a 2030 exclusivity or 2032 exclusivity, the time available to realize the market expansion opportunity is different in those 2 scenarios. Now that we have the longer runway, I'm going to be meeting with the team in the coming weeks and reevaluating do we do that trial? Is that trial the right study? Are there any changes that we would make to it before we start that trial? And we'll be providing that guidance in the coming weeks or months to the Street as we get to the clarity on that decision. We don't have that decision today, but it is exactly on point is a question that we would reopen.

Okay. Maybe as a follow-up to that, in terms of expanding the -- or extending the regulatory period, one of the considerations also is a pediatric indication. And so sort of what are the, I guess, challenges of doing a pediatric study in this population and just -- and how soon would you make a go or no-go decision on that potential?

So the pediatric extension is actually one of the variables that at play in the context of thinking about the EoE trial. One of the things that FDA has asked for with the guidance that they introduced a few years ago is in the context of the pediatric exclusivity 6-month extension, they are often now requesting a new indication data, not just data in children in the existing indication. So we have to do the studies in GERD in children. That's part of our post-approval requirements. But in addition to those studies extending into a new indication and EoE is one of the potential opportunities to do that. So that's a part of the consideration in the EoE study is what is the path to getting that extension? Will this qualify? How do we work through that process, we're going to be assessing that. Because we absolutely do want to get the 6-month extension if we can get it.

Sure, of course. I want to ask you a little bit about the longer-term strategy as well. And the company in the past has talked about potentially considerations of an OTC program as well as an authorized generic. What are your views on those 2 potential strategies and life cycle management -- as life cycle management options? Is there a preference for one or the other? And just how do you think about going and developing those programs?

So I think an OTC switch for this product eventually happens naturally, but it happens much closer to the loss of exclusivity date. So this is 7 years out. It's a thing we're going to evaluate, and we're going to do that assessment, but there's no urgency to having to figure it out today. We've got enough runway that we've got some time to do some careful thoughtful planning in that process. And similarly, the concept of an authorized generic again, I've seen companies do that very late in their exclusivity window. So is that a 2031, 2032, 2033 kind of thing? Maybe. Haven't analyzed it yet, haven't looked at it. We've got a whole bunch of runway before we think about what that looks like.

Okay. Continuing on the thread of sort of longer-term planning, what is your appetite now that you've come into the company about either working on internal pipeline development outside of vonoprazan or potentially looking externally and getting another asset for extending or adding to the pipeline here?

Right. So I think there are 3 ways to think about expanding our market opportunity within the context of indications. One is new indications for vonoprazan, EoE being a perfect [indiscernible] others, Barrett's and others might be possibilities. The second opportunity is thinking about combination products where vonoprazan plus something else might provide meaningful advantage because we've got -- there are a number of things that work in combination with PPIs, and there may be some things -- some opportunities that are combinations, we will evaluate those as well.

And the third and one that we are actively starting to look at is in-licensing other molecules. Thinking about the fact that we've already invested in building a commercial organization that has the capability to do clinical development, regulatory work in GI and significant deep clinical and regulatory expertise. And now with the increased GI commercial focus, we're going to have a sales organization and an MSL team that has relationships with every gastroenterologist in the country. And with the importance of this product to their patient base, really deep relationships in the coming years with every gastroenterologist in the country. That is an enormously powerful base from which to launch new products. And there will be, and there already are products in the GI space where they have good clinical data in the current VC funding environment, it's hard to raise money to fund clinical programs in some cases.

So there may be assets that are available. I expect we're going to look at 10 or 20 of them in order to find 1 or 2 that are interesting. So I don't know exactly what the timing is. I don't know which specific opportunities there will be. But the opportunities are plentiful in terms of products that have meaningful clinical data, meaningful commercial opportunities where it's more cost effective for us to develop it and it's more cost effective for us to commercialize it than it would be for a stand-alone company to do so. And that's the opportunity to leverage what we have to build a leading GI franchise that has sustainability beyond 2032, 2033 kind of date.

Okay. Steve, earlier, you talked about having visibility into profitability perhaps as early as next year. And I wanted to -- following up on that, I just want to ask how you're thinking about your capital needs and capital position over the coming years.

So we don't anticipate that we're going to need to raise additional funds. It's possible that we might choose to do so, but we don't anticipate that we're going to need to. The intention of bringing down our operating expenses, and we've communicated that the expectation is to bring OpEx to below $55 million by Q4. The pattern that you're going to see is Q1 obviously had much higher OpEx. Part of that was the DTC program, but part of that is pretty aggressive spend in a number of areas. Q2 will still be high. It will probably be a little bit lower than Q1, but still pretty high because a lot of the expenses we couldn't turn off during Q2. We just announced May 1. So we're in the middle of Q2.

Not on...

So you can't turn things off immediately. It takes 1 or 2 or 3 months to turn some of the activities off. So Q2 is still going to be really high. Q3 is going to come down substantially. By Q4, we've committed to being below $55 million. As our revenue ramps, I think most of the analysts have us in the $50 million, $60 million kind of run rate by Q4. So we're not profitable yet by Q4. But obviously, the burn gets diminished substantially, and it positions us to get into profitability in 2026. Now obviously, our cash number is going to come down because we're going to burn a bunch in Q2, we'll burn less in Q3, burn even less in Q4.

Our expectation is that we can stay north of our debt covenants and not need to raise cash. It's possible that we get close, and we choose to raise a little bit, but we're not going to need to do a financing most likely. That positions us to then be generating positive cash by potentially the second half of 2026 and be in a really good place in terms of our ability to, in the future years by 2027, 2028, be making investments in new clinical programs, in new products and building out a full GI pipeline, but do so out of operating cash flow rather than out of invested capital.

Okay. Unfortunately, we've run over time here. So we'll have to end it on that note. Thanks, for joining us.

Paul, thanks so much. Real pleasure.