Phathom Pharmaceuticals, Inc. Common Stock 2026 Q3 Earnings Call

Hello everyone, and thank you for joining us this morning to discuss Phathom's third 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. 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 result of operations and the trading prices for Phathom's common stock. 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, today's 10-Q, 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 obligations 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 non-cash 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.

I am pleased to share with you this morning the solid execution Phathom posted in the third quarter. Over the past year and a half, Phathom has significantly strengthened our financial position. In Q3, we delivered our second consecutive quarter of positive operating profit, excluding stock-based compensation, and once again generated positive cash flow. This quarter's net revenues grew by about 71% compared to Q3 last year and about 14% compared to last quarter. We are focused on making it easier for physicians to prescribe VOQUEZNA and for patients with GERD to get it. The physicians we talked to are already convinced of the clinical value of VOQUEZNA. In recent market research, 97% of HCPs we surveyed rated VOQUEZNA's efficacy as favorable compared to other GERD treatment options.

Our job now is to make it as easy as possible for providers to prescribe VOQUEZNA for GERD and for their patients to be able to access it affordably. Over the last few months, we have implemented our Access First initiatives, including multiple levers to help improve VOQUEZNA's access experience for physicians and patients. Our reps are making meaningful headway in GI offices every day, and we believe we are well-positioned to close out the year with a strong fourth quarter. I would like to turn briefly to a few key financial highlights for the quarter, and then Sanjeev will provide further commentary during his portion of the call. For Q3, we reported net revenues of $84.7 million, cash operating expenses of $60.5 million, positive operating profit of $5.8 million, both of those operating metrics excluding stock-based compensation, and cash generated from operations of about $2.1 million.

We are proud of our results this quarter and reiterate our full year revenue guidance of $310 million to $325 million heading into Q4. A few quick notes on our commercial metrics for Q3. Since launch, through October 16th, over 2 million VOQUEZNA prescriptions have been filled. After achieving our first million prescriptions just over 2 years into our launch, we are thrilled to have reached our second million milestone less than a year later. Of the approximately 380,000 prescriptions that were filled in Q3, about 248,000 were covered prescriptions, representing approximately 65% of the total, while about 132,000 were filled as cash pay. Compared to last quarter, this represents 19% growth in covered volume and 6% growth in cash volume. One note on data reporting. IQVIA recently adjusted their projection methodology for VOQUEZNA, which took effect for the data week ending October 9th.

These types of updates are commonplace by IQVIA as brands mature. As we discussed on our last call, we believe the key hurdle to broader use of VOQUEZNA in the treatment of GERD is making it easier for physicians to prescribe it and for patients to obtain it. When physicians consider whether to prescribe VOQUEZNA for GERD, they consider patient need, the amount of effort required of their staff, and their confidence level that the patient will actually receive the drug at an affordable cost. To address this, we have shifted our sales force to focus on Access First. Our reps are educating physicians and their office staff on PA requirements, the support available through our pharmacy partner, BlinkRx, and multiple patient support programs. This is not a complex strategy, but it requires steady blocking and tackling, office by office and physician by physician, which we acknowledge takes time.

Increasing physician utilization of BlinkRx is a key part of our Access First strategy. When prescriptions are sent to BlinkRx, we observe higher PA submission and approval rates, and ultimately, overall TRX fill rates are significantly higher compared to retail pharmacies. We continue to educate HCPs that BlinkRx assists with navigating the prior authorization process with HCPs and patients, keeping patients informed throughout the prescription fulfillment process, automatically applying our patient support programs when available to the patient, and helping patients access the lowest out-of-pocket cost available to them. At the end of Q3, we rolled out a $0 copay offering as part of our Access First strategy, available only through BlinkRx. We believe this new offering will encourage prescribers to use BlinkRx.

Rather than focusing on the potential difference in out-of-pocket costs between VOQUEZNA and a generic PPI, physicians can now consider whether VOQUEZNA is an appropriate treatment option for their patients with GERD, knowing that eligible commercially insured patients may pay as little as $0 out of pocket. We are seeing positive early signals of the impact of these programs, and we will continue to work to improve perceptions of access and affordability for VOQUEZNA. Turning briefly to our development programs. In EoE, we anticipate reporting top-line data from our Phase II pHalcon-EoE trial in Q4. The primary endpoint in this trial focuses on histologic improvement, a reduction of eosinophil counts after 12 weeks of treatment. Symptom improvements will also be evaluated as secondary endpoints. The additional 12-week open-label safety extension portion of this trial is ongoing.

Our Phase III pHalcon-NERD-302 study of VOQUEZNA for as-needed treatment of non-erosive GERD is currently enrolling patients. In this trial, patients are treated daily for four weeks with VOQUEZNA, then are randomized to as-needed treatment with VOQUEZNA or with placebo for six months. The primary endpoint will evaluate VOQUEZNA's ability to provide complete relief by two hours that is sustained for 24 hours. We expect top-line data in Q1 2028 and believe that if the trial is successful and we gain approval, we would unlock an incremental market opportunity for the many patients with GERD who don't want to continue taking PPIs on a daily basis. Lastly, I'd like to briefly touch on recent developments related to VOQUEZNA's exclusivity period. On October 21, 2026, BDR Pharmaceuticals filed suit against the FDA, principally challenging the FDA's alleged refusal to receive their ANDA referencing Phathom's NDA for VOQUEZNA.

Their suit alleges that the FDA improperly applied the GAIN Act to extend the NCE exclusivity for VOQUEZNA tablets. A second purported ANDA filer has subsequently filed a notice that it intends to move to consolidate its case with BDR's. Recall that the FDA conducted a thorough review of this matter via Phathom's citizen petition and came to a decision in June of 2025. Their decision was that 10 years of NCE exclusivity, as extended by the GAIN Act, would apply to all products containing vonoprazan. The FDA thereby recognized NCE exclusivity for VOQUEZNA tablets through May 3, 2032, and updated the Orange Book accordingly. On October 23, 2026, the FDA opened a public docket for 30 days to solicit comment on legal and regulatory questions raised by BDR's suit, which they felt were new compared to our citizen petition request.

We believe the FDA arrived at the correct decision following our citizen petition. Phathom has intervened in the litigation filed by BDR to continue to defend our statutory exclusivities. We intend to vigorously defend our position. I will now turn the call over to Sanjeev Narula to take you through our financial updates. Sanjeev? Thank you, Steve, and hello, everyone.

We are pleased with our Q3 financial results, and I believe we have strong momentum heading into the end of 2026. With that, let's go into our results. Revenues for Q3 were $84.7 million, reflecting year-on-year growth of $35.2 million, or 71%. Sequentially, revenue grew $10.4 million or 14% over Q2 2026. Covered prescription trends were strong, growing about 19% sequentially. While we observed wholesale inventory at the end of Q3 to be slightly lower than the levels at the end of Q2, we still delivered solid revenue growth. Our gross-to-net discount for Q3 came in slightly below our guidance. The results were driven by the channel mix for VOQUEZNA prescription and by decreasing accruals in connection with lower wholesale inventory levels. Both items had a modest positive impact on our gross-to-net for this quarter.

Our gross profit margin landed at approximately 78% for Q3, below our guidance. The variance was due to the inclusion of certain one-time charges in our cost of revenues. Third quarter cash operating expenses were about $60.5 million, an anticipated slight step-up compared to last quarter, which we outlined during our previous earnings call. On R&D side, the increase was primarily due to incremental clinical trial cost for our EoE and as-needed studies. On SG&A side, the increase was primarily tied to investments in our sales and marketing effort, including our Access First initiative. I am proud to report that for a second consecutive quarter, we have delivered operating profitability and generated cash from operations, ending the quarter with $184.6 million in cash and cash equivalent. This quarter's performance clearly demonstrate a pivot in the evolution of the company. Our capital structure is supported by a strong balance sheet.