Earnings call transcript: Phathom Pharmaceuticals beats Q1 2025 earnings expectations

Phathom Pharmaceuticals Inc. (PHAT) reported a better-than-expected performance for the first quarter of 2025, with earnings per share (EPS) of -1.07 USD, surpassing the forecast of -1.11 USD. Revenue also exceeded expectations, reaching 28.5 million USD against a forecast of 27.75 million USD. According to InvestingPro analysis, the stock appears undervalued at current levels, though the company’s overall financial health score remains fair at 1.94 out of 5. Despite this positive financial performance, the company’s stock fell 1.4% in premarket trading to 4.23 USD, reflecting investor caution.

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Key Takeaways

• Phathom Pharmaceuticals exceeded both EPS and revenue forecasts for Q1 2025.
• The company’s stock declined by 1.4% in premarket trading despite the earnings beat.
• Gross margin remained strong at 87%, with robust prescription growth.
• Operational cost-cutting measures are underway, targeting profitability by 2026.

Company Performance

Phathom Pharmaceuticals demonstrated resilience in Q1 2025, managing to surpass earnings expectations despite a challenging market environment. With a strong current ratio of 4.2x and liquid assets exceeding short-term obligations, the company maintains solid financial flexibility. The company continued to grow its prescription base, with a notable 8% increase in prescriptions from the previous quarter. However, the stock’s decline suggests that investors remain cautious, possibly due to ongoing losses and strategic shifts, reflected in the significant 76.5% decline over the past six months.

Financial Highlights

• Revenue: 28.5 million USD, a slight decline from the previous quarter.
• Earnings per share: -1.07 USD, better than the forecast of -1.11 USD.
• Gross margin: 87%, indicating strong cost management.
• Cash and cash equivalents: 212 million USD, providing a solid financial cushion.

Earnings vs. Forecast

Phathom Pharmaceuticals reported an EPS of -1.07 USD, beating the forecast of -1.11 USD by 0.04 USD. Revenue came in at 28.5 million USD, exceeding the forecast by 0.75 million USD. This marks a positive deviation from expectations, suggesting effective cost management and operational efficiency.

Market Reaction

The company’s stock fell by 1.4% in premarket trading to 4.23 USD, close to its 52-week low of 3.81 USD. This decline, despite the earnings beat, indicates investor concerns about the company’s long-term profitability and strategic direction.

Outlook & Guidance

Phathom Pharmaceuticals aims to achieve profitable operations by 2026 without requiring additional financing. The company is implementing cost-saving initiatives, including a reduction in staff and marketing expenses, to align with this goal. With a negative free cash flow yield and rapid cash burn rate, these efficiency measures are crucial. Revenue targets for the full year remain in line with consensus expectations, with analysts projecting nearly 200% growth.

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Executive Commentary

CEO Steve Bosta emphasized the company’s transition towards profitability, stating, "We are at an inflection point for FAVEN, transitioning from an early-stage company to a stable, profitable organization." Bosta also reassured stakeholders, "My promise to you is that in all our actions, my priorities will always be to serve our patients, our team, and our investors."

Risks and Challenges

• Continued net losses may impact investor confidence.
• A high gross-to-net discount rate could pressure margins.
• The paused Phase II study for eosinophilic esophagitis raises concerns about R&D pipeline robustness.
• Market competition, particularly the potential entry of Sabella, could affect market share.
• Macroeconomic pressures and healthcare policy changes may influence operational costs.

Q&A

During the earnings call, analysts inquired about the sales strategy and the impact of potential market entrants. Management confirmed no reductions in the sales force and expressed confidence in their product’s market potential, while remaining flexible about the timing of achieving profitability in 2026.

Full transcript - Phathom Pharmaceuticals Inc (PHAT) Q1 2025:

Conference Operator: Please be advised that today’s conference is being recorded. With that, I would like to turn the conference over to Eric Schirrelli, Fathom’s Head of Investor Relations.

Please go ahead.

Eric Schirrelli, Head of Investor Relations, Fathom: Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Fathom’s first quarter twenty twenty five results. This morning’s presentation will include remarks from Steve Bosta, our President and CEO and Molly Henderson, our Chief Financial and Business Officer. Robert Breedlove, our VP of Finance and Principal Accounting Officer, will also be joining the team during the Q and A portion of today’s call. Just a couple of logistical items before we get started.

Earlier this morning, we issued a press release detailing the results we will be discussing during the call. A copy of that press release can be found under the News Releases section of our corporate website. Further, the recording of today’s webcast can be found under the Events and Presentations section of our corporate website. Before we begin, let me remind you that we will be making a number of forward looking statements throughout today’s presentation. These forward looking statements involve risks and uncertainties, many of which are beyond control.

Actual results can materially differ from the forward looking statements, and any such risks can materially adversely affect the business, the results of operations and the trading prices for Fathom’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 ks and subsequent SEC filings. All forward looking statements made on this call are based on the beliefs of Fathom as of this date, and Fathom disclaims any obligation to update these statements. With that, I will now turn the call over to Steve Bosta, Fathom’s President and CEO, to kick us off. Steve?

Steve Bosta, President and CEO, Fathom: Thank you, Eric, and thank you to everyone joining the call today. I’m pleased to be here speaking with you all today as I considered my choice to join Fathom, the piece that was abundantly clear to me in all of my conversations was the tremendous impact that AQUESNA is having on patients’ lives. My focus throughout my career has been helping patients by delivering products that improve patient care and outcomes. This journey with Fathom builds on that focus. There are tens of millions of patients in The US that suffer from GERD and many of those patients are inadequately treated by current PPIs.

Based on our clinical data and the many, many patient testimonials and testimonials from prescribers, we know that ProQuestna delivers a meaningful improvement to the management of acid reflux. My first priority as CEO is to accelerate the launch of this great drug and build a profitable successful company for our employees and our shareholders. Before I address the operational topics that were discussed in today’s press release and that we’re going to go into in more detail, just a quick background might help for those who don’t know me. I’ve sat in the CEO seat for over twenty years leading biopharma, medical device and digital health companies. Each of those experiences had unique challenges.

A common theme across all of them has been my commitment to commercial creativity. I’ve built businesses and created value where others doubted the initial market opportunity. As I look at this new journey with Fathom, I can promise you that I will bring fresh perspective, a hands on approach, and a sense of urgency to growing this company. Fathom successfully developed a great drug and launched the Vaquesna to already within the first eighteen months, an annualized run rate of 120,000,000 in net revenues. That’s a great start.

Our future success centers around growing sales to achieve the significant potential and managing costs to reach profitable operations in 2026, thus mitigating financing risk and overhang and ultimately building a durable business with Vaquesa as the foundation of that business. Our operating priorities represent a shift somewhat compared to the company’s previous targets. We recognize that, you know, when the stock was trading near $20 per share, our access to capital was much more flexible than it is today. The cost of capital if we were to raise at $4 a share is more dilutive, and thus we’re taking steps that reflect that reality by responsibly managing expenses. I’m working with our team to establish the disciplined approach to spending based on efficiency with rigorous consideration of leveraging the high leverage growth drivers.

We have four priorities for the remainder of 2025. First, and absolutely our focus is on growing Vaquesna sales to maintain our revenue ramp. Second is clarifying our exclusivity timeline, you know, hopefully through our pending citizens petition and getting a clear answer from FDA, or if we don’t get a clear answer from FDA by taking the appropriate next steps if necessary. Third is implementing the cost savings that we are starting today, and we’ll be executing over the course of the coming months with vigilance on a number of our areas of spending to achieve profitable operations in 2026. And fourth is then charting a value creating future for Fathom that leverages the extraordinary potential of AQUESNA and builds on that foundation to create a durable sustaining company.

Today, we’re announcing that we will be implementing cost savings initiatives to reach operating expenses, excluding interest, stock comp,

: and certain

Steve Bosta, President and CEO, Fathom: accruals of less than $55,000,000 per quarter in Q4 of this year. These spending reductions in combination with the continued focus on revenue growth are intended to enable us to achieve profit from operations in 2026. Importantly, our target is to be able to achieve this with our current cash on the balance sheet without the need to draw down additional debt or raise additional equity. This reframing of our strategy does not imply a departure from our belief in Buquesna’s commercial opportunity. Rather, it just reflects the reality of the current capital markets and brings a much needed sense of urgency and cost control to our operations.

We remain focused on driving top line growth, and we believe our sales organization represents the core means by which we can achieve that goal. Our prioritization on profitability will require notable changes across the business, many of which you likely already saw in this morning’s press release. Let me start by addressing some of the personnel related changes. In the context of our cost reduction initiatives, Osme, Martin, and Molly will transition out of Fathom in the coming weeks. Osme will continue to advise the company to support our citizens petition process, some of our regulatory activities in future potential product pipeline strategies.

Robert Breedlove, who is currently our VP of Finance, and joins us on today’s call to address questions, has also been appointed Principal Accounting Officer. These transitions are aligned with our goal of streamlining operations. Several key functional leaders will now report directly to me providing for greater operational efficiencies and a commercially focused leadership team. With the reduction of some marketing and development activities, we’re also implementing a reduction in force that will reduce total staffing by approximately 6%. We’ve carefully assessed our commercial and development initiatives to consider the return on investment of our core strategies and investments, and we’ve decided to deprioritize certain initiatives and prioritize others.

Most notably, at the end of q two, we’re halting our broadcast cable and streaming television promotion, which are the largest DTC spend categories. We will be maintaining certain digital promotion activities which are providing higher ROI. So we’re choosing to invest in the areas with higher ROI and reducing spend in areas that may have lower returns. As I mentioned earlier, the core driver of our revenue growth is in our field sales organization. We’re maintaining the strength of that organization and have brought in new leadership, which we announced today.

I’m delighted to welcome to fathom our new SVP of sales, Jonathan Bentley, who joins us from Intracellular Therapies following their successful acquisition by J and J. Jonathan brings a wealth of knowledge and experience and a fresh perspective to our sales team, including prior GI experience, when he was with Salix. Jonathan will be a key member of our leadership team and leads the largest component of our organization, which is our commitment to our field sales organization. In R and D, we paused plans for our pending Phase II eosinophilic esophagitis study. That study had not yet begun to enroll patients.

We will evaluate over the coming months whether to initiate the study in the future based on the outcome of the Citizens Petition decision and strategic and financial considerations. Shifting for a moment to our citizens petition, which I know our shareholders are focused on. The FDA’s decision on this matter is of critical importance to our exclusivity runway. Since I joined the company, I’ve worked closely with the team to understand the situation and identify if there are any ways in which we can positively influence FDA’s consideration. The FDA is due to respond to our citizens petition in early June.

A positive response would confirm our regulatory exclusivity to 02/1932. If we receive a negative or indeterminate response, we’re going to consider the appropriate next steps and expect to take action to pursue the objective of maintaining exclusivity into 02/1932. We continue to have confidence in our legal position. The FDA granted QIDP status and a five year exclusivity extension to our HP Vaquesna treatment packs. Under established FDA practice, that same exclusivity period should appropriately apply to all forms of the new chemical entity, phenoprazin.

Unfortunately, FDA decisions and timelines are not within our control. I’m certainly aware of the uncertainty and concern that this pending decision has caused and the importance with which this topic is viewed by our investors. I’m confident that we have a correct interpretation of the FDA policy and solid arguments that should prevail. And I’m also confident that no matter which exclusivity period ultimately results, we have a meaningful path to creating significant shareholder value. Our initiatives today to continue ramping sales and to managing expenses to reach profitability next year are our first step on that path to creating significant value.

As for our first quarter twenty twenty five results, we reported net revenues of $28,500,000 and ended with $212,000,000 in cash. Our target is for this balance to be able to support our restructured operations without the need for additional financing through the point of reaching profitability next year. Molly will share further details on these results in our commercial KPIs shortly. Lastly, one note on the manufacturing front that does not affect our core Vaquesna tablet product, but does impact one of our H. Pylori combination packs.

We’ve been informed of a possible future disruption in the supply of Baquesna triple packs. We’re monitoring that situation closely and have not experienced any commercial disruption to date. But given the possibility that we could experience such, we wanted to inform our investors to avoid any possible future surprise. Given the limited sales contribution of the triple pack and the fact that the dual pack availability will not be affected, we do not anticipate any material impact on our revenues or operations if the supply disruption to the triple pack occurs. We could also switch our HP marketing emphasis quickly to the available dual pack if this develops.

We are at an inflection point for FAVEN, transitioning from an early stage company to a stable, profitable organization. We have only just begun to see Vopresna’s market potential. The launch has been going well, and there’s so much growth ahead for this extraordinary product. In all of my meetings so far, consistent theme is that patients and doctors love this drug. It really has a profound impact.

Vopresna’s benefit is a rapid, potent, and durable acid suppression profile. We are starting to make internal decisions with both a top line and bottom line focus. This will make us a stronger company and will help us drive Vopresna to reach its blockbuster potential. I will now turn the call over to Molly to provide further details on our recent commercial progress and financial results. Molly?

Molly Henderson, Chief Financial and Business Officer, Fathom: Thanks, Steve, and hello, everyone. Today I’ll be sharing updates on our key performance metrics since our last earnings report eight weeks ago and outlining our financial results for the first quarter of twenty twenty five. Starting with the latest Voclizna prescriptions, we have now surpassed 390,000 scripts filled by patients from launch through April 18. Over the eight weeks since our last earnings report, this figure has grown approximately 30%. In the first quarter specifically, we recorded approximately 127,000 filled Vaquesna prescriptions equating to a growth of about 8% over the fourth quarter.

Among the scripts filled this quarter, we observed roughly 75% being filled by repeat patients on Vequestim. These results include the typical seasonal Q1 softness and also account for an anticipated downward adjustment by our data provider IQVIA. IQVIA has informed us that a retroactive projection adjustment will be made in June, impacting data for the weeks ending January 10 through April 4 of this year. This is due to an overstatement in their mail channel volumes. As a result, we have incorporated an estimated 5% impact for this adjustment per IQVIA guidance in the Q1 filled prescription metric we reported today.

As of April 11, this has been adjusted in their weekly script data. Despite all of this, we have still demonstrated prescription growth, and we are pleased to see continued momentum with these KPIs. During the first quarter, access to Voclizna through our primary patient support program partner, Blink Rx, helped to offset some of the seasonality by offering patients a cash pay option, which can be a beneficial alternative for those affected by health plan changes and high deductible resets. As a result, the proportion of scripts in the first quarter which flowed through retail pharmacies and were captured by IQVIA changed to approximately seventy percent from seventy five percent in the fourth quarter, thereby representing a 70 to 30% split between retail and cash pay. In parallel, the number of prescribers who have written a filled script has increased to over 23,600 as of April 11 compared to over 20,000 as of our last report, demonstrating steady adoption over these last eight weeks.

Additionally, through the end of Q1, about 22,800 cumulative prescribers have written a filled Requesna prescription, up nearly 30% compared to the fourth quarter. Among this group, primary care prescribers continue to represent the majority of writers. On the access front, our commercial coverage remains consistent with over 120,000,000 lives covered, representing above 80% of the total commercially insured market. And beginning in April, we rolled out a new cash pay consignment program through Blink Rx that allows government patients whose insurance does not cover Vopresna to access the product outside of their insurance benefits. This program functions in a similar way to our existing commercial cash pay consignment program while requiring additional enrollment criteria.

We are pleased to be able to make VAPUSNA more accessible to this group of patients who make up approximately 50% of the GERD market. Before I begin discussing our financials, I’d like to share that today marks my final earnings call with VAPM. With the company entering a new phase under Steve’s leadership, we felt this was the right time to also transition the financial leadership. Over the next couple weeks, I’ll be working closely with Robert Breedlove, who has been involved with Fathom since its inception and will assume the role of principal accounting officer. I remain proud of what we have accomplished during my time at Fathom and believe the company is well positioned for continued success.

Now turning to the financials. Note that similar to prior quarters, I will be commenting on both GAAP and non GAAP financial measures. Supporting schedules with detailed reconciliations between non GAAP measures and their most directly comparable GAAP measures will be discussed later in my section and can be found in this morning’s press release. For the first quarter twenty twenty five, we reported net revenues of $28,500,000 down slightly on a sequential quarterly basis. Despite the increase in prescriptions filled, revenues were impacted by a shift in volume toward cash pay and elevated stocking at the end of twenty twenty four.

Specifically, recall that we noted wholesalers increased their inventory on hand by approximately one extra week at the end of last year, and those extra shipments were then earned through in the first quarter. We estimate this resulted in approximately $2,000,000 in additional stocking revenue in the fourth quarter of twenty twenty four. As of the March, wholesaler inventory levels have now returned to previous averages, approximating two weeks. Our gross to net discount rate this quarter was 53%, a slight improvement compared to the guidance we provided last quarter. We continue to expect our gross to net discount rate to range between 5565% on average for the remainder of 2025.

Moving down the P and L to our operating expenses, we reported non GAAP R and D expenses of $7,900,000 and non GAAP SG and A expenses of $90,300,000 for the first quarter of twenty twenty five, which represents a 4% decrease and 57% increase, respectively, compared to this period in 2024. As part of our SG and A expenses, we incurred advertising costs of $28,300,000 in connection with their new celebrity endorsed direct to consumer initiatives, representing a 40% increase compared to the fourth quarter of twenty twenty four. This change in spending levels was primarily driven by the timing and nature of our clinical operating activities on the R and D side and the expansion of commercial investment in support of AQUEZINE launch on the SG and A side. With regard to cost saving efforts described by Steve, Q2 expenses are expected to be relatively consistent with Q1, and we expect a more material reduction in operating expense beginning in the third quarter of this year. As a result, we are reducing our previous non GAAP full year 2025 operating expense range by 60,000,000 to $70,000,000 to $290,000,000 to $320,000,000 For the quarter ended 03/31/2025, we reported gross profit of $24,800,000 which equates to a gross margin of 87%, similar to last quarter.

After accounting for quarterly cash expenses, we reported a loss from operations of $73,300,000 excluding stock based compensation. Non GAAP adjusted net loss for the first quarter of twenty twenty five was $77,100,000 or $1.07 loss per share compared to $64,800,000 or $1.11 loss per share for the same period in 2024. Consistent with past earnings reports, the most significant reconciling item between GAAP and non GAAP operating expenses was noncash stock based compensation. Other non GAAP reconciling items include noncash interest on our revenue interest financing liability and noncash interest expense related to amortization of debt discount. Lastly, as of 03/31/2025, cash and cash equivalents were $212,000,000 Based on recent script trends, we have initiated discussions with our debt lender to lower the revenue triggers for the remaining debt tranches.

That being said, based on our current revenue forecast and revised spend goals, our target is for current cash balances to be able to support operations through the point of reaching profitability in 2026, excluding stock based compensation and without the need for further debt or equity financing. With that, I’ll turn the call back over to Steve for closing remarks. Steve?

Steve Bosta, President and CEO, Fathom: Thank you, Molly. And thank you again to everyone joining us on today’s call. It’s my pleasure to be joining Fathom at such a crucial point in the company’s journey. We are fortunate to be able to build a business around a game changing product that has the potential to improve the lives of millions of people. My goal is to deliver on that opportunity.

Throughout the call today, you’ve heard how we are fundamentally shifting the way we do business. Going forward, our strategic decisions will be driven by dual objectives. First, driving revenue growth. And second, being able to reach profitable operations in 2026 without requiring additional financing. Staying true to these pillars will put us on a path to success and will enable us to grow the business even further in the years to come.

My promise to you is that in all our actions, my priorities will always be to serve our patients, our team, and our investors. And to our investors specifically, we’re dedicated to being good stewards of your funds, and we’re committed to rewarding your confidence in our mission. Thank you again for joining us today. We appreciate your continued interest and support. I will now turn it over to the operator to facilitate a Q and A session.

Operator?

Conference Operator: As a reminder, to ask a question, please press star Our first question comes from Joseph Stringer with Needham and Company. Your line is now open.

Joseph Stringer, Analyst, Needham and Company: Hi, good morning. Thanks for taking our questions. Just curious if you could provide some more color on the timing of the C suite changes here. Why now just ahead of the CP decision? And what impact, if any, do you think these changes will have on the entire CP process?

And I guess as a follow-up to that, regarding the CP decision, in the scenarios where FDA says either yes or no, it seems pretty clear what next steps are. But I suppose in the scenario where FDA says they need more time, can you walk us through what that scenario looks like in terms of timelines and potential next steps? Thank you.

Steve Bosta, President and CEO, Fathom: Certainly, Jess. Thanks so much for jumping in with the question. In terms of the management changes, there’s going to be no interruption on our CP activities. We’ve got a team that is working with FDA that will continue those conversations. Osme on the management team has been the key point person leading that along with a couple of other colleagues internally and with external advisors.

He’s going to continue to work in that effort. As we communicated in the release, he’s going to retain an advisory role so he can be actively engaged in that. There’s going be no interruption in our prosecution activities related to the conversations with FDA. And the second half of your question is sort of what happens if we get a positive, negative, or a need more time kind of response, you’re right. If we get a positive response, really simple.

Then we’ve got the extra exclusivity runway and negative response, we clearly will need to take action. Likely in the need more time scenario, we will also need to take action because we can’t just sit in limbo and be on hold for a protracted period of time. But I say that with a qualification that it depends upon the nature of conversations that we have with FDA, depends on what their response is, follow-up conversations that we have with them to determine exactly what the next steps in action are. So I don’t want to presume a certain action sequence in that process. We’re in the midst of evaluating that.

But likely, we would need to take the initiative to actually define our exclusivity period more formally.

Joseph Stringer, Analyst, Needham and Company: Great. Thank you for taking our questions.

Conference Operator: Thank you. Our next question comes from Annabel Samimy with Stifel. Your line is now open.

Annabel Samimy, Analyst, Stifel: Hi, thanks for taking my questions. And just drilling down on a couple of things. Just while we’re talking about the CP, to be clear, are you speaking to the same, individuals at the FDA that you were speaking to previously? So that’s the first question. Then on the strategic reductions, just drilling down here and specifically on the decision to cut DTC, We all know it’s a pretty promotion sensitive market.

So I understand you’re pulling back digitally, but I guess there was also an effort to potentially expand from the 50,000 target audience to 100,000 target audience. So is this, should we take this as a signal that you’re on enough of a trajectory with sufficient awareness that it’s kind of on a flywheel and it can sort of build itself? How are you gonna, I guess, target this next batch of physicians? Or are you pulling back on that target audience? Thanks.

Steve Bosta, President and CEO, Fathom: So if we think about the promotion sensitivity of this market, to jump into that context and how we grow our physician audience, we’ve had an opportunity over the past weeks to take a look at what aspects of our operations are actually driving the growth in prescribers and driving the ongoing growth in our business. And so the key thing that is working is our sales activities. So the key thing that drives new adoption is field sales calls and working through the individual physician conversions to starting to write scripts and then individual physician conversations that drive growth. The broader DTC initiatives were not converting customers in terms of the broad broadcast spend, weren’t converting new writers at the same rate. And so that spend is simply providing a lower ROI as we described.

So we’re focusing on the thing that works. Now that doesn’t limit the total potential universe of physicians at all that would ultimately be prescribing, but the path to get there is really through the field sales activities to continue expanding prescriber base. I don’t think it limits in any way the overall potential. And there’s also sort of a question of timing of DTC and maturity of the product at the time that you implement DTC. So we would not in any way indicate that DTC is ultimately not going to be effective.

It may just be that we’re a bit early in this process, and we need a more established base of awareness regarding the product. The other element of your questions over the first part was related to conversations with FDA. And there’s both some consistency in staff at FDA and some changes. Obviously, senior folks at FDA have all changed. So the senior people at FDA that are going be driving the policy decision, that’s new with the new administration and working through that process.

But a lot of the folks within the legal office, we understand that there is some meaningful continuity in that process of folks that had previously been looking at this. So you will get internal advice to the senior team that comes from folks who are already well familiar with our program and our issues. But the senior policy decisions, obviously, staffing comes in with the new administration.

Molly Henderson, Chief Financial and Business Officer, Fathom: Okay. Got it. Thank you.

Conference Operator: Thank you. Our next question comes from Chase Knickerbocker with Craig Hallum. Your line is now open.

: Good morning. Thanks for taking the questions. Maybe for Steve, just on how should investors be thinking about the potential impact on overall scripts, script growth from the discontinuation of a lot of the DTC TV spend here? I mean, you have good survey data to determine kind of what portion of scripts are coming, being driven from there? You kind of just mentioned it.

I know that can be difficult to determine, but just I guess how should we be thinking about that? And along those same lines, management had previously noted comfortability around $165,000,000 net revenue consensus at the time in 2025. Can you just give us a sense overall for kind of what your model says for 2025 as it relates to how we should be kind of maybe moderating or changing our expectations?

Steve Bosta, President and CEO, Fathom: Chase, thanks for the impact of that. We’re not actually indicating you should be changing our expectations on revenue. I think that the range of revenues that the various analysts have in their projections are reasonable range for the year. There’s not an indication here that we think that you ought to be adjusting that in any way. I don’t think that the changes that we’re making are going to adversely impact our revenue ramp in any way.

We simply weren’t seeing a big uptick associated with the broad DCC program. So we are continuing the thing that is actually working to drive the revenue, which is our field sales activity. That’s the core thing, and we’re gonna be focusing Salesforce time on the activities that drive greatest volume. In some cases that may be bringing on new prescribers. And in some cases that may be going deeper with existing prescribers where I think potentially we had been broadening the push to try to get lots of new prescribers around the DTC initiative.

But there may be more leverage associated with depth. I’m not trying to signal a change in ramp of new prescribers. This is all work that Jonathan is going be doing. But today literally is, first day starting on in conversations with the sales team. I’m to give him time to get his feet under him and sort of think about how do we optimize the sales force activity, the sales force targeting, the time and effort within GI and primary care to optimize revenue.

But the thing that is working to grow our revenue is that field sales call on a physician. The most important thing that happens at Fathom is when a sales rep walks into a physician’s office and is having conversation to convert a new prescriber or to grow someone’s business or someone’s activity pattern from their first one or two scripts to now starting to adopt this for their patients that are inadequately served with PPIs. That process works, and that’s what’s driving our revenue, and that process is unchanged. We just weren’t seeing a big effect from the broad DTC spend. We were spending a lot of money that was not converting people.

And I think part of it is that we might be activating patients to go into physicians who are not yet familiar with the product. And so we were getting a lower return and not as many scripts being converted from that spend. So I don’t think by shutting off that spend on the broadcast DTC, we’re gonna adversely impact our ramp.

: And then fully fully noting that it’s Jonathan’s first day. But no plans on any sort of sales force reduction. Sales force size will remain the same. And then second point on that, any change in focus from a standpoint of primary care versus specialist GI?

Steve Bosta, President and CEO, Fathom: So, we’ve not made any change to the sales force. So, the cost reduction actions have not impacted the sales force in any way. And they’re going to be continuing at full strength in that process. As to the focus of GI versus primary care, that’s a thing that we’re going to be carefully evaluating what’s the allocation of sales force time. It’s not going be exclusively one or the other, but there may be a shifted emphasis of the amount of time within a specialty call point versus a primary care call point or the frequency of calls on GIs, how do we grow them?

Now, in fact, the majority of GIs are already writing scripts for Vopresna. So we’ve actually converted more than 50% of them to writing, but there is an opportunity also to go deeper. So so we may shift timing a little bit, but I don’t wanna get ahead of the assessment that he’s gonna do with the sales leadership team to figure out how do we optimize our time to get the optimal revenue ramp. That’s work that we’re going to be doing on an ongoing basis in the coming months. And I’m sure in the next one or two quarters, we’re going to be giving you more of an update on how that evaluation is evolving.

But again, it’s still early days since I joined. So we’re working through that exercise.

: Got it. And then just last confirmation question. Just to confirm, you plan to be cash flow from operations breakeven on a full year basis in 2026 or in a quarter within 2026?

Steve Bosta, President and CEO, Fathom: So we understand that our comment on that guidance was a little bit vague in that regard. And partly, that’s just preserving a little bit of flexibility. I mean, 2026 is still the year away. We could be operating profit. We could be showing an operating profit for the full year.

We could, show an operating profit for part of the year. It will depend upon the timing of various investments, and I don’t want to get too far ahead of a commitment. The broader commitment you should absolutely take from this conversation is a commitment to bring our spend rate down. That’s why we’ve given the very precise number of, look, we’re going to be below $55,000,000 in terms of operating expenses on a quarterly basis by Q4. We’re going to be vigilant about maintaining discipline in our spend rate.

And partly when we go profitable depends upon what the revenue ramp into 2026 is, and we’re not forecasting exactly which quarter that we might cross over in that process. Thanks, Steve.

Conference Operator: Thank you. Our next question comes from Yatin Suneja with Guggenheim. Your line is now open.

Yatin Suneja, Analyst, Guggenheim: Hey, guys. Good morning. Thank you for taking my question. Just a question particularly on what you are seeing in the market dynamics currently. Like if you look at the script for the last, I think, four or five weeks, it seems to be relatively flat.

So anything particular that is happening where you’re not seeing growth in Q2, which generally happens in the foreseeable products? So that’s one. If you could also comment on where you are on gross to net, and how any changes to gross to net we should anticipate for the better half of 2025. Thank you.

Steve Bosta, President and CEO, Fathom: Yeah. And I’ll do the first half of that regarding sort of the last few weeks, And then I’ll let Molly take the gross to net question and work through that. Well, in first half of it, we’re simply not going to get into the pattern of trying to sort of speculate on week to week IQVIA reported data and sort of week to week changes. As you see in the numbers, when you go through it, there will be up weeks and flat weeks. And that’s just the natural variability that happens in those kinds of numbers.

Nothing that we’re seeing in q two or that we’ve seen in the last couple weeks is impacting any of these decisions. This is basically looking at our long term spend pattern, and the expense discipline comes from the fact that the revenue is tracking along the lines that I think all of the the analyst estimates have been indicating. And so we’ve communicated that we are comfortable with those. We continue to be comfortable with the range of analyst estimates on revenue. There’s nothing that we’re seeing that departs from that, on the revenue side, but our spend rate was simply too high.

And to finance that spend rate at a $4 per share stock price would have been too highly dilutive. And so we’re taking the prudent step of reducing expenses. But it doesn’t in any way indicate that we have concerns about anything we’re seeing or any. But the last one or two weeks, you get one or two weeks of variability in that process. Overall, on gross to net, I’m going to let Molly jump in on that.

Molly Henderson, Chief Financial and Business Officer, Fathom: Hey, Gatin. So yes, as it relates to gross to net, we did see a bit of an improvement in the first quarter. It came in at 53%. As you remember, we signaled on average between 5565% for the full year. We still remain our guidance on the 55 to 65% of the year.

So just as you know, the economics between payers are different. So depending on which claims are coming through through which payer, it can have an impact on that gross to net. But on average, we still feel comfortable with that 55% to 65% to use as a guide for the year.

Yatin Suneja, Analyst, Guggenheim: Thank you.

Conference Operator: Thank you. Our next question comes from Paul Choi with Goldman Sachs. Your line is now open.

Paul Choi, Analyst, Goldman Sachs: Hi, thank you. Good morning, everyone, and thanks for taking our questions. I have a few. First for Steve, can you maybe just comment on how many of these changes like for instance the pullback in DTC had been considered prior to you taking the CEO? So just maybe some color on that would be helpful.

Second, just can you maybe comment on your level of conviction that the CP response will be on time in the June timeframe that you mentioned here, just given that we are starting to see FDA miss PDUFA deadlines and other delayed regulatory actions that should statutorily be on time? And third, can you comment given the expense pullback, are there still plans to continue the pediatric studies given how important they are for the sort of IP and exclusivity management for Vocasta here? Thank you very much.

Steve Bosta, President and CEO, Fathom: Paul, thank you for that. So let me just jump in on each of the three points. First, in terms of the changes that we’re implementing today, how many of these were considered prior to my taking the seat? I don’t think any of the changes that we are implementing today were on the table prior to my taking the seat. This is an evaluation that we’ve done over the last thirty days.

One of the first things that I did when I joined is spend the first two weeks literally meeting with every group in the company to ask the what’s working, what’s not working question and try to understand what parts of our organization are getting leverage, what parts of our organization, and what things are having a significant impact. And in the context of those reviews, and reviewing the DTC programs in some detail, we saw that, you know, we’re getting a positive return on our digital DTC. So I don’t wanna indicate that DTC doesn’t work at all, but the high dollar spend on some of our broadcast wasn’t providing near term return. Now it might actually be building brand value that might accrue to us in future years. That’s so I don’t wanna eliminate the possibility that we ever do DTC in that process, but it wasn’t having the near term impact that we needed to have.

So that was an insight that came through, some of those conversations. But the other thing that happens is we routinely reforecast on a quarterly basis. And, as Molly and I were meeting in the first few days, after I joined to review because I literally joined on April 1. So we were just getting through March 31 day. We were reviewing the three plus nine forecast internally around what we experienced in the first quarter and what our expected spend would be for the remaining quarter.

And my assessment in looking at that and I think others have of internally come to the same conclusion, is that with our current market capitalization, it

Yatin Suneja, Analyst, Guggenheim: would

Steve Bosta, President and CEO, Fathom: be too highly dilutive for us to raise money to continue spending at that rate. And we needed to pare back expenses pretty significantly. And so we’ve taken significant steps in the past few weeks to evaluate how do we bring our spend rate down. And, again, when the stock price was a much higher level last year, it would have been a reasonable decision to say we can finance a very aggressive spend rate with the stock price at $4 a share. It just doesn’t make sense to finance a very aggressive spend rate.

And so we’ve taken the steps to pare back pretty significantly to spending in a number of areas. Second question that you’ve got is much harder for me to answer on what’s our level of conviction on CP timing. There has been lots of turnover at FDA. We’ve not seen or heard anything that indicates that the CP timing of the decision is not on the timeframe. They should come back to us by early June.

But given the turnover at FDA, is possible that they don’t respond on that target date and they take some time longer, or it’s possible that they respond indicating that they need more time. Because obviously there’s been a significant amount of turnover in the organization, and that’s really out of our control in that process. So we’ve not heard anything from them that indicates that the timing is gonna be different. I don’t wanna, you know, send any signals in that regard. We fully expect that it’s still coming in in June, but it’s hard for us to confirm that our regulatory body is actually going to respond on the date they’re supposed to, given that they’ve had some turnover within the organization.

And then lastly, on plans to continue the pediatric studies. One of the pediatric extension strategies was related to the EOE study. We are deferring the EOE study to reevaluate it after the CP decision. So we have paused that study. That is one of the paths to getting that pediatric extension.

There may be other paths to getting the pediatric extension. And we are going to be evaluating all of the alternatives that may be available to us to get to the extended six months of exclusivity. Right now, the priority is on how do we get our financials in line to be able to get to breakeven and mitigate financing risk just because of the current market dynamics. That’s a short term need to bring down our spending that doesn’t eliminate the possibility of doing additional studies in 2026 or 2027 to be able to get to that extension. We’re going to be doing that evaluation on what the alternatives are, what studies are possible, and what’s the best path for doing that.

We still want to get that extension, but we may ramp down spend for the remainder of this year.

Paul Choi, Analyst, Goldman Sachs: Got it. Thank you very much.

Conference Operator: Thank you. Our next question comes from Kristen Kluska with Cantor Fitzgerald. Your line is now open.

Molly Henderson, Chief Financial and Business Officer, Fathom: Good morning. This is Ayaan on the line for Kristen here. Thank you for taking our questions. First, of the prescriptions filled to date, do you have a sense of the contribution from the non erosive? And then second, could you speak to the split of the thirty and sixty day scripts?

Is there a change in this pattern that could be attributed to physicians’ conflict with the plasma? Thank you very much.

Steve Bosta, President and CEO, Fathom: I’m not certain that I heard the second half of your question clearly regarding thirty to sixty days. I might ask you to repeat that just because it wasn’t entirely clear. But on the last comment that you made around physician confidence in this product, we’ve heard absolutely nothing in any way that implies that physicians don’t have enormous confidence in this product. I couldn’t possibly be more clear in the understanding from every conversation I’ve had with every one of our team members about discussions that they’ve had with physicians and the conversations with physicians who are using the product that they love this product. They find this product provides immediate benefit for patients.

Magnitude of the pain reduction for patients is really quite significant. The rapid onset of heartburn relief and acid reduction in the stomach is really quite significant. This is a better treatment than PPIs for patients particularly for patients who aren’t adequately treated by PPIs. So a patient who may be adequately treated by PPIs may not need switch, but a patient who’s still having heartburn or has breakthrough episodes or has an erosive condition or has nighttime GERD, for any number of reasons the patient may not be adequately treated with PPIs, they ought to be switching to our product. And physicians really like the effects that it has on their patients.

As to the percentage of patients that are non erosive versus erosive, Molly, I’m going to let you comment breakdowns and what we know in that process. And she’s been looking more closely at the number of these numbers historically.

Molly Henderson, Chief Financial and Business Officer, Fathom: Yeah, and I think as we mentioned in the past, it’s difficult to necessarily discern between the non erosive and erosive based on claims data because it can be somewhat muddied. But what we have seen as somewhat of an indirect proxy is the number of scripts between ten and twenty milligrams. But keep in mind that the tens can also be used as maintenance after the 20 are used for erosive. But that being said, we’re seeing continued strong momentum in the script data, and you see that in IQVIA every week of the 10. So we do believe that a lot of the new scripts are coming from the non erosive indication.

Got it, thank you, that’s very helpful.

Conference Operator: Thank you. Our next question comes from Umer Raffat with Evercore. Your line is now open.

Jun Jiang, Analyst, Evercore: Hey, good morning. This is Jun Jiang on for Umer. Thanks for taking our questions. I guess my first question is regarding manufacturing. I think you commented there will be a very limited impact.

Before Rekresin tablets, can you confirm are both API and finished products are manufactured in The U. And second question, I think Sabella just announced their top line data. There’s probably still some time before their potential launch of the product, but just from your perspective, what the competitive landscape will look like, and what might be the factors that could differentiate Vokresna from Fabella? Thank you.

Steve Bosta, President and CEO, Fathom: So just on manufacturing, if I understood your question clearly, it’s around the tariff impact on manufacturing of our product. And so there should be no near term impact. We’ve got a significant inventory of the API, already in place, and the final tablet manufacturing occurs in The US. And so there’s no tariff impact associated with importing our final product. Our API is made internationally.

So, you know, beyond the current inventory of API, if we have to make future purchases, if tariffs are continuing next year or the year after, it’s possible that there’s some impact. But our API cost is a very small percentage. So even a significant tariff on top of it would not have a material impact on our business. And if there’s any part of that that I missed, Molly, I’d ask you to jump in.

Molly Henderson, Chief Financial and Business Officer, Fathom: No, that was

Yatin Suneja, Analyst, Guggenheim: good.

Steve Bosta, President and CEO, Fathom: So the other element of your question is sort of the competitive landscape with surveillance data. And certainly, we’ve not seen full data. We’ve only seen the same thing everybody else has seen, which is their press release with p values and so on. It looks like their product also works and works well, and we would fully expect that this class works well. And so having another PCAP launch, I think, has the advantage from a physician perception that we’re suddenly not a product in the broader GERD treatment landscape, but rather there is a new category of products of PCAPs.

And so, yes, there’s always the competitive dynamic of having a second entrant. But often, there is a market growth dynamic associated with having a second entrant that the category grows, physician awareness of the category grows. There may be a second sales organization that is educating physicians about this category, and that grows the entire category and shifts patients to using the new class of therapy. So there could be an updraft as well as a competitive dynamic with a second entrant. Obviously, we have the first to market status.

And that becomes a very important consideration. So by the time they launch, physicians will have had a significant amount of experience with Baquesna and significant confidence in the product. And we’re carefully looking at a number of variables regarding the two products. But we do expect that they’re both going to work. There may be some differences in the molecule.

There may be differences in half life or other variables that could be important. But that analysis will be ongoing over the coming months as to exactly how to be positioned for the competitive entry of that product.

Jun Jiang, Analyst, Evercore: Thank you so much.

Conference Operator: Thank you. I’m showing no further questions at this time. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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