Earnings call transcript: Phathom Pharmaceuticals Q3 2025 earnings beat boosts stock

Phathom Pharmaceuticals Inc. reported better-than-expected earnings for the third quarter of 2025, with an EPS of -$0.15, surpassing the forecast of -$0.47. The revenue of $49.5 million exceeded expectations, resulting in a 5.25% revenue surprise. Following the announcement, the company’s stock surged by 15.08%, reflecting strong investor confidence.

Key Takeaways

• Phathom Pharmaceuticals exceeded EPS and revenue forecasts for Q3 2025.
• The stock price rose by 15.08% post-earnings announcement.
• The company achieved a significant reduction in cash operating expenses and usage.
• Strong growth in prescriptions and market penetration noted.
• Strategic realignment in sales territories to focus on gastroenterology.

Company Performance

Phathom Pharmaceuticals showed robust performance in Q3 2025, highlighted by a 25% quarter-over-quarter revenue growth. The company significantly reduced cash operating expenses by 43% and cash usage by 77% from the previous quarter. These cost management strategies, coupled with increased prescription growth, underscore the company’s effective execution of its strategic initiatives.

Financial Highlights

• Revenue: $49.5 million (25% quarter-over-quarter growth)
• Earnings per share: -$0.15 (beat forecast of -$0.47)
• Gross profit margin: 87%
• Cash and cash equivalents: Approximately $135 million

Earnings vs. Forecast

Phathom Pharmaceuticals reported an EPS of -$0.15, significantly beating the forecast of -$0.47, resulting in a 68.09% positive surprise. Revenue also surpassed expectations, with actual figures at $49.5 million against a forecast of $47.03 million, a 5.25% surprise.

Market Reaction

Following the earnings announcement, Phathom Pharmaceuticals’ stock price increased by $2.04, or 15.08%, reaching $14.33 in pre-market trading. This movement places the stock closer to its 52-week high of $19.50, reflecting positive investor sentiment.

Outlook & Guidance

The company narrowed its full-year revenue guidance to $170-$175 million and anticipates achieving operating profitability in 2026. Phathom plans to continue focusing on gastroenterology prescriber adoption and potentially expand back to primary care in 2027-2028.

Executive Commentary

"We are executing on the strategy that we laid out approximately six months ago," said Steven Basta, President and CEO. CFO Sanjeev Narula added, "We expect ourselves to be in operating profit position next year."

Risks and Challenges

• Continued unprofitability with negative EPS.
• Maintaining growth momentum in a competitive market.
• Low current market penetration at 3%.
• Potential regulatory hurdles in clinical trials.
• Dependence on a narrow focus within gastroenterology.

Q&A

During the earnings call, analysts inquired about the impact of sales territory realignment on prescription growth and strategies for converting GI prescribers through patient experience. Gross-to-net margin expectations and Medicare cash pay dynamics were also addressed.

Full transcript - Phathom Pharmaceuticals Inc (PHAT) Q3 2025:

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Hello and welcome to the Phathom Pharmaceuticals third quarter 2025 earnings results call. At this time, all participants are in a listen only mode. After the presentation, there will be a question and answer session. To raise your hand to ask a question, press Star 11. To lower your hand, you may press Star 11 again. Please be advised that today’s call is being recorded. With that, I would like to turn the call over to Eric Ciarelli, 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 Steven 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 and 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.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Phathom as of this date and Phathom.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: 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 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.

Steven Basta, President and CEO, Phathom Pharmaceuticals: With that, I will now turn the.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Call over to Steve Basta, Phathom’s President and CEO to kick us off. Steve. Thank you Eric. 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 two 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 at 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 Thielen has recently joined Phathom as our new Senior Vice President 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 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 six 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 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. Quite pleased with the performance that the entire team has delivered through the course of the past six 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 eosinophilic esophagitis (EOE) phase two trial, but we do still expect to operate at below $55 million cash operating expenses as we’ve previously stated, even with the additional clinical trial expense. My sincere thanks go to the entire Phathom team for the 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 17th. 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 prescriptions, 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 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 six 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 six 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 where previously it had been focused on the primary care call point. Step two, 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. It really is aligned with that strategy of driving depth rather than breadth of writing. Step three, 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 salesforce 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 two 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 a rep’s 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 salesforce 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 salesforce realignment can accelerate our growth during 2026. It may take some time to see the full impact of this salesforce realignment activity. The gastroenterology opportunity for VOQUEZNA includes a target universe of approximately 24,000 gastroenterology writers. That includes 17,000 physicians and about 7,000 affiliated nurse practitioners and physician 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. 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 2 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 2 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 3 study that includes pediatric patients and that creates the potential for us to extend our regulatory exclusivity by an additional six months. That will be determined at the end of the Phase 2 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 U.S. exclusivity into 2033 because an ANDA filing is not permitted until that May of 2032 date.

With a 10 to 18 month typical ANDA review timeline, we believe generic entry is unlikely until 2033. A note on the triple pack update that we’ve previously discussed. We’ve had good progress here working with our supplier of the triple packs. 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 pack from the supplier of that product. We have not to date experienced any disruption in triple pack 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 TI 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.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Thank you, Steve, and hello everyone. I wanted to begin by saying how privileged and excited I am to be part of Phathom Pharmaceuticals at this critical inflection point for the company. As I thought about my next chapter, I focused on three questions. Does the work matter for patients? Can I help build something durable? Is the team truly aligned with the mission at the heart of it? I wanted to join a company where work being done has essential to directly improve patients’ life. Phathom and VOQUEZNA checked all three boxes for me. That’s what drew me here. My conversation with Steve made the strategy clear, sharper on focus, and execute with discipline. The company’s 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 depth among GI prescribers.

GI prescribers’ commercial approach research I’ve seen, the specialist-led playbook 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 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’re pleased with our solid financial results for the third quarter of 2025 and feel that they clearly demonstrate the progress being made as a result of the shift in our strategy.

As Steve mentioned, we reported top-line net revenue of $49.5 million in Q3. In connection with our strong quarter and year-to-date results, we’re updating our full-year revenue guidance to $170 to $175 million. Q3 revenue represents a 25% increase compared to the prior quarter, driven almost entirely by covered prescriptions, which grew approximately 23% during the quarter. Cash pay prescriptions and changes to wholesale inventory had minimal impact to our quarterly.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Results.

Steven Basta, President and CEO, Phathom Pharmaceuticals: For third quarter 2025, our gross-to-net came in towards the lower end of the previously guided 55% to 65% range. Based on this result and our expectation for the rest of the year, we’re tightening our quarter four gross-to-net range to between 55% to 60%. Our gross profit for the quarter was approximately 87%, in line with our expectation. This margin, which includes product cost as well as licensing royalties, continues to be consistent compared to the previous quarter. After accounting for quarterly cash operating expenses, we reported a loss from operations excluding stock-based compensation of only $6 million. This is an 88% improvement compared to the previous quarter. Overall, we believe our revenue results to date reflect the progress of ongoing commercial efforts to focus on GI. 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 the non-GAAP form of this measure, which excludes non-cash stock-based compensation. For quarter three, 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 cost 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 continuing to grow revenues. In fact, we also achieved a meaningful reduction in spending this quarter. Compared to quarter two and quarter one of 2025, our quarter three operating expenses reflect a $36.8 million or 43% decrease from quarter two 2025, and $48.8 million or 50% decrease from quarter one 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 was 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 cost. Looking forward to Q4, we expect expenses to be somewhat higher than Q3, primarily related to the initiation of the Phase 2 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 a full year 2025 non-GAAP operating expenses to $280–$290 million. We believe our results clearly show a path towards operating profitability in 2026 excluding stock-based compensation.

Net revenue this quarter has 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 total approximately $135 million, reflecting only a $14 million reduction in net cash. This net cash usage reflects 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 a pivotal point in company’s journey. Our strong results this quarter are encouraging, and we remain confident in our ability to execute on our strategy for remainder of 2025 and into next year. With that, I will now turn the call back to Steve for his closing comments. Steve.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: 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 six 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 continued support. I now turn the call over to the operator for any questions. Thank you. As a reminder, to ask a question, you will need to press Star 11 on your telephone to remove yourself from the queue. You may press Star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from the line of Omer Rafat of Evercore. Please go ahead, Omer. Thank you, guys, and congratulations on Sanjeev. I have two 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 Q2 and Q3, 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 Q4. I guess that’s my question. Is that what you’re baking in, that prescription growth steps down in Q4? Which leads me to the second question, which is the cost cuts and the discipline coming through is solid right now. The cost cuts and discipline is very solid right now. My question is, from those advertising cuts that Sanjeev spoke to, do you anticipate any impact as we head into Q1 and Q2 next year? Because they may not show right away. Thank you.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Amar.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: 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. We are 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 salesforce transition. Those two variables have somewhat offsetting effects. We wanted to guide appropriately to something that we had significant confidence in.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Umar, 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. We’ve been obviously very mindful of watching the script trends, watching the return on the investments, and we feel comfortable with the level that we have is sustainable. Obviously, Umar, our job as a management team is to make sure we maximize the top line and we’ll continue to watch the expense level. Right now, we feel we’re not going to have any impact from the DTC that we paused at the end of the second quarter, but we’ll continue to watch as we go forward.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Thank you. Thank you. Our next question comes from the line of Kristen Thielen of Phathom Pharmaceuticals. Please go ahead, Kristen.

Good morning, everybody. Thanks for taking the questions. 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. Was that mix from several PCPs, or did you find that there were some that were higher responders?

Kristin, thank you for the really important point.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Thank you.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: A large part of the PPI market does 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 the script. Anyone who had written the script stayed in the call targeting list. What we’re trying to do is shift time toward GI, but it’s not 100%. Ultimately, where we want to get to is that 70% or more of our salesforce time is being spent in gastroenterology practices now. That leaves 30% of our salesforce time to continue calling on the top decile primary care physicians, that is, the primary care physicians who write the most PPI scripts.

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. For the coming quarter, 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, thanks. 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. They were still potential customers, they just weren’t getting as much face time with them since that territory didn’t exist before. Thank you.

Steven Basta, President and CEO, Phathom Pharmaceuticals: That’s right. That’s right.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: It’s not that we had 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. We had some territories that had 80 gastroenterologists in them. 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 two 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. That’s where the realignment needed to take place.

Thank you.

Thank you. Our next question comes from the line of Paul Choi of Goldman Sachs. Your line is open. Paul, hi.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Thank you.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Good morning.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Congratulations on all the progress.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: With.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Regarding the opening up of the

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Medicare access and the cash pay component of it.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Could you maybe just comment on how you think the mix of cash pay?

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: As a mix of covered prescriptions and.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Will that be evolving over the next few quarters? Any color on that would be great. 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. Thanks for taking the questions.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Thank you. 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. 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 number, then what % is where, but rather the growth specifically in the covered scripts and the growth specifically in the cash scripts. 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 the 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. I think what you’re going to expect to see is growth in covered scripts and growth in cash scripts. We’re not attempting to actively forecast that ratio. We want to drive continued growth in both on an aggressive basis.

Steven Basta, President and CEO, Phathom Pharmaceuticals: I think the other important point, Paul, to notice, as Steve mentioned in his prepared remarks, is our top-line revenue is driven by the covered prescriptions, which is what grew 23% this quarter. That has a direct relationship. The other thing to 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 the doctor and the patient decide.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Yeah, 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. That’s not lost revenue in any way. When that patient gets added, that’s just a positive additional impact in terms of the patient 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. 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. That’s a part of the reason for turning on that opportunity.

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. 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 as an NRx, to prescribing the product on a weekly basis, to really making this a core part of their practice. 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. 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’s 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 as an estimated number during Q3. 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. We are starting to see evidence of that growth pattern on an account by account basis. Okay, great. Thanks for all the additional color. Thanks, Paul. Thank you. Our next question comes from the line of Yanchin Saneha of Guggenheim. Please go ahead, Yanchin. Hey guys, can you hear me?

Steven Basta, President and CEO, Phathom Pharmaceuticals: Yes, hi everyone. Thank you for all the details.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Congrats on pretty good execution.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Maybe just two questions for me.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: As you are trying to.

Steven Basta, President and CEO, Phathom Pharmaceuticals: 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 vs GERD population? How should we think about the duration of treatment that is playing out right now?

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Sanjeev, congratulations on the new opportunity.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Maybe you can help us understand how should we think about 2026.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: As the sales ramp up?

Steven Basta, President and CEO, Phathom Pharmaceuticals: How should we think about the OpEx there? Thank you.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Okay, 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. They might be adding TUMS or other therapeutic modalities to their PPI whenever they have breakthrough heartburn.

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. The type of patient who lands in a gastroenterology practice is often a patient who’s either tried BID dosing or has cycled through a couple of PPIs or 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. 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. We’re hearing that in every conversation. I was just at ACG for a few days having a number of conversations with gastroenterologists over this past few days.

The commonality of the story is 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. 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 mg should be for erosive esophagitis and 10 mg is the approved dose for nonerosive reflux. It is really at the physician’s discretion how they use one or the other.

One of the things we also see is that many patients who start on 20 mg never switch to 10 mg. They just maintain their treatment on 20 mg, because if the patient’s doing well, they just continue on with the treatment that’s working for them, which gets to the duration of therapy. 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 six or seven 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. 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 is going to cause someone to want to continue using it. It is hard to predict exactly numerically how that evolves.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Yeah. Yatin, thank you for your question. Obviously we can’t give you like 2026 financial guidance right now. We’ll do that at the beginning of the year. Let me tell you a little bit qualitatively how we’re thinking about next year. Let me start with first on the top line. Obviously you saw strong Q3 with 25% revenue growth. You saw in Q2 we had a 39% revenue growth. With the pivot in strategy to go deeper in GI, we’ll continue to see more prescriptions coming, very effective calls. That percentage of revenue growth will continue. Obviously it will moderate as the base becomes bigger and bigger. 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 where things are there are going to be pushes and pulls.

I don’t expect fundamentally or a significant different gross-to-net which will kind of give us a steady path through gross margin next year. Now coming in terms of the operating expenses, I think the way to think about that in two 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 Q4. 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.

All of this putting together, one thing we said at the beginning of the discussion was we expect ourselves to be in operating profit position next year. That’s kind of what we are striving to with the cash usage that we have of $14 million this quarter. That goal is near to us. Again, we will be providing all that at the beginning of the year when we give the guidance. I feel very good about what the momentum is right now, where we are entering into Q4 and then entering into next year with a solid set of financials.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Thank you. Our next question comes from the line of Joseph Stringer of Needham and Company. Please go ahead, Joseph.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Thank you. Thanks for taking our questions.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Just two from us.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Kind of a follow-up question just given the backdrop of the Q3 print here, where revenue came in higher than consensus and OpEx a bit lower. In terms of hitting your goal of sustainable non-GAAP profitability in 2026 without the need for additional capital, you’ve been pretty consistent in that messaging.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: What’s your confidence in.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Hitting that goal now to say, compared to your confidence level maybe last quarter or quarters past? Secondly, 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.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Where you could really drive uptake or growth going forward? Thank you. Jerry, thanks so much for both of the questions. First, in terms of our confidence in getting to positive cash flow operations next year or positive, even as we’ve described it, we have remained consistent since May in the indication that we believe that is achievable. I think what we’ve done this quarter is just demonstrate that we are exactly on that path. It is one more quarter of clear demonstration of exactly the path that we set out in May, which is we are going to continue to grow revenue. The thing that continues to drive revenue growth is salesforce time in gastroenterology practices and driving growth and depth of adoption in GI practices.

That remains unchanged. That is what we saw when we looked at the metrics back in May. That is what was working. That is what was driving our revenue. We’ve done more of that. We are continuing to drive revenue. My confidence that as we do more of that, we are 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. 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. We are not guiding on this call to what the expense level is going to be in 2026. We will provide that guidance as we get toward 2026.

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. We would not have said it if we did not mean that we were going to try to work very diligently doing that and that we did not believe we could do it. We absolutely do believe we can do it from a marketing and analytics perspective. Nancy just started a couple weeks ago, so I’m not going to speak for her as to what she’s seen already. 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 salesforce time and marketing programs ever more efficiently and effectively? That is something that is not a one or two week exercise.

That is something that is going to be months and in fact years of work on an ongoing basis. I have just been delighted working with Nancy over the last couple of weeks, delighted working with Sanjeev over the last few weeks. We have got a really solid team that is being very thoughtful as they work through the plan.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Great. Thank you so much for taking our questions.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Thank you. Our next question comes from the line of Dennis Ding of Jefferies. Your line is open, Dennis.

Hi, this is Anthea on for Dennis. Thank you for taking our questions and 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? Then, second, in terms of expansion back into primary care, what is the gating factor there or what would you want to see to consider taking that on again?

Thank you so much, 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. In the course of that, it does create some vacancies. We are actively recruiting for all of those positions. Obviously, hiring doesn’t happen in a week or two. Hiring takes months. 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 salesforce strength of 300. I actually feel really good about where we are already today.

The significant salesforce strength that we already have is in the right territories calling in the right customers, and we’re going to start to see that traction. We’ll see incremental impact as we fill those territories through Q1, and that should play out through 2026. 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.

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 salesforce 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 onto VOQUEZNA in GI practices go back into the primary care office and talk to their physician about how much better they feel.

If a primary care physician had a patient in pain, sent them to a GI, and the patient came back, their first question is naturally going to be in the next visit, how are you doing, how did that referral go? When the conversation goes to the present, they feel a whole lot better. A physician has heard from 5, 8, 10 patients. That becomes a much softer target call for us to be able to drive conversions. 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. I don’t think that’s a 2026 thing. I think that’s 2027 or 2028. 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.

Great, thank you so much.

Thank you. Our next question comes from the line of Annabel Cimimi of Stifel. Please go ahead, Annabel.

Hi all. Thanks for taking my question. I think you guys 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? It seems like there is high end awareness. For 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? That’s my question.

Annabelle, thanks so much for the question. I agree we do have a terrific opportunity within GI and that’s an opportunity to get to really significant revenue. 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. 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.

What it takes to change that is repetition of conversation, repetition of experience, feedback from actual patient experience. We might get a physician to start writing, but only for the patients that have failed everything else. They switched them to between three PPIs, they switched them to double dose BID PPIs, and now they finally switched them to VOQUEZNA because there’s nothing else to do. As soon as 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 three 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. 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. 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? 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. 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. That’s happening today and it’s happening organically.

Okay, that’s great to know. Just one more question maybe for Sanjeev. 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%. If you are guiding gross 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? I just want to understand what gives you confidence on the gross-to-net being at the lower end of the range with some of these dynamics going on?

Steven Basta, President and CEO, Phathom Pharmaceuticals: Yeah, thank you for the question. Actually, gross margin, if you look at the last three quarters, has 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. I find comfortable with the three quarters in hand that we could tighten the guidance for fourth quarter from that perspective. As regards 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. As those percentages continue to grow, they’ll all be reflective of that because our bigger part of the gross-to-net is impacted by the covered script. I don’t expect that to change significantly between this year and next year.

Okay, got it. Thank you.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Thank you. Our next question comes from the line of Chase Knickerbocker of Craig Hallum. Please go ahead. Chase, good morning. Thanks for taking the questions. A lot’s been asked. Maybe just to stay on the topic of growth today, as we think about it longer term, should we think about that kind of tighter range as kind of the right way to think about medium to long term gross, should we continue to see some improvement even potentially going closer to 50% from the bottom end of the range now? Where do you think kind of gross-to-nets ultimately mature to as your business matures over the medium to long term? Sanjeev, just maybe any low hanging fruit that you see on the gross-to-nets to maybe continue to drive some improvement there from your past experiences. Thanks.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Yeah, Chase, thank you for the question. We obviously are very kind of focused on gross-to-net as every other line item. 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 Q3 results have been very consistent, and that gave 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, at the right time, what kind of guidance we want to give. Maybe a little bit tighter than what we had before, but we’ll come back to that when we give the guidance. 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. Also, we have things like DSA as the company gets matured, we have opportunities for renegotiation, some of those things. There are pushes and pulls that are going to happen. We’ll manage it. I don’t expect on an overall basis to be a significant change in our gross-to-net trajectory as we’ve seen this far for Q3 this year.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: Thank you. Our next question comes from the line of Matthew Caulfield of HC Wainwright. Please go ahead, Matthew. Hi Steve and team.

Steven Basta, President and CEO, Phathom Pharmaceuticals: Thank you, and welcome to Sanjeev.

Eric Ciarelli, Head of Investor Relations, Phathom Pharmaceuticals: 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. Thanks. 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, we’re pleased that we’re doing better than industry norms on some of the metrics. One of the key advantages of offering the Blink service is that it improves that pattern.

If a patient goes to a retail pharmacy and their product isn’t there and their script isn’t covered by their insurance, for example, and they get a higher than expected copay, 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 copay. If they are not getting covered, they will be offered a $50 cash price. That methodology enables us to significantly minimize that process. As we’re educating physicians about the fact that there’s an advantage to sending their patients to Blink, we can manage that cycle to reduce that walk away from a prescription, to minimize the copay, 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.

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 cover it, 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. That advantage, that whole process, is streamlined and works better through Blink than through a retail pharmacy typically. Understood. I appreciate that. Thanks, Steve. Thank you, ladies and gentlemen. That does end the Q and A session and conclude the Phathom Pharmaceuticals call for today. Thank you for participating. You may now disconnect.

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