All right. Well, welcome back to H.C. Wainwright's 28th Annual Global Investment Conference. My name is Matthew Caufield. I'm a senior biotech analyst here at H.C. Wainwright, and we're very grateful to be joined by Phathom Pharmaceuticals. We have Steven Basta, President and CEO, and also Sanjeev Narula, Chief Financial and Business Officer at Phathom. Thank you both very much Thank you for joining us. Thank you for having us. Matthew, it's a pleasure. Yeah. Absolutely. So maybe to start off, the team continues to make progress on the commercial front, as well as the pipeline. Maybe you could begin with a high-level view on Voquezna, and also just the overall pipeline progress. Well, Voquezna has had a really good launch over the first three years. We did close to $75 million in revenue last quarter, so we're annualizing at a $300 million run rate. Three years into the launch, and that reflects the significant emphasis on the significant clinical efficacy that this drug delivers, and the confidence on the part of physicians that Voquezna really is a meaningful improvement in therapy for many of their patients with either erosive esophagitis or non-erosive reflux. Although candidly, the majority of our patients are erosive esophagitis patients. We tend to be adopted first by physicians for their more severe patients, then we will be growing the penetration from there. But it's been a really good launch. We also were really pleased last quarter to deliver our first ever operating profit, and the way we're calculating that is obviously on a non-GAAP basis, we're excluding non-cash stock-based compensation. When you look at operating profit excluding stock-based comp, we delivered our first operating profit. That was actually one quarter ahead of the initial estimate when we made the pivot last year to manage expenses more rigorously and to drive our sales calls to gastroenterology offices to drive penetration within gastroenterology. We'd estimated that we could be profitable by mid-year, by Q3 of this year. We got there by Q2. We are committed to delivering positive operating profit each of the next two quarters. Positive cash flow in 2027. We are having really good momentum with the launch. From a pipeline perspective, we are at this point just focused on Voquezna, but we are looking at new indications for Voquezna. The next two key indications are in eosinophilic esophagitis. It is an inflammatory indication in the esophagus where PPI therapy, acid suppression therapy, is first-line therapy today, but none of the PPIs are indicated. We have an opportunity in that indication to have the first on-label acid suppression strategy for EoE patients. We have announced that we are going to be doing an as-needed use trial, so in non-erosive reflux patients to give patients the option of either daily dosing with Voquezna or as-needed dosing. Whenever they have a heartburn episode, they could dose. That will broaden utilization and give us a distinctive commercial value proposition and a distinctive call point within primary care that we can talk to primary care physicians about solving the problem that many of their patients have. We are both pleased with the commercial launch to date. encouraged by the ongoing programs to expand utilization, and significantly encouraged by the core momentum on driving top-line revenue while maintaining our expense discipline as an organization. Excellent. Then maybe for Sanjeev Narula, is the mention of the operating profitability for the coming quarters also based on excluding the stock-based comp component, or how does that play in? Yes. Let me just take the Yeah moment just to expand maybe on the rest of the year, if you allow me to do that. Yes, the definition of operating profit is exactly the same. In fact, we might change that next year to be more in line with like EBITDA, how the industry looks at it. But it is exactly the same definition. But I think the important thing to note, we did north of $74 million of revenue last Okay quarter, which was, if we look at it on a year-over-year basis, was 88%. For rest of the year, we're obviously not giving a quarter-to-quarter guidance, but if you look at our midpoint of our revised guidance and take into account what we did in first two quarters, we're actually going to be growing our revenue by 70% for the second half of the year versus last year, right? That is clearly telling you how the growth of the spend is. Then if you look at our expenses, right? We are a fully funded organization. We've got a salesforce, R&D programs. We don't expect our expenses to grow next year, next six months. They go modestly because of some of the clinical trials that we've announced, whether it is the as-needed study and the EoE trials. So you begin to see the operating profit. Revenue growing, expenses not growing, trying to see the operating leverage, and you're starting to see the operating profit. So we said we will have operating profit for second half. We may use cash, even though we were able to generate cash in the beginning of the second quarter ahead of time. We may use a little bit of the cash for working capital, but clearly we're going to be cash flow positive on a full year basis next year, and we're going to be operating profit positive on a full year basis next year. Excellent. Very encouraging. The team had discussed looking at the rate of conversion for GI prescribers also writing for their less severe patients. Can you describe the initiatives to improve the awareness of Voquezna access and reduce the friction to fulfilling those prescriptions? Right. I think that's a really important consideration. Classically, when you think about a product launch, you think about convincing physicians of the clinical efficacy and safety of the product, and in which patient populations they need to be using that product. We've already won that. 97% of gastroenterologists believe in the efficacy of Voquezna. And by and large, they believe that Voquezna is more efficacious than a PPI for many of their patients. If you ask a physician if this were as easy to prescribe as a PPI, where would you be using it? They look at you almost dumbfounded. They are like, "Of course, I'd be using it in almost all my patients," in their gastroesophageal reflux patients, if it was easy to use. The impediment to use is not that we need to build confidence and efficacy. That's already there. The hurdle that we need to overcome is effectively sort of a balance equation that you can think of when a physician is thinking about prescribing the product. How much does my patient need this product, and how much better are they going to do on Voquezna versus the other PPI alternatives, balanced against how much work is it going to be for my staff to get this, and how confident am I that the patient's actually going to get the product? And is there a way you get the product affordably? We really think about two sister concepts, access and affordability. In fact, we have systems in place to provide really good access and really good affordability for patients. But the physician needs to have confidence that those systems are in place, and they need to know how to take advantage of the support systems that we have in place, and their staff needs to know how to take advantage of the support systems that we have in place. One of the best mechanisms that we have is our partnership with BlinkRx. Right. The BlinkRx. Where as we drive prescriptions from physicians to BlinkRx, the BlinkRx support system will provide assistance to the office to make sure that the prior authorization gets submitted. They will make sure that that prior authorization gets submitted in accordance with the rules that that particular health plan uses. Some plans require one prior PPI failure. Some plans require two prior PPI failures. So making sure that the documentation in that prior authorization is consistent with the patient's condition, consistent with capturing their prior PPI use, and that that gets timely submitted to the plan. They will communicate with the patient while that process is running through that we're working to get them the lowest out-of-pocket cost. If the patient gets covered through their commercial insurance, BlinkRx will automatically apply our co-pay support program to bring down the patient's out-of-pocket cost. And most patients will be able to get this product for either a $25 copay if they're covered or a $55 cash pay price if they're not covered. So in fact, when the script gets sent to BlinkRx, most patients will get the drug, so the access will be solved, and most patients will get the drug at either $25 or $55 a month. So it will be affordable for most patients. Physicians don't have that general awareness today. Right. Often, if a patient goes to a retail pharmacy and the prior authorization hasn't been submitted yet, the pharmacist will tell them, "This is a very expensive drug. I don't know whether or not this is going to be covered by your insurance. And so the patient is concerned that they can't get access to the drug or that they're going to have a really high cost. So that creates the perception that either it's hard to get the drug or the perception that it's going to cost my patients a lot. In fact, when you send it through the BlinkRx system, most patients will get the drug, and most patients will get the drug for either a $25 copay or the backup plan is that they get the cash pay price. But in fact, most patients will get the $25 copay. Mm-hmm. Then the assumption, I guess then, is that the initial track of patients that were maybe more severe, there was less of that friction. Whereas now with less severe patients- Mm-hmm. I think that's right. that's become more of a- I think there was less of that friction, and offices were more willing to do the work to make sure that their patient could get the drug. In order for us to capture moderate severity patients rather than the most severe patients, Right we need to reduce the perceived workload. Just need to make it easier for the offices. Yeah. As we reduce the perceived workload, the physician's propensity to prescribe for moderately severe patients rather than their most severe patients will go up. We are already, again, we did north of $74 million of revenue last quarter. So we are already basically at a $300 million run rate. Right. If we triple from here, you get to $1 billion. The path to $1 billion in revenue, which we've talked about as the potential within the GI community alone, really is to just creating the mindset on the part of gastroenterologists, "Yeah, I can get this drug for my patients, and my patients are going to get it affordably." If they are confident that that's true, they will be willing to prescribe for their more moderate severity patients, and that's a much larger population of patients that we can capture. Got it. That's our path to growth. Yeah. It's really not complex, but it is a lot of blocking and tackling. It's a lot of education of every office, of every gastroenterologist, and of every staff member who is doing the PAs. Mm-hmm. Understood. In terms of looking at the landscape, there's another phase III asset out there that's also a PCAB. From our own KOL feedback, they feel that the initial Voquezna profile differentiation exists at the full eight-week healing window. Right. What are your considerations on a future landscape that could have more than one PCAB therapy? I think there are numerous precedent categories where the entrance of a second product actually defined the category as a category rather than just as a product. Today, physicians think about, "Should I use Voquezna or should I use a PPI?" When they start thinking about, "Should I use a PCAB rather than using a PPI?" We have the PCAB with which they have three years of experience and in which they have confidence, and that they will be confident they can get for their patients. By the way, we also have the best healing data in erosive esophagitis patients. And on label superior to Exactly. We get 93% of erosive esophagitis patients healed by eight weeks. If you think about what you are trying to do with an erosive esophagitis patient if you are a gastroenterologist, you have got a patient whose reflux, the acid is actually causing erosions on their esophagus. You want to heal those. You want to give the drug that has the best healing rates. We have the best healing rates that have been reported clinically. Not only do physicians have familiarity with our drug, they have three years of history, they are confident in the clinical efficacy of the drug, they are confident in the clinical safety of the drug, they will have solid experience prescribing habits. When they start thinking, "Hey, this is a category that I have to pay attention to," you start thinking about which of your patients do you need to shift to the category. Naturally, the lead player gets a lion's share of that. If this So we actually think this is going to be an upside for us. This is going to be market expanding opportunity. And we would gain in that scenario more than we would have been standalone. As well with coverage and reimbursement or kind of those negotiations as well? Well, our coverage is already really solid. Yeah. We've got north of 80% of commercial lives covered. Physicians can have confidence that their patients with commercial insurance are going to get coverage, and their patients with Medicare will either get coverage or they will be able to access our cash pay price so that there is broad access for their government-insured patients as well. Got it. When you consider the overwhelming availability of generic traditional PPIs, for instance, do you continue to view Voquezna and PCABs as an overall mechanism as an opportunity to one day replace PPIs as the dominant choice in GERD? Well, I think while we are a branded drug at a premium price point, we're not going to replace PPIs. Okay. PPIs work pretty well for 60%+ of patients with GERD. So if a patient with gastroesophageal reflux takes a PPI and their pain is resolved, there's no reason for them to step up to Voquezna. Right. Because their PPI is virtually free, it's easy to get, it takes no work for the physician. That's fine. That's not our target market. We're not trying to replace that 60% of the patient population. It's the 40% of the patients who take a PPI who are still experiencing significant pain. Maybe they are having breakthrough heartburn at night. They are getting erosions despite the fact that they are on a PPI. Those patients that are experiencing symptoms despite already being on a PPI, that is our target market. We are going to win over time, growing share of that population. Very helpful. Thinking about the pipeline as well, enrollment was completed for the phase II pHalcon trial in EoE, with the 12-week top line expected fourth quarter. That is right. this year. What are the most important things to look for that upcoming data set? This was the first placebo-controlled trial of an acid suppression therapy in EoE. There have been a number of published reports, open label generally, on the treatment with PPIs. There have been a number of case studies with the vonoprazan, the generic in Voquezna- from the Japanese experience that have reported eosinophil count reduction. We've seen that either PPI therapy or PCAB therapy with vonoprazan can reduce eosinophil counts. What is not known is what is the magnitude of that reduction in a well-controlled, placebo-controlled trial. We are doing the first such trial. What we are looking for in the trial is the magnitude of improvement sufficient to drive the design of a reasonable phase III program that would demonstrate the effectiveness of this strategy in treating EoE patients, and potentially in being a first-line therapy for EoE patients. What we will look for in the trial is what is the magnitude of eosinophil count reduction, and what change do we see on the symptom scores and are those changes significant enough that they enable us to design our phase III program appropriately? Mm-hmm. Very helpful. Then separately, there is a phase III program for the as-needed or on-demand treatment of GERD or That is right. GERD patients. This could be important since traditional PPI therapies lack approval and the necessary profile to treat on demand. Yeah, they lack approval, and they actually are not really appropriate for use on an as-needed basis. Right. PPIs often have to be taken for several days before they have significant effect. They don't work quickly enough, and they don't work reliably in an as-needed environment. Patients who require chronic PPI therapy tend to be on them chronically on a daily basis. A significant number of patients ask physicians on a regular basis, "Is there any way that I can get off of this?" They've been on a PPI for five years, 10 years, 15 years. Right. They want an alternative to maintaining that daily therapy, particularly because there is some noise on the internet about potential health risks associated with chronic use. Often physicians are asked by their patients, "Is there an alternative that I can use just when I have a heartburn episode?" That is the intention of our as-needed trial. The intention of our as-needed trial is to introduce for the first time ever a therapy that can be taken when you have a heartburn episode and that will work for 24 hours. That profile will meet the needs of patients who are requesting such a therapy on a regular basis from their primary care physicians, and therefore it opens up a different population of patients than the patients we are treating today. Right now, we are treating the patients that are most severe within both erosive and non-erosive reflux. This is a population of patients who may be reasonably controlled on a PPI but do not want to take a PPI therapy daily and would do well taking our therapy on an as-needed basis. So it is really an incremental market expansion opportunity. A unique value proposition that fits nicely with our expansion to primary care that we anticipate in a couple of years. And with turning on additional direct-to-consumer promotion, because it's a different direct-to-consumer promotion pitch than has been available for prior generations of therapies. Can I just add one other point? Yeah, please. This then sets the foundation for over-the-counter- Right platform that we may be thinking post-LOE. Yep. As the PPIs went generic. Right There's a large OTC volume, the kind of business volume they created. We believe Voquezna after as-needed study and patient and doctors getting used to prescribing becomes an outstanding platform for an OTC launch post going generic. Understood. With Voquezna successfully having reached upwards of 1.7 million total filled prescriptions through mid-July, roughly 325,000 total prescriptions filled during 2Q alone. In the context of there being roughly over 100 million+ annual prescriptions for PPIs in the U.S., what do you think can be the greatest drivers for Voquezna growth overall, as you think of that dynamic of 1 million- 2 million prescriptions out of the 100+ million PPIs that are filled annually? Right. I think the drivers are exactly what we've been talking about before. Yeah. Which is right now, those 1.7 million prescriptions are basically for the most severe patients. Yeah Primarily within GI practices. North of 70% of our scripts come from gastroenterologists. If you think about the broad universe of patients who are in a gastroenterology practice, we don't really think about the 110 million PPI prescription market. Yeah. That's not really our total available market. Our available market is those patients who are still in pain while on a PPI. 20 million prescriptions are written by gastroenterologists. By and large, most of those patients who are on a PPI in a gastroenterology practice got there because they were still in pain. Even though they were on a PPI, they were still experiencing heartburn symptoms. Their primary care physician sent them to the GI to get scoped just to make sure that there's not some other problem. A substantial portion of those 20 million prescriptions are going to patients who are not adequately managed today on a PPI, need a better acid suppression strategy. Voquezna is a better acid suppression strategy, and we're capturing the most severe of those patients. The best growth strategy for us is to go deeper in those practices, capture moderate severity patients, and the key to doing that is to make the process for getting this drug such that physicians have confidence that they can get it- and confidence that the patient can get it affordably. When a physician has confidence that their patient can get the drug and confidence that they can get it affordably at a low out-of-pocket cost, their willingness to prescribe to more moderate patients is going to be significant, and that's our easiest growth opportunity. It's our existing writers. Right. The existing call points were already in gastroenterology practices. They already believe in the efficacy of our drug, but they're reserving it right now for their most severe patients. I want them to give it to their moderately severe patients. That expansion. Understood. We just need to make it easy to prescribe. It is that simple. It is really not a complex strategy at all. We just need to make it easier to prescribe, and they will prescribe it to more patients, and that is how we triple our revenue from here. Very helpful. Then just in the interest of time, I wanted to make sure I asked you, what are your thoughts on any valuation disconnect and what can investors possibly be missing about the commercial platform, the expanded GI pipeline? It is really sort of awkward as a CEO to talk about what price should our stock be. I mean, Right I do see that there's a valuation disconnect. I mean, if we look at where our stock is trading today versus where it was trading a year ago, as Sanjeev noted, we were up 88% in revenue in Q2 versus Q2 of last year. The stock price is trading at a lower price today than it was a year ago. That doesn't make any sense to me. I'm reticent to say what the number ought to be, but I think we are creating significant value for our shareholders by virtue of growing the top-line revenue meaningfully, by virtue of getting expenses under control, by getting to positive operating profit, by getting to positive cash flow next year. We are demonstrating and executing strategies that inherently are creating value for our shareholders. When that gets reflected in our stock price is really up to the investment community. Of course. Well, with that, I'd like to thank Steven and Sanjeev and Phathom Pharmaceuticals. Tremendous conversation, and best of luck with your continued success. Thank you. Thank you. Thank you very much. Real pleasure. Thank you. Appreciate it.