Hello, and welcome to Phathom Pharmaceuticals First Quarter 2024 Earnings Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. With that, I would like to turn the conference call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom First Quarter 2024 results. This morning's presentation will include remarks from Terrie Curran, our President and CEO; Martin Gilligan, our Chief Commercial Officer; and Molly Henderson, our Chief Financial Officer. Azmi Nabulsi, our Chief Operating Officer, will also be joining the team during the Q&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 Phathom's 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 trading prices for Phathom's common stock. A discussion of these statements and risk factors is available on the current safe harbor slide as well as in the Risk Factors section of our most recent Form 10-K and subsequent SEC filings. All forward-looking statements made on this call are based on the beliefs of Phathom as of this date, and Phathom disclaims any obligation to update these statements. With that, I will now turn the call over to Terrie Curran, Phathom's President and CEO, to kick us off. Terrie?

Thank you, Eric, and thank you to all those joining us on today's call. I'm excited to report on the great progress we've made since the start of 2024. Throughout our first full quarter of launch, our team continued to deliver on our 3 main launch goals, communicating VOQUEZNA's clinical superiority versus a PPI, driving brand awareness and building access to commercial patients. Most importantly, the increased enthusiasm surrounding VOQUEZNA is clear. I'm pleased to share that they are now upwards of 43,000 prescriptions written and launched to date. A notable increase relative to the number we reported just 2 months ago. Its latest demand metric is evidence of how our teams have been successfully executing. I'll now share more on the progress we've made on each of our launch goals. Beginning with communicating superiority versus the PPI, our sales force has made great strides to inform target positions of the clinical differentiation that VOQUEZNA can offer patients, with each incremental sales call, we see our promotional messages resonating. Physician excitement and feedback continues to be overwhelmingly positive in part due to real-world patient experiences. On several occasions, we received unsolicited comments from both patients and doctors telling us how VOQUEZNA has delivered improved symptom relief. Patients are describing life-changing effects, especially for those that have suffered from this condition for many years. We're proud to be able to help these patients and we know these types of testimonials encourage physicians to expand their prescribing behaviors. From the outset, we've been determined to drive brand awareness with both physicians and consumers. At the end of March, we expanded these efforts in a significant way, launching a new direct-to-consumer or DTC campaign titled VOQUEZNA can kick some asset. Our market research indicates that patient requests are major driver of the prescribing…

Thanks, Terrie, and hello, everyone. Let me first echo that we believe the launch of VOQUEZNA is off to a great start. Our sales team continues to share positive feedback from their conversations with physicians, the breadth and depth of their outreach among high-volume prescribers increases daily. And beyond the doctors, the sentiment among patients is also very positive. We're now seeing some of the early users of VOQUEZNA come back for refills, further signaling their positive experiences. At the end of March, we significantly elevated our DTC efforts with the goal of increasing brand awareness among consumers and empowering them to request VOQUEZNA. We've also made progress on the commercial coverage front to best ensure those who want VOQUEZNA can get VOQUEZNA. I'll dive into each of these items in more detail, but let me start by providing an update on our most recent launch metrics. Today, we're reporting our latest available written and filled prescription data as of April 26, which is just 9 weeks removed from our previously reported data. In roughly 2 months, the number of VOQUEZNA prescriptions written has grown by 207% to over 43,000, while the number of filled prescriptions has grown by 361% to over 17,500. As you've heard us say, it takes time to disrupt long-established behaviors, but these latest metrics are an exciting testament to the willingness to physicians and patients to try something new and different. Looking more closely at the over 17,500 prescriptions filled, we're also seeing notable growth on a monthly basis. In fact, filled VOQUEZNA prescriptions for each month of the first quarter increased sequentially by more than 100%. Keep in mind that these figures reflect prescriptions flowing through retail pharmacies, which are captured by IQVIA as well as those flowing through our $50 cash pay assistance…

Thanks, Martin, and hello to everyone on the call. I'm happy to share our first quarter 2024 financial results with you today. As you've heard from Terrie and Martin, we've made important progress related to the launch of VOQUEZNA in such a short period of time. Before going into the numbers, I'd like to note 2 items. First, during this call and similar to last quarter, we will not be providing financial guidance regarding projected revenues, spend or earnings as we are still early stages of launch. Additionally, 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 measure will be discussed later in my section and can be found in this morning's press release. Now turning to the numbers. For the first quarter of 2024, we reported net revenues of $1.9 million. Keeping in mind that this was our first full quarter of launch, this represents a 180% sequential quarterly increase. Growing demand in filled prescriptions led the way to inventory restocking by wholesalers. Although it's difficult to estimate stocking behaviors this early into launch, we anticipate being able to get a better sense of stocking patterns over the next couple of quarters. On the gross to net discount front, we would like to flag that our gross to net discount this quarter was better than expected. This resulted from a 3-week period during the first quarter where our patient co-pay savings card was unavailable due to the Change Healthcare cyber attack. For the quarter ended March 31, 2024, we reported gross profit of $1.5 million, which equates to a gross margin of 78%, a sequential quarterly increase of about 220 basis points. Moving down the P&L to our operating expenses. We reported non-GAAP…

Thank you, Molly, and thank you again to everyone joining us on today's call. When VOQUEZNA was approved, I share this slide to outline our perceived path to a potential blockbuster opportunity. Now 6 months into our journey, we have delivered according to the plan. Our first quarter results demonstrate that Phathom is off to a strong start in 2024. We've made significant progress in growing demand, accelerating filled prescriptions and expanding brand awareness. Our launch metrics are proof that the power of VOQUEZNA is resonating with both physicians and consumers. In upcoming quarters, we'll look to continue our efforts on all of these fronts with an acute focus on establishing widespread commercial coverage throughout 2024. Simultaneously, we're nearing closer to the potential approval and label expansion of VOQUEZNA from the daily dosing of nonerosive GERD. We believe the large patient population in this indication and similar commercial dynamics with Erosive GERD create an important catalyst. Internally, when we think about the potential for the VOQUEZNA, our bar is high and we're committed to realizing this opportunity. We remain focused on our goal of displacing PPIs in a very large market and we look forward to sharing our progress throughout the remainder of the year. Thank you for joining us today. We appreciate your continued interest and support. I'll now turn it over to the operator to facilitate a 10-minute question-answer session, operator?

[Operator Instructions] Our first question comes from Yatin Suneja of Guggenheim.

Very nice update today. A couple for me, a real quick one. Could you -- I don't know if you just mentioned this, but could you talk about this bid between BlinkRx and [indiscernible]. It seems like the fill rate has really improved to almost 41% now versus that say, 27-ish percent when you reported last time, where you are on the fill rate if you can talk about that specifically for BlinkRx, that would be great. And you just touched on and I would love to hear from you how should we think about inflection when you get that labor?

Okay. I'll cover all those. This is Martin. So first, let me talk about Blink and IQVIA. I think your percentages are pretty spot on in terms of the split. And I think as we always said in the past is that as we gained more access moving through the process, you would start to see a shift more towards covered scripts going to Blink versus cash. So I think our awareness of Blink is really growing, and we're seeing it heavily utilized. But I just want to make sure for everyone on the line that we're really clear when we're talking about Blink, I think many people just think of it as the cash component of it. There -- they were offering that patient support that I mentioned earlier. But as you see more coverage come onboard, we just have, you'll probably see less scripts being filled over time there. And then I'll just remind you that any script that is going to Blink, that is covered is going to a partner pharmacy that is picked up by IQVIA. So that drives the rates that you're seeing and the fill rates. And then I think the last part of your question was regarding the inflection. So we envision, as we said, both on the access front that we expect inflections during Q2 and Q3 as we grow our coverage, just like you saw as we had with Cigna announcing today. And then I think the other inflection we'll be expecting is upon the approval and would start marketing for nonerosive GERD.

Our next question comes from Umer Raffat of Evercore.

This is [indiscernible] for Umer. I guess first one on gross to net. How much improvement should we expect throughout the year, especially towards the end of the year? And second question is on the potential indication expansion, do you expect an inflection in terms of volume in the second half? Or it will be a more gradual ramp?

Sure, I'll take the gross to net and then turn it over to Martin on the inflection. So as we said, we experienced a somewhat better-than-expected gross to net for the first quarter because of our co-pay assistance program not being available due to the cyber attack. We're not specifically commenting on our gross to net projections for the rest of the year as we're still in negotiations with a couple of other payers. But at this point, we're not seeing significant variations from our expectations. And then I'll turn it over to Martin for the inflection.

Yes. So I think as I mentioned a little earlier, a question before, is that we do expect an inflection for nonerosive GERD. And so what we're seeing is we're going to be entering a much larger market, Erosive GERD is 7 million patients. And that non-erosive is 15 million patients who are both diagnosed and treated. But we really feel that we're not going to be starting this launch at 0 like we did back in January. Again we have the same sales force calling on the same physicians. While the patients have different diagnoses, their symptoms are the same, the journeys are the same, and we hear the same level of dissatisfaction, that same level of discussion in terms of switching PPIs and adding on. So we know that the category is searching for a new mechanism and we believe that VOQUEZNA is that mechanism for them as it's playing out for Erosive GERD. So we believe that we've started our momentum and the erosive experience we have thus far will really benefit us moving into the nonerosive launch.

Just want to follow up. How much of the reported sales was inventory?

If I understand that way, is inventory. So the majority of the sales for the first quarter would have been demand related to those prescriptions that were filled. We're still a little bit early in the cycle to see stocking behavior, but what we're seeing so far is pretty commensurate with what you see in the industry, and I'd say probably around the 2- to 3-week range. But again, it's still a little bit early for us to see the stocking patterns.

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

I just want a clarifying question on the Blink IQVIA split. If we kind of back into the numbers based on the TRx metrics you provided, I think since your last update in early March, there have been around 13,700 TRx filled and around 7,300 IQVIA scripts. So that implies like a 53%-47% split or roughly 1:1 IQVIA to Blink since the last update. So is that a fair assessment? Question number one. And then that 1:1 split is similar to what you provided in March, just want to get a clarification on that. And then secondly, on the potential label expansion to NERD daily dosing. Can you talk a little bit about the different market access dynamics in particular from a payer perspective between the current launch in Erosive GERD and the potential launch in NERD. For example, your securing coverage for the bottle right now as we understand it, so when it comes time for label expansion to the NERD indication, it's not a separate negotiation with payers for the indication is -- is that also a fair assumption?

So I'll split it into 2 parts. I just want to make sure on the first one, I understand the question. Your question is you were estimating that in our last earnings call, the ratio between Blink and IQVIA was 1:1. And you're asking if it's 60%-40% now, is that correct? Yes. So I might have lost you. So the answer to that question is yes. I want to make sure I understood it. So right now, what we're reporting is that about 60% of the scripts are going through what I'll call the retail channel versus going through our cash support, which is exactly, I think, that we set out when we spoke in the last earnings call that as more access comes on board, you would expect that our -- they'll be a shift in ratio between what you see in IQVIA versus cash scripts, and we anticipate that continues as we get more coverage, which leads into the second part of your question in terms of non-erosive and the daily dosing. We are expecting the approval with our PDUFA of July '19. And right now, generally, as we look at coverage for pack -- is always for packaging, a presentation, not by indication, and this is how payers work. So when we've been reporting our data as of right now today of 72 million, that's all about the bottle. So we would anticipate that, that bottled coverage will carry forward for non-erosive. And it's our expectation that we would see the same type of coverage after approval with non-erosive that we have prior to.

Our next question comes from Paul Choi of Goldman Sachs.

I have two. The first one is, Martin, I wanted to follow up a little bit on your comments in your prepared remarks regarding refills. And can you maybe just comment or help us quantify what percentage of patients who are getting a script filled to come back and are you able to stick with the -- get a second bottle just to help us understand how many patients are sticking with the treatment from -- with VOQUEZNA from treatment onto the maintenance space. Any quantification there would be helpful. And my second question is, as you look at the mix between the bottle and the packs, at least as expressed by the IQVIA data, do you think that's a fair proxy for what the mix will look like in the indications going forward here as you expand into NERD as well?

Absolutely. So the first one on the refills, yes. So we are seeing 2 things that are also related to refills. As we're seeing more patients come back now and continuing on therapy. So I'm not ready to quantify that for you today, but I can tell you that -- that's exactly what's happening. And you see that in our TRx numbers as those TRxs continue to increase. We also know that more physicians are writing. And as I just said before, they're also writing for more patients. So I think that's what you're seeing reflective in the TRx data. And then your question on the mix of bottle versus packs, yes, the packs is about 10%. And our planning, that's what we always assume to see in our mix and you should expect that to carry forward.

Our next question comes from Chase Knickerbocker of Craig-Hallam.

This is [indiscernible] on for Chase here. Just one from us for BlinkRx. So when should we expect the volume that is under BlinkRx here to become really fairly small amount over -- of the overall volume, let's say, less than 20%. Should we think of that kind of being in the latter half of 2024? Or do you think it doesn't -- that won't happen until 2025?

Yes. So Chase, I think it's hard to put a number on that. I think what you can expect is that, that's going to -- as I've been saying, is that that's going to decline over time. We've got an interesting launch and a positive launch. We're bringing on new physicians. We're bringing on new payers, and we're in the middle of a launch, and we're getting ready for a launch. So as this continues to grow, you're just going to see a lot of movement on a lot of metrics, given all those factors. I think the key signal to us are 2 things. You heard today the increase in access. And you've heard, as we said last time, start to see that shift, what would be the patient support or cash that goes through Blink. So I don't have a number to give you today. I think there's a lot of movement in the market for us that's all very positive as I just mentioned, and you'll continue to see that decline during the year.

Our next question comes from Annabel Samimy of Stifel.

I guess I'm going to get just a little bit more granular on Blink for a minute. So you said that it's going to decrease over time. But is there a scenario where you have increased demand faster than you get payers on board and perhaps you have the percentage going through Blink increasing before it decreases. I guess that's the first question. And as far as coverage is concerned and what the tail of Blink might be. Is there a steady state of coverage that you think that you'll get to like 70% or 80% for the -- on that tail end, is Blink going to continue? Or are you just at some point, going to stop and then those patients just don't get prescriptions fulfilled. And so just trying to understand the go-forward dynamics there.

Yes. So Annabel, there were a couple of questions there, but they all have a common thread in related. So I think I'm going to hit them all here, is there a case where demand might grow faster than payer coverage? I -- that's an interesting question. I think we've seen steady growth, and that's what we feel good about. Our demand, is it steadily growing. So I think you'll continue to see that. And we're far along in negotiations with the other major payers, which will be continuing through Q2 and Q3. So I don't think that's going to be the case. I think we're going to have coverage come on board as we see growth in prescriptions. And I think the next part of that would we see an increase in cash Blink coverage scripts before we saw a decrease. I'm not prepared to say that, that's correct or incorrect, but it's not what we're expecting. I think you saw a big change from our last earnings call where we had that 1:1 versus 60%-40%. So our anticipation is that will continue to decline. And then will we continue Blink? I mean, we'll always look to do the right things for patients. There will probably always be some level of coverage that doesn't exist and we want to make sure that we do the right things for patients. So we'll always be in there. And then in terms of, I think, one of your other questions was steady state for coverage. I think we're going to see it continue to grow, as I just said a moment ago, between going into Q2, which we're in and you've already seen it. So we've kind of kept that statement that we made in the last earnings call that we expected to see more growth in Q2 and Q3. So we've already had our first step in Q2, where we believe there's more to come in Q2 and Q3.

Our next question comes from Matthew Caufield of H.C. Wainright.

So for the launch, is there any granularity that you can share at this stage between the prescriptions coming from GI or primary care? And do you anticipate one or the other being a greater target or a contributor for growth?

So -- I'm sorry did you finish?

Yes. Yes.

Okay. I'm sorry. I thought I cut you off. Just wanted to make sure. Yes. So right now, we're seeing -- not to our surprise, that the percentage of scripts are leaning heavier towards GI. So what's the rationale for that? I know we've spoken in the past that when we set our sales force out, their objective was to start at the higher deciles, which would be the higher volume position. So really starting on those decile tens and working down to 9, 8, et cetera. And that's where you see the imbalance between the GIs being the higher decile and the primary care being lower. So yes, so right now, at this point, we're seeing a higher slant towards gastroenterologists, but we're actually seeing primary care come on board. So it's playing out exactly as we thought it would.

Very helpful. And then maybe if I could just ask one more quick question. In regards to the current fill rate, do you know how that kind of stacks up against something like a more established PPI. Presumably not all the PPI prescriptions are getting filled either. But just curious how that could compare possibly.

Yes. So I think that's a hard comparison. I think when you're looking at something that's a generic product that's been around for 30-some-odd years and is also OTC. I think a better way to look at it is, our fill rate as it compares to a launch product and where we are. And what you heard today was a rate we have of 41%. And we know, looking at other launches that not only is that consistent, but it's actually in a really good position right now at our place at launch. So -- and a lot of it that's kind of driving in terms of the coverage we have right now has come on board as we announced today with Cigna. And that fill rate will only go up moving forward.

Thank you. This concludes the question-and-answer session. Thank you for participating in today's conference. This does conclude the program, and you may now disconnect.