Phathom Pharmaceuticals, Inc. Q3 FY2026 earnings call

• Financial Strength: Achieved second consecutive quarter of positive operating profit ($5.8 million, excluding stock-based compensation) and positive cash flow from operations (~$2.1 million). Ended the quarter with $184.6 million in cash and cash equivalents.
• Commercial Execution: Over 2 million Voquesna prescriptions filled since launch. Q3 saw ~380,000 prescriptions, with 65% covered and 35% cash pay. Covered prescription volume grew 19% sequentially.
• Access First Strategy: Shifted sales force focus to improving access experience. Implemented 'BlinkRx' pharmacy partner integration to streamline prior authorizations (PAs) and patient support. Rolled out a $0 copay offer for commercially insured patients via BlinkRx to improve affordability perception and drive adoption.
• Physician Education: Focused on educating physicians and office staff on PA requirements (e.g., documenting prior PPI use) to reduce administrative burden and increase confidence in patient access.
• Pipeline Updates: Phase II Falcon EOE trial top-line data expected in Q4 2026. Phase III Falcon NERD 302 study for as-needed treatment is enrolling, with top-line data expected in Q1 2028.
• Legal/Exclusivity: FDA confirmed 10 years of NCE exclusivity through May 2032. BDR Pharmaceuticals sued FDA challenging this; Fathom intervened to defend its position.

The company reported a single product segment, Voquesna (for GERD). Net revenues were $84.7 million in Q3 2026, representing 100% of the firm's revenue contribution. This reflects a 71% year-over-year growth and a 14% sequential increase from Q2.

• Full Year 2026 Revenue: Maintained guidance of $310 million to $325 million.
• Gross-to-Net (GTN): Expects full-year GTN to settle toward the lower end of the 55%-59% range due to lower wholesale inventory levels reducing pipeline accruals in Q3/Q4.
• Gross Margin: Anticipates approximately 80% gross margin for the full year.
• Cash Operating Expenses: Maintained guidance of $235 million to $245 million (excluding stock-based compensation), tracking toward the lower end of the range.
• Cash Flow: Reiterated expectation of durable, positive cash flow in 2027.

• Litigation Risk: Ongoing lawsuit by BDR Pharmaceuticals against the FDA regarding Voquesna’s NCE exclusivity period under the GAIN Act. While Fathom has intervened, the outcome remains uncertain.
• Competitive Entry: Potential market impact from a second PCAB entrant in early 2027, though management views this as potentially expanding category awareness rather than immediately eroding share.
• Prescription Friction: Persistent inertia among physicians and patients regarding mail-order pharmacies (BlinkRx) versus traditional retail pharmacies may limit adoption speed despite improved access programs.
• Regulatory/Payer Changes: Uncertainty around future payer negotiations or rebate structures if new competitors enter the market, though current contracts remain stable.

Q: Kristen Kluska asked about specific access initiatives beyond BlinkRx updates and the next steps in the litigation with BDR Pharmaceuticals. / A: Steve Basta explained that access efforts focus on educating physicians on capturing prior PPI use in medical notes to simplify PA submissions and building confidence in patient affordability. The $0 copay via BlinkRx aims to remove cost barriers. Regarding litigation, he noted the FDA opened a public docket for comments but declined to predict specific legal outcomes, stating they will vigorously defend their exclusivity position.

Q: Martin Oster inquired about eligibility for the $0 copay program, its impact on gross-to-net (GTN), and long-term GTN implications. / A: Steve Basta clarified that the $0 copay applies to commercially insured patients using BlinkRx (excluding Massachusetts due to state restrictions), replacing the previous $25 cap. Sanjeev Narula added that while there is an incremental cost, it is insignificant relative to overall GTN and is net-positive because it drives incremental script volume and fill rates that more than offset the subsidy cost.

Q: Mike DeFiori asked about 2027 payer negotiations in light of a potential second PCAB competitor and whether inventory reserves explain gross margin declines. / A: Steve Basta stated that existing commercial contracts are broad and not currently being altered by the prospect of a second entrant. Sanjeev Narula confirmed that the gross margin variance was primarily due to one-time manufacturing charges from the previous quarter, not recurring fulfillment costs, and that distribution fees may decrease as the company scales.

Q: Annabel Samimi asked about physician resistance to BlinkRx, steady-state prescription volumes through Blink, and whether current studies aim for IP extension. / A: Steve Basta described the challenge as 'inertia' rather than active resistance, requiring education to shift habits from retail to mail-order. He expects Blink volume to grow regionally. Regarding studies, he clarified that the NERD trial is for market expansion (as-needed use), while the EOE trial aims to expand the patient population and potentially secure pediatric exclusivity through FDA discussions in 2027.

Q: Yatin Suneja asked about the commercial build-out in 2027 and business development strategy given positive cash flow. / A: Steve Basta indicated that commercial infrastructure costs will remain largely stable in 2027, allowing revenue growth to drive leverage. He emphasized the intent to build a significant GI portfolio by acquiring additional assets (commercial or clinical) that can be launched before 2033. Sanjeev Narula added that 2027 will be the pivot point where sufficient cash flow allows for business development investments alongside debt repayment obligations starting in 2028.