Phathom Pharmaceuticals, Inc. (PHAT) Q4 2024 Earnings Report, Transcript and Summary

Hello, and welcome to the Phathom Pharmaceuticals Fourth Quarter and Full Year 2024 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. [Operator Instructions] Please be advised that today's call is being recorded. With that, I would like to turn the conference 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's fourth quarter and full year 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 today’s Form 10-K. 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. Terri?

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 made during 2024 and the work that's underway to ensure 2025 is a year of strong growth. Throughout our first full year of product availability, we reported many accomplishments and consistently exceeded expectations. Most noteworthy, we secured broad commercial access launched a full-scale consumer campaign and received FDA approval for non-Erosive GERD. As I reflect on the past year, it's clear that we have built a strong foundation with each of our accomplishments serving as key building blocks. Feedback from physicians, testimonials from patients and continued demand give us confidence that the VOQUEZNA is a game-changing product and that we’re successfully bringing it to market. We're proud of the work we've done so far, but this is just the beginning. We'll continue building off this strong foundation and focus on pivotal growth drivers in 2025. We fully believe VOQUEZNA can reach blockbuster status. Importantly, our launch data reinforces story, commercial coverage has held consistently above 120 million lives with the majority of these lives being able to access VOQUEZNA after stepping through only one generic PPI prescription, a pretty satisfied criteria for most acid reflux patients, and with over 300,000 prescriptions filled to date, the pull-through from this coverage is evident. Without a doubt, the non-Erosive approval sparked an inflection in our launch, and we believe that momentum will continue throughout 2025 and beyond. Looking more broadly at Phathom's future, there is so much to be excited about related to our ongoing launch and upcoming development goals. On the commercial front, we will continue to invest with the objective of making VOQUEZNA a household name, the product physicians and patients think of when they think of heartburn. In fact, I'm pleased to share that we'll soon be rolling out exciting new consumer campaign, expanding upon VOQUEZNA Can Kick Some Acid and aimed at further enhancing brand awareness. In parallel, our sales force we focused on reaching primary care positions who are the largest group of GERD treated. We've built amazing awareness with GI, but PCPs are where we can make a big difference. Every year there are hundreds of thousands of PCPs who write PPIs for their patients. We would be adding VOQUEZNA to the tool kit to materially help the way they treat good [ph]. For now, we're focused on driving growth by calling on the highest volume PCP with increased frequency. Our reps are working to ensure these positions recognized the VOQUEZNA brand, understand the clinical benefits and know that the access process is often as easy as checking a box. We believe this is a path to displacing PPIs, and Martin will share more on these efforts later in the call. On the development front, we've always used VOQUEZNA as a pipeline in a product and we believe eosinophilic esophagitis or EoE, can be the next indication to expand the label. In fact, we recently finalized the Phase 2 design with the FDA. This is a space we're excited about because we think VOQUEZNA can make a difference. EoE is a chronic inflammatory condition of the esophagus, which is drawing increased attention from the medical community as both the incidence and prevalence have grown in recent years. Although compared to [indiscernible], EoE is a smaller market, we believe it could be a unique opportunity given the importance of the condition, the need, the lifelong management and the overlap with the gastroenterology market. Patients with EoE usually present with heartburn symptoms and difficulty swallowing. The unmet need is significant given the current treatment options are limited. Although an approved corticosteroid and biologic offered two options, PPIs continue to be first-line therapy despite not being approved this indication. The rationale is that PPIs are meant to reduce Esophageal inflammation and neutralize acid reflect symptoms. Based on this, we believe the potency of VOQUEZNA may potentially provide an alternative first-line therapy ahead of PPIs, biologics and corticosteroids. Our study will be the first large well-controlled study in EoE for either a acid secretory class, PPIs or PCABs. It will include approximately 150 subjects with both adult and adolescent segments. ,: Recently, we've also been working on the development of an Orally Disintegrating Tablet for ODT formulations of VOQUEZNA. This is another key pillar to our development strategy that complements the work we are doing in EoE. Once available an ODT formulation could present a relevant administration more desirable for patients with difficulty swallowing, which is the core symptom among those suffering from EoE and also common among pediatric and elderly patients. Additionally, an ODT formulation offers the opportunity for new intellectual property, potentially further protecting the brand. An OTC formulation can be a longer-term source of differentiation from an over-the-counter VOQUEZNA product. In fact, we believe the VOQUEZNA is uniquely suited for prescriptions over-the-counter or OTC switch, such and if it could create a long-term durable revenue stream. The total OTC asset control market generates approximately $3 billion in annual sales. PPI specifically account for roughly one-third of those sales with branded products making up about 35% of the corresponding PPI unit volumes. We believe the VOQUEZNA is rapid, potent and durable acid suppression profile supports the potential to capture market share by providing rapid and complete heartburn relief as needed. However, there's work to be done before we can achieve that vision. Throughout 2025, we'll be analyzing the OTC market opportunity and developing our long-term strategy. Separately, we're exploring real-world data to understand the prevalence of GERD symptoms among the increasing wave of GLP-1 users and the utilization of acid suppressant to release such symptoms. Our review will help us to determine if further efforts are warranted to evaluate the potential of equipment to provide relief to those patients. Before turning the call over to Martin, I'd like to take a moment to mention our active Citizen Petition to the FDA and potential outcomes. On December 11, 2024, we submitted a Citizen Petition or CP to the FDA requesting that they update the Orange Book to reflect a 10-year period of new chemical entity exclusivity for our 10 milligram and 20 milligram bottles based on the fact that the underlying drug substance across all the VOQUEZNA products contains the same new active moiety, vonoprazan. We continue to feel confident in the strength of our legal positions as outlined in the CP. We are now just about halfway through the 180-day period, the FDA to review and provide a response. If the FDA grants our CP on or before the June deadline, we expect the Orange Book to be quickly updated to reflect regulatory exclusivity through May 2032 for all the VOQUEZNA products. However, even in the case where the FDA rules against our CP request, we are equally confident in our patent position. Our composition of matter patent is strong, and we expect it to expiry will be extended to at least mid-2030, pending the granting of our requested patent term extension under the Hatch-Waxman Act. Additionally, we have a separate patent to vonoprazan formulation. Lastly, on the financial side, Molly will further detail our fourth quarter 2024 results later in the call, for which we reported net revenues of $29.7 million and ended with $297 million in cash. We remain confident that our balance sheet and the available capital under our debt agreement can support the investments needed to pursue our launch and development plans. In 2024, we built a strong foundation. We are now leveraging our commercial and development expertise to grow the launch and continue exploring new opportunities for the VOQUEZNA franchise. We here has an impassionate resilient and determined to deliver VOQUEZNA’s blockbuster potential. We're just getting started, and I'm excited by the opportunities that lie ahead in 2025. I'll now turn the call over to Martin to provide further details on our recent commercial updates. Martin?

Thanks, Terrie, and hello, everyone. As you heard Terrie mentioned, we are extremely happy with the progress we made in 2024. Our results continue to prove we're successfully executing on our strategy, and I'm incredibly proud of the Phathom team. Launching a drug is hard, launching a retail-focused drug and disrupting a massive genericized market is even harder. However, that is what we set out to do, and I believe we're doing it well. Many of you have told us, it's been a long time since you've seen and launched quite like this. I attribute our success largely to the impact of VOQUEZNA's having on patients and to the agility of this team. I will begin with sharing updates on our key performance metrics since we last spoke. However, today, you will also hear me share a few additional data points that highlight new information we've learned from being on the market for a little over a year. I'd like to note ahead of time that not all of these are necessarily metrics that we will share on a recurring basis. However, we feel they are important to share at this stage to provide a view into 2024 results. Starting with the latest on VOQUEZNA's prescriptions, we have now surpassed 300,000 scripts filled by patients from launch through February 21. Over the 17 weeks since our last report, this figure has more than doubled, displaying growth of approximately 110%. In the fourth quarter, specifically, we recorded approximately 118,000 fills of VOQUEZNA's prescriptions equating to a growth of over 70% compared to our third quarter report. As always, these figures include volumes filled through retail pharmacies, which are captured by IQVIA as well as those filled through BlinkRx, one of our patient assistant programs. Consistent with previous quarters, the proportion of scripts in Q4 flowing through retail pharmacies and captured by IQVIA continue to increase now reaching approximately 75%. As we begin 2025, it's worth noting that branded products typically experience seasonal slowness to start the year. The effects of holidays, patient health plan changes and deductible resets are felt industry-wide and VOQUEZNA is no exception. As such, we anticipate the impact from these events will reflect historical trends as it relates to Q1 filled script growth and the ratio of retail filled prescriptions. That being said, we believe previous trends will quickly return after the first couple of months of the year. Furthering this belief is the fact that we have seen total demand continue to increase over the last two months. To us, this signals a growing opportunity to fill VOQUEZNA’s scripts, which we believe should materialize after the standard volatility in early year fulfillment diminishes. Separately, we've also been monitoring VOQUEZNA's refill rate. Among scripts filled in the fourth quarter, we observed about 70% being filled by patients continuing VOQUEZNA therapy. Based on where we are in launch, I'm pleased with this ratio, especially considering we're tracking in line with other successful launches. It implies that patients are initiating VOQUEZNA treatment and remaining on therapy. In fact, what gives me more confidence is our preliminary duration of therapy analysis, which complements these refill patterns. Now that we're a year into VOQUEZNA availability, we've had the chance to monitor usage among some of our earliest cohorts of patients. Specifically, we looked at patients who initiated therapy on VOQUEZNA's 10 milligram or 20 milligram in the second quarter of 2024 and track the number of bottle prescriptions they filled over the subsequent six months. In that time frame, an average of 3.5 VOQUEZNA's prescriptions, were filled implying a run rate above pre-launch expectations. Again, paired with refill data, this is very encouraging. We are seeing patients initiate treatment and continue on therapy in line with PPI usage. This very early data is sourced from a relatively small sample given the proximity to launch, but we're happy with the preliminary results, and we plan to continue monitoring patients' persistency and compliance over longer periods. In parallel, the total number of physicians who have written the field script has increased to over 20,000 as of February 14 compared to over 13,600 as of our last report demonstrating continued adoption among new writers. Through the end of Q4, about 17,800 cumulative prescribers have written a filled VOQUEZNA prescription, up nearly 45% to Q3. In addition to the growing number of writers, we're equally excited about the proportion to continue to write VOQUEZNA, signaling their positive experience. Among all the VOQUEZNA writers, about 75% have written more than once. From physician feedback in patient testimonials, we know that VOQUEZNA is having a positive impact on patients' lives. This repeat writer statistic validates that once physicians begin prescribing VOQUEZNA, they continue writing. As Terrie said, our goal is to bring on more new writers to continue this pattern, and we believe focusing on primary care is a clear path to achieving this. As we think about the VOQUEZNA opportunity, PCPs are the area where we can drive the most growth, and we are determined to increase adoption among this group. In fact, we're starting to see wider trends shift, especially following the approval of non-Erosive GERD our market research shows that primary care awareness of VOQUEZNA has almost doubled since the launch in mid-July. And just recently, we observed a total number of cumulative TCP writers surpass the total number of GI writers. We knew this would be the case given the difference in population sizes and the SKU of our target panel, however, to see it come to fruition so quickly after the non-Erosive launch is encouraging. There is still more work to do on this front. Right now, although smaller in size, our GI base makes up the majority of total writing. By focusing on primary care, we aim to increase both the number of writers and the frequency of the writing. Ultimately, our goal is for the volume being written by PCPs to surpass that of GIs. Meanwhile, the ability of patients to access VOQUEZNA at an affordable price when their physician rights is equally important. On the commercial front, despite the usual shifting of formularies to start the year, VOQUEZNA remains above 80% covered, equating to over 120 million lives. On the Medicare and Medicaid front, we continue to have limited coverage but we're working on ways to enhance access for government patients. Importantly, we remain pleased with the quality of our commercial coverage. For the majority of covered lives, we have secured access subject to a single step through a generic PPI prescription. In practice, this takes the form of a simple PA or Prior Authorization, and we are working to educate prescribers on this process. New branded products are often expected to be difficult to access, we want to disrupt that perception, whether it be through the completion of a simple PA or the use of BlinkRx, our patient assistance program, we are working to help physicians understand how easy it can be to get VOQUEZNA to the commercial patients. The communication of this message by our sales force, especially to PCPs is a key focus area for 2025. In the meantime, we've been pleased to see the VOQUEZNA patients therapy so far is exactly where we plan. Among the representative sample of VOQUEZNA bottle patients, over 80% have been on one PPI or less within the year prior to starting therapy. This is evidence that VOQUEZNA is not being reserved only for patients that have tried and failed multiple PPIs. Physicians are thinking about VOQUEZNA as an early alternative to PPIs as opposed to exhausting all possible options. This aligns with our formulary positioning and this one step market segment is not small by any means. On the consumer front, it is equally important to have patients aware of the brand and to motivate them to ask their doctors for VOQUEZNA. This is one of our top priorities in 2025. Our initial investment in the VOQUEZNA Can Kick Some Acid campaign is working. Since its televised launch in April of last year, there's been a 55% growth in the proportion of physicians who report receiving a request for VOQUEZNA. And among physicians aware of VOQUEZNA, our market research indicates that nearly three out of four are likely to write a prescription is asked by a patient. Based on this data and other internal metrics, we have chosen to increase our investment in DTC efforts, especially in the first half of 2025, we are doubling down on consumer brand awareness. Our investments will focus on ensuring that our reach and frequency is comprehensive. Additionally, we are working on an exciting new campaign that will further enhance our powerful messaging and distinctive look, by leveraging a unique real VOQUEZNA patient to drive greater engagement and demand. We are planning to go live on digital media in the next few weeks, and anticipate reaching broadcast TV, early in the second quarter. And stay tuned, we expect there to be some buzz around this new campaign. Overall, we feel our early launch performance has been impressive, and we're looking forward to growing demand in 2025. We have several key focus areas, increasing primary care adoption, ensuring awareness of the simple PA process, and expanding DTC promotion, we believe these will be pivotal drivers of growth. The foundation is set. And now we push for acceleration on the heels of the Non-Erosive launch. I'll now pass it off to Molly, to walk through our financial results. Molly?

Thanks, Martin. Hello, everyone, and thanks for joining us. I'm pleased to share our fourth quarter and full year 2024, financial results with you today. Similar to previous quarters, I'd like to note that I will be commenting on both GAAP and non-GAAP financial measures. Supporting schedules with detailed reconciliations between non-GAAP measures and their most directly comparable GAAP measures will be discussed later in my section and can be found in this morning's press release. Turning to our results, for the fourth quarter 2024, we reported net revenues of $29.7 million, which represents a sequential quarter-over-quarter increase of 81%. Strong VOQUEZNA demand resulting from the approval of Non-Erosive GERD last July was one of the primary drivers of our growth. For the full year 2024, we reported net revenues of $55.3 million. Most notably, during each quarter of 2024, we saw strong revenue growth, and we are pleased with our financial results from VOQUEZNA's first full year of launch of Erosive GERD and partial year launch of Non-Erosive GERD. Regarding gross to net, discount rates are once again in line with our expectations we set forth pre-launch. For the last three quarters of 2024, our gross to net discount approximated 57%. Based on this trend, resetting deductibles and evolving payer rebating levels overtime, we are narrowing the range of our GTN discount rate guidance to be between 55% and 65% for 2025. For the quarter ended December 31st, 2024, we reported gross profit of $25.8 million, which equates to gross margin of 87%, an increase of 155 basis points over the third quarter. For the full year, we reported gross profit of $47.3 million and a gross margin of 86%. Moving down the P&L to our operating expenses, for R&D, we reported GAAP expenses of $8.6 million for the fourth quarter, which represents a 36% decrease compared to this period in 2023. The year-over-year change is driven primarily by lower stock-based compensation expense in 2024 compared to the fourth quarter of 2023, which included a onetime vesting event for performance shares tied to the Erosive GERD approval. As for SG&A, we reported GAAP expenses of $76.7 million for the fourth quarter of 2024. This represents an increase of $19.7 million compared to the fourth quarter of 2023, primarily driven by the ongoing expansion of our commercial efforts in support of the VOQUEZNA launch. During the fourth quarter of 2024, we incurred advertising costs of $20.2 million in connection with our expanding DTC campaign, representing a 15% increase compared to the third quarter 2024. As for our projected operating expenses for 2025, there are a couple of items to keep in mind. As Terrie mentioned, we plan to initiate our Phase 2 eosinophilic esophagitis trial in the second quarter. We anticipate this trial and other investments in life cycle management opportunities will lead to increased R&D spend throughout the year. And on the SG&A side, you heard Martin talk about the positive impact our DTC campaign is having on brand awareness. In the first half of 2025, we plan to increase our investment to support the expansion of these DTC efforts. In the second half of the year, we will evaluate the effectiveness metrics from the enhanced campaign to inform our continued capital allocation strategy in this area. Overall, with the initiation of the EoE trial and growing DTC efforts, we are estimating our non-GAAP operating expenses for 2025 to range between $360 million and $390 million for the full year. We anticipate the split between R&D and SG&A will be similar to 2024, where R&D accounted for about 10% of the total spend compared to SG&A's 90% contribution. We have provided non-GAAP spend guidance as we believe it provides a more transparent view into our anticipated use of cash. As for EPS, we reported GAAP net loss for the fourth quarter 2024 of $74.5 million, or $1.05 loss per share compared to $79.6 million or $1.39 loss per share for the fourth quarter of 2023. Non-GAAP adjusted net loss for the fourth quarter of 2024 was $56.4 million, or $0.79 loss per share compared to $46 million, or $0.80 loss per share in the fourth quarter of 2023. Similar to previous quarters, the most significant reconciling item between GAAP and non-GAAP operating expenses was non-cash stock-based compensation. Other non-GAAP reconciling items include non-cash interest on our revenue interest financing liability and non-cash interest expense related to amortization of debt discount. Turning to cash. As of December 31, 2024, cash and cash equivalents were $297 million, up to an additional $100 million from our debt facility remains available this year, subject to the achievement of certain revenue milestones. Based on our current operating plan, estimated product revenues and funds available under our term loan, we remain confident that we have runway through cash flow positivity. Lastly, looking ahead to 2025 revenues. As commented in our industry, we note that the first quarter is often a soft quarter. This dynamic stems from lingering impacts of holidays, a shortened month, patient health plan changes, deductible resets and working through year-end stocking. Specifically as it relates to inventory, we've noted an elevated level of stocking by our wholesalers at the end of 2024, approximating about three weeks of inventory on hand compared to the typical two weeks we've been seeing. As a result of all these dynamics, we are anticipating softened first quarter revenues. But on a full year basis, we are comfortable with the current 2025 consensus revenue of approximately $165 million. Overall, we are pleased with our 2024 financial results and look forward to leveraging our strong foundation to ensure a successful 2025. We continue to view VOQUEZNA as a blockbuster opportunity, and we are allocating capital strategically to recognize this vision. With investments in our pipeline, expanded DTC marketing and ongoing physician promotion, we are excited about Phathom's future. We look forward to keeping the market updated on our progress throughout the year. With that, I'll turn the call back over to Terrie for closing remarks. Terry?

Thank you, Molly, and thank you again to everyone joining us on today's call. With the great progress in 2024 in the rearview, we look forward to all that's ahead in 2025. Our focus is on leveraging our highly experienced teams to drive growth. From a commercial perspective, we plan to further disrupt the GERD market with our large established field force and expanded DTC efforts. And on the development front, we're excited to investigate new indications and formulations with the goal of better serving patients with acid-related disorders. For now, accelerating the path to peak VOQUEZNA's adoption is our top priority. Based on the tremendous feedback we're hearing from patients and physicians, we believe we are on track to displace PPIs in a very large market. This is an element we think is currently being underappreciated. The dynamics of the GERD market, VOQUEZNA's benefit to patients and the importance of commercial execution have not changed. Our story remains tied to delivery, and we are prepared to demonstrate continued success in 2025. With the nonerosive GERD launch still in its early days, this is just the beginning of our journey. Thank you again 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-and-answer session. Operator?

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

Hi guys. Thank you for taking my question. Two questions from me. First one is on the -- on this citizen petition. Could you maybe help us understand the time lines around it? I think our understanding is in June, but given some of the political stuff happening at the FDA, just curious if it has to sort of give you an opinion by June. So that's one. And then if in a scenario, the decision doesn't go in your favor, what are certain options that you have? The second one is on Q1 specifically. Thank you for flagging the inventory in hand and other dynamics. But just to -- just to confirm, are you -- you do expect growth in Q1 relative to Q4? Or are you sort of trying to imply that it could be a down quarter. Thank you.

Thanks, Yatin. It's Terrie here. I'll take your first question on the CP, and then I'll hand over to Molly regarding Q1. So with the CP, we submitted -- you are correct. We submitted in December. So the time line there is 180 days. Within that time line, the FDA is required to respond to us. So we anticipate a response from them on that day or if not before, the 180 days. We don't see the changes within the FDA impacting that time line. We are very pleased with the progress that we're making on the CP as expected. We're proactively involved with key influential stakeholders in Washington and industry groups, and we're also pleased to see on the CP docket that we have posts from KOLs as well as industry and patient groups. So, very pleased with the progress we're making and remain very confident in that petition. If it does not go as anticipated, we will evaluate next steps, but most likely pursue litigation as we believe we have a very strong legal position. Molly?

Sure hi. Sure, as it relates to Q1, as we've been signaling that industry dynamics certainly point to a softened Q1. We haven't provided any more specifics, but I think it's safe to assume we're still two-thirds through the quarter, so we have some more work to do, but it's safe to assume that it will be a bit softer than, obviously, industry --- as the industry is showing.

Our next question comes from Joseph Stringer with Needham.

Hi, good morning. Thanks for taking our questions. For the Phase 3 on demand trial, when do you think you'll have enough real-world data to make a go, no-go decision there? And when can we potentially anticipate an announcement of this? Thanks.

Yes. Thanks Joey. We're continuing to evaluate the real-world utilization of VOQUEZNA on demand as well as the publication of white papers and guidelines that are already starting to incorporate the utilization or recommendation of VOQUEZNA as an on demand option because of its profile. So, I would say by midyear, we'll have enough information to make a decision and determine whether we proceed with that study.

Our next question comes from Annabel Samimy with Stifel.

Hi. Thanks for taking my question and great quarter. I want to, I guess, talk about the DTC a little bit. You shared some metrics on DTC. Is that what's driving the significant increase in prescribing physicians? And is this something that's primarily patient-driven? Or is it your education of physicians? Just I guess, help us understand the metrics around that, balance with the decision to make another campaign and then think about the cash and, I guess, runway to profitability and how this is all balanced? At what point do you pull back on some of the DTC to sort of drive the profitability, I guess, and some timing around that, if possible?

Morning Annabel, it's Martin. I guess one thing I just want to clarify in your question is the campaign, it's an evolution of our current campaign. So, what it tells us is that we've got a super strong campaign, that's really motivating patients to go in and ask physicians for VOQUEZNA. As a matter of fact, we've seen a 55% increase in the number of physicians who have received requests. And as I said earlier, about three out of four will grant based solely on that request. So, it's told us that the combination of the sales reps that are creating demand, the growth in primary care prescribers that have now passed cumulatively GI and patients going in that it's the right time to invest in DTC. We know it's reaching the intended audience. We know that it's motivating them to take action. And what we're doing is we're monitoring things such as impact on TRxs, as I mentioned before, request rates and those fill rates. So, it's definitely the right time. We've got a great campaign coming up that will really be an evolution and creatively take it to the next level.

And Annabel, as it relates to the cash runway question, it's certainly a balance between investment in DTC. And as Martin said, we continue to see some really good early signals on the effectiveness of those campaigns, but we also signaled we'll pause midyear and really do a deep dive in ROI to make sure it's the best use of our resources. And then I guess, tangential to that is the guidance we provided for OpEx for 2025 of $360 million to $390 million certainly includes a good-sized investment from a DTC perspective.

Great. Thank you.

Our next question comes from Kristen Kluska with Cantor Fitzgerald.

Good morning. Can you please speak to some of the early metrics you're seeing on refill trends and usage for NERD specifically now that you have a few more months of sales under your belt and how you might also anticipate that moving forward as more awareness is out there?

Sure. Happy to take that, Christine. So first, let me take the refill and then I'll address the part about non-erosive because definitely it's connected. It's still very early. I often have to remind myself that we're only seven months into the launch in non-erosive, but we are absolutely right where we should be in this stage of launch. I had given some specifics earlier in my comments about our refills. But when we look at that, we compare that to other small molecule chronic medication refills, and we're right where we need to be in terms of tracking to that. And the other thing that makes us feel really good is we believe we're tracking to the persistency and it's in line with PPIs. We always said prior to launch that the PPI is what we know their total days of therapy on an annual basis are 140 to 160 days a year. And given the information I shared previously, we're tracking directly towards that. Now contributing to that is the combination of both erosive and non-erosive. What I'm happy to share is that we're seeing consistent refill rates amongst the 10-milligram and the 20 milligram. The 10-milligram can be used and is used for maintenance, but we know that there was a significant increase in 10-milligram is growing even faster than the 20-milligram because of the non-erosive. So we see the two going hand in hand, and we're actually getting feedback from physicians that tell us that their patients are doing so well that they're continuing. So I think I answered everything, the refills as well as how it's tied to non-erosive.

Thank you.

Our next question comes from Umer Raffat with Evercore.

Hi, good morning. This is [indiscernible] on for Umer. Thank you so much for taking our question. And also thank you for providing additional data points. It's really helpful. I think just want to focus on the new patient starts number. So if you look at the NBRx data, it's kind of stabilized around 2,000 every week since, I think, October last year. And with the new consumer campaign, what should we expect going into this year in 2025? And on that point, how important is the BlinkRx right now considering the coverage has improved over 80%.

Yeah. So again, this is Martin, and I'll take -- I think I'll do those in order. The first one regarding the NBRx, we are definitely seeing an increase in new patient starts. And what we're able to see are not only new patients going through retail/IQVIA, but also patients who are going through BlinkRx. So the combination of that tells us that there's definitely an increase in growing new patients who are starting on VOQUEZNA. I will just refer back to, as Molly was referring to earlier, as with every brand, it's not unique to VOQUEZNA, there is some softness during Q1. But we feel that new patients are coming on board. And one of the drivers, as I mentioned earlier, and you put into your question was regarding the DTC and the consumer driving that. So we believe it's a combination of a couple of things that are increasing the new patients or NBRxs. It's a combination of new primary care doctors who are starting to adopt. We're seeing increasing number of physicians on a weekly basis. We're also seeing physicians do repeat or prescribing on more patients. And then lastly, the consumer going in and asking for VOQUEZNA. I might have -- I'm not sure if I answered everything. I might have missed the specifics of your Blink question.

The importance of Blink.

Yes. The importance of Blink. So I would say Blink remains very important for us. We brought Blink on board specifically to make sure that we're supporting patients -- it's been a very good experience, and it's very much focused on our commercial patients and what the intent is to get commercial patients on VOQUEZNA as the physician intended. We also see that when a patient goes to BlinkRx, they're more likely to have increased refill. So overall, it's been a great partnership and physicians have been adopting it widely.

Thank you so much.

Our next question comes from Paul Choi with Goldman Sachs. Q – Paul Choi: Hi. Thank you. Good morning. And thanks for taking our question. I want to ask about the ODT formulation that you're developing? And just with regard to the IP strategy would you initially seek the pediatric extension that would come with that potentially first? Or would you likely see the formulation patent issued first there. Just any clarity on sort of the sequencing of how that would be developed would be helpful. And then my second question is Molly's earlier comment on the roughly 57% gross to net. Can you maybe just remind us which channels are being included in that calculation? Is that excluding free drug? Any other or specific channels, just helping us understand that relative to your guidance range of 55% to 65% would be helpful. Thank you very much.

Yes. Paul, I'll take the patent question. They're independent of each other. So the ODT has broader applicability than just pediatric because it can be used in the EOE, on demand as well as pediatric, but also for OTC as well. So they will be running in parallel. So I see a scenario where we obtained the patent for that formulation before the accessibility [ph].

And – Hi, Paul, as it relates to gross to net, I mean, your question on which channel. So it's important to remember, essentially that gross-to-net does -- it takes gross revenue to net revenue. So what's included in gross revenue, it's important to use the right price points. So for anything that goes through Retail/IQVIA, it's at the WAC price, which is now a little over $680 a bottle versus the Blink channel, which has a WAC price of $50. So it's important if you use those two dynamics, you can actually get pretty close to that 57% that we reported. So I would say that's the most important element of calculating gross to net. Free a lot of the samples and so forth do not go through, that's more of a marketing expense. So the lion's share of what you see in gross to net is really the rebating as well as the wholesaler discount. Q – Paul Choi: Okay. Great. Thanks for that. If I could just ask a quick follow-up for the ODT. What that -- and your best estimate would sort of potentially take the IP out to?

Well, I mean, it will be a full protection. That will be in 20 years or so. Again, I cannot be so specific because we're working on this matter now, but it will be a full protection for the formulation for the different aspects, the multiple aspects of the formulation. Q – Paul Choi: Okay, great. Thank you.

Our next question comes from Matthew Caufield with H.C. Wainwright.

Hey, good morning guys, and thanks for the updates. Just quickly from our end. For those new prescriptions, would you say any greater potential resistance comes from prescriber acceptance of the novel mechanism itself, or any remaining initial coverage pushback at this stage? Thanks again.

Interesting question, Matt. No, I think -- and even resistance, I'm not sure we get resistance at all to VOQUEZNA. I mean, they're really welcoming the new mechanism. They recognize immediately that it's different than a PPI and that it has definitely a place in therapy. I think what you see is, as we bring on more primary care physicians, what you see over time is they first need to get a couple of patients started to have their first experience. And then what we hear from the physicians is they start repeating back to us the story. And the stories that we're hearing are really tied to two things, and it's all rooted in the rapid, potent, and durable profile is that how quickly it worked and that it actually lasted the full 24 hours and the patients are having a real life-changing experience being able -- during the night to last through night without any heartburn or disruption.

That’s helpful. Thank you.

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