Phathom Pharmaceuticals (NASDAQ:PHAT) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Phathom Pharmaceuticals reported a significant year-over-year revenue growth of 104% in Q1 2026, with revenues reaching $58.3 million, indicating strong demand for their gastroenterology-focused product, Voquesna.
The company expanded its sales team by 50 representatives, aiming to enhance its presence in the gastroenterology market. Its strategy focuses on increasing market share among gastroenterologists, targeting a 20-30% share to achieve $1 billion in annual revenue.
Phathom Pharmaceuticals maintained its 2026 revenue guidance at $320 to $345 million, expecting growth to be more pronounced in the second half of the year. The company anticipates achieving operating profitability by Q3 2026 and positive cash flow in 2027.
The company is preparing for potential competition from a new PCAB entrant in 2027 but remains confident in Voquesna’s clinical efficacy and market position.
Phathom Pharmaceuticals plans to leverage its cash flow and strong balance sheet to consider strategic investments and potential M&A opportunities, focusing on complementary GI assets.
Full Transcript
OPERATOR
Hello and welcome to Phathom Pharmaceuticals first quarter 2026 earnings result call. At this time, all participants are in a listen only mode. After the presentation, there will be a question and answer session. To ask a question during the Q and A session, you will need to press Star 11 on your telephone keypad. Please be advised that today’s call is being recorded. With that, I would like to turn the call over to Eric Shkreli, Fathom’s Head of Investor relations. Please go ahead.
Eric Shkreli (Head of Investor Relations)
Thank you Operator. Hello everyone and thank you for joining us this morning to discuss Fathom’s first quarter 2026 results. This morning’s presentation will include remarks from Steve Basta, our President and CEO, and Sanjeev Narula, our Chief Financial and Business Officer. A couple of notes before we get started. Earlier this morning we issued a press release detailing the results we will be discussing during the call. A copy of that press release can be found under the news releases section of our corporate website. Further, the recording of today’s webcast and the slides we’ll be reviewing can also be found on our corporate website under the events and presentations section. Before we begin, let me remind you that we will be making a number of forward looking statements throughout today’s presentation. These forward looking statements involve risks and uncertainties, many of which are beyond Fathom’s control. Actual results may materially differ from the forward looking statements. Any such risks may materially adversely affect our business and results of operations and the trading prices for Fathom’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 10K and subsequent SEC filings. All forward looking statements made on this call are based on the beliefs of Fathom as of this date and Fathom disclaims any obligation to update these statements. Later in the call we will be commenting on both GAAP and non GAAP financial measures. Specifically in the scope of this discussion when we refer to cash operating expenses, please note we are referring to the non GAAP form of this measure which excludes non cash stock based compensation. As always, detailed reconciliations between our non GAAP results and the most directly comparable GAAP measures are included in this morning’s press release. With that, I will now turn the call over to Steve Bosta, Fathom’s President and CEO to kick us off. Steve.
Steve Basta (President and CEO)
Thank you Eric and thank you everyone for joining our call this morning. Let me start with a few highlights and a bit of perspective on the quarter, we more than doubled revenue from Q1 2025 to Q1 2026. We believe we’re on track to potentially achieving 1 billion in annual revenue from gastroenterology prescriptions with the potential for a second billion from primary care prescriptions as patients cycle back to share their Requesna experience with their pcp and we evolve our sales and marketing focus to include this segment in the future. In 2025, we set our strategy to focus on building toward that first $1 billion target in GI. We’re executing that strategy in Q1 of this year. We expanded our sales team with nearly 50 new sales representatives trained and deployed into the field in recent months. Our sales force alignment to enable high frequency calls on gastroenterologists is complete. We have more than 290 reps in place to start Q2. In parallel, we’re rolling out enhanced HCP marketing programs with several initiatives in the works to support the sales team. Our primary sales and marketing focus is on increasing depth of writing among gastroenterologists and associated providers. We’re encouraged by the impact we’re already having. There are approximately 20 million PPI prescriptions written annually from gastroenterology HCPs and we believe that 20 to 30% market share among this group should get us to the first billion in annual revenue. We previously discussed that as we look at our top 300 gastroenterology writers, they are already averaging about 20% TRX share compared to PPIs. Importantly, when we look at new to brand or NBRX writing among these early adopters, our market share is even stronger. In Q1, Requesna achieved approximately 45% NBRX market share compared to PPIs among this group of 300 writers. This means that our top 300 gastroenterology writers were selecting Requesna for their patients nearly one out of every two times that they switch their patient’s therapy to a new product. In fact, even as you look as deep as our top 3,000 gastroenterology writers in Q1, cumulative NBRX or new to brand prescription market share remains north of 30% in that population of physician writers compared to PPIs. We believe new to brand conversions drive future TRX growth as we expect that many of these patients who are converted to Requesna will elect to remain on Requesna. While Q1 TRX numbers showed expected seasonality, the underlying trends in prescribing behaviors and particularly new to brand switching to Vaquesna reinforce our view that our strategy of going deeper in gastroenterology is starting to show early positive indicators. We’ve transitioned the strategy and profile of this business and we believe the effects of those changes are still getting underway. I’d like to briefly discuss key financial highlights for the quarter and then Sanjeev will provide further commentary during his portion of the call with more detail. Net revenues were 58.3 million for Q1 compared to 28.5 million for the same quarter last year. We believe we’re seeing similar early year revenue patterns compared to last year, with late March and early April prescription trends indicating the growth going into Q2. We are thus maintaining our revenue guidance for the year. Cash operating expenses excluding stock based compensation were 56.2 million for Q1. Our team continues to exercise fiscal discipline in our operations and lastly, our net cash usage for Q1 operations was approximately 15 million. A few quick notes on commercial metrics for Q1 through April 17, about 1.35 million VaqDNA prescriptions have been filled with covered prescriptions increased about 5% during the most recent four week period compared to the prior four week period, signaling that growth that I previously described in recent weeks going into Q2. Of the approximately 268,000 prescriptions that were filled in Q1, about 168,000 were covered prescriptions representing approximately 63% of the total, while about 100,000 were filled as cash pay. The incremental IQVIA reporting gap mentioned on our previous call was resolved by mid March and the TRX numbers we are reporting today include the prescriptions that IQVA has not captured. On a year over year basis. Covered prescriptions grew about 91% and total prescriptions filled grew about 115%. The higher growth in total prescriptions reflects the impact of introducing the cash pay option for Medicare patients. As of April 2025, weekly TRX in March approached the previous December highs and now as we begin Q2, we’ve seen two of the first three weeks in April reach new all time prescription highs for covered prescriptions. I mentioned earlier that we view NBRX prescription growth as an early indicator of how our strategy is playing out. We believe NBRX writing is the leading signal for a growing patient base as it represents a patient being switched to Requesna prescriptions for the first time. Ultimately, many of these new to brand prescriptions progressed to consistent refill prescriptions in future quarters, thus driving growth. In Q1. We saw covered NBRX grow approximately 11% over Q4 of 2025, signaling that we are continuing to see a solid rate of new patient starts on Requesna the proportion of NBRX being written by gastroenterologists versus other specialties has increased over the last few quarters, indicating the early effect of our strategy focus on gastroenterology. Introducing more new patients with GERD Faquesna is the first step to drive durable growth. Persistent refills for these patients then contribute to growth in future quarters. Among the cohort of patients that started Requesna in 2024, we saw an average of approximately six bottles worth of Requesna dispensed over a subsequent 12 month period. One note on this analysis is that the analysis may actually understate persistence to some degree as an additional 18% of the patients who had stopped Requesna through that analysis actually restarted therapy within 12 months of their original prescription. Lastly, we’ve recently been hearing questions from investors about a possible new PCAB entrant into the US market. Internally, we’re preparing for a potential second PCAB approval in the US in 2027. Last week, two Tegoprazan abstracts related to the Erosive Esophagitis Phase 3 trial for this product were released ahead of this year’s DDW conference where the data will be presented next week. The abstracts provide a preliminary summary of the data. As anticipated, the tagoprazan results support the effectiveness of PCABs as a class, while cross trial comparisons have inherent limitations and the studies were not a head to head evaluation. It may be helpful to our investors to note that in Our Requesna Phase 3 Erosive Esophagitis trial, approximately 93% of patients in all categories of erosive esophagitis achieved healing of their erosions by eight weeks. In the separate recently reported Tagoprazan study, approximately 85% of patients in all categories of erosive oesophagitis achieved healing of their erosions by eight weeks. We continue to feel confident in Requesna’s robust clinical data profile and are executing our commercial strategy in the GERD market. Overall, we remain confident in our outlook for 2026. Our foundation is strong, the sales force is implementing our gastroenterology focused strategy and new patients continue to start therapy. We are fully in execution mode as we continue to work to drive TRX and sales growth. I’ll now turn the call over to Sanjeet to take you through our financial updates.
Sanjeev Narula (Chief Financial and Business Officer)
Thank you Steve and hello everyone. We have a lot to cover so let’s jump right into our Q1 results. Revenues for quarter one were 58.3 million reflecting year on year growth of 104% and a sequential growth of 1% over Q4 2025. Our Q1 2026 revenue was somewhat light compared to our internal expectation due to market access, seasonality and other factors like winter storm and deployment timing of new salesforce team members. However, with recent weekly prescriptions demonstrating growth relative to early Q1 and our extended sales force in place, we remain confident in our outlook for Requesna in 2026. Our gross-to-net discount for Q1 came in at the lower end of our 55 to 59% guidance range because of channel mix for CODIS prescription. Our gross margin was in line with our guidance at approximately 80% for quarter one as described during last quarter’s call. This now reflects certain third party fulfillment costs being accounted for as cost of goods sold instead of gross-to-net adjustments. Q1 cash operating expenses were about 56.2 million reflecting continued disciplined expense management. This sequential step up was anticipated and tied to three main drivers expansion of our sales force, our annual national sales meeting in February and the ramp up of our Phase two EOE trial. In fact, I’m pleased to report that the EOE trial is enrolling ahead of schedule and as a result we’re anticipating top line Data by late Q4 2026 or early Q1 2027. Importantly, we continue to demonstrate expense discipline across the organization. With the year on year cash operating expenses down about 43% compared to Q1 2025. We reported a loss from operation excluding stock based compensation of approximately 9.9 million. We ended the quarter with about $181 million in cash and cash equivalent which reflects roughly 15 million used in Q1. After netting out the flows from our equity raise and debt amendment, the increase in cash Usage compared to Q4 2025 was driven by the timing of our annual corporate bonus payout and changes in the working capital due to timing of certain payments. We anticipated these dynamics and remain confident in our path to operating profitability and cash flow positivity. Overall, our balance sheet remains strong and as a result of our operations and the deliberate capital structure enhancement we did at the start of the year. Based on our current operating plan, we believe our cash on hand along with the anticipated future cash generated from operations will be sufficient to invest in our business, satisfy all outstanding debt obligations at all times without the need for another debt or equity raise. Now let me speak about our financial guidance for 2026. We’re maintaining all guidance ranges and estimates provided during last quarterly call. We continue to anticipate 2026 net revenue between 320 to 345 million. We continue to believe our gross-to-net discount will be within the 55 to 59% range and gross margin will be approximately 80%. As for spend, we anticipate that cash operating expenses excluding stock based compensation will be between 235 to 255 million. As we think about cadence, we continue to believe revenues will be more heavily weighted towards the back half of the year. We expect expenses to modestly step up in Q2 reflecting full quarter’s worth of cost of the expanded sales force. Lastly, we continue to anticipate achieving operating profitability excluding stock based compensation by Q3 and for full year 2026 with positive cash flow in 2027. We remain focused on executing with discipline and we feel confident in our ability to deliver on our GI focused strategy. We ended the quarter with strong balance sheet and believe we will strengthen our financial position as revenues grow. In summary, our priorities remain clear. First, drive efficient growth towards achieving 1 billion from GI prescriptions. Second, support strategic investments where needed while continue to be disciplined on spend as we look ahead. I am encouraged by the efforts and dedication of our commercial and R and D teams. We’re energized by the opportunity in front of us and we believe our internal metrics show the momentum is building. With that, I will now turn the call back to Steve for his closing remarks. Steve?
Steve Basta (President and CEO)
Thank you Sanjeev for the detailed financial review. With an expanded and trained sales force executing our gastroenterology focused strategy and continued expense discipline, we believe we have a clear path to strengthening the revenue trajectory and achieving operating profitability in …
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