Phathom Pharmaceuticals Q3 2026 Earnings Call Transcript

Phathom Pharmaceuticals (NASDAQ:PHAT) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Phathom Pharmaceuticals reported a 71% year-over-year increase in net revenues for Q3 2026, with revenues reaching $84.7 million.

The company maintained its full-year revenue guidance of $310 million to $325 million and achieved its second consecutive quarter of positive operating profit, excluding stock-based compensation.

Phathom’s Access First initiatives are aimed at improving the prescription and access process for Voquezna, with significant efforts to educate physicians and increase utilization through BlinkRx.

2 million Voquezna prescriptions have been filled since launch, with a notable increase in covered prescriptions, representing 65% of total prescriptions in Q3.

The company continues to defend its exclusivity period for Voquezna amidst ongoing litigation, while also progressing with development programs, including the Phase 2 PHALCON-EoE trial and the Phase 3 PHALCON-NERD-302 study.

Phathom plans to leverage its strong relationships in the gastroenterology community for future business development, aiming to expand its GI portfolio.

Full Transcript

OPERATOR

Hello and welcome to the Phathom Pharmaceuticals third quarter 2026 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. To ask a question during this time, you will need to press star 1 1 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 Shkrelli, Phathom Pharmaceuticals’ Head of Investor Relations.

Please go ahead.

Eric Shkrelli (Head of Investor Relations)

Thank you, operator. Hello everyone, and thank you for joining us this morning to discuss Phathom’s third quarter 2026 results. This morning’s presentation will include remarks from Steven Basta, our President and CEO, and Sanjeev Narula, our Chief Financial and Business Officer. 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 may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the trading prices for Phathom’s common stock.

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, today’s 10-Q, 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. 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 Steven Basta, Phathom’s President and CEO, to kick us off.

Steven Basta (Chief Executive Officer)

Thank you, Eric, and thank you everyone for joining our call this morning. I’m pleased to share with you this morning the solid execution Phathom posted in the third quarter. Over the past year and a half, Phathom has significantly strengthened our financial position. In Q3, we delivered our second consecutive quarter of positive operating profit excluding stock-based compensation and once again generated positive cash flow. This quarter’s net revenues grew by about 71% compared to Q3 last year and about 14% compared to last quarter.

We are focused on making it easier for physicians to prescribe Voquezna and for patients with GERD to get it. The physicians we talk to are already convinced of the clinical value of Voquezna. In recent market research, 97% of HCPs we surveyed rated Voquezna’s efficacy as favorable compared to other GERD treatment options. Our job now is to make it as easy as possible for providers to prescribe Voquezna for GERD and for their patients to be able to access it affordably.

Over the last few months, we’ve implemented our Access First initiatives, including multiple levers to help improve Voquezna’s access experience for physicians and patients. Our reps are making meaningful headway in GI offices every day, and we believe we are well positioned to close out the year with a strong fourth quarter. I’d like to turn briefly to a few key financial highlights for the quarter, and then Sanjeev will provide further commentary during his portion of the call. For Q3, we reported net revenues of $84.7 million, cash operating expenses of $60.5 million, positive operating profit of $5.8 million—both of those operating metrics excluding stock-based compensation—and cash generated from operations of about $2.1 million. We are proud of our results this quarter and reiterate our full-year revenue guidance of $310 million to $325 million heading into Q4.

A few quick notes on our commercial metrics for Q3: since launch through October 16th, over 2 million Voquezna prescriptions have been filled. After achieving our first million prescriptions just over two years into our launch, we’re thrilled to have reached our second million milestone less than a year later. Of the approximately 380,000 prescriptions that were filled in Q3, about 248,000 were covered prescriptions, representing approximately 65% of the total, while about 132,000 were filled as cash pay.

Compared to last quarter, this represents 19% growth in covered volume and 6% growth in cash volume. One note on data reporting: IQVIA recently adjusted their projection methodology for Voquezna, which took effect for the data week ending October 9th. These types of updates are commonplace by IQVIA as brands mature. As we discussed on our last call, we believe the key hurdle to broader use of Voquezna in the treatment of GERD is making it easier for physicians to prescribe it and for patients to obtain it. When physicians consider whether to prescribe Voquezna for GERD, they consider patient need, the amount of effort required of their staff, and their confidence level that the patient will actually receive the drug at an affordable cost. To address this, we’ve shifted our sales force to focus on Access First.

Our reps are educating physicians and their office staff on PA requirements, the support available through our pharmacy partner BlinkRx, and multiple patient support programs. This is not a complex strategy, but it requires steady blocking and tackling office by office and physician by physician, which we acknowledge takes time. Increasing physician utilization of BlinkRx is a key part of our Access First strategy. When prescriptions are sent to BlinkRx, we observe higher PA submission and approval rates, and ultimately overall TRx fill rates are significantly higher compared to retail pharmacies. We continue to educate HCPs that BlinkRx assists with navigating the prior authorization process with HCPs and patients, keeping patients informed throughout the prescription fulfillment process, automatically applying our patient support programs when available to the patient, and helping patients access the lowest out-of-pocket cost available to them.

At the end of Q3, we rolled out a $0 copay offering as part of our Access First strategy, available only through BlinkRx. We believe this new offering will encourage prescribers to use BlinkRx. Rather than focusing on the potential difference in out-of-pocket costs between Voquezna and a generic PPI, physicians can now consider whether Voquezna is an appropriate treatment option for their patients with GERD, knowing that eligible commercially insured patients may pay as little as $0 out of pocket.

We are seeing positive early signals of the impact of these programs, and we will continue to work to improve perceptions of access and affordability for Voquezna. Turning briefly to our development programs in EoE, we anticipate reporting top-line data from our Phase 2 PHALCON-EoE trial in Q4. The primary endpoint in this trial focuses on histologic improvement, a reduction of eosinophil counts after 12 weeks of treatment. Symptom improvements will also be evaluated as secondary endpoints. The additional 12-week open-label safety extension portion of this trial is ongoing.

Our Phase 3 PHALCON-NERD-302 study of Voquezna for as-needed treatment of non-erosive GERD is currently enrolling patients. In this trial, patients are treated daily for four weeks with Voquezna, then are randomized to as-needed treatment with Voquezna or with placebo for six months. The primary endpoint will evaluate Voquezna’s ability to provide complete relief by 2 hours that is sustained for 24 hours. We expect top-line data in Q1 2028 and believe that, if the trial is successful and we gain approval, we would unlock an incremental market opportunity for the many patients with GERD who don’t want to continue taking PPIs on a daily basis.

Lastly, I’d like to briefly touch on recent developments related to Voquezna’s exclusivity period. On October 21, 2026, BDR Pharmaceuticals filed suit against the FDA, principally challenging the FDA’s alleged refusal to receive their ANDA referencing Phathom’s NDA for Voquezna. Their suit alleges that the FDA improperly applied the GAIN Act to extend the NCE exclusivity for Voquezna tablets. A second purported ANDA filer has subsequently filed a notice that it intends to move to consolidate its case with BDR’s. The FDA conducted a thorough review of this matter via Phathom’s citizen petition and came to a decision in June of 2025. Their decision was that 10 years of NCE exclusivity, as extended by the GAIN Act, would apply to all products containing vonoprazan. The FDA thereby recognized NCE exclusivity for Voquezna tablets through May 3, 2032, and updated the Orange Book accordingly. On October 23, 2026, the FDA opened a public docket for 30 days to solicit comment on legal and regulatory questions raised by BDR’s suit, which they felt were new compared to our citizen petition request.

We believe the FDA arrived at the correct decision following our citizen petition. Phathom has intervened in the litigation filed by BDR to continue to defend our statutory exclusivities. We intend to vigorously defend our position. I will now turn the call over to Sanjeev to take you through our financial updates.

Sanjeev Narula (Chief Financial & Business Officer)

Thank you, Steve, and hello everyone. We’re pleased with our Q3 financial results and I believe we have strong momentum heading into the end of 2026. With that, let’s go into our results. Revenues of Q3 were 84.7 million, reflecting year-on-year growth of 35.2 million, or 71% sequentially. Revenue growth 10.4 million, or 14% over Q2 2026. Covered prescription trends were strong, growing about 19% sequentially. While we observed wholesale inventory at the end of Q3 to be slightly lower than the levels at the end of Q2, we still delivered solid revenue growth.

Our gross-to-net discount for Q3 came in slightly below our guidance. The results were driven by the channel mix for Voquezna prescriptions and by decreasing accruals in connection with lower wholesale inventory levels. Both items had a modest positive impact on our gross-to-net for this quarter. Our gross profit margin landed at approximately 78% for Q3, below our guidance; the variance was due to the inclusion of certain one-time charges in our cost of revenues.

Third quarter cash operating expenses were about 60.5 million, an anticipated slight step-up compared to last quarter, which we outlined during our previous earnings call. On the R&D side, the increase was primarily due to incremental clinical trial costs for our EoE and as-needed studies. On the SG&A side, the increase was primarily tied to investments in our sales and marketing effort, including our Access First initiatives. I am proud to report that for the second consecutive quarter we have delivered operating profitability and generated cash from operations, ending the quarter with 184.6 million in cash and cash equivalents.

This quarter’s performance clearly demonstrates a pivot in the evolution of the company. Our capital structure is supported by a strong balance sheet. Beginning October 1, 2026, our cash hold requirement across our capital structure shifted to a covenant set forth by our revenue interest financing. At that time, our cash holding requirement becomes about 119 million, right in line with approximately 120 million we anticipated and communicated during our Q4 2025 call. With 184.6 million in cash and cash equivalents on the balance sheet at the end of Q3, we have significant cash balance above this requirement, especially when considering recent positive cash generation trends.

Going forward, we expect this requirement to step down slightly over the next year as revenue increases and we make additional royalty payments. Beginning October 1, 2027, the relative holding threshold increases, so we anticipate our covenant requirements will be modestly higher thereafter. We expect it to decline based on the terms of the agreement, anticipated increases in revenue, and future royalty payments. As we’ve communicated previously, we believe based on current expectations that our current cash on hand and anticipated future cash generated from operations will be sufficient to invest in our business and satisfy all covenants at all times without the need for another debt or equity raise. Now let me turn to our latest financial guidance. To close 2026, we’re maintaining revenue guidance of 310 to 325 million for full year 2026. Given our year-to-date Q3 results, we expect our full year 2026 gross-to-net discount will come in towards the lower part of our 55% to 59% guidance range.

We continue to anticipate our gross margin will be approximately 80%. As for spend, we maintain our cash operating expense guidance, excluding stock-based compensation, of 235 to 245 million, and we believe we’re tracking towards the lower part of that range. We believe our second consecutive quarter of operating profitability represents a sustainable pattern going into Q4, including in total for full year 2026 and beyond. As for cash flow, we maintain our guidance of reaching durable, positive cash flow in 2027.

Overall, Q3 was a solid quarter for Phathom Pharmaceuticals and we’re proud of our results. I feel good about our financial strength and ability to execute going into Q4 and beyond. Thank you as always to our employees for their dedication in bringing Voquezna to millions of GERD patients in need. With this, I’ll turn it back to the operator for your questions. Operator, please open the line for Q&As.

OPERATOR

Ladies and gentlemen, if you have a question or comment at this time, please press Star 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press Star 11 again. Again, to ask a question or comment, please press Star 11 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Kristin Kluska from Cantor Fitzgerald.

Your line is open.

Kristin Kluska (Analyst)

Hi, good morning everybody and congrats on a nice revenue quarter. Two questions for me. The first, on some of the initiatives you’ve taken to help with access, can you walk us through specifically, other than the BlinkRx updates, how this is converting to better prescriptions and access? So essentially, are you helping the providers to walk through what requirements they are going to need when they file for this, or what are the specifics? And then my second question, I can appreciate you probably can’t comment much on some of the ongoing lawsuit stuff related to the GAIN Act, but I was hoping you could just let us know what your expectation on next steps are. Thank you.

Steven Basta (Chief Executive Officer)

Kristen, thanks so much for both of the questions. Let me just take each of them. First, the initiatives for access, so the phenomenon of access you can think of in two different ways. One is sort of in reality—actually three different contexts. One is in reality we’ve got pretty good coverage from payers, with north of 80% of commercial lives covered. So the actual market access coverage for the product is solid and broad-based. The second way of thinking about it is how much work is it for the physicians to complete the process and how accurately is the PA process completed.

And sort of the third part of it is affordability. So let’s just sort of—and perceptions around how much work it is and perceptions around affordability. So if you think about each of those elements, our market access status with payers is solid. We’ve got really good commercial coverage. We are very pleased with where we stand in that process. From a prior authorization logistics perspective, our prior authorizations are actually really straightforward, but there is some education of physicians regarding, for example, capturing prior PPI use in the medical notes, because PPIs might have been prescribed by a primary care physician and might not be in the records for the GI physician who’s prescribing the product.

And so just capturing that in the medical notes makes the prior authorization simpler when the medical assistant in the office is submitting the prior authorization to get that covered. And while many plans have only one prior PPI that’s required, some plans might require two prior PPIs. So part of what we’re doing is just educating physicians around: here’s what you need to document in the medical notes when you’re seeing the patient just to make sure that the PA goes through smoothly; educating the medical staff around: here are the plans in your region that require one prior PPI; who might require two prior PPIs. And there’s a very granular conversation happening on a physician-by-physician level, on a staff-by-staff, office-by-office level to work through what’s needed for this prior authorization. It’s a pretty simple document. It varies a little bit by plan—what are the local dominant plans in your area—and just making sure that we are building both the success rate, because capturing prior PPI use in your medical notes improves the success rate; submitting the PAs with all of the prior PPIs documented increases the success rate. But also we’re improving the perception and the confidence level that that access is going to go through.

So a lot of what we’ve been doing is around educating around the process and educating around confidence that your patients can, in fact, get it. And a key part of that also is if you send it to Blink, they’re going to help your staff with this process. And introducing the $0 copay improves perceptions of affordability. So there’s one, improved perceptions of how the access process flows, but also improved perceptions of affordability. That’s the same cost as a PPI.

So there are a number of initiatives that work both through Blink and through traditional retail pharmacies, but it’s really around streamlining that process and the knowledge base at the office level. And then in terms of the litigation, you know, obviously the next step that was announced in our press release on Monday is that FDA has opened up the open docket. Litigation goes through many steps. And we’re going to try to not predict exactly what happens in each step of this process because it’s an inherently fluid process as you go through these kinds of litigation matters. I’m sure you’ve seen dozens of companies work through this process because this is commonplace in our industry.

But we’ll reserve trying to predict what the next steps are in this process.

Kristin Kluska (Analyst)

Thanks, Steve.

OPERATOR

Thank you. Our next question or comment comes from the line of Martin Oster from Raymond James. Mr. Oster, your line is now open.

Martin Oster (Analyst)

Yeah. Hey team, thanks for taking the question. I wanted to ask a little bit more about the Access First initiatives. I like seeing those a lot. Steve, I guess I was curious if you could talk a little bit more about sort of the eligibility criteria for folks that are being kind of referred through BlinkRx—who would be eligible for $0 copay? What proportion of scripts do you think that might sort of benefit in terms of patients’ out-of-pocket? And then do you anticipate sort of any longer-term rethinking around gross-to-net as a result of that benefit to patients?

Steven Basta (Chief Executive Officer)

So, Marty, thanks so much for the question. We’re actually quite pleased with some of the initiatives that we’ve made on this Access First process. Although, you know, as we commented in the prepared remarks, this is a gradual education process that’s going to happen, again, office by office as we build confidence on the part of physicians. One element of it is the $0 copay initiative. So we have had, since launch, a copay support program that has brought down copays to $25, whether that was through retail pharmacies or through Blink.

That copay support program and the copay card is available to any patient who has commercial insurance coverage that covers the product. But they might have a high copay; we’re going to bring down the copay in most cases to that $25 level—historically at retail pharmacies or at Blink. What we just did is we enhanced that program through Blink, so we’ll bring down their copay all the way to zero. So if a patient has a $100 copay on their insurance plan, we’ll go ahead and buy that all the way down to zero.

We cover that incremental cost. That will obviously have a little bit of incremental patient support cost. We already have a significant copay support program—it’s already built in. I don’t have a projection on the exact magnitude of that in terms of the percentage on our GTN, but it’ll be a small impact. Sanjeev might have more insights on sort of the specific GTN impact, but on the eligibility. Who’s eligible for this? This is for commercial insured patients. So we can’t buy down the copay on government insured patients. But for commercial insured patients, where their plan covers Voquezna, we’re going to buy down their copay. And the advantage of offering this through Blink is to encourage physicians and patients to adopt the use of Blink, where we have a much more robust communication with the physician and their staff to be able to support the prior authorization process.

And it also changes the decision architecture for the physician. That instead of being concerned that even at $25 a month, $25 sounds innocuous, but over the course of a year, that can be $300 for a patient. That’s a lot more than they would pay for a generic PPI that often costs them nothing. Now, at $0 copay, it’s a different decision. It’s cost your patient nothing either way. So which is the better drug for your patient? That changes that decision architecture.

And so it’s for commercial patients. There is one state exclusion, by the way, just in full disclosure, Massachusetts, you know, restrictions that prohibit us from having the differential copay. So it’s not available in Massachusetts patients, but everyone else. Sanjeev, do you want to jump in on the GTN impact?

Sanjeev Narula (Chief Financial & Business Officer)

Yeah, to your point. So, Marty, the GTN per se, obviously there’s going to be minor impact, but it’s insignificant when you look at the overall gross to net. But I think the way to think about it is it’s going to be net positive for the company, even if we are paying a little bit higher because of $0 copay. But the contribution from each incremental script is going to be still positive. So net net is a very positive thing for us as more patients come in and able to utilize this.

Martin Oster (Analyst)

Excellent, thanks. Thanks for the additional color. And I, you know, I like the plan, Steve. There’s nothing that feels better than walking to the pharmacy and getting a free prescription. So I think it’s smart. Thank you.

OPERATOR

Thank you. Our next question or comment comes from the line of Umer Rafat from Evercore. Your line is open.

Mike DiFiore (Analyst)

Hi guys, this is Mike DiFiore in for Umer. Thanks so much for taking our questions. Just two for me. What are you seeing in 2027 payer negotiations that could change rebates or access, particularly if another PCAB launches? And second question is, does the inventory reserve explain most of the gross margin decline or are fulfillment costs putting recurring pressure on margins?

Steven Basta (Chief Executive Officer)

Thank you, Mike. Thanks for the question. I’ll take the first part and then the margin question I’ll pass off to Sanjeev. From a payer negotiations perspective, we’re, you know, our commercial insurance coverage is, you know, pretty broad under established contracts in many cases. And so in some cases we contract with plans, in other cases that are covering the product outside of our contract status, we’ve not seen any of that change in any meaningful way based upon the potential introduction of a second PCAB.

So those negotiations aren’t being altered at all by that dynamic. There are inevitably, you know, here or there specific plans that review processes over time, but nothing that constitutes a fundamental shift in any of our payer negotiations.

Sanjeev Narula (Chief Financial & Business Officer)

And just one point, Steve, as I take the second question, Mike, just adding on to the first point, Mike, as you know, there are always, you know, puts and takes in gross to net. We are also a growing company with our revenue growing up. So we have opportunities in terms of some of the other elements of gross to net like distribution fees and all that. So as we become bigger, there’s an opportunity to negotiate them down. So overall we feel the trend that we have this year is comfortable and we don’t expect any change due to a new competitor launching.

On that, on the point about your question on the gross margin, you’re right, it’s primarily the result of the one-time manufacturing charge that we took last quarter and we don’t see any incremental pressure on the cost for distribution or anything like that. It’s all very stable in line with our volumes.

Mike DiFiore (Analyst)

Great, thanks so much. Thank you.

OPERATOR

Our next question or comment comes from the line of Paul Choi from Goldman Sachs. Mr. Choi, your line is open.

Paul Choi (Analyst)

Hi. Thank you. Good morning and thanks for taking our questions. My first question is for Sanjeev. If we look at the guidance for the remainder of the year, it implies a revenue range of approximately 93 million to 108 million. At the high end. Can you, given your comments on gross net expected to be at the lower end of the range, could you comment maybe on just what you think the drivers could be or the factors that get you to the upper half of the implied guidance?

And then I had a follow up question.

Sanjeev Narula (Chief Financial & Business Officer)

Sure. Paul, I can’t be more specific about my Q4 printer guidance than what we have been. I think you hit the nail. We feel good about the momentum, Paul. The way to think about it is based on where the trends are. You saw the COVID script growing 19% sequentially. We feel good about and the coverage first initiative. As Steve pointed out beginning to show results. Obviously it’s going to take over a few quarters for us to see that, but I feel good about overall momentum.

That’s why we were absolutely confident in reaffirming our guidance and clearly specifically will announce the results when it comes in gross to net. I think the way to kind of simply think about it is we’ve been fairly consistent in all three quarters, except maybe this quarter were a little bit lower, essentially because of the reason that I articulated on my call. As you have lower wholesale inventories, you actually end up with less pipeline accruals, which actually reduces your gross to net from that perspective.

So if you normalize for that, our gross to net is exactly what we’ve been seeing in the first two quarters. Typically in Q4, your gross to net tends to be a little bit higher, primarily because of MDP. As the patients reach catastrophic coverage of $2,100, you ended up paying higher rebates. So we expect that to happen. And that’s why overall I was comfortable saying it’s going to be towards the lower part of that 55 to 59% of the range.

Paul Choi (Analyst)

Okay, great. Thank you for that. And to follow up on an earlier question, if another PCAB does enter the US market next year, in terms of sort of historical pricing analogs, do you expect sort of the pricing changes over the near to intermediate term to largely mirror what happened with the with the terms of PPIs in terms of market pricing changes? Just any comments there would be helpful. Thank you.

Steven Basta (Chief Executive Officer)

I’m not sure we’re in a position to project what’s going to happen in terms of pricing impacts in the market, given that we haven’t seen what the second entrant PCAB pricing might be or exactly what their strategies may be. So I’ll pass on trying to forecast what changes might happen until we actually see them enter the market.

Paul Choi (Analyst)

Great. Thanks, Steve.

OPERATOR

Thank you. Our next question or comment comes from the line of Annabel Samimi from Stifel. Your line is now open, ma’am.

Annabel Samimi (Analyst)

Hi, thanks for taking my question. So a few here. So first on the efforts for increasing BlinkRx, I guess in terms of getting past these frictions, where do you see the most resistance from physicians for adoption of Blink? Because from an economic perspective for the patient, it seems to be a very easy decision. So is it lack of awareness or is it patient willingness to use? I’ve heard from some KOLs that patients, some of their patients are just very comfortable with their local pharmacies and they don’t really want to use Blink.

So is it a resistance from the physician side or patient side? And is there a level of, I guess a percent level of prescriptions that you expect would go through Blink at a steady state? And could that in the future have an impact on gross net or is it going to be primarily the support that you’re providing through Blink as opposed to just Blink itself? And then I guess, last question, not specifically related to the litigation with FDA, but I was hoping you can be a little bit more explicit about the extent to which some of your new studies might, I guess, facilitate more IP aside from just the pediatric exclusivity.

So maybe you can talk to us about that a little bit. Thanks.

Steven Basta (Chief Executive Officer)

Sure, if I can. Annabel, thank you for each of the parts of that. So first on sort of the efforts of getting prescriptions to Blink, I don’t view that there is anything I would describe as resistance. It’s more that there’s inertia. And so what the inertia looks like is physicians just have a habit of prescribing to the patient’s local pharmacy because that pharmacy is in the patient’s records in the EHR and they simply ask the patient, where do you want your prescriptions to go?

And they might be prescribing three different drugs and they send them all to CVS down the street. And so what we’re trying to do is simply overcome that inertia and sort of the path of least resistance perception on the part of physician. If I just prescribe this, where I prescribe everything else and teach them that it’s a meaningfully better experience for their patient and the better experience for their staff with a higher likelihood their patient’s going to get the product if they prescribe to Blink.

So doesn’t take long, takes 10 seconds for the physician to find BlinkRx in their EHR and prescribe to BlinkRx, it might take 30 seconds for them to have a conversation with the patient about why they want to go through a mail order pharmacy because it improves their ability to get the product and it’s going to improve their out-of-pocket cost. That’s candidly one of the advantages of offering the $0 copay program is that it makes that conversation from the physician to the patient an easier conversation of, you know, I’m going to send this to a mail order pharmacy because that’s the only place where you’re going to be able to get this product at zero cost if it gets covered by your insurance plan. So it changes the willingness of a patient to get a drug through a mail order pharmacy rather than just to get it through the retail pharmacy down the street.

So it’s, I don’t think there’s active resistance anywhere. Nobody’s objecting saying, oh, I really don’t want to do that. But there is inertia. Patients are just comfortable getting their drug at their CVS or Walgreens down the street, and physicians are just comfortable by default prescribing it to the local pharmacy. So we have to teach the physician why it’s better for their patient, why it’s better for their staff. And then they might have to take 30 seconds and have a conversation with their patient on why they’re sending it to this other pharmacy.

Once that process happens, once they become familiar with that, that becomes just a second nature kind of conversation. So what we have to do is teach the physician to have that conversation the first five times, 10 times, until it becomes second nature for them that they just have a really simple conversation with their patient. You know what, this is where I send this drug because they’re going to be able to provide you really great support and then it’s really quick.

So we’re not actually seeing anything we would describe as resistance, but rather just inertia. And we’re changing longstanding habits. And that takes multiple sales calls and it takes multiple rounds of reinforcement. We haven’t. On your second point of is there a level of prescriptions that would go through Blink that’s going to vary on a regional basis? There are some regions where Medicaid patients, for example, need to go through local pharmacies because of certain state rules. There are a number of different dynamics in different regions, but our intention is to drive more and more prescriptions to Blink and increase the rates. I think we’ll have better visibility over the next several quarters as to what is the magnitude of scripts going to Blink and sort of percentage that’s achievable at this point?

Every incremental gain helps our access perception and helps our access reality. So it both makes the drug easier to get and improves physician perception on how easy the drug is to get, which will improve physician prescribing behavior. So both of those are factors that flow into the positive reinforcement. On your last question regarding the extent to which some of our new studies could facilitate more IP, we are certainly looking at strategies that could potentially enhance the IP duration. The current studies, other than the EOE study, are not specifically intended for IP extension strategies. So the as needed study is not about extending IP, but rather expanding the market, there is a significant population of patients who are regularly and frequently talking to their physician about whether or not there’s an alternative for them other than daily PPI therapy.

Because you can just go on the Internet and see the noise around chronic PPIs and whether or not you want to be on a PPI chronically. But if you’ve got chronic reflux symptoms and painful heartburn, you can’t get off of your daily PPI, but you really want to get off the daily therapy. That’s our opportunity. With the as needed use protocol, with that dosing regimen approved, in a couple of years, we would open up a very different conversation with physicians about solving the needs for patients who are coming and asking them specifically about whether or not there’s an as needed use option.

So that’s really a market expansion study, not life cycle extension study. The EOE study is specifically intended to support an extension of our exclusivity in addition to expanding the population of patients who’ve received the product. So there’s obviously an unmet need in EOE to understand the magnitude of clinical benefit that a patient can get from acid suppression therapies. We’re doing the first large, well-controlled trial of acid suppression in EOE and we’ll have that data in the coming months where I’ll have that data this quarter from the first 12-week blinded portion of that study.

And if that study is successful, in addition to leading to a Phase 3 study that could expand our use into that population of patients and serve the needs of those patients, it has the additional advantage of potentially opening up a conversation with FDA about a written request for the pediatric exclusivity extension.

Annabel Samimi (Analyst)

Okay, great. Thank you.

Steven Basta (Chief Executive Officer)

And then I think you also had a question about GTN via Blink, is that correct?

Annabel Samimi (Analyst)

Yes, through Blink. Yeah.

Sanjeev Narula (Chief Financial & Business Officer)

Yes. So Annabel, the simple way to think about it is overall it’s actually a good thing and positive for the company and the patient. So once you, as we pointed out earlier, the additional $25 actually is going to be more than offset by the incremental script contribution that we would get from each other. Script that is going through Blink that earlier was not able to get fulfilled. So I don’t expect any change in gross to net because of scripts going to Blink.

The other thing overall you think about it is Blink refill rates are much better. So overall that’s a good thing for again patients and the company as more scripts go towards Blink.

Annabel Samimi (Analyst)

Okay, perfect. Thank you.

OPERATOR

Thank you. Our next question or comment comes from the line of Joseph Stringer from Needham and Company. Mr. Stringer, your line is now open.

Joseph Stringer (Analyst)

Hi. Thanks for taking our question. Just to follow up on the Phase 2 EOE trial, we understand part of its goal is to secure pediatric extension, but could you just level set us on what a successful Phase 2 signal looks like here this quarter and if those results are favorable, what are the next steps and expected timelines towards securing that extension?

Steven Basta (Chief Executive Officer)

Thank you. Thanks so much for the question. So just a quick synopsis of the EOE study design. There are two phases in this trial. There’s a first 12-week blinded treatment phase, so patients were randomized to receive either Voquezna or placebo on a blinded, randomized basis. That data we will be reporting this quarter. So the patients have completed that 12-week treatment period and all that data is being aggregated and analyzed, et cetera, over time. And so that’ll be coming in the next couple months.

The patients are continuing on therapy for an additional 12 weeks. So we will have a full 24 weeks of treatment. But that continuation therapy is on an open-label basis. So that will be available toward the latter part of Q1. And at that point when we’ve got that data aggregated, we’ll be having a conversation with FDA about whether or not the data collectively provides a clear path to Phase 3 clinical trials. What would those Phase 3 trials look like? Is it appropriate to include pediatric patients in those trials and would they like to issue a written request for us to include pediatric patients, which would then qualify us for the six-month pediatric exclusivity extension if we complete that study in accordance with the agreement with FDA.

So those conversations with FDA would happen in 2027. Obviously that’s predicated upon what the results in the study are. The primary endpoint in the study is a reduction of eosinophil counts. So it’s a primarily histological endpoint. We have secondary endpoints in the study to look at symptom improvement. Based upon the aggregate of that data, both the histologic improvement and the symptom improvement, we will assess what we believe the prospects are for doing a Phase 3 study and what a Phase 3 study would look like.

And then we’ll have the conversations next year with FDA at the conclusion of those. If we’re in agreement with FDA on the design of the Phase 3 studies, we would start those Phase 3 trials. But those conversations will happen in 2027 and it’ll take. So we’ll be reporting before the end of this year the first 12-week data, then by the end of Q1, we’ll have the second 12-week data. So the full 24-week treatment period, the second 12 weeks being the open-label portion.

OPERATOR

Thank you. Our next question or comment comes from the line of Yatun Sineha from Guggenheim. Your line is now open.

Yatun Sineha (Analyst at Guggenheim)

Hey, guys, thank you for taking my questions. I have two quick questions. So the first one is, you know, as we think about sort of revenues ramping up or revenues increasing in 2027, how much of the incremental build-out will come on the commercial side? If you can maybe just comment on that. And then the second one is just on maybe business development. Right. You are now generating operating cash flow, which is positive. How do you think about bringing an asset?

What type of asset, if at all? What does your affordability look like as you build the company beyond the questionnaire? Thank you.

Steven Basta (Chief Executive Officer)

Yeah, and thank you for both of those. Appreciate the opportunity to start giving some sense of how we’re thinking about the organization. Obviously, we’re not providing 2027 financial guidance today, so I don’t want to get into exactly what the operating expenses will be, but we don’t see a fundamental change in the commercial infrastructure cost for next year. Our sales force is well established. Our marketing programs are in. We are doing the things that we need to do to influence physicians.

So as we continue to grow revenue next year, we’re expecting that the commercial organization and the commercial spend is largely in line with how we’re approaching this year. Although I would caveat that with we’re not yet providing financial guidance for next year. So we’ll do that when we get to the call in January or February. And Sanjeev may have any additional insights in that process. I’ll just quickly take the second part of that and then turn it over to Sanjeev for any other insights on that.

The second part of your question on sort of how we’re thinking about business development. As we’ve said in previous conversations and conversations with many of our investors, our intent is to build a significant GI business. So Voquezna gives us an enormous foothold in the gastroenterology community because of the breadth of application of a new reflux treatment to patients that physicians are seeing every day. We’re getting time and attention with gastroenterologists.

We’re building really solid relationships throughout our sales organization within the medical education teams, et cetera. We’re building really deep relationships with gastroenterologists that’s leverageable for future products. And we are starting the process of identifying what the future products would be that we would bring in. Our expectation is over the coming years we bring in additional GI products. It could be commercial products, it could be Phase 2 clinical programs that then need to complete Phase 3 to launch. But the intention would be that they would be products that we could launch before our 2033 potential exclusivity loss. So we’ve got the next six years to complete development and launch those programs to build out a significant GI portfolio. So you should expect in the coming years to see one or more deals to bring in additional assets.

We’re not projecting exactly when that happens. Depends on when we find the right asset and come to the right terms.

Sanjeev Narula (Chief Financial & Business Officer)

Yeah. So Steve, just adding to I think both the questions, Yathen, I think the simple way to think about 2027 revenue, again we’re not giving the guidance, will grow faster than our operating expenses and that’s the leverage that will drive consistent, on a full-year basis, positive cash flow for the company. And you saw that last couple of quarters. We kind of demonstrated that again. It’s going to continue that journey with moderate growth in operating expenses but clearly significant growth in the top line.

So I think that’s there that then start to create capacity. Your question also was in terms of business development capacity. So we will start to begin having some capacity. Obviously we’re mindful of our obligations. We start paying back some of our term debt in 2028. We got to make sure the cash flow is there and we will have plenty of cash flow for that and to meet our obligations in terms of liquidity, hold on REFA and start investing in business development.

So that’s the pivot point that 2027 will start to bring in terms of start investing in business development.

OPERATOR

Thank you. Our next question or comment comes from the line of Dennis Ding from Jefferies. Mr. Ding, your line is now open.

Dennis Ding (Analyst at Jefferies)

Hey, good morning. Thanks for taking our questions. We have two. Number one, so the competitor PCAB that may be approved in January. When I look at market comps, it feels like LDL-lowering drugs might be a decent proxy since it’s a heavily genericized market and branded drugs are positioned in late line. And when we look at the launch of Leqembi, that was actually a slight tailwind to existing branded drugs. Do you agree with that and are there other analogs you can point us to to help us get confidence that a new player wouldn’t slow your own growth?

And then question number two for 2027, I see consensus at 495 which implies a pretty meaningful acceleration. You’ve also previously talked about re-emphasizing the PCP call point at some point. So are you planning to do that in 2027 or what do you need to see exactly to put additional resources into that call point? Thank you.

Steven Basta (Chief Executive Officer)

Thanks so much for the insights and thank you for sharing with the group the context of the fact that a second entrant into a market does, in fact, expand physician awareness and expand the category. We fully expect that that’s going to be the case in the context of the acid reflux market and how one thinks about the introduction of a second P-CAB. You know, we certainly anticipate that having two sales forces calling on physicians, telling them that they should be thinking about using P-CABs for their patients who are failing on prior PPI therapy, will expand awareness, and it’ll just change the mindset that instead of sort of thinking about Voquezna as a new product and what do I need to do as a new product, if there are multiple products in a category, suddenly physicians think about, well, when am I going to adopt a new category?

And then as they think about that, our product has three years of history, lots of established relationships, lots of established use with patients. Their colleagues are comfortable with the product. So a physician beginning to use P-CABs is going to be much more inclined to use the market-leading product. And a physician who’s already got experience with Voquezna, has already heard from their patients how much better they feel on this product, is going to be much more inclined to use the product with which they already have comfort.

So I think the scenario you’re describing is exactly what we would expect to happen, which is the second product entrant actually shifts much more awareness to the need to take patients to the new class of products. And the market leader benefits along with the introduction of the second product. So I do think it’s going to create a tailwind and we’re looking forward to the impact that that’s going to have. On the second part of your question regarding the emphasis on PCPs, our priority is in GI and will remain in GI. We’re not expecting that to change in 2027. So we’re making 70% plus of our sales calls on gastroenterologists, and I would fully expect that that remains the core focus through 2027. We are really thinking about how do we build the confidence in the gastroenterology community. They already have confidence in how effective this product is and they already have confidence that this product can be life-changing for many of their patients.

But how do we build the confidence that it’s easy to get for their patients, their patients can get it affordably, that when their patients stay on it, they have a really good long-term experience? That repetition of those conversations with physicians through multiple calls deepens our relationships in GI and that’s the core focus through 2027. There will come a time when we expand into more primary care adoption, but I don’t envision that in the near term.

I think our core selling strategy remains for the foreseeable future.

OPERATOR

Thank you. Our next question or comment comes from the line of Matthew Caulfield from H.C. Wainwright and Company. Your line is now open, sir.

Matthew Caulfield (Analyst)

Great. Hi, good morning, Steve, Sanjeev and team. Regarding the discussed 65% total quarterly prescriptions being covered prescriptions, are those Rx completely covered or could those patients be paying the partial 25% or $25 rate with partial coverage? And has that split continued to improve between full coverage and the possible partial coverage? Thanks for any color there on the coverage discussion.

Steven Basta (Chief Executive Officer)

So Matthew, I’ll start the answer to this and Sanjeev might have more insights and add more to this. And so when we think about coverage, there really are different categories of patients who will experience different out-of-pocket cost. And so the out-of-pocket cost for commercially insured patients whose commercial plans cover Voquezna, that’s where we can apply our copay programs, whether it’s the copay program that buys down the cost for the patient to $25 in a retail pharmacy or the same copay program with the enhancement that we can buy down their cost to $0 if the prescription goes through Blink.

That’s really a copay buy-down that we can offer to a commercially insured patient. And that’s very typical in the industry. You see that with any number of companies through this process that can make the cost to the patient effectively zero in many cases and can broaden the awareness and the availability of this product for a significant number of commercially insured patients. We’re not able to offer the same sort of copay support programs for government-insured patients. And so the copay experience for a government-insured patient may vary depending upon the Medicare Part D plan that they’re on, whether or not it covers the product, whether or not they have a copay associated with that plan, whether or not they’ve hit the $2,100 cap. So they may have no copay associated with branded drug or any drug that’s dispensed once they’ve hit the cap.

Also, low income subsidy patients or Medicaid patients may have a very low out-of-pocket cost. So the copay experience just varies by patient depending upon patient categories. Sanjeev, I don’t know if there’s more that you want to add to that.

Sanjeev Narula (Chief Financial & Business Officer)

Yeah, just one quick comment. Overall, if you, Matthew, look at the impact, the gross to net, the impact is insignificant with the additional $25 that now we offer a $0 copay in terms of our gross to net because we are already covering a lot of the buy-down as part of our gross to net. I think the important thing to note there is we believe we will get incremental scripts through the $0 copay and that will more than offset any incremental cost that we believe will be insignificant in the scheme of things from a gross to net perspective.

Matthew Caulfield (Analyst)

Okay. It’s helpful. I appreciate it.

OPERATOR

Thank you. Our next question or comment comes from the line of Chase Knickerbocker from Craig Hallam. Your line is now open, sir.

Chase Knickerbocker (Analyst)

Good morning. Congrats on the progress here. Just a couple for me. I’m going to ask another one on the access side, but maybe just a little bit more metric focused. Would you be willing to disclose that percentage of scripts that’s going through Blink now and kind of how that’s trended so we can kind of, you know, kind of track that given its importance? And then maybe just for investors to kind of better understand the benefit, the benefit of going through Blink, can you just kind of talk to us about PA approval rates, fill rates and refill rates within Blink versus outside of Blink, again so investors can clearly understand the benefit there.

Steven Basta (Chief Executive Officer)

Chase, thanks so much for the questions. We’re going to pass on providing a litany of metrics that we then would end up evaluating every quarter to look at how each one works. Just, you know, that level of granularity I don’t think is going to be helpful. And I think it ends up creating lots of math and focus on each of the trends. But what you’re describing is, in fact, what we are tracking internally. So what we are tracking internally is the percentage of scripts.

And, in fact, there are many ways of looking at scripts. You can look at TRx dispensed and the TRx dispensed rate coming out of Blink versus retail. We’re looking at NRx, we’re looking at new-to-brand Rx, and we’re looking at the pattern of prescribing that’s going to Blink, and we are seeing a shift associated with the introduction of our education initiatives that more of those new-to-brand scripts are landing at Blink than had been before our access initiatives were implemented.

So it is clearly moving the needle in the right direction. One thing for everybody to keep in mind though is as we move new-to-brand prescriptions to Blink, we will, over time, improve the PA submission rates. We will, over time, be improving the overall PA approval rates. We will be, over time, improving the overall dispense rate. But it has a very gradual impact because new-to-brand prescriptions turn into a meaningful TRx benefit as you get to multiple refills, which happen over the course of many months.

So the incremental lift in new-to-brand scripts going to Blink that might occur within Q4 has a greater impact because if a script goes in November or goes in December to Blink, you get one fill in December, but you could get three fills in Q1 and multiple fills over the course of 2027. So that script has a greater impact on 2027. So you have an incremental build over time as the new-to-brand scripts turn into multiple TRxs. So the benefit of sending a script to Blink in terms of the metrics are a better conversion of new-to-brand scripts—that more of the scripts get filled—better submission rates of prior authorizations, better approval rates for prior authorizations, and better refill rates that we’re able to get over time because of the continuity of contact that Blink has on an ongoing basis with the office when the next prior authorization is required, or the contacts that they have with patients around the continuity of filling prescriptions.

And if a patient drops off, they have the ability to contact the patient, see if they want to fill the script some months later. So there are a number of contact point advantages that occur through that channel that are better than the experience in a traditional retail pharmacy that, over time, will build toward more consistency of utilization and better depth of adoption. But we’ll provide the guidance on what the general parameters are that improve.

I’ll pass on providing the specific numbers.

Chase Knickerbocker (Analyst)

Yeah, understood. And maybe just a little bit bigger picture, kind of along those lines. You know, it seems like this kind of access conversation, kind of improving