Phathom Pharmaceuticals' Q3 2025 Earnings Call: Contradictions in Advertising Strategy, DTC Approach, and Market Focus

Date of Call: October 30, 2025

Financials Results

• Revenue: $49.5M net revenue in Q3, up 25% sequentially (Q3 vs Q2); full-year revenue guidance narrowed to $170M–$175M
• Gross Margin: Gross profit ~87% for Q3; gross-to-net came in toward lower end of prior 55%–65% guidance; Q4 gross-to-net guided to 55%–60%
• Operating Margin: Loss from operations (ex-stock comp) of approximately $6M in Q3 (an 88% improvement vs prior quarter); cash operating expenses $49.3M (ex-SBC), down 38% YoY and down 43% vs Q2

Guidance:

• Full-year 2025 revenue narrowed to $170M–$175M
• Q4 gross-to-net tightened to 55%–60%
• Q4 cash operating expenses expected to remain below $55M (ex-stock-based compensation)
• Full-year non-GAAP operating expenses refined to $280M–$290M
• Cash balance ~$135M at 9/30; management expects cash to support operations to anticipated operating profitability in 2026 (ex-SBC) without additional equity

Business Commentary:

* Revenue and Cost Reduction: - Phathom Pharmaceuticals reported net revenue of $49.5 million for Q3 2025, marking a 25% increase quarter-over-quarter and aligning with their annual revenue guidance. - Significant operating expense cuts were achieved, with cash operating expenses dropping by 43% to $49.3 million compared to the previous quarter. - These trends are attributed to strategic shifts towards gastroenterology focus and disciplined expense management.

• Sales Force Realignment and Strategy:
• The company adjusted its sales strategy to focus more on gastroenterology, leading to a 280 to 300 sales rep increase and realignment of territories.
• This initiative aims to create better-balanced territories to maximize sales force time with target gastroenterologists.

• The shift is to drive depth of adoption in the gastroenterology segment and aligns with the opportunity in the 24,000-strong target universe of GI writers.

• Clinical Program and Regulatory Exclusivity:

• Phathom initiated a Phase II clinical trial in Eosinophilic Esophagitis, with the first subject enrolled in Q4.
• The trial seeks to displace PPI usage in EoE patients and potentially extend regulatory exclusivity by 6 months with a pediatric-focused Phase III study.

• This strategy is driven by the market opportunity for VOQUEZNA in EoE treatment and the potential for regulatory exclusivity extension.

• Medicare and Cash-Pay Impact:

• The opening of Medicare access led to a 38% increase in cash prescriptions in Q3, contributing to overall prescription growth.
• The company anticipates continued growth in both covered and cash prescriptions, with cash prescriptions offering positive patient access and physician adoption incentives.
• This reflects strategic targeting of both Medicare-covered and cash-pay patients to enhance product adoption and market penetration.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 25% Q3 revenue growth, 43% reduction in cash OpEx vs Q2, cash usage down 77% sequentially, and narrowed full-year revenue guidance; reiterated expectation to reach operating profitability in 2026 (ex-stock comp).

Q&A:

• Question from Umer Raffat (Evercore ISI): Your script growth in 2Q/3Q implied ~48k additional scripts but guidance implies ~35k in 4Q — are you baking in step-down in growth? Also, do advertising cuts risk lower growth into 1Q/2Q next year?
  Response: Guidance conservatively balances strong GI momentum against short-term disruption from the sales-force realignment in Q4; management does not expect the earlier DTC pause to materially hurt script trends and is comfortable with the current expense posture while continuing to monitor ROI.

• Question from Kristen Kluska (Cantor Fitzgerald): With the pivot to GI, how much are you still focusing on PCPs that were driving earlier scripts — were PCPs that wrote scripts retained or removed from targeting?
  Response: PCPs who have written scripts remain targeted; the reallocation removed non-writing PCPs so reps now spend ~70%+ time in GI while still calling top-decile PCPs who have adopted the product.

• Question from Kristen Kluska (Cantor Fitzgerald): The new territories created in July/October — were those GIs previously unvisited or just underserved?
  Response: Realignment split oversized and consolidated undersized territories so high-concentration GI areas get more frequent rep coverage and previously underserved high-volume GIs receive more face time.

• Question from Kyuwon Choi (Goldman Sachs): With Medicare access and cash-pay on, how do you expect cash-pay vs covered mix to evolve? Also, are you seeing increased repeat prescribing in GI?
  Response: Management does not actively manage or forecast the cash vs covered mix and aims to grow both; internally they are tracking an 'adoption ladder' and see physicians increasing repeat prescribing, with GI penetration currently ~3% of the 20M PPI opportunity.

• Question from Yatin Suneja (Guggenheim): What types of patients are you seeing in GI (NERD vs GERD) and how long are patients staying on therapy?
  Response: GI patients are typically PPI-refractory (often escalated or BID dosing); many start and remain on 20mg; early persistence shows roughly 6–7 prescriptions in the first year for converts and management expects durable, multi-year use though analysis is ongoing.

• Question from Yatin Suneja (Guggenheim): How should we think qualitatively about 2026 sales ramp and OpEx?
  Response: Qualitatively management expects continued quarter-by-quarter top-line growth, stable gross-to-net, a maintained lower base OpEx level, and targets operating profitability in 2026 excluding stock-based compensation.

• Question from Joseph Stringer (Needham): How confident are you now in achieving sustainable non-GAAP profitability in 2026 versus prior quarters?
  Response: Confidence is high — Q3 results reinforce the May plan and demonstrate the company is on the intended path toward operating profitability in 2026 (ex-SBC).

• Question from Joseph Stringer (Needham): Any initial insights from the new marketing analytics hire?
  Response: The new SVP of Marketing just started and analytics work is underway; it's too early for definitive insights but the team is focusing on directing sales and marketing more efficiently over coming months.

• Question from Anthea on behalf of Dennis (Jefferies): When will the territory realignment complete and when will productivity from the additional ~20 reps show up? And what gates returning to PCPs?
  Response: Territory maps are live now; hiring to reach ~300 reps is expected by Q1 with productivity materializing as hires are filled through Q1 and into 2026; expansion back into PCPs depends on NBRx per sales call improving until ROI supports reinvestment (likely beyond 2026).

• Question from Annabel Samimy (Stifel): Why haven't more physicians adopted VOQUEZNA — awareness or reimbursement — and is there an inflection point once you hit a critical mass?
  Response: Adoption is limited mainly by entrenched 30-year PPI prescribing habits; conversion requires repeated rep engagement and positive patient feedback, with adoption increasing gradually rather than sudden inflection.

• Question from Annabel Samimy (Stifel): With Medicare turned on and cash-pay mix shifting, why did gross-to-net come in at the lower end and is that sustainable?
  Response: Gross-to-net has been consistent at the lower end of the prior range over the last three quarters; management sees cash-pay mix as not materially affecting gross-to-net and expects no significant near-term change.

• Question from Chase Knickerbocker (Craig-Hallum): Over the medium/long term should we expect gross-to-net to materially improve toward ~50% and are there low-hanging opportunities to improve it?
  Response: Management views current gross-to-net levels as generally sustainable based on consistent results; potential levers (pricing, contract renegotiations, DSA) exist but no material near-term change is expected.

• Question from Matthew Caufield (H.C. Wainwright): What proportion of scripts are lost at fill and how is BlinkRx affecting abandonment?
  Response: They track abandonment internally (not disclosed) and report performance better than industry norms; Blink reduces walkaways by offering lower copays and streamlined fulfillment, improving conversion and downstream covered submissions.

Contradiction Point 1

Advertising Strategy and Impact on Growth

It involves the company's advertising strategy and its expected impact on growth, which are crucial for investor insights into the company's growth trajectory.

Could advertising cuts impact future growth? - Umer Raffat (Evercore ISI Institutional Equities, Research Division)

2025Q3: Advertising cuts focused on expenses not driving top-line growth. We monitor script trends and invest in high ROI activities. No immediate impact expected from prior DTC pause, but we'll continue monitoring. - Sanjeev Narula(CFO)

好的，我现在需要处理用户的请求，他们希望我作为专业的金融文章作者，总结并精简来自美股上市公司财报电话会议的问答环节的问题。用户特别强调要简洁、精准，不改变原意，并且符合美式英语习惯，只输出简化后的问题，保留问号。首先，我需要仔细阅读用户提供的原始问题：“Where are costs being cut, and what is the impact on growth trajectory? Is the $55 million Q4 figure a steady-state number?” 我的任务是缩短这两个问题，去掉冗长的表达，同时保持原意。第一个问题有两个部分，关于削减成本的领域和对增长轨迹的影响。第二个问题询问Q4的5500万美元是否为稳定状态数字。接下来，我要考虑如何简化。第一个问题可以拆分为两个更直接的问题，但用户可能希望保持每个问题独立。例如，“Where are costs being cut?” 可以简化为 “Where are cost reductions being implemented?” 而第二部分 “impact on growth trajectory” 可以改为 “impact on growth trajectory?”。但用户可能希望合并成一个更简洁的问题，比如 “What cost reductions are being made, and how will they affect growth trajectory?” 但原问题有两个独立的问题，所以可能需要分开处理。第二个问题，“Is the $55 million Q4 figure a steady-state number?” 这里“steady-state number”可能指的是长期稳定的数字，所以可以简化为 “Is the $55 million Q4 figure a stable-state number?” 或者更简洁的 “Is the $55 million Q4 figure a steady-state number?” 但用户可能希望用更常见的表达，比如 “steady-state” 是否合适，或者是否应该用其他术语，但用户原文用了这个，所以应该保留。需要注意美式英语的习惯，比如“steady-state”是否正确，但用户原文如此，所以保留。另外，数字格式是否正确，$55 million Q4 figure，这里Q4是第四季度，正确。现在检查是否每个问题都简洁，没有多余的词。例如，“Where are costs being cut” 可以更直接，比如 “What cost reductions are being implemented?” 但用户可能希望保持原问题的结构。或者“Where are cost reductions being implemented, and how will they affect growth trajectory?” 但用户的问题是两个独立的问题，所以可能需要分开。但用户给出的例子中，原始问题有两个问号，所以可能应该保持两个问题，但用户提供的示例输出可能合并了它们？需要看用户提供的例子。例如，用户给出的示例输出是两个问题，但可能合并为一个。不过原问题有两个问号，所以可能需要保留两个问题，但用户可能希望将它们合并成一个更简洁的问题。但用户可能希望每个问题单独处理。需要仔细分析。原问题有两个问号，所以可能用户希望将它们作为两个问题处理。但用户提供的示例输出可能希望将它们合并，但需要确认。例如，用户提供的例子中，原问题有两个问题，但输出可能是一个合并的问题。例如，用户给出的例子可能合并为：“What cost reductions are being implemented, and how will they impact growth trajectory? Is the $55 million Q4 figure a steady-state number?” 但用户可能希望每个问题单独简化，所以可能需要处理为两个问题。现在，我需要确保每个问题都简洁，没有冗余。例如，“Where are costs being cut” 可以简化为 “What cost reductions are being implemented?” 或者 “Where are cost reductions being made?” 但用户可能希望更直接，比如 “What cost reductions are being made?” 但原问题中的“Where are costs being cut”可能更关注削减的领域，所以可能需要保留“Where”。但可能可以更简洁，比如 “What cost reductions are being implemented?” 但用户的问题有两个部分，所以可能需要合并为一个更简洁的问题，例如 “What cost reductions are being made, and how will they impact growth trajectory?”对于第二个问题，“Is the $55 million Q4 figure a steady-state number?” 已经很简洁了，可能不需要改变，但需要确保符合美式英语习惯。例如，“steady-state”是否正确，或者是否应该用“stable-state”？但用户原文使用的是“steady-state”，所以保留。最终，输出应该是两个简化后的问题，每个问题保留问号，并且符合用户的要求。因此，正确的输出应该是：What cost reductions are being implemented, and how will they affect growth trajectory? Is the $55 million Q4 figure a steady-state number?但需要检查是否每个问题都足够简洁，没有冗余。例如，“Where are costs being cut” 可能可以简化为 “What cost reductions are being made?” 但用户可能希望保留“Where”以明确地点，但原问题中的“Where”可能更关注削减的领域，所以可能需要调整。 - Yatin Suneja (Guggenheim Securities, LLC, Research Division)

2025Q2: The DTC spend reduction, obviously, is an expense reduction for us, and we'll save the $20 million of SG&A in Q3. But that does not impact the top line. So that's an expense reduction. - Sanjeev Narula(CFO)

Contradiction Point 2

DTC Advertising Strategy

It highlights a shift in the company's approach to direct-to-consumer (DTC) advertising, which can impact marketing strategies and potentially affect revenue growth expectations.

Could advertising cuts impact future growth? - Umer Raffat (Evercore ISI Institutional Equities, Research Division)

2025Q3: Advertising cuts focused on expenses not driving top-line growth. We monitor script trends and invest in high ROI activities. No immediate impact expected from prior DTC pause, but we'll continue monitoring. - Sanjeev Narula(CFO)

Are you engaging with the same FDA officials? Why reduce DTC efforts in a promotion-sensitive market? - Annabel Samimy (Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q1: Sales activities drive growth, not DTC. DTC wasn't converting writers effectively. We'll focus on core sales activities and may reassess DTC strategy later. - Steve Basta(CEO)

Contradiction Point 3

Gastroenterologist vs Primary Care Focus

It highlights a shift in the company's strategic focus, which is crucial for understanding the target market and growth strategies.

How much focus remains on primary care physicians following the strategy shift to gastroenterology? - Kristen Kluska (Cantor Fitzgerald & Co., Research Division)

2025Q3: PCPs who adopted VOQUEZNA remain in targeting lists. The goal is 70% sales force time in gastroenterology, but primary care with past adoption remains engaged. - Steven Basta(CEO)

What is the tipping point from GI to primary care, and how does Medicare impact gross-to-net? - Annabel Samimy (Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q2: The focus remains on GI as a growth driver, and primary care is additive. - Steven Basta(CEO)

Contradiction Point 4

Impact of DTC on Revenue

It involves differing perspectives on the impact of direct-to-consumer (DTC) advertising on script growth and revenue, which are crucial factors for investor expectations.

How are you addressing patient script abandonment? - Yatin Suneja (Guggenheim Securities, LLC, Research Division)

2025Q3: No indication of physician concern. Non-erosive growth suggested by script data. No significant changes in prescription durations. - Molly Henderson(CFO)

What impact will reduced DTC TV spending have on script volume? Could you provide revenue guidance for 2025? - Chase Knickerbocker (Craig-Hallum Capital Group LLC, Research Division)

2025Q1: Sales activities drive growth, not DTC. DTC wasn't converting well. Sales force remains unchanged. No sales reduction. Focus on optimizing sales force allocation. - Steve Basta(CEO)

Contradiction Point 5

Advertising and DTC Strategy

It involves changes in marketing strategies, specifically regarding the impact of advertising cuts, which are crucial for market awareness and product adoption.

Could advertising cuts impact future growth? - Umer Raffat(Evercore ISI Institutional Equities, Research Division)

2025Q3: Advertising cuts focused on expenses not driving top-line growth. We monitor script trends and invest in high ROI activities. No immediate impact expected from prior DTC pause, but we'll continue monitoring. - Sanjeev Narula(CFO)

Is the increase in prescribing physicians due to DTC efforts, or is it driven by patient initiatives or physician education? - Annabel Samimy(Stifel, Nicolaus & Company, Incorporated, Research Division)

2024Q4: The DTC campaign is effective, with a 55% increase in physician requests. It motivates patients to ask for VOQUEZNA, and physicians are likely to prescribe upon request. - Martin Gilligan(CMO)