Phathom Pharmaceuticals, Inc.

Hello, and welcome to the Fathom Pharmaceuticals first quarter 2025 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 the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. With that, I would like to turn the conference over to Eric Chiarelli, Fathom's Head of Investor Relations. Please go ahead.

Thank you, Operator. Hello, everyone, and thank you for joining us this morning to discuss Fathom's first quarter 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO, and Molly Henderson, our Chief Financial and Business Officer. Robert Breedlove, our VP of Finance and Principal Accounting 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 presentation 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 Fathom'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 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 factor section of our most recent Form 10-K 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. With that, I will now turn the call over to Steve Bosta, Fathom's President and CEO, to kick us off. Steve?

Thank you, Eric, and thank you to everyone joining the call today. I'm pleased to be here speaking with you all today. As I considered my choice to join Fathom, the piece that was abundantly clear to me in all of my conversations was the tremendous impact Boquesna is having on patients' lives. My focus throughout my career has been helping patients by delivering products that improve patient care and outcomes. This journey with Fathom builds on that focus. There are tens of millions of patients in the U.S. that suffer from GERD. And many of those patients are inadequately treated by current PPIs. Based on our clinical data and the many, many patient testimonials and testimonials from prescribers, we know that Boquesnet delivers a meaningful improvement to the management of acid reflux. My first priority as CEO is to accelerate the launch of this great drug. and build a profitable, successful company for our employees and our shareholders. Before I address the operational topics that were discussed in today's press release and that we're going to go into in more detail, just a quick background might help for those who don't know me. I've sat in the CEO seat for over 20 years leading biopharma, medical device, and digital health companies. Each of those experiences had unique challenges. A common theme across all of them has been my commitment to commercial creativity. I've built businesses and created value where others doubted the initial market opportunity. As I look at this new journey with fathom, I can promise you that I will bring fresh perspective, hands on approach and a sense of urgency to growing this company. fathom successfully developed a great drug. and launched Vaquesna to already within the first 18 months, an annualized run rate of 120 million in net revenues. That's a great start. Our future success centers around growing sales to achieve Vaquesna's significant potential and managing costs to reach profitable operations in 2026. thus mitigating financing risk and overhang and ultimately building a durable business with Viqueza as the foundation of that business. Our operating priorities represent a shift somewhat compared to the company's previous targets. We recognize that when the stock was trading near $20 per share, our access to capital was much more flexible than it is today. The cost of capital, if we were to raise at $4 a share is more diluted and thus we're taking steps that reflect that reality by responsibly managing expenses. I'm working with our team to establish the disciplined approach to spending based on efficiency with rigorous consideration of leveraging the high leverage growth drivers. We have four priorities for the remainder of 2025. And absolutely, our focus is on growing Voquesna sales to maintain our revenue ramp. Second is clarifying our exclusivity timeline, you know, hopefully through our pending citizens petition and getting a clear answer from FDA, or if we don't get a clear answer from FDA by taking the appropriate next steps if necessary. Third, is implementing the cost savings that we are starting today and will be executing over the course of the coming months with vigilance on a number of our areas of spending to achieve profitable operations in 2026. And fourth is then charting a value creating future for Fathom that leverages the extraordinary potential of La Quesna and builds on that foundation to create a durable, sustaining company. Today, we're announcing that we will be implementing cost savings initiatives to reach operating expenses, excluding interest, stock comp, and certain accruals, of less than $55 million per quarter in Q4 of this year. These spending reductions, in combination with the continued focus on revenue growth, are intended to enable us to achieve profit from operations in 2026. Importantly, our target is to be able to achieve this with our current cash on the balance sheet, without the need to draw down additional debt or raise additional equity. This reframing of our strategy does not imply a departure from our belief in book business commercial opportunity. Rather, it just reflects the reality of the current capital markets and brings a much needed sense of urgency and cost control to our operations. We remain focused on driving top-line growth, and we believe our sales organization represents the core means by which we can achieve that goal. Our prioritization on profitability will require notable changes across the business, many of which you likely already saw in this morning's press release. Let me start by addressing some of the personnel-related changes. In the context of our cost reduction initiatives, Asmi, Martin, and Molly will transition out of Fathom in the coming weeks. Asmi will continue to advise the company to support our citizens petition process, some of our regulatory activities, and future potential product pipeline strategies. Robert Breedlove, who is currently our VP of Finance, and joins us on today's call to address questions, has also been appointed principal accounting officer. These transitions are aligned with our goal of streamlining operations. Several key functional leaders will now report directly to me providing for greater operational efficiencies and a commercially focused leadership team. With the reduction of some marketing and development activities, we're also implementing a reduction of force that will reduce total staffing by approximately 6 percent. We've carefully assessed our commercial and development initiatives to consider the return on investment of our core strategies and investments, and we've decided to deprioritize certain initiatives and prioritize others. Most notably, at the end of Q2, we're halting our broadcast table and streaming television promotion, which are the largest DTC spend categories. We will be maintaining certain digital promotion activities which are providing higher ROI. So we're choosing to invest in the areas with higher ROI and reducing spend in areas that may have lower returns. As I mentioned earlier, the core driver of our revenue growth is in our field sales organization. We're maintaining the strength of that organization and have brought in new leadership, which we announced today. I'm delighted to welcome to Fathom our new SVP of sales, Jonathan Bentley, who joins us from intracellular therapies following their successful acquisition by J&J. Jonathan brings a wealth of knowledge and experience and a fresh perspective to our sales team, including prior GI experience when he was with Salix. Jonathan will be a key member of our leadership team and leads the largest component of our organization, which is our commitment to our field sales organization. In R&D, we paused plans for our pending phase two eosinophilic esophagitis study. That study had not yet begun to enroll patients. We will evaluate over the coming months whether to initiate this study in the future based on the outcome of the citizen's petition decision and strategic and financial considerations. Shifting for a moment to our citizen's petition, which I know our shareholders are focused on, the FDA's decision on this matter is of critical importance to our exclusivity runway. Since I joined the company, I've worked closely with the team to understand the situation and identify if there are any ways in which we can positively influence FDA's consideration. The FDA is due to respond to our citizen's petition in early June. A positive response would confirm our regulatory exclusivity to 2032, If we receive a negative or indeterminate response, we're going to consider the appropriate next steps and expect to take action to pursue the objective of maintaining exclusivity into 2032. We continue to have confidence in our legal position. The FDA granted QIDP status and a five-year exclusivity extension to our HP-Vaquesna treatment packs. Under established FDA practice, that same exclusivity period should appropriately apply to all forms of the new chemical entity phenoprazine. Unfortunately, FDA decisions and timelines are not within our control. I'm certainly aware of the uncertainty and concern that this pending decision has caused and the importance with which this topic is viewed by our investors. I'm confident that we have a correct interpretation of the FDA policy and solid arguments that should prevail. And I'm also confident that no matter which exclusivity period ultimately results, we have a meaningful path to creating significant shareholder value. Our initiatives today to continue ramping sales and to managing expenses to reach profitability next year are a first step on that path to creating significant value. As for our first quarter 2025 results, we reported net revenues of $28.5 million and ended with $212 million in cash. Our target is for this balance to be able to support our restructured operations without the need for additional financing through the point of reaching profitability next year. Molly will share further details on these results in our commercial KPIs shortly. Lastly, one note on the manufacturing front that does not affect our core of a Cresna tablet product, but does impact one of our H. pylori accommodation packs. We've been informed of a possible future disruption in the supply of the Quesna triple packs. We're monitoring that situation closely and have not experienced any commercial disruption to date. But given the possibility that we could experience such, we wanted to inform our investors to avoid any possible future strides. Given the limited sales contribution of the triple PAC and the fact that the dual PAC availability will not be affected, we do not anticipate any material impact on our revenues or operations if a supply disruption to the triple PAC occurs. We could also switch our HP marketing emphasis quickly to the available dual PAC if this develops. We are at an inflection point for FADEN. transitioning from an early stage company to a stable, profitable organization. We have only just begun to see Voquesna's market potential. The launch has been going well, and there's so much growth ahead for this extraordinary product. In all of my meetings so far, a consistent theme is that patients and doctors love this drug. It really has a profound impact. Voquesna's benefit is a rapid, potent and durable asset suppression profile. We are starting to make internal decisions with both a top line and bottom line focus. This will make us a stronger company and will help us drive Vilkvesna to reach its blockbuster potential. I will now turn the call over to Molly to provide further details on our recent commercial progress and financial results. Molly?