Phathom Pharmaceuticals, Inc. (PHAT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Bank of America Annual Healthcare Conference. My name is Jason Gerberry. I'm one of the biopharma analysts at BofA, and I am pleased to be introducing our next company presenter, Phathom Pharmaceuticals. And we've got the team with us. We've got Terrie Curran, CEO; Todd Branning, CFO; Azmi Nabulsi, COO; and Martin Gilligan, Chief Commercial Officer. So thanks, team, for joining us at the conference. And I know you guys have a short presentation, so I'll hand it over to you, and then we'll come back to Q&A.

Thanks, Jason. As Jason said, we've distributed a short presentation. So I'll point you to each slide as we cover that. So thanks for having us today. We're really thrilled to be with you and to share an overview of Phathom and the positive results from our Phase III trial in the treatment of H. pylori that we released a few weeks ago. Phathom has licensed vonoprazan, which is a potassium competitive acid blocker, or a P-CAB, for the U.S., Canada and for Europe. And we believe vonoprazan has the potential to be a blockbuster, a first-in-class, best-in-class acid suppression therapy in a therapeutic area where there hasn't been any innovation approved in over 25 years. P-CABs provide rapid, durable and potent acid suppression and vonoprazan has established a track record. It's already approved in 14 countries. So it's largely derisked from both a clinical and commercial perspective. And in Japan, recently delivered USD 800 million in annual revenue and has achieved in Japan overall market leadership in the category as well as leadership in the H. pylori segment of the category. So those 2 diseases that Phathom is pursuing, the treatment of H. pylori and erosive esophagitis. And as I mentioned just earlier, we've just shared the results of our Phase III H. pylori trial, where we met all of the primary and the secondary endpoints. So we couldn't be more excited about this outcome. And it represents our best case scenario. In the fourth quarter this year, we expect to share the results from our second Phase III clinical program, PHALCON-EE, and that's on the treatment of erosive esophagitis. If you look at Slide 2, I'll talk through the results of the PHALCON-HP program and really what they mean for the unmet need and the eradication of H. pylori. But I also want to briefly highlight why these results are so strategically important to the goal of Phathom building a leading GI-focused company. Firstly, H. pylori indication has been granted qualified infectious disease product designation, or QIDP, from the FDA. And this designation provides for an additional 5 years of regulatory exclusivity. So assuming our first approval is for the treatment of H. pylori, we would expect to have at least 10.5 years of exclusivity for the compound before an ANDA could be filed. Secondly, these results position vonoprazan-based HP eradication therapies to potentially become the standard of care, really transforming the existing treatment paradigm. As we've been able to replicate the results that we saw in the Japanese programs, these impressive PHALCON-HP data further bolster our confidence in the potential for vonoprazan in the larger commercial opportunities of both erosive esophagitis and non-erosive disease. And finally, although H. pylori is a smaller commercial indication for us compared to the other indications, we believe that the expected timing of the potential approval will allow us to establish the team and the unique product profile prior to launching the larger indications. So let's move to the data on Slide 3. I'm not going to go into all of the data points and all the detail on this slide. But I do want to emphasize a couple of things. Firstly, we met all of the primary endpoints and all of the secondary endpoints. And that was for both the dual and the triple therapies in the program. And what I'd like to point out is that the primary endpoint for both the triple and the dual therapies were based on non-inferiority in the clarithromycin-sensitive population. And this endpoint was chosen based upon feedback from the FDA and is important for our regulatory submission. Importantly, what I'd like to highlight from a commercial standpoint are the secondary endpoints of superiority in all patients. And we tested both vonoprazan [ regimes ], so both the dual and the triple, in populations which included clarithromycin-resistant patients and clarithromycin-sensitive patients. So in the per protocol analysis, which is based upon the FDA guidance, it requires, among other things, that patients take at least 75% of study drug over the 14-day period. Both of the vonoprazan-based regimens demonstrated statistically significant superiority versus the standard of care, that's a PPI triple therapy, and achieved much higher eradication rates. And these results are very similar to the results that we saw in the Japanese H. pylori trials. And because of how they're compliant, the patients are in the Japanese trials, the per protocol population from PHALCON-HP is the best comparator to the Japanese data. And the ability to replicate the Japanese results in a Western population gives us great confidence in the potential of vonoprazan in other indications. As you can see from the data, the standard of care, PPI triplet-based regimens, failed to achieve greater than 70% eradication in all comers. And this is driven by clarithromycin resistance. It's really important to note that in clinical practice, physicians do not treat patients for clarithromycin resistance prior to treatment. A treatment that demonstrates superiority to the standard of care in all patient populations is then well positioned as a first-line option. So with declining eradication rates, it's not surprising that research has shown that up to 70% of physicians are not satisfied with their current H. pylori treatment. And we believe that the superior results in both the vonoprazan-based regimens, in addition to the potential of providing a dual regimen to limit the use of antibiotics, provides a very exciting opportunity for patients in the treatment of H. pylori. So with that, Jason, I'll turn it back to you for some Q&A.

Great. Maybe just for starters, can you provide a little context for how you ultimately came into securing the rights for P-CAB from your partner who, I believe, had presence in the GI category in the U.S. with Entyvio. So just maybe curious how that all came about, if you can just provide a little bit of background first.

Sure. So we've licensed vonoprazan from Takeda for the U.S., Europe and Canada. The company was formed back in early 2019 and went in public in October of 2019. And really, the access to the asset was our Chairman, Tachi Yamada. It was from Takeda. He was ex-Chief Medical Officer at Takeda and had worked on vonoprazan in its development. And with the change in strategic orientation to Takeda away from GI to focus more on orphan diseases, oncology, the company hadn't developed Takeda outside of Japan and really focused development on the Japanese market. So the team with Tachi and Frazier Healthcare approached Takeda, and really, it's a win-win in that Takeda still has an interest in the company and Phathom was formed to move these assets forward in the territories that we'd licensed it for.

Okay. Now you have pivotal data for GERD coming up in the next year. And maybe if you can just talk a little bit about the mechanistic rationale for P-CAB in that setting and the importance of blocking acid secretion for these patients with more severe forms of GERD and how much additional benefit you'd anticipate versus existing therapeutic options.

Sure. So yes, as you mentioned, we have initiated our program -- our Phase II program in NERD. And PPIs worked very differently, and mechanism is different to a proton competitive acid blocker. Both target the proton pump, which is constantly switching on and off in response to stimulus like food. So proton pump inhibitors only bind to the active pumps, wherein P-CAB bind to both active and inactive pumps, so stable in acid and have a long half-life. So that translates to the differentiated clinical profile that we see with P-CABs like vonoprazan. So really gives them 3 distinctive clinical features. So firstly, they're very potent or durable and also fast acting. So fast, durable and potent. And what we see in both the PK and PD studies when we compare vonoprazan to a PPI like lansoprazole, in the first day, you can see the pH weekly declining, whereas the PPI takes up to 3 to 5 days to really reach steady state and be efficacious. So this really translates to what we think will be a differentiated clinical profile for NERD. So not only for continuous treatment of NERD, but also for an on-demand regimen. So when patients are wanting to not take a PPI every day, they can take vonoprazan as needed to treat their symptoms. So we're looking at, in the NERD program, a continuous regimen and then switching on over to an on-demand regimen where patients take vonoprazan as needed. PPIs have within their label a continuous utilization of the PPI. But they don't work in an on-demand fashion because of the different mechanism. And so we expect to see a very differentiated profile in that on-demand utilization of vonoprazan versus the PPI.

Got it. Okay. Your Phase III study, the PHALCON-EE trial, correct? And we were expecting results here in the second half of the year. I think enrollment is complete from what I understand. So is this single Phase III pivotal sufficient for approval from your perspective? Or you need a second confirmatory trial? And I'm just kind of curious, there's -- it looks like some endoscopies that need to be performed. And so with COVID going on, I'm just kind of curious if that has any risk of sort of disrupting data capture, et cetera, as you think about lining up activities from those trials -- for that trial, I should say.

Sure. So we have had numerous consultations with the regulatory authorities, both in the U.S. as well as Europe. Both confirmed with the breadth of data that we have from Japan, one large Phase III pivotal in both HP as well as EE will be sufficient for us to file. So we expect to file the 2 NDAs for dual therapy and triple therapy in H. pylori by the end of the year. And we're right on track to read out the Phase III program for EE in the fourth quarter, and then we'll file the NDA for EE. And then the second part of the question was around endoscopies. We did...

Yes. I think just if any risk with COVID going on in terms of getting patients in to perform those and getting all the information needed to fully assess those patients.

Yes. We've been really pleased with the operational aspects of the clinical program during COVID. So it's for [ HP ] and EE. Even though we paused back in March as a result of COVID, and that was in reaction to the pause of elective endoscopy. Once we ran, issued randomization post that pause, it quickly accelerated and we're actually able to over-enroll and stay on track for the readout of the HP clinical program. And that has been exactly the same dynamic that we've seen with the EE program. All of the assumptions around the program have remained intact. We haven't -- in fact, the number of endoscopies that are being completed now despite the COVID has really accelerated, as practices have implemented current [ year ] policies and practices to ensure patients are able to have endoscopies. So there hasn't hindered enrollment at all. I think it also speaks to a couple of things. I think the unmet need in this category, there is also no alternative for these patients. So they're switching amongst PPIs. And so there's a large pool of patients that are looking for an alternative therapy. And it also speaks to the lack of competition in other categories that I've worked in. There's been a large number of Phase III programs where you're competing for patients in the programs. This isn't the case in either of the -- either the HP, the EE or, frankly, the NERD program where there are a large number of patients that are looking for alternative therapies. There are no therapies available commercially, and there are very few other ongoing clinical trials in Phase III.

Got it. And this next question might be for both you and Martin. Just thinking about the readout of the Phase III book, what's the regulatory? But then also what's the commercial bogey for success in this trial? And I would imagine that there's probably a number of scenarios, some where you may end up going more broadly to the market, some where you end up maybe going more narrowly to the market with a premium price point for value that's kind of demonstrated in the clinical trial. So not looking for pricing guidance here per se, but just kind of thinking about the different value equations and how that could be dictated by the clinical outcome, if I'm thinking about it the right way.

Sure. I'll make a couple of comments just how the results have impacted our thinking from a strategic perspective. And then I'll ask Martin to comment on the reaction that we've had in terms of preference share for treatment with a profile like that and then talk a little bit about how we're thinking about pricing and some of the anchor products that we're looking at pricing in the marketplace. So I think this is, as I mentioned earlier, really, as the data has read out, we modeled the program around the Japanese data. And this is really the base case scenario. Hitting all of the primary endpoints for both dual and triple therapy as well as the superiority endpoints of both regimens is absolutely the best case scenario. Showing superiority versus the standard of care with statistical significance is something that really positions this therapy as first line from a clinical -- both as a payer perspective. So perhaps Martin, you can just touch upon the action that you've had from the data as we've done some market research around preference share and also the data from the HP trial.

Sure. So first of all, we couldn't have been more excited from a commercial launch perspective to see us hit all 6 endpoints. So it really did set us up for a very good scenario. I think the opportunity is really 2. It is all patient -- the all-patient data set, seeing that superiority. But the underlying base for that is clarithromycin resistant. That represents over 30% of the market. And those physicians, there's no way for them to identify who that patient is. So not only was there superiority, but the gap between the control arm was just -- it was a really wide gap. So when you think about it, the physicians going to have a patient before them, they're not going to know if their clarithromycin-resistant and certainly going to -- should work well there based upon the clinical data. And even if they're not clarithromycin resistant, it's also superior in all patients. So it really does set up for a very good story. And then also the fact that we have the flexibility of a triple therapy or dual regimen. The dual regimen, there's a lot of concerns in the marketplace about overutilization or unnecessary utilization of antibiotic. It's going to remove one antibiotic from the treatment regimen. So when we -- what we've done thus far is we brought the data to KOLs, the key opinion leaders, and they've just been -- it's been exceptionally positive. They're pleased to see the high eradication rates we got that were achieved in the superiority. And they -- we've heard that it really is going to change the treatment landscape. Terrie mentioned market research. We haven't done market research with the current data. We'll be undertaking that, but the data is so closely aligned to the Japanese data. When we previously brought that to community physicians, what we heard from them was that they -- their preference to use it was in the high 60s, 50 percentage. So we already know that we have something in the results that matches what we brought to market research. And then also just -- you asked about pricing. Our...

Just to be clear, we're talking about GERD or H. pylori?

H. pylori.

Yes. Sorry. I was framing the question more just about scenarios for the GERD trial and the clinical and regulatory bogey for that Phase III and how that could impact the commercial opportunity. Just wanted to clarify.

Okay. So I apologize. So anyway, I told you what was good about H. pylori and I apologize. The -- but if I will then continue on the pricing because that was one of your questions. Doing indication pricing is quite exceptional and probably not the best approach. So we plan on doing a per tablet pricing. You asked about some of the things we're looking at. We've looked at Dexilant, which is the only branded PPI in the market that has reasonably good placement. And it's really -- it's just another PPI. So we use that as an analog, and that's currently a $10.28 per tablet from a WAC perspective. And H. pylori, the product is -- that would be used twice a day. So we think we have a differentiated profile. And then we hope with erosive esophagitis, the data will play out the same for very good positioning. But I do think that the H. pylori data gives us an opportunity as we launch to start socializing the profile with prescribers with erosive esophagitis. We clearly wouldn't start promoting that indication until we have approval, but we'll be calling on the right target base and sharing the profile that we have with H. pylori.

And maybe, Jason, I'll just kind of comment about the EE program. I think the H. pylori results really reinforce our thesis around the potency of vonoprazan and the differentiation, the mechanism really translating to that potency, which then will translate to the erosive esophagitis program. As you clearly recall, the program for erosive esophagitis is also closely aligned with the protocol design in Japan and highly powered both for healing as well as the maintenance files -- maintenance [ phases of trials ]. So I think if anything, it just gives us more confidence in the program going forward.

And do you need -- for the erosive esophagitis Phase III, do you need to show superiority as you think about sort of the bogey there?

Yes. As like the same with the HP program, with the EE, the primary endpoint is noninferiority and that's what we need for regulatory approval. However, for the secondary endpoints, we're looking at superiority.

This is Azmi Nabulsi as well. I'm going to confirm, too, that we have more data actually for erosive esophagitis. So we have the Japanese data, and we have the data from Asia, primarily China. So we have more data confirming the efficacy of and superiority of vonoprazan, and the study we are doing mimics those studies pretty much. And as Terrie mentioned, we need noninferiority for approval, but we're very, very well powered for superiority at multiple endpoints.

Right. Okay. How do you guys see the competitive landscape in erosive esophagitis, looking -- I know Ironwood had some disappointing results about a year ago in that setting. I'm not aware of anybody else who's really kind of going after this opportunity. So as you think about from a competitive positioning perspective, if you're successful in coming to market, who would you be up against? What would be sort of like the main thing you'd be looking to displace?

Yes. So maybe I'll -- sorry, Martin. I think you're exactly right. There has been no innovation in this space since the launch of the PPIs. And so the competitive set is very limited, and there are no other competitors that will be actively promoting in the erosive esophagitis segment of the market when we launch. The prescriber base is highly concentrated. And what we hear that we'll be displacing, our positioning, it will be -- our label will be very broad. We'll be able to secure a very broad label. But our expectation from a payer perspective is that we'll have one step through a generic PPI. So what we're hearing as we're kind of sharing even the HP data and physicians are starting to think about how that translates to EE is that as you think about all of the time the population has already been one of PPI and kind of switching amongst the existing either branded in Dexilant or a generic PPI. And so we will have all of that market opportunity when we launch. Do you want to add something there?

No, I would just say when you're launching a product, you're typically looking at share of voice and what you could obtain. There'll be really no counter-detailing. We will be the share of voice. We'll own share of voice. And what we know is the minute we reach out to physicians on this topic, there's just been no one developing the market. There's been no one speaking in the market. So there's a keen interest to hear what we have to say.

Got it. Okay. Now maybe just with H. pylori. Is this ultimately, from your perspective, kind of a starter foray into the market for you guys ultimately? Can you just talk about the relative market size of H. pylori versus, say, the current opportunities? And we look at -- I think RedHill had a drug that launched within the last year. Anybody who launches a drug in COVID, I guess it's you take it with a grain of salt to some degree, but maybe just frame the size of the opportunity and how this provides maybe a segue into the larger market opportunities for you.

Go ahead, Martin.

Sure. So the -- clearly, the H. pylori is a smaller market. We believe that there's somewhere around 2.5 million patients in the market that are treated on an annual basis. And it's really driven by symptomatology that gets a patient to the physician's office. So the RedHill actually, as you mentioned, was the only product that have launched recently. It is a product that is really -- it's not a new molecule. There's no new mechanism. It's a combination of products that have been used already. So we see already we'll have a key differentiating point. And when we're working with physicians and speaking with physicians about the benefits of a non-presented H. pylori, those would be the same physicians who would be prescribing eventually for erosive esophagitis. So it is a good -- a focused targeted launch to potential high prescribers of H. pylori will set us up for erosive esophagitis. As Terrie mentioned, the acid suppression story, it's that suppression that really enables that antibiotic to work even harder and be more effective. And that will ultimately translate over for acid suppression to the benefits in erosive esophagitis.

How would you think about sort of -- you talked about concentrated commercial infrastructure for HP and then how it scales with EE in time?

Yes, yes. So we know that these prescriber base has about -- the high-potential prescriber base has a 40% overlap. So there's a tremendous amount of synergy there. So what we envision is that we can go after a core target group of physicians with the launch of H. pylori and really focus in key geographies where we get that intersection of high-volume geography in terms of population, high prescriber potential and then establishing a core set of success and really awareness of the product to get ready to launch for the larger indication of erosive esophagitis.

All right. Well, we're up against our time. So thank you all for joining us and sharing your company story and the latest update. Really appreciate it.

Great. Thanks, Jason.

All right. Thanks. Well, have a good rest of your conference.

You, too. Bye.

All right. Bye now.