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

Welcome to the Phathom Pharmaceuticals FDA Approval Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. With that, I would like to turn the conference call over to Eric Sciorilli, Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you all for joining us this morning to discuss our recent FDA approvals. Just a couple of logistical items before we get started. A recording of today's webcast and presentation can be found under the Events and Presentations section of our corporate website. Also, 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 can materially differ from the forward-looking statements, and any such risks can materially adversely affect the business, the results of operations and trading prices for Phathom's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's 10-K for the year ended December 31, 2022, filed with the SEC as well as the company's subsequent SEC filings. With that, I will now turn the conference over to Terrie Curran, Phathom's President and CEO, to kick us off. Terrie?

Thank you, Eric, and thank you, again, to all those joining us today. Here with me for our prepared remarks is Martin Gilligan, our Chief Commercial Officer. I will lead off the presentation with an introduction, followed by an overview of the disease states and labels our 2 recently approved indications. Martin will then take you through our commercial strategy and how we will execute our launch plans. At the conclusion of our prepared remarks, our Chief Operating Officer, Azmi Nabulsi; and Chief Financial Officer, Molly Henderson, will join us to field the question and answer portion of today's call. With that, let me officially begin by saying that we are thrilled to now have FDA approval of vonoprazan, which we will now refer to by its brand name, VOQUEZNA. VOQUEZNA is the first-ever innovative acid suppressant to demonstrate superiority compared to a proton pump inhibitor, or PPI, across multiple indications. VOQUEZNA is a potassium-competitive acid blocker, or PCAB, now approved in the U.S. for the healing and maintenance of healing of all grades of erosive GERD or erosive esophagitis and relief of associated heartburn in adults. This achievement marks a huge milestone for both Phathom and for patients with erosive GERD. Phathom was founded 4 years ago to develop an asset that demonstrated clinical and commercial success outside the U.S. Since then, we have conducted 3 U.S. registrational trials in H. pylori or HP erosive GERD and nonerosive GERD or non-erosive reflux disease, all of which met their primary endpoints. Our focus and excitement now shift to introducing VOQUEZNA to the U.S. market and its over 20 million patients treated annually for acid-related disorders. VOQUEZNA represents a novel mechanism of action that demonstrate pharmacokinetic and pharmacodynamic or PK/PD advantages compared to the standard of care for acid suppressants, PPIs. Back in September 2021, we announced the results from our VONO-103 study, which evaluated the PK/PD profile of VOQUEZNA in comparison to the PPI lansoprazole. In both primary endpoints, VOQUEZNA demonstrated significantly greater asset inhibition. We believe this was driven by its mechanistic differences compared to PPIs, including a longer half-life, slow dissociation rates and stability in acid. Ultimately, these results help define VOQUEZNA's rapid, potent and durable acid suppression profile, the foundation on which VOQUEZNA is built. Shifting to order strategy. We believe there is tremendous growth opportunity building off the rapid, potent and durable acid suppression profile. Here, you will see our focus was to develop VOQUEZNA as a treatment for 3 distinct acid-related indications: HP, erosive GERD and non-erosive GERD. Following the structure of the slide, each indication represents an addressable market that significantly expands the population of patients who can benefit from VOQUEZNA. Our first step towards executing on this strategy was receiving approval for VOQUEZNA for TRIPLE and DUAL PAK for the treatment of H. pylori in adults. Now with the FDA's approval in erosive GERD, we're excited to have accomplished another key element of our strategic vision. Non-erosive GERD, if approved, will be another significant step. As we grow the brand across these indications, we are [ orange ] on our goal of displacing PPIs and becoming the #1 prescribed acid suppressant. Together, these indications represent large populations with a high degree of unmet medical need. And based upon our projections, we believe VOQUEZNA has the potential to reach annual peak revenues of greater than $3 billion. Focusing on -- for a moment on H. pylori. The path is now clear for a U.S. commercial launch. Helicobacter pylori itself is a widespread bacterial pathogen, which in recent decades has seen eradication rates drop below 80% in part due to antibiotic resistance, inadequate acid suppression and complex treatment regimens. VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK will now offer physicians and patients 2 new therapeutic options with demonstrated superior eradication rates compared to PPI-based lansoprazole triple therapy. We are ready to bring these products to market as first-line treatment options for patients with H. pylori. Our launch of VOQUEZNA for erosive GERD begins today, simultaneously with our launch of the HP pack. This news marks the first major innovation to the U.S. acid suppressant market in over 30 years and demonstrates our commitment to changing the GI treatment landscape for patients and health care providers. The team here at Phathom have worked tremendously hard to reach this milestone, and I'm extremely proud of our efforts. But we will not take our foot off the gas. As our enthusiasm grows and we kick off of our combined U.S. launch, we look forward to having this new first-in-class therapeutic option available to physicians and patients next month. I will now provide some additional color on the attractive market dynamics and strong approved label that validates our excitement for the erosive GERD opportunity. The GERD market in the U.S. is incredibly large and driven predominantly by prescription volume. Despite the abundance of OTC options that exist, data shows that 85% of PPI volume is still driven by prescriptions. This translates to about 110 million scripts written and filled annually across all indications, a figure that has remained steady over the last 5 years. Pair that with the total addressable erosive GERD market of approximately 7 million diagnosed and treated patients each year, and you'll start to see that this large market takes shape. As I mentioned earlier, PPIs have been the standard of care for decades, with no alternatives for millions of patients lacking symptom relief. And dissatisfaction is legitimate, but what solution can a physician offer? What we hear from the market is that switching between PPIs is common, and claims data back -- backs up this sentiment. In fact, a recent medical claim analysis showed about 35% of erosive GERD patients treated with a prescription PPI switched to a different PPI after only 3 months' treatment. Overall, erosive GERD is a market primed for new treatment option. Enter VOQUEZNA, with its label superiority claims compared to the PPI lansoprazole. Now turning to an overview of VOQUEZNA's prescribing information from the label. I'd like to bring your attention to the indications listed at the top of this table, which include clear references to usage in all grades of erosive GERD as well as the possible use of VOQUEZNA tablets for the treatment of H. pylori. As it relates to administration, note that the recommended dose for the 8-week healing phase is 20 milligrams, and the recommended dose for the maintenance phase, which can last up to 6 months, is 10 milligrams. Both doses are recommended to be taken once daily, with instructions stating the tablets can be taken with or without food, which is a differentiator for VOQUEZNA versus PPIs. For full prescribing information beyond these highlights, please visit voquezna.com. I would like to emphasize how pleased we are with the label. This screenshot on this page is from the clinical efficacy section. You can see there is a significant amount of trial data included, and I'd like to focus your attention to the multiple superiority claims references, including across the healing and maintenance of healing portions of the label. These claims establish VOQUEZNA as the only acid suppressant with a label that references superiority versus the PPI, and they provide the foundation for the strong promotional messages that our commercial team will be leveraging today. Touching upon safety. VOQUEZNA has demonstrated a well-tolerated safety profile. I began today mentioning the success of vonoprazan in other countries where it is already approved. Through clinical trials, commercial use and post-marketing studies in those other countries, tens of millions of patients have already had experience with vonoprazan. As with the prescribing information, for full safety information, please visit voquezna.com. Today marks the successful culmination of years of hard work and dedication by the Phathom team, our clinical and manufacturing partners and all of the patients and physicians who have taken part in clinical trials and market research. With approval for a erosive GERD, Phathom has achieved another important milestone, signaling the start of our commercial chapter. Each of the factors you see here, the large market with high dissatisfaction, the first new MOA in 30 years, the differentiated profile with superiority claims versus the PPI and the strong interest by physicians serves as cornerstones validating blockbuster potential. There's a lot to be excited about when it comes to VOQUEZNA's power to help heal erosive GERD. I'll now pass it over to Martin Gilligan, our Chief Commercial Officer, who will walk you through how we're going to translate this blockbuster potential into reality and help patients experience the benefits of VOQUEZNA. Martin?

Hello, everyone. Let me start by repeating how excited we are to launch VOQUEZNA. Everyone at Phathom is eager to get started, and I'll share with you today components of our launch strategy. As Terrie mentioned, our overarching strategy is to displace PPIs, which begins with the mechanistic differences, the rapid, potent and durable asset suppression profile. These 3 pillars are the foundation of the strategy: rapid, by increasing PH within 2 to 3 hours; potent, acid suppression achieved on day 1; and durable, asset suppression that lasts 24 hours. Once GIs and PCPs hear this mechanistic summary, her interest level increases, immediately recognizing this class is new and different. They want to understand more. It's the cornerstone of the brand story that we will begin to deliver in promotion. After decades of no new mechanism introduced in the category, VOQUEZNA's approval marks not only an introduction of a new class, but also the first product to have superiority claims versus a PPI included in its label. Terrie highlighted our strong and comprehensive label. We couldn't be more pleased to see the extent of the endpoints included, which provides support for how we promote VOQUEZNA. This slide is an example of the messages and material reflective of the label that we will begin to use in promotion immediately. No waiting, we go live today. 93% healing. Superior healing rates in patients with moderate to severe disease at week 2. This data sets the stage of how the unique mechanism is relevant to the clinical differentiation. Looking more closely at promotional claims. The durability of healing is seen through the superior maintenance of healing data generated in our clinical program. Remember, patients take PPIs chronically. So being able to promote that our pivotal clinical trial demonstrated superiority in patients with all grades of severity, including those with moderate to severe erosive GERD is both a differentiator and we believe, a driver to prescribe. It's at this point where we see physicians understand the full picture of rapid, potent and durable acid suppression. And they tell us that they can think of patients who are appropriate candidates for VOQUEZNA across all levels of severity. Similarly, in H. pylori, our reps will be promoting that VOQUEZNA-based treatment regimens demonstrated superior eradication rates in all patients and sharing that the efficacy had more than 2x the eradication rate versus triple therapy with the PPI lansoprazole in the difficult-to-treat clarithromycin-resistant patients. Again, this slide is a snapshot of data and messages that we will begin to use today. What we believe strengthens the physician's enthusiasm to prescribe is the consistency of the data across indications. And now the inclusion of superiority claims in our label for both H. pylori and erosive GERD indications sets VOQUEZNA apart from PPIs. So with a strong label and promotional claims, how do we approach the market? I'll now share how we execute the strategy. First, establish VOQUEZNA as the treatment of choice among physicians. Second, activate patients to request VOQUEZNA; and third, secure replacement therapy among PPI-experienced patients with the payer. Now I'll go deeper and look at how we engage each customer segment. Let's first cover our targeting. While there are a large number of providers in the U.S. that prescribe PPIs, we know that approximately 52,000 providers are identified as high-volume erosive GERD prescribers. What you see here is that GIs make up 18% of the 52,000 targets. It's not surprising that these GIs comprise more than 1/4 of the overall volume, as they see a significant amount of erosive GERD patients. What's interesting to many is that primary care is a key player in long-term patient management, both as initiators of therapy and the decision makers in this high switch market that Terrie described. This group represents 60% of the targets, and their volume puts a segment of the PCPs at the highest level of prescribers. It's the importance of GIs and volume of primary care that primarily drove the sizing of our 320-person sales force. I do want to note 2 additional points. First, APPs. It's a term used for nurse practitioners and physician assistants are growing in their accountability of diagnosing and managing erosive GERD. And they prescribe high volumes of PPIs in both GI and primary care practices. Collectively, they represent 17% of the call plan. Finally, what makes this market both unique and very large is that on average, these targets represent approximately 1,200 TRxs per year. If you think about that, each month, each of these providers writes a PPI or is a source of a refill for 100 patients. It's a significant volume and a significant opportunity for VOQUEZNA. Earlier, I mentioned how excited the Phathom team is about the approval of VOQUEZNA and erosive GERD and H. pylori. So you won't be surprised to hear our team is ready to launch. From previous meetings, many of you have heard me share that we have an MSL team in place for the past 2 years, and they have been actively engaged with the medical community. Now we are in the process of onboarding the sales force. By the end of this month, the first group of reps will be calling on physicians, with the full sales force rolling into place through January. These will be the only reps who have promoted erosive GERD in close to a decade, which gives them the opportunity to fully own the category as there is no company or brand competing for prescriptions. But our promotion goes beyond the 320 reps. As Terrie shared earlier, our promotional campaign and messages are focused on the power to heal, and we are launching that campaign immediately. Our 52,000 targets will be hearing the VOQUEZNA story through expansive virtual and in-person education. Some of this will be delivered via our Speaker Bureau, where we plan to have over 200 speakers execute high-quality educational programs in 2024. In addition, we are leveraging robust technology and data so that 90% of our targets will receive digital messaging more than 50 times per month. So as you can imagine, where physicians search on the web and interact in digital, social spaces, VOQUEZNA will be promoted. Lastly, on physician promotion, our presence at GI and PCP medical meetings becomes even stronger in 2024. For example, at the end of October, we had a powerful presence at ACG, which is the American College of Gastroenterology. The most common feedback was, I have patients in mind, when can I get it? Well, now we can tell them it will be available to patients starting in December. Turning to DTC. Our efforts will ramp up once product is available in pharmacy in December. Some of you have heard me speak of our consumer approach. Erosive GERD is a patient-driven, high switch market with a high level of dissatisfaction. As I referenced on the last slide, there is no branded competition. By using technology to our advantage, we can reach erosive GERD patients on their laptop, phones, social sites and where they search for GERD-related information, all with compelling data and a message to contact their physician regarding VOQUEZNA. And to ensure the actions are immediate, we have partnered with a leading telehealth provider. For any patient who does not have a physician or is in need of an immediate consult, they can click through on voquezna.com to a third-party site to make an appointment with an independent physician who can evaluate their condition and make appropriate prescribing decisions. I previously referenced that this is a patient-driven market. As we look at the market opportunity, we see DTC as a key component, and an overwhelming percentage of patients tell us they intend to ask their physician for a prescription. Now up to this point, I've been focused on promotion. As we think about the payer, we feel good about our access outlook. We've shared in the past that we have an experienced account team working with the payers. Given our success with HP packs of 65% commercial coverage, we intend to carry the same payer strategy going forward. Starting with price, VOQUEZNA WACC is $650 for a 30-count bottle for both the 10- and 20-milligram strengths. Given demonstrated superiority versus standard of care, coupled with a discount replacement, our base assumption is 1 step through a PPI. While our label supports first-line use, we know the segment of most interest to payers is in PPI-experienced patients. Now if you recall, this is a high switch market, with 35% of PPI patients moving to a different PPI after 90 days of therapy. So the step should not be a barrier. And as we look further out, it's our expectation that the VOQUEZNA bottle coverage will be regardless of indication, which means our erosive GERD effort will set the market access foundation for the potential non-erosive GERD approval. From the patient's perspective, VOQUEZNA will be available at all retail pharmacies. We also know that VOQUEZNA prescriptions will be captured by IQVIA and Symphony as part of their retail data collection. When the commercial patient with coverage gets to the retail counter, they will have the option to use a $25 co-pay assistance. Now to set expectations, coverage for erosive GERD or the bottle will build during Q1 and strengthen even more in Q2. To aid those commercial patients who do not yet have coverage, we are partnering with LinkRx. If the physician sends the prescription of LinkRx and the patient does not have coverage yet, the patient will be offered a VOQUEZNA price via LinkRx that is in the range of most common commercial plan co-pays. It is our expectation that these noncovered scripts will not be captured by IQVIA or Symphony. Most importantly, the goal of our patient support is to limit the patient's financial burden and for the physician's objective of the patient prescribed VOQUEZNA to get VOQUEZNA. And we believe we have put together a good support plan to deliver on that goal. Lastly, I started by saying that Phathom is excited to bring VOQUEZNA to patients and physicians. And I hope I've conveyed that passion we have to help the millions of patients suffering from erosive GERD and H. pylori. We're a commercial team with years of industry experience across sales, marketing and market access across GI and primary care and from markets where payer access has been critical. Our commercial leadership alone has done over 40 launches, and we have learned from each one. We believe we have a great solution for patients, options for access and are set up with data and analytics to ensure we can track our performance. We are fully prepared and ready to start. Terrie?

Thank you, Martin. With a robust commercial strategy and differentiated label, we are confident in the blockbuster opportunity that lies ahead. With products soon to be in the market, we know all eyes will be focused on the progress of our launch. So I wanted to spend some time sharing what can be expected in the near term. As product becomes available in December, our focus will be onboarding the sales reps and launching promotional campaigns. In 2023, we expect very minimal revenues. This is also when we expect our gross to net to be highest for the brand, with rates upwards of 75%, while commercial coverage is limited. In the first quarter of 2024, we expect the full sales force to be in the field. And by this point, physicians and patients will have heard or seen VOQUEZNA promotions multiple times. GTN expectations will remain similar in the first quarter of 2024, and our path towards gaining commercial access will be aided by the start of formulary reviews for erosive GERD. The second quarter is when we believe commercial access will begin to materialize, leading way to an uptick in prescription volume and therefore, revenues. As the Erosive GERD launch continues to build in the second half of 2024, we'll also be eagerly awaiting the FDA's action on our non-erosive GERD daily dosing NDA. If approved, this indication will significantly broaden the addressable population, further accelerating VOQUEZNA's uptake. And finally, another strategic step for 2024 will be the initiation of our Phase III nonerosive GERD as-needed trial. Next year is sure to be an [ immersive ] year for Phathom. In closing, I'll echo Martin by saying we're ready and we're excited. With 3 approved products and a pipeline focused on expanding VOQUEZNA's availability to patients, there is much to look forward to at Phathom. Today marks the shift towards executing on our commercial launch strategy, and I'm confident in our team's ability to deliver on this next chapter. The launch of VOQUEZNA reinforces our commitment to changing the GI treatment landscape, and we look forward to having VOQUEZNA available for the millions of patients in need of a better option. Thank you for joining us today. We appreciate your continued interest and support. I will now turn the call over to the moderator to facilitate question-and-answer session. Moderator?

Thank you. [Operator Instructions] The first question comes from the line of Yatin Suneja from Guggenheim.

Guys, congratulations on the early approval and very, very good label. So a couple of questions for me. First, and that's the #1 question regionally also get, is can you actually compare and contrast the market dynamics in Japan versus the U.S.? Obviously, the product was very successful or is successful in Japan. Just trying to understand why -- [indiscernible] the U.S. market is similar or different, if you can talk about. The second one is, Terrie, you did talk about the launch ramp a little bit, but just trying to get a sense of what would be -- like how will we figure out that there is an inflection in the ramp as we go into 2024? Is it more to do with the payer coverage coming upfront and the gross to net going down? Just curious on that dynamic as well.

Yes. So this is Martin. I'll take the first question is about comparison to Japan. And if I surely -- if Terrie thinks of anything else, please chime in. But I think what we find similar that we've heard from the team at Takeda, is that there was a high unmet need in the marketplace with a lot of switching, just like we see in the U.S. And generics -- it was a genericized market. At the time they launched, [ Nexium ] was the only branded product. And then I should note is that they are now the market leader in Japan, both from a revenue as well as a volume perspective. I think they have a 34%, 35% market share in Japan. So their growth and their performance has been tremendous. Much like the U.S., a branded premium price, again, genericized market, and they entered with a branded price premium. And then much as you heard Terrie say the power to heal, they also took a very strength, strong positioning in the marketplace, and we're taking that same approach. For me, that comes to mind, the 2 major differences are: one, obviously, the payer landscape. It's a very much a government-driven reimbursement scenario where, as we all know, that here in the U.S., there's multiple payers. And then we have superiority in our label. They had no superiority in the label, which we think gives us an additional advantage. So that's my commentary on Japan. Terrie, do you have anything else to add on that? Okay. And then, Yatin, I believe your second question was about the ramp. So...

Yes, about the ramp. And the reimbursement and negating factor to getting the gross to net -- and actually maybe talked about the gross to net once you have reimbursement in place.

Yes. I'll just -- I'll respond, and then I'll hand it over to Molly regarding specifically the GTN. But clearly, what are going to be the drivers? When we access, meaning people access, getting in and seeing the physicians and generating the prescriptions. And we believe physicians are ready and eager to hear about VOQUEZNA and prescribe VOQUEZNA. And then I think, as you mentioned, access is going to be key. And as I said in my earlier comments, it will roll in. We'll start seeing some access in Q1, but we'll really see that inflection point going into Q2 and Q3. Molly, do you want to comment on the GTN?

Sure. Yes. As Terrie mentioned in her prepared remarks, we expect the first couple of quarters to be hovering around that 75% range as we get access under our belts, as Martin described. And then from a steady state perspective, I think it's safe to assume in the range of 50% to 65% as we ramp up access as well as in addition to the non-erosive indication next year.

One moment for your next question. The next question comes from the line of Paul Choi of Goldman Sachs.

My congratulations on the approvals as well. A couple from us. Martin, can you maybe just talk about what your initial thoughts are on early sampling and just sort of availability as you build brand awareness over the next couple of quarters and how you see that transitioning from patient copayment assistance and coupons and things like that and the pace of commercial coverage? That's question one. And then question 2 is you talked a lot about your Speaker Program over the course of '24, which makes a lot of sense. I'm just curious if you're going to sponsor any investigative studies just sort of to gather real-world experience to further promote clinical experience and familiarity.

All right. Thanks, Paul. And thanks for the questions. I'll take the first 2, and then start on the third question and then hand it off to Azmi to finish up. So in terms of early sampling, we will be providing samples in the office of the bottle or the individual tablets. We will not be providing samples for H. pylori packs. But the samples will be very much limited and targeted, meaning we're not going to be flooding the market with samples to replace prescriptions. It will be very much targeted in terms of, one, who are we calling on and then the volume of patients that they actually see. So that's how we'll handle the sampling. And then I think what you were getting to in the next part of your question was overall prescriptions and assistance. So as I mentioned in my comments that we are partnering with LinkRx. If a physician sends a prescription there and our sales force will be making them very much aware of LinkRx, they'll provide for anyone who does not -- a commercial patient who does not yet have coverage, they will offer VOQUEZNA at a price which is much lower than the WACC. And then at that point, what will happen is once that patient does move to commercial coverage and it's picked up, they will then be funneled to a retail channel. So I think what you can anticipate is, as you'd tie in the GTN, as we move on through the launch through 2024, we'll still always have LinkRx as an option, we won't be relying on it as we might be in Q1. And then I think, Paul, your last question was about the speaker programs. So the speaker programs, as you mentioned, will roll out in 2024. And we'll actually probably be starting -- we will be starting some at the end of this calendar year to introduce the brand to subscribers. And you followed that up regarding investigator studies, and I'll pass that off to Azmi.

Yes, Paul, this is Azmi, COO. So yes, we will be sponsoring investigative studies. We already have a few proposals coming in. So we will work internally and with the investigators at these proposals to sponsor a number of them starting next year and beyond that. In addition, we have CME program that we sponsored -- or CME program. So even last year and this year have been very highly attended, real-time and also post conferences. So we're very pleased to the attention we're getting and the awareness and the interest in scientifically as well as educational.

Okay. Great. If I could just slip in 1 quick one. The 650 WACC pricing for the bottles, is that specific for the EE GERD indication? Or does that pricing also apply now to H. pylori?

The H. pylori pack price remains what it was. So there's no change there. The 650 is related to the bottle. Now what I should note, and you probably saw this on Terrie's slide, is the bottle has an indication for H. pylori as well. So erosive GERD as well as H. pylori. So a physician could choose if they wanted to prescribe the bottle for that. But the 650 is specific to the bottle and for both strengths, both the 10 and the 20.

One moment for your next question. Your next question comes from the line of Joseph Stringer of Needham & Company.

Two from us. How should we think about the levels or buckets of addressable erosive GERD patients? What types of patients do you consider the low-hanging fruit? Is it sort of the more severe Class C and D patients, for example? And how do you see the case of VOQUEZNA penetrating those various segments of patients? Second question is, based on your market research and discussion with [ TOLs ] and physicians, just curious, what's the biggest pushback from docs from a physician perspective that are potentially hesitant to prescribe VOQUEZNA for erosive GERD? For example, is it mostly price reimbursement or treatment guideline base? And what's the company's strategy to get some of those physicians on board with prescribing the drug?

Sure. Joey. So first of all, the addressable. So I think we could look at it in 2 ways. One would be -- and I think you referenced this as the severity. I've done a number of launches. And as you heard me say that the commercial team has -- and none of us have ever launched a product where out of the gate, you don't get the most of your patients. I mean, that's just natural for any physician. But what we don't see happening is that the market will be divided up by severity. What we understand from speaking to physicians and the academic community is that it's really treated empirically. They're not making decisions based on greater severity. And then also given the fact that we have -- and maybe most importantly, healing in the maintenance -- superiority in the healing of maintenance really does set us apart. So we don't think severity will be it. I think the addressable market will really be the PPI-experienced patients. As I -- as was commented by Terrie, there's a claims analysis that was done that 35% of patients who start on a PPI after 90 days switch to another PPI. And we also see that in other data sources as well. So that's why we believe that where physicians are thinking, and this ties into your next piece, is the same thing that payers are thinking. That will be a PPI-experienced patient. And so that's what we hear back from physicians. We don't get, I think you kind of said pushback or anything regarding the profile, the patient type. The most common question is, well, is it going to be reimbursed? Can I get it? And so that is something that we are obviously working on, and that is, as I mentioned, one, positioning ourselves with the payer, although we have a broad label, is 1 step through a PPI. And then in the meantime, providing support to get those patients on drug.

One moment for the next question. The next question comes from the line of Umer Raffat of Evercore.

Congratulations. First, maybe just a follow-up on this exact criteria for the types of patients that could jump on therapy. I know you mentioned PPI-experienced. But would the payers not push you towards truly PPI refractory? And PPI refractory as defined by the absolute highest dose, multiple times a day. That's one. And number two, the bucket that I did define, PPI refractory, having taken the absolute highest dose multiple times a day, how many patients is that truly in the erosive esophagitis setting? And then finally, as you think about your TRx ramp in the absence of having a bridge program where the drug is free for the patient, to what extent do you think that affects the TRx curve or not early into launch?

Umer, I'll try and address both of these. In terms of the criteria, clearly, what we hear is -- I'm repeating myself, I know -- is 1 step through a PPI, I think the assumption there is that the patient will have failed that PPI. It's a very symptom-driven market. And so they will have moved on for that reason. What we're not hearing anything at all regarding double dosing, increased dosing of PPIs beforehand, adding on to the PPI beforehand. I think part of your question was how many patients are actually doing that. I can tell you that I know that off -- information offhand. If I go back and I find it, we'll follow up. But really, where we've narrowed in consultation with payers,and in our discussions to date is the patients who've been on -- experienced fail the PPI. The next thing is -- the next question I think you had was about the TRx ramp. So what we've built into our forecasting models is really the full revenue coverage into our ramp. And we've not built in so much so the patients who might be funneling through getting products through Link who are not yet covered. We'll certainly be very glad to see those. But in terms of our revenue curves, we've not built those in. I hope I've answered the questions.

One moment for your last question. The last question comes from the line of Chase Knickerbocker of Craig-Hallum.

Congrats. I just want to add mine to the chorus there. Maybe to start, I want to dig in a little bit on the strategy when it comes to contracting. How do you weigh the importance of getting on a preferred brand tier or a fixed dollar amount co-pay versus maximizing gross to net margin? I mean, obviously, this is going to be more important where you can't buy on those co-pays and your Medicare Advantage formularies and Medicare formularies.

Yes, Chase, I'm not sure I fully understand the question. So let me go -- let me just repeat back. I think I heard you mentioned preferred brand and a $50 co-pay. Is that what you said?

Just fixed dollar amount co-pay, generally. How important it is to get there.

Yes. So let me provide some clarity. So what we're anticipating is in most instances, we'll probably be a nonpreferred brand, which makes sense when we're saying that we would be following a PPI. So it would be a nonpreferred position, and then we would be negotiating or having the contract with the payer for a rebate amount off of that 650 that would be attractive to them, allows them to manage the category but also provides value to them as well and make sure patient gets the drug. And then we believe what we've built in is the $25 copay and working in all of our pricing work both with physicians and patients and even payers. That's where we landed on the pay as low as $25 co-pay assistance. I'm not sure, did I answer your question?

Yes. And just maybe just a finer point on it for -- where you can't necessarily buy down that co-pay, is it going to be a coinsurance, is that the expectation?

Yes. I can't comment on each patient's individual plans and how that would be managed at a patient level. Everyone has different plans and plans within plans.

Got it. And then maybe just on awareness. I mean, if we were to take kind of a survey of GIs nationally, maybe we can just focus on the GI population right now. What would you say, I guess, the percent awareness of VOQUEZNA coming to market is? And then kind of within there, what's the familiarity of the clinical profile?

A really good question. So I think it might depend upon how you're asking the question. So overall, I would say, with gastroenterologists, we would expect it to be greater than 30%. But is it -- we've just introduced the VOQUEZNA brand name. So it could be teed up as VOQUEZNA, vonoprazan, a PCAB, a new acid suppressant coming. And I do know that after leaving ACG, as I commented earlier, there's a lot of enthusiastic questions about product coming to market.

Great. And maybe just last for me. If we peel back Japan just a little bit more. Do you have an idea of what the general split of usage is between indications in Japan, and we can just focus on the ones that you guys plan to be indicated for in the U.S.? And I guess, how do you expect usage in these indications to differ from what you see U.S. versus Japan? Or what we're going to see?

So the market -- well, let me just -- for everyone on the line, let me just make sure I caveat that. In Japan, it's called TAKECAB, and it's a Takeda product, it's not ours, so we don't have any internal data. And IQVIA does not provide data in Japan by indication. But obviously, we speak to the Takeda team. And so our sense is, first of all, they have multiple indications such as with aspirin or to prevent ulcers due to aspirin, duodenal ulcers, gastric ulcers. They have -- combination with NSAIDs, they have a lot of different indications. But what's really driving their market is GERD. So I would say more -- probably about 60% to 70% of their business is made up of GERD. Then you add in H. pylori, and then the other indications.

Any sense in there on erosive or non-erosive?

Yes. So they do not have a non-erosive indication. My sense is and my impression is that it might be split. But again, there's no data to support that. I think treatment is very different in Japan in terms of how they approach it. And I think an endoscopy is done much later in the process than is done here in the U.S.

[Operator Instructions] The next question comes from the line of Sean Kim of JonesTrading.

Congratulations for the approval. So I guess just 1 quick follow-up on the gross to net. So for the steady-state gross that you mentioned earlier in the call, are you kind of assuming incorporation of the non-erosive GERD as well? And also, should I have some similar gross-to-net dynamics for H. pylori?

Yes. So yes. Absolutely. Sean, I'll take that. So yes, what I referenced in the Q&A section was a 50% to 65% gross net on a steady state. Terrie had referenced the 75% at the outset of the launch. But now just addressing the 50%, 65%, that is all inclusive of all indications, including H. pylori and non-erosive. So as you look at your modeling, I think it's safe to assume with the advent of [ NERD ] in the middle of next year that we could be in that range of 50% to 65% throughout 2020 -- the latter part of 2024 and into 2025.

Okay. Great. Again, I've just got a couple of more questions. So about the direct-to-consumer marketing, do you have a sense of the potential budget that you might have for those marketing efforts? And also more broadly, what should we expect in terms of the overall expenses in 2024? And another question that I had was you mentioned about a lot of churning in patients going through different prescriptions, PPIs. Can you give us a sense of how much churning that you're expecting from vonoprazan? I think you mentioned about 35% for PPI patients switching to another PPI. Just curious if you have any sense of potential churning with vonoprazan.

Sure. I'll start with -- yes, sorry, I'll start -- barring with a continuation of the expense side of things, then turn over for the churn. As it relates to 2024 expense, what we've indicated is that, and as Martin has mentioned, the 320 sales force approximates about an all-in cost of 350 per rep, and that gives you an idea of the incremental spend for 2024 in addition to what we already have for 2023. On the DTC side, we've signaled that we wouldn't expect to spend a significant amount in DTC until we have non-erosive under our belt. So we're expecting that to be later in 2024. So from a modeling perspective, we would assume that you could build in some modest ramp for DTC in 2024 and then to a greater degree in 2025. And Martin, maybe I'll turn it over to you to answer the churning question.

So Sean, your question regarding direct-to-consumer, I'll touch base on that as well before I go to the churning. So how are we going to spend our money? So as I mentioned earlier, there's no competition in this marketplace. And using artificial intelligence in all of the data that's out there, we can really hyper target those patients or people that we believe have erosive GERD. And it's a matter of using billions of data points to identify them. So we can be really efficient in our spend through digital channels and social channels. And then to your second part in terms of churning. So I think maybe a better way to address it is 1 -- the short answer is, I can't say for certain what that will be. But what we do know is we have superiority versus PPIs. It will be obviously through reimbursement channels, receiving patients who experience PPIs. And what we know with given the superiority, we've modeled in about 160 days on an annual basis of therapy. Now keep in mind, this is a chronic medication. And I believe 160 days is a pretty good number of days for chronic therapy. So that's just the way we're looking at it.

As there are no questions, thank you for your participation in today's conference. This does conclude the program. You may now disconnect.