Phathom Pharmaceuticals Inc

NASDAQ:PHAT

Earnings Call Analysis

VOQUEZNA shows strong growth with 283% revenue increase

Phathom Pharmaceuticals has reported robust progress with its VOQUEZNA brand in Q2 2024. Net revenues surged by 283% to $7.3 million, largely due to increased prescriptions following the non-erosive GERD label expansion. Gross profit stood at $5.9 million with an 81% margin. Despite a net loss of $73.3 million for the quarter, the company maintains a strong cash position of $276 million. SG&A expenses rose significantly to $71.1 million, reflecting increased marketing efforts. The company remains confident, projecting continued growth and an expanded market reach for VOQUEZNA in the upcoming quarters.

Phathom Pharmaceuticals: A Promising Second Quarter

In the second quarter of 2024, Phathom Pharmaceuticals saw remarkable growth, achieving net revenues of $7.3 million, which translates to a staggering 283% increase from the previous quarter. This surge is largely attributed to the rising number of prescriptions for their product, VOQUEZNA, after its recent FDA approval for treating Non-Erosive GERD【4:0†source】【4:2†source】.

Strong Market Demand Fuels Growth

As of late July 2024, VOQUEZNA has established a strong foothold in the market, with a total of 122,000 prescriptions written and 60,000 filled, representing an increase of over 180% and 240% respectively in just three months. Notably, approximately 77% of U.S. commercial lives now have access to VOQUEZNA, thanks to critical formulary placements including major payers like CVS Caremark and UnitedHealthcare【4:4†source】【4:19†source】.

Significant Profit Margins and Expense Management

The company reported a gross profit of $5.9 million, resulting in a robust gross margin of 81%. While the R&D expenses saw a significant drop of 45% year-over-year due to completed clinical trials, SG&A expenses rose to $71.1 million, reflecting the heavy investment in marketing and building the commercial infrastructure for VOQUEZNA【4:0†source】【4:2†source】.

Guided Outlook for the Second Half of 2024

Although Phathom refrained from providing specific revenue guidance, management expressed confidence in achieving growth through an aggressive marketing strategy, including a direct-to-consumer campaign and leveraging their sales force to increase adoption among primary care physicians. They expect a significant boost due to the recent product launches and broad commercial access【4:1†source】【4:4†source】【4:3†source】.

Expanding Clinical Opportunities for VOQUEZNA

The company is also exploring further clinical opportunities for VOQUEZNA, including trials for as-needed dosing and treatment for Eosinophilic Esophagitis (EoE). This is indicative of their commitment to expanding the total addressable market and differentiating their product from existing treatments【4:4†source】【4:6†source】.

Financial Resilience Amid High R&D Costs

Despite a non-GAAP adjusted net loss of $73.3 million for Q2, Phathom's cash position remains strong at $276 million, bolstered by a recent $25 million drawdown from their debt facility. They indicate a cash runway extending through the end of 2026, which supports their ongoing launch strategy【4:4†source】【4:3†source】.

Executive Confidence and Strategic Vision

Phathom's leadership emphasized their strong commercial strategy, stating that the infrastructure for launching VOQUEZNA is effectively in place and that they have laid the groundwork for sustained success. They remain optimistic about achieving VOQUEZNA's projected peak sales potential of over $3 billion【4:1†source】【4:4†source】.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, and welcome to Phathom Pharmaceuticals second quarter 2024 earnings results call. [Operator Instructions] Please be advised that today's conference is being recorded.

With that, I would like to turn the conference over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.

[Eric Sciorilli, executive]

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's second quarter 2024 results.

This morning's presentation will include remarks from Terrie Curran, our President and CEO; Martin Gilligan, our Chief Commercial Officer; and Molly Henderson, our Chief Financial Officer. Azmi Nabulsi, our Chief Operating 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 Presentations 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 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 the trading prices for Phathom'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 Factors 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 Phathom as of this date and Phathom disclaims any obligation to update these statements.

With that, I will now turn the call over to Terrie Curran, Phathom's President and CEO, to kick us off. Terrie?

[Terrie Curran, executive]

Thank you, Eric, and thank you to all those joining us on today's call. Phathom was founded on our vision and a set of goals that from the start, many considered lofty.

But over the last 5 years, we have checked one box after another. We've demonstrated differentiation versus a 30-year-old standard of care for an approval for broad labels, launched multiple products spanning 3 indications and secured favorable commercial coverage in a genericized market.

To date, we've accomplished exactly what we set out to do. So whether you're new to the story or have followed us since the start, I encourage you to reflect on our track record as it sets the stage for how we intend to continue delivering on our goals for VOQUEZNA.

Today, I'm excited to report specifically on the great progress we made during the second quarter of 2024. The team has been focused on executing our commercial launch strategies with physicians, patients and payers. And only our second full quarter following launch, we believe the results of these efforts have been impressive and demonstrates strong momentum as we enter the back half of 2024.

Before diving into our latest launch metrics, I'd like to provide an update on 2 major developments. VOQUEZNA's approval for Non-Erosive GERD and our expanded commercial coverage.

As we announced on July 18, the FDA approved VOQUEZNA for the relief of heartburn associated with Non-Erosive GERD in adults. We're extremely pleased with the strength of the label, which highlighted VOQUEZNA's rapid onset of action and durability of effect. This outcome was a key milestone in our commercialization journey, expanding the total addressable market for VOQUEZNA.

GERD conditions impact about 65 million U.S. adults annually with about 22 million being diagnosed and treated with a prescription medication. Non-Erosive GERD alone is responsible for over 2/3 of this population. This impressively large market has demonstrated the need for an alternative treatment option given the higher degree of patient dissatisfaction and inadequate symptom relief.

Building upon our previous approval for Erosive GERD, this third and largest indication allows VOQUEZNA to be considered as a treatment option for all patients suffering from GERD or H. pylori. In anticipation of the PDUFA action date, our existing sales force was pre-trained and prepared to begin promotion in the field immediately upon approval.

It is important to note that the Non-Erosive GERD patient journey and target prescriber base mirrors that of Erosive GERD, which allows us to leverage our existing promotional efforts. In fact, over the past 2 weeks, we've already seen a notable increase in demand for 10-milligram tablet, which is the approved dose for Non-Erosive GERD.

Moreover, we believe the commercial access we have secured thus far also applies to Non-Erosive GERD patients who are prescribed VOQUEZNA bottles. Given the overlapping commercial dynamics across GERD conditions, our strategy has always been to hit the ground running.

With this approval, VOQUEZNA has now cleared another hurdle and is poised to recognize the full GERD market opportunity as we work towards our goal of displacing PPIs.

Our recent expansion of commercial coverage will be a key driver in achieving that goal. After announcing our placement on Cigna formularies midway through Q2, we recently announced the addition of VOQUEZNA to CVS Caremark's national formularies.

As the country's largest pharmacy benefit manager responsible for over 26 million commercial lives, this was a major development in ensuring widespread coverage for VOQUEZNA. And later in this call, Martin will provide an update on several other key payers for which we recently secured formulary placement.

Our efforts have resulted in an estimated 116 million commercially insured lives now having access to VOQUEZNA. Importantly, across the majority of this coverage, we were successful in securing position on formularies in line with our single-step strategy through a generic PPI prescription.

We're extremely pleased with this broad commercial coverage we've achieved for VOQUEZNA, while still in the early stages of launch. One of the most impressive examples of our launch success has been the evolution of VOQUEZNA volume. I'm pleased to share that launch to date, total demand has now surpassed 122,000 scripts written, of which over 60,000 have been filled by patients. We're remaining energized by these metrics and believe their growth trajectories are a testament to increasing interest from prescribers and expanded availability for patients.

Over the last few months, we've continued to see extraordinary testimonials pour in from these physicians and patients alike. Almost daily received positive feedback telling us how VOQUEZNA is relieving symptoms quickly and improving lives. Pictures of healed erosion, stories of sleeping through the night for the first time in years and overall quality of life improvements are just some of the anecdotes that have made us proud to be able to offer this first-in-class treatment option to patients suffering from acid-related conditions.

And with non-erosive now approved, we're thrilled by the opportunity to provide these benefits to millions more patients in need. In parallel with launch, we continue to explore development opportunities for VOQUEZNA. We're planning to initiate 2 clinical programs: a Phase III trial for as-needed dosing in Non-Erosive GERD and a Phase II trial in Eosinophilic Esophagitis or EoE.

Both programs aim to leverage the rapid, potent and durable asset suppression profile of VOQUEZNA. If these programs lead to FDA approvals, we believe these indications will continue to expand that total addressable market and further differentiate VOQUEZNA from PPIs, which are not approved to either indication.

On the financial side, Molly will further detail our second quarter 2024 results later in the call, for which we reported revenues of $7.3 million and ended with $276 million in cash. We remain confident that our strong balance sheet will enable us to continue delivering on our launch and development strategies.

After 2 full quarters on the market, VOQUEZNA's commercialization journey has progressed extremely well. Each quarter, we build upon our previous successes, bringing us closer to achieving the blockbuster opportunity we believe is possible for VOQUEZNA.

Today's results are evidence of our preparedness and commitment to delivering critical milestones in a short period of time. We've unlocked the largest segment of the GERD market and enhanced access for millions of patients.

I'm looking forward to continuing this journey and seeing VOQUEZNA's position grow in the marketplace. I'll now turn the call over to Martin to dive deeper into recent commercial updates. Martin?

[Martin Gilligan, executive]

Thanks, Terrie, and hello, everyone. I'm excited to share further details on the great progress we've made over the last 3 months. The VOQUEZNA launch is advancing as anticipated and we're happy with our latest performance metrics, which I will touch on shortly.

In the scope of launch timing, we still consider ourselves in the early stages of the journey and we've already made significant strides in building brand recognition and commercial coverage. I'll share updates on several of our commercial tactics and allow me to begin with perhaps the clearest indicators of progress, our launch metrics.

Today, we're reporting our latest available written and filled prescription data as of July 26, which is exactly 3 months since our previously reported data. Over that period, the number of VOQUEZNA scripts written has grown by more than 180% to over 122,000 prescriptions, while the number of scripts filled has grown by more than 240% to over 60,000 prescriptions.

In tandem, the number of prescribers who have written a filled script has now increased to roughly 8,200 as of July 19. We are pleased to see sustained material growth across all 3 of these metrics.

On a quarterly basis, we observed sequential growth of more than 265% with the number of filled scripts increasing from 9,500 in Q1 to 35,000 in Q2. As we've clarified in previous quarters, these figures include prescriptions flowing through retail pharmacies, which are captured by IQVIA as well as those flowing through BlinkRx, one of our patient assistant programs.

Of the scripts filled in Q2, approximately 65% were filled through retail pharmacies and captured by IQVIA. Additionally, we are also proud to share the growing number of physicians writing VOQUEZNA quarterly. At the end of Q2, about 7,250 prescribers had written a filled VOQUEZNA prescription, which reflects the growth of approximately 150% compared to Q1's cumulative writer count. We've previously called out the specialty mix leaning towards GIs, which continues to hold true.

More recently, we have started to observe an increase in nurse practitioners and physician assistants who are important writers in the long-term management of GERD patients. And with the non-erosive label expansion now approved, we believe we will see the specialty mix continue to evolve as primary care physicians consider VOQUEZNA for the millions of patients with acid-related heartburn.

Another important development has been the improvement in the conversion rate between total demand and filled VOQUEZNA prescriptions. Since our last earnings report, our launch to date fill rate has increased from 41% to nearly 50%, reflecting the impact of pull-through from commercial coverage.

We see this as an impressive accomplishment compared to what might typically be expected at this stage of launch. With the recent access wins, we believe our fill rate will continue to improve, allowing us to realize more of the revenue potential associated with our total demand.

As you heard Terrie mention earlier, we have made some terrific advances in securing widespread commercial coverage. This part of our launch strategy, in particular, was often questioned given the complexity of the payer systems and VOQUEZNA's entrants into a genericized market.

Skepticism frequently surfaced about whether VOQUEZNA would require evidence of endoscopy to obtain reimbursement or if it would be niche to only severe patients. But today, I'm proud to share that those questions are behind us and we've delivered exactly as we intended. After being placed on formularies at Express Scripts and Cigna earlier this year, VOQUEZNA recently earned formulary placement with several other key payers, including CVS Caremark, UnitedHealthcare, [ Optum ], Aetna and Prime Therapeutics.

Since the end of Q2, we've added about 38 million commercial lives to VOQUEZNA's covered population, bringing the total to an estimated 116 million people or 77% of all U.S. commercial lives.

Not surprisingly, all plans govern utilization management differently. But across the vast majority of covered lives, we believe we have been successful in negotiating access subject to a single step edit to a generic PPI prescription. As a result, VOQUEZNA is now available and affordable to millions of commercially insured patients. Additionally, our access wins were extremely timely as we recently kicked off VOQUEZNA's launch of Non-Erosive GERD.

Since coverage is contracted for the bowel presentation, we believe commercially covered patients with GERD regardless of type or severity are now able to easily access VOQUEZNA. With coverage in place at all 3 major PBMs and several other large payers, our aim now is to pull through demand via the plans for which VOQUEZNA is on formulary.

Now this begins with promotion. Immediately following the non-erosive approval, our sales force began sharing the news with physicians. One of our main goals is to inform prescribers that VOQUEZNA can now be used for all GERD sufferers with broad commercial coverage in place, providing access to patients.

We're simultaneously emphasizing VOQUEZNA's rapid, potent and durable acid suppression profile, which is reinforced by our strong product label. The reps are also communicating promotional messages focused on the key elements of differentiation such as VOQUEZNA's sustained effect with all day and all night heartburn relief.

Meanwhile, with consumers, VOQUEZNA can kick some acid DTC campaign continues to have an impact as it airs across digital channels as well as streaming and broadcast television. Without a doubt, word is spreading about the positive real-world experiences patients are having with VOQUEZNA.

With access in place and an expanded label applicable to the entire GERD population, our mission is to ensure as many physicians and patients as possible know about VOQUEZNA and its power to help treat GERD. Over the last 3 months, we've made significant progress across numerous aspects of launch. We have elevated our promotional efforts, heightened VOQUEZNA brand awareness, increased written and field scripts, expanded commercial access and unlocked the full GERD market.

I want to emphasize that these were foundational elements of our launch plan and with each in place, we're well positioned to take advantage of the opportunity that lies ahead. Further, the feedback from these early months of the erosive launch and early weeks of the non-erosive launch has been very strong.

In the coming quarters, we will continue to execute with the aim of delivering on the high bar we have set for the VOQUEZNA brand. We are excited about our current momentum and confident in our ability to realize this blockbuster opportunity.

I'll now pass it off to Molly to walk through our financial results. Molly?

[Molly Henderson, executive]

Thank you, Martin, and hello to everyone on the call. I'm happy to share our second quarter 2024 financial results with you today. We have made great strides in achieving regulatory commercial milestones, which have translated into a strong quarter for Phathom.

Before going into the numbers, I'd like to note 2 items. First, during this call and similar to previous calls, we will not be providing financial guidance regarding projected revenues or earnings as we are still in the early quarters of launch.

Additionally, I will be commenting on both GAAP and non-GAAP financial measures. Supporting schedules with detailed reconciliations between non-GAAP measures and their most directly comparable GAAP measures will be discussed later in my section and can be found in this morning's press release.

Now turning to the numbers. For the second quarter 2024, we reported net revenues of $7.3 million, which represents a 283% sequential quarterly increase, driven primarily by the increase in field VOQUEZNA prescriptions.

Changes in inventory stocking had a lesser impact this quarter. Following the non-erosive label expansion, we believe there will still be another couple of quarters before we have a better sense of steady-state stocking behaviors and their impact.

As for gross to net, we observed a discount rate in line with our expectations we set forth at the outset of launch. There were no onetime events impacting GTN this quarter as they were in the first quarter.

As a result of recently expanded access with major payers and the non-erosive launch, we believe our GTN discount will continue to evolve over the course of the third quarter and through the end of calendar year 2024.

For the quarter ended June 30, 2024, we reported gross profit of $5.9 million, which equates to a gross margin of 81%, a sequential quarterly increase of about 350 basis points.

Moving down the P&L to our operating expenses. We reported non-GAAP R&D spend of $6 million for the second quarter ended 2024, which represents a 45% reduction in spend compared to the second quarter of 2023. This also reflects a 26% decrease sequentially compared to last quarter.

Both decreases were primarily related to lower clinical trial costs associated with the wind down of activities related to our Phase III non-erosive daily dosing trial, which we read out last year.

As for SG&A, we reported non-GAAP expenses of $71.1 million for the second quarter of 2024. This represents an increase of about $57.6 million relative to the same period of 2023 and a sequential increase of approximately $13.5 million compared to Q1.

Both increases were driven by the continued build-out of our commercial infrastructure and marketing activities in support of VOQUEZNA launch. In particular, this period's SG&A expenses include our first full quarter of advertising costs, which approximated $16.7 million and were primarily related to our ongoing VOQUEZNA can kick some acid DTC media campaign.

We do not anticipate a significant increase in spend relative to our DTC campaign for the remainder of 2024. Similar to previous quarters, the most significant reconciling item between GAAP and non-GAAP operating expenses for these periods was noncash stock-based compensation.

Other non-GAAP reconciling items include noncash interest on our revenue interest financing liability and noncash interest expense related to amortization of debt discount.

Turning to EPS. We reported a non-GAAP adjusted net loss of $73.3 million for the second quarter of 2024 or $1.25 loss per share compared sequentially to a loss of $64.8 million or $1.11 loss per share for the first quarter of 2024.

As of June 30, 2024, cash and cash equivalents were $276 million. Of note, this balance includes the drawdown of $25 million from our debt facility in mid-June. Up to an additional $125 million remains available, of which $25 million is available this year and $100 million is available next year, subject to achievement of certain revenue milestones.

We believe we are in a strong financial position to continue supporting of VOQUEZNA launch, which now spans 3 indications. We remain invested in the long-term growth potential of the brand and reaffirm our expectation that we have cash runway through the end of 2026, based on our current operating plan, expected revenues and funds available under our term loan.

After 2 full quarters of launch, we are pleased with our financial results. Heading into the back half of 2024, we remain focused on ensuring our teams have the resources needed to maximize the VOQUEZNA opportunity. We believe our key payer wins will translate to a proportional increase in scripts filled through the retail channel, where revenue contributions are most significant, thereby driving top line growth into year-end.

With that, I will now turn the call back over to Terrie for closing comments. Terrie?

[Terrie Curran, executive]

Thank you, Molly, and thank you again to everyone joining us on today's call. In wrapping up today's call, I want to reiterate 3 numbers: 122,000 prescriptions written; 60,000 prescriptions filled; 8,200 cumulative riders, all of which we achieved in just under 8 months since launch and mostly without broad access on an expanded label.

And now having secured 77% commercial coverage, consider what VOQUEZNA can achieve as a new GERD treatment option proven to help relieve heartburn. We believe the key building blocks are in place for Phathom to realize VOQUEZNA's potential peak revenue opportunity of greater than $3 billion.

And I believe the numerous accomplishments we've covered today support an acceleration in our adoption trends. We have stayed true to our strategy, even achieving certain milestones ahead of schedule or with better-than-expected outcomes.

In the upcoming quarters, we will continue to drive value through commercial execution and we look forward to further improving the lives of patients suffering from acid-related conditions.

Thank you again for joining us today. We appreciate your continued interest and support. I'll now turn it over to the operator to facilitate a 10-minute question-and-answer session. Operator?

[Operator]

[Operator Instructions] And our first question coming from the line of Annabel Samimy with Stifel.

[Annabel Samimy, analyst]

Congratulations on all the progress. Just wanted to talk a little bit about the NERD expansion opportunity. I guess one of the things I'm curious is to what extent you need to really start tapping the primary care market to gain access to patients?

I -- just from conversations we've had with GIs, the GIs are very familiar with the product, but PCPs are less familiar and that's where the drug they claim would be pretty revolutionary. So just trying to understand what your efforts are going to be over there.

And then the second question I have is in terms of the access that you have for the formularies -- the access you have right now, do you have a sense of the various different types of plans and what percent are more open access plans versus very restricted plans? Or is the access that you have much broader than -- is it just broader, like can you just help us sort of qualify or characterize the formularies within the plans?

[Martin Gilligan, executive]

It's Martin. I got your question in 2 parts. First, I'll take the NERD expansion. And if I summarize it correctly, you're asking about tapping into primary care physicians. So I would agree with you that GIs have a much higher awareness of VOQUEZNA than primary care physicians, but that doesn't mean primary care physicians don't have any awareness.

If you recall, as we launched back in January, we very much focused on the top decile physicians. That's where we went first and had our highest frequency and they were mostly gastroenterologists. But I do think what we do know is that we're not starting at ground 0, but the primary care physicians, we're going to be calling on the same physicians as Terrie mentioned earlier, that we called on before and the patients have the same journey with the same symptoms and the level of unmet need is equally as high.

And we know that patients are actually searching for a new mechanism as well as primary care welcome the opportunity for that. So we've got the momentum going. We've been reaching out to primary care.

Obviously, we'll be dialing that up as we're moving forward. And then I'll also mention the direct-to-consumer is going to play a really big role in that. We already know from doing some work -- when we went to physicians who prescribed, 25% of them had already said that they've been contacted by their patients who specifically requested VOQUEZNA. And 80% of those physicians granted that request and that's exactly what we communicated that our expectation was going forward. And those patients are already going to primary care.

So we feel really good about our trajectory heading into primary care. I'll switch now to your access. So listen, here's what I like to say about our access. Numbers are great, 115 million lives, 77% commercial coverage, but it's really the quality of the coverage that truly really counts. And it's completely aligned with our strategy of one step through a PPI.

And I'll just say, I think we've done a tremendous job. Each of our -- obviously, each PBM and payer is comprised of multiple plans and multiple formularies. But we've contracted for one step as the key criteria: Express Scripts, Cigna, Prime Therapeutics, CVS Caremark, Aetna, UnitedHealthcare. So our expectation is, is that a patient will have completed an experience with one PPI and have the opportunity to go on with VOQUEZNA.

[Operator]

And our next question coming from the line of Joseph Stringer with Needham & Company.

[Joseph Stringer, analyst]

You mentioned that you can leverage the existing sales force for the NERD launch here. I guess, when do you anticipate we'll see an impact in the IQVIA TRx data, number one? And then number two, maybe as a follow-up to the previous question, so on the NERD approval and the impact on insurance coverage.

You mentioned, of course, 77% of commercial lives covered. What percentage of that is for the bottle? And you mentioned that you anticipate this coverage would carry over to the NERD indication. But I guess, is there any scenario in which that wouldn't be the case, meaning the coverage is, say, for Erosive GERD, but it would not be for NERD?

[Martin Gilligan, executive]

Sure, Joey. So first, I'll talk about the sales force. Yes, even if we say we're leveraging, we're actually utilizing and that was part of our vision and our plan. We set up the sales force knowing that non-erosive was coming. So our footprint has been in place and we've been calling on these positions.

I think you probably saw specifically in the past 2 weeks, but really last week, a jump in our prescriptions which we believe is tied to -- to both ends of your question, right? So first, it's clearly a non-erosive launch, which is what we anticipated. We were going to start seeing a jump there. So that will continue to grow over time.

But we've got all engines running. So we've got the DTC running. And then as we just announced the details of increasing our commercial coverage. So they all do kind of go together and they're working in tandem.

In terms of the coverage, what we're communicating is that is the coverage for the bottle. You're correct. So 77% commercial coverage. And it's our belief that that coverage is also for coverage for the all indications.

So all of our contracts where we have one step through PPI indicate VOQUEZNA for as it's indicated. And we've obviously informed all of the payers of our approval and we continue to move forward.

[Operator]

And our next question coming from the line of Yatin Suneja with Guggenheim.

[Yatin Suneja, analyst]

Congrats on a very good quarter. Just one -- a couple of questions for me. Number one on gross to net. Could you maybe help us understand where you are in terms of the net yield? I think my math suggests that it is maybe close to 40% net yield for the quarter.

If you can confirm or deny how close we are to that number? And how will that evolve? Should we expect an improvement in the yield or because of the NERD indication, there should be sort of a reduction in that yield. So that's just the first question.

[Terrie Curran, executive]

Sure. So yes, GTN is playing out also as we had expected going into launch. I think the numbers that you're estimating are right within the range that we estimated and not inconsistent with what we see as well. As far as going forward, with the improved access that we've recently won, we continue to expect to see a building on that GTN. But like I said, going into launch, we continue to believe it will be in that 50% to 65% discount on a steady-state basis.

[Yatin Suneja, analyst]

And that's just the retail part, right? Not the -- or it's on a blend basically that you're [indiscernible]?

[Terrie Curran, executive]

That's right. That's retail.

[Yatin Suneja, analyst]

Okay. Very good. And then with regard to the NERD sort of uptake, I mean, could you maybe talk about like what will be an average duration of treatment for NERD? And how would that compare to EE? And also, if you can articulate what you are seeing in terms of the refill rate, are patients getting refilled and at what frequency?

[Martin Gilligan, executive]

So Yatin, I had commented earlier that the patient journey is very similar between erosive and a non-erosive patient. And it goes beyond similarities. Things are almost spot-on. What we know from PPI utilization is that, on average, on an annual basis, it's about 150 to 160 days for both indications. So again, it's very similar. So I think we've been communicating that 160-day per year number.

And then in terms of refills, we're tracking exactly as you would expect for a successful launch. Right now we're at about 50% new prescriptions, 50% refills, but we expect a lot of fluctuation in that as we now enter non-erosive and new patients are starting to come on board as DTC is running. So there's going to be a lot of fluctuation in that in the coming months. But right now we're right on track where we should be for a successful launch.

[Operator]

And our next question is coming from the line Umer Raffat with Evercore ISI.

[Unknown Analyst]

This is [indiscernible] on for Umer. I guess, firstly, on NERD launch, how many of the scripts are from the 2Q number? And secondly, on the inventory level, I think last quarter, you commented there about 2 to 3 weeks of your inventory, has number changed in the second quarter?

[Terrie Curran, executive]

Yes. I think we caught a little bit of that. I think the last part was on inventory. So I'll cover that first and maybe if you can repeat the first question after that. But as it relates to inventory stocking, we're still early in launch, but what we're seeing is around 2 weeks, which is consistent with where we were at the end of the first quarter.

So we're not seeing a significant impact on the revenues per se relative to stocking. It's more driven by demand. And then if you could repeat the first question, that would be helpful.

[Unknown Analyst]

The first one is on NERD launch. How many of the scripts are we seeing from the number reported for the second quarter?

[Martin Gilligan, executive]

So Umer, if you are -- we had a little bit of a hard time hearing you. But if your question is about the number of scripts for the non-erosive launch, it's just really early to tell that. We're just weeks into this. I think what you can clearly say is some of the -- much of the growth that we've seen over the past couple of weeks is probably tied to that.

Again, we also have the addition of access and consumer running. But we would expect going forward that those 3 things will really be key drivers, which is the approval of non-erosive, the growth in commercial access and then the running of DTC. But right now it's -- we wouldn't have the data to answer that question specifically.

[Operator]

Our next question coming from the line of Paul Choi with Goldman Sachs.

[Kyuwon Choi, analyst]

Congrats on all the progress. My first question is for Martin. And can you maybe just clarify or elaborate on your prioritization of the nurse practitioners and nursing assistants in the primary care channel just as a driver of the NERD indication an opportunity versus the GI specialists and just kind of how much of your sales force effort is going to be directed there?

And my second question is for Molly, which is regarding the access to the additional capital under the Hercules agreement. Can you just remind me what the criteria and the triggers are for accessing it at this point? And sort of what -- how you're thinking about the planning and timing relative to your current burn rate?

[Martin Gilligan, executive]

I'll go first, Paul. Yes, you hit on the magic category of nurse practitioner or physician assistants. They play a really big role. And they played a big role in Erosive GERD, but specifically in non-erosive, they are the folks who are first-line diagnose and making treatment decisions. And in primary care, they'll play a really important role. So our sales force definitely spends time with them.

Gastroenterologists will always remain to be important. They're high-volume physicians. They're influential in the category. But definitely, as you said, we've seen a growth amongst those NPs and PAs and we expect to see that going forward.

[Molly Henderson, executive]

And then as it relates to, Paul, your question on the debt triggers. We expect that, I think, as I mentioned in my prepared remarks, there's $25 million remaining available this year under the next tranche that is unencumbered, meaning that we have free access to pull that down at our discretion. There's another $100 million that we have available under the facility that has 2 triggers next year and those are based upon revenue milestones.

But as we continue to reiterate that we feel we have very good cash position and that we have runway through the end of 2026 and that does assume a drawdown of those debt facilities. And I think one other point I'll make relative to our spend is another comment in my prepared remarks mentioned our DTC spend. We know that's something that often fluctuates through launches, but we feel good with our current amount of spend.

And as Martin has indicated, the resources we have in place really helped drive the non-erosive launch. We don't expect a significant increase in OpEx spend relative to our commercial activities.

[Operator]

And our next question coming from the line of Chase Knickerbocker with Craig-Hallum.

[Chase Knickerbocker, analyst]

Congrats on the continued progress. Just first for me and I'm sorry, I joined late here and I might make you repeat yourself. But on the Caremark contract, can you just update me on a little bit more of the details there? Does this also include an OTC attestation for the step-through?

[Martin Gilligan, executive]

Yes. So in terms of Caremark, it's like the others that I described, it's one step through a PPI and it does not include that OTC attestation, but I just -- I want to flag something here. When we came out of the gates with Express Scripts, Cigna, that was beyond even our strategy or what we thought the best case could be.

So I just caution you, don't take that as a opportunity loss, that's not with CVS Caremark. It's really that that was just above and beyond for the other. So we're right on strategy with that one step through a prescription PPI.

[Chase Knickerbocker, analyst]

No, makes sense. And kind of asking the question in the light of that being kind of an upside case to your previous expectations of that 77% of covered lives now from commercial patients in the United States that we have under contract, what portion of that does include that OTC attestation?

And then second, just kind of previously, we've discussed kind of Street expectations to kind of orient people on how you're thinking about the year. As we talk to GIs, which are still the majority of your writers here, at least to my knowledge, they definitely speak to kind of a multiple of prescriptions that they would expect for NERD patients relative to erosive, kind of speak to your confidence in kind of back half numbers, which, again, as it sits today, is a 50% increase kind of from Q2 to Q3 with kind of that in mind?

[Martin Gilligan, executive]

Yes. So a couple of parts to your question. In terms of what percent of the access is -- would also have that OTC attestation, I'm just going to say roughly and I'm going off memory, Chase, that out of the 115 million lives, about maybe 22 million of them fall under Express Scripts. So I think that answers the first part. In terms of the second part, I think your question was really about the fill rate. Is that correct, moving forward?

[Chase Knickerbocker, analyst]

Yes. More so just on kind of the increased demand that we'll drive from NERD. I mean, in some of our checks, we hear kind of multiples of prescriptions that they'll write per NERD relative to erosive with your current writers and then kind of informing how you guys are thinking about kind of Street expectations in the second half, where you've kind of oriented people on before. It calls for a 50% increase sequentially into Q3 and just speak to your confidence in that number?

[Martin Gilligan, executive]

Yes. So I'll take the first part of that and then pass it off to Molly. So one of the things that we've been talking to all of you about for a number of years now is that non-erosive was really the biggest indication. It's 3x larger than erosive. So we really just opened up the entire GERD market and I think our opportunity there is the fact that we have a real differentiated product.

It works all day and all night, but also it works very quickly, right? In our label, it talks about full effect at day 2, which is something that a PPI would not have and then also continues that same effect for both the 4-week period as well as the 20-week extension. So it's really got the sustainability. So it's differentiated.

And I can tell you, going back to Paul's earlier question, all physicians recognize that. You're seeing the experience, but as Paul brought up those nurse practitioners and physician assistants, they are just welcoming this product. So we think that non-erosive is exactly as we set out to do. It's just a really large opportunity.

[Molly Henderson, executive]

Yes. And as it relates to guidance, as you know, we're not providing specific guidance on a quarterly basis. But going into launch, we always knew the back half of 2024 was going to be significant between further access, DTC campaign up and running and non-erosive label. So those 3 items are really what's going to drive us on for the rest of this year. And we continue to reiterate that we feel comfortable with the full year consensus of where it is now.

[Operator]

And our last question coming from the line of Matthew Caufield with H.C. Wainwright.

[Matthew Caufield, analyst]

Just quickly here. So for the prescription mix currently favoring GIs, is that more a factor of those patients already having progressed to seeing a GI specialist at least at this stage? Or are primary care physicians at all less receptive to prior authorizations and then patients are essentially being passed forward to GI specialists? Is there any further distinctions there kind of for that mix?

[Martin Gilligan, executive]

Yes. So actually, let me -- I might miss your different topics here, just to clarify. First of all, I think the high utilization of GI is obviously one specialist adopt product -- new products sooner, new mechanisms sooner. But also -- and I think I referenced this earlier, out of the gates, we really focus on the highest decile physicians for Erosive GERD and they were naturally gastroenterologists.

So I think you should look at it more of where we put both our reach and our frequency in the early months of launch. Do not interpret that as primary care, do not see the opportunity or this differentiated product for primary care.

And the other thing I'll just say is, just to clarify the PA for -- I'll say for that one step through a PPI, the only thing the physician really needs to do is identify that that patient has been on a PPI. So there's different levels of prior authorizations and many of them are actually picked right up at the pharmacy, so the physician has no action. So I'm not sure the primary care actually has that much work to do to get VOQUEZNA.

[Operator]

Thank you. And that's all the time we have for our Q&A session. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.