Phathom Pharmaceuticals Inc

NASDAQ:PHAT

Earnings Call Analysis

Phathom's VOQUEZNA Accelerates Growth with Non-Erosive GERD Launch

In Q3 2024, Phathom Pharmaceuticals reported a significant jump in net revenues to $16.4 million, a 120% increase quarter-over-quarter, attributed to the successful launch of VOQUEZNA for non-erosive GERD. The company's gross profit climbed to $14 million, achieving an 86% gross margin. With over 143,000 prescriptions filled since launch, momentum from primary care prescribers is notable. The expanded commercial access now covers over 120 million U.S. lives, with plans to increase marketing investment for sustained growth. Despite a non-GAAP net loss of $67.9 million, the company's cash reserves reached $335 million, positioning them well for future initiatives.

Strong Revenue Growth Highlights Launch Success

In an impressive demonstration of market momentum, Phathom Pharmaceuticals reported net revenues of $16.4 million for Q3 2024, indicating a sequential quarter-over-quarter increase of over 120%. This surge in revenue is largely attributed to the recently launched non-erosive GERD treatment, VOQUEZNA, as well as the broader recognition that comes with its expanded label. Additionally, early data suggests that wholesalers are currently maintaining about two weeks of inventory at retail, indicating stable stocking levels.

Significant Gross and Operating Margins

The gross profit for the quarter was reported at $14 million, which translates into an impressive gross margin of 86%. This is a 440 basis point increase compared to the previous quarter, highlighting the company's strong pricing power and effective cost management strategies. However, it's important to note that net operating expenses revealed non-GAAP adjusted losses of $67.9 million for the quarter, or $1.05 loss per share. Yet, this was an improvement from a loss of $73.3 million in the previous quarter.

Investments Driving Future Growth

Operating expenses showed a mixed trend, with non-GAAP R&D spending decreasing by 32% compared to Q3 2023, reflecting the completion of prior clinical trials. Conversely, selling, general, and administrative expenses (SG&A) increased by $53.1 million year-over-year due to costs associated with building the commercial infrastructure needed to support the product launch. Notably, advertising expenses increased to approximately $17.5 million in Q3, as part of an active direct-to-consumer campaign aimed at enhancing brand awareness. Phathom plans to accelerate these commercial investments through the remainder of 2024 into 2025.

Enhanced Commercial Access and Adoption Momentum

Phathom has made significant strides in enhancing commercial access, with VOQUEZNA now covered under formularies representing over 120 million lives, or more than 80% of U.S. commercial lives. The successful inclusion of VOQUEZNA in CVS Caremark's National Formulary represents a landmark win, greatly increasing patient access. The launch has seen substantial engagement, with more than 143,000 prescriptions filled since launch, indicating robust market penetration and awareness. In fact, filled prescriptions increased by approximately 140% since the prior quarter, driven largely by the approval for non-erosive GERD.

Focused Strategy on Primary Care Prescribers

Importantly, the company is increasingly focusing on expanding its prescriber base beyond gastroenterologists, with primary care physicians beginning to adopt VOQUEZNA significantly — in Q3, the majority of new prescribers were primary care physicians. This strategic pivot is essential, as these doctors play a crucial role in managing GERD patients. Positive patient feedback appears to be fostering a favorable prescribing environment, as consumer engagement campaigns are also showing early success.

Outlook and Guidance

While Phathom has not provided specific revenue or earnings guidance for 2025, there is notable confidence within the management team regarding the ongoing growth trajectory. The early trends in filled prescriptions and market engagement suggest a solid foundation moving forward. Management expressed its commitment to monitoring progress closely and plans to provide guidance when they have greater visibility over the data regarding VOQUEZNA’s performance in the market.

Financial Position and Capital Raising Success

As of September 30, 2024, Phathom's cash and cash equivalents stood at $335 million, bolstered by a successful equity follow-on that generated proceeds of $130 million. This strategic placement in the capital markets reflects confidence in Phathom’s growth prospects, especially with the recent enhancements in product offerings and commercial coverage. The company also has a robust cash runway, further supported by a debt facility that could provide an additional $125 million, subject to revenue milestones.

Concluding Thoughts on VOQUEZNA's Market Potential

Overall, Phathom Pharmaceuticals is well-positioned to capitalize on the expanding market for VOQUEZNA, especially with the introduction of the non-erosive GERD indication, which expands its targeted patient segment to approximately 22 million adults in the U.S. As Phathom continues to refine its commercial strategies and build market awareness, investors should closely monitor the evolving prescription trends and market engagement initiatives that drive VOQUEZNA's potential as a key treatment option in the GERD market.

Earnings Call Transcript 2024-Q3

[Operator]

Hello, and welcome to the Phathom Pharmaceuticals Third Quarter 2024 Earnings Results Call. At this time, all participants are in listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's call 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 third 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 presentation section of our corporate website.



Before we begin, let me remind you that we will be making a number of forward-looking statements throughout today's presentation. These forward-looking statements involve risks and uncertainties, many of which are beyond 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.



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 FEC filing. 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. I'm excited to provide an update on Phathom's recent progress. Successful commercial launch of the VOQUEZNA remains our top priority, and I'm pleased to share that we're seeing growing interest from physicians and patients as well as increased coverage from payers.



Week over week and month over month, important key performance indicators have trended positively with respect to prescription data, market sentiment, and patient access. These outcomes inspire confidence that our launch strategies have been impactful. As we continue our launch journey, I'm confident that our teams are positioned appropriately to deliver on the VOQUEZNA's sizable market opportunity.



The third quarter of 2024 was momentous for Phathom and the VOQUEZNA. We achieved several important milestones which advanced our commercial launch and strengthened our balance sheet to enable continued investment in our business. On the commercial front, we secured FDA approval for the VOQUEZNA as a treatment for non-erosive GERD and greatly expanded commercial access, which has now surpassed 80% of lives covered.



On the financial side, we leveraged these achievements to successfully raise gross proceeds of $130 million in an equity follow-on, which we view as evidence that the capital markets have confidence in the opportunity that lies ahead. In July, the VOQUEZNA was approved for the release of heartburn associated with non-erosive GERD in adults. As the largest subcategory of GERD, this label expansion greatly increased the VOQUEZNA's addressable market to roughly 22 million U.S. adults.



And since the non-erosive GERD market dynamics are nearly identical to those of erosive GERD, our teams have been able to quickly leverage the sales and marketing plans we already had in place for our erosive GERD launch. The feedback so far has been tremendous. Ultimately, with both major GERD indications now approved, we believe the VOQUEZNA can be a game changer with its rapid onset of action and durability of effect, providing relief to millions of patients who are dissatisfied with their existing treatment options.



In parallel, we have also made important progress on enhancing the VOQUEZNA's commercial coverage in the third quarter. Late in July, we announced the addition of the VOQUEZNA to CVS Caremark National Formulary, the largest of the country's three major pharmacy benefits managers. Between this important accomplishment and several other formulary placements, over an estimated 120 million commercially insured lives now have access to the VOQUEZNA.



And for the majority of those lives, we successfully secured coverage subject to a single step through a generic PPI prescription. One of our launch goals has always been to ensure the VOQUEZNA is widely accessible and affordable to commercial patients. We feel we've done a good job in advancing this effort, and we are both proud of the quantity and quality of the coverage we have earned.



In the months to come, we believe our commercial access will serve as a tailwind, increasing utilisation across both GERD indications. In fact, the effects of securing both non-erosive approval and broader commercial coverage are already having a positive impact on our results. We believe our third quarter 2024 launch data are impressive, highlighted by increasing the VOQUEZNA volume.



In less than a year since launch, over 143,000 prescriptions have already been filled by patients. We believe the growth trajectory of this metric validates the unmet need in the market and serves as evidence that we are elevating brand awareness. With the fourth quarter underway, our goal is to improve on this momentum, expanding the number of the VOQUEZNA prescribers and the number of the VOQUEZNA scripts ultimately being filled by patients.



Outside the quantitative data, I continue to be impressed by the recognition that VOQUEZNA has earned in the marketplace. In addition to the many patient and physician testimonials we receive on a weekly basis, the VOQUEZNA has recently won multiple industry awards touting its innovation. Media coverage for the VOQUEZNA has also increased sharply, especially following our approval for non-erosive GERD.



And on the medical front, our team recently attended the American College of Gastroenterology conference where it was clear that the GI community and attending physicians continue to be excited by having the VOQUEZNA as a new option in their toolkit. Across these various sources of feedback, what I find most noteworthy is the consistency of the sentiment. Physicians, patients, key opinion leaders all describing a positive experience with the VOQUEZNA or reinforcing its potential to disrupt the PPI market.



Turning now to our pipeline, we've begun reviewing the VOQUEZNA's early real world non-erosive GERD data to understand consumer usage patterns and physician prescribing habits. Although additional data are needed, we believe these insights will help assess the value and potential timing of advancing a phase three program to validate the as-needs dosing of the VOQUEZNA for active heartburn episodes. Separately, we're in the final stages of obtaining FDA alignment on a phase two program investigating the VOQUEZNA as a potential treatment of the eosinophilic esophagitis or EoE, which we now plan to initiate in the first half of 2025.



On the financial side, Molly will further detail our third quarter 2024 results for which we reported net revenues of $16.4 million and ended with $335 million in cash. We remain confident that our strength and balance sheet will enable us to continue delivering on our business strategies. I'm very happy with today's results.



We believe our accomplishments in the third quarter were key steps in allowing Phathom to recognize the VOQUEZNA's full market opportunity. Our vision has always been focused on successfully executing our commercial strategy. And I believe we're making terrific progress.



We've appropriately invested in our people, technology and data to enable us to best understand and predict marketing levers that help drive growth. With recent approvals secured, commercial coverage expanded and continued brand investment, I'm confident we can achieve the blockbuster opportunity we believe is possible for the VOQUEZNA. I'll now turn the call over to Martin to provide further details on our recent commercial updates. Martin?

[Martin Gilligan, executive]

I'd like to start by echoing Terri's comments that we're pleased with our third quarter results. Following the VOQUEZNA's approval for non-erosive GERD and increased market access coverage, our teams have been working diligently to realize the expanded market opportunity. Today's results are clear evidence of the progress we've made.



As we have done previously, I will begin with sharing updates on our launch data and follow with additional color on the efforts that have helped drive our successful third quarter. Now, turning to our metrics, I'd like to note that we are no longer reporting total demand defined as the number of scripts written, even if not filled, as one of our quarterly data points. As we've mentioned in the past, demand was only meant to be an early launch metric.



It was intended to serve as an indicator of market interest for VOQUEZNA while we work to establish commercial coverage. Now, given our widespread commercial access, we believe the filled prescriptions metric is an accurate measure of usage amongst prescribers and patients. With that being said, we have now surpassed 143,000 prescriptions filled by patients from launch through October 25.



This is more than doubled since our last report, displaying a growth of nearly 140%. In the third quarter specifically, we recorded approximately 69,000 filled VOQUEZNA prescriptions, also just about doubling the amount we reported for the second quarter. We believe the recent label expansion for non-erosive GERD was the key driver of this growth.



In fact, filled prescriptions for 10 milligram, the approved dose for non-erosive GERD, increased by over 230% between Q2 and Q3. As a reminder, these figures include volumes filled through retail pharmacies, which are captured by IQVIA, as well as those filled through BlinkRx, one of our patient assistant programs. Consistent with our previous updates, as VOQUEZNA's commercial coverage expanded, we expected the proportion of volume flowing through retail pharmacies to increase.



As such, for the prescriptions filled in Q3, approximately 70% were filled through retail pharmacies and captured by IQVIA. In parallel, the total number of physicians who have written the filled script increased to over 13,600 as of October 18th, compared to over 8,200 as of our last report. We are pleased that the growth in VOQUEZNA writers continues to indicate strong adoption.



Through the end of Q3, about 12,400 cumulative prescribers have written a filled VOQUEZNA prescription up approximately 70% compared to Q2. Our data shows that repeat writing is growing, meaning those that prescribe VOQUEZNA are doing so often. Therefore, one of our key objectives has been to generate new writers with the aim that they will join those who write more frequently once they see VOQUEZNA benefit their patients.



I'm happy to report that this strategy is working and we're excited by the early results. All of this encouraging data stems from the widespread commercial access we have secured for VOQUEZNA. Early in Q3, we announced that CVS Caremark included VOQUEZNA on its national formularies with utilization management according to strategy, requiring only a single step through a generic prescription PPI.



In the months following, downstream health plans have assigned VOQUEZNA similar positioning on their formularies. Since the start of the third quarter, VOQUEZNA has been added to formularies responsible for covering over 42 million commercial lives. And importantly, we see the significant growth in prescriptions for 10 milligram as evidence that access is available for non-erosive GERD patients.



With major payer wins secured, we're proud of the availability and affordability that we've set forth for commercial patients. In less than a year, we have successfully negotiated access for all approved indications with appropriate utilization management across the majority of plans for which VOQUEZNA is covered. As a result, VOQUEZNA total covered population now captures over an estimated 120 million people, or more than 80% of all U.S. commercial lives.



On the promotional front, we remain focused on increasing awareness with target physicians. In the early days of launch, gastroenterologists were first to embrace VOQUEZNA as they were largely aware of the new mechanism coming to the market. Since then, and accelerating with non-erosive GERD, we've been focused on growing the primary care prescriber base.



In fact, Q3 was the first quarter since launch where the majority of new VOQUEZNA prescribers were primary care physicians. These doctors are responsible for most GERD patient management decisions. So our aim is to make VOQUEZNA a leading treatment option amongst this group.



As for consumers, we know that positive feedback and direct requests can often impact physician prescribing choices. Fortunately, patient sentiment has been terrific, and we believe that patients taking VOQUEZNA quickly notice the benefits and relay their experience back to their prescriber. In tandem, we continue to encourage patients to ask their physician about VOQUEZNA through further investment in our VOQUEZNA Can Kick Some Acid DTC campaign, which is expanded to include non-erosive GERD messaging.



While the data is still maturing, our preliminary analysis have confirmed that the campaign is reaching the appropriate audience and that exposed consumers are converting to VOQUEZNA. As we approach the first anniversary of VOQUEZNA's initial launch for erosive GERD and H. pylori, I'm confident in the foundation we've built and the momentum that has followed in these recent months.



We continue to be excited by our quarterly progress, and I believe we are poised to continue delivering outstanding results. With the non-erosive GERD indication having launched not even four months ago, we believe there is opportunity for significant growth as we work toward displacing PPIs and getting VOQUEZNA into patients' hands. 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 pleased to share our third quarter 2024 financial results with you today. Before going into the numbers, I'd like to note two 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 early into 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 GERD measures will be discussed later in my section and can be found in this morning's press release.



Turning to our results, during the third quarter and in September 30th, 2024, we reported net revenues of $16.4 million, which represents an over 120% sequential quarter-over-quarter increase. In connection with the momentum from our non-erosive GERD launch, we believe the label expansion also contributed to the revenue growth in the third quarter. While we are still assessing inventory stocking patterns, early data following the launch of non-erosive GERD have remained largely consistent with previous quarters, signalling that wholesalers are holding about two weeks' worth of retail product on hand.



Regarding growth to net, discount rates are once again in line with the expectations we set forth pre-launch. We will continue to monitor the evolution of our GTN discount, especially in the fourth quarter, which will be our first full quarter to include the impacts of non-erosive GERD and commercial coverage above 80% for the entire quarter. For the quarter ended September 30th, 2024, we reported gross profit of $14 million, which equates to a gross margin of 86%, an increase of about 440 basis points over last quarter.



Looking down the P&L to our operating expenses, we reported non-GAAP R&D spend of $7.4 million for the third quarter, which represents a 32% decrease compared to third quarter 2023. This also reflects a 22% increase sequentially compared to last quarter. The decrease compared to Q3, 2023 reflects the wind down of spend related to our completed phase three non-erosive daily dosing trial, while the sequential quarterly increase reflects standard business operations related to our ongoing regulatory and clinical activities.



As for SG&A, we reported non-GAAP expenses of $71.8 million for the third quarter, 2024. This represents an increase of $53.1 million relative to the same period in 2023, primarily driven by the build out of our commercial infrastructure in support of the VOQUEZNA launch in late '23. Additionally, this period's SG&A expense included advertising costs of approximately $17.5 million in connection with our ongoing DTC campaign, which compares to $16.7 million reported last quarter. On a sequential quarterly basis, this quarter's overall SG&A expenses were flat compared to the second quarter as expected and previously communicated. Going forward, we anticipate increased investments in our commercial activities for the remainder of 2024 and into 2025 based on the early results from our direct to consumer campaign. As for EPS, we reported non-GAAP adjusted net loss of $67.9 million for the third quarter, 2024, or $1.05 loss per share compared sequentially to $73.3 million or $1.25 loss per share for the second quarter of this year.



Similar to previous quarters, the most significant reconciling item between GAAP and non-GAAP operating expenses was non-cash stock-based compensation. Other non-GAAP reconciling items included non-cash interest on our revenue interest financing liability and non-cash interest expense related to amortization of debt discounts. Turning to the balance sheet, as of September 30th, 2024, cash and cash equivalents were $335 million, up to an additional $125 million from our debt facility remains available, of which $25 million is available this year and $100 million is available next year, subject to achievement of certain revenue milestones.



This cash balance includes proceeds received from the equity financing we closed upon in August. Following the approval of non-erosive GERD, our expanded commercial coverage, and strong Q2 results, we felt it was an opportune time to further strengthen the balance sheet. The August financing was initiated by reverse interest from select investors and resulted in gross proceeds of $130 million.



Beyond enhancing our cash position, we felt our ability to complete a financing and its challenging capital markets signalled confidence in our team's ability to deliver on VOQUEZNA's significant market opportunity. With this additional capital, we believe we have cash runway through cash flow positivity, based on our current operating plan, estimated product revenues, and funds available under our term loan. I'd like to close by reiterating our solid third quarter 2024 results and highlighting our focus on the remainder of 2024 and start of 2025.



We continue to believe we have a blockbuster opportunity with VOQUEZNA, and we are keenly focused on our capital allocation strategy and to ensure we have a strong return on investments made in our commercial and our direct to consumer campaign, as well as our R&D activities. We look forward to keeping the market updated on our strategy in these areas. With that, I would like to 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. We're very happy with our third quarter accomplishments.



Over the last few months, we've launched for VOQUEZNA for non-erosive GERD, expanded commercial coverage for patients and strengthened our balance sheet. Each of these milestones will play a major role in our ongoing commercialization of the VOQUEZNA. From the beginning, we focused on three goals that we felt would fuel a successful launch, communicating differentiation, driving brand awareness and building commercial access.



To date, we have made great progress on each of these pillars as evidenced by our quarterly results. In the fourth quarter, we'll continue to execute on our launch strategy and build-up on our early launch success. By expanding our DTC effort, we believe we can enhance brand awareness among patients and physicians, ultimately fortifying the VOQUEZNA's position in the marketplace.



We believe the VOQUEZNA is still very much in its early phases of growth and I'm confident that we're prepared to help it reach its full potential. 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]. Our first question or comment comes from the line of Annabel Samimy from Stiefel.

[Annabel Samimy, analyst]

So just wanted to try to clarify a little bit. Your coverage uptick was really impressively rapid. And so to what extent is the increased prescriptions from the actual access, because clearly you had Blink, versus the uptick that you might have expected from the non-erosive GERD indications? In other words, is this the inflection that we should start seeing from this NERD indication that we have? And what percent of prescriptions is now on 60 days?

[Martin Gilligan, executive]

It's Martin. First of all, thanks for recognizing the rapid coverage that we have. I think you heard us say before, it's a highlight for us. So, we couldn't be happier about it. In terms of the growth we're seeing, I'm going to say, it's a mixture of both. More scripts are getting through, which is exactly what we intended, but we also know that we're seeing increased demand tied to the launch of non-erosive. And so why do we know that we're seeing that demand?



Well, 10 milligrams, you just saw an immediate rise that continues to grow. Now, 10 milligrams can also be used for erosive GERD, but clearly that's tied to non-erosive. So it really is a mixture of the two. And then the last piece, I just wanted to make sure I have clarity. Did you say what percent are 60 days?

[Annabel Samimy, analyst]

Yes, I thought, so I think one of the things that we noted is that some of the prescriptions are 60 day prescriptions. So do you see a change in that pattern?

[Martin Gilligan, executive]

No, we're not seeing a change. Yes, so scripts in general, most of the scripts are written for 30 days, but there are some that are either for 60 or maybe 90. A lot of that's dictated by different health plans and what they require and or allow, but really it's driven mostly by the 30 days. But there is some that's a little bit more than that. Thanks.

[Annabel Samimy, analyst]

So it's more driven by health plans as opposed to physicians feeling confident that, okay, you need to use this. We can prescribe this for two months as opposed to one.

[Martin Gilligan, executive]

Yes, it's a combination. I mean, if you were to go to your doctor today, it depends upon how they write refills. So that's step number one. And then step number two is what the plan allows.

[Annabel Samimy, analyst]

And then one last question. Is there, I noticed that I thought you were going to initiate the as needed trial in the third quarter, and it looks like you're trying to do a little bit more analysis on the patterns of usage. Are you thinking that maybe you don't need that additional trial on an as needed basis or to get it on the label because it's already being used that way?

[Terrie Curran, executive]

Yes, Annabel, it's Terrie. I'll take that question. So, since we had the non-erosive indication approved, we've been evaluating real-world utilization.



And we really want to spend a couple of months just evaluating that data to ensure that we get good ROI on that trial. So over the next couple of months, we'll evaluate that. And then what we have seen is that even at ACG, the phase two on-demand results were presented and a number of physician papers have been published that incorporates on-demand into the recommendation.



So we're hearing from the physicians that they profile the rapid response. They're really seeing it clinically. And so we just want to really evaluate that data before we proceed with that.

[Operator]

Our next question or comment comes from the line of Paul Choi from Goldman Sachs.

[Kyuwon Choi, analyst]

My first question is for Molly. If you'd maybe just sort of comment on your latest thinking on gross net given the expansion in insurance coverage and number of lives covered. I guess any uptick that you're thinking of into 2025, any color there would be helpful.



And my second question maybe for Terry is, can you update us on the status of your gain application for Linaprazan monotherapy? What are sort of the gaining factors there or sort of ongoing discussion points? And I guess what gives you conviction that the Molly will be covered under a non-infectious disease application such as NERD or erosive GERD?

[Molly Henderson, executive]

So sure, as it relates to GTN, the range is coming, the results are coming right in the range of what we expected pre-launch, which was 50% to 65% discount. So if you do the math, you can calculate that we're right within that range.



Because we're going into a holiday period with Q4 and then changing health plans going into next year. And as you pointed out with the inclusion of non-erosive, we expect to still stay within that range, but we might see variability over the next couple quarters. But all that being said, we continue to expect to tighten that range and be right within where we expected.

[Terrie Curran, executive]

Paul its Terrie, I'll take your question regarding the orange book. So yes, we are engaged in discussions with FDA regarding the exclusivity that's reflected in the orange book. And ultimately, we continue to firmly believe the orange book listing for the VOQUEZNA should be updated to reflect the full 10 years of NCE exclusivity that the molecule received when the combo packs were approved as QIDP products.



So our external council believes that our regulatory exclusivity should protect the VOQUEZNA from generic entries into 2032. And we're currently in the process of evaluating the best path forward to ensure the FDA does reflect this in the orange book. And we'll provide updates if we have any material progress to report.



But as it stands now, nothing has changed from our side. We're still operating under the assumption that the FDA should not accept any replication from a generic until 2032. And we're very confident in that position.

[Operator]

Our next question or comment comes from the line of Mr. Joseph Stringer from Needham & Company.

[Joseph Stringer, analyst]

Can you comment on what you're seeing in terms of overall refill rates? And how does this compare to say what is typically seen for prescription PPI's?

[Martin Gilligan, executive]

Yes, so Joey, the refill rate, so I don't have a specific rate to share with you. But what I will say, and it kind of echoes my comments, is we're seeing more physicians write and we've seen a really large increase in new writers, which just tells us that the business is really healthy and going in the right direction. So as you have new writers, they haven't had the opportunity to do the refills yet, that's all coming on board. But we do know for those that have started to write, that they're writing more.



And what we do track and we're looking at is the persistency. And when you take a look at that and looking at patients that started earlier on in the launch and that are going back month after month, we're seeing refill rates that are healthy and reflect, as you just said, what you would expect to see in the PPI prescription market. So we feel really good about where we are.

[Operator]

Our next question or comment comes from the line of Yatin Suneja from Guggenheim.

[Yatin Suneja, analyst]

Just a couple from me. Could you maybe talk about how we should think about duration of therapy? Are you able to monitor sort of compliance and any comments there? So that's one.



Second is with regard to gross demand, I think if we assume 70-30 split between retail or IQVIA versus Blink, I think they get to about a gross demand discount, at least on the retail of about 55-56%. Is that sort of, is that math correct? Or could maybe talk about that and how it should evolve, specifically in Q1 of next year, which I think is going to be a little bit, we do have that one-time issues there. And then finally, any thoughts on establishing or thinking about establishing guidance?

[Martin Gilligan, executive]

I caught a couple of those and then I'll cover them, maybe not in the order that you had them and then turn it over to Molly. So first on the duration, I think this is a little bit of what I was speaking to the Joey's question. So what we're tracking right now is persistency and when patients get drugs, how long are they on? And we're seeing that to be very consistent with what is happening with the PPI. So we've always said that the days of therapy are somewhere between that 140 and 160 on an annual basis. And we have no reason to believe right now that it's going to be less than that, but we continue to study it as Terrie was mentioning earlier.



And then the Blink conversion, I think was another part of your question, or I call it that as the percent of scripts that are going through Blink. As was commented earlier, we moved from early on about 50% of the prescriptions only being captured by IQVIA and the balance going through BlinkRx or cash. So for here, let's just call it cash. We've really progressed that over time exactly like we said we would, is that was going to evolve. And as access came on board, we would see less utilization of the patient support of cash.



And that's what's really had us move through sequential quarters of actually getting down to 30% cash and 70% going through traditional retail. So we're making that progress. It'll continue to flow through as we move on. You do raise a good point though regarding Q1 next year. I think Molly was alluding to this a little bit earlier. Things change in Q1 for every company and every brand. You typically see a dip in prescriptions just early on and then in the quarter that rebounds. So what I will say is, we expect that it would probably be something that follows trends in the industry. We obviously have the BlinkRX cash option for patients as they need it.



And the reason the dip happens is because patients are either changing plans or their deductibles are resetting. So there's a little bit of burden for patients early on. But what I can tell you, and I'll just leave it at this before I turn it over to Molly is, that's common for every company. But what I do feel certain about is 2025 overall is going to be a big growth year for us.

[Molly Henderson, executive]

And as it relates to guidance, so yes, we continue to feel comfortable as it relates to full year 24 consensus. We want to make sure that we're very confident in whatever guidance we put out as it relates to revenue.



So we'll continue to monitor trends and make sure it's something when we do put out guidance that it's something we can feel very comfortable with. So, at this point for the rest of this year, we'll continue to reiterate that we feel comfortable with the current full year 2024 consensus.

[Yatin Suneja, analyst]

And any comment on the gross net that we did? Is that sort of in line? We're getting about 55%, 56% for retail.

[Molly Henderson, executive]

Yes, gross net, sure, yes. As the other question asked, we expect to continue to stay within the range that we provided pre-launch, which was at that 50% to 65% discount. And as you point out, we're right within that range. We expect some volatility going into the beginning of next year. As we indicated, but I continue to believe we'll stay within that range.

[Operator]

Our next question or comment comes from the line of Chase Knickerbocker from Craig-Hallum.

[Chase Knickerbocker, analyst]

So, I guess just first for me, maybe just starting on kind of primary care with obviously the NERD launch in the quarter. Do you feel like it's still very early days from a standpoint of kind of your awareness level within primary care?



What are you seeing from a demand level there? And again, do you think it's very early days and you really haven't seen that boost from primary care yet? Would love your thoughts there, Martin.

[Martin Gilligan, executive]

So, I'll tell you, we had always said that primary care was going to be a big player for non-erosive and it's certainly coming true. You hit on three pieces. One is awareness. We have seen awareness grow amongst primary care. And if you think about it, as I mentioned earlier in my comments, when we launched, gastroenterologists knew about PCABs and they knew something was coming and that was lesser primary care.



So we've seen that general awareness of VOQUEZNA since our sales force has been in place our talking to physicians grow. We've also seen a pop in the number of PCP prescribers. Our new writers in primary care have actually overtaken the new writers in gastroenterologists. So they are welcoming VOQUEZNA. And I can tell you, actually having met some of these physicians, they're actually seeing the results that Terrie mentioned earlier is that rapid uptake in the durability, or I should say the rapid effect in the durability, the symptom relief. So we're definitely seeing that boost and the boost will continue.

[Chase Knickerbocker, analyst]

And then maybe just a little bit, Martin, about how you're tracking success there with your sales reps, any kind of specific metrics that you're kind of comping them to as far as that awareness level with PCPs or just kind of like ordering primary care physicians within their territories. And then the last one from me to Molly would just be kind of, I guess, thoughts on potential guidance for 2025. When that time comes kind of early next year, do you think that you guys will be in a position from a visibility perspective into your business that you'll be able to give kind of 2025 full year guidance?

[Martin Gilligan, executive]

So what we're doing with the sales force is we're working with them, obviously in providing direction and then taking their on the ground feedback as to what's happening. But what we focus on is who are they seeing, the frequency with which they're seeing them, and then following up with those physicians and are they getting the messages we intended for them to receive? And I can tell you across all of those metrics, we feel really good. And then we also just do general awareness tracking as most brands do our physicians or intended prescribers or targets aware of our brand. And as I mentioned earlier, that continues to increase including primary care. Molly?

[Molly Henderson, executive]

Yes, so as it relates to guidance for 2025, Chase, as you pointed out, we're seeing some really nice trends in the script data. We'll want to make sure that we've got really good visibility and confidence in whatever range and guidance we provide. But because we're still so early in the non-erosive, it's only been on the market four months now, I would expect that we continue to want to see several more months of the trends and the impact of non-erosive before we put out the guidance. But certainly it's something we're focused on and something we want to make sure that we provide a range that we can achieve once we do.

[Operator]

[Operator Instructions]. Our next question or comment comes from the line of Umer Raffat from Evercore ISI.

[Chengxiang Liu, analyst]

This is Chengxiang on for Umer. Congrats on the quarter. A few questions, if I may. The first one is we've seen the fill rate increase from around 30% to 50% in the last few quarters. I know you're no longer reporting written prescription, but could you give more color on what is the trend of fill rate in this quarter?



And secondly, there is a clear inflection on the 10 milligram dose after the NERD launch. I know it's still early, but currently how much of the total volume is from NERD indication? And lastly, about the IP, so the QIDP is tied on the molecule.



So just want to confirm that even if you get the new indication on QIDP, it does not give you another five-year exclusivity.

[Martin Gilligan, executive]

In terms of the fill rate, yes, and you said it, you called it out, right? So at this point, we've dropped tracking that as a key metric that we're reporting out on. But what I can tell you is that we had always intended that to be a very temporary, as we shared with you all, metric that we would be reporting. Because at the time, it was the right thing to do because we only had 38% commercial access. And now that we're in excess of 80%, we feel the key metrics to look at are both the access, the growth in TRxs, and the growth in prescribers.



What I can tell you is that the physician prescribing continues to grow to levels that we feel really good about and are consistent with successful launches. So hopefully that answers that. And then the 10 milligram inflection, I'm not sure I got the entire question, but we definitely have seen, upon approval of non-erosive, an immediate uptake of the 10 milligram.



I will remind you that 10 milligram can also be used for non-erosive, but we also know that it's tied specifically to non-erosive. And it's really, we believe, making up the majority. We don't have a tieback specifically yet by ICD-10 codes, but we feel it's tied directly to non-erosive. Terrie?

[Terrie Curran, executive]

Yes, and then regarding the regulatory exclusivity, so the five years [indiscernible] NCE was for the VOQUEZNA royalty, and then the five years for QIDP is applied to VOQUEZNA chemical entity. So that's 10 years to get to 2032.

[Operator]

Our last question comes from the line of Matthew Caufield from H.C. Wainwright.

[Matthew Caufield, analyst]

Just one follow-up from us. So thinking more broadly, are there any observations from the H. pylori side of the label? Clearly, that's a smaller part of your focus, understandably, but has there been any change in prescriber engagement versus standard of care?



And even as a potential gateway to getting those same patients ultimately onto erosive or non-erosive prescriptions?

[Martin Gilligan, executive]

So to answer the question on H. pylori, it's important for our business, but clearly, the GERD market's so large that we tend to focus on that. So I would say that what really works for H. pylori kind of ties into your last part of your question is the benefits for GERD. It's that, it really demonstrates that it's a potent acid suppressant, and that when we speak to physicians, we tend to tie that message in so it has an ultimate payoff of the overall mechanism of action.



So that's how it's tied into non-erosive. And there are some patients afterwards when they are healed or their infection is eradicated that might flip over to be a non-erosive patient if in fact they continue to have GERD. But in terms of physicians, we do see that there are physicians who are starting to adopt H. pylori as their preferred treatment, that they are using both the dual and the triple pack. So I think it's made a welcome addition, and I think it's the differentiation that the VOQUEZNA brings to the treatment of H. pylori that is driving that.

[Eric Sciorilli, executive]

Thank you very much. This concludes the Q&A session. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.