Focused VOQUEZNA Marketing And Cost Cuts Will Secure 2032 Exclusivity

Key Takeaways

• Phathom focuses on VOQUEZNA's market potential in GERD treatment to drive substantial revenue while aiming for profitability through strategic cost management.
  
• New strategies and leadership in sales and marketing are set to optimize operations, potentially extending VOQUEZNA's market exclusivity and enhancing financial performance.
  
• Various uncertainties, including capital constraints and regulatory decisions, could negatively impact growth, earnings, and long-term revenue potential.

Catalysts

A biopharmaceutical company, focuses on developing and commercializing treatments for gastrointestinal diseases.

• Phathom emphasizes growing sales of VOQUEZNA, leveraging its significant market potential in the GERD treatment space, with the aim to drive substantial revenue growth.
  
• Strategic cost management, including reducing operating expenses to less than $55 million per quarter by Q4 2025, aims to achieve profitable operations in 2026, thereby improving net margins.
  
• The outcome of the Citizen's Petition with the FDA could potentially extend VOQUEZNA's exclusivity to 2032, which would likely enhance revenue prospects by reducing competitive pressures.
  
• Shifts in marketing strategy, like reducing direct-to-consumer television advertising and focusing on higher ROI digital promotions, are intended to optimize marketing spend and potentially improve earnings.
  
• New leadership in the sales division aims to maximize the effectiveness of the sales force, which is expected to be the primary driver of revenue, positively influencing the company's bottom line.

Phathom Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Phathom Pharmaceuticals's revenue will grow by 92.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -422.4% today to 25.8% in 3 years time.
• Analysts expect earnings to reach $151.1 million (and earnings per share of $1.95) by about May 2028, up from $-345.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $66.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.8x on those 2028 earnings, up from -0.5x today. This future PE is lower than the current PE for the US Pharmaceuticals industry at 16.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.79%, as per the Simply Wall St company report.

Phathom Pharmaceuticals Future Earnings Per Share Growth

Risks

• The cost of capital has become more dilutive due to the stock trading at $4, which limits flexible access to capital markets, potentially impacting future revenue growth and net margins.
  
• The ongoing uncertainty and pending decision regarding the FDA Citizen's Petition could impact VOQUEZNA's exclusivity timeline, affecting revenues and long-term earnings.
  
• The need to implement significant cost reductions, including a reduction in force and halting certain promotional activities, could hinder growth and affect revenue ramp, thus impacting earnings.
  
• Potential disruption in VOQUEZNA triple pack supply, even though not currently impacting revenues, could pose a risk to operations and future sales.
  
• Planned suspension of some research activities, like the eosinophilic esophagitis study, could delay pediatric study benefits and impact long-term revenue potential and net margins.

Valuation

• The analysts have a consensus price target of $17.625 for Phathom Pharmaceuticals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $28.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $586.3 million, earnings will come to $151.1 million, and it would be trading on a PE ratio of 12.8x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $2.29, the analyst price target of $17.62 is 87.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.