# Phathom Pharmaceuticals, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Phathom Pharmaceuticals, Inc.](/companies/phat.md) (CIK 1783183)
- Form: 10-Q
- Filed: 2024-11-07
- Accepted by EDGAR: Nov 7, 2024, 16:05 ET
- Period: 2024-09-30
- Accession: 0000950170-24-123264
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1783183/000095017024123264/phat-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1783183/000095017024123264/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $16.4m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $25.6m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $2.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $4.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $14.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $21.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $8.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $25.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $76.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $214.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$70.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$218.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $18.5m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $53.4m | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$85.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$259.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.32 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$4.29 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.32 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$4.29 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 64,627,847 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 60,543,545 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$203.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $130.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $334.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $373.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $387.0m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $65.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $574.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $175.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | −$187.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 55,928 characters.

*You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited interim financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023, or the 2023 Form 10-K.*

### Forward Looking Statements

The following discussion and other parts of this quarterly report contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, research and development plans and costs, the timing and likelihood of regulatory filings and approvals, commercialization plans, pricing and reimbursement, the potential to develop future product candidates, the timing and likelihood of success of the plans and objectives of management for future operations, and future results of anticipated product development efforts, are forward-looking statements. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate,” or “continue,” and similar expressions or variations. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in the Part II, Item 1A under the heading “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

### Overview

We are a biopharmaceutical company focused on developing and commercializing novel treatments for gastrointestinal, or GI, diseases. Our approved products, VOQUEZNA®, VOQUEZNA® TRIPLE PAK® and VOQUEZNA® DUAL PAK®, contain vonoprazan, an oral small molecule potassium-competitive acid blocker, or PCAB. PCABs are a novel class of medicines that block acid secretion in the stomach. Vonoprazan is the first gastric anti-secretory agent from a novel class approved in the United States, Europe, or Canada in over 30 years, and has shown rapid, potent, and durable anti-secretory effects. Vonoprazan has also demonstrated clinical benefits over the current standard of care as a single agent in the treatment of erosive gastroesophageal reflux disease, or Erosive GERD, also known as erosive esophagitis, and in combination with antibiotics for the treatment of *Helicobacter pylori*, or *H. pylori*, infection. Takeda Pharmaceutical Company Limited, or Takeda, developed vonoprazan and has received marketing approval in numerous countries in Asia and Latin America as well as Russia. Vonoprazan generated approximately $850 million in net sales in its seventh full year on the market since its approval in Japan in late 2014. In May 2019, we in-licensed the U.S., European, and Canadian rights to vonoprazan from Takeda.

In 2021 we reported positive topline data from two pivotal Phase 3 clinical trials for vonoprazan: one for the treatment of *H. pylori* infection, or PHALCON-HP, and a second for the treatment of Erosive GERD, or PHALCON-EE. These data are supplemented by the extensive existing clinical data generated by Takeda as part of its development program for vonoprazan in Japan and other markets. In September 2021, we submitted two new drug applications, or NDAs, for combination packs that contain vonoprazan for the treatment of *H. pylori* infection in adults, one in combination with amoxicillin and clarithromycin (vonoprazan triple therapy) and the other in combination with amoxicillin alone (vonoprazan dual therapy). In May 2022, the U.S. Food and Drug Administration, or FDA, approved the NDAs for vonoprazan triple therapy, under the brand name VOQUEZNA TRIPLE PAK, and vonoprazan dual therapy, under the brand name VOQUEZNA DUAL PAK. Subsequently, on November 1, 2023, the FDA approved vonoprazan, under the brand name VOQUEZNA, as a treatment for adults for the healing of all grades of Erosive GERD, maintenance of healing of all grades of Erosive GERD, and relief of heartburn associated with Erosive GERD, as well as in combination with amoxicillin, with or without clarithromycin, for the treatment of *H. pylori* infection in adults. We initiated commercial launch for VOQUEZNA for both the Erosive GERD and *H. pylori* indications, and VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK for treatment of H. pylori infection in the fourth quarter of 2023. In addition, based on our qualified infectious disease product, or QIDP, designations for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, we received an extension of five years of new chemical entity, or NCE, exclusivity based on the vonoprazan component in those NDAs. We believe the extended NCE exclusivity should apply to any other approved or future products containing vonoprazan we develop and for which we obtain FDA approval.

We are also continuing to develop vonoprazan as a treatment for heartburn symptoms associated with Non-Erosive GERD. In January 2023, we reported positive topline results from PHALCON-NERD-301, a Phase 3 study evaluating the safety and efficacy of vonoprazan for the daily treatment of adults with Non-Erosive GERD, and in August 2023, we announced successful completion of the 20-week extension period of PHALCON-NERD-301. Based on the results of this study, in September 2023, we submitted an NDA seeking approval of vonoprazan as a once-daily treatment for heartburn symptoms associated with Non-Erosive GERD in adults. On July 17, 2024, the FDA approved our NDA supplement, or sNDA, for VOQUEZNA 10 mg tablets for the relief of heartburn associated with Non-Erosive GERD. With this approval, patients and healthcare providers have immediate access to VOQUEZNA for Non-Erosive GERD, the largest category of GERD.

With our recent launch of VOQUEZNA for Non-Erosive GERD, we have begun generating real-world data which are being reviewed to understand consumer usage patterns and prescribing habits of healthcare providers. These insights will help assess the value and potential timing for advancing a Phase 3 program to validate the "as-needed" dosing of VOQUEZNA for active heartburn episodes, building on the positive results from our prior Phase 2 study. Additionally, we are in the final stages of obtaining FDA feedback on the Phase 2 study and program investigating VOQUEZNA as a potential treatment for Eosinophilic Esophagitis, or EoE, in adults and adolescents, with plans to initiate the program in the first half of 2025.

Our commercial launch continues to build momentum and demonstrate strong physician and patient demand. As of October 25, 2024, over 143,000 prescriptions for VOQUEZNA tablets, VOQUEZNA Triple Pak, and VOQUEZNA Dual Pak have been filled since launch. These prescriptions were written by more than 13,600 prescribers. In addition, due to increasing commercial demand, we continue to make progress in securing broad commercial coverage for VOQUEZNA with over 120 million, or over 80%, of total U.S. commercial lives now with access to VOQUEZNA tablets.

We are independently commercializing VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK in the United States. We plan to evaluate commercial partnerships for vonoprazan in Europe and Canada, expand development of vonoprazan into other indications, dosing regimens and alternative formulations and packaging, and evaluate the in-license or acquisition of additional clinical or commercial stage product candidates for the treatment of GI diseases in a capital efficient manner.

We commenced our operations in 2018 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, in-licensing our initial and approved product candidate, vonoprazan, meeting with regulatory authorities, managing our clinical trials of vonoprazan, preparing for commercialization of our initial products containing vonoprazan, commercially launching our approved products, and providing other selling, general and administrative support for our operations. Our operations to date have been funded primarily through commercial bank debt, our revenue interest financing debt and various equity offerings, including our at-the-market offerings. From inception through September 30, 2024, we sold 34,737,032 shares of our common stock and 2,608,922 pre-funded warrants, generating net proceeds of approximately $543.3 million, after deducting underwriting discounts, commissions and offering costs. As of September 30, 2024, we had cash and cash equivalents of $334.7 million. Based on our current operating plan, we believe that our existing cash and cash equivalents together with the drawdown of the remaining $125 million under our Loan and Security Agreement, as amended, or the Loan Agreement, with Hercules Capital, Inc. or Hercules, together with anticipated product revenues, are sufficient to fund operations for at least the next twelve months and we believe will be sufficient to enable us to reach cashflow positivity.

Since inception, we have incurred significant operating losses. Our net losses were $259.9 million and $122.0 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $1.2 billion. We expect to continue to incur operating losses for the foreseeable future. It could be several years, if ever, before VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK or other product candidates, if approved, generate significant revenues to offset these operating losses. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. The net losses we incur may fluctuate significantly from quarter to quarter and year to year.

We have generated limited revenue to date, until such time as we can generate significant revenue from sales of our approved products containing vonoprazan, we expect to finance our cash needs through equity offerings, our Loan Agreement, our Revenue Interest Financing Agreement, additional debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all, and this risk could be exacerbated by the impact of ongoing conflicts throughout the world and global economic conditions. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

### License Agreement with Takeda

On May 7, 2019, we and Takeda entered into an exclusive license, or the Takeda License, pursuant to which we in-licensed the U.S., European, and Canadian rights to vonoprazan fumarate. During the term of the Takeda License, we and our affiliates are not permitted to commercialize any pharmaceutical product, other than vonoprazan, that treats acid-related disorders, except for certain generic and OTC competing products in specified circumstances. We will be responsible at our cost for the development, manufacture and commercialization of vonoprazan products. We are required to use commercially reasonable efforts to develop and commercialize the vonoprazan products in our licensed territory.

Under the Takeda License, Takeda has the sole right and authority, with our input, to prepare, file, prosecute, and maintain all Takeda and joint patents on a worldwide basis at its own cost. We are responsible, at our cost, for preparing, filing, prosecuting, and maintaining patents on inventions made solely by us in connection with vonoprazan, subject to input from Takeda.

We paid Takeda upfront consideration consisting of a cash fee of $25 million, 1,084,000 shares of our common stock, a warrant to purchase 7,588,000 shares of our common stock at an exercise price of $0.00004613 per share, or the Takeda Warrant, and issued Takeda a right to receive an additional common stock warrant, or the Takeda Warrant Right, if Takeda’s fully-diluted ownership of the Company represented less than a certain specified percentage of the fully-diluted capitalization, including shares issuable upon conversion of then outstanding convertible promissory notes, calculated immediately prior to the closing of our IPO. The Takeda Warrant Right expired without effect since no fair value had been allocated to it upon completion of our IPO, and no additional warrant was issued. We agreed to make milestone payments to Takeda upon achieving certain tiered aggregate annual net sales of licensed products in the United States, Europe and Canada up to a total maximum milestone amount of $250 million. We also agreed to make tiered royalty payments at percentages in the low double digits on net sales of licensed products, subject to specified offsets and reductions. Royalties will be payable, on a product-by-product and country-by-country basis from the first commercial sale of such product in such country, until the latest of expiration of the licensed patents covering the applicable product, expiration of regulatory exclusivity in such country, or 15 years following first commercial sale in such country.

### Components of Results of Operations

### Revenue

We began to recognize revenue from product sales, net of rebates, chargebacks, discounts, and other adjustments, in November 2023 in conjunction with the commercial launch of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK in the United States.

### Cost of Revenue

Cost of revenue includes the cost of producing and distributing inventories that are related to product sales. This also includes royalties payable to Takeda, pursuant to the Takeda License Agreement (Refer to Note 3 for further details). In addition, shipping and handling costs for product sales are recorded as incurred. Cost of revenue also includes costs related to excess or obsolete inventory adjustment charges.

### Operating Expenses

### Research and Development

To date, our research and development expenses have related to the development and regulatory approvals of vonoprazan. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track total research and development expenses by indication.

Research and development expenses include:

- *Clinical development expenses:* external research and development expenses incurred under agreements with CROs, regulatory costs, and consultants to conduct and support our clinical trials of vonoprazan;
- *Personnel related expenses*: salaries, payroll taxes, and employee benefits;
- *Chemistry manufacturing and controls, or CMC, expenses:* costs related to the manufacturing of vonoprazan for our clinical trials;
- *Consulting, professional and other costs:* external costs related to consulting and professional services and other research costs incurred; and
- *Stock-based compensation expenses*: stock-based compensation expense recognized for those individuals involved in research and development efforts.

The following table summarizes our research and development expenses for the three and nine months ended September 30, 2024 and 2023 (in thousands):

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Clinical development and regulatory | $2,640 | $6,000 | $8,757 | $13,645 |
| Personnel related | 2,714 | 2,606 | 8,223 | 8,263 |
| Chemistry manufacturing and controls | 1,454 | 1,655 | 2,730 | 7,775 |
| Consulting, professional and other costs | 589 | 605 | 1,913 | 1,845 |
| Stock-based compensation | 1,296 | 1,397 | 3,876 | 4,977 |
| Total research and development expenses | $8,693 | $12,263 | $25,499 | $36,505 |

We plan to invest in our research and development expenses for the foreseeable future as we continue the development of vonoprazan. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials and nonclinical studies of vonoprazan or any future product candidates due to the inherently unpredictable nature of clinical and preclinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

### Selling, General and Administrative

Selling, general and administrative expenses consist of salaries and employee-related costs, including stock-based compensation, for personnel in commercial, executive, finance, accounting, legal, human resources and other administrative functions, legal fees relating to intellectual property and corporate matters, and professional fees for accounting and consulting services. We anticipate that our selling, general and administrative expenses will increase in the future to support our commercialization activities and research and development activities. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company.

### Interest Income

Interest income consists of interest on our money market funds.

### Interest Expense

Beginning on May 3, 2022, interest expense includes interest on the Revenue Interest Financing Agreement, which is based on the imputed effective rate derived from expected future payments and the carrying value of the obligation. We recalculate the effective interest rate each period based on the current carrying value and the revised estimated future payments. Changes in future payments from previous estimates are included in current and future interest expense.

Beginning on December 14, 2023, interest expense under the Loan Agreement consists of (i) cash interest at a variable annual rate equal to the greater of (a) 9.85% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 1.35% and provided that the cash interest rate shall be capped at 10.35% and upon Company achieving the certain milestones, the cash interest shall be decreased by 0.35%, (ii) payment-in-kind interest at a per annum rate of interest equal to 2.15%, and (iii) amortization of the Loan

Agreement debt discount recorded in connection with the fair value of warrants issued to the lenders, the debt issuance costs incurred, and the obligation to make a final payment.

From September 17, 2021 through December 13, 2023, interest expense under the Loan Agreement consisted of (i) cash interest at a variable annual rate equal to the greater of (a) 5.50% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 2.25% or the Interest Rate, (ii) payment-in-kind interest at a per annum rate of interest equal to 3.35%, and (iii) amortization of the Loan Agreement debt discount recorded in connection with the fair value of warrants issued to the lenders, the debt issuance costs incurred, and the obligation to make a final payment.

### Results of Operations

### Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):

|  | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Product revenue, net | $25,588 | $— | $25,588 |
| Cost of revenue | 4,158 | — | 4,158 |
| Gross profit | 21,430 | — | 21,430 |
| Operating expenses: |  |  |  |
| Research and development | 25,499 | 36,505 | (11,006) |
| Selling, general and administrative | 213,981 | 60,932 | 153,049 |
| Total operating expenses | 239,480 | 97,437 | 142,043 |
| Loss from operations | (218,050) | (97,437) | (120,613) |
| Other income (expense): |  |  |  |
| Interest income | 11,648 | 4,528 | 7,120 |
| Interest expense | (53,416) | (28,939) | (24,477) |
| Other expense, net | (57) | (174) | 117 |
| Total other expense | (41,825) | (24,585) | (17,240) |
| Net loss | $(259,875) | $(122,022) | $(137,853) |

*Revenue.* Product revenues were $25.6 million for the nine months ended September 30, 2024 related to sales of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK which were launched in the fourth quarter of 2023.

*Cost of Revenue.* Cost of revenue was $4.2 million for the nine months ended September 30, 2024. In periods prior to receiving FDA approval for VOQUEZNA, we recognized inventory and related costs associated with the manufacture of VOQUEZNA as research and development expense and as such, the cost of revenue and related gross profits are not necessarily indicative of future costs of revenue and gross profit. Therefore, the manufacturing costs related to the inventory purchased before FDA approval were already expensed in a prior period and are therefore excluded from the cost of revenue for the nine months ended September 30, 2024. These previously expensed costs were not material.

*Research and Development Expenses.* Research and development expenses were $25.5 million and $36.5 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease of $11.0 million consisted of reductions of $5.0 million of CMC costs related to vonoprazan, $5.0 million of regulatory and clinical study related expenses due to the wrapping up of our PHALCON-NERD-301 Phase 3 daily dosing study, and $1.0 million related to personnel-related expenses primarily for stock-based compensation.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses were $214.0 million and $60.9 million for the nine months ended September 30, 2024 and 2023, respectively. The increase of $153.1 million was due to increases of $94.3 million commercial expenses related to the launch of VOQUEZNA products, which includes $53.3 million of external project spend and $41.0 million in advertising and promotional expenses in support of our commercial launch of VOQUEZNA products, $59.9 million increase in personnel-related expenses, partially offset by a decrease of $1.1 million in consulting and other professional services.

*Other Income (Expense).* Other expense of $41.8 million for the nine months ended September 30, 2024 consisted of $53.4 million of interest expense under the Loan Agreement and Revenue Interest Financing Agreement, partially offset by $11.6 million of interest income related to cash held in money market funds. Other expense of $24.6 million for the nine months ended September 30, 2023 consisted of $28.9 million of interest expense under the Loan Agreement and Revenue Interest Financing Agreement and $0.2 million of other expense, partially offset by $4.5 million of interest income related to cash held in money market funds. Interest expense increased due to a higher debt balance under the Loan Agreement as well as a higher liability related to our Revenue Interest Financing Agreement versus the prior period, partially offset by higher interest income due to our increased cash position.

### Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):

|  | Three Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Product revenue, net | $16,352 | $— | $16,352 |
| Cost of revenue | 2,356 | — | 2,356 |
| Gross profit | 13,996 | — | 13,996 |
| Operating expenses: |  |  |  |
| Research and development | 8,693 | 12,263 | (3,570) |
| Selling, general and administrative | 76,099 | 23,396 | 52,703 |
| Total operating expenses | 84,792 | 35,659 | 49,133 |
| Loss from operations | (70,796) | (35,659) | (35,137) |
| Other income (expense): |  |  |  |
| Interest income | 3,711 | 2,720 | 991 |
| Interest expense | (18,484) | (10,107) | (8,377) |
| Other expense, net | (8) | (197) | 189 |
| Total other expense | (14,781) | (7,584) | (7,197) |
| Net loss | $(85,577) | $(43,243) | $(42,334) |

*Revenue.* Product revenues were $16.4 million for the three months ended September 30, 2024 related to sales of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK which were launched in the fourth quarter of 2023.

*Cost of Revenue.* Cost of revenue was $2.4 million for the three months ended September 30, 2024. In periods prior to receiving FDA approval for VOQUEZNA, we recognized inventory and related costs associated with the manufacture of VOQUEZNA as research and development expense and as such, the cost of revenue and related gross profits are not necessarily indicative of future costs of revenue and gross profit. Therefore, the manufacturing costs related to the inventory purchased before FDA approval were already expensed in a prior period and are therefore excluded from the cost of revenue for the three months ended September 30, 2024. These previously expensed costs were not material.

*Research and Development Expenses.* Research and development expenses were $8.7 million and $12.3 million for the three months ended September 30, 2024 and 2023, respectively. The decrease of $3.6 million consisted of reductions of $3.4 million of regulatory and clinical study related expenses due to the wrapping up of our PHALCON-NERD-301 Phase 3 daily dosing study, and $0.2 million of CMC costs related to vonoprazan.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses were $76.1 million and $23.4 million for the three months ended September 30, 2024 and 2023, respectively. The increase of $52.7 million was due to increases of $37.1 million of commercial expenses related to the launch of VOQUEZNA products, which includes $19.6 million of external project spend and $17.5 million in advertising and promotional expenses in support of our commercial launch of VOQUEZNA products, $20.1 million increase in personnel-related expenses, partially offset by a decrease of $4.5 million in consulting and other professional services.

*Other Income (Expense).* Other expense of $14.8 million for the three months ended September 30, 2024 consisted of $18.5 million of interest expense under the Loan Agreement and Revenue Interest Financing Agreement, partially offset by $3.7 million of interest income related to cash held in money market funds. Other expense of $7.6 million for the three months ended September 30, 2023 consisted of $10.1 million of interest expense under the Loan Agreement and Revenue Interest Financing Agreement and $0.2 million of other expense, partially offset by $2.7 million of interest income related to cash held in money market funds. Interest expense increased due to a higher debt balance under the Loan Agreement as well as a higher liability related to our Revenue Interest Financing Agreement versus the prior period, partially offset by higher interest income due to our increased cash position.

### Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of September 30, 2024, we had cash and cash equivalents of $334.7 million.

### Loan Agreement with Hercules

On September 17, 2021, or the Closing Date, we entered into the Loan Agreement with Hercules (in such capacity, the Agent or Hercules), as administrative agent and collateral agent and as a lender and the other financial institutions that from time to time become parties to the Loan Agreement as lenders (collectively, the Lenders).

The Loan Agreement provides for term loans in an aggregate principal amount of up to $200 million, or the Term Loan, under multiple tranches. The tranches consist of (i) a first tranche consisting of term loans in an aggregate principal amount of $100 million, all of which was funded on the Closing Date, or the First Advance, (ii) a second tranche consisting of up to an additional $50 million, (iii) a third and fourth tranches consisting of an additional total $50 million, which became available to us in May 2022.

On September 27, 2022, we entered into an amendment to the Loan Agreement, or the Second Loan Amendment, pursuant to which the date the second tranche of funding of $50 million will remain available to us has been moved until May 15, 2023, rather than December 15, 2022.

On May 9, 2023, we entered into the Third Amendment to Loan and Security Agreement, or the Third Loan Amendment, with the lenders, pursuant to which, among other things, (i) the second tranche availability was extended from through May 15, 2023, to through December 15, 2023, and became available on October 1, 2023, (ii) the third tranche availability was extended from through September 30, 2023, to through December 15, 2023, and became available on October 1, 2023, (iii) the effective date of the Performance Covenants was amended to provide an option to extend the covenant trigger date to May 15, 2024, subject to the achievement of the FDA approval of vonoprazan for Erosive GERD or the EE Milestone, prior to February 15, 2024, and (iv) the warrant agreement with Hercules was amended as described below. On November 1, 2023, the EE Milestone was achieved and the covenant trigger date was extended to May 15, 2024. In connection with the Third Loan Amendment, a tranche extension amendment fee of $150,000 and a covenant extension amendment fee of $100,000 was paid to the Agent. These fees have been recorded as debt discount and are being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

On December 14, 2023, we entered into a Fourth Amendment to Loan and Security Agreement, or the Fourth Loan Amendment, with the lenders, which, among other things, (i) increases the aggregate principal amount of the term loans from $200 million to $300 million; (ii) provides for the possibility of accessing the $200 million commitment through five additional tranches referred to as tranches 2 through 6, which are available subject to certain milestones and conditions: (a) Tranche 2: $50 million, $40 million of which was funded on December 14, 2023, available through March 15, 2024, (b) Tranche 3: $25 million available through June 15, 2024, (c) Tranche 4: $25 million available through December 15, 2024, (d) Tranche 5: $50 million available, subject to the achievement of a specified revenue milestone, through June 30, 2025, and (e) Tranche 6: $50 million available, subject to the achievement of a specified revenue milestone, through December 31, 2025; (iii) extends the interest only period and the maturity date from October 2026 to December 2027, (iv) reduces the cash interest rate from 10.75% (floating annual rate equal to the greater of (a) 5.50% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 2.25% to 9.85% (floating rate based on the greater of (a) 9.85% or (b) US WSJ Prime + 1.35%), provided that the cash interest rate shall be capped at 10.35% and upon us achieving the certain milestones, the cash interest shall be decreased by 0.35%, and (v) decreases the payment-in-kind interest rate from 3.35% per annum to 2.15% per annum. In connection with the Fourth Loan Amendment, an amendment fee of $250,000 was paid to the Agent and was recorded as a debt discount and being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

On March 15, 2024, we drew down the remaining $10 million available under the Second Tranche. In addition, on June 14, 2024, we drew down the $25 million available under the Third Tranche.

The Term Loan will mature on December 1, 2027, or the Maturity Date. The Term Loan bears (i) cash interest at a variable annual rate equal to the greater of (a) 9.85% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 1.35%, or the Interest Rate, and (ii) payment-in-kind interest at a per annum rate of interest equal to 2.15%. We may make payments of interest only through the Maturity Date. After the interest-only period, the principal balance and related interest will be required to be repaid in full on the Maturity Date.

In addition, we are obligated to pay a final payment fee of 7.50% of the original principal amount of amounts actually advanced under the Term Loan, or each a Term Loan Advance and together, the Term Loan Advances. In connection with the Fourth Loan Amendment, the final payment fee was amended to be $1 million plus 3.00% of any future tranche drawdowns under the agreement, due upon final maturity. Additionally, the initial final payment fee for the first term Loan advance was amended to become payable on October 1, 2026. As of September 30, 2024, the aggregate final payment fee for the first Term Loan Advance of $7.5 million, $2.5 million for the second Term Loan Advance, and $0.8 million for the third Term Loan Advance have been recorded within other long-term liabilities.

Under the Fourth Loan Amendment, we may elect to prepay all or a portion of the Term Loan Advances prior to maturity, subject to a prepayment fee of up to 1.25% of the then outstanding principal balance of the Term Loan Advances being prepaid when such prepayment occurs prior to October 1, 2026, or 0.50% if such prepayment occurs on or after October 1, 2026. After repayment, no Term Loan amounts may be borrowed again.

The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default, and representations, warranties and covenants, including financial covenants. The financial covenants under the Fourth Loan Amendment include (i) a minimum cash covenant and (ii) a performance covenant as follows:

(i) Minimum cash covenant - We must maintain a minimum cash balance of 20% of the outstanding principal balance at all times. The minimum cash balance may be increased to 35% or 50% under performance covenant (b) below if the performance covenants (a) or (c) are not met beginning September 30, 2024 and all times thereafter.

(ii) Performance covenant - Beginning September 30, 2024 and all times thereafter we must satisfy any one of the following:

a. Market capitalization exceeding $900 million;

b. Minimum cash balance exceeding (x) outstanding principal amount of term loans, multiplied by (y) (A) 50%, prior to achieving trailing three months net product revenue of greater than $35 million, and (B) 35% thereafter; or

c. Trailing three months net product revenue of at least (x) 30% of agreed upon projected net revenues for periods in the calendar year 2024 and 25% for all periods thereafter or (y) $120 million.

Upon the occurrence of an event of default, subject to any specified cure periods, all amounts owed by us may be declared immediately due and payable by Hercules, as collateral agent.

As of September 30, 2024, we were in compliance with all applicable covenants under the Loan Agreement.

As collateral for the obligations, we granted Hercules a senior security interest in all of our right, title, and interest in, to and under substantially all of our property, inclusive of intellectual property.

In connection with the entry into the Loan Agreement, we issued to Hercules a warrant, or the Warrant, to purchase a number of shares of our common stock equal to 2.5% of the aggregate amount of the Term Loan advances funded, and will issue to Hercules additional warrants when future Term Loan advances are funded. On the Closing Date, we issued a Warrant for 74,782 shares of common stock. The Warrant is exercisable for a period of seven years from the date of issuance at a per-share exercise price equal to $33.43, which was the closing price of our common stock on September 16, 2021. In connection with the entry into the Third Loan Amendment, we amended the form of warrants to be issued upon drawdowns of future tranches such that the exercise price of such warrants shall be equal to the lesser (i) of $11.6783, which was the trailing ten-day VWAP prior to entering into the Third Loan Amendment and (ii) the trailing ten-day VWAP preceding the date on which we drawdown future tranches. In connection with the entry into the Fourth Amendment, we eliminated the warrant agreement for all future tranches. The Warrant issued with the initial tranche was not modified as part of this amendment. The exercise price and terms of the outstanding Warrant remain unchanged.

The initial $1.3 million fair value of the Warrant, the $10.8 million final interest payment fees and $4.4 million of debt issuance costs have been recorded as debt discount and are being amortized to interest expense using the effective interest method over the term of the Term Loan.

### Revenue Interest Financing Agreement

On May 3, 2022, we entered into a Revenue Interest Financing Agreement, or the Revenue Interest Financing Agreement, with entities managed or advised by NovaQuest Capital Management, or NQ, Sagard Holdings Manager LP, or Sagard, and Hercules, together with NQ and Sagard, or the Initial Investors, pursuant to which we could receive up to $260 million in funding from the Initial Investors. Under the terms of the Revenue Interest Financing Agreement, we received $100 million at the initial closing and received an additional $160 million upon FDA approval of vonoprazan for treatment of Erosive GERD in the fourth quarter of 2023. Additionally, on October 31, 2022, we entered into a Joinder and Waiver Agreement with the Initial Investors and CO Finance LVS XXXVII LLC, or the Additional Investor, and Hercules in its capacity as administrative agent and collateral agent for itself and the lenders under that certain Loan Agreement, or the Joinder Agreement, in respect of the Revenue Interest Financing Agreement. Under the terms of the Joinder Agreement, we received $15 million in additional funding upon FDA approval of vonoprazan for Erosive GERD, or Approval Additional Funding, in the fourth quarter of 2023 and provides for $25 million in additional funding for achievement of a sales milestone, or Milestone Additional Funding, and, together with the Approval Additional Funding, or the Additional Investor Funding. The Initial Investors waived their right of first offer for any Additional Investor Funding. The total amount funded by the Initial Investors and any subsequent investors is referred to herein as the Investment Amount.

Under the Revenue Interest Financing Agreement, the Initial Investors and the Additional Investor, are entitled to receive a 10% royalty on net sales of products containing vonoprazan. The royalty rate is subject to a step-down on net sales exceeding certain annual thresholds and upon FDA approval for vonoprazan for an indication relating to the treatment of heartburn associated with Non-Erosive GERD, which occurred on July 17, 2024. The investors’ right to receive royalties on net sales will terminate when the investors have aggregate payments equal to 200% of the Investment Amount. In addition, at any time after the earlier of (i) April 30, 2024 and (ii) the date that the payment for Erosive GERD regulatory approval was made, we have the right to make a cap payment equal to 200% of the Investment Amount less any royalties already paid, at which time the agreement will terminate.

If the investors have not received aggregate payments of at least 100% of the Investment Amount by December 31, 2028, and at least 200% of the Investment Amount by December 31, 2037, each a Minimum Amount, then we will be obligated to make a cash payment to the investors in an amount sufficient to gross the investors up to the applicable Minimum Amount.

Upon the occurrence of an event of default taking place prior to April 1, 2025, between April 1, 2025 and April 1, 2028, and after April 1, 2028, we are obligated to pay 1.30 times Investment Amount, 1.65 times Investment Amount, and 2.0 times investment amount, respectively, less any amounts we previously paid pursuant to the agreement.

### At-the-Market-Offerings

In November 2020, we entered into an Open Market Sale AgreementSM, or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which we may, from time to time, sell shares of our common stock having an aggregate offering price of up to an amount registered under an effective registration statement through the Sales Agent.

In November 2023, we filed a shelf registration statement on Form S-3 which was declared effective by the SEC on November 17, 2023, which included an at-the-market prospectus pursuant to which we may, from time to time, sell up to an aggregate of $150 million of our common stock through the Sales Agent, or the 2023 ATM Offering. We are not obligated to, and we cannot provide any assurances that we will, make any sales of the shares under the Sales Agreement. The Sales Agreement may be terminated by the Sales Agent or us at any time. For the year ended December 31, 2023, we sold 1,514,219 shares for net proceeds of approximately $14.1 million after deducting $0.4 million of issuance costs. No shares were sold during the three and nine months ended September 30, 2024. As of September 30, 2024, all of the available $150 million under the 2023 ATM Offering remains available.

### Underwritten Public Offerings

On August 20, 2024, we completed an underwritten public offering, in which we sold 8,695,652 shares of our common stock at a price of $11.50 per share and pre-funded warrants to purchase 2,608,922 shares of our common stock at a price of $11.499 per pre-funded warrant for total gross proceeds of $130.0 million. The net purchase price after deducting the underwriting discounts and commissions and other offering expenses, was $10.77 per share or net proceeds of $121.8 million.

On May 23, 2023, we completed an underwritten public offering, in which we sold 12,793,750 shares of our common stock, which included the exercise in full by the underwriters of their option to purchase 1,668,750 shares, at a price of $11.75 per share for total gross proceeds of $150.3 million. The net purchase price after deducting underwriting discounts and commissions was $11.08 per share, which generated net proceeds of $141.8 million. We incurred an additional $0.4 million of offering expenses in connection with this public offering.

### Funding Requirements

Based on our current operating plan, we believe that our existing cash and cash equivalents together with the drawdown of the remaining $125 million under our Loan Agreement with Hercules together with anticipated product revenues, are sufficient to fund operations for at least the next twelve months and we believe will be sufficient to enable us to reach cashflow positivity. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties and actual results could vary materially. We have based this estimate on assumptions that may prove to be inaccurate, and we could deplete our capital resources sooner than we expect and not reach cashflow positivity based on the amount and timing of product sales and operating expenses, among other factors. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Our future capital requirements will depend on many factors, including:

- our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payers and adequate market share and revenue for any approved products;
- patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payers;
- the initiation, type, number, scope, results, costs and timing of our clinical trials of vonoprazan, and preclinical studies or clinical trials of other potential product candidates we may choose to pursue in the future, including feedback received from regulatory authorities;
- the costs and timing of manufacturing for vonoprazan or any future product candidates, including commercial scale manufacturing for any approved product candidates;
- the costs, timing and outcome of regulatory review of future vonoprazan applications or such applications for any future product candidates;
- the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
- our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;
- the costs associated with hiring additional personnel and consultants as our business grows;
- the timing and amount of the milestone or other payments we must make to Takeda and any future licensors;
- the costs and timing of establishing or securing sales and marketing capabilities for vonoprazan or any future product candidate;
- the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; and
- costs associated with any products or technologies that we may in-license or acquire.

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through equity offerings, the Loan Agreement, the Revenue Interest Financing Agreement, debt financings, or other capital sources, including potential collaborations, licenses and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Including our existing cash and cash equivalents, we believe that we have sufficient working capital on hand to fund operations such that there is no substantial doubt as to our ability to continue as a going concern at the date the financial statements were issued. There can be no assurance that we will be successful in acquiring additional funding, that our projections of future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years. Based on our current operating plan, we believe that our existing cash and cash equivalents together with the drawdown of the remaining $125 million under our Loan Agreement with Hercules together with anticipated product revenues, are sufficient to fund operations for at least the next twelve months and we believe will be sufficient to enable us to reach cashflow positivity.

### Cash Flows

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):

| Net cash provided by (used in): | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Operating activities | $(203,314) | $(93,783) | $(109,531) |
| Investing activities | (130) | (1,159) | 1,029 |
| Financing activities | 156,728 | 155,587 | 1,141 |
| Net (decrease) increase in cash | $(46,716) | $60,645 | $(107,361) |

### Operating Activities

Net cash used in operating activities was approximately $203.3 million and $93.8 million for the nine months ended September 30, 2024 and 2023, respectively. The net cash used in operating activities for the nine months ended September 30, 2024 was due to approximately $197.0 million spent on ongoing research and development and selling, general and administrative activities and a $6.3 million net change in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $15.5 million increase in accounts payable and accrued expenses (including interest, operating lease assets and liabilities), and a $21.8 million increase in accounts receivable, inventory, and prepaid assets and other current assets in support of our growth and launch of our first commercial products. The net cash used in operating activities for the nine months ended September 30, 2023 was due to approximately $79.5 million spent on ongoing research and development and general and administrative activities and a $14.3 million net change in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $3.1 million decrease in accounts payable and accrued expenses (including interest and clinical trial expenses), and a $11.2 million increase in prepaid assets and other current assets, inventory, operating right-of-use assets and lease liabilities and other long-term assets.

### Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 and 2023, was related to payments for acquiring property and equipment.

### Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2024 was $156.7 million primarily related to $34.7 million of net proceeds from the issuance of debt under our Loan Agreement and $121.8 million of net proceeds from issuance of common stock and pre-funded warrants in connection with the underwritten public offering completed in August 2024. Net cash provided by financing activities for the nine months ended September 30, 2023 was $155.6 million related to net proceeds from the sale of our common stock.

### Contractual Obligations and Commitments

There were no material changes outside the ordinary course of our business during the nine months ended September 30, 2024 to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Form 10-K.

### Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a description of our critical accounting policies, please see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Significant Judgments and Estimates” contained in our 2023 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the nine months ended September 30, 2024.

### Other Company Information

### JOBS Act

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period.

### Recent Accounting Pronouncements

The information required by this item is included in Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies included in Part 1, Item 1 of this quarterly report.

### Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

## Market risk

As filed, 376 characters.

As of September 30, 2024, there have been no material changes surrounding our market risk, including interest rate risk, foreign currency exchange risk, and inflation risk, from the discussion provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” of our 2023 Form 10-K.

## Controls and procedures

As filed, 2,438 characters.

### Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this quarterly report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during our third fiscal quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 8,846 characters.

Other than as set forth below, there have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” of our 2023 Form 10-K.

***If the scope of any patent protection or non-patent regulatory exclusivity we obtain is not sufficiently broad, or if we lose or fail to obtain any of our patent protection or non-patent regulatory exclusivity, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.***

The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our in-licensed pending and future patent applications may not result in patents being issued which protect vonoprazan or any future product candidates or which effectively prevent others from commercializing competitive product candidates.

Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we own in the future or license currently issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any future patents that we own or license, now or in the future, may be challenged or circumvented by third parties or may be narrowed or invalidated as a result of challenges by third parties. Consequently, we do not know whether vonoprazan or any future product candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our future patents or the patents of our current and future licensors by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and prospects.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our future patents or the patents of our current and future licensors may not cover vonoprazan or any future product candidates or may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant review, or PGR, and inter partes review, or IPR, or other similar proceedings in the USPTO or foreign patent offices challenging our patent rights. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we or our predecessors and the patent examiner were unaware during prosecution. There is no assurance that all potentially relevant prior art relating to our in-licensed patents and patent applications has been found. There is also no assurance that there is not prior art of which we, our predecessors or licensors are aware, but which we do not believe affects the validity or enforceability of a claim in our in-licensed patents and patent applications, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our patent rights, allow third parties to commercialize vonoprazan or any future product candidates and compete directly with us, without payment to us. It is possible that defects of form in the preparation or filing of our or our current and future licensors’ patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If there are material defects in the form, preparation, prosecution, or enforcement of our future patents or future patent applications or our current and future licensors’ patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.

Any loss of patent rights, loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of vonoprazan or any future product candidates, which could materially and adversely impact our business. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. In addition, if the breadth or strength of protection provided by our future patents and future patent applications or the patents and patent applications of our current and future licensors is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize vonoprazan or any future product candidates.

In addition to patent exclusivity, the successful commercialization of our products also depends, in part, on our ability to obtain and maintain periods of non-patent exclusivity during which time the FDA is precluded from accepting new drug applications, or NDAs, submitted under Section 505(b)(2) of the FDCA or abbreviated new drug applications, or ANDAs, for certain competitive products. In May 2021, FDA granted qualified infectious disease product, or QIDP, designations to vonoprazan tablets in combination with both amoxicillin capsules and clarithromycin tablets, and with amoxicillin capsules alone, respectively, for the treatment of H. pylori infection. On May 3, 2022, the FDA approved our NDAs for these products, branded as VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, respectively. Because these approvals were for QIDP-designated drugs containing the active moiety, vonoprazan, which had not previously been approved, the FDA granted five-years of NCE exclusivity, which was extended by an additional five-years pursuant to the GAIN Act, resulting in a total of ten-years of NCE exclusivity, until May 3, 2032.

In November 2023, we received approval for VOQUEZNA, which also contains vonoprazan. NCE exclusivity protects against the submission and the FDA’s acceptance of a 505(b)(2) NDA or ANDA referencing that NCE for the duration of the exclusivity period, and the FDA interprets this form of exclusivity to attach to the active moiety such that the submission and the FDA’s acceptance of ANDAs and 505(b)(2) NDAs for a drug with that active moiety may not occur until the innovator’s exclusivity has expired, whether or not FDA has approved other versions of the drugs entitled to exclusivity, and regardless of the specific listed drug product to which the ANDA or 505(b)(2) application refers. Consequently, we believe that VOQUEZNA, because it contains vonoprazan, should benefit from the same extended period of NCE exclusivity granted in connection with our NDAs for VOQUEZNA DUAL PAK and VOQUEZNA TRIPLE PACK, until May 3, 2032.

The FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” referred to as the Orange Book, identifies that VOQUEZNA benefits from the same five-year period of NCE exclusivity as VOQUEZNA DUAL PAK and VOQUEZNA TRIPLE PAK, but does not currently identify the GAIN Act extension of an additional five-years of NCE exclusivity to which we believe it is entitled. We informally requested that the FDA correct the VOQUEZNA listings to reflect the same extended NCE exclusivity period as VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK. However, the FDA has not yet updated those listings. Based on feedback from the FDA, we plan to evaluate our alternatives, which may include pursuing a citizen petition or legal or other actions at the appropriate time. If the FDA ultimately concludes that the GAIN Act extension of NCE exclusivity granted in connection with our VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK NDAs does not extend to our VOQUEZNA NDA, there is the potential we could be subject to competition earlier than we currently anticipate given that our regulatory exclusivity would no longer extend beyond the current expected expiry of our vonoprazan drug patents in 2030 (assuming the grant of patent term extension). If this occurs, it would have a material adverse effect on our business and financial condition.

Filed Nov 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-123264. Last ingested by Listed: Nov 2, 2026, 17:47 ET. No prices; not investment advice.