When we learn more IPO details from management, I’ll provide a final opinion.
Company and Technology
Buffalo Grove, Illinois-based Phathom was founded in 2018 to develop and commercialize new treatments for GI diseases.
Company management is headed by President, CEO, and Treasurer David Socks, who has been with the firm since 2018 and has previously co-founded Incline Therapeutics, where he served as its President and COO.
In 2019, the firm changed its name to Phathom Pharmaceuticals as a result of the merger of the company with YamadaCo IIA.
The company’s lead drug candidate, “Vonoprazan”, is a potassium-competitive stomach acid blocker that inhibits acid secretion by competitively blocking potassium availability to hydrogen-potassium ATPase – a key enzyme responsible for the acidification of the stomach contents and the activation of the digestive enzyme pepsin.
Unlike traditional acid medication, such as proton pump inhibitors (PPIs), vonoprazan is longer-lasting, more resistant to acidic environments, and doesn’t require multiple courses of intake to complete the desired effect due to the inhibition of only functioning proton pumps, representing a potentially better alternative to the currently standardized therapies used for the management and treatment of acid-related GI diseases.
Vonoprazan was developed and commercialized by Takeda Pharmaceuticals (OTCPK:TKPHF, TYO:4502) in Japan under the brand TAKECAB for patients suffering from gastric ulcer, duodenal ulcer, or reflux esophagitis, who are undergoing an H. pylori treatment, or to prevent recurrence of gastric or duodenal ulcers during intake of low-dose aspirin or non-steroid anti-inflammatory medications. (Source: Takeda)
Phathom intends to initiate two pivotal Phase 3 clinical trials in Q4 2019 – one for the treatment of erosive GERD, also known as erosive esophagitis, and a second for the treatment of H. pylori infection, with top line data expected from both trials in 2021.
Below is the current status of the company’s drug development pipeline:
(Source: Company registration statement)
Management believes the company is in a position to leverage the clinical data from Takeda Pharmaceuticals, including the results of 17 Phase 3 clinical trials, to advance its lead drug candidate through pivotal trials in the US and Europe.
Market and Competition
According to a 2019 market research report by Market Study Report citing data from a Global Info Research study, the global GI diseases market was valued at $33.6 billion in 2019 and is projected to reach $35.3 billion by 2024. This represents a CAGR of about 0.9% between 2019 and 2024.
The North American region accounts for the largest share of consumption of GI therapeutics, reaching 52% in 2015.
Major competitors that provide or are developing GI disease treatments include:
Sanofi (SNY, EPA:SAN)
Bayer (OTCPK:BAYZF, ETR:BAYN)
PHAT’s recent financial results are typical of clinical-stage biopharma firms in that they feature no revenue and significant R&D and G&A expenses associated with development costs for its drug pipeline.
(Source: Company registration statement)
As of June 30, 2019, the company had $82.9 million in cash and $169.3 million in total liabilities. (Unaudited, interim)
PHAT intends to raise $100 million in gross proceeds from an IPO of its common stock, although the final figure may be different.
No existing shareholders have indicated an interest in purchasing shares at the IPO price. I would expect to see some form of investor “support” for the IPO, as this is typical for life science firms seeking public investment.
Per the firm’s latest filing, it plans to use the net proceeds from the IPO as follows:
… to fund the clinical development of vonoprazan and the remainder for working capital and general corporate purposes, including pre-commercial activities… We believe, based on our current operating plan, that the net proceeds from this offering together with our existing cash and cash equivalents, will be sufficient to fund our operations for at least the next 24 months, although there can be no assurance in that regard. In particular, we expect that the net proceeds from this offering will allow us to complete our planned Phase 3 clinical trials of vonoprazan in the treatment of erosive esophagitis and H. pylori infection. However, our expected use of proceeds from this offering described above represents our current intentions based on our present plans and business condition.
Management’s presentation of the company roadshow is not available.
Listed underwriters of the IPO are Goldman Sachs, Jefferies, and Evercore ISI.
PHAT is seeking public investment capital to fund its lead candidate which is preparing to enter Phase 3 trials in the current quarter.
The market opportunity for the firm’s lead candidate for the treatment of GERD is expected to reach $4.34 billion by 2025.
The drug is already generating more than $500 million in net sales in Japan only four years after approval in 2014.
The firm’s collaboration partner, Takeda, has already received marketing approval for vonoprazan in nine countries in Asia and Latin America.
Management believes it can use Takeda’s existing clinical data to support its trial efforts in the U.S. and Europe.
When we learn management’s assumptions on IPO pricing and valuation, I’ll provide a follow-up.
Expected IPO Pricing Date: To be announced.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.