Earnings Call Transcript - PHAT Q4 2025

Operator, Operator

Hello, and welcome to Phathom Pharmaceuticals Fourth Quarter and Full Year 2025 Earnings Results Call. Please be advised that today's call is being recorded. With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead.

Eric Sciorilli, Head of Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's fourth quarter and full year 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer. A couple of notes before we get started. Earlier this morning, we issued a press release detailing the results we'll 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 and the slides we'll be reviewing can also be found on our corporate website under the Events and Presentations section. Before we begin, let me remind you that we'll 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 may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the trading prices for Phathom's common stock. A discussion of these statements and risk factors is available on the current safe harbor slide as well as in the Risk Factors section of our most recent Form 10-K and subsequent SEC filings. All forward-looking statements made on this call are based on the beliefs of Phathom as of this date, and Phathom disclaims any obligation to update these statements. Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release. With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve?

Steven Basta, President and CEO

Thank you, Eric, and thank you to our investors and analysts for joining our call this morning. Thank you even more to the Phathom colleagues for your diligence and dedication throughout 2025. It was a transformational year for the company, and we're now set to execute our growth and profitability plan. Let me start by summarizing the key points Sanjeev and I will be discussing today. We had a successful Q4. We delivered on expectations for both revenue and cash operating expense levels, coming in at the better end of our guided ranges. We've taken key steps in the recent two months to enhance our capital structure, reduce our interest expense, and modify our outstanding term loan obligations. As a result, we believe our cash on hand, along with anticipated future cash generated from operations will be sufficient to satisfy all obligations under both our term debt and our revenue interest financing agreements. We're on track in guiding to operating profitability beginning in Q3 of this year and for the full year 2026. Our $320 million to $345 million revenue guidance for 2026 reflects our operating expectation of continued solid growth from our GI-focused strategy and includes an accounting-related classification change, which Sanjeev will cover in more detail. Our sales organization is positioned to deliver, and we're seeing clear signs that our GI strategy is working. I'm very proud of what our team accomplished in 2025. We believe we've set ourselves up for success, both financially and operationally. Beginning the update today with our financial highlights for Q4 and full year 2025, our results are in line with our preannounced estimates from January and incrementally a bit better on expenses and on cash usage. We've delivered on the plan we set forth on our May earnings call and reiterated in our earnings calls in August and in October. Net revenues were $175.1 million for the full year 2025, representing 217% year-over-year growth. Q4 sequential quarterly growth was solid during a period of sales force alignment as we had discussed in our October call. In August, we guided to $165 million to $175 million for 2025 revenue. We updated that in October to $170 million to $175 million, narrowing it to the top half of the range. And ultimately, we delivered at the high end of that range. Our Q4 revenue was $57.6 million, in line with our pre-released January estimate of $57 million to $58 million. Cash operating expenses, excluding stock-based compensation, were $50.3 million for Q4, better than both the less than $55 million target we guided to and to our preannounced range of $51 million to $53 million. We delivered solid growth through the last three quarters of 2025 while cutting quarterly cash operating expenses by nearly 50%. Our net cash usage for Q4 of 2025 was approximately $5 million. That's 64% lower than Q3 and consistent with our expectations of reaching operating profitability beginning in Q3 2026 and cash flow positivity in 2027. We've taken significant steps to enhance our capital structure. Our goals were: one, to reduce any financing overhang or potential risks stemming from repayment obligations or cash covenants; and two, to reduce our interest expenses. In 2025, we got the fundamentals of our business in order, growing revenue and reducing expenses. That improved financial profile enabled us to complete a successful equity offering in January and to renegotiate our debt terms as we announced today. We have modified our term loan agreement to extend the maturity date, which had previously been December of 2027, we've extended it to February 2029. And we've reduced our interest expense obligation and reduced the total outstanding principal amount. As a result of these capital structure enhancements, we believe our current cash plus the cash that we expect to generate from operations in the coming years will be sufficient to meet all obligations under both our term loan and our revenue interest financing agreements. Sanjeev will provide further details on these items and take you through our 2026 guidance. I'm very proud of our operating and financial progress these last 12 months. The entire Phathom team is dedicated to our objectives of growing revenue while being disciplined on expenses. We're exhibiting strong momentum, which we expect to carry forward throughout 2026. A few quick notes on our commercial progress. I said before how fortunate we are to be able to positively impact the lives of so many patients. Through February 13, over 1.1 million VOQUEZNA total prescriptions have been filled to more than 230,000 patients. We believe we're just starting to penetrate an enormous market. About 65 million patients have gastroesophageal reflux, of which 40% experienced inadequate symptom relief from PPIs. About 273,000 prescriptions were filled in Q4 alone. 174,000 of these were covered prescriptions growing 21% quarter-over-quarter and representing approximately 64% of the total prescriptions filled in Q4, while 99,000 were filled as cash pay prescriptions. Covered prescription volume drives our revenues while cash pay prescription volume improves physician perception of access and makes it easier for physicians to prescribe VOQUEZNA with confidence that their patients will be able to get the drug. Most importantly, both paths enable us to help patients in need of VOQUEZNA. Additionally, in November, we turned on a GoodRx offering, providing an alternative payment option for patients filling VOQUEZNA prescriptions sent to retail pharmacies. Looking forward, we have confidence in 2026 growth. We just completed our national sales meeting and the sentiment from the field is terrific. We start March with more than 285 of our 300 sales positions currently filled, a nearly full-strength sales organization. Our strategy to drive depth and frequency of calls to gastroenterologists is solid, and we believe it will ramp utilization and writing frequency among GIs treating GERD. 2026 will be an important year for us as we drive sales growth and transition to profitability. Overall, we continue to deliver as we guided on each of our previous earnings calls. Our 2025 results ended at the better end of our revenue and cash operating expense guidance ranges we communicated, and we believe we're on track to transition operating profitability beginning in Q3 of this year and to reach cash flow positivity in 2027. We've taken important steps to enhance our capital structure and mitigate any covenant or repayment concerns. The sales force is nearly full strength and energized following our national sales meeting. We're well positioned to execute and deliver on our strategy in 2026. I'll now turn the call over to Sanjeev to take you through our detailed financial updates.

Sanjeev Narula, Chief Financial and Business Officer

Thank you, Steve, and hello, everyone. I'm pleased to report our Q4 and full year 2025 results today. I'm encouraged by the changes we've made throughout 2025 and excited about what's on the horizon for 2026 and beyond. We have a lot of important updates on the financial front, so let me get right into it. Steve provided some top-level highlights for the quarter, and I'll provide additional color commentary. Our revenues for Q4 of $57.6 million were consistent with the pre-release and demonstrated 16% sequential quarterly growth. Aligned with the full year, the quarter also came in at the very top end of our guidance. As always, covered script volume primarily drives our revenue, while contribution from cash scripts and inventory dynamics remain minimal and consistent. Our gross to net for Q4 came in at the high end of the 55% to 60% range we provided last quarter as a result of shifting rebating mix. Our full year gross to net was within our expectations. Our gross margin remained consistent in Q4 and full year at approximately 87%. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation, of approximately $320,000, a 95% improvement compared to Q3. As you can see, this is a meaningful change in the operating profile of our company. As always, please refer to this morning's press release for a reconciliation between non-GAAP measures and their most directly comparable GAAP measures. Q4 cash operating expenses were about $50 million, notably favorable compared to the less than $55 million guidance we set forth earlier last year due to continued expense discipline. Similarly, our full year cash operating expenses of approximately $284 million came in at the low end of the range we provided on our Q3 call. We ended the year with about $130 million in cash and cash equivalents, which roughly reflects a $5 million cash usage in Q4 and signals a very clear path to operating profitability this year. Now let me turn to the enhancement of our capital structure. In January, we improved our capital structure via an oversubscribed equity offering, and today, we're announcing a modification of our term debt. As a result of these deliberate steps, we believe we now have a cost-effective and sustainable capital structure to meet our business needs and all of our debt obligations. The offering raised $130 million in gross proceeds, which brought our cash balance just north of $250 million at the start of the year. I'm pleased to announce today that we have successfully modified the terms of our outstanding term facility, which we believe will greatly benefit the company going forward. We reduced the remaining principal to $175 million outstanding and paid certain end of term fees and accrued paid-in-kind amounts from the original agreement. In total, we used approximately $56 million of our cash balance to streamline the facility. Additionally, we were successful in lowering the interest rate from 12% to 9.85%. Lastly, we extended the loan maturity date from December 2027 to February 2029. Partial monthly repayments will begin in 2028, which are anticipated to reduce the outstanding principal as well as our interest expenses. We expect we will be generating positive operating cash flow beginning in 2027 in advance of these repayment obligations. Overall, these modified terms reduce our interest expense, remove near-term payment hurdles, and provide greater financial flexibility. Following our capital structure enhancement, we believe our cash on hand, along with anticipated future cash flow from operations, will be sufficient to invest in our operations as needed and to satisfy all liquidity covenants and repayment obligations. For complete clarity on our covenant, we expect our highest cash flow requirement between now and September 30, 2027, will be approximately $130 million. The cash flow requirement is derived from our covenant in our revenue interest financing agreement, which becomes effective for the first time on October 1, 2026. All cash flow requirements relating to our term debt are substantially lower than those from our revenue interest financing agreement. Beginning October 1, 2027, we expect revenue interest financing agreement covenants will require that we temporarily hold a modestly higher cash balance, which will decline thereafter as revenues increase and we make additional royalty payments. To be clear, the cash flow covenants between the term debt and revenue interest financing agreements are not additive. We manage our liquidity to whichever covenant is the highest at any given point in time. Rest assured, for all these periods, we believe our cash on hand of approximately $190 million following our term debt modification and our anticipated cash generated from operations beginning in 2027 will be sufficient to satisfy all covenants at all times. We refer you to our 10-K filed earlier this morning for more information. While on the topic of our 10-K, I'd like to flag that in this year's document, we updated the business section and risk factors to reflect the company's transition to a primarily commercial entity. While the comparison against prior years will show significant tax changes, I want to be clear that we believe important updates are being covered during this earnings call and in this morning's press release. Now I'd like to move to our 2026 guidance. With our GI-focused strategy taking hold and our financial position enhanced, we're ready to deliver in 2026. Today, we are issuing guidance on several financial metrics, which reflect that sentiment. Before I get into the numbers, I'd like to provide clarity on the accounting-related explanatory note you saw in this morning's press release. Beginning January 1, certain third-party charges will be included in cost of goods sold instead of gross to net adjustments. All things equal, net revenue will be higher as a result of costs moving from gross to net adjustments to cost of goods sold, leading to a mostly net neutral effect on our gross profit line in our P&L. Importantly, this change is simply a different classification of these costs and does not impact the underlying operations of our business. We are estimating an approximately $17 million to $20 million shift in 2026 between two line items, which is reflected in following guidance. We anticipate 2026 net revenue will be $320 million to $345 million, including the estimated effect of the classification change I just described. As for gross to net, we believe the discount will be between 55% to 59%. We anticipate gross margin will be approximately 80%. As for spend, we are anticipating cash operating expenses, excluding stock-based compensation, of $235 million to $255 million, which at midpoint reflects a 14% decrease compared to 2025 results. Now a few comments about the cadence of these items over the course of 2026. We believe revenue will exhibit a similar pattern to last year with approximately 40% being achieved in the first half and approximately 60% being achieved in the second half, with the first quarter being the soft quarter due to typical seasonality. We expect expenses will be relatively stable on a quarterly basis, but will reflect a modest step-up from where we exited Q4 2025, accounting for nearly full-strength sales team, new marketing initiatives, and full-year cost of our EoE Phase II trial. Based on anticipated revenue, gross profit, and cash operating expenses, we anticipate achieving operational profitability, excluding stock-based compensation by Q3 and in total for full year 2026. And finally, we believe we will achieve cash flow positivity in 2027. In summary, our financial profile has transitioned meaningfully, and I'm excited for this next phase. This quarter results were strong, coming in at the better end of our guidance we previously provided. Our operational momentum is solid, which gives me confidence in our 2026 revenue trajectory. I feel confident in our financial position and believe we have the resources we need to execute the plan and deliver on the guidance ranges we set forth today. With that, I'll now turn the call back to Steve for his closing remarks.

Steven Basta, President and CEO

Thank you, Sanjeev, for the detailed financial review. I would like to extend my thanks to everyone at Phathom for their extraordinary efforts throughout 2025. I was able to meet many of our sales team members during our recent national sales meeting, and I'm heartened by their dedication and exceptional talent. Our transition to focus on gastroenterologists and to reach operating profitability is well underway. Thank you also to our shareholders for your support and confidence. We're dedicated to delivering value to reward your investment. Operator, please open the line for questions.

Operator, Operator

Our first question or comment comes from the line of Kristen Kluska from Cantor Fitzgerald.

Kristen Kluska, Analyst

Congrats on a really strong end of the year and the work you were able to do around the interest, definitely very favorable here. So the question I have for you this morning is just recognizing it's still very much early days. What can you tell us about the early signals that you're seeing from this strengthened sales force and strategy, especially coming out of that meeting? Are you seeing that more of the GIs that were new to your strategy are converting? And are you also seeing some early signals of growth within those current GIs where you added more touch points?

Steven Basta, President and CEO

Kristen, thanks so much for the kind thoughts and for bringing us to what I think is the most important topic actually, which is the core focus on our GI call point is the fundamental element of our growth strategy, and we are seeing consistent signs of momentum. It's interesting as you characterize the two different paths of sort of converting new writers versus growing existing writers. Virtually all gastroenterologists, not quite all, but a very high percentage of gastroenterologists have already written a script for VOQUEZNA. So we've got broad penetration within the gastroenterology community, both among physicians and among APPs with high conversion success already. What we focus on all of our sales force messaging in the context of our national sales meeting, in the context of the conversations that the regional managers are having with the territory sales representatives is all about how to grow writing frequency. We have what we refer to as an adoption ladder where physicians try the product and then we are trying to improve their consistency of writing and they become consistent writers, and then we try to improve their consistency of writing and they become adopters and so on. As we grow in the terms of the frequency of the physician writing a new prescription for VOQUEZNA. What we are seeing is very clear trends on those adoption letters associated with physicians moving up in category. So a physician who has only written two NRxs in the last quarter, a consistent physician will have written six or more weeks in the last quarter, et cetera. We are seeing physicians move from one category to the next consistently, where on one of the metrics, we'd only had 400 or 500 physicians last summer that were in the upper categories. Now we've got well north of 2,000 physicians in the upper categories. So we're seeing that adoption rate among not just the highest frequency writers, but very broadly within the GI community increasing. And that's the focus of all of our sales force conversations. That was the focus of our national sales meeting is how do we take physicians through that adoption ladder. It's the focus of each of our coaching conversations, and we're seeing clear evidence of it in our writing pattern. One of the metrics that I find to be helpful as we think about the long-term opportunity for this product is what is the rate of adoption we've achieved among the top few hundred writers. And there we're already seeing that we're now passing on average 20% penetration in terms of their PPI volume being converted to VOQUEZNA. When we get to 20% conversion across the broader GI community, that's where we're approaching $1 billion of revenue potentially in GI. That's clearly where we're headed over the next few years.

Operator, Operator

Our next question or comment comes from the line of Annabel Samimy from Stifel.

Annabel Samimy, Analyst

Following up on that comment, in the areas where you've been focusing on gastroenterologists, do you have any insight into how patients are moving back to primary care? Are you starting to see some growth in those more established accounts? I'm interested to know if this effort has led to any organic increase in primary care. Once everything is aligned and running smoothly, do you anticipate a significant change, or do you expect consistent growth throughout the year?

Steven Basta, President and CEO

So Annabel, that's a really important component of the long-term growth path is building beyond just GI to capture the return of patients to primary care and the growth there. Just candidly, we've not looked at it; at least I've not looked at it. I know our sales team is doing much more granular work on a physician-by-physician basis at the specific referral patterns for specific gastroenterologists to see their referring physicians and how they've adopted. I've looked at it much more broadly for the entire universe of primary care physicians, and we are seeing an uplift in primary care prescribing volume on a broad basis. The granularity that you're describing is very much an analysis that over time, we will do much more frequently. The near-term focus is on that core gastroenterology conversion point. And the expectation, exactly to your point, is over the next 6, 12, 18 months, we're going to see those patients returning to primary care and see those growing, and we'll be looking at that metric more precisely. But what we are seeing on a broad basis when we look at the total prescribing in GI and the total prescribing and primary care is an uplift in both. Even though the majority of our sales force time is going to GI, that uplift broadly in primary care prescribing volume would suggest that we are seeing exactly that effect. So was there a second half of your question? Or did that capture it?

Annabel Samimy, Analyst

Expectation for any inflections once everyone is on board...

Steven Basta, President and CEO

We don't specifically map out when an inflection point might occur because it's challenging to predict when the slope changes. Our focus is on achieving consistent growth month-over-month and quarter-over-quarter rather than implementing a dramatic strategy shift at this moment. In 2025, we significantly adjusted our strategy, realigning sales territories and changing call points. Looking ahead to 2026, our priority will be on diligent execution. We aim to ensure that we are making the right calls to gastroenterologists with the appropriate frequency and delivering effective messages every time. We're also addressing their access needs and facilitating their ability to write more VOQUEZNA prescriptions, which contributes to our growth. Therefore, we don't need to change our strategy but rather execute our plan effectively each quarter. While I can't precisely predict the growth trajectory from one quarter to the next, I do anticipate steady growth, which may accelerate at some point. We are witnessing positive indicators of increased adoption among physicians and the success of our sales representatives in their respective offices.

Operator, Operator

Our next question or comment comes from the line of Dennis Ding from Jefferies.

Anthea Li, Analyst

This is Anthea on for Dennis. Congrats on the quarter. First on Q1, do you expect sequential quarterly growth given the deployment of the expanded sales force? Or are you seeing that seasonality plus the winter storms will still be headwinds here? And is there a plan to seek broader Medicare coverage for VOQUEZNA this year and if that's baked into guidance?

Steven Basta, President and CEO

So Anthea, I'll briefly address the first part and then give Sanjeev the opportunity to add more detail on the seasonality in this process. We're clearly observing the typical seasonality that occurs, and the winter storms are having some impact as well. We've experienced slow weeks whenever the entire country is shut down due to an ice storm, which affects us. We don’t provide quarterly revenue guidance with that level of detail. While we acknowledge that Q1 is the weakest of the four quarters annually, we do not give guidance on whether it will be flat, up, or down. What we have provided is full-year guidance, and the metrics we're observing in terms of our sales call activity, physician prescribing behavior, and growth patterns give us confidence about our full-year performance. Sanjeev, if you want to add anything about seasonality?

Sanjeev Narula, Chief Financial and Business Officer

Yes. I think you pointed out, Steve, that we don't provide quarterly guidance. But I think what I said this time, if you look at in our kind of prepared remarks that we said earlier, if you look at the cadence of our business on a full-year basis, we'll be roughly kind of same trajectory as we experienced in 2025. 40% of our top-line revenue will be in the first half of the year, approximately 60% in the second half. And I said Q1 is going to be the slowest quarter because of typical seasonality. So I think that's kind of what we see, what the exact number is going to be. Obviously, you will hear that in the first quarter call that we talk about it. But clearly, it is the slowest to softest months because of the typical seasonality.

Steven Basta, President and CEO

And then the second half of your question, Anthea, I think, was related to Medicare. So we're not anticipating a fundamental change in broad Medicare coverage where we get coverage for all Medicare patients. What we are seeing is incremental Medicare prescriptions being covered either through medical appeals processes or through specific Medicare Part D plans. So as different Medicare Part D plans become more familiar with seeing VOQUEZNA prescriptions being submitted, they are beginning to cover those more frequently. Thus, we may see over time some increase in the number of Medicare scripts that are actually being processed and being covered, but it's not a broad coverage decision, nor do we anticipate that there's going to be any broad fundamental change in a broad coverage decision on a system-wide basis for the entire population of Medicare patients.

Operator, Operator

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

Joseph Stringer, Analyst

Just wanted to follow up on the previous question. Looking at the IQVIA prescription data and the impact of seasonality, is the magnitude of the seasonality effect this cycle in line with your expectations, I guess, all things considered? And maybe another way of asking is, are there any nuances about the launch now with the refocused effort that would make it more or less sensitive to seasonality?

Steven Basta, President and CEO

Thank you for the question. It's quite challenging to define the extent of seasonality from one year to another. What we're observing aligns closely with last year's trend, where January was particularly light, followed by February also being light. Then, in March last year, we noticed an uptick. We expect this same pattern to materialize, especially with several boosts in March as we come off the national sales meeting. Everyone is reenergized, our sales organization is fully staffed, and physicians have had time to finalize their plans. Patients who switched plans now have a chance to determine how to get their drug covered. These factors, which create some confusion in January as everyone adjusts to new health plans, typically get resolved in the first month or two. This annual effect is common for branded products, though its specific intensity can vary by product. We're beginning to see what this pattern looks like for us and we don’t notice anything out of the ordinary in that aspect. One observation is that the IQVIA reported numbers suggest a higher than usual underreporting compared to our internal figures. We believe we've identified the reason for that, and it should resolve itself. However, there might be some additional softness reflected in the IQVIA reported numbers compared to our actual figures. Nonetheless, the softness in January and February is genuine, and we anticipate a significant improvement in March. Additionally, as Anthea also pointed out, winter storms affected not just us but many companies, causing a slowdown for a week in January and another week in February in the Northeast. I don't want to exaggerate those factors; the main influence appears to be the regular annual seasonality we expect each year.

Operator, Operator

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

Unknown Analyst, Analyst

This is Daniel on for Paul. So we're curious about like if you could provide color on the proportions of prescriptions that are now filled to BlinkRx versus the new GoodRx that came online? And how is the economy of the channels versus the more traditional dispensary?

Steven Basta, President and CEO

There are several aspects to consider. First, regarding GoodRx, we just started using it in November. GoodRx already had coupons for our co-pay support program. If someone is at a pharmacy with a retail prescription and needs co-pay support because their insurance co-pay is high, they can use GoodRx to obtain our co-pay card, which can significantly reduce their co-pay amount, sometimes down to $25, our target co-pay when feasible. We also introduced a cash pay purchase option through GoodRx, which will still be counted in the IQVIA script numbers since it is dispensed from a retail pharmacy. Patients can purchase it for $199, primarily for those who either cannot access the co-pay card due to being on a government plan or whose co-pay would exceed $199. These numbers are still relatively small and represent a tiny percentage of the overall volume, having only launched in November. In future quarters, if this becomes a significant figure, we will share more details. Currently, it's a minimal number and not a key driver, but we want to make sure everyone is aware of this option. We're trying to offer multiple ways for patients in different reimbursement situations and access conditions to obtain the product at a reasonable price. More than half of our prescriptions are going through the Blink network, which routes them either to pharmacies as covered scripts or as cash pay scripts directly through Blink. When a physician sends a prescription to Blink, it first checks if the script will be covered. If it is, it appears in the IQVIA numbers but not in our Blink cash statistics, even though Blink facilitates that process. Currently, about half of our total scripts go through Blink. If they get covered, they show up in IQVIA numbers, and if not, they are counted as cash scripts. As mentioned, around 36% of our prescriptions are cash scripts dispensed through Blink. The difference in numbers reflects the scripts that are covered after initially being sent to Blink. Does that answer your question, or did you have another part to ask?

Operator, Operator

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

Chase Knickerbocker, Analyst

Just a quick one. Steve, what inning do you think we are in as far as kind of getting reps to full productivity or kind of where you expect them to be after kind of shifting the focus in the fall, but also changing the lines of like some of the geographical lines of a lot of these territories in the fall as well? Where do you think we are as far as the inning there?

Steven Basta, President and CEO

Yes. So I think full productivity for a sales rep comes several months after the sales rep is on board because there is a training process, there's a learning process. It takes a month or two to get to know the accounts in your territory and to have scheduled all of the launch events. So we had a number of sales training classes that came in January and then our national sales meeting in February. By March, April, all of those folks are hitting the ground. I mean they're hitting the ground immediately after their training program. But within a month or two, they've met most of the accounts in their territory, and they've got their launches scheduled and they've got momentum within each of those accounts, and you start to see the real impact. So I would think we are to use the baseball analogy at the seventh or eighth inning of that nine-inning process of sort of the sequence of events where the sales force gets to be fully effective.

Chase Knickerbocker, Analyst

And sort of since that shift to focus in GI, have you seen kind of the increase in productivity that having more kind of condensed patient base at these prescribers would indicate? Or do you think there's kind of additional efficiency that we'll continue to kind of harvest over the course of this year?

Steven Basta, President and CEO

It's interesting to note that even when the sales force is operating at full efficiency, the impact on sales isn't immediately visible within that day, week, or even month. This is because most of our prescriptions come from existing patients who are simply refilling their prescriptions, as well as from doctors who have already adopted the product and are now recommending it to additional physicians. Essentially, we are only influencing the rate of incremental adoption. For instance, if there is a base volume of 70% to 80%, the effect we're having is mostly on the remaining 20%. If we increase effectiveness by 30%, that 20% would rise to 26%, but it's important to recognize that it's still based on the existing 80%. Therefore, when we do achieve greater effectiveness in our sales efforts, it doesn't lead to an immediate boost in revenue within the month. Instead, what happens is that this incremental effectiveness accumulates over time. The increased patient conversions we see in a given month contribute not only to that month's prescriptions but also to refills in subsequent months and additional new prescriptions going forward. Consequently, there's a cumulative growth effect rather than an immediate shift in revenue from the sales activities. This illustrates how products that require consistent usage develop and build up over time.

Operator, Operator

Our next question or comment comes from the line of Min Lee from Guggenheim Partners.

Min Lee, Analyst

Congrats on the data. One quick question for me. What is the company's long-term vision beyond VOQUEZNA? I mean given that you guys have established this GI network, do you guys plan to utilize this network to consider maybe future partnership with companies that have already commercially ready GI assets? Or do you guys plan to maybe pursue any other indications beyond EoE?

Steven Basta, President and CEO

So Min, thank you for the question. So at this point, the only new indication that we're pursuing actively is EoE for VOQUEZNA. There are other indications and other populations that are of interest that we're evaluating. We've made no decisions. For example, we did a Phase II trial for as-needed use, haven't made a decision yet about whether or not we wish to pursue that in a Phase III program, but there are other populations that also could be of interest. Our long-term growth plan, as we have indicated, is to build a GI company that will bring in additional assets. This year is very much a year of consolidating our execution plan building deep relationships at every gastroenterology office. The 300-person field force is going to have those deep relationships and is going to be fostering them and build a leverageable base that we could bring a second product into. We are also starting business development activities to explore what other products would make sense either to bring in a commercial product potentially or very possibly a Phase II or Phase III clinical stage product that could launch in 2030, '31, or '32 before we get to our LOE date so that we're launching not just probably a product, but two or three products over the course of the next four or five years that would build out a GI pipeline. So we're starting those conversations. We have had people bring us several ideas that are interesting. I don't feel any urgency that we need to distract our sales force with a second product right now. We just need to grow VOQUEZNA. We need to just execute on our core activity set, but we are actively thinking about what products would make sense to bring in to launch over the next two to five-year period of time, and that could mean products at various stages from commercial down to Phase II stage. But it has to be launchable within the next two to five years, so that's launched before our LOE date in 2033 or '34.

Operator, Operator

Our next question or comment comes from the line of Martin Auster from Raymond James.

Martin Auster, Analyst

Congratulations on a successful 2025 and on the recent steps taken to strengthen the balance sheet. I want to follow up on an earlier question regarding Q1 seasonality. I wonder if the plan resets and other factors contributing to seasonality will lead to an increase in the rate of cash pay patients expected in the quarter. Additionally, regarding the gross to net guidance provided by Sanjeev, are there any trends assumed within the 55% to 59% range, or is that metric anticipated to remain stable throughout the year?

Steven Basta, President and CEO

So thanks, Martin. Appreciate the kind thoughts on the questions. I'll take the first half, which is around cash pay and the second half, I'll give to Sanjeev in terms of GTN and sort of expectations. We would expect that we'll see some uptick in the amount of cash pay patients. I don't have any guidance on how much that is. I don't think it's going to be too significant in that process. But you'll see some patients who have a high deductible plan where they will be able to get access to the product on a cash basis from Blink. And then as they work through their deductibles, they will then be able to get it covered at some later period. So you may see some movement in cash pay percentage in the early months of each year. That's not just this year; that would just be in general as a pattern in this process. We don't provide guidance on what that mix is going to be on a quarter-to-quarter basis, but that would be a typical feature of the seasonality patterns that one might expect. Separately, in terms of GTN and patterns and trends on GTN. Sanjeev, do you want to take that?

Sanjeev Narula, Chief Financial and Business Officer

Yes. Yes, I'll take that, Steve. Thank you. So Martin, as you saw, like in 2025, so we kind of narrowed the guidance, if you recall, in our Q3 call to 55%, 60%. And right through the last year, we were kind of operating within that range. Quarter-to-quarter, there are variations because your planned business may change from one quarter to the other. But overall, it was very consistent and stable. And that's kind of what I expect in the guidance that we gave early this morning, 55% to 59%. Overall, for the full year, we'll be within that guidance. Quarter-to-quarter, there could be changes depending on how the plan flows and the business flows from that perspective.

Operator, Operator

Our next question or comment comes from the line of Matthew Caufield from H.C. Wainwright.

Matthew Caufield, Analyst

We had one question on the landscape that came up from investors. There's a separate private company with later-stage clinical development in non-erosive reflux disease and erosive esophagitis based on the P-CAB formulation. And just curious on your longer-term thoughts on any prospective entrants into the P-CAB space later into the future and maintaining VOQUEZNA's positioning.

Steven Basta, President and CEO

Thank you for your question, Matthew. I apologize for muting for a moment to cough as I’m dealing with a bit of a cold. I believe you are asking about Sebela, which is developing tegoprazan. There is another P-CAB also in development that is several years away. We closely monitor competitive developments regarding all P-CABs. Tegoprazan is a solid product, and we expect it to go through the NDA process, having filed their application in January. It's reasonable to anticipate that approval could come by early 2027, but we can't predict the exact timeline or potential questions that may arise. When we consider how the market might evolve with a second player entering the P-CAB space, there are interesting dynamics at play. One question that might arise is whether two P-CABs will compete directly, but the reality is that we are part of a market with 110 million PPI prescriptions annually, and since our launch, we have only reached 1.1 million prescriptions total. Currently, we are running at about 1 million prescriptions per year, which means we hold just 1% of the PPI market. If a second entrant arrives, they won’t necessarily be taking away prescriptions from us. Instead, both of us will work to increase awareness of P-CABs, especially for patients suffering with PPIs. The introduction of another product in this category often shifts physicians’ mindsets from focusing solely on the first entrant to considering the entire category. This increase in category awareness is beneficial for us, as the first product usually earns the majority of prescriptions because physicians are more comfortable with it and it has established access. A second entrant generally helps to expand the category and can lead to increased revenue for both companies involved. We believe that having another sales force discussing P-CABs and their benefits for patients still experiencing PPI-related pain will positively affect the adoption of P-CABs. We are optimistic about the expanding acceptance among physicians regarding the necessity of PPIs. We feel confident in our product and have received positive feedback from physicians regarding its effects on patients, who also love it. All of this will help reinforce that the leading product in this category will see the most growth.

Operator, Operator

I'm showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.