Phathom Pharmaceuticals, Inc. (PHAT) Bundle
Understanding Phathom Pharmaceuticals, Inc. (PHAT) Revenue Streams
Understanding Phathom Pharmaceuticals, Inc. Revenue Streams
Phathom Pharmaceuticals, Inc. has reported its revenue primarily from the sales of its product VOQUEZNA, which was launched in the fourth quarter of 2023. The following data illustrates the revenue performance for the three and nine months ended September 30, 2024, compared to the same periods in 2023.
| Period | Product Revenue, Net (in thousands) | Cost of Revenue (in thousands) | Gross Profit (in thousands) | Year-over-Year Revenue Growth Rate |
|---|---|---|---|---|
| Three Months Ended September 30, 2024 | $16,352 | $2,356 | $13,996 | — |
| Three Months Ended September 30, 2023 | $0 | $0 | $0 | — |
| Nine Months Ended September 30, 2024 | $25,588 | $4,158 | $21,430 | — |
| Nine Months Ended September 30, 2023 | $0 | $0 | $0 | — |
The significant increase in product revenue for the three months ended September 30, 2024, is attributed to the successful launch of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK. The total operating expenses for the same period were reported at $84.8 million, which includes:
- Research and Development Expenses: $8.7 million
- Selling, General and Administrative Expenses: $76.1 million
The year-over-year revenue growth rate is not applicable for 2023 since the product was launched in late 2023, resulting in no revenue prior to that period. The overall revenue contribution from the product sales is expected to grow as the company expands its market presence.
For the nine months ended September 30, 2024, the increase in selling, general and administrative expenses was largely driven by:
- Commercial Expenses: $94.3 million related to the launch
- Personnel-related Expenses: $59.9 million
As of September 30, 2024, the total loss from operations was reported at $218.1 million, reflecting the high costs associated with launching a new product and ongoing development efforts .
A Deep Dive into Phathom Pharmaceuticals, Inc. (PHAT) Profitability
A Deep Dive into Phathom Pharmaceuticals' Profitability
Gross Profit, Operating Profit, and Net Profit Margins:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Product Revenue, Net | $16,352,000 | $0 | $16,352,000 |
| Cost of Revenue | $2,356,000 | $0 | $2,356,000 |
| Gross Profit | $13,996,000 | $0 | $13,996,000 |
| Operating Expenses | $84,792,000 | $35,659,000 | $49,133,000 |
| Loss from Operations | ($70,796,000) | ($35,659,000) | ($35,137,000) |
| Net Loss | ($85,577,000) | ($43,243,000) | ($42,334,000) |
The gross profit margin for Q3 2024 can be calculated as follows:
Gross Profit Margin: (Gross Profit / Product Revenue) x 100 = (13,996 / 16,352) x 100 = 85.7%
Trends in Profitability Over Time:
For the nine months ended September 30, 2024:
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Product Revenue, Net | $25,588,000 | $0 | $25,588,000 |
| Cost of Revenue | $4,158,000 | $0 | $4,158,000 |
| Gross Profit | $21,430,000 | $0 | $21,430,000 |
| Total Operating Expenses | $239,480,000 | $97,437,000 | $142,043,000 |
| Loss from Operations | ($218,050,000) | ($97,437,000) | ($120,613,000) |
| Net Loss | ($259,875,000) | ($122,022,000) | ($137,853,000) |
Comparison of Profitability Ratios with Industry Averages:
As of Q3 2024, the profitability ratios can be summarized as follows:
| Metric | Phathom Pharmaceuticals | Industry Average |
|---|---|---|
| Gross Profit Margin | 85.7% | 60% - 70% |
| Operating Profit Margin | Not Applicable (Loss) | 10% - 20% |
| Net Profit Margin | Not Applicable (Loss) | 5% - 15% |
Analysis of Operational Efficiency:
The operational efficiency can be assessed through the trends in gross margin and operating expenses:
- Research and Development Expenses: $25,499,000 for 2024 vs. $36,505,000 for 2023, a decrease of $11,006,000.
- Selling, General and Administrative Expenses: $213,981,000 for 2024 vs. $60,932,000 for 2023, an increase of $153,049,000.
- Total Operating Expenses: Increased significantly due to the commercial launch of new products.
As of September 30, 2024, the company had an accumulated deficit of $1.2 billion .
Debt vs. Equity: How Phathom Pharmaceuticals, Inc. (PHAT) Finances Its Growth
Debt vs. Equity: How Phathom Pharmaceuticals Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Phathom Pharmaceuticals had total debt of approximately $175.7 million, net of debt discount. This amount consists of long-term debt, with no current portion reported for that date. The long-term debt non-current portion stood at $185.8 million, while the unamortized debt discount was $10.1 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Phathom Pharmaceuticals is calculated based on its total debt of $175.7 million and total stockholders' equity of approximately $1.0 billion as of September 30, 2024. This results in a debt-to-equity ratio of approximately 0.17. This ratio is significantly lower than the industry average for biopharmaceutical companies, which typically ranges from 0.5 to 1.0, indicating a conservative approach to leveraging debt.
Recent Debt Issuances and Credit Ratings
In 2023, Phathom Pharmaceuticals raised $175 million through a Revenue Interest Financing Agreement. The company also entered into a Loan Agreement with Hercules, providing for term loans of up to $200 million. As of the latest updates, there has been no formal credit rating issued by the major credit rating agencies for Phathom Pharmaceuticals, reflecting its emerging growth status and ongoing financial development.
How the Company Balances Between Debt Financing and Equity Funding
Phathom Pharmaceuticals has primarily financed its growth through a combination of debt and equity. In addition to the aforementioned debt agreements, the company has issued common stock to raise $121.8 million in net proceeds from a public offering completed in August 2024. The balance between equity and debt financing reflects the company's strategy to maintain liquidity while minimizing the risk associated with high leverage.
| Financial Metric | As of September 30, 2024 |
|---|---|
| Total Debt | $175.7 million |
| Long-term Debt (Non-current) | $185.8 million |
| Unamortized Debt Discount | $10.1 million |
| Total Stockholders' Equity | $1.0 billion |
| Debt-to-Equity Ratio | 0.17 |
| Net Proceeds from Debt Issuances (2023) | $175 million |
| Net Proceeds from Public Offering (August 2024) | $121.8 million |
Assessing Phathom Pharmaceuticals, Inc. (PHAT) Liquidity
Assessing Phathom Pharmaceuticals, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 2.07, indicating a strong liquidity position with current assets of $334.7 million and current liabilities totaling $161.5 million.
Quick Ratio: The quick ratio stands at 2.01 as of the same date, reflecting a solid ability to meet short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, is currently at $173.2 million. This represents a significant increase from $99.5 million as of December 31, 2023, showcasing improved operational efficiency and financial health.
Cash Flow Statements Overview
| Cash Flow Type | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|
| Operating Activities | ($203,314) | ($93,783) |
| Investing Activities | ($130) | ($1,159) |
| Financing Activities | $156,728 | $155,587 |
| Net Change in Cash | ($46,716) | $60,645 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents amount to $334.7 million, providing a cushion for ongoing operations. However, net cash used in operating activities has increased significantly, with a reported cash burn rate of $203.3 million for the nine months ended September 30, 2024, compared to $93.8 million in the prior year. This trend raises concerns about sustainability if revenues do not increase significantly in the near future.
Furthermore, the company has a substantial debt obligation with an outstanding loan balance of $185.8 million and accrued interest of $1.5 million. The effective interest rate on the revenue interest financing liability is approximately 14.26%, which could strain future cash flows.
Is Phathom Pharmaceuticals, Inc. (PHAT) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the company reported a net loss of $259.9 million for the nine months ended, compared to a net loss of $122.0 million for the same period in 2023. The net loss per share for the nine months was $4.29.
Price-to-Earnings (P/E) Ratio
Currently, the company does not have a P/E ratio as it is not generating positive earnings. The net losses have led to a lack of profitability, making this metric inapplicable for valuation at this time.
Price-to-Book (P/B) Ratio
The book value as of September 30, 2024, was approximately $1.001 billion with total outstanding shares of 68.3 million. The P/B ratio can be calculated as follows:
| Metric | Value |
|---|---|
| Market Capitalization (as of latest stock price $11.50) | $785.45 million |
| Book Value | $1.001 billion |
| P/B Ratio | 0.78 |
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) as of September 30, 2024, is calculated as follows:
| Metric | Value |
|---|---|
| Market Capitalization | $785.45 million |
| Total Debt | $185.8 million |
| Cash and Cash Equivalents | $334.7 million |
| Enterprise Value (EV) | $636.55 million |
| EBITDA (assumed for calculation purposes) | Not Applicable (negative earnings) |
| EV/EBITDA Ratio | Not Applicable |
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly. As of September 30, 2024, the stock price was $11.50, reflecting a recent public offering where shares were sold at this price. The stock has experienced volatility, with a high of $12.00 and a low of $6.50 over the past year.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, and hence the dividend yield is 0%. The payout ratio is also not applicable due to the absence of dividends.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a mixed outlook, with some analysts rating the stock as a Hold while others suggest a Sell due to ongoing operational losses and market risks.
Key Risks Facing Phathom Pharmaceuticals, Inc. (PHAT)
Key Risks Facing Phathom Pharmaceuticals, Inc.
Industry Competition: The biopharmaceutical industry is highly competitive, with numerous companies developing similar products. As of September 30, 2024, Phathom's product revenues were reported at $25.6 million for the nine months ended, primarily from VOQUEZNA and its variants, which launched in Q4 2023. The competitive landscape could pressure pricing and market share.
Regulatory Changes: Phathom operates in a heavily regulated environment. The approval of VOQUEZNA by the FDA on October 27, 2023, was a significant milestone, yet ongoing compliance with FDA regulations remains a risk. Future regulatory changes could affect operations and market access.
Market Conditions: Economic fluctuations can impact funding availability and investor sentiment. As of September 30, 2024, the company had $334.7 million in cash and cash equivalents, which is essential for sustaining operations amid changing market conditions.
Operational Risks: Phathom has incurred significant net losses, amounting to $259.9 million for the nine months ended September 30, 2024. The company anticipates continued losses in the foreseeable future, raising concerns about operational sustainability.
Financial Risks: The company's total liabilities were reported at $574.2 million as of September 30, 2024, including long-term debt and revenue interest financing liabilities. This high level of debt presents a risk of financial distress if revenue growth does not meet projections.
Strategic Risks: The reliance on a single product line exposes the company to risks associated with product performance and market acceptance. The net loss per share was $4.29 for the nine months ended September 30, 2024, underscoring the financial impact of these strategic choices.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition in biopharmaceuticals, affecting pricing and market share. | Potential reduction in product revenues. |
| Regulatory Changes | Compliance with FDA regulations and changes in laws affecting operations. | Increased compliance costs. |
| Market Conditions | Economic fluctuations impacting funding and investor sentiment. | Potential for decreased cash reserves. |
| Operational Risks | Significant net losses affecting operational viability. | Negative impact on cash flow and sustainability. |
| Financial Risks | High level of debt leading to financial distress. | Risk of insolvency if revenues do not grow. |
| Strategic Risks | Dependence on a single product line. | High volatility in financial performance. |
Mitigation Strategies: The company aims to diversify its product offerings and strengthen its financial position through strategic partnerships and additional funding sources. The Loan Agreement with Hercules provides access to up to $200 million in funding, which is crucial for ongoing operations and development efforts.
As of September 30, 2024, the outstanding loan balance was $185.8 million, indicating the importance of managing debt while pursuing growth opportunities.
Future Growth Prospects for Phathom Pharmaceuticals, Inc. (PHAT)
Future Growth Prospects for Phathom Pharmaceuticals, Inc.
Analysis of Key Growth Drivers
The primary growth driver for the company is the launch of its products, specifically VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK. The product revenues for the nine months ended September 30, 2024, amounted to $25.6 million. The company has filled over 143,000 prescriptions since the launch, indicating strong market demand.
Future Revenue Growth Projections and Earnings Estimates
Projected revenues are expected to increase significantly as the company expands its market reach and product offerings. The company anticipates that the sales of its products will continue to grow, supported by a broad commercial coverage that currently reaches over 120 million U.S. commercial lives. The net loss for the nine months ended September 30, 2024, was $259.9 million, with the company projecting ongoing investments in its product pipeline and marketing efforts.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is seeking commercial partnerships for its products in Europe and Canada, which may enhance its revenue potential. In addition, it plans to evaluate the in-licensing or acquisition of additional product candidates for gastrointestinal diseases in a capital-efficient manner.
Competitive Advantages That Position the Company for Growth
Phathom Pharmaceuticals has established a competitive edge through its exclusive licensing agreement with Takeda for the U.S., European, and Canadian rights to vonoprazan fumarate. This strategic partnership allows the company to focus on the development and commercialization of its product line without competition in the specified markets for acid-related disorders.
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Product Revenue, Net | $16.4 million | $0 | $16.4 million |
| Cost of Revenue | $2.4 million | $0 | $2.4 million |
| Gross Profit | $13.996 million | $0 | $13.996 million |
| Net Loss | $85.6 million | $43.2 million | $42.4 million |
| Cash and Cash Equivalents | $334.7 million | $216.5 million | $118.2 million |
Conclusion
As the company continues to establish its market presence and expand its product offerings, it is well-positioned for future growth. The combination of strong product demand, strategic partnerships, and a solid financial foundation will play a crucial role in driving the company's performance moving forward.
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Updated on 16 Nov 2024
Resources:
- Phathom Pharmaceuticals, Inc. (PHAT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Phathom Pharmaceuticals, Inc. (PHAT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Phathom Pharmaceuticals, Inc. (PHAT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.