Annual
Report
2022
A Note from Phathom’s President & CEO
To Our Shareholders:
At Phathom, our mission is to change the treatment landscape of gastrointestinal (GI) disorders. Over the past year, our
team continued to advance this mission by securing Phathom’s first regulatory approvals from the U.S. Food and Drug
Administration (FDA) which brings us one step closer to delivering the first medicine in a new class of acid suppressants
to patients in the United States in over 30 years.
In 2022, Phathom made great strides in our efforts to bring novel treatments to patients as we garnered FDA approvals
for our initial products, VOQUEZNA® TRIPLE PAK® (vonoprazan, amoxicillin, clarithromycin) and VOQUEZNA® DUAL PAK®
(vonoprazan, amoxicillin) for the treatment of Helicobacter pylori (H. pylori) infection in adults. These products were
given priority review designation by the FDA and were previously designated as qualified infectious disease products,
highlighting the urgency for new and effective treatment options, and providing Phathom an additional five years
of market exclusivity. Eradication rates of H. pylori infection continue to decline due in part to increasing antibiotic
resistance, inadequate acid suppression, and complex treatment regimens, and we look forward to bringing these two
novel potential treatments to market that may help address these emerging concerns.
Last year, Phathom also submitted a new drug application with the FDA seeking approval of vonoprazan for the healing
and maintenance of healing of erosive gastroesophageal reflux disease (GERD), thereby advancing the development of
vonoprazan as a potential treatment for erosive GERD. As we recently announced, Phathom expects to submit stability
and other required data to the FDA in the second quarter of 2023 for our erosive GERD new drug application with
anticipated combined commercial launch for the erosive GERD and H. pylori indications, subject to FDA approval, by
the end of 2023. Over the past few years, a great deal of work has gone into building the core commercial capabilities
of our company, and we remain eager and ready to address the unmet medical needs of millions of patients seeking
new alternatives to standard of care treatments.
Another recent milestone achievement was advancing the development of vonoprazan as a treatment for non-erosive
GERD by delivering positive results from the primary endpoint of PHALCON-NERD-301, our Phase 3 trial evaluating
vonoprazan as a once-daily treatment for non-erosive GERD, the largest subcategory of GERD and one of the most
common gastrointestinal disorders worldwide. These results mark our third positive Phase 3 trial for vonoprazan in a
third potential indication. We remain on track to complete this study in the second half of 2023 and plan to submit a
regulatory application seeking FDA approval by year end. These Phase 3 data build on the positive topline results we
shared in 2022 from our Phase 2, proof-of-concept trial for vonoprazan dosed on an as needed (on-demand) basis for
the treatment of non-erosive GERD, which we believe supports the potential of vonoprazan to provide patients with
a rapid relief agent to treat non-erosive GERD on an as needed basis–a dosing regimen for which no proton pump
inhibitor (PPI) is approved in the U.S.
Along with Phathom’s regulatory progress and strong clinical data, we also succeeded in strengthening our balance
sheet in 2022 by securing up to $300 million in non-dilutive capital under the terms of our revenue interest financing
agreement. This financing should provide our organization with additional financial flexibility in order to help support
our future potential product launches.
While the past year presented some unexpected challenges, our team rose to the challenge and continued to advance
the development and commercial potential of vonoprazan. We remain excited about the future of Phathom, vonoprazan,
and our commitment to changing the landscape in GI and advancing treatments for patients with acid-related disorders.
We thank you for your continued support in the exciting years ahead.
Sincerely,
Terrie Curran
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-39094
PHATHOM PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
100 Campus Drive, Suite 102
Florham Park, New Jersey
(Address of Principal Executive Offices)
82-4151574
(I.R.S. Employer
Identification No.)
07932
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (877) 742-8466
Title of each class
Common Stock, par value $0.0001 per share
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
PHAT
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
The Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐
Accelerated filer
Smaller reporting company
☒
Large accelerated filer
Non-accelerated filer
Emerging growth company
☐
☒
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2022, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $198.0 million, based on the
closing price of the registrant’s common stock on the Nasdaq Global Select Market of $8.44 per share.
As of February 24, 2023, the registrant had 41,973,271 shares of common stock ($0.0001 par value) outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant’s definitive proxy statement for the 2023 annual meeting of stockholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K are incorporated by reference into Part III of this Form 10-K.
PHATHOM PHARMACEUTICALS, INC.
TABLE OF CONTENTS
FORM 10-K
For the Year Ended December 31, 2022
INDEX
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
4
66
143
143
143
143
144
145
146
160
160
160
161
161
161
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
162
Certain Relationships and Related Transactions, and Director Independence 162
162
Principal Accounting Fees and Services
162
162
Exhibits, Financial Statement Schedules
Form 10 K Summary
Signatures
163
163
169
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
2
PART I
This annual report on Form 10-K contains 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 annual 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 involve known and unknown risks, uncertainties and other important factors that may cause our
actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. This annual report on Form 10-K also
contains estimates and other statistical data made by independent parties and by us relating to market size and
growth and other data about our industry. This data involves a number of assumptions and limitations, and you
are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of
our future performance and the future performance of the markets in which we operate are necessarily subject to
a high degree of uncertainty and risk.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-
looking statements in this annual 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, and short term and long term business
operations and objectives. These forward-looking statements speak only as of the date of this annual report and
are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, “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. Moreover, we
operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is
not possible for management to predict all risk factors and uncertainties. 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.
This annual report includes trademarks, tradenames and service marks that are the property of other
organizations. Solely for convenience, trademarks and tradenames referred to in this annual report appear without
the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the
fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these
trademarks and tradenames.
We maintain a website at www.phathompharma.com, to which we regularly post copies of our press
releases as well as additional information about us. Our filings with the Securities and Exchange Commission, or
SEC, are available free of charge through our website as soon as reasonably practicable after being electronically
filed with or furnished to the SEC. Information contained in our website does not constitute a part of this report or
our other filings with the SEC.
3
Item 1. Business
Overview
We are a biopharmaceutical company focused on developing and commercializing novel treatments for
gastrointestinal, or GI, diseases. Our initial approved products, VOQUEZNA TRIPLE PAK™ and VOQUEZNA DUAL
PAK™, and our current product candidate, VOQUEZNA™, 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, 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, also known as
erosive esophagitis or EE, PHALCON-EE. In April 2021, we reported positive topline data from PHALCON-HP, and in
October 2021, we reported positive topline data from PHALCON-EE. These data are supplemented by the extensive
existing clinical data generated by Takeda as part of their 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. Prior to these approvals, in May 2021, we received qualified infectious disease product, or
QIDP, designations for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, which, upon approval of these products,
added five years of regulatory exclusivity to the five years of new chemical entity, or NCE, exclusivity for
vonoprazan to which these products were, and future products we develop containing vonoprazan will be,
entitled.
In March 2022, we submitted an NDA for vonoprazan 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. If approved, we expect to market the product under the brand name VOQUEZNA. In August 2022,
prior to the launch of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, we announced that, consistent with
current FDA Guidance for Industry: Control of Nitrosamine Impurities in Human Drug Products, we initiated testing
to determine whether nitrosamine impurities were present in our initial commercial drug product for VOQUEZNA
TRIPLE PAK and VOQUEZNA DUAL PAK. These tests revealed trace levels of a nitrosamine impurity, N-nitroso-
vonoprazan, or NVP, that is not described within the FDA Guidance document. In January 2023, we announced
that, although the FDA established an acceptable daily intake, or AI, for NVP at 96 ng/day, the FDA (Division of
Gastroenterology) advised us that it would not be acting on our erosive GERD NDA on or prior to the Prescription
Drug User Fee Act, or PDUFA, target action date of January 11, 2023. Rather, the FDA requested additional stability
data demonstrating that the levels of NVP will remain at or below the AI throughout the proposed shelf life of the
product. In February 2023, we received complete response letters from the FDA relating to our erosive GERD NDA
and post approval supplement relating to our approved H. pylori NDAs, both of which address specifications and
controls for NVP. These letters formalized FDA’s prior request that we provide additional stability data to
demonstrate that levels of NVP will remain at or below the AI throughout the proposed shelf life of the product.
No additional deficiencies were cited by the FDA in either letter. We have scheduled a meeting with the FDA in
March of 2023 to discuss our resubmission plan and timeline. If we are unable to demonstrate to the FDA that we
will be able to maintain NVP levels at or below the AI, launches of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL
4
PAK will be further delayed and approval of our erosive GERD NDA will continue to be delayed, which could
substantially increase our costs and delay or put at risk our ability to generate revenue and adversely affect our
commercial prospects.
Also in January 2023, we reported positive topline results from PHALCON-NERD-301, a Phase 3 study
evaluating the efficacy and safety of vonoprazan for the daily treatment of adults with symptomatic non-erosive
gastroesophageal reflux disease, or non-erosive GERD. This study will continue through a 20-week extension
period to evaluate long term safety and efficacy before its completion. We are also in discussions with the FDA
regarding the design of a Phase 3 trial to evaluate the novel dosing regimen of vonoprazan as an as needed
treatment for episodic heartburn relief in patients with non-erosive GERD, a dosing regimen not approved in the
United States for proton pump inhibitors. This trial would constitute our fourth Phase 3 trial for vonoprazan. In
February 2022, we reported positive topline results from PHALCON-NERD-201, the Phase 2 study evaluating proof-
of-concept efficacy from this novel dosing regimen.
We plan to independently commercialize vonoprazan in the United States. In addition, we plan to seek
commercial partnerships for vonoprazan in Europe and Canada, expand development of vonoprazan into other
indications, dosing regimens and alternative formulations and packaging, and in-license or acquire additional
clinical or commercial stage product candidates for the treatment of GI diseases in a capital efficient manner.
GERD and H. pylori infection are two of the most common acid-related GI diseases and impact millions of
people. The prevalence of GERD is estimated to be 20% of the U.S. population and 15% of the population in the
five major countries in Europe (France, Germany, Italy, Spain and the United Kingdom) (collectively, the “EU5”).
GERD is a disease that develops when the reflux of acidic stomach contents causes troublesome symptoms and/or
complications. Approximately 30% of GERD patients have erosive GERD. H. pylori is a bacterial pathogen that
infects approximately 35% of the U.S. population and 45% of the EU5 population. As a result of the chronic
inflammation induced by H. pylori infection, approximately 20% of infected patients will develop a range of
pathologies, including dyspepsia, peptic ulcer disease, gastric cancer, and mucosa-associated lymphoid tissue
(MALT) lymphoma.
Over the last thirty years, the proton pump inhibitor, or PPI, class, has been the standard of care for the
treatment of acid-related GI diseases. PPIs are generally used as a single agent for the treatment of GERD and in
combination with antibiotics for the treatment of H. pylori infection. The PPI class includes drugs such as Prilosec
(omeprazole), Nexium (esomeprazole), and Prevacid (lansoprazole). Prior to the introduction of generic and over-
the-counter, or OTC, alternatives, annual PPI class sales reached approximately $12.5 billion in the United States,
with peak sales for individual brands of approximately $3.7 billion for Prilosec, $3.5 billion for Nexium, and $3.4
billion for Prevacid.
While PPIs are the current standard of care and have experienced significant commercial success, they have
significant limitations that result in a large unmet medical need. In GERD, PPI therapy is suboptimal for many
patients due to the slow onset and insufficient duration of acid control which can lead to inadequate symptom
relief. Approximately 15% to 45% of GERD patients remain inadequately treated with PPIs. In the treatment of H.
pylori infection, the standard of care consists of a combination of a PPI and at least two oral antibiotics. However,
increasing antibiotic resistance has resulted in declining eradication rates with PPI-based therapy. We believe
these unmet medical needs are in part driven by limitations associated with the mechanism of action and
pharmacokinetics of PPIs.
5
PPIs reduce gastric acid secretion by irreversibly binding to and inhibiting active proton pumps expressed on
the parietal cells. PPIs require activation by gastric acid, but they are unstable in the presence of acid. This
instability, combined with the short circulating half-life of PPIs, limits their efficacy. Additionally, because proton
pumps continuously switch between active and inactive states, multiple doses of PPIs are required to inhibit
enough proton pumps to achieve a clinical benefit. As a result, PPIs have a relatively slow onset of action and
limited potency and duration of effect, which may result in patients experiencing only partial relief, increasing PPI
dosage, and/or cycling through multiple PPIs seeking relief.
Vonoprazan has a differentiated mechanism of action from PPIs. Unlike PPIs, vonoprazan:
•
•
•
•
•
does not require activation by gastric acid;
is stable in the presence of acid;
is designed to selectively concentrate in the parietal cells in both the resting and stimulated states, bind
to the active pumps and remain associated with the active and inactive pumps;
binds to the pumps in a noncovalent and reversible manner; and
has a long plasma half-life that replenishes the drug at the site of action over the course of the day.
These factors have enabled vonoprazan to demonstrate more rapid and potent acid suppression versus the
PPIs esomeprazole and lansoprazole in human subjects two hours after oral dosing and maintain target acid
inhibition over a 24-hour period in randomized, open-label, crossover clinical trials. In contrast, PPIs require three
to five days to reach steady state acid suppression and do not reliably maintain target acid inhibition over a 24-
hour period. In addition, vonoprazan demonstrated approximately 10-to-100-fold better acid control compared to
lansoprazole and esomeprazole.
Vonoprazan has demonstrated clinical advantages over the PPI lansoprazole in the treatment of erosive
GERD and H. pylori infection in completed Phase 3 clinical trials conducted in the United States and Europe,
including:
•
faster and more complete healing of erosive GERD in patients with moderate to severe disease;
• more durable healing of erosive GERD in patients with all grades of disease;
•
higher H. pylori eradication rates in combination with antibiotics compared to standard of care triple
therapy; and
• more flexible dosing, including dosing independent of food and time of day
Moreover, we believe that vonoprazan’s anti-secretory mechanism has the potential to contribute to
additional clinical advantages over PPIs such as rapid symptom relief through as needed dosing in the treatment of
patients with non-erosive GERD.
6
Erosive GERD. Our NDA seeking approval of vonoprazan, under the brand name VOQUEZNA, for the
treatment of adults with erosive GERD was based on the results from PHALCON-EE, our Phase 3 clinical trial
conducted in the United States and Europe. This trial assessed vonoprazan versus lansoprazole in the healing and
maintenance of healing of adult patients with erosive GERD. In PHALCON-EE, vonoprazan met its primary healing
endpoint demonstrating non-inferiority to lansoprazole in the number of patients who showed complete healing
of erosive GERD after eight weeks of treatment. Further, in a pre-specified secondary endpoint, vonoprazan
demonstrated superior healing after two weeks of treatment in patients with moderate to severe erosive GERD
compared to lansoprazole. After two weeks of treatment, 70% of patients with moderate to severe erosive GERD
were healed after treatment with vonoprazan versus 53% with lansoprazole (p=0.0008). In the maintenance phase
of the trial both doses of vonoprazan (10 mg and 20 mg) met the primary endpoint of non-inferiority compared to
lansoprazole in the number of all patients who maintained healing of erosive GERD through week 24. Further, both
vonoprazan doses also met a pre-specified secondary endpoint demonstrating superiority of maintenance of
healing versus lansoprazole (79% for vonoprazan 10 mg, 81% for vonoprazan 20 mg compared to 72% for
lansoprazole 15 mg) (p<0.0001 for both non-inferiority comparisons; p=0.0436 for vonoprazan 10 mg superiority
comparison; p=0.0272 for vonoprazan 20 mg superiority comparison). Both vonoprazan doses also met the pre-
specified secondary endpoint of demonstrating superiority of the percentage of patients with moderate-to-severe
disease who maintained healing of erosive GERD through week 24 (75% vonoprazan 10 mg, 77% vonoprazan 20
mg v. 61% lansoprazole 15 mg) (p=0.0490 for vonoprazan 10 mg superiority comparison; p=0.0196 for vonoprazan
20 mg superiority comparison).
In PHALCON-EE, vonoprazan 20 mg met the secondary endpoint of showing non-inferiority to lansoprazole
30 mg in the mean percentage of 24-hour heartburn free days over the healing period, and both vonoprazan doses
met the secondary endpoint of showing non-inferiority to lansoprazole 15 mg in the mean percentage of 24-hour
heartburn free days over the maintenance period. Finally, vonoprazan 20 mg was also compared to lansoprazole
30 mg in a superiority test for onset of sustained resolution of heartburn by day three of the healing phase but did
not achieve statistical significance (p=0.2196).
A p-value is the probability that the reported result was achieved purely by chance, such that a p-value of
less than or equal to 0.05 or 0.01 means that there is a 5.0% or 1.0% or less probability, respectively, that the
difference between the control group and the treatment group is purely due to chance. A p-value of 0.05 or less
typically represents a statistically significant result.
The results from PHALCON-EE were consistent with the results of four Phase 3 clinical trials previously
conducted by Takeda, two in each of Japan and China, assessing vonoprazan versus lansoprazole in the healing and
maintenance of healing of erosive GERD in which vonoprazan met its primary endpoint in demonstrating non-
inferiority to lansoprazole.
Symptomatic non-erosive gastroesophageal reflux disease. In PHALCON-NERD-301, a Phase 3 study
evaluating the efficacy and safety of vonoprazan for the daily treatment of adults with non-erosive GERD, both
doses of vonoprazan (10 mg and 20 mg) met the primary endpoint evaluating the mean percentage of 24-hour
heartburn -free days through week four by demonstrating statistical significance versus placebo (mean 46.4%
vonoprazan 10 mg, 46.0% vonoprazan 20 mg, compared to 27.5% for placebo; p<0.0001 for both vonoprazan 10
mg and 20 mg versus placebo). The median percentage of 24-hour heartburn-free days was 48.3%, 46.7% and
17.0% for vonoprazan 10 mg, vonoprazan 20 mg, and placebo, respectively. We anticipate full results from this trial
will be available in the second half of 2023 after the completion of the 20-week extension period, which is
currently ongoing to further evaluate the safety and efficacy of both doses of vonoprazan after six months of
continuous use. Pending receipt of these results, we expect to submit an application to the FDA in the second half
of 2023 seeking approval of vonoprazan as a daily treatment of adults with non-erosive GERD.
7
In PHALCON-NERD-201, a Phase 2 study evaluating three doses of vonoprazan (10 mg, 20 mg, and 40 mg) as
an as needed therapy for relief of episodic heartburn in subjects with non-erosive GERD, all three vonoprazan
doses successfully met the primary endpoint evaluating the percentage of heartburn episodes completely relieved
within three hours with relief sustained for over 24 hours and were statistically significant (p<0.0001) when
compared to placebo. Within three hours, vonoprazan 10 mg, 20 mg, and 40 mg achieved complete and sustained
relief in 56.0%, 60.6% and 70.0% of evaluable heartburn episodes, respectively, as compared to 27.3% of episodes
for placebo. An evaluable heartburn episode is a heartburn episode for which the participant completes a
minimum of one timed assessment after taking study medication.
Further, based on the positive PHALCON-NERD-201 results, we are in discussions with the FDA regarding the
design of a Phase 3 trial, which would be our fourth Phase 3 trial for vonoprazan, to evaluate the novel dosing
regimen of vonoprazan as an as needed treatment for episodic heartburn relief in patients with non-erosive GERD,
a dosing regimen not approved in the United States for PPIs.
H. pylori. The FDA’s approval of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK was based on the results
from PHALCON-HP, our Phase 3 clinical trial in the United States and Europe studying two vonoprazan-based
treatment regimens for the eradication of H. pylori infection, both of which successfully met their primary
endpoints and all secondary endpoints. The trial studied vonoprazan triple therapy and vonoprazan dual therapy
compared to lansoprazole in combination with amoxicillin and clarithromycin, or lansoprazole triple therapy. The
objective of the PHALCON-HP trial was to compare eradication rates in all treated subjects as well as in two pre-
identified subgroups of patients: those patients with clarithromycin resistant strains of H. pylori, and those
patients who did not have clarithromycin or amoxicillin resistant strains of H. pylori. For regulatory purposes, the
primary endpoint of this study was a non-inferiority comparison in the non-resistant subgroup for each of
vonoprazan triple therapy and vonoprazan dual therapy compared to lansoprazole triple therapy.
In PHALCON-HP, both vonoprazan-based regimens successfully met their primary endpoints. In the modified
intent-to-treat (mITT) population, H. pylori eradication rates were 84.7% for vonoprazan triple therapy and 78.5%
for vonoprazan dual therapy compared to 78.8% with lansoprazole triple therapy (p<0.0001 and p=0.0073,
respectively, for non-inferiority). In the pre-specified per protocol population, a subset of the mITT population
comprised of patients who were protocol compliant, H. pylori eradication rates were 90.4% with vonoprazan triple
therapy and 81.2% with vonoprazan dual therapy compared to 82.1% with lansoprazole triple therapy (p<0.0001
and p=0.0155, respectively, for non-inferiority).
In PHALCON-HP vonoprazan triple therapy and vonoprazan dual therapy also met all secondary endpoints,
demonstrating superior eradication rates versus lansoprazole triple therapy in all patients and in the subgroup of
patients with clarithromycin resistant strains of H. pylori. Among all patients, the H. pylori eradication rate of
vonoprazan triple therapy was superior to that of lansoprazole triple therapy in both the mITT population (80.8%
vs. 68.5%; p=0.0001) and the per protocol population (85.7% vs. 70.0%; p<0.0001). In the subset of patients with
H. pylori strains resistant to clarithromycin, the H. pylori eradication rate with vonoprazan triple therapy was
superior to that of lansoprazole triple therapy in both the mITT population (65.8% vs. 31.9%; p<0.0001) and the
per protocol population (67.2% vs. 29.0%; p<0.0001).
8
Among all patients, the H. pylori eradication rate of vonoprazan dual therapy was superior to that of
lansoprazole triple therapy in both the mITT population (77.2% vs. 68.5%; p=0.0127) and the per protocol
population (81.1% vs. 70.0%; p=0.0027). The H. pylori eradication rate of vonoprazan dual therapy was also
superior to that of lansoprazole triple therapy in the subset of patients with H. pylori strains resistant to
clarithromycin in both the mITT population (69.6% vs. 31.9%; p<0.0001) and the per protocol population (79.5% vs.
29.0%; p<0.0001).
The vonoprazan triple therapy results of PHALCON-HP were consistent with the results of a Phase 3 clinical
trial previously conducted by Takeda in Japan assessing vonoprazan in combination with the antibiotics amoxicillin
and clarithromycin versus lansoprazole in combination with these same antibiotics in first line treatment of H.
pylori infection at antibiotic doses and treatment duration (7 days) consistent with local practice in Japan.
Vonoprazan dual therapy was not tested in this study.
Our management team has deep expertise in developing GI therapeutics, including anti-secretory agents,
and direct experience developing vonoprazan at Takeda. Our Chief Executive Officer, Terrie Curran, has more than
20 years of experience in the biopharmaceutical industry. Ms. Curran served as President, Global Inflammation and
Immunology (I&I) Franchise and as a member of the Executive Committee at Celgene Corporation from 2017 to
2019. Ms. Curran joined Celgene in 2013 as the U.S. Commercial Head of the I&I Franchise, where she built the
capabilities and recruited the teams that executed the successful launch of OTEZLA, which was sold to Amgen in
November 2019 for $13.4 billion.
Azmi Nabulsi, M.D., M.P.H., our Chief Operating Officer, is the former Deputy Chief Medical and Scientific
Officer at Takeda. Our Head of Regulatory, Tom Harris, is the former Senior Vice President and Head of Global
Regulatory at Takeda. Dr. Nabulsi and Mr. Harris were extensively involved with the development of vonoprazan at
Takeda.
Our Pipeline
The following chart summarizes our current development programs.
9
Our Strategy
Our mission is to improve the lives of people suffering from gastrointestinal diseases. Our strategy is initially
focused on developing and commercializing vonoprazan as a first-in-class PCAB in the United States for the
treatment of acid-related GI diseases. Key elements of this strategy include:
• Obtain marketing approval of VOQUEZNA for treatment of erosive GERD and initiate commercial
launch of VOQUEZNA, VOQUEZNA TRIPLE PAK and DUAL PAK in the U.S. In May 2022, the FDA
approved VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK for the treatment of H. pylori infection in
adults. In February 2023, we received complete response letters from the FDA relating to our erosive
GERD NDA and post approval supplement relating to our approved H. pylori NDAs, both of which
address specifications and controls for NVP. We have scheduled a meeting in March 2023 with the FDA
to discuss our resubmission plan and timeline. Following potential approval of resubmissions and
launch, we expect all our approved products containing vonoprazan will benefit from a 10-year period of
marketing exclusivity that commenced upon approval of our initial products for H. pylori infection in
May 2022. This 10-year period of exclusivity is the result of vonoprazan being approved as new
chemical entity, or NCE, which provided a five-year period of marketing exclusivity for all our products
containing vonoprazan commencing with approval of VOQUEZNA TRIPLE PAK and DUAL PAK in May
2022. And, because those products received QIDP designations, the five-year NCE period of marketing
exclusivity for all our products containing vonoprazan was automatically extended by five years, until
May 2032.
• Advance the clinical development of vonoprazan in non-erosive GERD and seek marketing approval.
Symptomatic non-erosive gastroesophageal reflux disease, or non-erosive GERD, is a major subcategory
of GERD and is characterized by reflux-related symptoms in the absence of esophageal mucosal
erosions. We are pursuing development of vonoprazan for treatment of non-erosive GERD as both an as
needed and once-daily therapy. In January 2023, we reported positive topline results for the primary
endpoint of PHALCON-NERD-301, a Phase 3 study evaluating the efficacy and safety of vonoprazan for
the daily treatment of non-erosive GERD in adults. We are also in discussions with the FDA regarding the
design of a Phase 3 trial in order to evaluate the novel dosing regimen of vonoprazan as an as needed
treatment for episodic heartburn relief in patients with non-erosive GERD, a dosing regimen not
approved in the U.S. for PPIs. The pursuit of this novel dosing regimen is supported by the positive
topline results we reported in February 2022 for PHALCON-NERD-201, a Phase 2 study evaluating
various doses of vonoprazan and placebo as an as needed treatment for adults with non-erosive GERD.
•
•
Commercialize vonoprazan in the United States. We plan to independently commercialize VOQUEZNA
TRIPLE PAK, VOQUEZNA DUAL PAK, and if approved, VOQUEZNA, in the United States by building a
leading gastroenterology commercial infrastructure to support the adoption of vonoprazan. We believe
we can successfully commercialize these products in the United States with a focused sales force
targeting prescribers of treatments for H. pylori and GERD, particularly gastroenterologists. Prescriptions
for treatments for H. pylori and GERD are both highly concentrated, with approximately 76% of
prescriptions in H. pylori and 65% of prescriptions in erosive GERD being written by 10% of the PPI
prescribers. We believe we have an opportunity to achieve significant share of voice and exposure to
physicians given the scarcity of actively marketed anti-secretory medicines. Given the limitations of PPIs
and current unmet need, we believe the commercial opportunity for VOQUEZNA, VOQUEZNA TRIPLE
PAK and DUAL PAK is substantial.
Seek commercial partnerships to maximize the vonoprazan opportunity outside of the United States.
To address the opportunity for vonoprazan in Europe and Canada, we plan to seek one or more partners
with existing commercial infrastructure and expertise in these markets. We believe this strategy will
allow us to realize the value of the market opportunity in Europe and Canada while focusing our
resources on the U.S. market.
10
•
•
Further expand the development of vonoprazan across indications, dosing regimens, and alternative
formulations and packaging. In addition to both daily and as needed dosing for the treatment of
symptoms related to non-erosive GERD, we plan to pursue vonoprazan lifecycle extension strategies in
areas with clear unmet need, clinical rationale, and commercial justification. For example, we are
planning discussions with the FDA on our proposed development plan to study vonoprazan as a
treatment for eosinophilic esophagitis, or EoE. These strategies may include: (i) potential indications in
addition to EoE, including treatment of gastric and duodenal ulcers, and Barrett’s esophagus; and (ii)
alternative formulations and packaging, such as orally disintegrating tablets and other oral dosage forms
for patients with difficulty swallowing, and an intravenous formulation for in-hospital applications.
Additionally, we believe that vonoprazan has the ideal profile for an OTC product because of the
potential for as needed symptom relief and a well-tolerated safety profile.
In-license or acquire additional clinical or commercial stage product candidates for the treatment of GI
diseases in a capital efficient manner. We intend to take advantage of our management team’s GI
expertise to opportunistically in-license or acquire additional innovative therapies for diseases treated
by gastroenterologists. We plan to leverage our development and planned commercial infrastructure to
support multiple assets targeting GI indications.
11
Acid-Related GI Diseases
Overview
Gastric acid is a digestive fluid formed in the stomach. The highly acidic environment of the stomach causes
the unfolding, or denaturing, of food proteins that are subsequently broken down by gastric enzymes. Gastric acid
is secreted by the hydrogen potassium ATPase enzyme, which is known as the proton pump. Proton pumps are
expressed on the channeled surfaces, or canaliculi, of parietal cells in the stomach, which secrete acid. Proton
pumps are continuously synthesized and switch between active and inactive states in response to various stimuli,
such as food. When activated, proton pumps increase acid secretion.
GI diseases where treatment is related to acid control, such as GERD, peptic ulcer disease, Zollinger Ellison
syndrome, and H. pylori infection, are significant medical problems because of their high prevalence, chronic
nature and clinical sequelae. GERD results from the effects of acid on compromised mucosal defenses in the
gastrointestinal tract. The reflux of gastric acid into the esophagus produces frequent and/or severe heartburn,
indigestion, and reflux symptoms. Chronic GERD may damage esophageal tissue and progress to more severe
diseases including erosive GERD, Barrett’s esophagus, and esophageal cancer. GERD and related diseases are
associated with impaired quality of life and substantial costs to the healthcare system given their chronic nature
and sequelae. In H. pylori infection, gastric acid limits the effectiveness of antibiotics used to eradicate infection.
Chronic H. pylori infection can lead to dyspepsia, peptic ulcer disease, gastric cancer, and mucosa-associated
lymphoid tissue (MALT) lymphoma.
12
Prevalence
The prevalence of GI diseases is high. Approximately 20% to 40% of Western adults report chronic heartburn
or regurgitation symptoms potentially related to GERD. We estimate that there are approximately 65 million
individuals in the United States and 50 million individuals in the EU5 with GERD. In the United States, GERD is the
most common gastroenterology-related outpatient diagnosis. Additionally, approximately 35% of the U.S.
population and 45% of the EU5 population are infected with H. pylori. We estimate that there are approximately
115 million individuals in the United States and 145 million individuals in the EU5 infected with H. pylori.
Prevalence of GERD and H. pylori Infection
Treatments
Treatments of acid-related GI diseases aim to provide relief of acute symptoms, healing of damaged tissue,
and prevention of long-term clinical sequelae associated with chronic acid exposure. Gastric acidity is measured by
the pH scale, a logarithmic scale where 7.0 describes a neutral state and lower levels indicate a higher level of
acidity. The pH of the stomach typically ranges from 1.5 to 3.5. In patients with acid-related GI diseases, increasing
gastric pH has been shown to improve mucosal healing rates and provide more rapid symptom relief for patients.
For example, the duration of time that intra-gastric acidity is greater than pH 3.0 correlates with the healing of
duodenal and gastric ulcers, and pH greater than 4.0 is correlated with the healing of erosive GERD. Similarly, in
patients with H. pylori infection, a more neutral gastric pH of 6.0 to 8.0 preserves antibiotic function and is optimal
for successful eradication.
Drug-induced gastric acid suppression is a key component of the management of acid-related GI diseases.
Three classes of drugs with distinct mechanisms of action are principally used for treatment in the United States
and Europe: antacids, histamine receptor antagonists, or H2RAs, and PPIs.
Antacids
Antacids, first commercially available in the 1930s, directly neutralize gastric acid to raise intra-gastric pH
and can alleviate intermittent, mild symptoms of acid-related GI diseases, such as heartburn, but they are only
effective for a short duration and require frequent administrations per day. In addition, antacids do not
significantly help heal or prevent complications of acid-related diseases. Antacids include commonly known OTC
products, such as Alka-Seltzer, Pepto-Bismol, Rolaids, and TUMS.
13
Histamine Receptor Antagonists (H2RAs)
H2RAs, first commercially available in the 1970s, decrease gastric acid secretion in order to raise gastric pH.
H2RAs represented a dramatic improvement over antacids in the control of gastric acid and consequently in the
management of acid-related GI diseases. H2RAs are also generally safe and well-tolerated. Among the H2RA class
were the first commercial blockbuster drugs, Pepcid (famotidine), Tagamet (cimetidine), and Zantac (ranitidine).
Zantac was the world’s highest-selling prescription drug in the mid-1990s, with peak global sales of $3.7 billion and
U.S. sales of $2.2 billion. Prior to the launch of generic H2RAs and increasing competition from PPIs, the H2RA class
achieved sales of approximately $3.5 billion in the United States. H2RAs achieved commercial success despite
clinical limitations, including unreliable 24-hour acid control, poor control of post-meal symptoms, and loss of
efficacy over time.
Proton Pump Inhibitors (PPIs)
PPIs, first commercially available in 1989, offered improved acid control over H2RAs. Pharmacodynamic data
demonstrated that PPIs maintain gastric pH above target levels for a longer duration than H2RAs. A commonly
used benchmark of anti-secretory activity is the percentage of time in a 24-hour period that gastric pH exceeds 4.0,
which we refer to as time above pH 4.0, which ranges from 40% to 71% for PPIs versus 33% for H2RAs.
Given this improved pharmacodynamic profile, PPIs demonstrated improved clinical symptom relief and
healing over H2RAs. In a meta-analysis of results from 33 randomized clinical trials with over 3,000 GERD patients,
a reduction in symptoms was achieved in 83% of patients taking PPIs versus 60% of those on H2RAs. In a second
meta-analysis, the eight-week healing rate in patients with erosive GERD was 82% for PPIs versus 52% for H2RAs.
The PPI class is currently the first-line treatment of acid-related GI diseases. Prior to the introduction and
adoption of generic and OTC alternatives, annual PPI class sales reached approximately $12.5 billion in the United
States, with peak sales for individual brands of approximately $3.7 billion for Prilosec, $3.5 billion for Nexium, and
$3.4 billion for Prevacid. As recently as 2015, the last branded PPI, Dexilant (dexlansoprazole), reached
approximately $530 million in sales in the United States despite limited differentiation from other PPIs. While
Dexilant demonstrated a modest improvement in time above pH 4.0 compared to other PPIs, the approved dose
did not demonstrate consistent superiority in Phase 3 trials against other PPIs for the healing of erosive GERD and
has not been tested against PPIs in other indications. We believe that the commercial success of Dexilant highlights
the value to physicians and patients of even incremental improvements over other PPIs.
History of Pharmaceutical Agents for Control of Gastric Acid
14
PPI Limitations
While PPIs provide clinically meaningful symptom relief and healing for millions of patients suffering from
acid-related GI diseases, they are inadequate for many patients. The suboptimal anti-secretory profile of PPIs
results in slow onset of symptom relief, breakthrough nighttime or postprandial heartburn, and treatment failure.
A recent population-based survey with over 70,000 participants in the United States showed that 55% of patients
who reported having GERD symptoms were taking PPIs, with 68% taking them daily, and 54% of those daily PPI
users reporting persistent symptoms. This is consistent with earlier studies that have shown that approximately
15% to 45% of GERD patients are inadequately treated with PPIs, experiencing persistent, troublesome symptoms,
such as heartburn and regurgitation. In approximately two-thirds of symptomatic GERD patients, reflux symptoms
are not adequately controlled after the first dose of a PPI, and nearly 50% of patients still suffer from symptoms
three days later. Given these limitations, more than 20% of GERD patients on PPI therapy take their PPI twice daily,
which is not FDA approved, or purchase OTC heartburn treatments in addition to their prescription medicine. In a
survey of approximately 1,000 GERD patients and 1,000 physicians, approximately one third of GERD patients
reported persistent symptoms and were dissatisfied with PPI therapy and 35% of physicians perceived patients as
somewhat satisfied to completely dissatisfied with PPI treatment. In addition, in a real world study conducted in
2020 and 2021 evaluating the perspectives and unmet needs of over 400 physicians and patients in the U.S. in the
management of acid related disorders, fewer than one-third of the physician participants were satisfied with
current treatment options for their patients. Moreover, fewer than 50% of patients in the study reported they
were satisfied with their current treatment.
In patients with more severe grades of erosive GERD, studies with PPIs have reported failure rates of healing
of esophageal erosions exceeding 25%. Additionally, recurrence of erosions is common in healed erosive GERD
patients receiving maintenance PPI therapy. One study reported recurrence in 15% to 23% of patients with less
severe erosive GERD and 24% to 41% of patients with more severe erosive GERD. We believe that these limitations
of PPIs are in part driven by their mechanism of action and pharmacokinetics.
Mechanistic Differences Between PPIs and Vonoprazan
PPIs
After oral dosing, PPIs reach the gastric parietal cells through the bloodstream. PPIs are prodrugs that are
converted to their active form in the acidic environment of the secretory canaliculus of the parietal cell but
degrade quickly because their active form is unstable in acid. For example, the half-life of omeprazole (Prilosec) is
less than 10 minutes at pH 2.0. The active form of a PPI blocks acid production by covalently binding to active
proton pumps that have moved to the surface of the secretory canaliculi after activation of the parietal cell with
stimuli, such as a meal. Because PPIs bind only to actively secreting pumps, it is generally recommended that they
be administered 30 to 60 minutes before a meal to achieve maximal efficacy. Once covalently bound to the proton
pumps, the active PPI molecule is no longer available to bind to newly synthesized or activated proton pumps.
Furthermore, given the relatively short plasma half-life of most PPIs of one to two hours, resupply of additional PPI
molecules from the bloodstream is limited, and newly activated pumps are not inhibited. Due to this profile, PPIs
must be dosed over several days to inhibit enough proton pumps to increase gastric pH to a clinically meaningful
threshold. Moreover, PPIs have a limited window of efficacy leading to incomplete acid suppression over the 24-
hour dosing interval. In addition, PPIs are primarily metabolized by CYP2C19, an enzyme which has significant
interpatient metabolic variability based on genotype. As a result, PPI exposure levels in some patients may not
achieve target levels, potentially reducing clinical efficacy.
15
Vonoprazan
Vonoprazan, a PCAB, has a differentiated mechanism of action relative to PPIs. Vonoprazan is designed to
selectively concentrate in the parietal cell in both the resting and stimulated states. In contrast to most PPIs,
vonoprazan does not require gastric acid for activation, remains stable in the presence of gastric acid, binds to the
active proton pumps in a noncovalent and reversible manner, remains associated with the active and inactive
proton pumps, and remains in the secretory canaliculus where it continues to inhibit acid secretion over an
extended period. Vonoprazan’s prolonged effect is also maintained through a slow dissociation rate from the
proton pumps and resupply from the bloodstream due to its seven-hour half-life. These characteristics allow
vonoprazan to rapidly achieve target 24-hour acid suppression within two hours of a single dose, unlike PPIs that
require three to five days to achieve stable acid suppression. In addition, vonoprazan is primarily metabolized by
CYP3A4/5, an enzyme which has less genetic variability than CYP2C19, and may exhibit more consistent activity
than PPIs across U.S. and European populations.
The mechanistic and pharmacologic differences of PPIs and vonoprazan are summarized in the table below.
Vonoprazan Pharmacodynamics vs. PPIs
Vonoprazan’s more rapid, potent, and durable anti-secretory effects versus the PPI lansoprazole (Prevacid®)
were demonstrated in a randomized, open-label, crossover clinical trial comparing 20 mg of once daily, or QD,
vonoprazan to 30 mg QD of lansoprazole for 7 days in 41 healthy volunteers. As shown below, vonoprazan had a
significantly higher 24-hour holding time ratio than lansoprazole for pH>4.0 on Day 1 (62.4% vs. 22.6%) and Day 7
(87.8% vs. 42.3%) and for pH>6.0 on Day 1 (33.1 vs. 7.4) and Day 7 (62.5% vs. 16.4%). Mean 24-hour intragastric pH
for vonoprazan and lansoprazole was 4.6 and 2.8, respectively, on Day 1, and 5.9 and 3.8, respectively, on Day 7.
Gastric pH levels are measured on a logarithmic scale from 0.0 to 14.0, in which each point represents a 10-fold
change in acidity and higher pH values represent less acidity. In this study, vonoprazan maintained an average pH
approximately two points higher than lansoprazole at Day 7.
16
Improved Onset and Potency of pH Control of Vonoprazan vs. Lansoprazole at Day 1 and Day 7
This improved potency and duration of pH control with vonoprazan, as measured by 24-hour pH hold time
and time above pH 4.0, was evident not only at Day 1, but also at Day 7 when lansoprazole had reached its steady
state (see table below).
24-hr Hold Time > pH 4.0 and Mean pH of Vonoprazan vs. Lansoprazole at Day 1 and Day 7
Vonoprazan demonstrated similarly greater time above pH 4.0 versus the PPI esomeprazole (Nexium) in a
randomized, open-label, crossover clinical trial comparing 20 mg QD vonoprazan to 20 mg QD of esomeprazole in
20 healthy volunteers. In that trial, greater duration of pH control with vonoprazan, as measured by time above pH
4.0 was observed both on Day 1 and Day 7 (see table below).
17
24-hr Hold Time > pH 4.0 of Vonoprazan vs. Esomeprazole at Day 1 and Day 7
Vonoprazan for the Potential Treatment of Acid-Related GI Diseases
Given the shortcomings of PPI therapy, we believe that there is a significant unmet medical need for a safe
and effective anti-secretory agent with rapid, potent, and durable effects. In May 2022, we received FDA approval
for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, each for the treatment of H. pylori infection in adults. In
March 2022, we submitted an NDA seeking approval of vonoprazan, under the brand name VOQUEZNA, for the
treatment of erosive GERD in adults. At present, have been unable to initiate commercial launch of VOQUEZNA
TRIPLE PAK and VOQUEZNA DUAL PAK, or obtain FDA approval of VOQUEZNA due to the presence of trace levels of
a nitrosamine impurity detected in our intended commercial drug product. Before we developed and obtained our
initial approvals for products containing vonoprazan in the United States, vonoprazan was developed in markets
outside of the United States by Takeda through an extensive clinical program, including 19 Phase 3 clinical trials. As
of December 2022, over 9,000 subjects were exposed to vonoprazan in completed and ongoing clinical trials.
Vonoprazan received marketing approval in Japan in late 2014 and generated approximately $850 million in net
sales in its seventh full year on the market in Japan.
Vonoprazan in GERD
Based on the significant unmet medical need, previous Phase 3 trial results from Japan and elsewhere in
Asia, and commercial potential, we have prioritized the development and commercialization of vonoprazan in
GERD, specifically for:
•
•
the healing of erosive GERD and relief of associated heartburn; and
the maintenance of healing of erosive GERD and relief of associated heartburn.
In January 2023, we also reported positive topline data for the primary endpoint from our first Phase 3 trial
for vonoprazan as a once-daily treatment for patients with non-erosive GERD.
GERD Disease Overview
GERD is one of the most prevalent diseases of any kind and is the most prevalent GI disease, affecting
approximately 20% of the U.S. population and approximately 15% of the European population. We estimate there
are approximately 65 million individuals with GERD in the United States and 50 million individuals with GERD in the
EU5. GERD is a disease that develops when the reflux of acidic stomach contents into the esophagus causes
troublesome symptoms and/or complications. The term covers a spectrum of diseases, the main categories of
which are erosive GERD, or EE, and non-erosive reflux disease, or non-erosive GERD. These diseases are detailed
below:
18
•
•
Erosive GERD: Approximately 30% of GERD patients have erosive GERD, which is classified by erosions in
the gastric mucosa caused by acidic reflux of stomach contents into the esophagus. Erosive GERD is
commonly graded by the Los Angeles (LA) classification system, which characterizes the extent of
erosions in the esophagus and is graded on a scale of increasing severity from A to D, with D being the
most severe. Approximately 20% to 30% of erosive GERD patients have moderate-to-severe disease with
LA grade C or D erosions. Erosive GERD can have serious consequences. If left untreated, esophagitis
may develop into peptic stricture, Barrett’s esophagus or esophageal cancer.
Symptomatic non-erosive gastroesophageal reflux disease (non-erosive GERD): Approximately 70% of
GERD patients have non-erosive GERD, which is classified by an endoscopically normal esophagus, but
abnormal gastric acid exposure in the esophagus and persistent symptoms.
GERD patients typically present with heartburn and reflux symptoms. Based on these symptoms, patients are
typically treated first-line with PPIs prior to a diagnostic endoscopy for specific disease classification of erosive
GERD or non-erosive GERD. Clinical guidelines suggest that endoscopy be performed in patients who continue to
have symptoms despite a four- to-eight-week course of daily PPIs or have alarm symptoms, including GI bleeding,
anemia, weight loss, chest pain, or difficult or painful swallowing. Our market research suggests that most patients
are treated empirically based on symptoms rather than based on endoscopic characterization of disease.
GERD Treatment Paradigm
Approximately 80% of GERD patients are pharmacologically treated with prescription or OTC medications.
PPIs are currently the most effective anti-secretory agents available in the United States and Europe for relieving
GERD symptoms and healing erosions in gastric mucosa. Our market research suggests that approximately 80% of
patients who are pharmacologically treated receive PPIs, and more than 80% of PPI use is prescription rather than
OTC. The majority of PPI use is chronic, with more than 70% of patients prescribed PPIs for daily use. According to
IQVIA NSP, there were approximately 7.8 billion prescription PPI doses dispensed during the 12 months ended
December 31, 2022.
There are few treatment options for GERD patients who are inadequately managed on PPI therapy. In a real
world study conducted in 2020 and 2021 evaluating the perspectives and unmet needs of over 400 physicians and
patients in the U.S. in the management of acid related disorders, only half of physicians reported that their
patients are getting long-lasting relief from a PPI resulting in approximately 25% of patients taking a PPI more than
once a day despite patients’ concerns about long term side effects of PPI use. A limited number of patients
proceed to a surgical procedure, such as Nissen fundoplication. However, this procedure results in postoperative
morbidity of 5% to 20%, as well as a two- to six-week recovery period and a median hospital stay of two days.
19
Our U.S. market research survey reported that 55% to 60% of physicians included in the survey believed that
vonoprazan has demonstrated superior efficacy in the healing and maintenance of healed esophageal erosions
compared to existing erosive GERD treatments, provides faster onset of action compared to existing GERD
treatments, and has superior duration and magnitude of gastric pH control compared to existing GERD treatments.
Clinical Data for Vonoprazan in GERD
Our Development Program in Erosive GERD
Five Phase 3 clinical trials have been completed comparing vonoprazan to PPIs in erosive GERD: our healing
and maintenance of healing trial in the United States and Europe; a healing trial in Japan; a maintenance of healing
trial in Japan; a healing trial in Asia (China, Taiwan, and Korea); and a maintenance of healing trial in Asia. In
addition to these Phase 3 trials, several published investigator-sponsored studies have compared vonoprazan to
PPIs across dosing regimens and endpoints. Results of these clinical trials are summarized below.
Healing and Maintenance of Healing of Erosive GERD in the United States and Europe (PHALCON-EE)
In October 2021, we announced that vonoprazan successfully met its primary endpoints and key secondary
superiority endpoints in PHALCON-EE, our pivotal Phase 3 trial evaluating vonoprazan versus lansoprazole for the
treatment of erosive GERD.
PHALCON-EE was a randomized, double-blind, two-phase, multicenter, Phase 3 trial that enrolled 1,024
patients with EE in the U.S. and Europe. PHALCON-EE was modeled after the successful Phase 3 clinical trials
conducted in Japan and Asia with limited differences, including the combination of the healing and maintenance
phases into one single study whereas in Japan and Asia separate clinical trials were conducted for each of these
indications.
The first phase of the trial, the Healing Phase, evaluated the efficacy and safety of vonoprazan 20 mg QD
compared to lansoprazole 30 mg QD for the healing of erosive GERD for up to eight weeks. In the Healing Phase,
patients were assessed via endoscopy to determine complete healing following 2 weeks of treatment and, if
complete healing was not achieved, a second endoscopy occurred at 8 weeks of treatment. Patients who achieved
complete healing were re-randomized into the second phase of the trial, the Maintenance Phase, where
vonoprazan 10 mg and 20 mg were compared to lansoprazole 15 mg to assess maintenance of healing of erosive
GERD via endoscopy following 24 weeks of treatment. Heartburn symptom relief was assessed via secondary
endpoints in both the Healing and Maintenance Phases of the study based on twice daily e-diary data collection.
20
Design of US/EU Phase 3 Clinical Trial for the Healing and Maintenance of Healing of Erosive GERD
Healing Phase
The primary endpoint analysis of the Healing Phase was non-inferiority of vonoprazan 20 mg compared to
lansoprazole 30 mg in the percentage of all patients who have complete healing of erosive GERD by Week 8.
Vonoprazan met the non-inferiority criteria for the primary comparison with a healing rate of 93% compared to
85% for lansoprazole (p<0.0001). Based on a prespecified exploratory comparison test, the difference in healing
rates in all patients between vonoprazan and lansoprazole was also significant (nominal p<0.0001). Non-inferiority
analyses are conducted to evaluate whether the effect of an agent is not worse than the active control by more
than a specified margin, while superiority analyses are conducted to evaluate whether an agent outperformed a
comparator by a statistically significant margin.
Vonoprazan met the secondary superiority endpoint of healing in patients with moderate-to-severe disease,
defined as patients with esophageal erosions classified as Grades C or D by the Los Angeles (LA) Classification
System, at Week 2, demonstrating significantly faster healing than lansoprazole (70% for vonoprazan 20 mg and
53% for lansoprazole 30 mg) (p=0.0008). Vonoprazan also met the secondary endpoint of showing non-inferiority
to lansoprazole 30 mg in the mean percentage of 24-hour heartburn free days over the healing period. In
additional pre-specified secondary endpoint superiority comparisons, vonoprazan 20 mg healing rates were
numerically greater than lansoprazole 30 mg in all patients at Week 2 (nominal p=0.0348) and in moderate-to-
severe patients by Week 8 (nominal p<0.0001), although these superiority comparisons were not tested in the pre-
specified testing hierarchy.
Vonoprazan 20 mg was also compared to lansoprazole 30 mg in a superiority test for onset of sustained
resolution of heartburn by day 3 but did not achieve statistical significance (p=0.439).
21
Results of US/EU Phase 3 Clinical Trial in the Healing of Erosive GERD
Maintenance Phase
Vonoprazan met the primary and all secondary endpoints in the Maintenance Phase. The primary endpoint
of the Maintenance Phase was non-inferiority of vonoprazan 10 mg and 20 mg compared to lansoprazole 15 mg in
the percentage of all patients who maintained healing of erosive GERD through Week 24.
Both vonoprazan doses met the Maintenance Phase primary endpoint of non-inferiority while also meeting
the pre-specified secondary comparison demonstrating superiority of maintenance of healing versus lansoprazole
(79% for vonoprazan 10 mg, 81% for vonoprazan 20 mg compared to 72% for lansoprazole 15 mg) (p<0.0001 for
both non-inferiority comparisons; p=0.0438 for vonoprazan 10 mg superiority comparison; p=0.0136 for
vonoprazan 20 mg superiority comparison).
Both vonoprazan doses also met the secondary endpoint of demonstrating superiority of the percentage of
patients with moderate-to-severe disease who maintained healing of erosive GERD through Week 24 (75%
vonoprazan 10 mg, 77% vonoprazan 20 mg v. 61% lansoprazole 15 mg) (p=0.0490 for vonoprazan 10 mg
superiority comparison; p=0.0196 for vonoprazan 20 mg superiority comparison). Additionally, both vonoprazan
doses also met the secondary endpoint of showing non-inferiority to lansoprazole 15 mg in the mean percentage
of 24-hour heartburn free days over the maintenance period.
22
Results of US/EU Phase 3 Clinical Trial in Maintenance of Healing of Erosive GERD
Healing and Maintenance of Healing of Erosive GERD Clinical Trials in Japan and Asia
The results of PHALCON-EE were consistent with the results of earlier Phase 3 trials of vonoprazan in healing
and maintenance of healing of erosive GERD after which it was modeled. These trials were conducted in Japan as
well as other countries in Asia.
In two Phase 3 trials in healing of erosive GERD comparing vonoprazan 20 mg QD to lansoprazole 30 mg QD
for up to eight weeks, one conducted in Japan and the other in several countries in Asia, vonoprazan achieved the
primary endpoint of non-inferiority versus lansoprazole on the percent of patients with healed erosive GERD up to
Week 8. Exploratory testing suggested higher healing rates for vonoprazan versus lansoprazole in the moderate to
severe patients at Week 2 in both studies.
Similarly, in two Phase 3 trials in maintenance of healing of erosive GERD comparing two doses of
vonoprazan (10 mg and 20 mg QD) to lansoprazole 15 mg QD for 24 weeks, one conducted in Japan and the other
in several countries in Asia, both vonoprazan doses achieved the primary endpoint of non-inferiority versus
lansoprazole on the percent of patients with recurrence of erosive GERD during the 24-week maintenance period.
In both studies, exploratory testing suggested higher maintenance of healing rates for both vonoprazan doses
versus lansoprazole in all patients and in the moderate to severe patients.
Our Development Program in Symptomatic Non-Erosive Gastroesophageal Reflux Disease (Non-Erosive GERD)
We believe that there is an opportunity to broadly position vonoprazan’s use in GERD with an indication in
symptomatic GERD in patients without erosions, non-erosive GERD, in addition to an indication in erosive GERD.
We are evaluating vonoprazan as a treatment for non-erosive GERD with both daily and as needed dosing
regimens. Non-erosive GERD patients do not have esophageal erosions which require chronic treatment to prevent
recurrence of erosions and their potential sequelae. We believe the rapid onset of acid control of vonoprazan may
enable as-needed use for the management of heartburn in non-erosive GERD patients as an alternative to chronic
daily treatment with PPIs.
23
Daily Dosing of Vonoprazan for the Treatment of Non-Erosive GERD(PHALCON-NERD-301)
In January 2023, we reported positive topline data from the primary endpoint in PHALCON-NERD-301, our
Phase 3 study evaluating the efficacy and safety of vonoprazan for the daily treatment of non-erosive GERD in
adults. In this trial, patients in each vonoprazan treatment group, 10 mg and 20 mg, had a significantly higher
mean percentage of 24-hour heartburn-free days (without daytime or nighttime heartburn as assessed by daily
diary) compared to placebo after four weeks. This is the same endpoint used in other Phase 3 trials for PPIs that
are approved in the U.S. for the treatment of non-erosive GERD. Results from the full trial are expected in the
second half of 2023.
PHALCON-NERD-301 is a Phase 3 study evaluating the efficacy of vonoprazan 10 mg and 20 mg as a daily
dosing (QD) treatment, as compared to placebo (QD), in the relief of heartburn over four weeks in participants
with symptomatic non-erosive reflux disease, or non-erosive GERD. The trial also includes a blinded 20-week long-
term extension period, which is currently ongoing, to further evaluate the safety and efficacy of both doses of
vonoprazan after six months of continuous use. A total of 772 patients with non-erosive GERD were enrolled,
randomized and dosed in the multisite U.S. trial.
Design of PHALCON-NERD-301 Phase 3 Non-Erosive Daily Dosing Clinical Trial
Primary Endpoint of Phase 3 Clinical Trial in the Treatment of Non-Erosive GERD
The primary endpoint of the study, measured during the four-week, double-blind, placebo-controlled period,
is the mean percentage of 24-hour heartburn free days. The topline results from the study showed both doses of
vonoprazan, 20 mg and 10 mg, met the primary endpoint and demonstrated a significantly greater mean
percentage of 24-hour heartburn-free days versus placebo (46.4% vonoprazan 10 mg, 46.0% vonoprazan 20 mg,
27.5% for placebo; p<0.0001 for both vonoprazan doses versus placebo). Additionally, the median percentage of
24-hour heartburn-free days was 48.3%, 46.7% and 17.0% for vonoprazan 10 mg, vonoprazan 20 mg, and placebo,
respectively.
24
Vonoprazan was generally well tolerated in the initial four week double-blind, placebo-controlled phase of
the trial. The overall adverse events for all vonoprazan arms were comparable to placebo and consistent with what
was reported in previous studies. The most commonly reported adverse event was nausea (2.3% vonoprazan 10
mg, 3.1% vonoprazan 20 mg, 0.4% placebo) with no other events reported above 3.0% in either vonoprazan dose
arm.
Results of Phase 3 Clinical Trial in the Treatment of Non-Erosive GERD
25
As Needed Dosing of Vonoprazan for the Treatment of Non-Erosive GERD
In February 2022, we announced that vonoprazan (10 mg, 20 mg and 40 mg), successfully met the primary
endpoint in PHALCON-NERD-201, a Phase 2 trial evaluating three doses of vonoprazan versus placebo as an as
needed treatment of non-erosive GERD.
PHALCON-NERD-201 was a Phase 2, randomized, double-blind, multicenter study that enrolled 458 subjects
in the U.S. to evaluate the efficacy and safety of vonoprazan 10 mg, 20 mg, and 40 mg administered as needed for
relief of episodic heartburn compared to placebo in subjects with non-erosive GERD (as confirmed by endoscopy).
After an initial four-week vonoprazan 20 mg QD dose open-label run-in period, two hundred and seven subjects
without a heartburn episode during the last 7 days of the run-in period and who also met drug and diary
compliance requirements were randomized to receive vonoprazan 10 mg, 20 mg, 40 mg or placebo as needed for
six weeks. Subjects completed an electronic diary to assess presence and severity of heartburn symptoms and use
of rescue antacid (if needed).
Design for PHALCON-NERD Phase 2 Non-Erosive GERD As Needed Dosing Trial
In this Phase 2 proof -of-concept trial, the primary endpoint was the percentage of heartburn episodes
completely relieved within three hours and with no further heartburn reported for 24 hours after taking study
drug. All three vonoprazan doses met this primary endpoint and were statistically significant (p<0.0001) when
compared to placebo. Within three hours, vonoprazan 10 mg, 20 mg and 40 mg achieved complete and sustained
relief in 56.0%, 60.6% and 70.0% of evaluable heartburn episodes, respectively, as compared to 27.3% of episodes
for placebo.
During the PHALCON-NERD open-label daily dosing run-in phase, where all enrolled participants received
vonoprazan 20 mg QD for four weeks, the mean percentage of 24-hour heartburn free days observed was 65.4%
(median 76.0%).
Based on the results of PHALCON-NERD-201, we are in discussions with the FDA regarding the design of a
Phase 3 trial to evaluate the novel dosing regimen of vonoprazan as an as -needed treatment for episodic
heartburn relief in patients with non-erosive GERD, a dosing regimen not approved in the U.S. for PPIs.
26
Results of Phase 2 Non-Erosive GERD As Needed Dosing Trial
27
Vonoprazan in Combination with Antibiotics for the Treatment of H. pylori Infection
Disease Burden and Outcomes
H. pylori is a bacterial pathogen that infects approximately 35% of the U.S. population, 45% of the EU5
population, and more than 50% of the global population. We estimate that there are approximately 115 million
individuals in the United States and 145 million individuals in the EU5 infected with H. pylori, and we believe there
are approximately 2.5 million patients treated for H. pylori infection in the United States each year. As a result of
the chronic inflammation induced by H. pylori infection, approximately 20% of infected patients develop a range of
pathologies including dyspepsia, peptic ulcer disease, gastric cancer, and mucosa-associated lymphoid tissue
(MALT) lymphoma. Gastric cancer is the third most common cause of cancer-related death worldwide, and over
80% of gastric cancers are attributed to H. pylori infection. Globally there are more than one million new cases of
gastric cancer and approximately 782,000 deaths each year. Eradication of H. pylori infection has been proven to
reduce the incidence of gastric cancer, and the American College of Gastroenterologists, or ACG, guidelines
recommend treatment for all patients diagnosed with H. pylori infection.
H. pylori eradication rates from the 1990s have fallen to current rates of <80% due to increasing antibiotic
resistance. In 2017, the World Health Organization (WHO) listed H. pylori among the 16 antibiotic-resistant
bacteria that pose the greatest threat to human health and designated H. pylori as a Class 1 carcinogen, meaning
that it is a definite known cause of cancer. In 2014, the FDA added H. pylori to the agency’s list of qualifying
pathogens that have the potential to pose a serious threat to public health under the GAIN Act. We believe that
vonoprazan-based treatment regimens have the potential to restore eradication rates to their original rates in the
United States and Europe given the clinical and post-marketing experience in the Japanese market.
A recent study compiled real-world health insurance claims data in Japan from 2008 to 2016 for H. pylori
eradication. Prior to vonoprazan’s approval in late 2014, the H. pylori eradication rate across Japan fell to below
80% as shown in the figure below. Approximately one year after vonoprazan’s launch, the eradication rate
increased to greater than 85%. From January 2015 to March 2016, the eradication rate with PPI-containing
regimens in Japan was between 78% and 82% while the eradication rate with vonoprazan-containing regimens was
91% across all patients in this analysis.
28
Eradication Rate of H. pylori Infection in Japan Before and After Launch of Vonoprazan
Results were similar in a real-world study using a different Japanese health insurance claims database.
Among patients initiating vonoprazan or a PPI between January 2015 and January 2020 to treat H. pylori infection,
80% of PPI-treated patients and 93% of vonoprazan-treated patients did not receive a second line of triple therapy.
In Japan, vonoprazan-containing regimens have become the most common first line treatment. One-year
post launch, approximately 80% of all treated H. pylori-infected patients received vonoprazan-based regimens. In
the study of H. pylori-infected patients, vonoprazan-based regimens overtook PPI-based regimens as the most
common first-line treatment between 2015 and 2019. Within this Japanese database, the number of patients using
vonoprazan-based regimens increased from 6,594 to 28,956 patients, while the number of patients using a PPI-
based regimen decreased from 11,238 to 2,629, shown in the figure below.
Uptake of Vonoprazan-Based vs. PPI-Based Therapy for First Line Treatment of H. pylori Infection in Japan from
2015-2019
29
Current Treatment Paradigm in the United States and Europe
The ACG treatment guidelines for H. pylori infection recommend using PPIs in conjunction with antibiotics to
improve antibiotic efficacy against H. pylori infection. The use of anti-secretory agents enhances the effect of
antibiotics in two ways. First, anti-secretory agents increase gastric pH, which in turn increases the stability of the
antibiotics. For example, amoxicillin and clarithromycin are chemically unstable at the low pH typically found in the
human stomach. Second, several antibiotics, including amoxicillin and clarithromycin, are most potent against H.
pylori at the time of maximum bacterial replication, which occurs at pH 6.0 to 8.0. H. pylori is in a dormant state at
lower pH values, which reduces the effectiveness of the antibiotics.
The table below shows the minimum inhibitory concentration of antibiotic required to eradicate 90% of H.
pylori in vitro, or MIC90. As pH increases, the amount of antibiotic required for 90% eradication decreases
substantially.
H. pylori MIC90 Values as a Function of pH
A triple therapy regimen (PPI, clarithromycin, and either amoxicillin or metronidazole) is the regimen most
commonly used in clinical practice for the first-line treatment of H. pylori infection. However, H. pylori eradication
rates with PPI triple therapy in the 1990s have fallen to current levels of <80%, primarily due to increased
resistance of H. pylori to clarithromycin and metronidazole. A recent meta-analysis indicates that U.S. resistance
rates measured from 2012 to 2016 were 20% for clarithromycin, 29% for metronidazole, and 19% for levofloxacin.
Additionally, in a U.S.-based study from 2021, 65.6% of tested H. pylori was resistant to at least one antibiotic
currently used for treatment, with resistance rates of 33% for clarithromycin and approximately 30% for
metronidazole and levofloxacin. These figures represent a marked increase from 2009 to 2011 for both
clarithromycin and metronidazole, for which resistance was 9% for clarithromycin, 21% for metronidazole, and
11% for levofloxacin. H. pylori resistance to amoxicillin remains low despite its use in most triple therapy regimens;
resistance is generally <2% among isolates in the United States and Europe. There is a similar trend of increasing
resistance to key antibiotics in Europe.
Given the declining eradication rates for H. pylori, bismuth quadruple therapy is recommended as first-line
treatment in areas with known high rates of clarithromycin or metronidazole resistance; however, our U.S. market
research study reported that physicians prescribe quadruple therapy to only 17% of first-line patients. Due
predominantly to considerations of convenience and patient compliance, approximately 75% of physicians
surveyed in our market research expressed a preference for convenience, or combination packs compared to
individual bottles for both dual and triple therapy. Further, geographic patterns of resistance in the United States
are poorly understood and treatment is largely empiric, with susceptibility testing rarely conducted prior to first-
line treatment. Our U.S. market research study reported that only 8% and 16% of physicians conduct resistance
testing prior to prescribing treatment for first-line and second-line H. pylori infection, respectively.
In our U.S. market research study, physicians highlighted the need for more effective and simpler first-line
treatment options. For the treatment of H. pylori infection, surveyed physicians highlighted the need for improved
eradication rates and more convenient dosing as key unmet needs. In fact, on average, 53% and 52% reported a
preference to use vonoprazan first line in patients with H. pylori infection, and in patients with refractory H. pylori
infection, respectively.
30
Our H. pylori Phase 3 Clinical Trial in the United States and Europe – PHALCON-HP
In April 2021, we announced that in PHALCON-HP, our pivotal Phase 3 clinical trial for the eradication of H.
pylori infection, both vonoprazan-based regimens successfully met their primary endpoints and met all secondary
endpoints. The trial studied vonoprazan triple therapy and vonoprazan dual therapy compared to lansoprazole
triple therapy. We believe PHALCON-HP was the largest U.S. Phase 3 registration trial ever conducted in H. pylori
infection, randomizing 992 patients with confirmed H. pylori infection.
PHALCON-HP was a randomized, multicenter, Phase 3 trial that enrolled 1,046 patients of which 992 patients
with a confirmed H. pylori infection were randomized to one of three arms:
•
•
vonoprazan dual therapy: vonoprazan 20 mg BID and amoxicillin 1 g TID for 14 days (n=324);
vonoprazan triple therapy: vonoprazan 20 mg BID, amoxicillin 1000 mg BID and clarithromycin 500 mg
BID for 14 days (n=338); and
• PPI triple therapy: lansoprazole 30 mg BID, amoxicillin 1000 mg BID and clarithromycin 500 mg BID for
14 days (n=330).
The objective of the PHALCON-HP trial was to compare eradication rates in all treated subjects as well as in
two pre-identified subgroups of patients: those patients with clarithromycin resistant strains of H. pylori, and those
patients who did not have clarithromycin or amoxicillin resistant strains of H. pylori. For regulatory purposes, the
primary endpoint of this study was a non-inferiority comparison in the non-resistant subgroup for each of
vonoprazan triple therapy and vonoprazan dual therapy compared to lansoprazole triple therapy. All endpoints
measured the percentage of patients with successful eradication of H. pylori infection as assessed by 13C-urea
breath test four weeks after completion of treatment. The primary analysis in the non-resistant population
assessed the non-inferiority of vonoprazan dual therapy compared to lansoprazole triple therapy and vonoprazan
triple therapy compared to lansoprazole triple therapy. Secondary analyses for superiority were conducted in all
patients and in the subgroup of patients with clarithromycin-resistant H. pylori infection. Further efficacy analyses
were conducted using the pre-specified per protocol population (n=822), which is comprised of patients who were
protocol compliant as defined by FDA established criteria.
Design for PHALCON-HP Phase 3 H. pylori Clinical Trial
31
Primary endpoint analysis
Both vonoprazan-based regimens successfully met their primary endpoints in the subset of patients with H.
pylori strains that were not shown to be resistant to clarithromycin or amoxicillin. In the mITT population, H. pylori
eradication rates were 84.7% with vonoprazan triple therapy and 78.5% for vonoprazan dual therapy compared to
78.8% with lansoprazole triple therapy (p<0.0001 and p=0.0073, respectively, for non-inferiority).
In the per protocol population, H. pylori eradication rates were 90.4% with vonoprazan triple therapy and
81.2% with vonoprazan dual therapy compared to 82.1% with lansoprazole triple therapy (p<0.0001 and p=0.0155,
respectively, for non-inferiority).
Secondary endpoint analysis
Vonoprazan triple therapy and vonoprazan dual therapy also met all secondary endpoints, and
demonstrated superior eradication rates versus lansoprazole triple therapy in all patients and patients with
clarithromycin resistant strains of H. pylori. Patients with clarithromycin resistant strains comprised 20.3% of the
PHALCON-HP study population.
Vonoprazan triple therapy
The H. pylori eradication rate of vonoprazan triple therapy was superior to that of lansoprazole triple therapy
among all patients in both the mITT population (80.8% vs. 68.5%; p=0.0003) and the per protocol population
(85.7% vs. 70.0%; p<0.0001).
The H. pylori eradication rate of vonoprazan triple therapy was superior to that of lansoprazole triple therapy
in the subset of patients with H. pylori strains resistant to clarithromycin in both the mITT population (65.8% vs.
31.9%; p<0.0001) and the per protocol population (67.2% vs. 29.0%; p<0.0001).
Vonoprazan dual therapy
The H. pylori eradication rate of vonoprazan dual therapy was superior to that of lansoprazole triple therapy
among all patients in both the mITT population (77.2% vs. 68.5%; p=0.0127) and the per protocol population
(81.1% vs. 70.0%; p=0.0027).
The H. pylori eradication rate of vonoprazan dual therapy was superior to that of lansoprazole triple therapy
in the subset of patients with H. pylori strains resistant to clarithromycin in both the mITT population (69.6% vs.
31.9%; p<0.0001) and the per protocol population (79.5% vs. 29.0%; p<0.0001).
32
Results of US/EU Phase 3 Clinical Trial in H. pylori Infection
Primary Endpoint Analysis –Subjects without clarithromycin or amoxicillin resistant strains
Secondary Endpoint Analyses – All subject and subjects with clarithromycin resistant strains
Antibiotic resistance and declining eradication rates are significant clinical issues, and we believe that
vonoprazan triple therapy and vonoprazan dual therapy have the potential to provide improvements over PPI-
based therapies in addressing each of these issues. Vonoprazan dual therapy also has potential to spare the use of
clarithromycin, representing an opportunity both for effective treatment and sound antibiotic stewardship through
the avoidance of an additional antibiotic. As an alternative to multi-antibiotic drug regimens, vonoprazan dual
therapy might also help to limit the spread of resistance among other pathogenic bacteria within populations. In
addition, vonoprazan triple therapy and vonoprazan dual therapy will both be available in daily dosing blister cards
inclusive of the appropriate antibiotic. We believe this convenience pack has the potential to enhance compliance
in a category where full adherence to treatment regimen is often a challenge.
33
Convenience Packs for H. pylori
In September 2021, we submitted NDAs for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, for the
treatment of H. pylori infection in adults, each as a pre-packaged convenience, or combination pack with either
clarithromycin and amoxicillin or amoxicillin alone. On May 3, 2022, the FDA approved both NDAs.
Convenience packs have the potential to improve patient adherence and treatment outcomes, and we
believe there is a meaningful market opportunity for such a product. In the United States, PrevPac was formerly
marketed as a pre-packaged convenience pack of lansoprazole, clarithromycin, and amoxicillin and achieved peak
sales of $150 million. In Japan, vonoprazan is marketed both as a stand-alone medicine as well as in pre-packaged
convenience packs with either clarithromycin and amoxicillin (Vonosap) or metronidazole and amoxicillin
(Vonopion).
Phase 3 Clinical Trial in Japan of Vonoprazan in Combination with Antibiotics to Treat H. pylori Infection
The results of PHALCON-HP were consistent with the results of a Phase 3 clinical trial in H. pylori-positive
patients completed in Japan. In that trial, patients were treated with either vonoprazan triple therapy (vonoprazan
20 mg BID, amoxicillin 750 mg BID, and clarithromycin (200 mg or 400 mg) BID) or lansoprazole triple therapy
(lansoprazole 30 mg BID, amoxicillin 750 mg BID, and clarithromycin (200 mg or 400 mg) BID) for seven days as is
customary in Japan. The primary endpoint of the clinical trial was confirmed H. pylori eradication determined by
13C-urea breath test. The primary analysis was non-inferiority, and additional analyses of the second line
eradication rate and eradication rate in antibiotic-resistant subgroups were also conducted.
Vonoprazan-based triple therapy demonstrated a non-inferior eradication rate of 93% compared to 76% for
lansoprazole-based triple therapy (p<0.0001). Post hoc analyses suggested that vonoprazan-based triple therapy
was superior to lansoprazole-based triple therapy (p<0.0001). Patients who were not eradicated on vonoprazan-
based triple therapy or lansoprazole-based triple therapy were treated with a different triple therapy regimen of
vonoprazan, amoxicillin, and metronidazole. In this second-line setting, the H. pylori eradication rate with the
different vonoprazan triple therapy was 98%. Exploratory analysis suggested that vonoprazan-based triple therapy
had significantly higher eradication rates versus the lansoprazole-based triple therapy in the subgroup of subjects
with clarithromycin resistant strains of H. pylori.
34
Summary of Vonoprazan Safety Data
Safety in Clinical Studies
As of December 2022, over 9,000 subjects have been exposed to vonoprazan in completed and ongoing
Phase 1 to 3 clinical trials. The doses studied have ranged from 1 to 120 mg with durations up to one year.
In PHALCON-HP, both vonoprazan-based regimens were generally well tolerated with safety results
comparable to patients who received lansoprazole triple therapy. The most common adverse events (≥2.0%)
reported in the vonoprazan triple therapy, vonoprazan dual therapy, and lansoprazole triple therapy arms,
respectively, were diarrhea (4.0%, 5.2%, and 9.6%), dysgeusia (4.3%, 0.6%, and 6.1%), abdominal pain (2.3%, 2.6%
and 2.9%), headache (2.6%, 1.4%, 1.4%), vulvovaginal candidiasis (2.3%, 1.4%, 1.2%), hypertension (2.0%, 1.1%,
0.9%), and nasopharyngitis (0.3%, 2.0%, 0.9%). Overall rates of discontinuation due to adverse events were 2.3%
for vonoprazan triple therapy-treated patients, 0.9% for vonoprazan dual therapy-treated patients, and 1.2% for
lansoprazole triple therapy-treated patients.
Additionally, the safety results for vonoprazan observed in PHALCON-EE were consistent with the results
observed in prior clinical studies. In the healing phase of the study, the most common adverse events (≥2%) were
abdominal pain (2.1% for vonoprazan and 1.2% for lansoprazole), diarrhea (2.1% for vonoprazan and 2.5% for
lansoprazole). Rates of discontinuation due to adverse events in the healing phase were 1% for vonoprazan 20 mg
and 2.2% for lansoprazole 30 mg.
In the maintenance phase of the study, the most common adverse events (≥2%) were gastritis (2.7%
vonoprazan 10 mg, 6.4% vonoprazan 20 mg, 2.7% lansoprazole), diarrhea (1.0% vonoprazan 10 mg, 2.7%
vonoprazan 20 mg, 4.4% lansoprazole), abdominal pain (4.1% vonoprazan 10 mg, 5.4% vonoprazan 20 mg, 2.4%
lansoprazole), dyspepsia (3.7% vonoprazan 10 mg, 4.1% vonoprazan 20 mg, 2.7% lansoprazole), gastroesophageal
reflux disease (2.4% vonoprazan 10 mg, 3.7% vonoprazan 20 mg, 2.0 lansoprazole), hypertension (3.0%
vonoprazan 10 mg, 3.4% vonoprazan 20 mg, 2.0% lansoprazole), liver function test (1.0% vonoprazan 10 mg, 2.0%
vonoprazan 20 mg, 3.0% lansoprazole), and nausea (2.0% vonoprazan 10 mg, 1.4% vonoprazan 20 mg, 1.0%
lansoprazole). Rates of discontinuation due to adverse events in the maintenance phase were 0.7% for
vonoprazan10 mg, 2.7% for vonoprazan 20 mg, and 0.7% for lansoprazole.
Frequency of serious adverse events, or SAEs, in the healing phase were similar between vonoprazan 20 mg
and lansoprazole at 0.6%. In the maintenance phase, SAEs were reported in 4.7% of patients for vonoprazan 20
mg, 3.4% for vonoprazan 10 mg and 2.4% for lansoprazole. Further, this clinical trial was conducted during the
2020-2021 global pandemic, and coronavirus infection was reported in 2.1% of the vonoprazan 20 mg-treated
patients and 1.8% of the lansoprazole-treated patients in the healing phase whereas it was reported in 6.1% of the
vonoprazan 10 mg-treated patients, 10.1% of the vonoprazan 20 mg-treated patients and 6.7% of the
lansoprazole-treated patients in the maintenance phase. There were 2 deaths in the vonoprazan 20 mg-treated
patients due to coronavirus infection. None of the coronavirus infection events reported were considered related
by the investigator.
In PHALCON-NERD-301, vonoprazan was generally well tolerated in the initial four-week double-blind,
placebo-controlled phase of the trial. The overall adverse events for all vonoprazan arms were comparable to
placebo and consistent with what was reported in previous studies. The most commonly reported adverse event
was nausea (2.3% vonoprazan 10 mg, 3.1% vonoprazan 20 mg, 0.4% placebo) with no other events reported above
3.0% in either vonoprazan dose arm. There was a total of three SAEs reported in the four-week period of the study,
one in the vonoprazan 10 mg arm and two in the vonoprazan 20 mg arm. Full safety data from this study will be
available following the completion of the 20-week long-term extension period.
35
In PHALCON-NERD-201, vonoprazan was generally well tolerated. In both phases of the trial, no adverse
event was reported in more than three percent of the participants in a treatment group. There was a total of four
SAEs in the daily dosing phase, only one of which was related to study drug, and no SAEs in the as needed phase.
The safety data for all vonoprazan arms were comparable to placebo and consistent with what was reported in
previous studies.
Certain earlier generation PCABs previously under development by other companies may have been
discontinued in-part due to their hepatic safety profile. These hepatic safety concerns may be compound-specific
and not generalizable to the PCAB class. It is notable that vonoprazan is based on a pyrrole chemical structure and
is chemically distinct from previously discontinued PCABs that were based on an imidazole structure. Vonoprazan
has had a similar hepatic safety profile to lansoprazole across all clinical studies conducted by Takeda, in which
1.0% of subjects treated with vonoprazan 10 mg or 20 mg and 0.8% of subjects treated with lansoprazole 15 mg or
30 mg had ALT or AST elevations greater than three times the upper limit of normal or bilirubin elevations greater
than two times the upper limit of normal. Similarly, in the healing phase of PHALCON-EE, transient elevations in
ALT or AST greater than 3 times the upper limit of normal were observed in 0.4% of subjects treated with
vonoprazan 20 mgs and 0.2% of subjects treated with lansoprazole. In the maintenance phase, transient ALT or
AST elevations greater than three times the upper limit of normal were observed in 1% of subjects treated with
vonoprazan 10 mg, 0.3% of subjects treated with vonoprazan 20 mg, and 2% of subjects treated with lansoprazole.
Vonoprazan Post-Marketing Safety in Japan and Asia
The most recent post-marketing safety report from December 2022 includes an estimate of over 50 million
patients who have received vonoprazan in Japan and other countries in Asia since its launch. Based on the post-
marketing experience, the clinically significant adverse reactions section of the Japanese prescribing information
for vonoprazan was updated to include shock, anaphylaxis, hepatic impairment, skin reactions such as toxic
epidermal necrolysis, Steven-Johnson syndrome, and erythema multiforme; and events of pancytopenia,
agranulocytosis, leukocytopenia, and thrombocytopenia. The incidence of these reactions was considered
extremely rare (less than 1 in 100,000 patients) and a causal relationship to vonoprazan could not be ruled out.
Although serious hepatic adverse events have been observed among patients exposed to vonoprazan in Japan in
the post-marketing setting, these cases were typically confounded by comorbidities or other concomitant
medications and believed to be idiosyncratic reactions. Post-marketing safety data, including the December 2022
post-marketing safety report, has been submitted to the PMDA. Moreover, the four year interim results from the
VISION trial, a five year randomized, open-label, multicenter study conducted by Takeda evaluating the long-term
efficacy and safety of vonoprazan compared with the PPI lansoprazole in patients with EE, further demonstrate
that the safety profile of vonoprazan is generally comparable to lansoprazole.
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Vonoprazan Launch in Japan
Vonoprazan Regulatory Status
Vonoprazan first received approval in Japan on December 26, 2014, and was launched shortly thereafter in
February 2015, as TAKECAB® for the following indications:
• Healing and maintenance of healing of erosive esophagitis;
• Adjunct to antibiotics in H. pylori treatment;
• Gastric ulcer;
• Duodenal ulcer;
•
•
Prevention of recurrence of gastric ulcer or duodenal ulcer during low-dose aspirin administration; and
Prevention of recurrence of gastric ulcer or duodenal ulcer during nonsteroidal anti-inflammatory drug
(NSAID) administration.
Vonoprazan was subsequently approved in Japan in February 2016 for the treatment of H. pylori in
combination packs with antibiotics (Vonosap Pack 400, Vonosap Pack 800, and Vonopion Pack), and has since been
approved in numerous other countries in Asia and Latin America as well as Russia.
Vonoprazan Commercialization in Japan
Vonoprazan was approved in Japan in December 2014. In 2021, its seventh full year on the market,
vonoprazan generated approximately $850 million in net sales in Japan, a 17% increase over the prior year. In
addition, in the quarter ended December 31, 2021, vonoprazan generated over $249 million in net sales, a 16%
increase over the corresponding quarter from the prior year. Finally, based on sales during the 12 month period
ending September 2022, vonoprazan had achieved a 26.5% market share based on volume and 45.7% market
share based on sales among prescription acid suppression therapies in Japan.
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We believe that the market dynamic for anti-secretory agents in Japan is similar to that in the United States.
In both countries, the anti-secretory market is largely genericized. Ahead of the vonoprazan launch in Japan, all
PPIs, other than Nexium, were available as generics. As of September 2021, generic drugs in Japan represent
approximately 80% of the market by volume, compared to the United States where generics are currently
approximately 90% of the market by volume. Although vonoprazan and Dexilant are priced at a premium to
generic PPIs in Japan and the United States, respectively, both have experienced commercial success.
Vonoprazan Commercial Opportunity and Strategy
The market for prevention and treatment of acid-related GI diseases in the United States and Europe is large.
There were approximately 7.8 billion prescription PPI doses dispensed during the 12 months ended December 31,
2022. We estimate that there are approximately 65 million individuals with GERD in the United States and 50
million individuals with GERD in the EU5, of whom 15% to 45% are inadequately treated with PPIs. In addition, we
estimate that there are approximately 115 million individuals in the United States infected with H. pylori, of which
2.5 million are treated each year, and 145 million individuals in the EU5 infected with H. pylori.
Over many decades of use, multiple drug classes and individual drugs have demonstrated the substantial
commercial opportunity for therapies treating acid-related GI diseases. H2RAs including Axid, Pepcid, Tagamet,
and Zantac provided the first significant improvement in disease management over antacids and as a class reached
approximately $3.5 billion in annual sales. After H2RAs, PPIs emerged as the new standard of care. Prior to the
introduction of generic and OTC alternatives, annual PPI class sales reached approximately $12.5 billion in the
United States, and peak sales for individual brands were approximately $3.7 billion for Prilosec, $3.5 billion for
Nexium, and $3.4 billion for Prevacid.
We believe the results of our Phase 3 clinical trials in H. pylori and, subject to FDA approval, erosive GERD,
support the differentiation of products containing vonoprazan from the PPI-based standard of care, which could
result in attractive market access and formulary positioning. For example, following approval of VOQUEZNA
TRIPLE PAK and VOQUEZNA DUAL PAK, and although these products are not yet available in the U.S. market, we
believe our interactions with payers highlight the commercial potential of these products. For example, as of
February 2023, 51% of commercial lives have coverage for both VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL
PAK. Moreover, if approved for the treatment of GERD, we believe vonoprazan has the potential to improve the
standard of care for acid-related GI diseases by providing a safe and effective treatment option for the millions of
patients in need of more potent, rapid, or durable acid suppression.
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In May 2022, we conducted a U.S. market research study with 90 gastroenterologists, 90 primary care
physicians and 45 advanced practice providers who treat GERD. Before seeing the vonoprazan clinical data, 82% of
these clinicians strongly agreed that PPIs are the most potent class of acid suppressing agents. After review of
vonoprazan clinical data and messages, only 34% strongly agreed that PPIs are the most potent class of acid
suppressing agents.
Sales and Marketing
We are in the process of building marketing, sales, and distribution capabilities. We plan to independently
commercialize vonoprazan in the United States by building a leading specialty gastroenterology-focused
commercial infrastructure to support the adoption of vonoprazan. We believe we can successfully launch
vonoprazan in the United States with a focused sales force targeting high prescribers of PPIs, particularly
gastroenterologists and primary care physicians. PPI prescribing is highly concentrated with approximately 76% of
prescriptions in H. pylori and 65% of prescriptions in erosive GERD being written by 10% of the PPI prescribers
(approximately 50,700 prescribers), according to IQVIA data. We believe we have an opportunity to achieve
significant share of voice and exposure to physicians given the scarcity of actively marketed anti-secretory
medicines.
To address the commercial opportunity for vonoprazan in Europe and Canada, we plan to seek one or more
partners with existing commercial infrastructure and expertise in these markets.
Additional Vonoprazan Development Opportunities
Eosinophilic esophagitis and other indications
While we are initially focused on the development of vonoprazan for the treatment of GERD and H. pylori
infection, we believe there are opportunities to expand the use of vonoprazan to other indications, such as
eosinophilic esophagitis (EoE), in our licensed territories. Eosinophilic esophagitis is an autoimmune disease with
significant unmet need. Although not approved for this indication, PPIs are prescribed for the treatment of
eosinophilic esophagitis. Vonoprazan demonstrated similar efficacy to PPIs in an investigator-sponsored EoE
clinical trial in Japan. In this clinical trial, 112 patients with eosinophilic esophagitis were treated with vonoprazan,
or the PPI rabeprazole or esomeprazole. Of patients treated with vonoprazan, 82% had complete relief of
symptoms compared to 70% for esomeprazole and 76-78% for rabeprazole. Similarly, 35% of patients treated with
vonoprazan demonstrated complete remission of eosinophilic esophagitis by histology, compared to 37% for
esomeprazole and 31-38% for rabeprazole. We are planning discussions with the FDA regarding the design of a
Phase 2 clinical trial studying vonoprazan as a treatment for eosinophilic esophagitis in adults.
In addition to eosinophilic esophagitis, Barrett’s esophagus and Zollinger Ellison syndrome are severe
diseases related to acid secretion where PPIs are the current standard of care. The improved acid control of
vonoprazan relative to PPIs may lead to use in these indications improved results over PPIs.
Formulations and Packaging
Orally Disintegrating Tablet. An orally disintegrating tablet, or ODT, formulation for vonoprazan is currently
in development by Takeda. We may conduct one or more Phase 1 trials to support potential approval of the ODT
formulation. We believe that the ODT represents a meaningful commercial opportunity for patients with difficulty
swallowing, as estimated peak U.S. sales of the lansoprazole ODT formulation were over $450 million.
Intravenous Formulation. We are exploring the potential to develop an intravenous formulation of
vonoprazan for use in acute bleeding, critically ill patients, or other in-hospital applications. Several PPIs have
approved intravenous formulations.
Pediatric Formulation. We are exploring the potential to develop an oral formulation, in addition to an ODT
formulation, for pediatric use.
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Over the Counter Use
We believe that vonoprazan has the ideal profile for an OTC product, including the potential for as needed
symptom relief and a well-tolerated safety profile. Sales of OTC heartburn relief products in the United States are
substantial, constituting a multi-billion-dollar market.
Competition
The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and
strong emphasis on proprietary products. We face potential competition from many sources, including major
pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and government
agencies and public and private research institutions. VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, if
launched, VOQUEZNA, if approved and launched, and vonoprazan, if it receives marketing approval in Europe or
Canada, will all compete with existing therapies and new therapies that may become available in the future.
Some of our competitors, either alone or with their strategic partners, have substantially greater financial,
technical and human resources and significantly greater experience in the discovery and development of product
candidates, obtaining FDA and other regulatory approvals of treatments and commercializing those treatments.
These same competitors may invent technology that competes with vonoprazan. Mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even more resources being concentrated among a
smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified
scientific and management personnel and establishing clinical trial sites and subject recruitment for clinical trials,
as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with
large and established companies.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
products that are more effective, have fewer or less severe side effects, are more convenient or are less expensive
than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for, or
initiate commercial launch of, their products more rapidly than we may obtain approval for or launch products
containing vonoprazan, which could result in our competitors establishing a strong market position before we are
able to enter the market. In addition, we expect that VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, if
launched, and VOQUEZNA, if approved, will be priced at a premium over competitive generic products and our
ability to compete may be affected in many cases by insurers or other third-party payers seeking to encourage the
use of generic products.
We expect that vonoprazan for the treatment of H. pylori infection in adults, if launched, and, if approved,
for the treatment of patients with erosive GERD, will primarily compete with generic PPIs marketed by multiple
pharmaceutical companies in both the prescription and OTC markets. Additionally, in March 2020, RedHill
Biopharma Ltd. launched Talicia, a co-formulated capsule comprising generic omeprazole, amoxicillin, and rifabutin
for the treatment of H. pylori infection.
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We are aware of other PCABs in development in the United States, as well as a number of other PCABs in
territories outside of the United States that if developed and approved in our territories may compete with
vonoprazan. In the United States, Neurogastrx previously announced its intention to commence a Phase 3 erosive
GERD trial for fexuprazan, under an exclusive license from Daewoong Pharmaceutical Co., Ltd., or Daewoong. In
addition, Cinclus Pharma AG, or Cinclus, received qualified QIDP designation for linaprazan glurate in combination
with antibiotics for the treatment of H. pylori infection, completed a Phase 2 dose selection study for erosive GERD
in November 2022, and plans to initiate Phase 3 studies in 2023 for the treatment of GERD and H. pylori infection.
Finally, Sebela Pharmaceuticals, which acquired development and commercialization rights in United States and
Canada to tegoprazan from HK inno.N, a South Korean company, has initiated two Phase 3 studies in the United
States, one for non-erosive GERD and the other for healing and maintenance of healing of erosive GERD. The
earliest estimated completion date for any these studies is May 2024 and December 2024, respectively. Outside
the United States, in 2022 Daewoong launched fexuprazan in South Korea for the treatment of erosive GERD under
the brand name Fexuclue, has submitted applications for regulatory approval in additional countries in Asia and
Latin America, and has out-licensed rights to develop fexuprazan in China to Shanghai Haini, a subsidiary of China’s
Yangtze River Pharmaceutical Group. Also outside the United States, revaprazan is marketed by Yuhan Corporation
in South Korea, and tegoprazan is marketed by HK inno.N in South Korea, is also marketed in China and Indonesia,
and is currently in development by RaQualia Pharma, Inc. in Japan. Additionally, Jeil Pharm has initiated a Phase 3
trial in South Korea of its PCAB candidate, JP-1366, in erosive GERD, and Cinclus’ linaprazan glurate has completed
a Phase 2 clinical trial in Europe. To our knowledge, none of these compounds have demonstrated superiority to
PPIs in a Phase 3 clinical trial.
Additionally, we are aware of several clinical-stage PPIs in territories outside of the United States that if
developed and approved in our licensed territories may compete with vonoprazan. These include Dexa Medica’s
DLBS-2411, currently launched in the Philippines and in Phase 3 in Indonesia, Sihuan Pharmaceutical’s anaprazole,
currently in Phase 3 in China, and Eisai’s azeloprazole, currently in a Phase 2 in China.
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Intellectual Property
Intellectual property, including patents, trade secrets, trademarks and copyrights, is important to our
business. Our commercial success depends in part on our ability to obtain and maintain proprietary intellectual
property protection for vonoprazan, as well as for future product candidates and novel discoveries, product
development technologies, and know-how. Our commercial success also depends in part on our ability to operate
without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights.
Our policy is to develop and maintain protection of our proprietary position by, among other methods, licensing or
filing U.S. and foreign patents and applications relating to our technology, inventions, and improvements that are
important to the development and implementation of our business.
Our patent portfolio, comprising patents and patent applications exclusively licensed to us, is built with a
goal of establishing broad protection that generally includes, for the product candidate compound, claims directed
to composition of matter, pharmaceutical compositions or formulations, methods of synthesis, and methods of
treatment using such pharmaceutical compositions or formulations. As of December 31, 2022, our patent portfolio
covering vonoprazan consists solely of exclusively licensed patents and patent applications from Takeda. Subject to
the terms of the license agreement we entered into with Takeda on May 7, 2019, or the Takeda License, we have
licensed from Takeda exclusive rights in the United States, Europe, and Canada to patents and patent applications
covering the composition of matter, formulation, use and/or manufacture of vonoprazan. Our patent portfolio
comprises 10 distinct patent families protecting the technology relating to the compound vonoprazan and its
synthetic intermediates, methods of synthesizing vonoprazan and related compounds, various formulations of
vonoprazan products, as well as methods of treating diseases with vonoprazan and related compounds. As of
December 31, 2022, our portfolio consists of approximately 23 issued U.S. patents, 6 pending U.S. applications, 14
issued European patents subsequently validated in individual European countries, 3 pending European
applications, 5 issued Canadian patents, and 3 pending Canadian applications. The issued patents and pending
applications have nominal expiration dates ranging from 2024 to 2038 without accounting for any available patent
term adjustments or extensions. The issued U.S. patent covering the composition of matter of vonoprazan is
expected to expire in August 2028, not including patent term extension. The issued U.S. patent covering the
formulation of vonoprazan is expected to expire in August 2030, not including patent term extension.
The term of individual patents in our portfolio depends upon the legal term of patents in the countries in
which they are obtained. In most countries in which we file, including the United States, the patent term is 20
years from the earliest date of filing a non-provisional patent application. In the United States, the term of a patent
may be eligible for patent term adjustment, which permits patent term restoration as compensation for delays
incurred at the USPTO during the patent prosecution process. In addition, for patents that cover an FDA-approved
drug, the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a
patent term extension of up to five years beyond the expiration of the patent. While the length of the patent term
extension is related to the length of time the drug is under regulatory review, patent term extension cannot
extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only one
patent per approved drug may be extended under the Hatch-Waxman Act. Similar provisions are available in
Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future,
if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering
those products. We plan to seek any available patent term extension to any issued patents we may be granted in
any jurisdiction where such extensions are available; however, there is no guarantee that the applicable
authorities, including the FDA in the United States, will agree with our assessment of whether such extensions
should be granted, and if granted, the length of such extensions.
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The patent positions of companies like ours are generally uncertain and involve complex legal and factual
questions. The relevant patent laws and their interpretation outside of the United States is also uncertain. Changes
in either the patent laws or their interpretation in the United States and other countries may diminish our ability to
protect our technology or product candidates and could affect the value of such intellectual property. In particular,
our ability to stop third parties from making, using, selling, offering to sell or importing products that infringe our
intellectual property will depend in part on our success in obtaining and enforcing patent claims that cover our
technology, inventions and improvements. We cannot guarantee that patents will be granted with respect to any
of our licensed pending patent applications or with respect to any patent applications we may file in the future,
nor can we be sure that any patents that may be granted to us or Takeda in the future will be commercially useful
in protecting our products, the methods of use or manufacture of those products. Moreover, issued patents do not
guarantee the right to practice our technology in relation to the commercialization of our products. Issued patents
only allow us to block potential competitors from practicing the claimed inventions of the issued patents.
Further, patents and other intellectual property rights in the pharmaceutical and biotechnology space are
evolving and involve many risks and uncertainties. For example, third parties may have blocking patents that could
be used to prevent us from commercializing vonoprazan and any future product candidates and practicing our
proprietary technology, and any issued patents may be challenged, invalidated or circumvented, which could limit
our ability to stop competitors from marketing related products or could limit the term of patent protection that
otherwise may exist for vonoprazan and any future product candidates. In addition, the scope of the rights granted
under any issued patents may not provide us with protection or competitive advantages against competitors with
similar technology. Furthermore, our competitors may independently develop similar technologies that are outside
the scope of the rights granted under any issued patents. For these reasons, we may face competition with respect
to vonoprazan and any future product candidates. Moreover, because of the extensive time required for
development, testing and regulatory review of a potential product, it is possible that, before any particular product
candidate can be commercialized, any patent protection for such product may expire or remain in force for only a
short period following commercialization, thereby reducing the commercial advantage the patent provides.
It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers
and other advisors to execute confidentiality agreements upon the commencement of employment or consulting
relationships with us, and for employees and consultants to enter into invention assignment agreements with us.
These agreements provide that all confidential information developed or made known to the individual during the
course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in
specific circumstances. Where applicable, the agreements provide that all inventions to which the individual
contributed as an inventor shall be assigned to Phathom, and as such, will become our property. There can be no
assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade
secrets in the event of unauthorized use or disclosure of such information.
Further, we have filed for and have received trademark registrations for our company name “Phathom
Pharmaceuticals” in the United States, European Union, and other foreign jurisdictions, and are pursuing
trademark protection in certain other foreign jurisdictions.
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License Agreement with Takeda Pharmaceutical Company Limited
On May 7, 2019, we and Takeda entered into the Takeda License, pursuant to which, Takeda granted us an
exclusive, sublicensable (with Takeda’s reasonable consent) license under certain patents and know how relating
to vonoprazan and owned or controlled by Takeda during the term of the Takeda License to commercialize
vonoprazan products using specified formulations for all human therapeutic uses in the United States, Europe and
Canada, and a non-exclusive license under such patents and know how to develop and manufacture such
vonoprazan products anywhere in the world (subject to Takeda’s consent as to each country) for the purposes of
commercializing the vonoprazan products in the United States, Europe and Canada. We granted Takeda a non-
exclusive, royalty-free, sublicensable license under our rights in any patents and know-how that are necessary or
useful to enable Takeda to develop and manufacture vonoprazan products anywhere in the world for the purposes
of commercialization outside United States, Europe and Canada. We also granted Takeda an exclusive, royalty-free
license under our rights in certain patents and know-how owned or controlled by us and necessary for the
exploitation of vonoprazan products, in each case for Takeda to commercialize any vonoprazan product outside of
the United States, Canada, and Europe and for purposes other than human therapeutic use.
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 the 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 have the first right to enforce the licensed patent rights with
respect to certain infringing products in the United States, Europe and Canada.
We paid Takeda upfront consideration consisting of a cash payment of $25.0 million, 1,084,000 shares of
common stock and a warrant to purchase 7,588,000 shares of common stock, or the Takeda Warrant. 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 a total maximum milestone amount of $250.0 million. We
also agreed to make tiered royalty payments in the low double digits to the mid-teens 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.
The Takeda License will continue until the expiration of the obligation to pay royalties in all countries and on
all products. We may terminate the Takeda License in its entirety without cause upon six months’ prior written
notice. We and Takeda may terminate the Takeda License in the case of the other party’s insolvency, or upon prior
written notice within a specified time period for the other party’s material uncured breach. Takeda may terminate
the Takeda License in its entirety if we challenge the licensed patents, or if we assist any third party in challenging
such patents.
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Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial
quantities of vonoprazan. Vonoprazan is a small molecule that can be manufactured using commercially available
technologies.
With respect to any future product candidates, we expect to continue to rely on third-party contract
manufacturers to manufacture clinical supplies and commercial quantities of any approved product. Although we
rely on contract manufacturers, we have personnel with manufacturing experience to oversee our relationships
with Takeda, Sandoz, Catalent and Evonik.
Takeda Commercial Supply Agreement
In April 2020, we entered into a Commercial Supply Agreement with Takeda, or the Takeda Supply
Agreement, pursuant to which Takeda will supply us with commercial quantities of vonoprazan bulk drug. Pursuant
to the Commercial Supply Agreement, Takeda has agreed to supply us certain quantities of vonoprazan bulk drug
product according to approved specifications at a fixed price per batch of bulk drug product in order to
commercialize vonoprazan in accordance with the Takeda License. The Takeda Supply Agreement sets forth a
minimum and maximum number of batches of vonoprazan bulk drug product that we are required to order each
year, and if we do not purchase the minimum number of batches in a year, other than as a result of Takeda’s
inability to supply such batches for any reason, or as a result of force majeure, we are required to pay Takeda the
amount corresponding to the shortfall. Takeda has no obligation to supply bulk drug product above the maximum
number of batches specified in the Takeda Supply Agreement.
In addition, under the Takeda Supply Agreement, Takeda will provide certain services and materials,
including vonoprazan drug substance, to support the transfer of technology and Takeda manufacturing know-how
to our contract manufacturing organizations, or CMOs, that we designate. Takeda has agreed to negotiate in good
faith to provide reasonable additional support, including technical advice and supply of materials, to assist us with
technology transfers to the CMOs.
The Takeda Supply Agreement will continue until the earlier of (a) two years from the date we place an order
for bulk drug product for the first commercial launch of vonoprazan in any jurisdiction in the United States, Europe
or Canada, and (b) December 31, 2023. The Takeda Supply Agreement may be terminated upon written notice by
either party if the other party has failed to remedy a material breach within a specified cure period following
written notice of such breach. The Takeda Supply Agreement will terminate immediately upon the termination of
the Takeda License in accordance with its terms.
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Sandoz Supply and Packaging Agreement
In December 2020, we entered into a Supply and Packaging Services Agreement with Sandoz GmbH, or the
Sandoz Supply Agreement, pursuant to which Sandoz has agreed to supply commercial quantities of amoxicillin
capsules and clarithromycin tablets, to package these antibiotics with vonoprazan drug product in finished
convenience packs, and to supply us with these convenience packs.
Pursuant to the Sandoz Supply Agreement, we agreed to purchase certain quantities of convenience packs
from Sandoz at an agreed upon price per pack. The price per pack is fixed for the first two (2) years following
launch of the convenience pack in the United State and may be adjusted thereafter based on Sandoz’s cost
increases, subject to an annual cap. The Sandoz Supply Agreement sets forth an annual minimum number of
convenience packs that we must purchase each year following launch of the convenience pack product, and if we
do not meet the minimum order in a given year, we are required to pay Sandoz the amount corresponding to the
shortfall. Sandoz has no obligation to supply convenience packs above a maximum number of packs above a
certain percentage of our forecasts. We have agreed to purchase convenience packs, amoxicillin capsules and
clarithromycin tablets, in each case intended for sale in the United States, exclusively from Sandoz during the five-
year period following launch.
The Sandoz Supply Agreement will continue for five years from launch of the convenience pack in the U.S.
and may be terminated effective at the end of the initial five-year term upon written notice by either party prior to
the end of the third year following launch. In the absence of such notice, the Sandoz Supply Agreement will extend
automatically for an additional three-year period, and thereafter as mutually agreed upon by the parties. The
Sandoz Supply Agreement may also be terminated at any time upon written notice by either party for uncured
material breach following written notice of such breach.
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Catalent Commercial Supply Agreement
In July 2021, we entered into a Commercial Supply Agreement, or the Tablet Supply Agreement, with
Catalent Pharma Solutions, LLC, or Catalent, pursuant to which Catalent has agreed to supply us with commercial
quantities of vonoprazan fumarate tablets.
Pursuant to the Tablet Supply Agreement, Catalent has agreed to supply us with, and the Company has
agreed to purchase from Catalent, finished vonoprazan tablets at an agreed upon price per unit. The price per unit
may be adjusted annually based on increases in costs incurred by Catalent. The Tablet Supply Agreement requires
us to purchase a specified percentage of its requirements of finished vonoprazan tablets from Catalent, which
percentage is subject to adjustment following the third anniversary of the first day of the calendar quarter during
which Catalent is scheduled to deliver the initial finished vonoprazan tablets to us intended for commercial sale,
excluding validation batches, or the Commencement Date.
Unless terminated earlier, the term of the Tablet Supply Agreement extends for a period of five years from
the Commencement Date. The Tablet Supply Agreement will extend automatically for additional two year periods
unless terminated by either party upon at least 24months prior written notice. The Tablet Supply Agreement may
also be terminated at any time upon written notice by either party if the other party has failed to remedy a
material breach of the terms of the Tablet Supply Agreement within a specified period following receipt of written
notice of such breach.
Evonik Commercial Supply Agreement
In August 2022, we entered into a Commercial Supply Agreement, or the API Supply Agreement, with Evonik
Operations GmbH, or Evonik, pursuant to which Evonik has agreed to supply us with commercial quantities of
vonoprazan drug substance, or API.
Pursuant to the API Supply Agreement, Evonik has agreed to supply us with, and we have agreed to
purchase, certain quantities of API at an agreed upon price which varies based on the volume of product ordered.
The price may also be adjusted based on actual changes in costs incurred by Evonik. Subject to pre-existing
purchase obligations to Takeda, we have agreed to purchase a percentage of our annual requirements of API from
Evonik, for which the percentage of our annual API requirements is subject to adjustment based upon the price of
API under the API Supply Agreement.
Unless terminated earlier, the API Supply Agreement has an initial period that expires in August 2027. This
initial term will be extended by two additional years if Evonik successfully qualifies a second manufacturing facility
to produce API no later than December 31, 2024. The API Supply Agreement may be terminated effective at the
end of the initial period on at least 24-months written notice by either party. In the absence of such notice, the
API Supply Agreement will extend automatically for additional 2-year periods which may be terminated upon 18
months’ notice. The API Supply Agreement may also be terminated at any time upon written notice by either
party if the other party has failed to remedy a material breach of the terms of the Supply Agreement within a
specified period following receipt of written notice of such breach.
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Government Regulation
Government authorities in the United States, at the federal, state and local level, and other countries
extensively regulate, among other things, the research, development, testing, manufacture, quality control,
approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export
and import of products such as those we are developing. A new drug must be approved by the FDA through the
NDA process before it may be legally marketed in the United States.
U.S. Drug Development Process
In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act, or the FDCA,
and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance
with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial
time and financial resources.
The process required by the FDA before a drug may be marketed in the United States generally involves the
following:
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completion of preclinical laboratory tests, animal studies and formulation studies in accordance with
Good Laboratory Practice, or GLP, regulations and other applicable regulations;
submission to the FDA of an investigational new drug application, or IND, which must become effective
before human clinical trials may begin;
approval by an independent institutional review board, or IRB, at each clinical site before each trial may
be initiated;
performance of adequate and well-controlled human clinical trials in accordance with Good Clinical
Practice, or GCP, regulations to establish the safety and efficacy of the proposed drug for its intended
use;
submission to the FDA of an NDA;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug
is produced to assess compliance with current Good Manufacturing Practice, or cGMP, requirements to
assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength,
quality and purity, and of selected clinical investigation sites to assess compliance with GCPs; and
FDA review and approval of the NDA to permit commercial marketing of the product for particular
indications for use in the United States.
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Once a pharmaceutical candidate is identified for development, it enters the preclinical testing stage.
Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal
studies. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP
regulations. Prior to beginning the first clinical trial with a product candidate in the United States, a sponsor must
submit an IND to the FDA. The sponsor must submit the results of the preclinical tests, together with
manufacturing information and analytical data, to the FDA as part of the IND. An IND is a request for authorization
from the FDA to administer an investigational new drug product to humans. The sponsor will also include a
protocol detailing, among other things, the objectives of the first phase of the clinical trial, the parameters to be
used in monitoring safety, and the effectiveness criteria to be evaluated, if the first phase lends itself to an efficacy
evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes
effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on
a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the
clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due
to safety concerns about on-going or proposed clinical trials or non-compliance with specific FDA requirements,
and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.
Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the
supervision of one or more qualified investigators in accordance with GCP regulations, which include the
requirement that all research subjects provide their informed consent in writing for their participation in any
clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial,
dosing procedures, subject selection and exclusion criteria and the safety and effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND as well as any subsequent protocol
amendments. While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical
studies performed since the last progress report, among other information, must be submitted at least annually to
the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and
unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed
to the drug, findings from animal or in vitro testing suggesting a significant risk to humans exposed to the drug,
and any clinically important increased rate of a serious suspected adverse reaction compared to that listed in the
protocol or investigator brochure.
Furthermore, an IRB at each institution participating in the clinical trial must review and approve each
protocol before a clinical trial commences at that institution and must also approve the information regarding the
trial and the consent form that must be provided to each trial subject or his or her legal representative, monitor
the study until completed and otherwise comply with IRB regulations. There are also requirements governing the
reporting of ongoing clinical studies and clinical study results to public registries. The FDA or the sponsor may
suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are
being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial
at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug
has been associated with unexpected serious harm to patients. In addition, some clinical trials are overseen by an
independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or
committee. Depending on its charter, this group may determine whether a trial may move forward at designated
check points based on access to certain data from the trial.
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Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
• Phase 1: The product candidate is initially introduced into healthy human volunteers or patients with
the target disease or condition. These studies test for safety, dosage tolerance, absorption, metabolism,
distribution and excretion and, if possible, to gain an early indication of its effectiveness.
• Phase 2: The product candidate is administered to a limited patient population with a specified disease
or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify
possible adverse side effects and safety risks.
• Phase 3: The product candidate is administered to an expanded patient population to further evaluate
dosage, to provide statistically significant evidence of the product’s effectiveness for its intended use(s)
and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These
clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and
provide, if appropriate, an adequate basis for product labeling.
Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing
approval. These trials are used to gain additional experience from the treatment of patients in the intended
therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a
condition of approval of an NDA.
While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical studies
performed since the last progress report, among other information, must be submitted at least annually to the
FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected
suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug,
findings from animal or in vitro testing suggesting a significant risk to humans exposed to the drug, and any
clinically important increased rate of a serious suspected adverse reaction compared to that listed in the protocol
or investigator brochure.
The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that
the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or
terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with
the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. In addition,
some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as
a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial
may move forward at designated check points based on access to certain data from the trial.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain
points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted.
Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share
information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to
reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2
trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will
support approval of the new drug.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop
additional information about the chemistry and physical characteristics of the drug and finalize a process for
manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and, among other
things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final
drug. In addition, appropriate packaging must be selected and tested and stability studies must be conducted to
demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
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There are also requirements governing the reporting of ongoing clinical trials and completed trial results to
public registries. Sponsors of certain clinical trials of FDA-regulated products are required to register and disclose
specified clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the
product, patient population, phase of investigation, trial sites and investigators and other aspects of the clinical
trial is then made public as part of the disclosure.
NDA Review and Approval Process
Assuming successful completion of all required testing in accordance with all applicable regulatory
requirements, the results of product development, preclinical and other non-clinical studies and clinical trials,
along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug,
proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval
to market the product. The submission of an NDA is subject to the payment of substantial user fees; a waiver of
such fees may be obtained under certain limited circumstances.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting
them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may
request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted
with the additional information. The resubmitted application also is subject to review before the FDA accepts it for
filing. Once filed, the FDA reviews an NDA to determine, among other things, whether a product is safe and
effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the
product’s identity, strength, quality and purity. Under current PDUFA guidelines, the FDA has a goal of ten months
from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This
review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has
approximately two months to make a “filing” decision after the application is submitted.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a
panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides
a recommendation as to whether the application should be approved and under what conditions. The FDA is not
bound by the recommendations of an advisory committee, but it considers such recommendations carefully when
making decisions.
Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured.
The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in
compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure
compliance with GCP requirements.
After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval
letter authorizes commercial marketing of the drug with prescribing information for specific indications. A
Complete Response Letter indicates that the review cycle of the application is complete and the application will
not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the
NDA identified by the FDA and may require additional clinical data, such as additional clinical trials or other
significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a
Complete Response Letter is issued, the sponsor must resubmit the NDA, addressing all of the deficiencies
identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may
decide that the NDA does not satisfy the criteria for approval.
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If a product receives regulatory approval, the approval may be significantly limited to specific diseases and
dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the
product. In addition, the FDA may require a sponsor to conduct Phase 4 testing, which involves clinical trials
designed to further assess a drug’s safety and effectiveness after NDA approval, and may require testing and
surveillance programs to monitor the safety of approved products which have been commercialized. The FDA may
also place other conditions on approval including the requirement for a risk evaluation and mitigation strategy, or
REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must
submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS could
include medication guides, physician communication plans or elements to assure safe use, such as restricted
distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or
marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Marketing
approval may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial
marketing.
The Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric clinical trials for most
drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of
administration. Under PREA, original NDAs and supplements must contain a pediatric assessment unless the
sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of
the product for the claimed indications in all relevant pediatric subpopulations and support dosing and
administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA
may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A deferral may be
granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric
clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric
clinical trials begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required
assessment, fails to keep a deferral current or fails to submit a request for approval of a pediatric formulation.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates.
The FDA has a Fast Track designation program that is intended to expedite or facilitate the process for reviewing
new drug products that meet certain criteria. Specifically, product candidates are eligible for Fast Track designation
if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to
address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of
the product candidate and the specific indication for which it is being studied. The sponsor of a Fast Track product
candidate has opportunities for more frequent interactions with the applicable FDA review team during product
development and, once an NDA is submitted, the product candidate may be eligible for priority review. A Fast
Track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of
the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the
submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the
schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the
NDA.
A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible
for Breakthrough Therapy designation to expedite its development and review. A product candidate can receive
Breakthrough Therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in
combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing
therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in
clinical development. The designation includes all of the Fast Track program features, as well as more intensive
FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the
development and review of the product candidate, including involvement of senior managers.
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Any marketing application for a drug submitted to the FDA for approval, including a product candidate with a
Fast Track designation or Breakthrough Therapy designation, may also be eligible for other types of FDA programs
intended to expedite development and review, such as priority review and accelerated approval. A product
candidate is eligible for priority review if it is designed to treat a serious or life-threatening disease or condition,
and if approved, would provide a significant improvement in safety or effectiveness compared to available
alternatives for such disease or condition. The FDA will attempt to direct additional resources to the evaluation of
an application designated for priority review in an effort to facilitate the review. The FDA endeavors to review
applications with priority review designations within six months of the filing date as compared to ten months for
review of new molecular entity NDAs under its current PDUFA review goals.
In addition, a product candidate may be eligible for accelerated approval. Drug products intended to treat
serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination
that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit,
or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably
likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the
severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition
of approval, the FDA will generally require that a sponsor of a drug receiving accelerated approval perform
adequate and well-controlled confirmatory clinical trials verify and describe the anticipated effect on irreversible
morbidity or mortality or other clinical benefit. Products receiving accelerated approval may be subject to
expedited withdrawal procedures if the sponsor fails to conduct the required confirmatory studies in a timely
manner, or if such studies fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a
condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing
of the commercial launch of the product.
Fast Track designation, Breakthrough Therapy designation, accelerated approval, and priority do not change
the standards for approval but may expedite the development or approval process. Even if a product qualifies for
one or more of these programs, the FDA may later decide that the product no longer meets the conditions for
qualification or decide that the time period for FDA review or approval will not be shortened.
Post-Approval Requirements
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory standards is
not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown
problems with a product may result in restrictions on the product or even complete withdrawal of the product
from the market. After approval, some types of changes to the approved product, such as adding new indications,
certain manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are
required to register their establishments with the FDA and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMP regulations and other
laws and regulations. In addition, the FDA may impose a number of post-approval requirements as a condition of
approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and
surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.
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Any drug products manufactured or distributed pursuant to FDA approvals are subject to pervasive and
continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of
adverse experiences with the drug, providing the FDA with updated safety and efficacy information, drug sampling
and distribution requirements, complying with certain electronic records and signature requirements, and
complying with FDA promotion and advertising requirements. The FDA strictly regulates labeling, advertising,
promotion and other types of information on products that are placed on the market and imposes requirements
and restrictions on drug manufacturers, such as those related to direct-to-consumer advertising, the prohibition on
promoting products for uses or in patient populations that are not described in the product’s approved labeling
(known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities
involving the Internet. Physicians may prescribe, in their independent professional medical judgment, legally
available products for uses that are not described in the product’s labeling and that differ from those tested by us
and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients
in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The
FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
However, companies may share truthful and not misleading information that is otherwise consistent with a
product’s FDA-approved labelling.
Discovery of previously unknown problems or the failure to comply with the applicable regulatory
requirements may result in restrictions on the marketing of a product or withdrawal of the product from the
market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any
time during the product development process, approval process or post-approval, may subject an applicant or
manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could
include refusal to approve pending applications, withdrawal of an approval, clinical holds on post-approval clinical
trials, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or
distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or
communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties.
Non-Patent and Marketing Exclusivity
Data and market exclusivity provisions under the FDCA can delay the submission or the approval of certain
marketing applications. The FDCA provides a five-year period of non-patent data exclusivity within the United
States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity
if the FDA has not previously approved any other new drug containing the same active moiety, which is the
molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not
approve or even accept for review an abbreviated new drug application, or ANDA, or an NDA submitted under
Section 505(b)(2), or 505(b)(2) NDA, submitted by another company for another drug based on the same active
moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for
another indication, where the applicant does not own or have a legal right of reference to all the data required for
approval. However, an application may be submitted after four years if it contains a certification of patent
invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.
The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an
existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by
the applicant are deemed by the FDA to be essential to the approval of the application, for example new
indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for
which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA
from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or
condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA.
However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of
the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and
effectiveness.
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Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric
exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity
if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a
written request does not require the sponsor to undertake the described clinical trials.
Additionally, under the GAIN Act, the FDA may designate a product as a “qualified infectious disease
product,” or QIDP. In order to receive this designation, a drug must qualify as an antibacterial or antifungal drug
for human use intended to treat serious or life-threatening infections, including those caused by either (1) an
antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called
“qualifying pathogen” found on a list of potentially dangerous, drug-resistant organisms established and
maintained by the FDA under the law. The FDA interprets QIDP designation to apply to a specific drug product,
including a specific dosage form of the product. A sponsor must request such designation before submitting a
marketing application, and the FDA will respond to a request for QIDP designation within 60 days of the date the
FDA receives the request. The GAIN Act permits the FDA to revoke a QIDP designation only if the request for such
designation contained an untrue statement of material fact.
The benefits of QIDP designation include potential eligibility for priority review and Fast Track designation,
and an extension by an additional five years of any non-patent marketing exclusivity period awarded, such as a
five-year exclusivity period awarded for a new molecular entity. This extension is in addition to any pediatric
exclusivity extension that may be awarded, and the extension will be awarded only to a drug first approved on or
after the date of enactment. The GAIN Act provisions prohibit the grant of an exclusivity extension where the
application is a supplement to an application for which an extension is in effect or has expired, is a subsequent
application for a specified change to an approved product, or is an application for a product that does not meet
the definition of QIDP based on the uses for which it is ultimately approved.
U.S. Healthcare Fraud and Abuse Laws and Compliance Requirements
In addition to FDA regulation of pharmaceutical products, U.S. federal and state healthcare laws and
regulations restrict business practices in the pharmaceutical industry. These laws may impact, among other things,
our current and future business operations, including our clinical research activities, and constrain the business or
financial arrangements and relationships with healthcare providers and other parties. These laws include anti-
kickback and false claims laws, civil monetary penalties laws, and transparency laws regarding drug pricing and
payments or other items of value provided to physicians and other healthcare providers.
The federal Anti-Kickback Statute prohibits, among other things, individuals or entities from knowingly and
willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in
kind to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease
or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. A
person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to
have committed a violation.
The federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary
penalties laws prohibit, among other things, any individual or entity from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government, knowingly making, using or causing to be made or
used a false record or statement material to a false or fraudulent claim to the federal government, or from
knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal
government. In addition, the government may assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False
Claims Act.
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The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal
criminal statutes that prohibit, among other things, knowingly and willfully executing a scheme to defraud any
healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing
or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with
the delivery of or payment for healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback
Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented
under HIPAA or specific intent to violate it in order to have committed a violation.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and
medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance
Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS,
information related to payments or other transfers of value made to physicians (defined to include doctors,
dentists, optometrists, podiatrists and chiropractors), certain other non-physician practitioners (physician
assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse
anesthetists, anesthesiology assistants and certified nurse midwives), and teaching hospitals, and applicable
manufacturers and applicable group purchasing organizations to report annually to CMS ownership and
investment interests held by physicians and their immediate family members.
Similar state and local laws and regulations may also restrict business practices in the pharmaceutical
industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not
limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or
services reimbursed by non-governmental third-party payers, including private insurers, or by patients themselves;
state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government, or
otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state
laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information
or which require tracking gifts and other remuneration and items of value provided to physicians, other healthcare
providers and entities; and state and local laws that require the registration of pharmaceutical sales
representatives.
Violation of any of such laws or any other governmental regulations that apply may result in significant
criminal, civil and administrative penalties including damages, fines, imprisonment, disgorgement, additional
reporting requirements and oversight if we become subject to a corporate integrity agreement or similar
agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm,
diminished profits and future earnings, disgorgement, exclusion from participation in government healthcare
programs and the curtailment or restructuring of our operations.
U.S. Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidate for
which we may seek regulatory approval. Sales in the United States will depend, in part, on the availability of
sufficient coverage and adequate reimbursement from third-party payers, which include government health
programs such as Medicare, Medicaid, TRICARE and the Veterans Administration, as well as managed care
organizations and private health insurers. Prices at which we or our customers seek reimbursement for
vonoprazan and any future product candidates can be subject to challenge, reduction or denial by third-party
payers.
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The process for determining whether a third-party payer will provide coverage for a product is typically
separate from the process for setting the reimbursement rate that the payer will pay for the product. In the United
States, there is no uniform policy among payers for coverage or reimbursement. Decisions regarding whether to
cover a product, the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan
basis. Third-party payers often rely upon Medicare coverage policy and payment limitations in setting their own
coverage and reimbursement policies, but also have their own methods and approval processes. Therefore,
coverage and reimbursement for products can differ significantly from payer to payer. As a result, the coverage
determination process is often a time-consuming and costly process that can require manufacturers to provide
scientific and clinical support for the use of a product to each payer separately, with no assurance that coverage
and adequate reimbursement will be applied consistently or obtained in the first instance.
Third-party payers are increasingly challenging the price and examining the medical necessity and cost-
effectiveness of medical products and services, in addition to their safety and efficacy. Adoption of price controls
and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls
and measures, could further limit sales of any product that receives approval. Third-party payers may not consider
vonoprazan or any future product candidates to be medically necessary or cost-effective compared to other
available therapies, or the rebate percentages required to secure favorable coverage may not yield an adequate
margin over cost or may not enable us to maintain price levels sufficient to realize an appropriate return on our
investment in drug development. Additionally, decreases in third-party reimbursement for any product or a
decision by a third-party payer not to cover a product could reduce physician usage and patient demand for the
product.
Medicaid is a joint federal and state program administered by the states for low-income and disabled
beneficiaries. Medicare is a federal program that is administered by the federal government covering individuals
age 65 and over as well as those with certain disabilities. Under the Medicaid Drug Rebate Program, or MDRP, as a
condition of having federal funds being made available to the states for covered outpatient drugs under Medicaid,
pharmaceutical manufacturers must enter into an agreement with the Secretary of Health and Human Services to
pay a rebate to state Medicaid programs for each unit of covered outpatient drug dispensed to a Medicaid
beneficiary and paid for by the state Medicaid program. Medicaid drug rebates are based on pricing data that
pharmaceutical manufacturers report on a monthly and quarterly basis to the U.S. Centers for Medicare &
Medicaid Services, or CMS, which is the federal agency that administers the MDRP and Medicare programs. For the
MDRP, these data include the average manufacturer price, or AMP, for each drug and, in the case of innovator
products, the Best Price, or BP, which represents the lowest price available from the manufacturer to any entity in
the United States in any pricing structure, calculated to include all applicable sales and associated rebates,
discounts and other price concessions. If a manufacturer becomes aware that its MDRP government price
reporting submission for a prior quarter was incorrect or has changed as a result of recalculation of the pricing
data, the manufacturer must resubmit the corrected data for up to three years after those data originally were
due. If a manufacturer fails to provide information timely or is found to have knowingly submitted false
information to the government, the manufacturer may be subject to civil monetary penalties and other sanctions,
including termination from the MDRP.
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Federal law requires that a manufacturer that participates in the MDRP also participate in the Public Health
Service’s 340B drug pricing program, or the 340B program, in order for federal funds to be available for the
manufacturer’s drugs under Medicaid. The 340B program is administered by the Health Resources and Services
Administration, or HRSA, and requires participating manufacturers to agree to charge statutorily defined covered
entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs used in an
outpatient setting. These 340B covered entities include a variety of community health clinics and other entities
that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate
share of low-income patients. The 340B ceiling price is calculated using a statutory formula, which is based on the
AMP and rebate amount for the covered outpatient drug as calculated under the MDRP. In general, products
subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and
discount requirement. Manufacturers must report 340B ceiling prices to HRSA on a quarterly basis, and HRSA
publishes them to 340B covered entities. HRSA has finalized regulations regarding the calculation of the 340B
ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally
overcharge covered entities for 340B-eligible drugs. HRSA has also finalized an administrative dispute resolution
process through which 340B covered entities may pursue claims against participating manufacturers for
overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in
unlawful diversion or duplicate discounting of 340B drugs. In addition, legislation may be introduced that, if
passed, would further expand the 340B program, such as adding further covered entities or requiring participating
manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.
In order to be eligible to have drug products paid for with federal funds under Medicaid and purchased by
certain federal agencies and grantees, a manufacturer must also participate in the U.S. Department of Veterans
Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. Under the VA/FSS program, a manufacturer must
report the Non-Federal Average Manufacturer Price, or Non-FAMP, for its covered drugs to the VA and charge
certain federal agencies no more than the Federal Ceiling Price, which is calculated based on Non-FAMP using a
statutory formula. These federal agencies are the VA, the U.S. Department of Defense, the U.S. Coast Guard, and
the U.S. Public Health Service (including the Indian Health Service). The manufacturer must also pay rebates on
products purchased by military personnel and dependents through the TRICARE retail pharmacy program. If a
manufacturer participating in the FSS program fails to provide timely information or is found to have knowingly
submitted false information, the manufacturer may be subject to civil monetary penalties.
Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs,
including the cost of prescription drugs and combination products. A number of states have either implemented or
are considering implementation of drug price transparency legislation. Requirements under such laws include
advance notice of planned price increases, reporting price increase amounts and factors considered by
manufacturers in taking such increases, wholesale acquisition cost disclosure to prescribers, purchasers, and state
agencies, and new product notice and reporting. Such legislation could limit the price or payment for certain drugs,
and a number of states are authorized to impose civil monetary penalties or pursue other enforcement
mechanisms against manufacturers who fail to comply with drug price transparency requirements, including the
untimely, inaccurate, or incomplete reporting of drug pricing information.
U.S. Healthcare Reform
In the United States, there has been, and continues to be, several legislative and regulatory changes and
proposed changes regarding the healthcare system that could prevent or delay marketing approval of product
candidates, restrict or regulate post-approval activities, and affect the profitable sale of product candidates.
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Among policy makers and payers in the United States, there is significant interest in promoting changes in
healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding
access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been
significantly affected by major legislative initiatives. In March 2010, the Patient Protection and Affordable Care Act,
or the Affordable Care Act, was passed, which substantially changed the way healthcare is financed by both
governmental and private insurers, and significantly affected the pharmaceutical industry. The Affordable Care Act,
increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to
23.1%; required collection of rebates for drugs paid by Medicaid managed care organizations; required
manufacturers to participate in a coverage gap discount program, in which manufacturers must agree to offer
point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded
prescription drugs” to specified federal government programs, implemented a new methodology by which rebates
owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled,
infused, instilled, implanted, or injected; expanded eligibility criteria for Medicaid programs; created a new
Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at
the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending,
potentially including prescription drug spending.
Since its enactment, there have been judicial and political challenges to certain aspects of the Affordable
Care Act, or ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the
ACA without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President
Biden issued an executive order to initiate a special enrollment period from February 15, 2021, through August 15,
2021, for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also
instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access
to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that
include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance
coverage through Medicaid or the ACA.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was
enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year,
which went into effect on April 1, 2013, and, due to subsequent legislative amendments to the statute will remain
in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022,
unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was
signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals,
and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years.
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Moreover, there has been heightened governmental scrutiny over the manner in which manufacturers set
prices for their marketed products, which has resulted in several Congressional inquiries and proposed and
enacted federal and state legislation designed to, among other things, bring more transparency to product pricing,
review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for pharmaceutical products. Most recently, on August 16, 2022, the Inflation
Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain
drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject
to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace
inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting
program (beginning in 2025). Individual states in the U.S. have also become increasingly active in implementing
regulations designed to control pharmaceutical product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In
addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to
determine which drugs and suppliers will be included in their healthcare programs. Furthermore, there has been
increased interest by third-party payers and governmental authorities in reference pricing systems and publication
of discounts and list prices.
The likelihood of implementation of additional reform initiatives is uncertain. Moreover, in the coming years,
additional legislative and regulatory changes could be made to governmental health programs that could
significantly impact pharmaceutical companies and the success of our product candidates.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and
varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and
governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our
products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals
by the comparable foreign regulatory authorities before we can commence clinical trials or marketing of the
product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the
United States apply similarly in the context of the European Union, or EU, the approval process varies between
countries and jurisdictions and can involve additional product testing and additional administrative review periods.
The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that
required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory
approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may
negatively impact the regulatory process in others.
Regulation and Procedures Governing Marketing Authorization of Medicinal Products in the EU
Non-clinical studies and clinical trials
Similarly to the United States, the various phases of non-clinical and clinical research in the EU are subject to
significant regulatory controls.
Non-clinical studies are performed to demonstrate the health or environmental safety of new biological
substances. Non-clinical studies must be conducted in compliance with the principles of good laboratory practice,
or GLP, as set forth in EU Directive 2004/10/EC. In particular, non-clinical studies, both in vitro and in vivo, must be
planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which
define a set of rules and criteria for a quality system for the organizational process and the conditions for non-
clinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development
requirements.
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Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national
regulations and the International Conference on Harmonization, or ICH, guidelines on good clinical practices, or
GCP, as well as the applicable regulatory requirements and the ethical principles that have their origin in the
Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint an EU
entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU
member states, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical
trial.
A clinical trial application, or CTA, must be submitted to competent national health authorities and
independent ethics committees, much like the FDA and IRB, respectively. Once the CTA is approved by the national
health authority and the ethics committee has granted a positive opinion in relation to the conduct of the trial in
the relevant member state(s), in accordance with a country’s requirements, clinical study development may
proceed. The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal
product dossier containing information about the manufacture and quality of the medicinal product under
investigation.
Currently, CTAs must be submitted to the competent authority in each EU member state in which the trial
will be conducted. Under the new Clinical Trials Regulation, which became applicable on January 31, 2022, there
will be a centralized application procedure where one national authority takes the lead in reviewing the application
and the other national authorities have only limited involvement. The extent to which ongoing clinical trials will be
governed by the Clinical Trials Regulation will depend on the duration of the individual clinical trial from January
31, 2022 onward. If an ongoing clinical trial continues for more than three years from January 31, 2022 the Clinical
Trials Regulation will begin to apply to the clinical trial as of January 31, 2025.
Medicines used in clinical trials must be manufactured in accordance with good manufacturing practice, or
GMP. Other national and EU-wide regulatory requirements may also apply.
Marketing Authorizations
In the EU, medicinal product candidates can only be commercialized after obtaining a marketing
authorization, or MA. To obtain regulatory approval of a product candidate in the EU, we must submit a Marketing
Authorization Application, or MAA. The process for doing this depends, among other things, on the nature of the
medicinal product.
There are two types of MAs:
•
"Centralized MAs" are issued by the European Commission through the centralized procedure, based on
the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA and are valid
throughout the EU. The centralized procedure is mandatory for certain types of products, such as (i)
medicinal products derived from biotechnological processes, (ii) designated orphan medicinal products,
(iii) advanced medicinal therapy products, or ATMPs, such as gene therapy, somatic cell-therapy or
tissue-engineered medicines and (iv) medicinal products containing a new active substance indicated for
the treatment of certain diseases, such as HIV/AIDS, cancer, neurodegenerative diseases, diabetes, auto-
immune and other immune dysfunctions and viral diseases. The centralized procedure is optional for
any products containing a new active substance not yet authorized in the EU, or for products that
constitute a significant therapeutic, scientific or technical innovation or for which the granting of a MA
would be in the interest of public health in the EU.
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•
"National MAs" are issued by the competent authorities of the EU member states, only cover their
respective territory, and are available for product candidates not falling within the mandatory scope of
the centralized procedure. Where a product has already been authorized for marketing in an EU
member state, this National MA can be recognized in another member state through the mutual
recognition procedure. If the product has not received a National MA in any member state at the time of
application, it can be approved simultaneously in various member states through the decentralized
procedure. Under the decentralized procedure an identical dossier is submitted to the competent
authorities of each of the member states in which the MA is sought, one of which is selected by the
applicant as the reference member state.
Under the above described procedures, before granting the MA, the EMA or the competent authorities of
the EU member states make an assessment of the risk-benefit balance of the product on the basis of scientific
criteria concerning its quality, safety and efficacy.
MAs have an initial duration of five years. After these five years, the authorization may be renewed for an
unlimited period on the basis of a reevaluation of the risk-benefit balance. Under the centralized procedure and in
exceptional cases, the CHMP might perform an accelerated review of a MA in no more than 150 days (not
including clock stops).
Data and marketing exclusivity
The EU also provides opportunities for market exclusivity. Upon receiving marketing authorization,
innovative medicinal products generally receive eight years of data exclusivity and an additional two years of
market exclusivity. If granted, the data exclusivity period prevents generic or biosimilar applicants from relying on
the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic
or biosimilar MA in the EU during a period of eight years from the date on which the reference product was first
authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from
commercializing its product in the EU until 10 years have elapsed from the initial MA of the reference product in
the EU. The overall 10-year market exclusivity period can be extended to a maximum of eleven years if, during the
first eight years of those 10 years, the MA holder obtains an authorization for one or more new therapeutic
indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical
benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by
the EU’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity.
Pediatric investigation plan
In the EU, MAAs for new medicinal products have to include the results of trials conducted in the pediatric
population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee,
or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of
the drug for which MA is being sought. The PDCO can grant a deferral of the obligation to implement some or all of
the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in
adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data
are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or
condition for which the product is intended occurs only in adult populations, or when the product does not
represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is obtained
in all EU member states and study results are included in the product information, even when negative, the
product is eligible for six months’ supplementary protection certificate extension (if any is in effect at the time of
approval) or, in the case of orphan pharmaceutical products, a two year extension of the orphan market exclusivity
is granted.
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The advertising and promotion of medicinal products is also subject to laws concerning promotion of
medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial
practices. All advertising and promotional activities for the product must be consistent with the approved
summary of product characteristics, and therefore all off-label promotion is prohibited. Direct-to-consumer
advertising of prescription medicines is also prohibited in the EU. Although general requirements for advertising
and promotion of medicinal products are established under EU directives, the details are governed by regulations
in each member state and can differ from one country to another.
Outside of the United States, the pricing of pharmaceutical products and medical devices is subject to
governmental control in many countries. In the EU, pricing and reimbursement schemes vary widely from country
to country. Some countries provide that products may be marketed only after a reimbursement price has been
agreed. Some countries may require the completion of additional studies that compare the cost effectiveness of a
particular therapy to currently available therapies or so-called health technology assessments, in order to obtain
reimbursement or pricing approval. Other countries may allow companies to fix their own prices for products, but
monitor and control product volumes and issue guidance to physicians to limit prescriptions. Efforts to control
prices and utilization of pharmaceutical products and medical devices will likely continue as countries attempt to
manage healthcare expenditures. Historically, products launched in the EU do not follow price structures of the
United States and generally prices tend to be significantly lower.
Failure to comply with the aforementioned EU and member state laws may result in administrative, civil or
criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials, or to
grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total
or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions,
suspension of licenses, fines and criminal penalties.
The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists
of the 27 EU member states plus Norway, Liechtenstein and Iceland.
Brexit and the Regulatory Framework in the United Kingdom
The United Kingdom, or UK, left the EU on January 31, 2020, following which existing EU medicinal product
legislation continued to apply in the United Kingdom during the transition period under the terms of the EU-UK
Withdrawal Agreement. The transition period, which ended on December 31, 2020, maintained access to the EU
single market and to the global trade deals negotiated by the EU on behalf of its members. The transition period
provided time for the UK and EU to negotiate a framework for partnership for the future, which was then
crystallized in the Trade and Cooperation Agreement, or TCA, and became effective on the January 1, 2021. The
TCA includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP
inspections of manufacturing facilities for medicinal products and GMP documents issued but does not foresee
wholesale mutual recognition of UK and EU pharmaceutical regulations.
EU laws which have been transposed into UK law through secondary legislation continue to be applicable as
“retained EU law”. However, new legislation such as the EU Clinical Trials Regulation or in relation to orphan
medicines will not be applicable. The UK government has passed a new Medicines and Medical Devices Act 2021,
which introduces delegated powers in favor of the Secretary of State or an ‘appropriate authority’ to amend or
supplement existing regulations in the area of medicinal products and medical devices. This allows new rules to be
introduced in the future by way of secondary legislation, which aims to allow flexibility in addressing regulatory
gaps and future changes in the fields of human medicines, clinical trials and medical devices.
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As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, is the UK’s
standalone medicines and medical devices regulator. As a result of the Northern Ireland protocol, different rules
will apply in Northern Ireland than in England, Wales, and Scotland, together, Great Britain, or GB; broadly,
Northern Ireland will continue to follow the EU regulatory regime, but its national competent authority will remain
the MHRA. The MHRA has published a guidance on how various aspects of the UK regulatory regime for medicines
will operate in GB and in Northern Ireland following the expiry of the Brexit transition period on December 31,
2020. The guidance includes clinical trials, importing, exporting, and pharmacovigilance and is relevant to any
business involved in the research, development, or commercialization of medicines in the UK. The new guidance
was given effect via the Human Medicines Regulations (Amendment etc.) (EU Exit) Regulations 2019, or the Exit
Regulations.
The MHRA has introduced changes to national licensing procedures, including procedures to prioritize access
to new medicines that will benefit patients, including a 150-day assessment and a rolling review procedure. All
existing EU MAs for centrally authorized products were automatically converted or grandfathered into UK MAs,
effective in GB (only), free of charge on January 1, 2021, unless the MA holder chooses to opt-out. After Brexit,
companies established in the UK cannot use the centralized procedure and instead must follow one of the UK
national authorization procedures or one of the remaining post-Brexit international cooperation procedures to
obtain an MA to commercialize products in the UK. The MHRA may rely on a decision taken by the European
Commission on the approval of a new (centralized procedure) MA when determining an application for a GB
authorization; or use the MHRA’s decentralized or mutual recognition procedures which enable MAs approved in
EU member states (or Iceland, Liechtenstein, Norway) to be granted in GB.
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Data privacy and security laws
Pharmaceutical companies may be subject to federal, state and foreign data privacy, security and data breach
notification laws governing the collection, use, disclosure and protection of health-related and other personal
information. For example, in the U.S., HIPAA imposes privacy, security and breach reporting obligations with
respect to individually identifiable health information upon “covered entities” (health plans, health care
clearinghouses and certain health care providers), and their respective business associates, individuals or entities
that create, receive, maintain or transmit protected health information in connection with providing a service for
or on behalf of a covered entity. HIPAA mandates the reporting of certain breaches of health information to the
Department of Health and Human Services, or HHS, to affected individuals and if the breach is large enough, to the
media. Entities that are found to be in violation of HIPAA as the result of a breach of unsecured personal health
information, or PHI, a complaint about privacy practices or an audit by the HHS may be subject to significant civil,
criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to
enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-
compliance. Even when HIPAA does not apply, according to the Federal Trade Commission or the FTC, failing to
take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in
or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a
company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of
consumer information it holds, the size and complexity of its business, and the cost of available tools to improve
security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that
merits stronger safeguards. In addition, certain state and non-U.S. laws, such as the California Consumer Privacy
Act, or CCPA, the California Privacy Rights Act, or CPRA, similar laws in Colorado, Connecticut, Virginia and Utah,
and the EU General Data Protection Regulation, or GDPR, govern the privacy and security of personal information,
including health-related information in certain circumstances, some of which are more stringent than HIPAA and
many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant
civil and/or criminal penalties and private litigation. Privacy and security laws, regulations, and other obligations
are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in
investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on
data processing.
Human Capital
As of February 24, 2023, we had 112 full-time employees, 10 of whom have a Ph.D. or M.D. None of our
employees are represented by labor unions or covered by collective bargaining agreements. We consider our
relationship with our employees to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing
and developing our existing and new employees, advisors and consultants. The principal purposes of our equity
and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-
based compensation awards in order to increase stockholder value and the success of our company by motivating
such individuals to perform to the best of their abilities and achieve our objectives.
Corporate Information
We were originally incorporated under the laws of the state of Delaware on January 9, 2018 under the name
North Bridge IV, Inc. On March 13, 2019, we changed our name to Phathom Pharmaceuticals, Inc. and merged
YamadaCo IIA, Inc., a Delaware corporation, or YamadaCo, with and into our company, with Phathom
Pharmaceuticals, Inc. as the surviving entity, or the Merger. References throughout this annual report to Phathom
Pharmaceuticals, Inc. include North Bridge IV, Inc. prior to the Merger. Our principal executive offices are located
at 100 Campus Drive, Suite 102, Florham Park, New Jersey 07932, and our telephone number is (877) 742-8466.
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Available Information
Our internet address is www.phathompharma.com. Our investor relations website is located at
https://investors.phathompharma.com. We make available free of charge on our investor relations website under
“Financials and Filings” our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, our directors’ and officers’ Section 16 reports and any amendments to those reports as soon as reasonably
practicable after filing or furnishing such materials to the SEC. They are also available for free on the SEC’s website
at www.sec.gov.
We use our investor relations website as a means of disclosing material non-public information and for
complying with our disclosure obligations under Regulation FD. Investors should monitor such website, in addition
to following our press releases, SEC filings and public conference calls and webcasts. Information relating to our
corporate governance is also included on our investor relations website. The information in or accessible through
the SEC and our website are not incorporated into, and are not considered part of, this filing.
Item 1A.
Risk Factors
You should carefully consider the following risk factors, together with the other information contained in this
annual report on Form 10-K, including our financial statements and the related notes and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” before making a decision to purchase or
sell shares of our common stock. We cannot assure you that any of the events discussed in the risk factors below
will not occur. These risks could have a material and adverse impact on our business, results of operations, financial
condition and growth prospects. If that were to happen, the trading price of our common stock could decline.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair
our business operations or financial condition. In this section, we first provide a summary of the more significant
risks and uncertainties we face and then provide a full set of risk factors and discuss them in greater detail.
SUMMARY RISKS FACTORS
● We have a limited operating history, have incurred significant operating losses since our inception and
expect to incur significant losses for the foreseeable future;
● We may never generate any revenue or become profitable or, if we achieve profitability, we may not be
able to sustain it;
● We will require substantial additional financing to achieve our goals, and a failure to obtain this
necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or
terminate our product development programs, commercialization efforts or other operations;
● We may not be successful in demonstrating to the FDA that we are able to maintain the level of the
nitrosamine impurity N-nitroso-vonoprazan below the acceptable daily intake established by the FDA;
● Our Revenue Interest Financing Agreement could limit cash flow available for our operations and expose
us to risks that could adversely affect our business, financial condition and results of operations;
● We currently depend entirely on the success of products containing vonoprazan including VOQUEZNA
TRIPLE PAK and VOQEUZNA DUAL PAK, which have not been launched but are our only approved
products, and, if approved, VOQUEZNA for the treatment of erosive GERD. If we are unable to obtain
approval of vonoprazan for treatment of erosive GERD, and launch and successfully commercialize these
products, or experience significant delays in doing so, or are unable to advance the clinical development
of, and obtain regulatory approval for, vonoprazan to treat non-erosive GERD, our business will be
materially harmed;
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● Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and the
results of prior clinical trials and other investigator-initiated clinical trials of vonoprazan are not
necessarily predictive of our future results. Vonoprazan may not have favorable results in our clinical
trials, or receive additional regulatory approvals on a timely basis, if at all;
● Vonoprazan and any future product candidates are subject to extensive regulation and compliance
obligations, which is costly and time consuming, and such regulation may cause unanticipated delays or
prevent the receipt of the required approvals to commercialize vonoprazan and any future product
candidates;
● We may not be successful in our efforts to expand our pipeline by identifying additional indications and
formulations for which to investigate vonoprazan in the future. We may expend our limited resources to
pursue a particular indication or formulation for vonoprazan and fail to capitalize on product candidates,
indications or formulations that may be more profitable or for which there is a greater likelihood of
success;
● We currently have a limited commercial organization, no field sales representatives, and have no
experience as a company in commercializing products, and we may have to invest significant additional
resources to develop these capabilities. If we are unable to establish the necessary commercial
capabilities or enter into agreements with third parties to market and sell our products, we may not be
able to generate product revenue;
● We rely on third parties to conduct our preclinical and clinical trials and perform other tasks for us. If
these third parties do not successfully carry out their contractual duties, meet expected deadlines or
comply with regulatory requirements, we may not be able to obtain additional regulatory approvals for
or commercialize vonoprazan and our business could be harmed;
● We currently engage third-party manufacturers for all of our clinical and commercial supplies. The loss
of any of these suppliers, or any future single source suppliers, could harm our business;
● We rely on the Takeda License to provide us rights to develop and commercialize vonoprazan in the
United States, Europe, and Canada. If the license agreement is terminated, we would lose our rights to
develop and commercialize vonoprazan;
●
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent
protection, our ability to prevent our competitors from commercializing similar or identical product
candidates would be adversely affected;
● The successful commercialization of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK (or, if approved,
VOQUEZNA for the treatment of erosive GERD or any future product candidates) will depend in part on
the extent to which governmental authorities and health insurers establish coverage, adequate
reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and
adequate reimbursement for our products could limit our ability to market those products successfully
and decrease our ability to generate revenue;
●
If following commercialization of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK (and if approved,
VOQUEZNA for the treatment of erosive GERD or any future product candidates) we fail to comply with
reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental
pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions
and fines, which could have a material adverse effect on our business, financial condition, results of
operations and growth prospects;
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● We are subject to various foreign, federal, and state healthcare and privacy laws and regulations, and
our failure to comply with these laws and regulations could harm our results of operations and financial
condition;
● Our business is subject to risks arising from epidemic diseases, such as the COVID-19 pandemic;
● We are highly dependent on the services of our key executives and personnel, and if we are not able to
retain these members of our management or recruit additional management, clinical and commercial
personnel, our business will suffer; and
● The trading price of our securities is likely to be volatile, and purchasers of our securities could incur
substantial losses.
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Risks Related to Our Limited Operating History, Financial Position and Capital Requirements
We have a limited operating history, have incurred significant operating losses since our inception and expect to
incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or,
if we achieve profitability, we may not be able to sustain it.
Biopharmaceutical product development is a highly speculative undertaking and involves a substantial
degree of risk. We are a late clinical-stage biopharmaceutical company with a limited operating history upon which
you can evaluate our business and prospects. We commenced operations in 2018, and to date, we have focused
primarily on organizing and staffing our company, business planning, raising capital, in-licensing our initial product
candidate, vonoprazan, meeting with regulatory authorities, conducting our Phase 3 clinical trials of vonoprazan,
preparing applications for regulatory approval for vonoprazan and preparing for a potential commercial launch. As
a company, we have not yet demonstrated an ability to initial commercial launch a product launch, manufacture a
commercial scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing
activities necessary for successful product commercialization. Consequently, any predictions made about our
future success or viability may not be as accurate as they could be if we had a history of successfully obtaining
regulatory approvals for and commercializing biopharmaceutical products.
We have incurred significant operating losses since our inception. If vonoprazan is not successfully
developed, approved and commercially launched in the United States, Europe and/or Canada, we may never
generate any revenue. We have incurred cumulative net losses since our inception and, as of December 31, 2022,
we had an accumulated deficit of $727.1 million. Substantially all of our losses have resulted from expenses
incurred in connection with in-licensing and developing vonoprazan, commercial activities in preparation for a
potential product launch, and from general and administrative costs associated with our operations. Vonoprazan
will require substantial additional time and resources before we will be able to begin generating revenue from
product sales, and any future product candidates will require substantial additional development time and
resources before we will be able to apply for or receive regulatory approvals and begin generating revenue from
product sales. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will
increase substantially as we continue our development of, seek additional regulatory approvals for, and potentially
commercialize vonoprazan and seek to identify, assess, acquire, in-license, or develop additional product
candidates.
To become and remain profitable, we must succeed in developing and eventually commercializing products
that generate significant revenue. This will require us to be successful in a range of challenging activities, including
completing clinical trials and preclinical studies of vonoprazan and any future product candidates, obtaining
regulatory approval for these product candidates and manufacturing, marketing and selling any products. We are
still in the early stages of a number of these activities. We may never succeed in these activities and, even if we do,
may never generate revenues that are significant enough to achieve profitability. In addition, we have not yet
demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by
companies in new and rapidly evolving fields, particularly in the biopharmaceutical industry. For example, we have
not been able to demonstrate to FDA that we can produce commercial product in which the level of an identified
nitrosamine impurity remains below its acceptable daily intake limit throughout the shelf-life of the product.
Because of this and the other numerous risks and uncertainties associated with biopharmaceutical product
development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we
will be able to initiate product commercialization and achieve profitability. Even if we do achieve profitability, we
may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and
remain profitable would depress the value of our company and could impair our ability to raise capital, expand our
business, continue our product development efforts, diversify our product candidate pipeline or even continue our
operations. A decline in the value of our company could also cause you to lose all or part of your investment.
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We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary
capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our
product development programs, commercialization efforts or other operations.
The development and commercialization of biopharmaceutical product candidates is capital-intensive. We
expect our expenses to increase in connection with our ongoing activities, particularly as we prepare to
commercialize vonoprazan for H. pylori and, if approved, erosive GERD and progress our non-erosive GERD
development program. In addition, if one or more products containing vonoprazan are commercialized, we will be
required to make milestone and royalty payments to Takeda, from whom we have in-licensed the rights to develop
and commercialize vonoprazan in the United States, Europe, and Canada pursuant to the Takeda License.
Furthermore, if and to the extent we seek to acquire or in-license additional product candidates in the future, we
may be required to make significant upfront payments, milestone payments, and/or royalty payments. If we obtain
additional regulatory approvals for vonoprazan or regulatory approval for any future product candidate, we also
expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and
distribution. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual
amounts necessary to successfully complete the development and commercialization of vonoprazan or any future
product candidate. Accordingly, we will need to obtain substantial additional funding in connection with our
continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to
delay, reduce or eliminate our research and development programs or any future commercialization efforts.
We believe that our existing cash and cash equivalents together with the drawdown of the remaining $100
million under our loan and security agreement, or the Loan Agreement, with Hercules Capital, or Hercules, are
sufficient to fund operations for at least the next twelve months and receipt of the $175 million milestone under
our revenue interest financing agreement following approval of vonoprazan for the treatment of erosive GERD, will
enable us to fund our operations through 2024. In particular, we expect that these funds will allow us to launch
vonoprazan for H. pylori and erosive GERD subject to approval of our resubmissions. We have based these
estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we
currently expect. Our operating plans and other demands on our cash resources may change as a result of many
factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public
or private equity or debt financings or other capital sources, including potentially collaborations, licenses and other
similar arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic
considerations even if we believe we have sufficient funds for our current or future operating plans. Attempting to
secure additional financing may divert our management from our day-to-day activities, which may adversely affect
our ability to develop vonoprazan or any future product candidates.
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Our future capital requirements will depend on many factors, including:
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the costs and timing of establishing or securing additional sales and marketing capabilities in advance of
initiating commercial launch of VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, and, if approved,
VOQUEZNA for the treatment of erosive GERD or any future product candidate;
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 if any product candidate is approved;
the costs, timing and outcome of regulatory review of our resubmissions following receipt of complete
response letters for our post approval supplement for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL
PAK and our NDA for VOQUEZNA for the treatment of erosive GERD, and the costs, timing and outcome
of regulatory review of 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;
•
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the costs associated with hiring additional personnel and consultants as our business grows particularly
commercial personnel;
the timing and amount of the milestone or other payments we must make to Takeda and any future
licensors;
• 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;
•
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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 terms and timing of establishing and maintaining collaborations, licenses and other similar
arrangements; and
the costs associated with any products or technologies that we may in-license or acquire.
Conducting clinical trials and preclinical studies is a time consuming, expensive, and uncertain process that
takes years to complete, and we may never generate the necessary data or results required to obtain regulatory
approval and achieve product sales. In addition, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, and, if approved,
VOQUEZNA for the treatment of erosive GERD or any future product candidate, may not achieve commercial
success. Our commercial revenues, if any, would initially be derived from sales of products containing vonoprazan
in the United States.
Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.
Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek
additional capital due to favorable market conditions or strategic considerations, even if we believe we have
sufficient funds for our current or future operating plans.
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Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to
relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash
needs through equity offerings, our Loan Agreement with Hercules, our revenue interest financing agreement,
other 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, your ownership interest will be diluted, and the terms of these securities may include liquidation or
other preferences that adversely affect your rights as a common stockholder. Our Loan Agreement and our
Revenue Interest Financing Agreement include, and any future debt financing and preferred 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. For example, our Loan
Agreement with Hercules contains minimum cash financial covenants. If on or prior to March 31, 2024, we have
not received FDA approval of our NDA for vonoprazan for the treatment of erosive GERD, raised additional
funding, or significantly reduced our operating expenses, we may be in violation of these covenants. If we default
on such indebtedness, with Hercules or a future lender, we could lose such assets and intellectual property.
If we raise funds through future collaborations, licenses and other similar arrangements, we may have to
relinquish valuable rights to our future revenue streams, research programs or product candidates or grant
licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock.
Risks Related to the Development and Regulatory Approval of Product Candidates
We currently depend entirely on the success of vonoprazan, which is contained in our only approved products
and product candidate. If we are unable to successfully launch and commercialize vonoprazan, obtain additional,
required regulatory approvals and advance the clinical development of vonoprazan in additional indications, or
experience significant delays in doing any of the foregoing, our business will be materially harmed.
We currently have two approved products and one product candidate, all of which contain vonoprazan,
which we in-licensed from Takeda. Our current business depends entirely on our ability to successfully develop,
obtain regulatory approval for, and commercialize products containing vonoprazan in a timely manner. This may
make an investment in our company riskier than similar companies that have multiple approved products or
product candidates in active development that may be able to better sustain failure of a single product. In May
2022, the 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. In August 2022, prior to the launch of
VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, we announced that, consistent with current FDA Guidance for
Industry: Control of Nitrosamine Impurities in Human Drug Products, we initiated testing to determine whether
nitrosamine impurities were present in our initial commercial drug product for VOQUEZNA TRIPLE PAK and
VOQUEZNA DUAL PAK. These tests revealed trace levels of a nitrosamine impurity, N-nitroso-vonoprazan, or NVP,
that is not described within the FDA Guidance document. In January 2023, we announced that, although the FDA
established an acceptable daily intake (AI) for NVP at 96 ng/day, the FDA (Division of Gastroenterology) advised us
that it would not be acting on our erosive GERD NDA on or prior to the Prescription Drug User Fee Act (PDUFA)
target action date of January 11, 2023. Rather, the FDA requested additional stability data demonstrating that the
levels of NVP will remain at or below the AI throughout the proposed shelf life of the product. In February 2023,
we received complete response letters from the FDA relating to our erosive GERD NDA and post approval
supplement relating to our approved H. pylori NDAs, both of which address specifications and controls for NVP.
These letters formalize FDA’s prior request that we provide additional stability data to demonstrate that levels of
NVP will remain at or below the AI throughout the proposed shelf life of the product. No additional deficiencies
were cited by the FDA in either letter. We have scheduled a meeting with the FDA in March 2023 to discuss our
resubmission plan and timeline. If we are unable to demonstrate to the FDA that we will be able to maintain NVP
levels at or below the AI, launches of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK will be further delayed
and approval of our erosive GERD NDA will continue to be delayed, which could substantially increase our costs
and delay or put at risk our ability to generate revenue and adversely affect our commercial prospects.
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Also 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. We are
also in discussions with the FDA regarding the design of a Phase 3 trial to evaluate the novel dosing regimen of
vonoprazan as an as needed treatment for episodic heartburn relief in patients with non-erosive GERD, a dosing
regimen not approved in the U.S. for PPIs. This trial would constitute our fourth Phase 3 trial for vonoprazan. In
February 2022, we reported positive topline results from PHALCON-NERD-201, a Phase 2 proof-of-concept study
evaluating this novel dosing regimen.
Our assumptions about the commercial potential of vonoprazan are based in part on the commercial
experience of vonoprazan in Japan. However, our assumptions may prove to be wrong, and we may encounter a
materially and adversely different development and commercial experience.
The success of vonoprazan will depend on several factors, including the following:
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demonstrating safety and efficacy to the satisfaction of applicable regulatory authorities, including
without limitation, demonstrating to the FDA that levels of NVP will remain below the AI throughout the
shelf-life of our products;
acceptance by the FDA or comparable foreign regulatory authorities of the proposed design of our
clinical trials;
the willingness of the FDA, the European Medicines Agency, or EMA, and other comparable foreign
regulatory authorities to accept the data from the clinical trials and preclinical studies and clinical trials
conducted outside of our licensed territories by Takeda and independent investigators as part of the
basis for review and approval of vonoprazan;
the outcome, timing and cost of meeting regulatory requirements established by the FDA, EMA, and
other comparable foreign regulatory authorities;
receipt of additional regulatory approvals, including approvals required to initiate distribution and sale
of products containing vonoprazan, from applicable regulatory authorities including the FDA;
• making and/or maintaining arrangements with Takeda, Catalent, Sandoz, Evonik or any future third-
party manufacturers for, or establishing, commercial manufacturing capabilities and receiving/importing
commercial supplies approved by FDA and other regulators from Takeda, Catalent, Sandoz, Evonik or
any future third-party manufacturer;
•
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establishing sales, marketing and distribution capabilities and, following required approval,
commercializing vonoprazan, whether alone or in collaboration with others;
establishment and maintenance of patent and trade secret protection or regulatory exclusivity for
vonoprazan;
• maintaining an acceptable safety profile of vonoprazan following approval; and
• maintaining and growing an organization of people who can develop and, if approved, commercialize,
market, and sell vonoprazan to physicians, patients, healthcare payers, and others in the medical
community.
If we are unable to demonstrate to FDA’s satisfaction our ability to maintain the level of NVP below the AI
throughout the shelf-life of our products, the launches of our approved products may be further delayed and
approval and launch of our erosive GERD NDA may also be further delayed, which could substantially increase our
costs and put at risk our ability to generate revenue and adversely affect our commercial prospects.
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The success of our business, including our ability to finance our company and generate any revenue in the
future, will primarily depend on the successful completion of clinical development, regulatory approval and
commercialization of vonoprazan, including successfully addressing, to the FDA’s and the medical community’s
satisfaction, the formation of nitrosamine impurities in commercial batches of vonoprazan drug product, which
may be significantly delayed beyond our current expectations and may never occur. Although we have obtained
marketing approval of two vonoprazan-based treatment regimens for one indication, we have not yet succeeded
in launching and successfully commercializing vonoprazan. Any inability to obtain required, additional regulatory
approvals for, or, if approved, successfully commercialize vonoprazan, would materially and adversely affect our
business, financial condition, prospects and operating results.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and the results
of preclinical studies and early clinical trials are not necessarily predictive of future results.
Clinical drug development is expensive and can take many years to complete, and its outcome is inherently
uncertain. Even if we believe the results of our clinical trials are positive, obtaining regulatory approval may not
occur on a timely basis, if at all. The results from clinical trials or preclinical studies of a product candidate may not
predict the results of later clinical trials of the product candidate, and interim results of a clinical trial are not
necessarily indicative of final results. Product candidates in later stages of clinical trials may fail to show the
desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical
trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant
setbacks in clinical development even after the product candidate achieved promising results in earlier clinical
trials. The results of our trials may not be comparable to those achieved previously, whether as a result of
differences in trial design, patient population or otherwise.
For example, in our Phase 3 clinical trial for the treatment of H. pylori infection, the vonoprazan dual therapy
arm was not double-blinded because patients in this arm were administered amoxicillin three times daily, versus
twice daily for the triple therapy regimens. Both triple therapy regimens were double-blinded. The inability to
double-blind the dual therapy arm may impact how regulatory agencies or healthcare payers interpret such
results. For example, the EMA has noted that it expects additional analyses of treatment compliance and drop-out
rates in the dual therapy arm because it will not be double-blinded.
Further, in July 2019, we received scientific advice from the EMA on our Phase 3 clinical trial of vonoprazan
in the healing and maintenance of healing of erosive GERD. For the healing phase of the study, the EMA
recommended that we include an endoscopy to assess healing at Week 4 in addition to the planned endoscopies
at Week 2 and Week 8 because the summary of product characteristics for lansoprazole suggests four weeks of
treatment to assess healing in erosive GERD. We decided not to incorporate this change into the study design
given the additional burden on study subjects to return for a third endoscopy in an eight-week period. This
decision may impact the future summary of product characteristics for vonoprazan or may cause the EMA to
require us to conduct additional clinical trials for vonoprazan to support marketing approval.
In addition, Takeda, a third party over which we have no control, has the right to develop and commercialize
vonoprazan outside of the United States, Europe, and Canada. Takeda has marketing approval for vonoprazan in
certain countries in Asia and Latin America, and Takeda has ongoing clinical trials of vonoprazan in certain
indications that we are also pursuing. If such ongoing trials fail to meet their primary endpoints, have serious
adverse events or encounter other problems, the development potential of vonoprazan could be materially and
adversely affected. In addition, if serious adverse events or other problems occur with patients using vonoprazan
marketed outside of our licensed territories, or if the results of ongoing or future clinical trials of vonoprazan
conducted by Takeda or others generate negative results or results that conflict with the results of our clinical
trials, the FDA or other regulatory authorities may delay, limit, or deny approval of vonoprazan, require us to
conduct additional clinical trials as a condition to marketing approval, or withdraw their approval of vonoprazan or
otherwise restrict our ability to market and sell vonoprazan, if approved. In addition, treating physicians may be
less willing to prescribe vonoprazan due to concerns over such trial results or adverse events, which would limit
our ability to commercialize vonoprazan.
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For the foregoing reasons, our ongoing and future clinical trials and our efforts to obtain additional
regulatory approvals for vonoprazan may not be successful. Further, any safety concerns observed in any one of
our ongoing or future clinical trials for the targeted indications could limit the prospects for additional regulatory
approvals of vonoprazan or any future product candidates in those and other indications, which could have a
material adverse effect on our business, financial condition and results of operations.
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Any difficulties or delays in the commencement or completion, or termination or suspension, of our ongoing or
future clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and
adversely affect our commercial prospects.
Before obtaining marketing approvals from regulatory authorities for the sale of vonoprazan for additional
indications or approval of any future product candidates, we must conduct extensive clinical trials to demonstrate
the safety and efficacy of vonoprazan in such new indication or of any future product candidates in humans. We do
not know whether any ongoing studies will be completed on schedule, if at all, or if any future clinical trials will
begin on time. The commencement and completion of clinical trials can be delayed for a number of reasons,
including delays related to:
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the FDA, EMA or comparable foreign regulatory authorities disagreeing as to the design or
implementation of our clinical trials and reaching consensus among the FDA and EMA over the design of
the same clinical trial;
any failure or delay in obtaining regulatory authorizations to commence a trial;
any failure or delay in reaching an agreement with contract research organizations, or CROs, and clinical
trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among
different CROs and trial sites;
institutional review boards, or IRBs, or other reviewing bodies refusing to approve, suspending or
terminating the trial at an investigational site, precluding enrollment of additional subjects, or
withdrawing their approval of the trial;
changes to clinical trial protocols;
clinical sites deviating from trial protocols or dropping out of a trial;
• manufacturing or obtaining sufficient quantities of vonoprazan and any future product candidates;
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inability to obtain and deliver sufficient quantities of vonoprazan and any future product candidates to
clinical sites;
subjects failing to enroll or remain in our trials at the rate we expect, or failing to return for post-
treatment follow-up;
subjects choosing an alternative treatment for the indication for which we are developing vonoprazan
and any future product candidates, or participating in competing clinical trials;
lack of adequate funding to continue the clinical trial;
subjects experiencing severe or unexpected drug-related adverse effects;
• occurrence of serious adverse events in trials of the same class of agents conducted by other companies;
•
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selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the
resulting data;
a facility manufacturing vonoprazan or any future product candidates or any of their components being
ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut
down due to violations of current good manufacturing, or cGMP, regulations or other applicable
requirements, or infections or cross-contaminations of product candidates in the manufacturing
process;
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any changes to our manufacturing process that may be necessary or desired;
third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not
performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol,
good clinical practices, or GCP, or other regulatory requirements;
third-party contractors not performing data collection or analysis in a timely or accurate manner; or
third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other
government or regulatory authorities for violations of regulatory requirements, in which case we may
need to find a substitute contractor, and we may not be able to use some or all of the data produced by
such contractors in support of our marketing applications.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the
institutions in which such trials are being conducted or by the FDA or comparable foreign regulatory authorities.
The FDA or comparable foreign regulatory authorities may impose a suspension or termination due to a number of
factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical
protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory
authorities, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug,
changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical
trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical
trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols
to IRBs for reexamination, which may impact the costs, timing, or successful completion of a clinical trial.
Further, conducting clinical trials in foreign countries, as we have done for vonoprazan and may do for any
future product candidates, presents additional risks that may delay completion of our clinical trials. These risks
include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences
in healthcare services or cultural customs, managing additional administrative burdens associated with foreign
regulatory schemes, as well as political and economic risks relevant to such foreign countries.
Moreover, principal investigators for our clinical trials currently serve and may continue to serve as scientific
advisors or consultants to us from time to time and receive compensation in connection with such services. Under
certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign
regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial
relationship between us and a principal investigator has created a conflict of interest or otherwise affected
interpretation of the clinical trial. The FDA or comparable foreign regulatory authority may therefore question the
integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be
jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or
comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing
approval of vonoprazan or any future product candidates.
If we experience delays in the completion of, or termination of, any clinical trial of vonoprazan or any future
product candidates, the commercial prospects of vonoprazan and any future product candidates will be harmed,
and our ability to generate product revenues from any of these product candidates will be delayed. Moreover, any
delays in completing our clinical trials will increase our costs, slow down our product candidate development and
approval process and jeopardize our ability to commence product sales and generate revenues.
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In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the
commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a
product candidate. We may make formulation or manufacturing changes to vonoprazan or any future product
candidates, in which case we may need to conduct additional preclinical studies to bridge our modified product
candidates to earlier versions. Any delays to our clinical trials that occur as a result could shorten any period during
which we may have the exclusive right to commercialize vonoprazan or any future product candidates and our
competitors may be able to bring products to market before we do, and the commercial viability of vonoprazan
and any future product candidates could be significantly reduced. Any of these occurrences may harm our
business, financial condition, and prospects significantly.
We may find it difficult to enroll patients in our clinical trials. If we encounter difficulties enrolling patients in our
clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may not be able to initiate or continue clinical trials for vonoprazan or any future product candidates if
we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required
by the FDA or similar regulatory authorities outside the United States. Subject enrollment, a significant factor in
the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the
proximity of patients to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial,
the risk that enrolled patients will not complete a clinical trial, our ability to recruit clinical trial investigators with
the appropriate competencies and experience, competing clinical trials and clinicians’ and patients’ perceptions as
to the potential advantages and risks of the product candidate being studied in relation to other available
therapies, including any new drugs that may be approved for the indications we are investigating as well as any
drugs under development. We will be required to identify and enroll a sufficient number of patients for each of our
clinical trials. Potential patients for any planned clinical trials may not be adequately diagnosed or identified with
the diseases which we are targeting or may not meet the entry criteria for such trials. We also may encounter
difficulties in identifying and enrolling patients with a stage of disease appropriate for our clinical trials and
monitoring such patients adequately during and after treatment. We may not be able to initiate or continue
clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials
required by the FDA or comparable foreign regulatory authorities.
The timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate
in our trials, as well as completion of required follow-up periods. The eligibility criteria of our clinical trials further
limits the pool of available trial participants. If patients are unwilling to participate in our trials for any reason,
including the existence of concurrent clinical trials for similar patient or the availability of approved therapies, or
we otherwise have difficulty enrolling a sufficient number of patients, the timeline for recruiting patients,
conducting trials and obtaining regulatory approval of vonoprazan and any future product candidates may be
delayed. Further, public health emergencies, such as the COVID-19 pandemic have and may continue to negatively
affect site activation, as well as patient enrollment and retention. Our inability to enroll a sufficient number of
patients for any of our future clinical trials would result in significant delays or may require us to abandon one or
more clinical trials altogether.
Our assumptions used in determining expected clinical trial timelines may not be correct, and we may
experience delays in enrollment, which would result in the delay of completion of such trials beyond our expected
timelines.
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Use of vonoprazan or any future product candidates could be associated with side effects, adverse events or
other properties or safety risks, which could delay or preclude approval, cause us to suspend or discontinue
clinical trials, abandon a product candidate, limit the commercial profile of an approved label or result in other
significant negative consequences that could severely harm our business, prospects, operating results and
financial condition.
As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events
associated with vonoprazan’s or any future product candidates’ use. Results of our ongoing or future clinical trials
could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.
Undesirable side effects caused by vonoprazan and any future product candidates could cause us or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial
of regulatory approval by the FDA or comparable foreign regulatory authorities. The drug-related side effects could
affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product
liability claims. Any of these occurrences may harm our business, financial condition, and prospects significantly.
Moreover, if vonoprazan or any other future product candidates are associated with undesirable side effects
in clinical trials or have characteristics that are unexpected, we may elect to abandon their development or limit
their development to more narrow uses or subpopulations in which the undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit
the commercial expectations for the product candidate, if approved. We may also be required to modify our study
plans based on findings in our clinical trials.
As of December 2022, more than 9,000 subjects have been exposed to vonoprazan in completed and
ongoing Phase 1 to 3 clinical trials. The doses studied have ranged from 1 to 120 mg with durations up to one year.
In our Phase 3 clinical trial for EE, the most common adverse reactions (≥2%) in vonoprazan-treated patients in the
healing phase were abdominal pain and diarrhea and in the maintenance phase were gastritis, diarrhea, abdominal
pain, dyspepsia, gastroesophageal reflux disease, hypertension, abnormal liver function test, and nausea. Of these,
only two adverse events, both in the maintenance phase, exceeded 5%: gastritis (6.4%, vonoprazan 10 mg) and
abdominal pain (5.4%, vonoprazan 20 mg). In our Phase 3 clinical trial evaluating vonoprazan in combination with
amoxicillin and clarithromycin or amoxicillin, most common adverse reactions (≥2%) in vonoprazan triple therapy-
treated patients were dysgeusia, diarrhea, headache, abdominal pain, vulvovaginal candidiasis and hypertension
and with vonoprazan dual therapy-treated patients were diarrhea, abdominal pain and nasopharyngitis.
Certain earlier generation PCABs previously under development by other companies may have been
discontinued in part due to their hepatic safety profile. These hepatic safety concerns may be compound-specific
and not generalizable to the PCAB class. Vonoprazan has shown similar hepatic safety results to lansoprazole
across all comparative clinical studies conducted by Takeda, in which 1.0% of subjects treated with vonoprazan 10
mg or 20 mg and 0.8% of subjects treated with lansoprazole 15 mg or 30 mg had ALT or AST elevations greater
than three times the upper limit of normal or bilirubin elevations greater than two times the upper limit of normal.
Similarly, in the healing phase of PHALCON-EE, transient elevations in ALT or AST greater than 3 times the upper
limit of normal were observed in 0.4% of subjects treated with vonoprazan 20 mgs and 0.2% of subjects treated
with lansoprazole. In the maintenance phase, ALT or AST greater than three times the upper limit of normal were
observed in 1% of subjects treated with vonoprazan 10 mg, 0.3% of subjects treated with vonoprazan 20 mg, and
2% of subjects treated with lansoprazole. The most recent post-marketing safety report from December 2022
includes an estimate of over 50 million patients who have received vonoprazan in Japan and other countries in
Asia since launch. Based on the post-marketing experience, the clinically significant adverse reactions section of
the Japanese prescribing information for vonoprazan was updated to include shock, anaphylaxis, hepatic
impairment, skin reactions such as toxic epidermal necrolysis, Steven- Johnson syndrome, and erythema
multiforme, and events of pancytopenia, agranulocytosis, leukocytopenia, and thrombocytopenia. The incidence
of these reactions was considered extremely rare (less than 1 in 100,000 patients) and a causal relationship to
vonoprazan could not be ruled out. Although serious hepatic adverse events have been observed among patients
exposed to vonoprazan in Japan in the post-marketing setting, these cases were typically confounded by
comorbidities or other concomitant medications and are believed to be idiosyncratic reactions.
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The post-marketing safety data, including the December 2022 post-marketing safety report and the
reported hepatic safety events, have been submitted to the PMDA. We may also observe hepatic-related events in
our clinical trials.
It is possible that as we continue to test vonoprazan and any future product candidates in our clinical trials,
or as the use of vonoprazan and any future product candidates becomes more widespread if they receive
regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as
well as conditions that did not occur or went undetected in previous trials, will be reported by patients. If any such
side effects become known later in development or upon approval, such findings may harm our business, financial
condition and prospects significantly. Further, if a serious safety issue is identified in connection with use of
vonoprazan commercially or in third-party clinical trials in Asia or elsewhere, such issues may adversely affect the
development potential of vonoprazan or result in regulatory authorities restricting our ability to develop
vonoprazan.
In addition, if vonoprazan or any future product candidate receives marketing approval, and we or others
later identify undesirable side effects caused by such products, a number of potentially significant negative
consequences could result, including:
•
regulatory authorities may withdraw, suspend or limit approvals of such product, or seek an injunction
against its manufacturer;
• we may be required to recall a product or change the way such product is administered to patients;
•
regulatory authorities may require additional warnings on the label, such as a “black box” warning or a
contraindication;
• we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or similar risk
management measures or create a medication guide outlining the risks of such side effects for
distribution to patients;
• we may be required to change the way a product is distributed or administered, conduct additional
clinical trials or change the labeling of a product or be required to conduct additional post-marketing
studies or surveillance;
• we could be sued and held liable for harm caused to patients;
•
sales of the product may decrease significantly or the product could become less competitive; and
• our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular
product candidate, if approved, and could significantly harm our business, results of operations and prospects.
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As a company, we have only received regulatory approval for two products, VONOPRAZAN TRIPLE PAK and
VONOPRAZAN DUAL PAK, for which we have not initiated commercial launch, and may be unable to obtain
additional regulatory approvals for vonoprazan or approval of any future product candidates.
Although we have completed our pivotal Phase 3 clinical trials for vonoprazan for treatment of H. pylori
infection, erosive GERD, and non-erosive GERD, and have obtained regulatory approvals for VONOPRAZAN TRIPLE
PAK and VONOPRAZAN DUAL PAK for the treatment of H. pylori infection, we still need to obtain regulatory
approval from the FDA for VOQUEZNA for the treatment of erosive GERD and have not yet submitted our
submission for regulatory approval for non-erosive GERD. Moreover, due to the formation of the nitrosamine NVP
in vonoprazan drug product, we have not been able to launch either of our approved products. As a company, we
may be unable to successfully control the formation of NVP and as a result would not be able to launch our
approved products or obtain approval of vonoprazan for erosive GERD. In addition, we may not be able to obtain
regulatory approval of any future product candidates. We may require more time and incur greater costs than our
competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure
to timely obtain regulatory approvals could delay us in commercializing vonoprazan or any future product
candidates.
Vonoprazan and any future product candidates are subject to extensive regulation and compliance obligations,
which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt
of the required approvals to commercialize vonoprazan and any future product candidates.
The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import,
export, marketing and distribution of vonoprazan and any future product candidates are subject to extensive
regulation by the FDA in the United States and by comparable foreign regulatory authorities in other foreign
markets. In the United States, we are not permitted to market vonoprazan and any future product candidates until
we receive the necessary regulatory approval from the FDA and in the EU, we are not permitted to market
vonoprazan and any future product candidates until we receive a marketing authorization from the European
Commission or competent authorities of the EU member states. The process of obtaining regulatory approval is
expensive, often takes many years following the commencement of clinical trials and can vary substantially based
upon the type, complexity and novelty of the product candidates involved, as well as the target indications and
patient population. The ability of the FDA and foreign regulatory authorities to review and approve new products
can be affected by a variety of factors, including government budget and funding levels and the ability to hire and
retain key personnel. In addition, approval policies or regulations may change, and the FDA and EMA and
comparable regulatory authorities have substantial discretion in the drug approval process, including the ability to
delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in
clinical development of product candidates, regulatory approval is never guaranteed. For example, in February
2023, we received complete response letters from the FDA relating to our erosive GERD NDA and post approval
supplement to our approved H. pylori NDAs, both of which address nitrosamine specifications and controls. As a
result, the approval of vonoprazan for treatment of erosive GERD and our ability to launch our approved products
for the treatment of H. pylori infection have been delayed.
Prior to obtaining approval to commercialize a product candidate in the United States or internationally, we
must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the
satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and
effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different
ways. Even if we believe the nonclinical or clinical data for vonoprazan and any future product candidates are
promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory
authorities. The FDA or comparable foreign regulatory authorities, as the case may be, may also require us to
conduct additional preclinical studies or clinical trials for vonoprazan and any future product candidates either
prior to or post- approval, or may object to elements of our clinical development program.
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The FDA, EMA or other comparable foreign regulatory authorities can delay, limit or deny approval of a
product candidate for many reasons, including:
•
•
•
•
•
such authorities may disagree with the design or implementation of our clinical trials;
negative or ambiguous results from our clinical trials or results may not meet the level of statistical
significance required by the FDA, EMA, or other comparable foreign regulatory agencies for approval;
serious and unexpected drug-related side effects may be experienced by participants in our clinical trials
or in clinical trials conducted by Takeda or others outside of our licensed territories, or by patients using
vonoprazan or drugs similar to vonoprazan;
the population studied in the clinical trial may not be sufficiently broad or representative to assure
safety in the full population for which we seek approval;
such authorities may not accept clinical data from trials which are conducted at clinical facilities or in
countries where the standard of care is potentially different from that of the United States;
• we may be unable to demonstrate to the satisfaction of such authorities that a product candidate is safe
and effective for its proposed indication and that a product candidate’s clinical and other benefits
outweigh its safety risks;
•
•
•
•
•
•
•
such authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
such authorities may not agree that the data collected from clinical trials of vonoprazan, including data
collected from clinical trials conducted by Takeda and independent investigators outside of our licensed
territories, and any future product candidates are acceptable or sufficient to support the submission of
an NDA or other submission or to obtain regulatory approval, and such authorities may impose
requirements for additional preclinical studies or clinical trials;
such authorities may disagree regarding the formulation, labeling and/or the specifications of
vonoprazan and any future product candidates;
approval may be granted only for indications that are significantly more limited than what we apply for
and/or with other significant restrictions on distribution and use;
such authorities may find deficiencies in the manufacturing processes or facilities of Takeda, Sandoz,
Evonik, Catalent or any future third-party manufacturers with which we contract for clinical and
commercial supplies;
regulations of such authorities may significantly change in a manner rendering our or any of our
potential future collaborators’ clinical data insufficient for approval; or
such authorities may not accept a submission due to, among other reasons, the content or formatting of
the submission.
With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing
risks, may involve additional product testing, administrative review periods and agreements with pricing
authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result
in increased cautiousness by the FDA, EMA, and other comparable foreign regulatory authorities in reviewing new
drugs based on safety, efficacy, or other regulatory considerations and may result in significant delays in obtaining
regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent
us or any of our potential future collaborators from commercializing vonoprazan and any future product
candidates.
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Of the large number of drugs in development, only a small percentage successfully complete the FDA, EMA
or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the
unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market
vonoprazan and any future product candidates, which would significantly harm our business, financial condition,
results of operations and prospects.
Even if we eventually receive approval of an NDA or foreign marketing application for vonoprazan and any
future product candidates, the FDA or other comparable foreign regulatory authority may grant approval
contingent on the performance of costly additional clinical trials, including confirmatory Phase 3 clinical trials,
Phase 4 clinical trials, and/or the implementation of a REMS or risk management measures, which may be required
to ensure safe use of the drug after approval. The FDA or other comparable foreign regulatory authority also may
approve a product candidate for a more limited indication or patient population than we originally requested, and
the FDA or other comparable foreign regulatory authority may not approve the labeling that we believe is
necessary or desirable for the successful commercialization of a product. Any delay in obtaining, or inability to
obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and
would materially adversely impact our business and prospects.
We may not be successful in our efforts to expand our pipeline by identifying and successfully developing
vonoprazan for additional indications and formulations. We may expend our limited resources to pursue a
particular indication or formulation for vonoprazan and fail to capitalize on product candidates, indications or
formulations that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on specific indications and
formulations for vonoprazan. As a result, we may fail to generate additional clinical development opportunities for
vonoprazan for a number of reasons, including, vonoprazan may in certain indications, on further study, be shown
to have harmful side effects, limited to no efficacy, or other characteristics that suggest it is unlikely to receive
marketing approval and achieve market acceptance in such additional indications.
For example, we believe the rapid onset of action of vonoprazan may enable as needed use for the
management of non-erosive GERD. However, no proton pump inhibitor has received approval from the FDA for
this indication. We may be incorrect in our belief regarding the potential of vonoprazan as an as needed treatment
for non-erosive GERD and any future clinical trial we conduct studying as needed dosing of vonoprazan in non-
erosive GERD patients may not succeed including as a result of our design and enrollment criteria.
Furthermore, research programs to identify additional indications for vonoprazan require substantial
technical, financial and human resources. We may also pursue additional formulations and packaging for
vonoprazan, such as orally disintegrating tablets and other oral dosage forms for patients with difficulty
swallowing, and an intravenous formulation for in-hospital applications. However, we may not successfully
develop these additional formulations for chemistry-related, stability-related or other reasons. If we do not
accurately evaluate the commercial potential or target market for vonoprazan or any future product candidates,
we may relinquish valuable rights to that product candidate through future collaborations, licenses and other
similar arrangements in cases in which it would have been more advantageous for us to retain sole development
and commercialization rights to such product candidate.
Additionally, we may pursue additional in-licenses or acquisitions of development-stage assets or programs,
which entails additional risk to us. Identifying, selecting and acquiring promising product candidates requires
substantial technical, financial and human resources expertise. Efforts to do so may not result in the actual
acquisition or license of a particular product candidate, potentially resulting in a diversion of our management’s
time and the expenditure of our resources with no resulting benefit.
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We enrolled patients in Europe in our erosive GERD and H. pylori trials. Additionally, we may conduct future
clinical trials outside of the United States. However, the FDA and other comparable foreign regulatory
authorities may not accept data from such trials, in which case our development plans will be delayed, which
could materially harm our business.
We enrolled patients in Europe in our erosive GERD and H. pylori trials, and we may conduct one or more of
our future clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted
outside the United States and not subject to an IND, acceptance of this data is subject to certain conditions
imposed by the FDA. For example, where data from foreign clinical trials are intended to serve as the sole basis for
marketing approval in the United States, the FDA will not approve the application on the basis of foreign data
alone unless those data are applicable to the United States population and United States medical practice; the
trials were performed by clinical investigators of recognized competence; and the data are considered valid
without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary,
the FDA is able to validate the data through an on-site inspection or other appropriate means. Similar
requirements may apply in foreign jurisdictions.
For trials that are conducted only at sites outside of the United States and not subject to an IND, the FDA
requires the clinical trial to have been conducted in accordance with GCP and the FDA must be able to validate the
data from the clinical trial through an on-site inspection if it deems such inspection necessary. For such trials not
subject to an IND, the FDA generally does not provide advance comment on the clinical protocols for the trials, and
therefore there is an additional potential risk that the FDA could determine that the trial design or protocol for a
non-United States clinical trial was inadequate, which could require us to conduct additional clinical trials. In
addition, such foreign trials would be subject to the applicable local laws of the foreign regulatory agency and legal
requirements where the trials are conducted. There can be no assurance the FDA will accept data from clinical
trials conducted outside of the United States. If the FDA or comparable regulatory authority does not accept data
from our clinical trials of vonoprazan and any future product candidates, it would likely result in the need for
additional clinical trials, which would be costly and time consuming and delay or permanently halt our
development of vonoprazan and any future product candidates.
Conducting clinical trials outside the United States also exposes us to additional risks, including risks
associated with:
•
•
•
•
•
additional foreign regulatory requirements;
foreign exchange fluctuations;
compliance with foreign manufacturing, customs, shipment and storage requirements;
cultural differences in medical practice and clinical research; and
diminished protection of intellectual property in some countries.
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Interim, top-line and preliminary data from clinical trials that we or others announce or publish from time to
time may change as more patient data become available and are subject to audit and verification procedures
that could result in material changes in the final data.
From time to time, we or others, such as Takeda, may publicly disclose preliminary or top-line data from
clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings
and conclusions are subject to change following a more comprehensive review of the data related to the particular
study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data,
and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-
line or preliminary results that we or others report may differ from future results of the same clinical trials, or
different conclusions or considerations may qualify such results, once additional data have been received and fully
evaluated. Top-line and preliminary data also remain subject to audit and verification procedures that may result
in the final data being materially different from the preliminary data previously published. As a result, top-line and
preliminary data should be viewed with caution until the final data are available.
From time to time, we or others may also disclose interim data from clinical trials. Interim data from clinical
trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between preliminary, top-line or interim
data and final data could significantly harm our business prospects.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates,
calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could
impact the value of the particular program, the approvability or commercialization of the particular product
candidate or product and our company in general. In addition, the information we choose to publicly disclose
regarding a particular study or clinical trial is based on what is typically extensive information, and you or others
may not agree with what we determine is the material or otherwise appropriate information to include in our
disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to
future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our
business. If the top-line data that we report differ from actual results, or if others, including regulatory authorities,
disagree with the conclusions reached, our ability to obtain approval for, and commercialize, vonoprazan and any
future product candidates may be harmed, which could harm our business, operating results, prospects, or
financial condition.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns
could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new
products and services from being developed or commercialized in a timely manner, which could negatively
impact our business.
The ability of the FDA and other government agencies to review and approve new products can be affected
by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a
government agency’s ability to hire and retain key personnel and accept the payment of user fees, and other
events that may otherwise affect the government agency’s ability to perform routine functions. Average review
times at the FDA and other government agencies have fluctuated in recent years as a result. In addition,
government funding of other government agencies that fund research and development activities is subject to the
political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies, such as
the EMA, may also slow the time necessary for new drugs and or modifications to approved drugs or to be
reviewed and/or approved by necessary government agencies, which would adversely affect our business. For
example, over the last several years, the United States government has shut down several times and certain
regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
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Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and
foreign manufacturing facilities at various points. Even though the FDA has since resumed stand inspection
operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its
inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the
evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further
inspectional delays. Regulatory authorities outside the United States may adopt similar restrictions or other policy
measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health
concerns continue to hinder or prevent the FDA or other regulatory authorities from conducting their regular
inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other
regulatory authorities to timely review and process our regulatory submissions, which could have a material
adverse effect on our business.
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Risks Related to Our Reliance on Third Parties
We rely on the Takeda License to provide us rights to develop and commercialize vonoprazan in the United
States, Europe, and Canada. If the license agreement is terminated, we would lose our rights to develop and
commercialize vonoprazan.
Pursuant to the Takeda License, we have secured an exclusive license from Takeda to commercialize
vonoprazan products using specified formulations for all human therapeutic uses in the United States, Europe, and
Canada, and a non-exclusive license to develop and manufacture vonoprazan products anywhere in the world
(subject to Takeda’s consent as to each country) for the purposes of commercializing the vonoprazan products in
the United States, Europe, and Canada.
The Takeda License will continue until the expiration of the obligation to pay royalties in all countries and on
all products, unless terminated earlier. We may terminate the Takeda License in its entirety without cause upon
prior written notice. We and Takeda may terminate the Takeda License in the case of the other party’s insolvency
or for the other party’s material uncured breach. Takeda may terminate the Takeda License in its entirety if we
challenge the licensed patents, or if we assist any third party in challenging such patents. In addition, if any of the
commercial milestones or other cash payments become due under the terms of the Takeda License, we may not
have sufficient funds available to meet our obligations, which would allow Takeda to terminate the Takeda License.
If the license agreement is terminated, we would lose our rights to develop and commercialize vonoprazan, which
in turn would have a material adverse effect on our business, operating results and prospects.
We rely on third parties to conduct our clinical trials. Any failure by a third party to conduct the clinical trials
according to GCPs and other requirements and in a timely manner may delay or prevent our ability to seek or
obtain regulatory approval for or commercialize vonoprazan and any future product candidates.
We are dependent on third parties to conduct our preclinical and clinical trials, including our completed and
ongoing Phase 3 clinical trial of vonoprazan. Specifically, we have used and relied on, and intend to continue to use
and rely on, medical institutions, clinical investigators, CROs and consultants to conduct our clinical trials in
accordance with our clinical protocols and regulatory requirements. These CROs, investigators and other third
parties will play a significant role in the conduct and timing of these trials and subsequent collection and analysis of
data. While we have agreements governing the activities of our third-party contractors, we have limited influence
over their actual performance. Nevertheless, we are responsible for ensuring that each of our clinical trials is
conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our
reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our
CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA
and comparable foreign regulatory authorities for vonoprazan and any future product candidates that reach
clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors,
principal investigators and trial sites. If we or any of our CROs or trial sites fail to comply with applicable GCPs, the
clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign
regulatory authorities may require us to perform additional clinical trials before approving our marketing
applications. In addition, our clinical trials must be conducted with product produced under cGMP or similar
regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay
the regulatory approval process.
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CROs, investigators or other third parties may not devote adequate time and resources to such trials or
perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our
clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, our clinical
trials may be extended, delayed, or terminated. In addition, many of the third parties with whom we contract may
also have relationships with other commercial entities, including our competitors, for whom they may also be
conducting clinical trials or other drug development activities that could harm our competitive position. In
addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time
to time and may receive cash or equity compensation in connection with such services. If these relationships and
any related compensation result in perceived or actual conflicts of interest, or the FDA or comparable regulatory
authority concludes that the financial relationship may have affected the interpretation of the study, the integrity
of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself
may be jeopardized, which could result in the delay or rejection of any NDA or similar marketing application we
submit by the FDA or by comparable regulatory authority. Any such delay or rejection could prevent us from
commercializing vonoprazan and any future product candidates.
If any of our relationships with these third parties terminate, we may not be able to enter into arrangements
with alternative third parties or do so on commercially reasonable terms. Switching or adding additional CROs,
investigators and other third parties involves additional cost and requires management time and focus. In addition,
there is a natural transition period when a new CRO commences work. As a result, delays occur, which can
materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our
relationships with our CROs, investigators and other third parties, we may encounter challenges or delays in the
future and these delays or challenges may have a material adverse impact on our business, financial condition and
prospects.
We currently rely on Catalent and Takeda for the manufacture of vonoprazan for clinical development and
expect to rely on Catalent, Evonik and other third parties for clinical supplies for the foreseeable future, and we
expect to rely on Takeda, Catalent, Evonik and other third parties to produce commercial supplies of vonoprazan
drug substance and drug product, and on Sandoz for commercial supplies of amoxicillin and clarithromycin for
our convenience packs. This reliance on third parties increases the risk that we will not have sufficient quantities
of vonoprazan, amoxicillin, and/or clarithromycin, which could delay, prevent or impair our development or
commercialization efforts.
We do not own or operate manufacturing facilities and have no plans to build our own clinical or commercial
scale manufacturing capabilities. Pursuant to the Takeda License, we entered into a clinical manufacturing and
supply agreement with Takeda for the supply of vonoprazan for our clinical trials. In addition, we entered into a
commercial supply agreement with Takeda for the commercial supply of bulk drug product and/or drug substance,
a commercial supply agreement with Catalent for the commercial supply of drug product, a commercial supply
agreement with Evonik for the supply of drug substance, and a commercial supply and packaging agreement with
Sandoz for commercial supply of amoxicillin, clarithromycin and finished convenience packs containing vonoprazan
and one or both of those antibiotics. As a result, we currently rely, and expect to continue to rely, on third parties
for the manufacture of vonoprazan and related raw materials for clinical development and commercial supply. If
Takeda, Catalent, Evonik or Sandoz fails to fulfill its obligations under its respective supply agreement(s), or if any
of the vonoprazan drug product or drug substance supplied by Takeda, Catalent or Evonik cannot be utilized due to
quality or cGMP or similar concerns, adverse findings during regulatory inspections or other reasons, our
development plans and commercialization of vonoprazan, if approved, could be significantly delayed or otherwise
adversely affected. The facilities used by Takeda, Catalent and Evonik to manufacture vonoprazan and by Sandoz
to manufacture amoxicillin and clarithromycin and to package the antibiotics and vonoprazan must be approved by
the FDA and foreign regulatory authority pursuant to inspections that may be conducted after we submit
marketing authorizations to the FDA and comparable foreign regulatory authorities. We do not control the
manufacturing process of, and are completely dependent on, Takeda, Catalent, Evonik and Sandoz for compliance
with applicable cGMP or similar requirements. If Takeda, Catalent, Evonik, Sandoz, or any other third-party
manufacturer we contract with in the future, cannot successfully manufacture material that conforms to our
specifications and the strict regulatory requirements of the FDA or others, including requirements related to the
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manufacturing of high potency compounds, they will not be able to secure and/or maintain regulatory approval for
their manufacturing facilities. In addition, we have no control over Takeda’s, Catalent’s, Evonik’s, Sandoz’s, or any
other third-party manufacturer’s ability to maintain adequate quality control, quality assurance and qualified
personnel. If the FDA or a comparable foreign regulatory authority does not approve of facilities of the third-party
manufacturer for the manufacture of vonoprazan or if it withdraws any such approval in the future, we may need
to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain
regulatory approval for or market vonoprazan, if approved. For example, in June 2020, the FDA issued a warning
letter to Takeda following a routine inspection of aseptic (sterile) drug product manufacturing at Takeda’s
manufacturing facility located in Hikari, Yamaguchi, or the Hikari Facility. Although it is not an aseptic product,
Takeda also manufactures vonoprazan drug substance and drug product at the Hikari Facility. The warning letter
indicated that the FDA was not satisfied with Takeda’s response to an FDA Form 483 issued to Takeda following
the inspection and cited significant violations of cGMP for finished aseptic pharmaceuticals. Due to the issues
relating to the Hikari Facility, we did not include the Hikari Facility, as a contract manufacturing site in the H. pylori
NDAs we submitted to FDA in September 2021. In October 2021, the FDA revised the inspection classification of
the Hikari Facility to Voluntary Action Indicated, or VAI. Takeda has reported that this revision means the FDA
determined that the conditions in the warning letter dated June 2020 have been sufficiently addressed. We have
not experienced any clinical supply constraints to date as a result of the issues at the Hikari Facility, and we
currently do not expect these issues will have an effect on our ongoing or future clinical trials or commercial
supplies. Our failure, or Takeda’s, Catalent’s, Evonik’s, Sandoz’s or any other third-party manufacturer’s failure, to
comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of product candidates
or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect
supplies of our products. Furthermore, Takeda may choose to prioritize the manufacture of vonoprazan for its
markets over the manufacture of vonoprazan for our licensed markets.
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Our or Takeda’s, Catalent’s, Evonik's or Sandoz’s failure, or the failure of any future third-party
manufacturer, to execute on our manufacturing requirements, to do so on commercially reasonable terms and
comply with cGMP could adversely affect our business in a number of ways, including:
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an inability to initiate and continue clinical trials of vonoprazan or any future product candidates;
delay in submitting regulatory applications, or receiving marketing approvals, for vonoprazan and any
future product candidates;
subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by
regulatory authorities;
requirements to cease development or to recall batches of vonoprazan and any future product
candidates; and
in the event of approval to market and commercialize vonoprazan or any future product candidates, an
inability to meet commercial demands for vonoprazan or any future product candidates.
Reliance on third-party manufacturers entails additional risks, including:
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failure of third-party manufacturers to comply with regulatory requirements and maintain quality
assurance;
breach of the manufacturing agreement by the third party;
failure to manufacture our product according to our specifications;
failure to manufacture our product according to our schedule or at all;
• misappropriation of our proprietary information, including our trade secrets and know-how; and
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termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient
for us.
Vonoprazan and any products that we may develop may compete with other product candidates and
products for access to manufacturing facilities. Moreover, there may be a limited number of manufacturers that
operate under cGMP or similar regulations and that might be capable of manufacturing for us.
Any performance failure on the part of Takeda, Catalent, Evonik, Sandoz or any future manufacturers could
delay clinical development or marketing approval, and any related remedial measures may be costly or time
consuming to implement. We do not currently have arrangements in place for redundant supply or a second
source for all required raw materials used in the manufacture of vonoprazan and any future product candidates. If
Takeda, Catalent, Evonik, or Sandoz cannot perform as agreed, we may be required to replace them and we may
be unable to replace them on a timely basis or at all. Further, Takeda, Catalent, Evonik, Sandoz and any other third-
party manufacturers we may use may experience manufacturing or shipping difficulties due to resource
constraints or as a result of natural disasters, labor disputes, unstable political environments, or public health
emergencies such as the COVID-19 pandemic or ongoing hostilities in the Ukraine. If Takeda, Catalent, Evonik,
Sandoz or other third-party manufacturers were to encounter any manufacturing or shipping difficulties or delays
due to these factors, our ability to provide vonoprazan to patients in clinical trials, or to provide product for
treatment of patients if approved, would be jeopardized.
Our current and anticipated future dependence upon others for the manufacture of vonoprazan or any
future product candidates or products may adversely affect our future profit margins and our ability to
commercialize any products that receive marketing approval on a timely and competitive basis.
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Our reliance on third parties, including Takeda, Catalent and Evonik, requires us to share our trade secrets,
which increases the possibility that a competitor will discover them or that our trade secrets will be
misappropriated or disclosed.
Because we rely, and expect to continue to rely on Takeda, Catalent and Evonik to manufacture vonoprazan
and to perform quality testing, we must, at times, share our proprietary technology and confidential information,
including trade secrets, with them. We seek to protect our proprietary technology, in part, by entering into
confidentiality agreements, consulting agreements or other similar agreements with our advisors, employees and
consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the
rights of the third parties to use or disclose our confidential information. Despite the contractual provisions
employed when working with third parties, the need to share trade secrets and other confidential information
increases the risk that such trade secrets become known by our competitors, are intentionally or inadvertently
incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that
our proprietary position is based, in part, on our know-how and trade secrets and despite our efforts to protect
our trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other
unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on
our business, financial condition, results of operations and prospects.
We may seek to enter into collaborations, licenses and other similar arrangements and may not be successful in
doing so, and even if we are, we may not realize the benefits of such relationships.
We may seek to enter into collaborations, joint ventures, licenses and other similar arrangements for the
development or commercialization of vonoprazan and any future product candidates, due to capital costs required
to develop or commercialize vonoprazan and any future product candidates or manufacturing constraints. We may
not be successful in our efforts to establish such collaborations for vonoprazan and any future product candidates
because vonoprazan and any future product candidates may be deemed to be at too early of a stage of
development for collaborative effort or third parties may not view vonoprazan and any future product candidates
as having the requisite potential to demonstrate safety and efficacy or significant commercial opportunity. In
addition, we face significant competition in seeking appropriate strategic partners, and the negotiation process can
be time consuming and complex. Further, any future collaboration agreements may restrict us from entering into
additional agreements with potential collaborators. Following a strategic transaction or license, we may not
achieve an economic benefit that justifies such transaction.
Even if we are successful in our efforts to establish such collaborations, the terms that we agree upon may
not be favorable to us, and we may not be able to maintain such collaborations if, for example, development or
approval of a product candidate is delayed, the safety of a product candidate is questioned or sales of an approved
product candidate are unsatisfactory.
In addition, any potential future collaborations may be terminable by our strategic partners, and we may not
be able to adequately protect our rights under these agreements. Furthermore, strategic partners may negotiate
for certain rights to control decisions regarding the development and commercialization of vonoprazan and any
future product candidates, if approved, and may not conduct those activities in the same manner as we do. Any
termination of collaborations we enter into in the future, or any delay in entering into collaborations related to
vonoprazan or any future product candidates, could delay the development and commercialization of vonoprazan
or any future product candidates and reduce their competitiveness if they reach the market, which could have a
material adverse effect on our business, financial condition and results of operations.
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Risks Related to Commercialization of Vonoprazan and Any Future Product Candidates
Even if we receive regulatory approval for any product candidate, we will be subject to ongoing regulatory
obligations and continued regulatory review, which may result in significant additional expense.
With respect to our approved products, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, and, if approved,
VOQUEZNA and any future product candidates, the FDA, EMA or other comparable regulatory authority may
impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for
potentially costly and time-consuming post-approval studies, post-market surveillance or clinical trials to monitor
the safety and efficacy of the product. The FDA and comparable regulatory authorities may also require a REMS or
similar risk management measures as a condition of approval of any additional products containing vonoprazan or
future product candidates, which could include requirements for a medication guide, physician communication
plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and
other risk minimization tools. In addition, for our approved products or future products that obtain approval,
particularly following commercial launch of any such products, the manufacturing processes, labeling, packaging,
distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our
products will be subject to extensive and ongoing regulatory requirements. These requirements include
submissions of safety and other post-marketing information and reports, registration, as well as continued
compliance with cGMPs and similar requirements and GCP requirements for any clinical trials that we conduct
post-approval. Later discovery of previously unknown problems with our products, including adverse events of
unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure
to comply with regulatory requirements, may result in, among other things:
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restrictions on the marketing or manufacturing of our products, withdrawal of the product from the
market or voluntary or mandatory product recalls;
restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical
trials
fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on
clinical trials;
refusal by the FDA or comparable foreign regulatory authority to approve pending applications or
supplements to approved applications filed by us or suspension or revocation of approvals;
product seizure or detention, or refusal to permit the import or export of our products; and
injunctions or the imposition of civil or criminal penalties.
The occurrence of any event or penalty described above may inhibit our ability to commercialize products
containing vonoprazan and any future product candidates and generate revenue and could require us to expend
significant time and resources in response and could generate negative publicity.
The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may
be enacted that could prevent, limit or delay regulatory approval of additional products containing vonoprazan and
any future product candidates. If we are slow or unable to adapt to changes in existing requirements or the
adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose
any marketing approval that we may have obtained, may be subject to enforcement action, and we may not
achieve or sustain profitability.
For instance, the EU has adopted the Clinical Trials Regulation, or CTR, in April 2014, which became
applicable on 31 January 2022. The CTR is directly applicable in all EU member states, repealing the current Clinical
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Trials Directive. The CTR harmonizes the assessment and supervision processes for clinical trials throughout the EU
via a Clinical Trials Information System, which will notably contain a centralized EU portal and database.
It is currently unclear to what extent the United Kingdom, or UK, will seek to align its regulations with the EU.
The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented
into UK law, through secondary legislation). A decision by the UK not to closely align its regulations with the new
approach that will be adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as
opposed to other countries and/or make it harder to seek a marketing authorization in the EU for our product
candidates on the basis of clinical trials conducted in the UK.
Additionally, the EU pharmaceutical legislation is currently undergoing a complete review process, in the
context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November
2020. A proposal for revision of several legislative instruments related to medicinal products (potentially revising
the duration of regulatory exclusivity, eligibility for expedited pathways, etc.) is expected to be adopted by the
European Commission by the end of 2022. The proposed revisions, once they are agreed and adopted by the
European Parliament and European Council (not expected before the end of 2024) may have a significant impact
on the biopharmaceutical industry in the long term.
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The commercial success of vonoprazan or any future product candidates will depend upon the degree of market
acceptance of such product candidates by physicians, patients, healthcare payers and others in the medical
community.
Vonoprazan and any future product candidates may not be commercially successful. The commercial success
of vonoprazan or any future product candidates, if approved, will depend significantly on the broad adoption and
use of such product by physicians and patients for approved indications. The degree of market acceptance of
vonoprazan or any future products, if approved, will depend on a number of factors, including:
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demonstration of clinical efficacy and safety compared to other more-established products;
the indications for which vonoprazan or any future product candidates are approved;
the limitation of our targeted patient population and other limitations or warnings contained in any
FDA-approved labeling or comparable approved labeling;
acceptance of a new drug for the relevant indication by healthcare providers and their patients;
the pricing and cost-effectiveness of our products, as well as the cost of treatment with our products in
relation to alternative treatments and therapies;
• our ability to obtain and maintain sufficient third-party coverage and adequate reimbursement from
government healthcare programs, including Medicare and Medicaid, private health insurers and other
third-party payers;
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the willingness of patients to pay all, or a portion of, out-of-pocket costs associated with our products in
the absence of sufficient third-party coverage or adequate reimbursement;
any restrictions on the use of our products, and the prevalence and severity of any adverse effects;
potential product liability claims;
the timing of market introduction of our products as well as competitive drugs;
the effectiveness of our or any of our potential future collaborators’ sales and marketing strategies; and
unfavorable publicity relating to the product.
If either of our current approved products, and if approved, any additional product containing vonoprazan or
any future product candidate, does not achieve an adequate level of acceptance by physicians, hospitals,
healthcare payers or patients, we may not generate sufficient revenue from that product and may not become or
remain profitable. Our efforts to educate the medical community and third-party payers regarding the benefits of
our products may require significant resources and may never be successful.
Takeda has the right to develop and commercialize vonoprazan outside of the United States, Europe, and
Canada and has received marketing approval for vonoprazan in certain countries in Asia and Latin America as well
as in Russia. We have little or no control over Takeda’s commercialization activities with respect to vonoprazan
outside of our licensed territories even though those activities could impact our ability to successfully
commercialize vonoprazan. For example, Takeda can make statements or use promotional materials with respect
to vonoprazan outside of our licensed territories that are inconsistent with our positioning of the product in the
United States, Europe, and Canada, and could sell vonoprazan in foreign countries at prices that are dramatically
lower than the prices we would charge in our licensed territories. These activities and decisions, while occurring
outside of our licensed territories, could harm our commercialization strategy. In addition, product recalls or safety
issues with vonoprazan outside our licensed territories could result in serious damage to the brand and impair our
ability to successfully market vonoprazan in our licensed territories.
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The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of
off-label uses. If we are found or alleged to have improperly promoted off-label uses, we may become subject to
significant liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about
prescription products such as our currently approved products, and any additional products containing vonoprazan
and any future product candidates, if approved. In particular, a product may not be promoted for uses that are not
approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. For
example, the FDA has approved both VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK for the treatment of H.
pylori infection in adults, and we are not currently permitted to promote these products for any other uses, unless
and until such uses are approved by the FDA. For any product for which we have obtained a marketing approval,
however, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the
approved label. If we are found to have promoted such off-label uses, we may become subject to significant
liability. The federal government has levied large civil and criminal fines against companies for alleged improper
promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested
that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is
changed or curtailed. If we cannot successfully manage the promotion of products containing vonoprazan or any
future product candidates, if approved, we could become subject to significant liability, which would materially
adversely affect our business and financial condition.
The successful commercialization of VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, or if approved, VOQUEZNA
or any future product candidates, will depend in part on the extent to which governmental authorities and
health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to
obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market
those products and decrease our ability to generate revenue.
The availability of coverage and the adequacy of reimbursement by governmental healthcare programs, such
as Medicare and Medicaid, private health insurers and other third-party payers are essential for most patients to
be able to afford prescription medications such as VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, or, if approved,
VOQUEZNA or any future product candidates. Our ability to achieve coverage and acceptable levels of
reimbursement for our products by third-party payers will have an effect on our ability to successfully
commercialize those products. Even if we obtain coverage for a given product by a third-party payer, the resulting
reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably
high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere
will be available for any product that we may develop, and any reimbursement that may become available may be
decreased or eliminated in the future.
Third-party payers increasingly are challenging prices charged for pharmaceutical products and services, and
many third-party payers may refuse to provide coverage and reimbursement for particular drugs when an
equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payer may consider
our products as substitutable and only offer to reimburse patients for the less expensive product. Even if we are
successful in demonstrating improved efficacy or improved convenience of administration with our products,
pricing of existing drugs may limit the amount we will be able to charge for our products. These payers may deny
or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at
levels that are too low to enable us to realize an appropriate return on our investment in product development. If
reimbursement is not available or is available only at limited levels, we may not be able to successfully
commercialize our products and may not be able to obtain a satisfactory financial return on products that we may
develop.
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There is significant uncertainty related to third-party payer coverage and reimbursement of newly approved
products. In the United States, third-party payers, including private and governmental payers, such as the
Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be
covered. Some third-party payers may require pre-approval of coverage for new or innovative devices or drug
therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this
time what third-party payers will decide with respect to the coverage and reimbursement for our products.
Obtaining and maintaining reimbursement status is time consuming, costly and uncertain. The Medicare and
Medicaid programs increasingly are used as models for how private payers and other governmental payers
develop their coverage and reimbursement policies for drugs. However, no uniform policy for coverage and
reimbursement for products exists among third-party payers in the United States. Therefore, coverage and
reimbursement for products can differ significantly from payer to payer. As a result, the coverage determination
process will require us to provide scientific and clinical support for the use of our products to each payer
separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained
in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some
cases at short notice, and we believe that changes in these rules and regulations are likely.
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Outside the United States, international operations are generally subject to extensive governmental price
controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in
Europe and other countries has and will continue to put pressure on the pricing and usage of our products. In
many countries, the prices of medical products are subject to varying price control mechanisms as part of national
health systems. Other countries allow companies to fix their own prices for medical products but monitor and
control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the
amount that we are able to charge for our products. Accordingly, in markets outside the United States, the
reimbursement for our products may be reduced compared with the United States and may be insufficient to
generate commercially reasonable revenue and profits.
Moreover, increasing efforts by governmental and third-party payers in the United States and abroad to cap
or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for
newly approved products and, as a result, they may not cover or provide adequate payment for our products. We
expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward
managed healthcare, the increasing influence of health maintenance organizations and additional legislative
changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical
procedures and other treatments, has become very intense. As a result, increasingly high barriers are being
erected to the entry of new products.
If following commercialization of products containing vonoprazan (or any future product candidates, if
approved) we fail to comply with reporting and payment obligations under the Medicaid Drug Rebate Program
or other governmental pricing programs, we could be subject to additional reimbursement requirements,
penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition,
results of operations and growth prospects.
If we successfully commercialize products containing vonoprazan and, if approved, any future product
candidates, we will likely participate in governmental programs, such as Medicaid, that impose extensive drug
price reporting and payment obligations on pharmaceutical manufacturers.
Medicaid is a joint federal and state program that is administered by the states for low-income and disabled
beneficiaries. Medicare is a federal program that is administered by the federal government covering individuals
age 65 and over as well as those with certain disabilities. Under the Medicaid Drug Rebate Program, or MDRP, as a
condition of having federal funds being made available to the states for covered outpatient drugs under Medicaid,
pharmaceutical manufacturers must enter into an agreement with the Secretary of Health and Human Services to
pay a rebate to state Medicaid programs for each unit of covered outpatient drug dispensed to a Medicaid
beneficiary and paid for by the state Medicaid program. Medicaid drug rebates are based on pricing data that
pharmaceutical manufacturers report on a monthly and quarterly basis to the U.S. Centers for Medicare &
Medicaid Services, or CMS, which is the federal agency that administers the MDRP and Medicare programs. For the
MDRP, these data include the average manufacturer price, or AMP, for each drug and, in the case of innovator
products, the Best Price, or BP, which represents the lowest price available from the manufacturer to any entity in
the United States in any pricing structure, calculated to include all applicable sales and associated rebates,
discounts and other price concessions. If a manufacturer becomes aware that its MDRP government price
reporting submission for a prior quarter was incorrect or has changed as a result of recalculation of the pricing
data, the manufacturer must resubmit the corrected data for up to three years after those data originally were
due. If a manufacturer fails to provide information timely or is found to have knowingly submitted false
information to the government, the manufacturer may be subject to civil monetary penalties and other sanctions,
including termination from the MDRP.
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Federal law requires that any company that participates in the MDRP also participate in the Public Health
Service’s 340B drug pricing program, or the 340B program, in order for federal funds to be available for the
manufacturer’s drugs under Medicaid. The 340B program is administered by the Health Resources and Services
Administration, or HRSA, and requires participating manufacturers to agree to charge statutorily defined covered
entities no more than the 340B “ceiling price” for the manufacturer’s covered drugs used in an outpatient setting.
These 340B covered entities include a variety of community health clinics and other entities that receive health
services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of
low-income patients. The 340B ceiling price is calculated using a statutory formula, which is based on the average
manufacturer price and rebate amount for the covered outpatient drug as calculated under the MDRP. In general,
products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price
calculation and discount requirement. Manufacturers must report 340B ceiling prices to HRSA on a quarterly basis,
and HRSA publishes them to 340B covered entities. HRSA has finalized regulations regarding the calculation of the
340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and
intentionally overcharge covered entities for 340B-eligible drugs. HRSA has also finalized an administrative dispute
resolution process through which 340B covered entities may pursue claims against participating manufacturers for
overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in
unlawful diversion or duplicate discounting of 340B drugs. In addition, legislation may be introduced that, if
passed, would further expand the 340B program, such as adding further covered entities or requiring participating
manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.
In order to be eligible to have drug products paid for with federal funds under Medicaid and purchased by
certain federal agencies and grantees, a manufacturer must also participate in the U.S. Department of Veterans
Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. Under the VA/FSS program, a manufacturer must
report the Non-Federal Average Manufacturer Price, or Non-FAMP, for its covered drugs to the VA and charge
certain federal agencies no more than the Federal Ceiling Price, which is calculated based on Non-FAMP using a
statutory formula. These federal agencies are the VA, the U.S. Department of Defense, the U.S. Coast Guard, and
the U.S. Public Health Service (including the Indian Health Service). The manufacturer must also pay rebates on
products purchased by military personnel and dependents through the TRICARE retail pharmacy program. If a
manufacturer participating in the FSS program fails to provide timely information or is found to have knowingly
submitted false information, the manufacturer may be subject to civil monetary penalties.
Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs,
including the cost of prescription drugs and combination products. A number of states have either implemented or
are considering implementation of drug price transparency legislation that may prevent or limit our ability to take
price increases at certain rates or frequencies. Requirements under such laws include advance notice of planned
price increases, reporting price increase amounts and factors considered by manufacturers in taking such
increases, wholesale acquisition cost disclosure to prescribers, purchasers, and state agencies, and new product
notice and reporting. Such legislation could limit the price or payment for certain drugs, and a number of states are
authorized to impose civil monetary penalties or pursue other enforcement mechanisms against manufacturers
who fail to comply with drug price transparency requirements, including the untimely, inaccurate, or incomplete
reporting of drug pricing information. If we are found to have violated state law requirements, we may become
subject to penalties or other enforcement mechanisms, which could have a material adverse effect on our
business.
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Pricing and rebate calculations vary across products and programs, are complex, and are often subject to
interpretation by pharmaceutical manufacturers, governmental or regulatory agencies, and the courts, which can
change and evolve over time. Such pricing calculations and reporting, along with any necessary restatements and
recalculations, could increase costs for complying with the laws and regulations governing the MDRP and other
governmental programs, and under the MDRP could result in an overage or underage in Medicaid rebate liability
for past quarters. Price recalculations under the MDRP also may affect the ceiling price at which manufacturers are
required to offer products under the 340B program. Civil monetary penalties can be applied if we are found to
have knowingly submitted any false price or product information to the government, if we are found to have made
a misrepresentation in the reporting of ASP, if we fail to submit the required price data on a timely basis, or if we
are found to have charged 340B covered entities more than the statutorily mandated ceiling price. CMS could also
terminate our Medicaid drug rebate agreement, in which case federal payments may not be available under
Medicaid for our covered outpatient drugs. We cannot assure you that our submissions will not be found to be
incomplete or incorrect.
We face significant competition, and if our competitors develop technologies or product candidates more rapidly
than we do or their technologies are more effective, our ability to develop and successfully commercialize
products may be adversely affected.
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies,
intense competition and a strong emphasis on proprietary and novel products and product candidates. Our
competitors have developed, are developing or may develop products, product candidates and processes
competitive with vonoprazan. Any product candidates that we successfully develop and commercialize will
compete with existing therapies and new therapies that may become available in the future. We believe that a
significant number of products are currently under development, and may become commercially available in the
future, for the treatment of GI diseases for which we may attempt to develop vonoprazan or any future product
candidates. Our competitors include larger and better funded pharmaceutical, biopharmaceutical, biotechnological
and therapeutics companies. Moreover, we may also compete with universities and other research institutions
who may be active in the indications we are targeting and could be in direct competition with us. We also compete
with these organizations to recruit management, scientists and clinical development personnel, which could
negatively affect our level of expertise and our ability to execute our business plan. We will also face competition
in establishing clinical trial sites, enrolling patients for clinical trials and in identifying and in-licensing new product
candidates. Smaller or early-stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies.
We expect that VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK for the treatment of H. pylori infection,
and, if approved, VOQUEZNA, for the treatment of erosive GERD, will primarily compete with generic PPIs
marketed by multiple pharmaceutical companies in both the prescription and OTC markets. Additionally, in March
2020, RedHill Biopharma Ltd. launched Talicia, a co-formulated capsule comprising generic omeprazole,
amoxicillin, and rifabutin for the treatment of H. pylori infection.
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We are aware of other PCABs in development in the United States, as well as a number of other PCABs in
territories outside of the United States that if developed and approved in our territories may compete with
vonoprazan. In the United States, Neurogastrx previously announced its intention to commence a Phase 3 erosive
GERD trial for fexuprazan, under an exclusive license from Daewoong Pharmaceutical Co., Ltd., or Daewoong. In
addition, Cinclus Pharma AG, or Cinclus, received QIDP designation for linaprazan glurate in combination with
antibiotics for the treatment of H. pylori infection, completed a Phase 2 dose selection study for erosive GERD in
November 2022, and plans to initiate Phase 3 studies in 2023 for the treatment of GERD and H. pylori infection.
Finally, Sebela Pharmaceuticals, which acquired development and commercialization rights in United States and
Canada to tegoprazan from HK inno.N, a South Korean company, has initiated two Phase 3 studies in the United
States, one for non-erosive GERD and the other for healing and maintenance of healing of erosive GERD. The
estimated completion date for these studies is May 2024 and December 2024, respectively. Outside the United
States, in 2022 Daewoong launched fexuprazan in South Korea for the treatment of erosive GERD under the brand
name Fexuclue, has submitted applications for regulatory approval in additional countries in Asia and Latin
America, and has out-licensed rights to develop fexuprazan in China to Shanghai Haini, a subsidiary of China’s
Yangtze River Pharmaceutical Group. Also outside the United States, revaprazan is marketed by Yuhan Corporation
in South Korea, and tegoprazan is marketed by HK inno.N in South Korea, is also marketed in China and Indonesia,
and is currently in development by RaQualia Pharma, Inc. in Japan. Additionally, Jeil Pharm has initiated a Phase 3
trial in South Korea of its PCAB candidate, JP-1366, in erosive GERD, and Cinclus’ linaprazan glurate has completed
a Phase 2 clinical trial in Europe. To our knowledge, none of these compounds have demonstrated superiority to
PPIs in a Phase 3 clinical trial.
Additionally, we are aware of several clinical-stage PPIs in territories outside of the United States that if
developed and approved in our licensed territories may compete with vonoprazan. These include Dexa Medica’s
DLBS-2411, currently launched in the Philippines and in Phase 3 in Indonesia, Sihuan Pharmaceutical’s anaprazole,
currently in Phase 3 in China, and Eisai’s azeloprazole, currently in a Phase 2 in China.
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In July 2012, the Food and Drug Administration Safety and Innovation Act was passed, which included the
GAIN Act. The GAIN Act is intended to provide incentives for the development of new, qualified infectious disease
products. In December 2016, the 21st Century Cures Act was passed, providing additional support for the
development of new infectious disease products. These incentives may result in more competition in the market
for new antibiotics and may cause pharmaceutical and biotechnology companies with more resources than we
have to shift their efforts towards the development of product candidates that could be competitive with
vonoprazan or any future product candidates.
Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and
supply resources or experience than we do. If we initial commercial launch of VOQUEZNA TRIPLE PAK, VOQUEZNA
DUAL PAK, or if approved, VOQUEZNA or any future product candidate, we will face competition based on many
different factors, including the safety and effectiveness of our products, the ease with which our products can be
administered and the extent to which patients accept relatively new routes of administration, the timing and scope
of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales
capabilities, price, reimbursement coverage and patent position. Competing products could present superior
treatment alternatives, including by being more effective, safer, more convenient, less expensive or marketed and
sold more effectively than any products we may develop. Competitive products may make any products we
develop obsolete or noncompetitive before we recover the expense of developing and commercializing
vonoprazan or any future product candidates. If we are unable to compete effectively, our opportunity to generate
revenue from the sale of our products we may develop, if approved, could be adversely affected.
If the market opportunities for vonoprazan or any future products are smaller than we believe they are, our
revenue may be adversely affected, and our business may suffer.
The precise incidence and prevalence for all the conditions we aim to address with vonoprazan or any future
product candidates are unknown. Our projections of both the number of people who have these diseases, as well
as the subset of people with these diseases who have the potential to benefit from treatment of vonoprazan or
any future product candidates, are based on our beliefs and estimates. These estimates have been derived from a
variety of sources, including the scientific literature, surveys of clinics or market research, and may prove to be
incorrect. Further, new trials may change the estimated incidence or prevalence of these diseases. The total
addressable market across vonoprazan and any future product candidates will ultimately depend upon, among
other things, the diagnosis criteria included in the final label for each of vonoprazan and any future product
candidates approved for sale for these indications, the availability of alternative treatments and the safety,
convenience, cost and efficacy of vonoprazan and any future product candidates relative to such alternative
treatments, acceptance by the medical community and patient access, drug pricing and reimbursement. The
number of patients in the United States and other major markets and elsewhere may turn out to be lower than
expected, patients may not be otherwise amenable to treatment with our products or new patients may become
increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and
our business.
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We currently have a limited marketing and sales organization and have no experience as a company in
commercializing products, and we may have to invest significant resources to develop these capabilities. If we
are unable to establish marketing and sales capabilities or enter into agreements with third parties to market
and sell our products, we may not be able to generate product revenue.
We have limited internal marketing, sales or distribution capabilities, and we have never commercialized a
product. In order to initiate commercial launch for VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, or, if approved,
VOQUEZNA or any future product candidates, we must build a marketing and sales organization with technical
expertise and supporting distribution capabilities to commercialize each such product in major markets, which will
be expensive and time consuming, or collaborate with third parties that have direct sales forces and established
distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales
force and distribution systems. We plan to independently commercialize vonoprazan in the United States by
building a leading specialty gastroenterology commercial infrastructure to support the adoption of vonoprazan and
we plan to seek one or more partners with existing commercial infrastructure and expertise in Europe and Canada.
We have no prior experience as a company in the marketing, sale and distribution of biopharmaceutical products
and there are significant risks involved in building and managing a marketing and sales organization, including our
ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training
to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team.
Any failure or delay in the development of our internal sales, marketing and distribution capabilities would
adversely impact the commercialization of these products. We may not be able to enter into collaborations or hire
consultants or external service providers to assist us in sales, marketing and distribution functions on acceptable
financial terms, or at all. In addition, our product revenues and our profitability, if any, may be lower if we rely on
third parties for these functions than if we were to market, sell and distribute any products that we develop
ourselves. We likely will have little control over such third parties, and any of them may fail to devote the
necessary resources and attention to sell and market our products effectively. If we are not successful in
commercializing vonoprazan or any future product candidates, either on our own or through arrangements with
one or more third parties, we may not be able to generate any future product revenue and we would incur
significant additional losses.
Our future growth may depend, in part, on our ability to operate in foreign markets, particularly Europe and
Canada, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Our future growth may depend, in part, on our ability to develop and commercialize vonoprazan and any
future product candidates in foreign markets, particularly Europe and Canada. We are not permitted to market or
promote vonoprazan and any future product candidates before we receive regulatory approval from applicable
regulatory authorities in foreign markets, and we may never receive such regulatory approvals for vonoprazan or
any future product candidates. To obtain separate regulatory approval in any other countries we must comply with
numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things,
clinical trials, commercial sales, pricing and distribution of vonoprazan and any future product candidates. If we
obtain regulatory approval of vonoprazan and any future product candidates and ultimately commercialize our
products in foreign markets, we would be subject to additional risks and uncertainties, including:
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different regulatory requirements for approval of drugs in foreign countries;
reduced protection for intellectual property rights;
the existence of additional third-party patent rights of potential relevance to our business;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, public health emergencies or political instability in particular
foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling
internationally;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues,
and other obligations incident to doing business in another country;
foreign reimbursement, pricing and insurance regimes;
• workforce uncertainty in countries where labor unrest is common;
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production shortages resulting from any events affecting raw material supply or manufacturing
capabilities internationally; and
business interruptions resulting from geopolitical actions, including war and terrorism, or natural
disasters including earthquakes, typhoons, floods and fires.
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Risks Related to Our Business Operations and Industry
Our operating results may fluctuate significantly, which makes our future operating results difficult to predict
and could cause our operating results to fall below expectations or any guidance we may provide.
Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to
predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are
outside of our control, including, but not limited to:
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the timing and cost of, and level of investment in, research, development, regulatory approval and
commercialization activities relating to VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, VOQUEZNA or
any future product candidates, which may change from time to time;
coverage and reimbursement policies with respect to VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK,
and, if approved, VOQUEZNA or any future product candidates, and potential future drugs that compete
with such products, if approved;
the cost of manufacturing vonoprazan or any future product candidates, which may vary depending on
the quantity of production and the terms of our agreements with Takeda, Catalent, Evonik, Sandoz and
any future third-party manufacturers;
business interruptions resulting from geopolitical actions, including war, such as the ongoing hostilities
in the Ukraine, and terrorism, or natural disasters such as earthquakes, typhoons, floods and fires or
public health emergencies or pandemics such as the ongoing COVID-19 pandemic;
the timing and amount of the milestone or other payments we will be required to pay to Takeda
pursuant to the Takeda License;
expenditures that we may incur to acquire, develop or commercialize additional product candidates and
technologies;
the level of demand for any approved products, which may vary significantly;
future accounting pronouncements or changes in our accounting policies; and
the timing and success or failure of preclinical studies or clinical trials for vonoprazan or any future
product candidates or competing product candidates, or any other change in the competitive landscape
of our industry, including consolidation among our competitors or partners.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly
and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be
meaningful. Investors should not rely on our past results as an indication of our future performance.
This variability and unpredictability could also result in our failing to meet the expectations of industry or
financial analysts or investors for any period. If our revenue or operating results fall below the expectations of
analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the
market are below the expectations of analysts or investors, the price of our common stock could decline
substantially. Such a stock price decline could occur even when we have met any previously publicly stated
revenue or earnings guidance we may provide.
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Our business is subject to risks arising from epidemic diseases, such as the ongoing COVID-19 pandemic.
A public health pandemic, such as COVID-19, has the potential to impact worldwide economic activity and
poses the risk that we or our employees, contractors, including our CROs, suppliers, and other partners may be
prevented from conducting business activities for an indefinite period of time, including due to spread of the
disease within these groups or due to shutdowns that may be requested or mandated by governmental
authorities. In March 2020, due to efforts to combat the COVID-19 pandemic, we announced a temporary pause in
randomization of new patients in our Phase 3 trials and did not recommence randomizations in either trial until
June 2020. While it is not possible at this time to estimate the full impact that COVID-19 or a future public health
pandemic could have on our business, the measures taken by the governments of countries affected could, in
addition to disrupting our clinical trials, disrupt the supply chain and the manufacture or shipment of drug
substance and finished drug product of vonoprazan for use in our clinical trials or in commercial distribution, which
could delay our ongoing clinical trials and increase development costs, or impair our ability to successfully
commercialize vonoprazan following regulatory approval, and in either case have a material adverse effect on our
business, financial condition and results of operations. The COVID-19 pandemic and mitigation measures had had
an adverse impact on global economic conditions and mitigation measures regarding a future public health
pandemic could have an adverse effect on our business and financial condition, including impairing our ability to
raise capital when needed. The extent to which COVID-19 or a future public health pandemic impacts our results
will depend on future developments that are highly uncertain and cannot be predicted.
Our indebtedness may limit our flexibility in operating our business and adversely affect our financial health and
competitive position, and all of our obligations under our indebtedness are secured by substantially all of our
assets, excluding our intellectual property and certain other assets. If we default on these obligations, our
lenders could foreclose on our assets.
In September 2021, we entered into the Loan Agreement with Hercules. We borrowed $100.0 million at the
inception of the Loan Agreement and may be eligible to borrow up to an additional $100.0 million. All obligations
under the Loan Agreement are secured by a first priority lien on substantially all of our assets, including intellectual
property and certain other assets. As a result, if we default on any of our obligations under the Loan Agreement,
Hercules could foreclose on its security interest and liquidate some or all of the collateral, which would harm our
business, financial condition and results of operations and could require us to reduce or cease operations.
In order to service our current indebtedness and any additional indebtedness we may incur in the future, we
need to generate cash from our operating activities or other financings. Our ability to generate cash is subject, in
part, to our ability to successfully execute our business strategy, as well as general economic, financial,
competitive, regulatory and other factors beyond our control. Our business may not be able to generate sufficient
cash flow from operations, and future borrowings or other financings may not be available to us in an amount
sufficient to enable us to service our indebtedness and fund our other liquidity needs. To the extent we are
required to use cash from operations or the proceeds of any future financing to service our indebtedness instead
of funding working capital or other general corporate purposes, we will be less able to plan for, or react to,
changes in our business, industry and in the economy generally. This could place us at a competitive disadvantage
compared to our competitors that have less indebtedness.
The Loan Agreement contains customary affirmative and negative covenants that limit our ability to engage
in certain transactions that may be in our long-term best interest. The affirmative covenants include, among
others, covenants requiring us to maintain certain levels of cash subject to a control agreement in favor of
Hercules, and commencing on November 15, 2023, certain levels of trailing three-month net product revenue from
the sale of vonoprazan and products containing vonoprazan, deliver certain financial reports, maintain insurance
coverage and satisfy certain requirements regarding our operating accounts. The negative covenants include,
among others, limitations on our ability to incur additional indebtedness and liens, merge with other companies or
consummate certain changes of control, acquire other companies, engage in new lines of business, make certain
investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various
specified transactions.
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While we believe we are currently in compliance with the covenants contained in the Loan Agreement, we
may breach these covenants in the future. Our ability to comply with these covenants may be affected by events
and factors beyond our control. In the event that we breach one or more covenants, the lenders may choose to
declare an event of default and require that we immediately repay all amounts outstanding under the applicable
agreement, terminate any commitment to extend further credit and foreclose on the collateral. The occurrence of
any of these events could have a material adverse effect on our business, financial condition and results of
operations.
Our Revenue Interest Financing Agreement could limit cash flow available for our operations and expose us to
risks that could adversely affect our business, financial condition and results of operations.
In May 2022, we entered into a Revenue Interest Financing Agreement with the Initial Investors pursuant to
which we can receive up to $260 million in funding from the Initial Investors, and in October 2022, we entered into
the Joinder Agreement under which we can receive up to $40 million from the Additional Investor, bringing the
total funding available under the Revenue Interest Financing Agreement to up to $300 million. Under the terms of
the Revenue Interest Financing Agreement and Joinder Agreement, we received $100 million at the initial closing
and can receive an additional $175 million upon FDA approval of vonoprazan for treatment of erosive GERD on or
before March 31, 2024. In addition, we are eligible for $25,000,000 in additional funding for achievement of a sales
milestone.
Under the Revenue Interest Financing Agreement, the investors 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 if we receive FDA approval for vonoprazan for an indication relating to the treatment of
heartburn associated with non-erosive GERD. 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 is
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.
Pursuant to the Revenue Interest Financing Agreement, we also agreed to specified affirmative and negative
covenants, including covenants to use commercially reasonable efforts to promote products containing
vonoprazan in the United States and covenants requiring us to maintain certain levels of cash. The Revenue
Interest Financing Agreement also contains representations and warranties, other covenants, indemnification
obligations, and other provisions customary for transactions of this nature. In the event of an event of default
under the Revenue Interest Financing Agreement, the investors may be entitled to foreclose on the pledged
collateral which includes the applicable royalty under the Royalty Interest Financing Agreement from net sales of
product containing vonoprazan.
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We are dependent on the services of our current management and other clinical and scientific personnel, and if
we are not able to retain these individuals or recruit additional management or clinical and scientific personnel,
our business will suffer.
Our success depends in part on our continued ability to attract, retain and motivate highly qualified
management, clinical and scientific personnel. We are highly dependent upon our current senior management
team and our development personnel. The loss of services of any of these individuals or personnel could delay or
prevent the successful development of our product pipeline, completion of our ongoing clinical trials, initiation or
completion of future clinical trials, or the commercialization of vonoprazan or any other future product candidates.
Although we have executed employment agreements or offer letters with each member of our senior
management team, these agreements are terminable at will with or without notice and, therefore, we may not be
able to retain their services as expected. We do not currently maintain “key person” life insurance on the lives of
our executives or any of our employees. This lack of insurance means that we may not have adequate
compensation for the loss of the services of these individuals.
We will continue to expand and need to effectively manage our managerial, operational, financial and other
resources in order to successfully pursue our clinical development and commercialization efforts. We may not be
successful in maintaining our unique company culture and continuing to attract or retain qualified management
and scientific and clinical personnel in the future due to the intense competition for qualified personnel among
pharmaceutical, biotechnology and other businesses. Our industry has experienced a high rate of turnover of
management personnel in recent years. If we are not able to attract, integrate, retain and motivate necessary
personnel to accomplish our business objectives, we may experience constraints that will significantly impede the
achievement of our development objectives, our ability to raise additional capital and our ability to implement our
business strategy.
We have recently substantially increased the size of our organization, and we may encounter difficulties in
managing our growth and expanding our operations successfully.
We have substantially increased our organization from seventy-three full-time employees in December 2021
to one hundred and twelve full-time employees as of December 31, 2022. As we continue development and
pursue the potential commercialization of vonoprazan and any future product candidates, as well as function as a
public company, we will continue to expand our marketing, sales, financial, regulatory, and manufacturing
capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect
that we will need to manage additional relationships with various strategic partners, suppliers and other third
parties. Our future financial performance and our ability to develop and commercialize vonoprazan and any future
product candidates and to compete effectively will depend, in part, on our ability to manage our recent substantial
growth and any future growth effectively.
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We are subject to various foreign, federal, and state healthcare laws and regulations, and our failure to comply
with these laws and regulations could harm our results of operations and financial condition.
Our business operations and current and future arrangements with investigators, healthcare professionals,
consultants, third-party payers, patient organizations and customers expose us to broadly applicable foreign,
federal and state fraud and abuse and other healthcare laws and regulations. These laws may constrain the
business or financial arrangements and relationships through which we conduct our operations, including how we
research, market, sell and distribute any products for which we obtain marketing approval. Such laws include, but
are not limited to:
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the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from
knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any
kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce
or reward, or in return for, either the referral of an individual for, or the purchase, lease, or order, or
arranging for or recommending the purchase, lease, or order of any good, facility, item or service, for
which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as
Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-
Kickback Statute or specific intent to violate it in order to have committed a violation;
the U.S. civil and criminal federal false claims laws, including the civil False Claims Act, which can be
enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which
prohibit, among other things, individuals or entities from knowingly presenting, or causing to be
presented, to the federal government, claims for payment or approval that are false or fraudulent,
knowingly making, using or causing to be made or used, a false record or statement material to a false
or fraudulent claim, or from knowingly making or causing to be made a false statement to avoid,
decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the
government may assert that a claim including items or services resulting from a violation of the federal
Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes
criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to
execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false statement, in connection with
the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-
Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud
statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;
the U.S. federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the
Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for
Medicare & Medicaid Services, or CMS, information related to certain payments and other “transfers of
value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and
chiropractors) , certain non-physician practitioners (physician assistants, nurse practitioners, clinical
nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology
assistants and certified nurse midwives)and teaching hospitals, as well as ownership and investment
interests held by the physicians described above and their immediate family members; and
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws,
which may apply to our business practices, including but not limited to, research, distribution, sales and
marketing arrangements and claims involving healthcare items or services reimbursed by non-
governmental third-party payers, including private insurers, or by the patients themselves; state laws
that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government,
or otherwise restrict payments that may be made to healthcare providers and other potential referral
sources; and state laws and regulations that require drug manufacturers to file reports relating to
pricing and marketing information or which require tracking gifts and other remuneration and items of
value provided to physicians, other healthcare providers and entities.
We may also be subject to additional regulation in the conduct of our business. For example, we may be
subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S.
companies and their employees and agents from authorizing, promising, offering, or providing, directly or
indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of
public international organizations and foreign government owned or affiliated entities, candidates for foreign
political office, and foreign political parties or officials thereof.
Ensuring that our internal operations and business arrangements with third parties comply with applicable
healthcare laws and regulations could involve substantial costs. It is possible that governmental authorities will
conclude that our business practices do not comply with current or future statutes, regulations, agency guidance
or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are
found to be in violation of any of the laws described above or any other governmental laws and regulations that
may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties,
damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, or
similar programs in other countries or jurisdictions, disgorgement, imprisonment, contractual damages,
reputational harm, additional reporting requirements and oversight if we become subject to a corporate integrity
agreement or similar agreement to resolve allegations of non-compliance with these laws, diminished profits and
the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time
consuming and may require significant financial and personnel resources. Therefore, even if we are successful in
defending against any such actions that may be brought against us, our business may be impaired. If any of the
physicians or other providers or entities with whom we expect to do business are found not to be in compliance
with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including
exclusion from government funded healthcare programs and imprisonment. If any of the above occur, it could
adversely affect our ability to operate our business and our results of operations.
Enacted and future legislation and healthcare reform measures may increase the difficulty and cost for us to
obtain marketing approval for and commercialize vonoprazan and any future product candidates and may affect
the prices we may set.
In the United States and some foreign jurisdictions, there have been, and we expect there will continue to
be, a number of legislative and regulatory changes and proposed changes to the healthcare system, including cost-
containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect
our ability to profitably sell any product candidates for which we obtain marketing approval. In particular, there
have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce
healthcare costs and improve the quality of healthcare.
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For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act, collectively the Affordable Care Act, was enacted in the United States. Among
the provisions of the Affordable Care Act of importance to our potential product candidates, the Affordable Care
Act includes:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription
drugs and biologic agents, which is apportioned among these entities according to their market share in
certain government healthcare programs;
a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-
sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under
Medicare Part D;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug
Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs,
respectively;
a methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected;
an extension of a manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who
are enrolled in Medicaid managed care organizations;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing
program;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research, along with funding for such research; and
establishment of a Center for Medicare Innovation at CMS to test innovative payment and service
delivery models to lower Medicare and Medicaid spending, potentially including prescription drug
spending.
Since its enactment, there have been judicial and political challenges to certain aspects of the Affordable
Care Act. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA
without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President
Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15,
2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also
instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access
to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that
include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance
coverage through Medicaid or the ACA.
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In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was
enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year,
which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain
in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022,
unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was
signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals,
and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years. Further, there has been heightened governmental scrutiny in the United States of
pharmaceutical pricing practices in light of the rising cost of prescription drugs. At the federal level, such scrutiny
has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation
designed to, among other things, bring more transparency to product pricing, review the relationship between
pricing and manufacturer patient programs, and reform government program reimbursement methodologies for
products. Most recently, on August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with
Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare
Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the
Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the
Secretary of the Department of Health and Human Services to implement many of these provisions through
guidance, as opposed to regulation, for the initial years. For that and other reasons, it is currently unclear how the
IRA will be effectuated.
The likelihood of implementation of these and other reform initiatives is uncertain. In the coming years,
additional legislative and regulatory changes could be made to governmental health programs that could
significantly impact pharmaceutical companies and the success of our product candidates.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to
control pharmaceutical and biological product pricing, including price or patient reimbursement constraints,
discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in
some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional
healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what
pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare
programs. Furthermore, there has been increased interest by third party payers and governmental authorities in
reference pricing systems and publication of discounts and list prices. These reforms could reduce the ultimate
demand for vonoprazan and any future product candidates, if approved, or put pressure on our product pricing,
which could negatively affect our business, results of operations, financial condition and prospects.
We expect that these healthcare reform measures that may be adopted in the future may result in more
rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we
receive for any approved product. Any reduction in reimbursement from Medicare or other government programs
may result in a similar reduction in payments from private payers. The implementation of cost containment
measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or
commercialize vonoprazan and any future product candidates, if approved.
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We and any of our third-party manufacturers or suppliers may use potent chemical agents and hazardous
materials, and any claims relating to improper handling, storage or disposal of these materials could be time
consuming or costly.
We and any of our third-party manufacturers or suppliers will use biological materials, potent chemical
agents and may use hazardous materials, including chemicals and biological agents and compounds that could be
dangerous to human health and safety of the environment. Our operations and the operations of our third-party
manufacturers and suppliers also produce hazardous waste products. Federal, state and local laws and regulations
govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes.
Compliance with applicable environmental laws and regulations may be expensive, and current or future
environmental laws and regulations may impair our product development efforts. In addition, we cannot eliminate
the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or
hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically
exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. In
the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount
exceeding our resources, and our clinical trials or regulatory approvals could be suspended.
Although we maintain workers’ compensation insurance for certain costs and expenses we may incur due to
injuries to our employees resulting from the use of hazardous materials or other work- related injuries, this
insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for toxic
tort claims that may be asserted against us in connection with our storage or disposal of biologic, hazardous or
radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health
and safety laws and regulations, which have tended to become more stringent over time. These current or future
laws and regulations may impair our research, development or production efforts. Failure to comply with these
laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could
materially adversely affect our business, financial condition, results of operations and prospects.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to
limit commercialization of our products.
We face an inherent risk of product liability as a result of the clinical trials of vonoprazan and any future
product candidates and will face an even greater risk if we commercialize vonoprazan or, following approval, any
future product candidates. For example, we may be sued if vonoprazan or any future product candidates allegedly
cause injury or are found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any
such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to
warn of dangers inherent in the product candidate, negligence, strict liability and a breach of warranties. Claims
may be brought against us by clinical trial participants, patients or others using, administering or selling products
that may be approved in the future. Claims could also be asserted under state consumer protection acts.
If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities
or be required to limit or cease the commercialization of our products. Even a successful defense would require
significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may
result in:
•
•
decreased demand for our products;
injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants;
•
costs to defend the related litigation;
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•
•
•
•
•
•
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
significant negative financial impact;
the inability to commercialize vonoprazan and any future product candidates; and
a decline in our stock price.
Our inability to maintain sufficient product liability insurance at an acceptable cost and scope of coverage to
protect against potential product liability claims could prevent or inhibit the commercialization of VOQUEZNA
TRIPLE PAK and VOQUEZNA DUAL PAK, and, if approved, VOQUEZNA and additional products we may develop.
Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or
settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits
of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be
subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a
court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance,
and we may not have, or be able to obtain, sufficient capital to pay such amounts. Moreover, in the future, we
may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against
losses. As a result of receiving marketing approval for, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, we have
expanded our insurance coverage to include the commercialization of these products as well as, if approved,
vonoprazan; however, we may be unable to continue to obtain this liability insurance on commercially reasonable
terms and such insurance may be insufficient to cover our exposure.
We and others, including any of our potential future collaborators, will be required to report to regulatory
authorities if any of our approved products cause or contribute to adverse medical events, and any failure to do
so would result in sanctions that would materially harm our business.
If we or any of our potential future collaborators are successful in commercializing VOQUEZNA TRIPLE PAK
and VOQUEZNA DUAL PAK, or, if approved, VOQUEZNA or any future product candidates, the FDA and foreign
regulatory authorities would require that we and Takeda (with respect to products containing vonoprazan) and any
of our current or potential future collaborators, report certain information about adverse medical events if those
products may have caused or contributed to those adverse events. The timing of our obligation to report would be
triggered by the date we become aware of the adverse event as well as the nature of the event. We, Takeda and
any of our potential future collaborators or CROs may fail to report adverse events within the prescribed
timeframe. If we, Takeda or any of our potential future collaborators or CROs fail to comply with such reporting
obligations, the FDA or a foreign regulatory authority could take action, including criminal prosecution, the
imposition of civil monetary penalties, seizure of our products or delay in approval of future products.
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Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations,
standards and other requirements could adversely affect our business, results of operations, and financial
condition.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous
state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention,
and security of personal data, such as information that we may collect in connection with clinical trials in the U.S.
and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the
foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of
their requirements may have on our business. This evolution may create uncertainty in our business, affect our
ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information,
necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional
costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in
the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our
internal policies and procedures or our contracts governing our processing of personal information could result in
negative publicity, government investigations and enforcement actions, claims by third parties and damage to our
reputation, any of which could have a material adverse effect on our operations, financial performance and
business.
As our operations and business grow, we may become subject to or affected by new or additional data
protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the U.S.,
HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach
reporting of individually identifiable health information. Certain states have also adopted comparable privacy and
security laws and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be
subject to interpretation by various courts and other governmental authorities, thus creating potentially complex
compliance issues for us and our future customers and strategic partners. In addition, California enacted the CCPA
on June 28, 2018, which went into effect on January 1, 2020. The CCPA creates individual privacy rights for
California consumers and increases the privacy and security obligations of entities handling certain personal
information. It provides for civil penalties for violations, as well as a private right of action for data breaches that is
expected to increase data breach litigation. Further, the CPRA recently passed in California. The CPRA will impose
additional data protection obligations on covered businesses, including additional consumer rights processes,
limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive
data. It will also create a new California data protection agency authorized to issue substantive regulations and
could result in increased privacy and information security enforcement. The majority of the provisions will go into
effect on January 1, 2023, and additional compliance investment and potential business process changes may be
required. Similar laws have passed in Virginia, Connecticut, Colorado and Utah and have been proposed in other
states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. The
enactment of such laws could have potentially conflicting requirements that would make compliance challenging.
In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data
protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our
financial condition.
Furthermore, the FTC and many state Attorneys General continue to enforce federal and state consumer
protection laws against companies for online collection, use, dissemination and security practices that appear to
be unfair or deceptive. For example, according to the FTC, failing to take appropriate steps to keep consumers’
personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section
5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable
and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of
its business, and the cost of available tools to improve security and reduce vulnerabilities.
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In Europe, GDPR, went into effect in May 2018 and imposes strict requirements for processing the personal
data of individuals within the EEA. Companies that must comply with the GDPR face increased compliance
obligations and risk, including more robust regulatory enforcement of data protection requirements and potential
fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company,
whichever is greater. In addition, the GDPR increases the scrutiny of transfers of personal data from the EEA to the
United States and other jurisdictions that the European Commission does not recognize as having “adequate” data
protection laws. In 2016, the EU and United States agreed to a transfer framework for data transferred from the
EU to the United States called the Privacy Shield, but in July 2020 the Court of Justice of the EU, or the CJEU,
limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating
the Privacy Shield for purposes of international transfers and imposing further restrictions on use of the standard
contractual clauses, or SCCs. While the CJEU upheld the adequacy of the SCCs, it made clear that reliance on them
alone may not necessarily be sufficient in all circumstances. Use of the SCCs must now be assessed on a case-by-
case basis taking into account the legal regime applicable in the destination country, in particular applicable
surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be
put in place, however, the nature of these additional measures is currently uncertain. The CJEU went on to state
that if a competent supervisory authority believes that the SCCs cannot be complied with in the destination
country and the required level of protection cannot be secured by other means, such supervisory authority is
under an obligation to suspend or prohibit that transfer. The European Commission issued revised SCCs on June 4,
2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.
The revised SCCs must be used for relevant new data transfers from September 27, 2021; existing standard
contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022. There is some
uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether
they can be relied on for data transfers to non-EEA entities subject to the GDPR. The revised SCCs apply only to the
transfer of personal data outside of the EEA and not the UK; the UK’s Information Commissioner’s Office launched
a public consultation on its draft revised data transfers mechanisms in August 2021. As supervisory authorities
issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be
used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory
investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries
and regions in which we operate, it could affect the manner in which we provide our services, the geographical
location or segregation of our relevant systems and operations, and could adversely affect our financial results.
The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and
recommendations made by the European Data Protection Board. The revised SCCs must be used for relevant new
data transfers from September 27, 2021; existing standard contractual clauses arrangements must be migrated to
the revised clauses by December 27, 2022. The new SCCs apply only to the transfer of personal data outside of the
EEA and not the United Kingdom; the United Kingdom’s Information Commissioner’s Office launched a public
consultation on its draft revised data transfers mechanisms in August 2021. There is some uncertainty around
whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on
for data transfers to non-EEA entities subject to the GDPR. As supervisory authorities issue further guidance on
personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking
enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or
if we are otherwise unable to transfer personal data between and among countries and regions in which we
operate, it could affect the manner in which we provide our services, the geographical location or segregation of
our relevant systems and operations, and could adversely affect our financial results.
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Our internal computer systems, or those of any of our CROs, manufacturers, service providers, other contractors
or consultants or potential future collaborators, may fail or suffer security breaches, which could result in a
material disruption of our product development programs.
The United States federal and various state and foreign governments have adopted or proposed
requirements regarding the collection, distribution, use, security, and storage of personally identifiable
information and other data relating to individuals, and federal and state consumer protection laws are being
applied to enforce regulations related to the online collection, use, and dissemination of data. Despite the
implementation of security measures, our internal computer systems and those of our current and any future
CROs and other service providers, contractors, consultants and collaborators are vulnerable to damage from
computer viruses, cybersecurity threats, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. Attacks upon information technology systems are increasing in their
frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and
organized groups and individuals with a wide range of motives and expertise. As a result of the COVID-19
pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the
increased number of our employees who are working remotely, which may create additional opportunities for
cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access
to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may
be unable to anticipate these techniques or implement adequate preventative measures. We may also experience
security breaches that may remain undetected for an extended period. If such an event were to occur and cause
interruptions in our operations or result in the unauthorized disclosure of or access to personally identifiable
information or individually identifiable health information (violating certain privacy laws such as GDPR), it could
result in a material disruption of our development programs and our business operations, whether due to a loss of
our trade secrets or other similar disruptions. Some of the federal, state and foreign government requirements
include obligations of companies to notify individuals of security breaches involving particular personally
identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or
organizations with which we have formed strategic relationships. Even though we may have contractual
protections with such vendors, contractors, or other organizations, notifications and follow-up actions related to a
security breach could impact our reputation, cause us to incur significant costs, including legal expenses, harm
customer confidence, hurt our expansion into new markets, cause us to incur remediation costs, or cause us to
lose existing customers. For example, the loss of clinical trial data from completed or future clinical trials could
result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the
data. We also rely on third parties to manufacture vonoprazan and any future product candidates, and similar
events relating to their computer systems could also have a material adverse effect on our business. To the extent
that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or
inappropriate disclosure of confidential or proprietary information, we could incur liability, the further
development and commercialization of vonoprazan and any future product candidates could be delayed, and we
could be subject to significant fines, penalties or liabilities for any noncompliance to certain privacy and security
laws.
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Our employees and independent contractors, including principal investigators, CROs, consultants and vendors,
may engage in misconduct or other improper activities, including noncompliance with regulatory standards and
requirements.
We are exposed to the risk that our employees and independent contractors, including principal
investigators, CROs, consultants and vendors may engage in misconduct or other illegal activity. Misconduct by
these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that
violate: (i) the laws and regulations of the FDA and other similar regulatory bodies, including those laws that
require the reporting of true, complete and accurate information to such regulatory bodies, (ii) manufacturing
standards, including cGMP and similar requirements, or (iii) federal and state healthcare, security, fraud and abuse
laws, data privacy and security laws, and other similar non-U.S. laws that require the true, complete and accurate
reporting of financial information or data. Activities subject to these laws also involve the improper use or
misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our
preclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions
and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees
and other third parties, and the precautions we take to detect and prevent this activity may not be effective in
controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other
actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are
subject to the risk that a person or government could allege such fraud or other misconduct, even if none
occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or
asserting our rights, those actions could have a significant impact on our business and financial results, including,
without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary
fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare
programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve
allegations of non-compliance, imprisonment, contractual damages, reputational harm, diminished profits and
future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our
business and our results of operations.
We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption
laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair our
ability to compete in domestic and international markets. We could face criminal liability and other serious
consequences for violations, which could harm our business.
We are subject to export control and import laws and regulations, including the U.S. Export Administration
Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the
U.S. Treasury Department’s Office of Foreign Assets Controls, and anti-corruption and anti-money laundering laws
and regulations, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery
statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state and national anti-
bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are
interpreted broadly and prohibit companies and their employees, agents, clinical research organizations,
contractors and other collaborators and partners from authorizing, promising, offering, providing, soliciting or
receiving, directly or indirectly, improper payments or anything else of value to recipients in the public or private
sector. We have engaged, and may engage in the future, third parties for clinical trials outside of the United States,
and may engage third parties to sell our products abroad once we enter a commercialization phase, and/or to
obtain necessary permits, licenses, patent registrations and other regulatory approvals. We have direct or indirect
interactions with officials and employees of government agencies or government-affiliated hospitals, universities
and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents,
clinical research organizations, contractors and other collaborators and partners, even if we do not explicitly
authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above
may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import
privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other
consequences.
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We may engage in strategic transactions that could impact our liquidity, increase our expenses and present
significant distractions to our management.
From time to time, we may consider strategic transactions, such as acquisitions of companies, asset
purchases and out-licensing or in-licensing of intellectual property, products or technologies, similar to our
approach in in-licensing and acquiring our current product candidates. Any future transactions could increase our
near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our
common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process
research and development expenses, any of which could affect our financial condition, liquidity and results of
operations. Additional potential transactions that we may consider in the future include a variety of business
arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business
combinations and investments. Future acquisitions may also require us to obtain additional financing, which may
not be available on favorable terms or at all. These transactions may never be successful and may require
significant time and attention of management. In addition, the integration of any business that we may acquire in
the future may disrupt our existing business and may be a complex, risky and costly endeavor for which we may
never realize the full benefits of the acquisition. Accordingly, although we may not undertake or successfully
complete any additional transactions of the nature described above, any additional transactions that we do
complete could have a material adverse effect on our business, results of operations, financial condition and
prospects.
Risks Related to Our Intellectual Property
Our success depends on our ability to protect our intellectual property and our proprietary technologies.
Our commercial success depends in part on our ability to obtain and maintain patent protection and trade
secret protection for vonoprazan and any future product candidates, proprietary technologies and their uses as
well as our ability to operate without infringing upon the proprietary rights of others. If we are unable to protect
our intellectual property rights or if our intellectual property rights are inadequate for our technology or
vonoprazan or any future product candidates, our competitive position could be harmed. We generally seek to
protect our proprietary position by filing patent applications in the United States and abroad related to
vonoprazan or any future product candidates, proprietary technologies and their uses that are important to our
business. We do not currently own any issued patents or pending patent applications. We also seek to protect our
proprietary position by acquiring or in-licensing relevant issued patents or pending patent applications from third
parties. We have in-licensed from Takeda a number of United States, European, and Canadian patents and patent
applications relating to the compound vonoprazan as well as the use and manufacture of vonoprazan products.
Pending patent applications cannot be enforced against third parties practicing the technology claimed in
such applications unless, and until, patents issue from such applications, and then only to the extent the issued
claims cover the technology. There can be no assurance that our future patent applications or the patent
applications of our current and future licensors will result in patents being issued or that issued patents will afford
sufficient protection against competitors with similar technology, nor can there be any assurance that the patents
if issued will not be infringed, designed around or invalidated by third parties.
Even issued patents may later be found invalid or unenforceable or may be modified or revoked in
proceedings instituted by third parties before various patent offices or in courts. The degree of future protection
for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect
our rights or permit us to gain or keep any competitive advantage. These uncertainties and/or limitations in our
ability to properly protect the intellectual property rights relating to vonoprazan and any future product
candidates could have a material adverse effect on our financial condition and results of operations.
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We cannot be certain that the claims in our licensor’s U.S. pending patent applications, corresponding
international patent applications and patent applications in certain foreign countries will be considered patentable
by the United States Patent and Trademark Office, or USPTO, courts in the United States or by the patent offices
and courts in foreign countries, nor can we be certain that the claims in our licensor’s issued patents will not be
found invalid or unenforceable if challenged.
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance
that we or any of our potential future collaborators will be successful in protecting vonoprazan and any future
product candidates by obtaining and defending patents. These risks and uncertainties include the following:
•
•
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the USPTO and various foreign governmental patent agencies require compliance with a number of
procedural, documentary, fee payment and other provisions during the patent process, the
noncompliance with which can result in abandonment or lapse of a patent or patent application, and
partial or complete loss of patent rights in the relevant jurisdiction;
patent applications may not result in any patents being issued;
patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or
otherwise may not provide any competitive advantage;
• our competitors, many of whom have substantially greater resources than we do and many of whom
have made significant investments in competing technologies, may seek or may have already obtained
patents that will limit, interfere with or block our ability to make, use and sell vonoprazan and any
future product candidates;
•
•
there may be significant pressure on the U.S. government and international governmental bodies to
limit the scope of patent protection both inside and outside the United States for disease treatments
that prove successful, as a matter of public policy regarding worldwide health concerns; and
countries other than the United States may have patent laws less favorable to patentees than those
upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market
competing products.
The patent prosecution process is also expensive and time consuming, and we and our licensor may not be
able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner
or in all jurisdictions where protection may be commercially advantageous. It is also possible that we and our
licensor will fail to identify patentable aspects of our research and development output before it is too late to
obtain patent protection. Moreover, in some circumstances such as under the Takeda License, we do not have the
right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, directed
to technology that we license from third parties. We may also require the cooperation of our licensors in order to
enforce the licensed patent rights, and such cooperation may not be provided. Therefore, these patents and
applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
We cannot be certain that patent prosecution and maintenance activities by our licensors have been or will
be conducted in compliance with applicable laws and regulations, which may affect the validity and enforceability
of such patents or any patents that may issue from such applications. If they fail to do so, this could cause us to
lose rights in any applicable intellectual property that we in-license, and as a result our ability to develop and
commercialize products or product candidates may be adversely affected and we may be unable to prevent
competitors from making, using and selling competing products.
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In addition, although we enter into non-disclosure and confidentiality agreements with parties who have
access to patentable aspects of our research and development output, such as our employees, outside scientific
collaborators, CROs, third-party manufacturers, consultants, advisors and other third parties, any of these parties
may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing
our ability to seek patent protection.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights
from third parties, including our rights in vonoprazan licensed from Takeda, or otherwise experience disruptions
to our business relationships with our licensors, we could lose license rights that are important to our business.
We are a party to the Takeda License under which we are granted rights to intellectual property that are
important to our business and we may enter into additional license agreements in the future with other third
parties. The Takeda License imposes, and we expect that any future license agreements where we in-license
intellectual property, will impose on us, various development, regulatory and/or commercial diligence obligations,
payment of milestones and/or royalties and other obligations. If we fail to comply with our obligations under these
agreements, or we are subject to bankruptcy-related proceedings, the licensor may have the right to terminate the
license, in which event we would not be able to market products covered by the license. Additionally, if a future
license agreement includes a sublicense from a third party who is not the original licensor of the intellectual
property at issue, then we must rely on our direct licensor to comply with its obligations under the primary license
agreements under which such licensor obtained rights in the applicable intellectual property, where we may have
no relationship with the original licensor of such rights. If such a licensor fails to comply with its obligations under
its upstream license agreement, the original third-party licensor may have the right to terminate the original
license, which may terminate our sublicense. If this were to occur, we would no longer have rights to the
applicable intellectual property unless we are able to secure our own direct license with the owner of the relevant
rights, which we may not be able to do on reasonable terms, or at all, which may impact our ability to continue to
develop and commercialize vonoprazan and any future product candidates incorporating the relevant intellectual
property.
We may need to obtain further licenses from third parties to advance our research or allow
commercialization of vonoprazan and any future product candidates, and we cannot provide any assurances that
third-party patents do not exist which might be enforced against vonoprazan and any future product candidates in
the absence of such a license. We may fail to obtain any of these licenses on commercially reasonable terms, if at
all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the
same technologies licensed to us. In that event, we may be required to expend significant time and resources to
develop or license replacement technology. If we are unable to do so, we may be unable to develop or
commercialize the affected product candidates, which could materially harm our business and the third parties
owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to
our sales, an obligation on our part to pay royalties and/or other forms of compensation.
Licensing of intellectual property is of critical importance to our business and involves complex legal,
business and scientific issues. Disputes may arise between us and our licensors regarding intellectual property
subject to a license agreement, including:
•
the scope of rights granted under the license agreement and other interpretation-related issues;
• whether and the extent to which our technology and processes infringe on intellectual property of the
licensor that is not subject to the licensing agreement;
• our right to sublicense patents and other rights to third parties;
• our diligence obligations with respect to the use of the licensed technology in relation to our
development and commercialization of vonoprazan and any future product candidates, and what
activities satisfy those diligence obligations;
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• our right to transfer or assign the license; and
•
the ownership of inventions and know-how resulting from the joint creation or use of intellectual
property by our licensors and us and our partners.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our
current licensing arrangements on acceptable terms, we may not be able to successfully develop and
commercialize the affected product candidates, which would have a material adverse effect on our business.
In addition, certain of our agreements may limit or delay our ability to consummate certain transactions,
may impact the value of those transactions, or may limit our ability to pursue certain activities. For example, if we
choose to sublicense or assign to any third parties our rights under our existing license agreement with Takeda
with respect to any licensed product, we may be required to wait for a certain period or until the occurrence of
certain funding or development milestones.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent
protection, 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.
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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.
The patent protection and patent prosecution for vonoprazan or any future product candidates may be
dependent on third parties.
We may rely on third parties to file and prosecute patent applications and maintain patents and otherwise
protect the licensed intellectual property under certain current and future license agreements, such as the Takeda
License. Under such arrangements, we may not have primary control over these activities for certain of licensed
patents or patent applications and other intellectual property rights. We cannot be certain that such activities by
third parties have been or will be conducted in compliance with applicable laws and regulations or will result in
valid and enforceable patents or other intellectual property rights. In addition, our current and future licensors
may not be fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent
rights, which could compromise such patent rights. We may in the future enter into license agreements where the
licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the
invalidity of these patents and even if we are permitted to pursue such enforcement or defense, we will require
the cooperation of our licensors. We cannot be certain that our licensors will allocate sufficient resources or
prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the
licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our business
because it might prevent us from continuing to license intellectual property that we may need to operate our
business. If any of our licensors or any of our future licensors or future collaborators fail to appropriately prosecute
and maintain patent protection for patents covering vonoprazan or any future product candidates, our ability to
develop and commercialize those product candidates may be adversely affected and we may not be able to
prevent competitors from making, using and selling competing products.
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In addition, even where we have the right to control prosecution of patent applications or enforcement of
patents we have acquired or licensed from third parties, we may still be adversely affected or prejudiced by actions
or inactions of our predecessors or licensors and their counsel that took place prior to us assuming control over
such activities.
Third parties may retain certain rights to the technology that they license to us, including the right to use the
underlying technology for noncommercial academic and research use, to publish general scientific findings from
research related to the technology, and to make customary scientific and scholarly disclosures of information
relating to the technology. For example, under the Takeda License, Takeda retained the rights to the inventions in
all countries other than the United States, Europe, and Canada. Takeda also retained the right to develop certain
drug products that contain vonoprazan where vonoprazan is not the only active pharmaceutical ingredient. It is
difficult to monitor whether our predecessors or licensors limit their use of the technology to these uses, and we
could incur substantial expenses to enforce our rights to our licensed technology in the event of misuse.
If we are limited in our ability to utilize acquired or licensed technologies, or if we lose our rights to critical
in-licensed technology, we may be unable to successfully develop, out-license, market and sell our products, which
could prevent or delay new product introductions. Our business strategy depends on the successful development
of licensed and acquired technologies into commercial products. Therefore, any limitations on our ability to utilize
these technologies may impair our ability to develop, out-license or market and sell our product candidate.
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Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual
property rights have limitations and may not adequately protect our business or permit us to maintain our
competitive advantage. For example:
• others may be able to develop products that are similar to vonoprazan or any future product candidates
but that are not covered by the claims of the patents that we own in the future or license;
• we or our current and future licensors or predecessors might not have been the first to make the
inventions covered by the issued patents or patent applications that we own in the future or license;
• we or our current and future licensors or predecessors might not have been the first to file patent
applications covering certain of the claimed inventions;
• others may independently develop similar or alternative technologies or duplicate any of our
technologies without infringing our intellectual property rights;
•
•
it is possible that the pending patent applications we own or license will not lead to issued patents;
issued patents that we own in the future or license may be held invalid or unenforceable, as a result of
legal challenges by our competitors;
• our competitors might conduct research and development activities in countries where we do not have
patent rights and then use the information learned from such activities to develop competitive products
for sale in our major commercial markets;
• we may not develop additional proprietary technologies that are patentable; and
•
the patents of others may have an adverse effect on our business.
Should any of these events occur, it could significantly harm our business, results of operations and
prospects.
Our commercial success depends significantly on our ability to operate without infringing the patents and other
proprietary rights of third parties. Claims by third parties that we infringe their proprietary rights may result in
liability for damages or prevent or delay our developmental and commercialization efforts.
Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of
third parties. However, our research, development and commercialization activities may be subject to claims that
we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties.
Other entities may have or obtain patents or proprietary rights that could limit our ability to make, use, sell, offer
for sale or import vonoprazan and any future product candidates and products that may be approved in the future,
or impair our competitive position. There is a substantial amount of litigation, both within and outside the United
States, involving patent and other intellectual property rights in the biopharmaceutical industry, including patent
infringement lawsuits, oppositions, reexaminations, IPR proceedings and PGR proceedings before the USPTO and/
or foreign patent offices. Numerous third-party U.S. and foreign issued patents and pending patent applications
exist in the fields in which we are developing product candidates. There may be third-party patents or patent
applications with claims to materials, formulations, methods of manufacture or methods for treatment related to
the use or manufacture of vonoprazan and any future product candidates.
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As the biopharmaceutical industry expands and more patents are issued, the risk increases that vonoprazan
and any future product candidates may be subject to claims of infringement of the patent rights of third parties.
Because patent applications are maintained as confidential for a certain period of time, until the relevant
application is published we may be unaware of third-party patents that may be infringed by commercialization of
vonoprazan and any future product candidates, and we cannot be certain that we were the first to file a patent
application related to a product candidate or technology. Moreover, because patent applications can take many
years to issue, there may be currently pending patent applications that may later result in issued patents that
vonoprazan and any future product candidates may infringe. In addition, identification of third-party patent rights
that may be relevant to our technology is difficult because patent searching is imperfect due to differences in
terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. In
addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these
patents. Any claims of patent infringement asserted by third parties would be time consuming and could:
•
•
•
•
•
•
•
result in costly litigation that may cause negative publicity;
divert the time and attention of our technical personnel and management;
cause development delays;
prevent us from commercializing vonoprazan and any future product candidates until the asserted
patent expires or is held finally invalid or not infringed in a court of law;
require us to develop non-infringing technology, which may not be possible on a cost-effective basis;
subject us to significant liability to third parties; or
require us to enter into royalty or licensing agreements, which may not be available on commercially
reasonable terms, or at all, or which might be non-exclusive, which could result in our competitors
gaining access to the same technology.
Although no third party has asserted a claim of patent infringement against us as of the date of this annual
report, others may hold proprietary rights that could prevent vonoprazan and any future product candidates from
being marketed.
Any patent-related legal action against us claiming damages and seeking to enjoin activities relating to
vonoprazan and any future product candidates or processes could subject us to potential liability for damages,
including treble damages if we were determined to willfully infringe, and require us to obtain a license to
manufacture or develop vonoprazan and any future product candidates. Defense of these claims, regardless of
their merit, would involve substantial litigation expense and would be a substantial diversion of employee
resources from our business. We cannot predict whether we would prevail in any such actions or that any license
required under any of these patents would be made available on commercially acceptable terms, if at all.
Moreover, even if we or our future strategic partners were able to obtain a license, the rights may be
nonexclusive, which could result in our competitors gaining access to the same intellectual property. In addition,
we cannot be certain that we could redesign vonoprazan and any future product candidates or processes to avoid
infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the
failure to obtain necessary licenses, could prevent us from developing and commercializing vonoprazan and any
future product candidates, which could harm our business, financial condition and operating results.
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Parties making claims against us may be able to sustain the costs of complex patent litigation more
effectively than we can because they have substantially greater resources. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation or administrative proceedings,
there is a risk that some of our confidential information could be compromised by disclosure. In addition, any
uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on
our ability to raise additional funds or otherwise have a material adverse effect on our business, results of
operations, financial condition and prospects.
We may not be successful in obtaining or maintaining necessary rights to vonoprazan and any future product
candidates through acquisitions and in-licenses.
Because our development programs may in the future require the use of proprietary rights held by other
third parties, the growth of our business may depend in part on our ability to acquire, in-license, or use these third-
party proprietary rights. We may be unable to acquire or in-license any compositions, methods of use, processes
or other third-party intellectual property rights from third parties that we identify as necessary for vonoprazan and
any future product candidates. The licensing and acquisition of third-party intellectual property rights is a
competitive area, and a number of more established companies are also pursuing strategies to license or acquire
third-party intellectual property rights that we may consider attractive. These established companies may have a
competitive advantage over us due to their size, cash resources and greater clinical development and
commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to
assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on
terms that would allow us to make an appropriate return on our investment. If we are unable to successfully
obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights
we have, we may have to abandon development of that program and our business and financial condition could
suffer.
We may be involved in lawsuits to protect or enforce our future patents or the patents of our current and future
licensors, which could be expensive, time consuming and unsuccessful. Further, our future issued patents or the
patents of our current and future licensors could be found invalid or unenforceable if challenged in court.
Competitors may infringe our intellectual property rights or those of our current and future licensors. To
prevent infringement or unauthorized use, we and/or any such licensors may be required to file infringement
claims, which can be expensive and time consuming. In addition, in a patent infringement proceeding, a court may
decide that a patent we own or license is not valid, is unenforceable and/or is not infringed. If we or any of our
current and future licensors were to initiate legal proceedings against a third party to enforce a patent directed at
vonoprazan and any future product candidates, the defendant could counterclaim that our patent or the patent of
our current or future licensor is invalid and/or unenforceable in whole or in part. In patent litigation, defendant
counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge
include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness,
written description, non-enablement, or obviousness-type double patenting. Grounds for an unenforceability
assertion could include an allegation that someone connected with prosecution of the patent withheld relevant
information from the USPTO or made a misleading statement during prosecution.
If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at
least part, and perhaps all, of the patent protection on such product candidate. In addition, if the breadth or
strength of protection provided by our future patents and future patent applications or those of our current and
future licensors is threatened, it could dissuade companies from collaborating with us to license, develop or
commercialize current or future product candidates. Such a loss of patent protection would have a material
adverse impact on our business.
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Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights
may cause us to incur significant expenses and could distract our technical and management personnel from their
normal responsibilities. Such litigation or proceedings could substantially increase our operating losses and reduce
the resources available for development activities or any future sales, marketing or distribution activities. We may
not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our
competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can
because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could compromise our ability to compete in the marketplace.
Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation or other legal proceedings relating to our intellectual property rights, there is a risk that some of
our confidential information could be compromised by disclosure during this type of litigation or other
proceedings.
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Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the
market price of our common shares to decline.
During the course of any intellectual property litigation, there could be public announcements of the
initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the
litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our
existing products, programs or intellectual property could be diminished. Accordingly, the market price of shares of
our common stock may decline. Such announcements could also harm our reputation or the market for our future
products, which could have a material adverse effect on our business.
Derivation or interference proceedings may be necessary to determine priority of inventions, and an unfavorable
outcome may require us to cease using the related technology or to attempt to license rights from the prevailing
party.
Derivation or interference proceedings provoked by third parties or brought by us or declared by the USPTO
or similar proceedings in foreign patent offices may be necessary to determine the priority of inventions with
respect to our future patents or future patent applications or those of our current and future licensors. An
unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it
from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on
commercially reasonable terms. Our defense of such proceedings may fail and, even if successful, may result in
substantial costs and distract our management and other employees. In addition, the uncertainties associated with
such proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our
clinical trials, continue our research programs, license necessary technology from third parties or enter into
development or manufacturing partnerships that would help us bring vonoprazan and any future product
candidates to market.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our future
patent applications or those of our current and future licensors and the enforcement or defense of our future
issued patents or those of our current and future licensors.
On September 16, 2011, the Leahy-Smith America Invents Act, or Leahy-Smith Act, was signed into law. The
Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect
the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-
Smith Act, the United States transitioned in March 2013 to a “first inventor to file” system in which, assuming that
other requirements of patentability are met, the first inventor to file a patent application will be entitled to the
patent regardless of whether a third party was first to invent the claimed invention. A third party that files a patent
application in the USPTO after March 2013 but before us could therefore be awarded a patent covering an
invention of ours even if we had made the invention before it was made by such third party. This will require us to
be cognizant going forward of the time from invention to filing of a patent application. Furthermore, our ability to
obtain and maintain valid and enforceable patents depends on whether the differences between our technology
and the prior art allow our technology to be patentable over the prior art. Since patent applications in the United
States and most other countries are confidential for a period of time after filing or until issuance, we may not be
certain that we or our current and future licensors are the first to either (1) file any patent application related to
vonoprazan and any future product candidates or (2) invent any of the inventions claimed in the patents or patent
applications.
The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications
will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art
to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO
administered post-grant proceedings, including PGR, IPR, and derivation proceedings. An adverse determination in
any such submission or proceeding could reduce the scope or enforceability of, or invalidate, our patent rights,
which could adversely affect our competitive position.
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Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in
United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence
in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be
insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may
attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first
challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its
implementation could increase the uncertainties and costs surrounding the prosecution of our future patent
applications or those of our current and future licensors and the enforcement or defense of our future issued
patents or those of our current and future licensors, all of which could have a material adverse effect on our
business, financial condition, results of operations and prospects.
In 2012, the European Patent Package, or EU Patent Package, regulations were passed with the goal of
providing a single pan-European Unitary Patent and a new European Unified Patent Court, or UPC, for litigation
involving European patents. Implementation of the EU Patent Package will likely occur in the first half of 2023.
Under the UPC, all European patents, including those issued prior to ratification of the European Patent Package,
will by default automatically fall under the jurisdiction of the UPC. The UPC will provide our competitors with a
new forum to centrally revoke our European patents, and allow for the possibility of a competitor to obtain pan-
European injunctions. It will be several years before we will understand the scope of patent rights that will be
recognized and the strength of patent remedies that will be provided by the UPC. Under the EU Patent Package as
currently proposed, we will have the right to opt our patents out of the UPC over the first seven years of the
court’s existence, but doing so may preclude us from realizing the benefits of the new unified court.
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Changes in U.S. patent law, or laws in other countries, could diminish the value of patents in general, thereby
impairing our ability to protect vonoprazan and any future product candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual
property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve a high
degree of technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is
costly, time consuming and inherently uncertain. Changes in either the patent laws or in the interpretations of
patent laws in the United States and other countries may diminish the value of our intellectual property and may
increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or
defense of issued patents. We cannot predict the breadth of claims that may be allowed or enforced in our future
patents or in third-party patents. In addition, Congress or other foreign legislative bodies may pass patent reform
legislation that is unfavorable to us. Evolving judicial interpretation of patent law could also adversely affect our
business. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing
the scope of patent protection available in certain circumstances or weakening the rights of patent owners in
certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future,
this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending
on decisions by the U.S. Congress, the U.S. federal courts, the USPTO, or similar authorities in foreign jurisdictions,
the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to
obtain new patents or to enforce the existing licensed patents and the patents we might obtain or license in the
future.
We may be subject to claims challenging the inventorship or ownership of our future patents, the patents of our
current and future licensors, or other intellectual property.
We may also be subject to claims that former employees or other third parties have an ownership interest in
our future patents, the patents of our current and future licensors or other intellectual property. Litigation may be
necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending
any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Such
an outcome could have a material adverse effect on our business. Even if we are successful in defending against
such claims, litigation could result in substantial costs and distraction to management and other employees.
Patent terms may be inadequate to protect our competitive position on vonoprazan and any future product
candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural
expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may
be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering vonoprazan
and any future product candidates are obtained, once the patent life has expired, we may be open to competition
from competitive products. Given the amount of time required for the development, testing and regulatory review
of product candidates, patents protecting vonoprazan and any future product candidates might expire before or
shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with
sufficient rights to exclude others from commercializing products similar or identical to ours.
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If we do not obtain patent term extension for vonoprazan and any future product candidates, our business may
be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of vonoprazan and any future
product candidates, one or more of our U.S. patents or those of our current and future licensors, may be eligible
for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, or
the Hatch-Waxman Amendments. The Hatch- Waxman Amendments permit a patent restoration term of up to five
years as compensation for patent term lost during product development and the FDA regulatory review process. A
maximum of one patent may be extended per FDA approved product as compensation for the patent term lost
during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent
beyond a total of 14 years from the date of product approval and only those claims covering such approved drug
product, a method for using it or a method for manufacturing it may be extended. Patent term extension may also
be available in certain foreign countries upon regulatory approval of vonoprazan and any future product
candidates. However, we may not be granted an extension because of, for example, failing to apply within
applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable
requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than
we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is
less than we request, our competitors may obtain approval of competing products following our patent expiration,
and our revenue could be reduced, possibly materially. Further, if this occurs, our competitors may take advantage
of our investment in development and trials by referencing our clinical and preclinical data and launch their
product earlier than might otherwise be the case.
We may not be able to protect our intellectual property rights throughout our licensed territories.
Although we have issued patents and pending patent applications in the United States and certain other
countries in which we intend to commercialize our products, filing, prosecuting and defending patents in all
relevant countries throughout our licensed territories could be prohibitively expensive, and our intellectual
property rights in some countries outside the United States can be less extensive than those in the United States.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as
federal and state laws in the United States. Consequently, we may not be able to prevent third parties from
practicing our inventions in all countries outside the United States or from selling or importing products made
using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in
jurisdictions where we have not obtained patent protection to develop their own products and, further, may
export otherwise infringing products to territories where we have patent protection but enforcement is not as
strong as that in the United States. These products may compete with vonoprazan or any future product
candidates, and our patents, the patents of our current and future licensors or other intellectual property rights
may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property
rights in foreign jurisdictions. The legal systems of many foreign countries do not favor the enforcement of patents
and other intellectual property protection, which could make it difficult for us to stop the infringement of our
intellectual property rights or marketing of competing products in violation of our proprietary rights. Proceedings
to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and
attention from other aspects of our business, could put our future patents or the patents of our current and future
licensors at risk of being invalidated or interpreted narrowly and our future patent applications or the patent
applications of our current and future licensors at risk of not issuing and could provoke third parties to assert
claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies
awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property
rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license.
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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant
licenses to third parties. In addition, many countries limit the enforceability of patents against government
agencies or government contractors. In these countries, the patent owner may have limited remedies, which could
materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any
patents relevant to our business, our competitive position may be impaired, and our business, financial condition,
results of operations and prospects may be adversely affected.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary,
fee payment and other requirements imposed by regulations and governmental patent agencies, and our patent
protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents
and/or applications will be due to the USPTO and various foreign patent offices at various points over the lifetime
of our future patents and/or future applications and those of our current and future licensors. We have systems in
place to remind us to pay these fees, and we rely on third parties to pay these fees when due. Additionally, the
USPTO and various foreign patent offices require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. We employ reputable law firms and
other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late
fee or by other means in accordance with rules applicable to the particular jurisdiction. However, there are
situations in which noncompliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it
could have a material adverse effect on our business.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would
be harmed.
In addition, we rely on the protection of our trade secrets, including unpatented know-how, technology and
other proprietary information to maintain our competitive position. Although we have taken steps to protect our
trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and
confidential information and inventions agreements with employees, consultants and advisors, we cannot provide
any assurances that all such agreements have been duly executed, and any of these parties may breach the
agreements and disclose our proprietary information, including our trade secrets, and we may not be able to
obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a
trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courts
inside and outside the United States are less willing or unwilling to protect trade secrets.
Moreover, third parties may still obtain this information or may come upon this or similar information
independently, and we would have no right to prevent them from using that technology or information to
compete with us. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of
this information may be greatly reduced and our competitive position would be harmed. If we cannot otherwise
maintain the confidentiality of our proprietary technology and other confidential information, then our ability to
protect our trade secret information may be jeopardized.
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We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our
employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former
employers.
As is common in the biopharmaceutical industry, in addition to our employees, we engage the services of
consultants to assist us in the development of vonoprazan and any future product candidates. Many of these
consultants, and many of our employees, were previously employed at, or may have previously provided or may
be currently providing consulting services to, other biopharmaceutical companies including our competitors or
potential competitors. We may become subject to claims that we, our employees or a consultant inadvertently or
otherwise used or disclosed trade secrets or other information proprietary to their former employers or their
former or current clients. Litigation may be necessary to defend against these claims. If we fail in defending any
such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel, which could adversely affect our business. Even if we are successful in defending against these claims,
litigation could result in substantial costs and be a distraction to our management team and other employees.
If our trademarks and trade names are not adequately protected, then we may not be able to build name
recognition in our markets of interest and our business may be adversely affected.
We intend to use registered or unregistered trademarks or trade names to brand and market ourselves and
our products. Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or
determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and
trade names, which we need to build name recognition among potential partners or customers in our markets of
interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability
to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name
or trademark infringement claims brought by owners of other trademarks or trademarks that incorporate
variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to
establish name recognition based on our trademarks and trade names, then we may not be able to compete
effectively and our business may be adversely affected. We may license our trademarks and trade names to third
parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks and
trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our
licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.
Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, trade secrets, domain
names, copyrights or other intellectual property may be ineffective and could result in substantial costs and
diversion of resources and could adversely affect our financial condition or results of operations.
Any collaboration arrangements that we have or may enter into in the future may not be successful, which could
adversely affect our ability to develop and commercialize our products.
The success of our collaboration arrangements will depend heavily on the efforts and activities of our
collaborators and partners. Under the Takeda License, for example, Takeda has certain obligations with respect to
assisting with the transition of information and materials to us as well as providing clinical and commercial supply
of the vonoprazan product. Collaborations and partnerships are subject to numerous risks, which may include that:
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collaborators have significant discretion in determining the efforts and resources that they will apply to
collaborations;
collaborators may not pursue development and commercialization of our products or may elect not to
continue or renew development or commercialization programs based on trial or test results, changes in
their strategic focus due to the acquisition of competitive products, availability of funding or other
external factors, such as a business combination that diverts resources or creates competing priorities;
collaborators could independently develop, or develop with third parties, products that compete
directly or indirectly with our products or product candidates;
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a collaborator with marketing, manufacturing and distribution rights to one or more products may not
commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;
• we could grant exclusive rights to our collaborators that would prevent us from collaborating with
others;
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collaborators may not properly maintain or defend our intellectual property rights or may use our
intellectual property or proprietary information in a way that gives rise to actual or threatened litigation
that could jeopardize or invalidate our intellectual property or proprietary information or expose us to
potential liability;
disputes may arise between us and a collaborator that causes the delay or termination of the research,
development or commercialization of our current or future products or that results in costly litigation or
arbitration that diverts management attention and resources;
collaborations may be terminated, and, if terminated, may result in a need for additional capital to
pursue further development or commercialization of the applicable current or future products;
collaborators may own or co-own intellectual property covering our products that results from our
collaborating with them, and in such cases, we would not have the exclusive right to develop or
commercialize such intellectual property; and
a collaborator’s sales and marketing activities or other operations may not be in compliance with
applicable laws resulting in civil or criminal proceedings.
Intellectual property discovered through government funded programs may be subject to federal regulations
such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies.
Compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-U.S.
manufacturers.
We may acquire or license in the future intellectual property rights that have been generated through the
use of U.S. government funding or grant. Pursuant to the Bayh-Dole Act of 1980, the U.S. government has certain
rights in inventions developed with government funding. These U.S. government rights include a non-exclusive,
non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the
U.S. government has the right, under certain limited circumstances, to require us to grant exclusive, partially
exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate
steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public
health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal
regulations (also referred to as “march-in rights”). The U.S. government also has the right to take title to these
inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to
register the intellectual property within specified time limits. Intellectual property generated under a government
funded program is also subject to certain reporting requirements, compliance with which may require us to
expend substantial resources. In addition, the U.S. government requires that any products embodying any of these
inventions or produced through the use of any of these inventions be manufactured substantially in the United
States. This preference for industry may be waived by the federal agency that provided the funding if the owner or
assignee of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant
licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United
States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S.
industry may limit our ability to contract with non-U.S. product manufacturers for products covered by such
intellectual property.
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Risks Related to Our Common Stock
The trading price of the shares of our common stock has been, and is likely to continue to be, highly volatile, and
purchasers of our common stock could incur substantial losses.
The stock market in general and the market for stock of biopharmaceutical companies in particular have
experienced extreme volatility that has often been unrelated to the operating performance of particular
companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price
at which they paid. Our common stock has a limited trading history and the market price has fluctuated widely,
and may in the future fluctuate widely, depending upon many factors such as those discussed in this “Risk Factors”
section and many others, some of which are beyond our control, including the following:
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a relatively low-volume trading market for our shares of common stock that could cause trades of small
blocks of shares to have a significant impact on the price of our shares of common stock;
• market conditions in the biopharmaceutical sector and issuance of securities analysts’ reports or
recommendations;
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establishment of short positions by holders or non-holders of our common stock;
an inability to obtain additional funding;
sales of our stock by insiders and stockholders, including Takeda;
• our ability to enroll patients in our ongoing and any future clinical trials;
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results of our clinical trials and preclinical studies, the results of clinical trials conducted by Takeda and
others for vonoprazan, and the results of trials of our competitors or those of other companies in our
market sector;
regulatory approval of vonoprazan and any future product candidates, or limitations to specific label
indications or patient populations for its use, or changes or delays in the regulatory review process;
any termination or loss of rights under the Takeda License;
regulatory developments in the United States and foreign countries;
changes in the structure of healthcare payment systems, especially in light of reforms to the U.S.
healthcare system;
the success or failure of our efforts to acquire, license or develop additional product candidates;
innovations or new products developed by us or our competitors;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;
• manufacturing, supply or distribution delays or shortages;
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any changes to our relationship with any manufacturers, suppliers, licensors, future collaborators or
other strategic partners;
achievement of expected product sales and profitability;
variations in our financial results or those of companies that are perceived to be similar to us;
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general economic, industry and market conditions, public health emergencies or other events or factors,
many of which are beyond our control;
additions or departures of key personnel;
intellectual property, product liability or other litigation against us;
changes in our capital structure, such as future issuances of securities and the incurrence of additional
debt; and
changes in accounting standards, policies, guidelines, interpretations or principles.
In addition, in the past, stockholders have initiated class action lawsuits against biopharmaceutical
companies following periods of volatility in the market prices of these companies’ stock. Such litigation, if
instituted against us, could cause us to incur substantial costs and divert management’s attention and resources,
which could have a material adverse effect on our business, financial condition and results of operations.
Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to
control or significantly influence all matters submitted to stockholders for approval. Furthermore, many of our
current directors were appointed by our principal stockholders.
Our executive officers, directors and greater than 5% stockholders, in the aggregate, own a majority of our
outstanding common stock. As a result, such persons acting together have the ability to control or significantly
influence all matters submitted to our board of directors or stockholders for approval, including the appointment
of our management, the election and removal of directors and approval of any significant transaction, as well as
our management and business affairs. This concentration of ownership may have the effect of delaying, deferring
or preventing a change in control, impeding a merger, consolidation, takeover or other business combination
involving us, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain
control of our business, even if such a transaction would benefit other stockholders.
We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a
return on your investment will depend on appreciation, if any, in the price of our common stock.
We have never declared or paid any cash dividend on our common stock. We currently anticipate that we
will retain future earnings for the development, operation and expansion of our business and do not anticipate
declaring or paying any cash dividends for the foreseeable future. In addition, under the terms of the Loan
Agreement, we are prohibited from paying any cash dividends without the consent of the lenders. Any return to
stockholders will therefore be limited to the appreciation of their stock. Shares of our common stock may not
appreciate in value or even maintain the price at which stockholders have purchased their shares.
Sales of a substantial number of shares of our common stock by our existing stockholders, including Takeda, in
the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that
these sales might occur could significantly reduce the market price of our common stock and impair our ability to
raise adequate capital through the sale of additional equity securities.
As of December 31, 2022, up to 8,780,741 shares of common stock that are either subject to outstanding
options, warrants or other rights or reserved for future issuance under our employee benefit plans will become
eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules,
exercise limitations, and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common
stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common
stock could decline.
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Further, we filed a registration statement, which became effective on November 17, 2020, registering the
resale of up to 14,499,416 shares of common stock held by Takeda and Frazier Life Sciences IX, L.P., or Frazier,
including all shares of our common stock underlying the Takeda Warrant, which warrant has since been exercised
in full. As a result of the registration statement, Takeda and Frazier are each able to freely sell some or all of their
shares of our common stock. Any sales by these stockholders could have a material adverse effect on the trading
price of our common stock.
We are an emerging growth company and a smaller reporting company, and the reduced disclosure
requirements applicable to emerging growth companies and smaller reporting company may make our common
stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and may remain an emerging growth
company until the last day of the fiscal year following the fifth anniversary of the completion of our IPO. However,
if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer”
as defined in Rule 12b-2 under the Exchange Act, our annual gross revenues exceed $1.235 billion or we issue
more than $1.0 billion of non-convertible debt in any three- year period, we will cease to be an emerging growth
company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are
permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other
public companies that are not emerging growth companies. These exemptions include:
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being permitted to provide only two years of audited financial statements, in addition to any required
unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” disclosure;
not being required to comply with the auditor attestation requirements in the assessment of our
internal control over financial reporting pursuant to the Sarbanes-Oxley Act;
not being required to comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements, unless the SEC,
determines the new rules are necessary for protecting the public;
reduced disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved.
Investors may find our common stock less attractive if we rely on these exemptions. If some investors find
our common stock less attractive as a result, there may be a less active trading market for our common stock and
our stock price may be reduced or more volatile. In addition, the JOBS Act provides that an emerging growth
company 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 these accounting standards until
they 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 are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller
reporting company even after we are no longer an emerging growth company. We may take advantage of certain
of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these
scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0
million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0
million during the most recently completed fiscal year and our voting and non-voting common stock held by non-
affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
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Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may
consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions
that could significantly reduce the value of our shares to a potential acquiror or delay or prevent changes in control
or changes in our management without the consent of our board of directors. The provisions in our charter
documents include the following:
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a classified board of directors with three-year staggered terms, which may delay the ability of
stockholders to change the membership of a majority of our board of directors;
no cumulative voting in the election of directors, which limits the ability of minority stockholders to
elect director candidates;
the exclusive right of our board of directors, unless the board of directors grants such right to the
stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or
the resignation, death or removal of a director, which prevents stockholders from being able to fill
vacancies on our board of directors;
the required approval of at least 66-2/3% of the shares entitled to vote to remove a director for cause,
and the prohibition on removal of directors without cause;
the ability of our board of directors to authorize the issuance of shares of preferred stock and to
determine the price and other terms of those shares, including preferences and voting rights, without
stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;
the ability of our board of directors to alter our amended and restated bylaws without obtaining
stockholder approval;
the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal our
amended and restated bylaws or repeal the provisions of our amended and restated certificate of
incorporation regarding the election and removal of directors;
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at
an annual or special meeting of our stockholders;
an exclusive forum provision providing that the federal district courts will be the exclusive forum for
actions and proceedings a cause of action arising under the Securities Act of 1933, as amended, and that
the Court of Chancery of the State of Delaware will be the exclusive forum for certain other actions and
proceedings;
the requirement that a special meeting of stockholders may be called only by the board of directors,
which may delay the ability of our stockholders to force consideration of a proposal or to take action,
including the removal of directors; and
advance notice procedures that stockholders must comply with in order to nominate candidates to our
board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may
discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s
own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General
Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any
holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other
exceptions, the board of directors has approved the transaction.
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Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court
of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and
our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with
us or our directors, officers or employees.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the
Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought
on our behalf under Delaware statutory or common law, including any action asserting a breach of fiduciary duty,
any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended
and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim
against us that is governed by the internal affairs doctrine; provided, that, this provision would not apply to suits
brought to enforce a duty or liability created by the Securities Act or the Exchange Act, or any other claim for
which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal
law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce
any duty or liability created by the Exchange Act or the rules and regulations thereunder. The choice of forum
provisions in our amended and restated certificate of incorporation may limit a stockholder’s ability to bring a
claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees,
which may discourage such lawsuits against us and our directors, officers and other employees. By agreeing to
these provisions, however, stockholders will not be deemed to have waived our compliance with the federal
securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of
forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it
is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to
find the choice of forum provisions in our amended and restated certificate of incorporation to be inapplicable or
unenforceable in an action, we may incur additional costs associated with resolving such action in other
jurisdictions, which could adversely affect our business and financial condition.
Our ability to use net operating loss carryforwards and other tax attributes may be limited.
We have incurred substantial losses during our history and do not expect to become profitable in the near
future, and we may never achieve profitability. To the extent that we continue to generate taxable losses, unused
losses will carry forward to offset future taxable income, if any, until such unused losses expire (if at all).
Under recently enacted U.S. tax legislation, federal net operating loss, or NOL, carryforwards generated in
periods after December 31, 2017, may be carried forward indefinitely but may only be used to offset 80% of our
taxable income annually. Our NOL carryforwards are subject to review and possible adjustment by the Internal
Revenue Service, or the IRS, and state tax authorities. Under Section 382 of the Internal Revenue Code of 1986, as
amended, or the Code, our federal NOL carryforwards may become subject to an annual limitation in the event of
certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess
of 50 percentage points. Our ability to utilize our NOL carryforwards and other tax attributes to offset future
taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in
connection with our IPO or future offerings. Similar rules may apply under state tax laws. We have not yet
determined the amount of the cumulative change in our ownership resulting from our IPO or other transactions,
or any resulting limitations on our ability to utilize our NOL carryforwards and other tax attributes. If we earn
taxable income, such limitations could result in increased future tax liability to us and our future cash flows could
be adversely affected. We have recorded a full valuation allowance related to our NOLs and other deferred tax
assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
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Recent U.S. tax legislation may materially adversely affect our financial condition, results of operations and cash
flows.
The Tax Act has significantly changed the U.S. federal income taxation of U.S. corporations, including by
reducing the U.S. corporate income tax rate and revising the rules governing NOLs. Many of these changes became
effective beginning in 2018, without any transition periods or grandfathering for existing transactions. The
legislation is unclear in many respects and may continue to be subject to potential amendments and technical
corrections, as well as interpretations and implementing regulations by the U.S. Treasury Department and the IRS,
which have lessened or increased certain adverse impacts of the legislation and may do so in the future. We
continue to work with our tax advisors to determine the full impact that the recent tax legislation as a whole will
have on us. We urge our investors to consult with their legal and tax advisors with respect to such legislation and
the potential tax consequences of investing in our common stock.
General Risk Factors
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and
expenses.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, water
shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or
manmade disasters or business interruptions, for which we are predominantly self-insured. We rely on third-party
manufacturers to produce vonoprazan and any future product candidates. Our ability to obtain clinical supplies of
vonoprazan and any future product candidates could be disrupted if the operations of these suppliers were
affected by a man-made or natural disaster or other business interruption. The occurrence of any of these business
disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Our failure to meet the continued listing requirements of the Nasdaq could result in a delisting of our common
stock.
If we fail to satisfy the continued listing requirements of the Nasdaq, such as the corporate governance
requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock.
Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability
to sell or purchase our common stock when you wish to do so. In the event of a delisting, any action taken by us to
restore compliance with listing requirements may not allow our common stock to become listed again, stabilize
the market price or improve the liquidity of our common stock, prevent our common stock from dropping below
the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
We incur significant costs as a result of operating as a public company, and our management will be required to
devote substantial time to new compliance initiatives.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a
private company. We are subject to the reporting requirements of the Exchange Act, which require, among other
things, that we file with the SEC, annual, quarterly and current reports with respect to our business and financial
condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and Nasdaq to
implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including
requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate
governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory “say on pay” voting
requirements that will apply to us when we cease to be an emerging growth company. Stockholder activism, the
current political environment and the current high level of government intervention and regulatory reform may
lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and
impact the manner in which we operate our business in ways we cannot currently anticipate.
140
We expect the rules and regulations applicable to public companies to substantially increase our legal and
financial compliance costs and to make some activities more time consuming and costly. If these requirements
divert the attention of our management and personnel from other business concerns, they could have a material
adverse effect on our business, financial condition and results of operations. The costs we incur as a public
company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas
of our business. For example, these rules and regulations make it more difficult and more expensive for us to
obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the
same or similar coverage in the future. We cannot predict or estimate the amount or timing of additional costs we
may incur to respond to these requirements. The impact of these requirements could also make it more difficult
for us to attract and retain qualified persons to serve on our board of directors, our board committees or as
executive officers.
If securities or industry analysts do not publish research or reports or publish unfavorable research or reports
about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or
industry analysts publish about us, our business, our market or our competitors. If securities or industry analysts
do not continue coverage of our company, the trading price for our stock would be negatively impacted. In
addition, if one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If
one or more of these analysts ceases to cover us or fails to regularly publish reports on us, interest in our stock
could decrease, which could cause our stock price or trading volume to decline.
If we fail to maintain proper and effective internal control over financial reporting, our ability to produce
accurate and timely financial statements could be impaired, investors may lose confidence in our financial
reporting and the trading price of our common stock may decline.
Pursuant to Section 404 of Sarbanes-Oxley, our management is required to report upon the effectiveness of
our internal control over financial reporting. When we lose our status as an “emerging growth company” and
reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to
the effectiveness of our internal control over financial reporting. The rules governing the standards that must be
met for management to assess our internal control over financial reporting are complex and require significant
documentation, testing and possible remediation. To comply with the requirements of being a reporting company
under the Exchange Act, we are in the process of implementing additional financial and management controls,
reporting systems and procedures; and hiring additional accounting and finance staff. If we or, if required, our
auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose
confidence in our financial reporting and the trading price of our common stock may decline.
There could be material weaknesses or significant deficiencies in our internal control over financial reporting
in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to
accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our
internal control over financial reporting is effective, or if our independent registered public accounting firm
determines we have a material weakness or significant deficiency in our internal control over financial reporting
once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of
our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or
investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our
internal control over financial reporting, or to implement or maintain other effective control systems required of
public companies, could also restrict our future access to the capital markets.
141
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in
the market price of its securities. This risk is especially relevant for us, because we, like many other biotechnology
and pharmaceutical companies, have recently experienced significant stock price volatility. If we face such
litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could
harm our business.
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Item 1B. Unresolved Staff Comments
Not applicable.
Item 2.
Properties
Our corporate offices are located in Buffalo Grove, Illinois, and Florham Park, New Jersey. We believe that
our facilities are adequate to meet our current needs, and that suitable additional alternative spaces will be
available in the future on commercially reasonable terms, if required.
For additional information, see Note 6, Lease Commitments included in Item 15 of this Annual Report on
Form 10-K.
Item 3.
Legal Proceedings
We are not currently subject to any material legal proceedings. From time to time, we may be involved in
legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such
proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of
resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
Item 4. Mine Safety Disclosures
Not applicable.
143
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock has been publicly traded on the Nasdaq Global Select Market under the symbol “PHAT”
since our initial public offering on October 25, 2019, which was completed at a price to the public of $19.00 per
share. Prior to our initial public offering, there was no public market for our common stock.
Holders of Common Stock
As of February 24, 2023, there were 41,973,271 shares of our common stock outstanding held by
approximately 59 holders of record of our common stock. This number was derived from our shareholder records
and does not include beneficial owners of our common stock whose shares are held in the name of various
dealers, clearing agencies, banks, brokers and other fiduciaries.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings,
if any, to finance the operation of our business and do not anticipate paying any cash dividends in the foreseeable
future. Any future determination related to dividend policy will be made at the discretion of our board of directors
after considering our financial condition, results of operations, capital requirements, business prospects and other
factors the board of directors deems relevant, and subject to the restrictions contained in any future financing
instruments. In addition, under the terms of our Loan Agreement, we are prohibited from paying any cash
dividends without the consent of the lenders.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12 of Part III of this annual report on Form 10-K for information about our equity compensation
plans which is incorporated by reference herein.
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Performance Graph
Not applicable.
Unregistered Sales of Equity Securities
Use of Proceeds
On October 24, 2019, our registration statement on Form S-1 (File No. 333-234020) was declared effective
by the SEC for our initial public offering. At the closing of the offering on October 29, 2019, we sold 10,997,630
shares of common stock, which included the exercise in full by the underwriters of their option to purchase
1,434,473 additional shares, at an initial public offering price of $19.00 per share and received gross proceeds of
$209.0 million, which resulted in net proceeds to us of approximately $191.5 million, after deducting underwriting
discounts and commissions of approximately $14.6 million and offering-related transaction costs of approximately
$2.9 million. None of the expenses associated with the initial public offering were paid to directors, officers,
persons owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates.
Goldman Sachs & Co. LLC, Jefferies LLC and Evercore Group L.L.C. acted as joint book-running managers for the
offering.
As of December 31, 2021 the net proceeds from our initial public offering and follow on offering had been
applied as follows: $151.7 million toward the clinical development of vonoprazan and $79.7 million towards
working capital and general corporate purposes. As of December 31, 2021, we had used all of the net proceeds
from our IPO of approximately $191.5 million.
Issuer Repurchases of Equity Securities
None.
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together
with our financial statements and related notes included elsewhere in this annual report. This discussion and
analysis contains forward-looking statements based upon our current beliefs, plans and expectations that involve
risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other
parts of this annual report.
Overview
We are a biopharmaceutical company focused on developing and commercializing novel treatments for
gastrointestinal, or GI, diseases. Our initial approved products, VOQUEZNA TRIPLE PAK and VONOPRAZAN DUAL
PAK, as well as our current product candidate, VOQUEZNA, contain vonoprazan, an oral small molecule PCAB.
PCABs are a novel class of medicines that block acid secretion in the stomach. Vonoprazan has shown rapid,
potent, and durable anti-secretory effects and has demonstrated clinical benefits over the current standard of care
as a single agent in the treatment of erosive gastroesophageal reflux disease, or erosive GERD, and in combination
with antibiotics for the treatment of H. pylori infection. 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, PHALCON-EE. In
April 2021, we reported positive topline data from PHALCON-HP, and in October 2021, we reported positive
topline data from PHALCON-EE. These data are supplemented by the extensive existing clinical data generated by
Takeda as part of their 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 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. Prior to approval, in May 2021, we received qualified
infectious disease product, or QIDP, designations for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, which,
upon approval of these products, added five years of regulatory exclusivity to the five years of new chemical entity,
or NCE, exclusivity for vonoprazan to which these products were, and future products we develop containing
vonoprazan will be, entitled.
In March 2022, we submitted an NDA for vonoprazan 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. If approved, we expect to market the product under the brand name VOQUEZNA. In August 2022,
we announced that, consistent with current FDA recommendations for all chemically synthesized drug compounds,
we previously initiated post-approval testing to determine whether nitrosamine impurities were present in our
initial commercial drug product for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK. These tests revealed trace
levels of a nitrosamine impurity, N-nitroso-vonoprazan, or NVP, that is not described within the FDA guidance
document entitled “Control of Nitrosamine Impurities in Human Drugs – Guidance for Industry.” In January 2023,
we announced that, although the FDA established an acceptable daily intake level (AI) for NVP at 96 ng/day, the
FDA advised us that it would not be acting on our erosive GERD NDA on or prior to the Prescription Drug User Fee
Act (PDUFA) target action date of January 11, 2023. Rather, the FDA requested additional stability data
demonstrating that the levels of NVP will remain at or below the AI throughout the proposed shelf life of the
product. In February 2023, we received complete response letters from the FDA relating to our erosive GERD NDA
and post approval supplement relating to our approved H. pylori NDAs, both of which address specifications and
controls for NVP. These letters formalize FDA’s prior request that we provide additional stability data to
demonstrate that levels of NVP will remain at or below the AI throughout the proposed shelf life of the product.
146
No additional deficiencies were cited by the FDA in either letter. We have scheduled a meeting with the FDA in
March 2023 to discuss our resubmission plan and timeline. If we are unable to demonstrate to the FDA that we will
be able to maintain NVP levels at or below the AI, launches of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK
will be further delayed and approval of our erosive GERD NDA will continue to be delayed, which could
substantially increase our costs and delay or put at risk our ability to generate revenue and adversely affect our
commercial prospects.
Also 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. We are
also in discussions with the FDA regarding the design of a Phase 3 trial to evaluate the novel dosing regimen of
vonoprazan as an as needed treatment for episodic heartburn relief in patients with non-erosive GERD, a dosing
regimen not approved in the U.S. for PPIs. This trial would constitute our fourth Phase 3 trial for vonoprazan. In
February 2022, we reported positive topline results from PHALCON-NERD-201, a Phase 2 proof-of-concept study
evaluating this novel dosing regimen.
We plan to independently commercialize VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK and, if approved,
VOQUEZNA, in the United States. We plan to seek commercial partnerships for vonoprazan in Europe and Canada,
expand development of vonoprazan into other indications, dosing regimens and alternative formulations and
packaging, and in-license or acquire 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 product candidate,
vonoprazan, meeting with regulatory authorities, conducting our Phase 3 clinical trials of vonoprazan, preparing
applications for regulatory approval for vonoprazan and preparing for a potential commercial launch. Our
operations to date have been funded primarily through the issuance of convertible promissory notes, commercial
bank debt, the proceeds from our initial public offering and our follow-on public offering. From our inception
through December 31, 2022, we have raised aggregate gross proceeds of $90.3 million from the issuance of
convertible promissory notes, $100.0 million of debt, net proceeds from our initial public offering of $191.5 million
from the sale of 10,997,630 shares of common stock, which included the exercise in full by the underwriters of
their option to purchase 1,434,473 additional shares at a public offering price of $19.00 per share, after deducting
underwriting discounts, commissions and offering costs, and net proceeds of $88.6 million from the sale of
2,250,000 shares of common stock at a public offering price of $39.48 per share after deducting underwriting
discounts and commissions, and an additional $0.2 million in offering costs. As of December 31, 2022, we had cash
and cash equivalents of $155.4 million. Based on our current operating plan, we believe that our existing cash and
cash equivalents together with the drawdown of the remaining $100 million under our Loan Agreement with
Hercules are sufficient to fund operations for at least the next twelve months and receipt of $175 million in
additional milestone payments under our Revenue Interest Financing Agreement, will be sufficient to fund our
operations through the end of 2024.
We have not initiated commercial launch of any products and have incurred net losses since our inception.
Our net losses for the years ended December 31, 2022 and 2021 were $197.7 million and $143.9 million,
respectively. As of December 31, 2022, we had an accumulated deficit of $727.1 million. Our net losses may
fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical
development activities, other research and development activities and pre-commercialization activities. We expect
our expenses and operating losses will increase as we continue to advance vonoprazan through clinical trials, seek
additional regulatory approvals for vonoprazan, expand our quality, regulatory, manufacturing and
commercialization capabilities, incur significant commercialization expenses for marketing, sales, manufacturing
and distribution if we obtain marketing approval for VOQUEZNA for erosive GERD in the U.S., protect our
intellectual property, expand our general and administrative support functions, including hiring additional
personnel, and incur additional costs associated with operating as a public company.
147
We have never generated any revenue and do not expect to generate any revenues from product sales
unless and until we obtain regulatory approval for VOQUEZNA, or approval of our resubmission for VOQUEZNA
TRIPLE PAK and VOQUEZNA DUAL PAK, in the U.S. Accordingly, until such time as we can generate significant
revenue from sales of products containing vonoprazan, if ever, 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 the ongoing hostilities in the Ukraine on 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 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 $25.0 million, 1,084,000 shares of our
common stock, the Takeda Warrant to purchase 7,588,000 shares of our common stock at an exercise price of
$0.00004613 per share, 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 $250.0 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.
148
Components of Results of Operations
Operating Expenses
Research and Development
To date, our research and development expenses have related to the development 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.
Research and development expenses include:
•
•
•
salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals
involved in research and development efforts;
external research and development expenses incurred under agreements with CROs, and consultants to
conduct and support our ongoing clinical trials of vonoprazan; and
costs related to the manufacturing of vonoprazan for our clinical trials.
We plan to increase 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.
Our future clinical development costs may vary significantly based on factors such as:
•
•
•
•
•
•
•
•
•
•
•
•
per patient trial costs;
the number of trials required for approval;
the number of sites included in the trials;
the countries in which the trials are conducted;
the length of time required to enroll eligible patients;
the number of patients that participate in the trials;
the number of doses evaluated in the trials;
the drop-out or discontinuation rates of patients;
potential additional safety monitoring requested by regulatory agencies;
the duration of patient participation in the trials and follow-up;
the phase of development of the product candidate; and
the efficacy and safety profile of the product candidate;
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General and Administrative
General and administrative expenses consist of salaries and employee-related costs, including stock-based
compensation, for personnel in 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 general and administrative expenses will increase in the future to
support our continued research and development activities, pre-commercial preparation activities for vonoprazan
and, if any future product candidate receives marketing approval, commercialization 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. The Company recalculates 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 financing expense.
Beginning on September 17, 2021, interest expense consists 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% (the
“Interest Rate”), (ii) payment-in-kind interest at a per annum rate of interest equal to 3.35%, and (iii) amortization
of the Hercules 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.
Prior to September 17, 2021, interest expense consisted of interest on our outstanding commercial bank
debt with SVB at a variable annual rate equal to the greater of (a) 7.25% and (b) Prime Rate (as reported by the
Wall Street Journal) plus 1.75% and amortization of the SVB Term Loan 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.
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Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
The following table summarizes our results of operations for the years ended December 31, 2022 and 2021
(in thousands):
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Interest income
Interest expense
Other expense
Total other income expense
Net loss
Years Ended
December 31,
2022
2021
Change
$ 71,441 $ 72,338 $
100,999
172,440 135,080
(172,440 ) (135,080 )
(897 )
62,742 $ 38,257
37,360
(37,360 )
2,132
(27,305 )
(110 )
(25,283 )
2,091
(20,517 )
1,946
(16,480 )
$ (197,723 ) $ (143,883 ) $ (53,840 )
41
(6,788 )
(2,056 )
(8,803 )
Research and Development Expenses. Research and development expenses were $71.4 million and $72.3
million for the years ended December 31, 2022 and 2021, respectively. The decrease of $0.9 million consisted of
consisted of a reduction of $3.2 million of expenses related to regulatory requirements and $0.4 million of
chemistry manufacturing and controls, or CMC, costs related to vonoprazan, partially offset by increases $2.7
million of personnel-related, consulting and other research expenses.
General and Administrative Expenses. General and administrative expenses were $101.0 million and $62.7
million for the years ended December 31, 2022 and 2021, respectively. The increase of $38.2 million was due to
increases of $21.0 million in professional services expenses for commercial, medical affairs and other services,
$15.7 million in personnel-related expenses, $1.7 million in legal and other expenses in 2022, partially offset by a
$0.2 million reduction in consulting fees.
Other Income (Expense). Other expense of $25.3 million for the year ended December 31, 2022 consisted of
$27.4 million of interest expense under the Hercules Loan and Revenue Interest Financing Agreements, partially
offset by $2.1 million of interest income on deposits. Other expense of $8.8 million for the year ended December
31, 2021 consisted of $6.8 million of interest expense and $2.0 million of charges related to early extinguishment
of debt.
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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 December 31, 2022, we had cash and cash
equivalents of $155.4 million.
Loan Agreement with Hercules
On September 17, 2021, (the “Closing Date”), we entered into a Loan and Security Agreement (the “Loan
Agreement”) with Hercules Capital, Inc., in its capacity as administrative agent and collateral agent and as a lender
(in such capacity, the “Agent” or “Hercules”) 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 $200.0 million (the
“Term Loan”) under multiple tranches. The tranches consist of (i) a first tranche consisting of term loans in an
aggregate principal amount of $100.0 million, all of which was funded on the Closing Date (the “First Advance”), (ii)
a second tranche consisting of up to an additional $50.0 million, which became available to us upon achievement
of the protocol-specified primary efficacy endpoints in our Phase 3 trial studying vonoprazan for the healing and
maintenance of healing of erosive GERD with acceptable safety data, such that the results support the submission
of a New Drug Application (“NDA”) or supplemental NDA without the need to conduct another Phase 3 study and
will be available, if specified conditions are met, through December 15, 2022, see amendment to later date below,
(iii) a third and fourth tranches consisting of an additional total $50.0 million, which became available to us in May
2022 upon the achievement of (a) FDA approval of our NDA for vonoprazan and amoxicillin, or its NDA for
vonoprazan, amoxicillin and clarithromycin, in each case for an indication relating to the treatment of H. pylori
with an approved indication on the claim that is generally consistent with that sought in our NDA submission; and
(b) filing of an NDA or supplemental NDA for vonoprazan for indications relating to the healing and maintenance of
healing of erosive GERD. The third and fourth tranches will remain available until September 30, 2023, and March
31, 2024, respectively. We intend to use the proceeds of the Term Loan advances for working capital and general
corporate purposes. In addition, approximately $54 million of the proceeds from the First Advance was used to
satisfy in full and retire our indebtedness under its previously outstanding credit facility with Silicon Valley Bank
(the “SVB Term Loan”).
On September 27, 2022, the Company 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
the Company has been moved until May 15, 2023, rather than December 15, 2022.
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The Term Loan will mature on October 1, 2026 (the “Maturity Date”). The Term Loan bears (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% (the “Interest Rate”) and (ii) payment-in-kind interest at a per annum rate of interest equal to
3.35%. We may make payments of interest only through October 1, 2024, which was extended to October 1, 2025,
upon the achievement of the Second Performance Milestone in May 2022 prior to September 30, 2024 and the
condition that no default or event of default exists, and which is further extendable to October 1, 2026, subject to
FDA approval of our NDA (or supplemental NDA) for vonoprazan for an indication relating to the healing and
maintenance of healing of erosive GERD with an approved indication on the label that is generally consistent with
that sought in our NDA submission (or supplemental NDA submission) (the “Third Performance Milestone”) on or
prior to September 30, 2025 and no default or event of default exists (the “interest only period”). After the
interest-only period, the principal balance and related interest will be required to be repaid in equal monthly
installments and continuing until the Maturity Date.
The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default,
and representations, warranties and covenants, including a financial covenant requiring us to maintain certain
levels of cash subject to a control agreement in favor of the Agent (minus accounts payable not paid within 120
days of invoice) (“Qualified Cash”), and commencing on May 15, 2023, trailing three-month net product revenue
from the sale of vonoprazan and products containing vonoprazan. The revenue covenant will be waived at any
time in which we maintain Qualified Cash equal to at least 60.0% (prior to the Third Performance Milestone), and
35% (following the Third Performance Milestone) of the total outstanding Term Loan principal amount, or our
market capitalization is at least $900.0 million.
Under the Second Loan Amendment, the commencement date for the covenant based on trailing three-
month net product revenue from the sale of vonoprazan and products containing vonoprazan was moved from
May 15, 2023, to November 15, 2023.
As collateral for the obligations, we granted to 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 (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 will be 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.
Revenue Interest Financing Agreement
On May 3, 2022, we entered into a Revenue Interest Financing Agreement (the “Revenue Interest Financing
Agreement”), with entities managed or advised by NovaQuest Capital Management (“NQ”), Sagard Holdings
Manager LP (“Sagard”) and Hercules Capital, Inc. (“Hercules” together with NQ and Sagard, the “Initial Investors”)
pursuant to which we can 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 can receive an additional
$160 million upon FDA approval of vonoprazan for treatment of erosive GERD on or before March 31, 2024. In
addition, we had the right to obtain a written commitment from a third party for up to (i) at any time prior to
December 31, 2022, $15,000,000 in additional funding upon FDA approval of vonoprazan for erosive GERD
(“Approval Additional Funding”), and (ii) at any time prior to June 30, 2024, $25,000,000 in additional funding for
achievement of a sales milestone (“Milestone Additional Funding”, and, together with the Approval Additional
Funding, the “Additional Investor Funding”).The Initial Investors had a right of first offer for any Additional Investor
Funding.
153
On October 31, 2022, we entered into a Joinder and Waiver Agreement with the Initial Investors and CO
Finance LVS XXXVII LLC (“the Additional Investor”), and Hercules Capital, Inc. in its capacity as administrative agent
and collateral agent for itself and the lenders under that certain Loan Agreement (the “Joinder Agreement”) in
respect of the Revenue Interest Financing Agreement. Under the terms of the Joinder Agreement, the Initial
Investors waived their rights of first offer regarding the Additional Investor Funding and the Additional Investor
joined the Revenue Interest Financing Agreement to extend commitments for the 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 subsequent to the payment of
the Approval Additional Funding, 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 if we receive FDA approval for vonoprazan for an indication relating to the treatment of heartburn
associated with non-erosive GERD. 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 is 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 the Company previously
paid pursuant to the agreement. Upon the occurrence of a change in control event taking place prior to the earlier
of April 1, 2024, or FDA approval of vonoprazan for erosive GERD, we are obligated to pay 200% of the Investment
Amount plus either 15% of the Investment Amount if occurrence prior to May 3, 2023, or plus 30% of the
Investment Amount if occurrence thereafter.
At-the-Market-Offering
On November 10, 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 $125.0 million through the Sales Agent, or the ATM Offering. Sales of our
common stock made pursuant to the Sales Agreement, if any, will be made under our shelf registration statement
on Form S-3 which was filed on November 10, 2020 and declared effective by the SEC on November 16, 2020. 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, 2022, we sold 2,414,897 shares of our common stock under the ATM Offering for net
proceeds of approximately $24.6 million after deducting $0.8 million of issuance costs. As of December 31, 2022,
we utilized $25.4 million of the available $125.0 million under the ATM Offering.
154
Underwritten Public Offering
On December 16, 2020, the Company completed an underwritten public offering, in which it sold 2,250,000
shares of its common stock at a price of $42.00 per share for total gross proceeds of $94.5 million. The net
purchase price after deducting underwriting discounts and commissions was $39.48 per share, which generated
net proceeds of $88.8 million. We incurred an additional $0.2 million of offering expenses in connection with the
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 $100 million under our Loan Agreement with Hercules are sufficient to fund
operations for at least the next twelve months and receipt of $175 million in additional milestone payments under
our Revenue Interest Financing Agreement, will be sufficient to fund our operations through the end of 2024. We
expect such amounts will allow us to complete our ongoing Phase 3 clinical trial studying vonoprazan for non-
erosive GERD (daily dosing), and , if our post-complete response letter resubmissions concerning NVP are
approved by FDA, launch vonoprazan for H. pylori and erosive GERD. 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 wrong, and we could deplete our capital resources sooner than we expect.
Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and
expenses in these trials is uncertain.
155
Our future capital requirements will depend on many factors, including:
•
•
•
•
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 if any product candidate is approved;
the costs, timing and outcome of regulatory review of vonoprazan or 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, including
additional executive officers and clinical development personnel;
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;
• 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 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.
156
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 $100 million under our
Loan Agreement with Hercules are sufficient to fund operations for at least the next twelve months and receipt of
$175 million in additional milestone payments under our Revenue Interest Financing Agreement, will be sufficient
to fund our operations through the end of 2024.
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):
Operating activities
Investing activities
Financing activities
Net decrease in cash
Operating Activities
Years Ended
December 31,
2022
2021
$ Change
$
$
(146,530 ) $
(1,041 )
120,042
(27,529 ) $
(148,457 ) $
(328 )
44,708
(104,077 ) $
1,927
(713 )
75,334
76,548
Net cash used in operating activities was approximately $146.5 million and $148.5 million for the years
ended December 31, 2022 and 2021, respectively. The net cash used in operating activities for the year ended
December 31, 2022 was due to approximately $152.0 million spent on ongoing research and development and
general and administrative activities offset by a $5.5 million change in operating assets and liabilities. The net
change in operating assets and liabilities primarily related to a $7.7 million increase in accounts payable and
accrued expenses in support of the growth in our operating activities, partially offset by a $2.2 million increase in
prepaid assets and other assets. The net cash used in operating activities for the year ended December 31, 2021
was due to approximately $121.1 million spent on ongoing research and development and general and
administrative activities and a $27.4 million net change in operating assets and liabilities. The net change in
operating assets and liabilities primarily related to a $28.2 million decrease in accounts payable and accrued
expenses (including clinical trial expenses) in support of the growth in our operating activities, partially offset by a
$0.8 million decrease in prepaid and other assets.
Investing Activities
Net cash used in investing activities for the years ended December 31, 2022 and 2021 was primarily due to
the cash we paid for acquiring property, plant and equipment.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2022 was $120 million, was due to
the net proceeds from the revenue interest financing liability and issuance of common stock under the ATM
Offering. Net cash provided by financing activities for the year ended December 31, 2021 was $44.7 million, due to
$96.9 million of net proceeds from the loan agreement with Hercules and $1.9 million of proceeds related to stock
option exercises partially offset by the $54.1 million repayment of the SVB Term Loan.
157
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of December 31, 2022 (in thousands):
Payments Due by Period
1-3
Years
Less than
1 Year
3-5
Years
More than
5 Years
Total
Total debt, including interest
and final payment fee (1)
Minimum operating lease
payments
Total
$ 124,471 $
— $ 29,707 $ 94,764 $
2,000
$
$ 126,471 $
734
734 $ 30,973 $ 94,764 $
1,266
—
—
—
—
(1) Our outstanding long-term debt bears interest at a variable rate. The interest amounts included herein are based on the interest rate in effect as of
December 31, 2022.
In addition to the contractual obligations summarized above, on May 5, 2020, we entered into a Commercial
Supply Agreement with Takeda, pursuant to which Takeda will supply commercial quantities of vonoprazan bulk
drug product. We incurred $0.7 million and $1.8 million of expenses related to the Commercial Supply Agreement
during the years ended December 31, 2022 and 2021, respectively. We have no remaining minimum purchase
obligation related to this agreement.
Additionally, on December 30, 2020, we entered into a Supply and Packaging Services Agreement with
Sandoz, pursuant to which Sandoz has agreed to supply commercial quantities of amoxicillin capsules and
clarithromycin tablets, to package these antibiotics with vonoprazan, in finished convenience packs, and to supply
us with these convenience packs. The supply agreement commits the Company to a minimum purchase obligation
of approximately $3.8 million during the first 24-month period following the launch of the final product. As of
December 31, 2022, we are unable to estimate the timing of future expenses and, therefore, any related payments
are not included in the table above. We have not incurred any expenses under the agreement during the year
ended December 31, 2022.
Additionally, on May 3, 2022, we entered into a Revenue Interest Financing Agreement (the “Revenue
Interest Financing Agreement”), with entities managed or advised by NovaQuest Capital Management (“NQ”),
Sagard Holdings Manager LP (“Sagard”) and Hercules Capital, Inc. (“Hercules” together with NQ and Sagard, the
“Initial Investors”) and received $100 million at the initial closing (the "Investment Amount"). Under the Revenue
Interest Financing Agreement, the Initial Investors are entitled to receive a 10% royalty on net sales of products
containing vonoprazan. The investors’ right to receive royalties on net sales will terminate when the investors have
aggregate payments equal to 200% of the Investment Amount. We have not made any payments under the
Revenue Interest Financing Agreement during the year ended December 31, 2022.
We enter into contracts in the normal course of business for our contract research services, contract
manufacturing services, professional services and other services and products for operating purposes. These
contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts and not
included in the table above.
158
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 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.
While our significant accounting policies are more fully described in Note 1 to our financial statements, we
believe that the following accounting policies are the most critical for fully understanding and evaluating our
financial condition and results of operations.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued
expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders,
communicating with our personnel to identify services that have been performed on our behalf and estimating the
level of service performed and the associated cost incurred for the service when we have not yet been invoiced or
otherwise notified of the actual cost. We make estimates of our accrued expenses as of each balance sheet date
based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates
with the service providers and make adjustments, if necessary. The significant estimates in our accrued research
and development expenses include the costs incurred for services performed by our vendors in connection with
research and development activities for which we have not yet been invoiced.
Our research and development activities include estimates of the services received and efforts expended
pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The
financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in
uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of
services provided and result in a prepayment of the research and development expense. In accruing service fees,
we estimate the time period over which services will be performed and the level of effort to be expended in each
period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust
the accrual or prepaid expense accordingly. Advance payments for goods and services that will be used in future
research and development activities are expensed when the activity has been performed or when the goods have
been received rather than when the payment is made.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our
estimates of the status and timing of services performed differ from the actual status and timing of services
performed, it could result in us reporting amounts that are too high or too low in any particular period. To date,
there have been no material differences between our estimates of such expenses and the amounts actually
incurred.
Stock-Based Compensation Expense
Stock-based compensation expense represents the cost of the grant date fair value of equity awards
recognized over the requisite service period of the awards (generally the vesting period) on a straight-line basis
with forfeitures recognized as they occur. We use the Black-Scholes valuation model to determine the fair value of
our stock awards. Through December 31, 2022, our stock-based compensation expense consisted of recognized
fair value related to our issuance of restricted stock awards, for which the fair value is determined based on the
fair value of the underlying common stock, stock options, and ESPP awards.
159
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 $700.0 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 $1.0 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 Item 15 of this annual 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our cash and cash equivalents consist of cash in readily available checking accounts and money market
funds. As a result, the fair value of our portfolio is relatively insensitive to interest rate changes. Our long-term
debt bears interest at a variable rate. A 10% increase or decrease in the interest rate on our long-term debt would
not have a material effect on our financial position, results of operations or cash flows.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and research and development contract costs.
We do not believe inflation has had a material effect on our results of operations during the periods presented.
Item 8.
Financial Statements and Supplementary Data
The financial statements required pursuant to this item are incorporated by reference herein from the
applicable information included in Item 15 of this annual report and are presented beginning on page F-1.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
160
Item 9A.
Controls and Procedures
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 annual 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.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting
is a process designed under the supervision and with the participation of our management to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States of America.
Management conducted an assessment of the effectiveness of our internal control over financial reporting based
on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control—Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as
of December 31, 2022, our internal control over financial reporting was effective.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our registered public accounting firm due to an
exemption provided by the JOBS Act for “emerging growth companies.”
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the fourth quarter ended
December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspection
Not applicable.
161
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item will be contained in our definitive proxy statement to be filed with the
SEC in connection with our 2023 Annual Meeting of Stockholders, or the Definitive Proxy Statement, which is
expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2022, under the
headings “Election of Directors,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting
Compliance,” and is incorporated herein by reference.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that applies to our officers, directors and employees, which
is available on our website at www.phathompharma.com. The Code of Conduct and Ethics contains general
guidelines for conducting the business of our company consistent with the highest standards of business ethics and
is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002
and Item 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to
our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar functions and (2) the nature of any waiver,
including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers,
the name of such person who is granted the waiver and the date of the waiver on our website in the future.
Item 11.
Executive Compensation
The information required by this item will be set forth in the section headed “Executive Compensation and
Other Information” in our Definitive Proxy Statement and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in the section headed “Security Ownership of Certain
Beneficial Owners and Management” in our Definitive Proxy Statement and is incorporated herein by reference.
The information required by Item 201(d) of Regulation S-K will be set forth in the section headed “Executive
Compensation” in our Definitive Proxy Statement and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in the section headed “Certain Relationships and
Related Person Transactions,” “Board Independence” and “Committees of the Board of Directors” in our Definitive
Proxy Statement and is incorporated herein by reference.
Item 14.
Principal Accounting Fees and Services
The information required by this item will be set forth in the section headed “Independent Registered Public
Accountants’ Fees” in our Definitive Proxy Statement and is incorporated herein by reference.
162
Item 15. Exhibits, Financial Statement Schedules
1.
All financial statements.
PART IV
The financial statements of Phathom Pharmaceuticals, Inc., together with the report thereon of Ernst &
Young LLP, an independent registered public accounting firm, are included in this annual report on Form 10-K
beginning on page F-1.
2.
Financial statement schedules.
All schedules have been omitted because the information required to be set forth therein is not applicable or
is shown in the financial statements or notes thereto.
3.
Exhibits
A list of exhibits is set forth on the Exhibit Index immediately preceding the signature page of this annual
report on Form 10-K and is incorporated herein by reference.
Item 16. Form 10-K Summary
None.
163
Phathom Pharmaceuticals, Inc.
Index to Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Balance Sheets
Statements of Operations and Comprehensive Loss
Statements of Stockholders’ Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Phathom Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Phathom Pharmaceuticals, Inc. (the Company) as of
December 31, 2022 and 2021, the related statements of operations and comprehensive loss, stockholders' equity
(deficit) and cash flows for each of the two years in the period ended December 31, 2022, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with
U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019.
Iselin, New Jersey
February 28, 2023
F-2
PHATHOM PHARMACEUTICALS, INC.
Balance Sheets
(in thousands, except share and par value amounts)
Assets
Current assets:
Cash and cash equivalents
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Restricted cash
Other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable (including related party amounts of $35 and $1,343,
respectively)
Accrued clinical trial expenses
Accrued expenses (including related party amounts of $2,499 and $2,330,
respectively)
Accrued interest
Operating lease liabilities, current
Total current liabilities
Long-term debt, net of discount
Revenue interest financing liability
Operating lease liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 4)
Stockholders’ equity:
December 31,
2022
December 31,
2021
$
$
$
155,385 $
5,127
160,512
1,207
2,287
505
299
164,810 $
9,997 $
—
14,678
854
708
26,237
95,264
109,525
1,098
7,500
239,624
183,259
3,267
186,526
650
1,914
160
181
189,431
5,150
1,402
11,405
477
487
18,921
89,671
—
1,183
7,500
117,275
Preferred stock, $0.0001 par value; authorized shares — 40,000,000 at
December 31, 2022 and 2021; no shares issued and outstanding at
December 31, 2022 and 2021
Common stock, $0.0001 par value; authorized shares — 400,000,000 at
December 31, 2022 and 2021; issued shares — 41,723,308 and 31,656,035
at December 31, 2022 and 2021, respectively; outstanding shares —
41,468,871 and 30,511,226 at December 31, 2022 and 2021, respectively
Treasury stock — 19 and 1 shares at December 31, 2022 and 2021,
respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ (deficit) equity
Total liabilities and stockholders’ equity
See accompanying notes.
—
3
—
3
—
652,276
(727,093 )
(74,814 )
164,810 $
—
601,523
(529,370 )
72,156
189,431
$
F-3
PHATHOM PHARMACEUTICALS, INC.
Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Operating expenses:
Research and development (includes related party amounts of $2,123 and
$4,933, respectively)
General and administrative (includes related party amounts of $0 and $18,
respectively)
Total operating expenses
Loss from operations
Other income (expense):
Years Ended
December 31,
2022
2021
$
71,441 $
72,338
100,999
172,440
62,742
135,080
(172,440 )
(135,080 )
Interest income
Interest expense
Other expense
Total other expense
Net loss and comprehensive loss
Net loss per share, basic and diluted
Weighted-average shares of common stock outstanding, basic and diluted
2,132
(27,305 )
(110 )
(25,283 )
(197,723 ) $
(5.05 ) $
39,118,215
41
(6,788 )
(2,056 )
(8,803 )
(143,883 )
(3.89 )
37,002,959
$
$
See accompanying notes
F-4
PHATHOM PHARMACEUTICALS, INC.
Statements of Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
Common Stock
Shares
28,516,010
Amount
Balance at December 31, 2020
Issuance of common stock
from exercise of stock options
Cashless exercise of common
stock warrants
401(k) matching contribution
Vesting of restricted shares
Stock-based compensation
ESPP shares issued
Issuance of common stock
warrants
Net loss
Balance at December 31, 2021
Cashless exercise of common
stock warrants
401(k) matching contribution
Vesting of restricted shares
and restricted stock units
Issuance of common stock
under ATM facility
Stock-based compensation
ESPP shares issued
Net loss
Balance at December 31, 2022
107,583
228,696
26,750
1,601,950
—
30,237
—
—
30,511,226 $
7,359,285
101,540
992,825
2,414,897
-
89,098
—
41,468,871 $
Treasury
Stock
Shares
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
—
579,755
(385,487 )
194,271
—
1,944
1
—
—
—
—
—
903
—
16,812
819
—
—
—
—
—
—
1,944
—
903
—
16,812
819
—
—
1 $ 601,523 $
1,290
—
—
(143,883 )
(529,370 ) $
1,290
(143,883 )
72,156
18
—
—
—
1,116
—
—
—
—
—
1,116
—
—
—
—
—
19 $ 652,276 $
24,595
24,133
909
—
—
—
—
(197,723 )
(727,093 ) $
24,595
24,133
909
(197,723 )
(74,814 )
3
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
3
See accompanying notes
F-5
PHATHOM PHARMACEUTICALS, INC.
Statements of Cash Flows
(in thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Stock-based compensation
Issuance of PIK interest debt
Accrued interest on revenue interest financing liability
Amortization of debt discount
Other
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (includes changes in related party amounts
of $0 and $82, respectively)
Accounts payable and accrued expenses (includes changes in related party amounts of
$1,139 and $2,766, respectively)
Accrued clinical trial expenses
Accrued interest
Operating right-of-use assets and lease liabilities
Other long-term assets
Net cash used in operating activities
Cash flows from investing activities
Cash paid for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of common stock from exercise of stock options
Repayment of long-term debt
Net proceeds from issuance of long-term debt
Net proceeds from revenue interest financing transaction
Net proceeds from issuance of common stock under ATM facility
Net cash provided by financing activities
Net decrease in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash – beginning of period
Cash and cash equivalents and restricted cash – end of period
Supplemental disclosure of cash flow information
Interest paid
Supplemental disclosure of noncash investing and financing activities
Issuance of common stock warrants in connection with long-term debt
Property and equipment purchases included in accounts payable and accrued expenses
Final interest payment fee
Settlement of ESPP liability in common stock
Settlement of 401(k) liability in common stock
Operating lease liabilities arising from obtaining right-of-use assets
See accompanying notes.
Years Ended
December 31,
2022
2021
$
(197,723 ) $
(143,883 )
620
24,133
3,484
14,079
2,110
1,329
521
16,812
990
—
3,595
823
(1,860 )
605
8,679
(1,402 )
377
(238 )
(118 )
(146,530 )
(9,791 )
(18,595 )
165
98
203
(148,457 )
(1,041 )
(1,041 )
(328 )
(328 )
—
—
—
95,446
24,596
120,042
(27,529 )
183,419
155,890 $
7,033 $
— $
138 $
— $
909 $
1,116 $
554 $
1,944
(54,125 )
96,889
—
—
44,708
(104,077 )
287,496
183,419
4,069
1,290
2
7,500
819
903
—
$
$
$
$
$
$
$
$
F-6
PHATHOM PHARMACEUTICALS, INC.
Notes to Financial Statements
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Organization and Basis of Presentation
Phathom Pharmaceuticals, Inc., or the Company or Phathom, was incorporated in the state of Delaware in
January 2018. The Company is a biopharmaceutical company focused on developing and commercializing novel
treatments for gastrointestinal diseases. The Company’s financial statements are prepared in accordance with U.S.
generally accepted accounting principles, or GAAP.
Liquidity and Capital Resources
From inception to December 31, 2022, the Company has devoted substantially all of its efforts to organizing
and staffing the Company, business planning, raising capital, in-licensing its initial product candidate, vonoprazan,
meeting with regulatory authorities, managing the clinical trials of vonoprazan, preparing for commercialization of
its initial products containing vonoprazan, and providing other general and administrative support for these
operations. The Company has a limited operating history, has never generated any revenue, and the sales and
income potential of its business is unproven. The Company has incurred net losses and negative cash flows from
operating activities since its inception and expects to continue to incur additional net losses in the future as it
continues to develop and prepares for commercialization of vonoprazan. From inception to December 31, 2022,
the Company has funded its operations through the issuance of convertible promissory notes, commercial bank
debt, revenue interest financing debt, the sale of 10,997,630 shares of common stock for net proceeds of
approximately $191.5 million in its 2019 IPO, the sale of 2,250,000 shares of common stock for net proceeds of
approximately $88.6 million in its December 2020 follow-on public offering, and the sale of 2,414,897 shares of
common stock for net proceeds of approximately $24.6 million in its September 2022 issuance of common stock
under the ATM Offering.
The accompanying financial statements have been prepared assuming the Company will continue as a going
concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business, and do not include any adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classification of liabilities. Management is required to perform a two-step
analysis over the Company’s ability to continue as a going concern. Management must first evaluate whether there
are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern
(Step 1). If management concludes that substantial doubt is raised, management is also required to consider
whether its plans alleviate that doubt (Step 2).
Management believes that it has sufficient working capital on hand to fund operations through at least the
next twelve months from the date these financial statements were available to be issued. There can be no
assurance that the Company will be successful in acquiring additional funding, if needed, that the Company’s
projections of its future working capital needs will prove accurate, or that any additional funding would be
sufficient to continue operations in future years.
F-7
Use of Estimates
The preparation of the Company’s financial statements requires it to make estimates and assumptions that
impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and
liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the
Company’s financial statements relate to accruals for research and development expenses, and the valuation of
warrant liabilities and various other equity instruments. Although these estimates are based on the Company’s
knowledge of current events and actions it may undertake in the future, actual results could differ materially from
those estimates and assumptions.
Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and
expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-
recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use
in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a
three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets.
Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to
develop its own assumptions.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, are
classified within the Level 1 designation discussed above, while prepaid and other current assets, accounts
payable, and accrued liabilities, approximate fair value due to their short maturities.
The Company has no financial assets measured at fair value on a recurring basis. None of the Company’s
non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels
have occurred during the periods presented.
As of December 31, 2022, the estimated fair value of the Company’s long-term debt approximated the
carrying amount given its floating interest rate basis. The fair value of the Company’s long-term debt was
estimated for disclosure purposes only and was determined based on quoted market data for valuation, and thus
categorized as Level 2 in the fair value hierarchy.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when
purchased to be cash equivalents. Cash and cash equivalents include cash in readily available checking accounts
and money market funds.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist
primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions
in excess of federally insured limits. The Company has not experienced any losses in such accounts and
management believes that the Company is not exposed to significant credit risk due to the financial position of the
depository institutions in which those deposits are held.
F-8
Property, Plant, and Equipment, Net
Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation expense is
recognized using the straight-line method over the useful life of the asset. Computer equipment and related
software are depreciated over two to three years. Furniture and fixtures are depreciated over three years.
Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the
related assets. Expenditures for repairs and maintenance of assets are charged to expense as incurred. Upon
retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the
accounts and any resulting gain or loss is included in loss from operations.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including property, plant and equipment, for impairment whenever
events or changes in business circumstances indicate that the carrying amount of the assets may not be fully
recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to
result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment
loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair
value. No impairment losses have been recorded through December 31, 2022.
F-9
Leases
At the inception of a contractual arrangement, the Company determines whether the contract contains a
lease by assessing whether there is an identified asset and whether the contract conveys the right to control the
use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the
Company records the associated lease liability and corresponding right-of-use asset upon commencement of the
lease using the implicit rate or a discount rate based on a credit-adjusted secured borrowing rate commensurate
with the term of the lease. The Company additionally evaluates leases at their inception to determine if they are to
be accounted for as an operating lease or a finance lease. A lease is accounted for as a finance lease if it meets one
of the following five criteria: the lease has a purchase option that is reasonably certain of being exercised, the
present value of the future cash flows is substantially all of the fair market value of the underlying asset, the lease
term is for a significant portion of the remaining economic life of the underlying asset, the title to the underlying
asset transfers at the end of the lease term, or if the underlying asset is of such a specialized nature that it is
expected to have no alternative uses to the lessor at the end of the term. Leases that do not meet the finance
lease criteria are accounted for as an operating lease. Operating lease assets represent a right to use an underlying
asset for the lease term and operating lease liabilities represent an obligation to make lease payments arising from
the lease. Operating lease liabilities with a term greater than one year and their corresponding right-of-use assets
are recognized on the balance sheet at the commencement date of the lease based on the present value of lease
payments over the expected lease term. Certain adjustments to the right-of-use asset may be required for items
such as initial direct costs paid or incentives received. As the Company’s leases do not typically provide an implicit
rate, the Company utilizes the appropriate incremental borrowing rate, determined as the rate of interest that the
Company would have to pay to borrow on a collateralized basis over a similar term and in a similar economic
environment. Lease cost is recognized on a straight-line basis over the lease term and variable lease payments are
recognized as operating expenses in the period in which the obligation for those payments is incurred. Variable
lease payments primarily include common area maintenance, utilities, real estate taxes, insurance, and other
operating costs that are passed on from the lessor in proportion to the space leased by the Company. The
Company has elected the practical expedient to not separate between lease and non-lease components.
Revenue Interest Financing Liability
The Company 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 Capital, Inc., or Hercules, together with NQ and Sagard, the Initial Investors,
in which the Company received funds in return for royalties on net sales of products containing vonoprazan. The
net proceeds received under the transaction were recognized as short-term and long-term liabilities with interest
expense based on an imputed effective rate derived from the expected future payments. The Company
recalculates 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 financing
expense.
F-10
Research and Development Expenses and Accruals
All research and development costs are expensed in the period incurred and consist primarily of salaries,
payroll taxes, employee benefits, stock-based compensation charges for those individuals involved in research and
development efforts, external research and development costs incurred under agreements with contract research
organizations and consultants to conduct and support the Company’s ongoing clinical trials of vonoprazan, and
costs related to manufacturing vonoprazan for clinical trials.
The Company has entered into various research and development contracts with clinical research
organizations, clinical manufacturing organizations and other companies. Payments for these activities are based
on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments
made in advance of or after performance are reflected in the accompanying balance sheets as prepaid expenses or
accrued liabilities, respectively. The Company records accruals for estimated costs incurred for ongoing research
and development activities. When evaluating the adequacy of the accrued liabilities, the Company analyzes
progress of the services, including the phase or completion of events, invoices received and contracted costs.
Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of
any reporting period. Actual results could differ from the Company’s estimates.
In-Process Research and Development
The Company evaluates whether acquired intangible assets are a business under applicable accounting
standards. Additionally, the Company evaluates whether the acquired assets have a future alternative use.
Intangible assets that do not have future alternative use are considered acquired in-process research and
development. When the acquired in-process research and development assets are not part of a business
combination, the value of the consideration paid is expensed on the acquisition date. Future costs to develop
these assets are recorded to research and development expense as they are incurred.
General and Administrative Expenses
General and administrative expenses consist of salaries, stock-based compensation, facilities and third-party
expenses. General and administrative expenses are associated with the activities of the executive, finance,
accounting, information technology, legal, medical affairs and human resource functions.
Stock-Based Compensation
Stock-based compensation expense represents the cost of the grant date fair value of equity awards
recognized over the requisite service period of the awards (generally the vesting period) on a straight-line basis
with forfeitures recognized as they occur.
The Company also maintains an employee stock purchase program, or ESPP, under which it may issue
shares. The Company estimates the fair value of stock options and shares that will be issued under the ESPP using
the Black-Scholes valuation model, which requires the use of estimates. The Company recognizes stock-based
compensation cost for shares that it will issue under the ESPP on a straight-line basis over the requisite service
period of the award.
F-11
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in
the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the
differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the statement of operations in the period that includes the enactment date.
The Company recognizes net deferred tax assets to the extent that the Company believes these assets are
more likely than not to be realized. In making such a determination, management considers all available positive
and negative evidence, including future reversals of existing taxable temporary differences, projected future
taxable income, tax-planning strategies, and results of recent operations. If management determines that the
Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount,
management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the
provision for income taxes.
The Company records uncertain tax positions on the basis of a two-step process whereby (i) management
determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical
merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold,
management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon
ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to
unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the
related tax liability.
Beginning in 2022, the Tax Cuts and Jobs Act, or TCJA, eliminates the option to deduct research and
development expenditures currently and requires taxpayers to amortize domestic and foreign research and
development expenditures over 5 years and 15 years, respectively. The requirement did not impact cash from
operations in the current period.
F-12
Comprehensive Loss
Comprehensive loss is defined as a change in equity during a period from transactions and other events and
circumstances from non-owner sources. The Company’s comprehensive loss was the same as its reported net loss
for all periods presented.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker in making decisions on how to
allocate resources and assess performance. The Company views its operations and manages its business as one
operating segment.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common
shares outstanding for the period, without consideration for potentially dilutive securities. The Company included
7,588,000 shares of common stock under its warrant (the “Takeda Warrant”) issued to Takeda Pharmaceutical
Company Limited (“Takeda”) in connection with a May 2019 license agreement (see Note 4) in the calculation of
basic weighted-average common shares outstanding from the time it became exercisable at the Company’s IPO
until its exercise because the Takeda Warrant was exercisable for little consideration. As of December 31, 2022, all
Takeda Warrants has been exercised and no Takeda Warrants remain exercisable. For the years ended December
31, 2022 and December 31, 2021, the Company has excluded weighted-average unvested shares of 686,703 and
1,939,252, respectively, from the weighted-average number of common shares outstanding. Diluted net loss per
share is computed by dividing the net loss by the weighted-average number of common shares and dilutive
common stock equivalents outstanding for the period determined using the treasury-stock and if-converted
methods. Dilutive common stock equivalents are comprised of unvested common stock, options and warrants. For
the periods presented, there is no difference in the number of shares used to calculate basic and diluted shares
outstanding as inclusion of the potentially dilutive securities (warrants, stock options, and common shares subject
to repurchase) would be antidilutive.
Recently Adopted Accounting Standards
There were no recently adopted accounting standards which would have a material impact on the
Company's financial statements.
Recently Issued Accounting Pronouncements
The Company assesses the adoption impacts of recently issued accounting standards by the Financial
Accounting Standards Board or other standard setting bodies on the Company's financial statements as well as
material updates to previous assessments. There were no new material accounting standards issued or adopted in
year of 2022 that impacted the Company.
F-13
2. Balance Sheet Details
Property, Plant and Equipment, net
Property, plant and equipment, net, consist of the following (in thousands):
December 31,
2022
2021
Computer equipment and software
Furniture and fixtures
Leasehold improvements
Construction in process
Total property, plant and equipment, gross
Less: accumulated depreciation
Total property, plant and equipment, net
$
$
1,078 $
1,086
115
399
2,678
(1,471 )
1,207 $
646
780
76
—
1,502
(852 )
650
Depreciation expense for the years ended December 31, 2022 and 2021 was approximately $0.6 million and
$0.5 million, respectively. No property, plant or equipment was disposed of during the years ended December 31,
2022 and 2021.
Accrued Expenses
Accrued expenses consist of the following (in thousands):
Accrued research and development expenses
Accrued compensation expenses
Accrued professional & consulting
expenses
Accrued other
Total accrued expenses
$
$
December 31,
2022
2021
3,080 $
8,447
3,000
151
14,678 $
3,165
6,344
1,855
41
11,405
F-14
3. Related Party Transactions
Frazier is a principal stockholder of the Company and is a principal stockholder in PCI Pharma Services, or
PCI. In the third quarter of 2019, the Company engaged PCI for clinical manufacturing services. As of December 31,
2022 and 2021, the Company had $1.1 million and $1.7 million, respectively, in outstanding accounts payable and
accrued expenses related to these manufacturing services. For the years ended December 31, 2022 and 2021, the
Company incurred $0.7 million and $3.2 million, respectively, of expenses related to services performed by PCI.
Takeda became a common stockholder of the Company in connection with the May 2019 license agreement
(see Note 4). In conjunction with this license, Takeda provides proprietary supplies for the Company’s ongoing
clinical development of vonoprazan in addition to the exclusive license for the commercialization of vonoprazan in
the United States, Canada and Europe. On May 5, 2020, the Company entered into a Commercial Supply
Agreement, or the Commercial Supply Agreement, with Takeda, pursuant to which Takeda agreed to supply
commercial quantities of vonoprazan bulk drug product or drug substance. Pursuant to the Commercial Supply
Agreement, Takeda agreed to supply the Company with, and the Company agreed to purchase from Takeda,
certain quantities of vonoprazan bulk drug product according to approved specifications at a fixed price per batch
of bulk drug product in order to commercialize vonoprazan in accordance with the Takeda License. Unless
terminated earlier, the term of the Commercial Supply Agreement extends for a period of two years from the date
the Company places an order for bulk drug product or drug substance for the first commercial launch of
vonoprazan in any jurisdiction in the licensed territory, provided that this two-year period will expire no later than
December 31, 2023. The Commercial Supply Agreement will terminate immediately upon the termination of the
Takeda License in accordance with its terms. In connection with the Takeda License, the Company entered into a
temporary services agreement, or the Temporary Services Agreement, with Takeda on November 24, 2020.
Pursuant to the Temporary Services Agreement, Takeda agreed to provide or procure the provision of services
related to the ongoing clinical development of vonoprazan. The Temporary Services Agreement will terminate
immediately upon termination of the Takeda License in accordance with its terms. As of December 31, 2022 and
December 31, 2021, the Company had $1.4 million and $0.9 million, respectively, in outstanding accounts payable
and accrued expenses related to these agreements. For the years ended December 31, 2022 and 2021, the
Company incurred $1.4 million and $1.8 million, respectively, of expenses related to these agreements. The
Company has no remaining minimum purchase obligation related to these agreements.
F-15
4. Commitments and Contingencies
License Agreement
On May 7, 2019, the Company entered into a license agreement with Takeda pursuant to which it was
granted an exclusive license to commercialize vonoprazan fumarate in the United States, Canada and Europe, or,
the Takeda License. The Company also has the right to sublicense its rights under the agreement, subject to certain
conditions. The agreement will remain in effect, on a country-by-country and product-by-product basis, until the
later of (i) the expiration of the last to expire valid patent claim covering vonoprazan fumarate alone or in
combination with at least one other therapeutically active ingredient, (ii) the expiration of the applicable
regulatory exclusivity and (iii) 15 years from the date of first commercial sale, unless earlier terminated. The
Company may terminate the Takeda License upon six months’ written notice. The Company and Takeda may
terminate the Takeda License in the case of the other party’s insolvency or material uncured breach. Takeda may
terminate the Takeda License if the Company challenges, or assists in challenging, licensed patents.
In consideration of the Takeda License, the Company (i) paid Takeda $25.0 million in cash, (ii) issued Takeda
1,084,000 shares of its common stock at a fair value of $5.9 million, (iii) issued the Takeda Warrant to purchase
7,588,000 shares of its common stock at an exercise price of $0.00004613 per share at an initial fair value of $47.9
million, and (iv) issued a right to receive an additional common stock warrant, or, the Takeda Warrant Right,
should Takeda’s fully-diluted ownership of the Company represent less than a certain specified percentage of the
fully-diluted capitalization, including shares issuable upon conversion of then outstanding convertible promissory
notes, calculated immediately before the closing of the Company’s IPO, with a nominal initial fair value due to the
low probability of issuance. The Takeda Warrant Right expired without effect since no fair value had been allocated
to it upon completion of the IPO, and no additional warrant was issued. In addition, the Company is obligated to
pay Takeda up to an aggregate of $250.0 million in sales milestones upon the achievement of specified levels of
product sales, and a low double-digit royalty rate on aggregate net sales of licensed products, subject to certain
adjustments. The Takeda Warrant had an exercise price of $0.00004613 per share, and was to expire on May 7,
2029 and became exercisable upon the consummation of the IPO. As of December 31, 2022 all Takeda Warrants
have been exercised.
Purchase Commitments
In December 2020, the Company entered into a supply agreement with Sandoz pursuant to which Sandoz
will supply commercial quantities of amoxicillin capsules and clarithromycin tablets, package these antibiotics with
vonoprazan, and provide in finished convenience packs. The supply agreement commits the Company to a
minimum purchase obligation of approximately $3.8 million in the first 24-month period following the launch of
the final product. The Company has not incurred any expenses under the agreement during the years ended
December 31, 2022 and 2021.
Contingencies
In the event the Company becomes subject to claims or suits arising in the ordinary course of business, the
Company would accrue a liability for such matters when it is probable that future expenditures will be made and
such expenditures can be reasonably estimated.
5. Lease Commitments
As of December 31, 2022, the Company had operating leases for office space in both Buffalo Grove, Illinois
and Florham Park, New Jersey, with weighted average remaining lease terms of 2.3 years and 2.7 years,
respectively. All operating leases contain an option to extend the term for one additional five-year period, which
was not considered in the determination of the right-of-use asset or lease liability as the Company did not consider
it reasonably certain that it would exercise such options.
F-16
The total rent expense for the years ended December 31, 2022 and 2021 was approximately $1.0 million and
$0.7 million, respectively.
The following table summarizes supplemental balance sheet information related to the operating leases as
of December 31, 2022:
Assets:
Operating lease right-of-use assets
Total right-of-use assets
$
2,287 $
2,287
1,914
1,914
December 31,
2022
2021
Liabilities:
Operating lease liabilities, current
Operating lease liabilities, non-current
Total operating lease liabilities
708
1,098
1,806 $
487
1,183
1,670
$
As of December 31, 2022, the future minimum annual lease payments under the operating leases were as
follows (in thousands):
2023
2024
2025
Total minimum lease payments
Less: amount representing interest
Present value of operating lease liabilities
Less: operating lease liabilities, current
Operating lease liabilities
$
Weighted-average remaining lease term (in years)
Weighted-average incremental borrowing rate
734
753
513
2,000
(194 )
1,806
(708 )
1,098
2.6
8.20 %
Operating cash flows for the years ended December 31, 2022 included $1.1 million in cash payments for
operating leases, none of which were prepaid lease payments. Operating cash flows for the years ended December
31, 2021 included $0.7 million in cash payments for operating leases, $0.1 million of which were prepaid lease
payments.
6. Debt
Total debt consists of the following (in thousands):
Long-term debt, current portion
Long-term debt, non-current portion
Unamortized debt discount
Total debt, net of debt discount
December 31,
2022
$
$
—
104,474
(9,210 )
95,264
On September 17, 2021, or the Closing Date, the Company entered into a Loan and Security Agreement, or,
the Loan Agreement, with Hercules Capital, Inc., in its capacity as administrative agent and collateral agent and as
a lender, or, in such capacity, the Agent or Hercules, and the other financial institutions that from time to time
become parties to the Loan Agreement as lenders, or, collectively, the Lenders.
F-17
The Loan Agreement provides for term loans in an aggregate principal amount of up to $200.0 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 $100.0 million, all of which was funded to the Company on the Closing Date, or First
Advance, (ii) a second tranche consisting of up to an additional $50.0 million, which became available to the
Company upon achievement of the protocol-specified primary efficacy endpoints in the Company’s Phase 3 trial
studying vonoprazan for the healing and maintenance of healing of erosive GERD with acceptable safety data, such
that the results support the submission of a New Drug Application, or NDA, or supplemental NDA without the need
to conduct another Phase 3 study and will be available, if specified conditions are met, through December 15,
2022, see amendment to later date below, (iii) a third and fourth tranches consisting of an additional total $50.0
million, which became available to the Company in May 2022 upon the achievement of (a) Food and Drug
Administration, or FDA, approval of the Company’s NDA for vonoprazan and amoxicillin, or its New Drug
Application for vonoprazan, amoxicillin and clarithromycin, in each case for an indication relating to the treatment
of Helicobacter pylori, or H. pylori, with an approved indication on the claim that is generally consistent with that
sought in the Company’s NDA submission; and (b) filing of the Company’s NDA or supplemental NDA for
vonoprazan for indications relating to the healing and maintenance of healing of erosive GERD. The third and
fourth tranches will remain available until September 30, 2023, and March 31, 2024, respectively.
On September 27, 2022, the Company 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
the Company has been moved until May 15, 2023, rather than December 15, 2022.
The Company paid a $1.25 million facility charge in connection with closing of the Loan Agreement and
would need to pay 0.5% of any advances made under the third and fourth tranches.
The Term Loan will mature on October 1, 2026, or the Maturity Date. The Term Loan bears (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”, and (ii) payment-in-kind interest at a per annum rate of interest equal
to 3.35%. Phathom may make payments of interest only through October 1, 2024, which was extended to October
1, 2025, upon the achievement of the Second Performance Milestone in May 2022 prior to September 30, 2024
and met the condition that no default or event of default exists, and which is further extendable to October 1,
2026, subject to FDA approval of the Company’s NDA (or supplemental NDA) for vonoprazan for an indication
relating to the healing and maintenance of healing of erosive GERD with an approved indication on the label that is
generally consistent with that sought in the Company’s NDA submission (or supplemental NDA submission), or the
Third Performance Milestone, on or prior to September 30, 2025 and no default or event of default exists (the
“interest only period”). After the interest-only period, the principal balance and related interest will be required to
be repaid in equal monthly installments and continuing until the Maturity Date.
In addition, the Company is 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. As of December 31, 2022, the aggregate final payment fee for the first Term Loan Advance of $7.5
million has been recorded as an other long-term liability.
The Company 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. After repayment, no Term Loan amounts may be borrowed again.
As collateral for the obligations, the Company has granted to Hercules a senior security interest in all of
Company’s right, title, and interest in, to and under substantially all of Company’s property, inclusive of intellectual
property.
F-18
The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default,
and representations, warranties and covenants, including a financial covenant requiring the Company to maintain
certain levels of cash subject to a control agreement in favor of the Agent (minus accounts payable not paid within
120 days of invoice), or Qualified Cash, and commencing on May 15, 2023, trailing three-month net product
revenue from the sale of vonoprazan and products containing vonoprazan. The revenue covenant will be waived at
any time in which the Company maintains Qualified Cash equal to at least 60.0% (prior to the Third Performance
Milestone), and 35% (following the Third Performance Milestone) of the total outstanding Term Loan principal
amount, or the Company’s market capitalization is at least $900.0 million. Upon the occurrence of an event of
default, subject to any specified cure periods, all amounts owed by the Company may be declared immediately
due and payable by Hercules, as collateral agent. As of December 31, 2022, the Company was in compliance with
all applicable covenants under the Loan Agreement.
Under the Second Loan Amendment, the commencement date for the covenant based on trailing three-
month net product revenue from the sale of vonoprazan and products containing vonoprazan was moved from
May 15, 2023, to November 15, 2023.
In connection with the entry into the Loan Agreement, the Company issued to Hercules a warrant, or, the
Warrant, to purchase a number of shares of the Company’s 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, the Company issued a Warrant for 74,782 shares of common stock. The Warrant
will be 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 the Company’s common stock on September 16, 2021. The Warrant is
exercisable any time until September 17, 2028 and had an initial fair value of approximately $1.3 million.
The initial $1.3 million fair value of the Warrant, the $7.5 million final interest payment fee and $3.1 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.
Future minimum principal payments under the Term Loan, including the final payment fee, as of December
31, 2022 are as follows (in thousands):
Year ending December 31:
2023
2024
2025
2026
Total principal and interest payments
Less payment-in-kind and final payment fee
Total term loan borrowings
$
—
—
29,707
94,764
124,471
(24,471 )
100,000
Prior to the Loan Agreement with Hercules, the Company had a loan with SVB and approximately $54.3
million of the proceeds from the First Advance was used to satisfy in full and retire the Company’s indebtedness
under the SVB Term Loan with SVB, including accrued interest through the payoff date.
During the years ended December 31, 2022 and 2021, the Company recognized $13.0 million and $6.8
million, respectively, of interest expense, including amortization of the debt discount, in connection with the
Hercules Loan Agreement and SVB Term Loan. As of December 31, 2022, the Company had outstanding loan
balance of $104.5 million and accrued interest of $0.9 million.
F-19
7. Revenue Interest Financing Liability
On May 3, 2022, Phathom entered into a Revenue Interest Financing Agreement with Initial Investors NQ,
Sagard, and Hercules pursuant to which the Company will receive up to $260 million in funding from the Initial
Investors. Under the terms of the Revenue Interest Financing Agreement, the Company received $100 million at
the initial closing and can receive an additional $160 million upon FDA approval of vonoprazan for treatment of
erosive GERD on or before March 31, 2024. At any time prior to December 31, 2022, the Company also has the
right to obtain a written commitment from a third party for up to $15 million of funding upon FDA approval of
vonoprazan for erosive GERD. In addition, the Company has the right at any time prior to June 30, 2024, to obtain a
written commitment from a third party for up to $25 million of funding upon achievement of a sales milestone.
The Initial Investors have a right of first offer if the Company seeks to obtain such additional funding. The total
amount funded by the Initial Investors and any subsequent investors is referred to herein as the Investment
Amount.
On October 31, 2022, the Company entered into a Joinder Agreement with the Initial Investors and CO
Finance LVS XXXVII LLC (“the Additional Investor”), and Hercules Capital, Inc. Under the terms of the Joinder
Agreement, the Initial Investors waived their rights of first offer regarding the Additional Investor Funding and the
Additional Investor joined the Revenue Interest Financing Agreement to extend commitments for the Additional
Investor Funding.
Under the Revenue Interest Financing Agreement, the investors 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 if the Company receives FDA approval for vonoprazan for an indication relating to the
treatment of heartburn associated with non-erosive GERD. 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 is made, the Company has 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 the Company 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, the Company is obligated to pay 1.30 times Investment Amount, 1.65 times
Investment Amount, and 2.0 times investment amount, respectively, less any amounts the Company previously
paid pursuant to the agreement.
Upon the occurrence of a change in control event taking place prior to the earlier of April 1, 2024, or FDA
approval of vonoprazan for erosive GERD, the Company is obligated to pay 200% of the Investment Amount plus
either 15% of the Investment Amount if occurrence prior to May 3, 2023, or plus 30% of the Investment Amount if
occurrence thereafter.
During the year ended December 31, 2022, the Company received gross proceeds of $100.0 million before
deducting transaction costs of $4.6 million, which resulted in net proceeds of $95.4 million.
F-20
The Company has evaluated the terms of the Revenue Interest Financing Agreement and concluded that the
features of the Investment Amount are similar to those of a debt instrument. Accordingly, the Company has
accounted for the transaction as a debt obligation with interest expense based on an imputed effective rate
derived from the initial carrying value of the obligation and the expected future payments. The Company
recalculates 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 the current and future
financing expense. The carrying value of the revenue interest financing liability was $109.5 million as of December
31, 2022.
Total revenue interest financing liability consists of the following (in thousands):
Beginning liability balance
Proceeds from the Revenue Interest Financing
Agreement
Less: transaction costs
Less: royalty payments and payables
Plus: interest expense
Ending liability balance
December 31,
2022
$
—
100,000
(4,554 )
-
14,079
109,525
$
During the year ended December 31, 2022, the Company recognized $14.1 million of interest expense in
connection with the revenue interest financing liability.
The Company will record liabilities associated with additional funding upon FDA approval of vonoprazan for
erosive GERD and achievement of the sales milestone when such contingent events occur. To determine the
accretion of the liability related to the Revenue Interest Financing Agreement, the Company is required to estimate
the total amount of future royalty payments and estimated timing of such payments based on the Company’s
revenue projections. As royalty payments are made, the balance of the debt obligation will be effectively repaid.
Based on the Company’s periodic review, the exact timing of repayment is likely to be different in each reporting
period as compared to those estimated in the Company’s initial revenue projections. A significant increase or
decrease in actual net sales of vonoprazan compared to the Company’s revenue projections could impact the
interest expense associated with the revenue interest financing liability. Also, the Company’s total obligation can
vary depending on change in control or default events and the achievement of FDA approval of vonoprazan for
erosive GERD and achievement of the sales milestone.
F-21
8. Stockholders’ Equity
Common Stock
In March 2019, subsequent to the Merger, the Company sold 1,491,072 shares of the Company’s common
stock to Frazier.
In March 2019, the founders granted the Company a repurchase right for the 3,373,408 shares of common
stock originally purchased in 2018. The Company has the right, but not the obligation, to repurchase unvested
shares in the event the founder’s relationship with the Company is terminated, subject to certain limitations, at
the original purchase price of the stock. The repurchase right lapsed for 843,352 shares in March 2019 and the
repurchase right for the remaining 2,530,056 shares lapses in equal monthly amounts over the following 48-month
period ending in March 2023. The fair value of the founder shares at the date the repurchase right was granted is
being recognized as stock-based compensation expense on a straight-line basis over the vesting period. As of
December 31, 2022, 79,064 shares of common stock were subject to repurchase by the Company and the
associated repurchase liability was not significant. The amount of recognized and unrecognized stock-based
compensation related to the founder stock was immaterial for all periods presented.
In May 2019, the Company issued Takeda 1,084,000 shares of common stock in connection with the Takeda
License.
For the period from January 1, 2019 to May 6, 2019, the Company issued 2,524,852 shares of common stock
to various employees and consultants of the Company for aggregate proceeds of approximately $1,000. Upon
issuance, these shares were subject to a repurchase option by the Company at the original purchase price of the
shares. The repurchase rights generally lapse as to 25% of the shares on the first anniversary of the vesting
commencement date, and the repurchase right lapses as to 1/48th of the shares each one-month period
thereafter, subject to the purchaser remaining continuously an employee, consultant or director of the Company.
In November 2019, the Company repurchased 17,560 shares at the original purchase price for an aggregate
purchase price of $5.20. As of December 31, 2022, 175,373 shares remain available for repurchase by the
Company and the associated repurchase liability was not significant.
On October 29, 2019, upon completion of the IPO, the Company sold 10,997,630 shares of common stock,
which included the exercise in full by the underwriters of their option to purchase 1,434,473 additional shares at a
public offering price of $19.00 per share. The net proceeds were approximately $191.5 million, after deducting
underwriting discounts, commissions and offering costs.
In November 2020, the Company entered into an Open Market Sale Agreement, or, the Sales Agreement,
with Jefferies LLC, or, the Sales Agent, under which it may, from time to time, sell shares of its common stock
having an aggregate offering price of up to $125.0 million through the Sales Agent, or, the ATM Offering. Pursuant
to the Sales Agreement, the Company will pay the Sales Agent a commission for its services in acting as an agent in
the sale of common stock in an amount equal to 3% of the gross sales price per share sold. In September 2022, the
Company sold 2,414,897 shares for net proceeds of approximately $24.6 million under the ATM offering after
deducting $0.8 million of issuance costs. As of December 31, 2022, the Company has utilized $25.4 million of the
available $125.0 million under the ATM Offering.
On December 16, 2020, the Company completed an underwritten public offering, in which it sold 2,250,000
shares of its common stock at a price of $42.00 per share for total gross proceeds of $94.5 million. The net
purchase price after deducting underwriting discounts and commissions was $39.48 per share, which generated
net proceeds of $88.8 million. The Company incurred an additional $0.2 million of offering expenses in connection
with this public offering.
F-22
A summary of the Company’s unvested shares is as follows:
Balance at December 31, 2021
Share vesting
Balance at December 31, 2022
1,144,809
(890,372 )
254,437
For accounting purposes, unvested awards are considered issued, but not outstanding until they vest.
Common stock reserved for future issuance consists of the following:
Common stock warrants
Stock options and performance-based awards
outstanding
Shares available for issuance under the 2019 Incentive
Plan
Shares available for issuance under the ESPP Plan
Balance at December 31, 2022
December 31,
2022
91,228
6,876,237
957,885
752,938
8,678,288
Preferred Stock
The Company is authorized to issue up to 40 million shares of preferred stock. As of December 31, 2022, and
December 31, 2021, there were no shares of preferred stock issued or outstanding.
Equity Incentive Plan
The Company’s 2019 Equity Incentive Plan, or the Existing Incentive Plan, provides for the grant of incentive
stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit
awards, and other stock awards to eligible recipients, including employees, directors or consultants of the
Company. The Company had 2,231,739 shares of common stock authorized for issuance under the Existing
Incentive Plan, of which, 1,400,528 stock options and 16,260 restricted stock awards were granted in 2019. As a
result of the adoption of the 2019 Incentive Award Plan, or the 2019 Plan, in October 2019, no further shares are
available for issuance under the Existing Incentive Plan.
2019 Incentive Award Plan
In October 2019, the board of directors adopted, and the Company’s stockholders approved, the 2019 Plan,
which became effective in connection with the IPO. Under the 2019 Plan, the Company may grant stock options,
stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then
employees, officers, non-employee directors or consultants of the Company or its subsidiaries. The number of
shares initially available for issuance will be increased by (i) the number of shares subject to stock options or
similar awards granted under the Existing Incentive Plan that expire or otherwise terminate without having been
exercised in full after the effective date of the 2019 Plan and unvested shares issued pursuant to awards granted
under the Existing Incentive Plan that are forfeited to or repurchased by the Company after the effective date of
the 2019 Plan, with the maximum number of shares to be added to the 2019 Plan pursuant to clause (i) above or
equal to 1,416,788 shares, and (ii) an annual increase on January 1 of each calendar year beginning in 2020 and
ending in 2029, equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the
immediately preceding calendar year and (b) such smaller number of shares as determined by the board of
directors. As of December 31, 2022, 957,885 shares remain available for issuance, which reflects 2,789,868 stock
options and performance-based units, or PSU, and restricted stock unit, or RSU, awards granted, and 392,207 of
awards cancelled or forfeited, during the year ended December 31, 2022 as well as an annual increases of
1,582,802 shares authorized on January 1, 2022.
F-23
Performance-based Units
During 2020, the Company granted the initial PSUs whereby vesting depends upon the approval by the FDA
of vonoprazan for H. pylori and then, or concurrent with, erosive GERD. In 2022, the Company granted an
additional 37,500 PSUs to employees. As of December 31, 2022, the PSU milestones had not been achieved. As of
December 31, 2022, no related compensation cost had been recognized. The following table summarizes PSU
activity under the 2019 Incentive Award Plan during the year ended December 31, 2022.
Unvested balance at December 31, 2021
Granted
Vested
Forfeited
Unvested balance at December 31, 2022
Weighted-
Average
Grant
Date Fair
Value
Per Share
32.23
20.06
—
35.39
30.97
Number of
Stock Units
394,300 $
37,500
—
(19,500 )
412,300 $
As of December 31, 2022 there was approximately $12.8 million of related unrecognized compensation cost,
which will be recognized upon vesting.
Restricted Stock Units
During 2022, the Company granted 1,010,437 RSUs with vesting over time. The following table summarizes
RSU activity under the 2019 Incentive Award Plan during the year ended December 31, 2022.
Unvested balance at December 31, 2021
Granted
Vested
Forfeited
Unvested balance at December 31, 2022
Number of
Stock Units
Weighted-
Average Grant
Date Fair Value
Per Share
- $
1,010,437
(102,453 )
(30,517 )
877,467 $
-
10.79
8.51
12.14
11.03
As of December 31, 2022, the Company had $7.2 million of unrecognized stock-based compensation
expense, which is expected to be recognized over a weighted-average period of 1.8 years.
Employee Stock Purchase Plan
In October 2019, the board of directors adopted, and the Company’s stockholders approved, the Employee
Stock Purchase Plan, or the ESPP, which became effective in connection with the IPO. The ESPP permits
participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation,
which includes a participant’s gross base compensation for services to the Company, including overtime payments
and excluding sales commissions, incentive compensation, bonuses, expense reimbursements, fringe benefits and
other special payments. A total of 270,000 shares of common stock was initially reserved for issuance under the
ESPP. In addition, the number of shares available for issuance under the ESPP will be annually increased on January
1 of each calendar year beginning in 2020 and ending in 2029, by an amount equal to the lesser of: (i) 1% of the
shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of
shares as is determined by the board of directors. As of December 31, 2022, 752,938 shares of common stock
remain available for issuance, which reflects 89,098 shares sold to employees during the year ended December 31,
2022.
F-24
The ESPP is considered a compensatory plan, and the Company recorded related stock-based compensation
of $0.5 million and $0.4 million for the years ended December 31, 2022 and 2021, respectively. The weighted-
average assumptions used to estimate the fair value of ESPP awards using the Black-Scholes option valuation
model were as follows:
Assumptions:
Expected term (in years)
Expected volatility
Risk free interest rate
Dividend yield
Years Ended
December 31,
2022
2021
0.50
68.59 %
2.04 %
—
0.69
76.25 %
0.09 %
—
The estimated weighted-average fair value of ESPP awards during 2022 and 2021 was $3.98 and $14.66,
respectively. As of December 31, 2022, the total unrecognized compensation expense related to the ESPP was
$31,000, which is expected to be recognized over a weighted-average period of approximately 0.5 months.
401(k) Plan
The Company established a 401(k) savings plan during the year ended December 31, 2020. The Company’s
contributions to the plan are discretionary. During the years ended December 31, 2022 and December 31, 2021,
the Company incurred $1.3 million and $0.8 million, respectively, of expense related to estimated employer
contribution liabilities, which was based on a 75% match of employees’ contributions during the periods. In August
2021, the Board of Directors approved a semi-annual discretionary match for 2021, which was settled by
contributing 18,394 shares. In January 2022, the Board of Directors approved a second semi-annual discretionary
match for 2021, which was settled by contributing 16,756 shares. In July 2022, the Board of Directors approved a
semi-annual match for 2022, which was settled by contributing 84,784 shares.
Stock Options
The fair value of each employee and non-employee stock option grant is estimated on the date of grant
using the Black-Scholes option-pricing model. The Company, prior to the IPO on October 29, 2019, was a private
company and lacked company-specific historical and implied volatility information. Therefore, it estimated its
expected volatility based on the historical volatility of a publicly-traded set of peer companies. Due to the lack of
historical exercise history, the expected term of the Company’s stock options for employees was determined
utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees was
equal to the contractual term of the option award. The risk-free interest rate was determined by reference to the
U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the
expected term of the award. Expected dividend yield was zero based on the fact that the Company has never paid
cash dividends and does not expect to pay any cash dividends in the foreseeable future.
F-25
A summary of the Company’s stock option activity and related information is as follows:
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value (in
thousands)
7.91 $ 13,973
Options
Outstanding
4,186,729 $
1,741,931
—
(342,190 )
27.53
14.62
—
29.32
23.40
25.00
Balance at December 31, 2021
Options granted
Options exercised
Options cancelled
Balance at December 31, 2022
Options exercisable as of December 31, 2022
5,586,470 $
2,455,735
7.90 $
7.18
4,476
2,867
The estimated weighted-average fair value of employee and nonemployee director stock options granted
during 2022 was $8.40 per option. As of December 31, 2022, the Company had $37.3 million of unrecognized
stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.1
years.
The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes
option valuation model were as follows:
Assumptions:
Expected term (in years)
Expected volatility
Risk free interest rate
Dividend yield
Stock-Based Compensation Expense
Years Ended
December 31,
2022
2021
5.88
66.00 %
2.06 %
—
5.93
67.46 %
0.68 %
—
Stock-based compensation expense recognized for all equity awards, including founder stock, has been
reported in the statements of operations as follows (in thousands):
Years Ended
December 31,
2022
2021
Research and development expense
General and administrative expense
Total
$
$
5,534 $
18,599
24,133 $
3,838
12,974
16,812
F-26
9. Income Taxes
For the years ended December 31, 2022 and 2021, the Company did not record a provision for income taxes
due to a full valuation against its deferred taxes. A reconciliation between the provision for income taxes and
income taxes computed using the U.S. federal statutory corporate tax rate is as follows (in thousands):
Income taxes computed at the statutory
rate
Permanent items
Research and development credit
Change in valuation allowance
Other
Provision (benefit) for income taxes
$
$
Years Ended
December 31,
2022
2021
(41,522 ) $
2,713
(2,453 )
41,137
125
— $
(30,216 )
1,387
(2,950 )
31,783
(4 )
—
Significant components of the Company’s net deferred tax assets are as follows (in thousands):
$
Deferred tax assets:
Net operating loss carryforwards
Research credits
Intangible assets
Other
Gross deferred tax assets
Less valuation allowance
Deferred tax assets, net of valuation
allowance
Deferred tax liabilities:
Other
Net deferred tax assets
$
Years Ended
December 31,
2022
2021
85,918 $
8,897
25,319
6,517
126,651
(126,170 )
481
(481 )
— $
60,936
6,694
13,809
3,996
85,435
(85,033 )
402
(402 )
—
Based upon the Company’s history of operating losses, the Company is unable to conclude that it is more
likely than not that the benefit of its deferred tax assets will be realized. Accordingly, the Company has provided a
full valuation allowance for its deferred tax assets as of December 31, 2022 and 2021.
As of December 31, 2022 and 2021, the Company had federal net operating loss carryforwards of
approximately $408.7 million and $290.1 million, respectively, which are carried over indefinitely.
As of December 31, 2022, the Company had approximately $1.7 million of state net operating loss
carryforwards that begins to expire in 2036.
As of December 31, 2022, the Company has available federal research and development credits of $10.5
million which begin to expire in 2038. The Company has $0.9 million of state research and development credits,
some of which, begin to expire in 2025.
The Company has not completed a formal analysis of the potential impact of Section 382 on its deferred tax
assets as of December 31, 2022. Until this analysis has been completed, the Company has not adjusted any of its
deferred tax assets, including net operating losses or research and development credits. The Company will reassess
the amount of net operating losses and credits subject to limitation under Section 382 when a study is complete.
F-27
Due to the existence of the valuation allowance, future changes in the deferred tax assets related to these tax
attributes will not impact the Company’s effective tax rate.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is
to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon settlement. While the Company believes that it has appropriate support for the positions
taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities
in determining the adequacy of its provision for income taxes.
The following table summarizes the activity related to the Company's gross unrecognized tax benefits:
Beginning balance
Increases related to prior year tax positions
Increases related to current year tax positions
Ending balance
Years Ended
December 31,
2022
2021
$
$
1,704 $
-
623
2,327 $
938
64
702
1,704
As of December 31, 2022, the Company has gross unrecognized tax benefits of $2,327, none of which would
affect the effective tax rate due to a full valuation allowance. The Company does not anticipate any significant
changes in its unrecognized tax benefits over the next 12 months. The Company's policy is to recognize the
interest expense and/or penalties related to income tax matters as a component of income tax expense. The
Company has no accrual for interest or penalties on its balance sheet at December 31, 2022, and has not
recognized interest and/or penalties in its statement of operations for the year ended December 31, 2022.
The Company is subject to taxation in the United States and various states. The Company is not currently
under examination by any taxing authorities. Due to the carryover of tax attributes, the statute of limitations is
currently open for tax years since inception.
10. Subsequent Events
At-The-Market Offering
From January 1, 2023 through February 27, 2023, the Company issued 1,514,219 shares of common stock in
a single trade under the ATM Sale Agreement generating gross proceeds of $14.5 million and net proceeds of
$14.1 million, after offering expenses.
F-28
EXHIBIT INDEX
Exhibit Description
Form
Date
Number
Filed
Herewith
Incorporated by Reference
S-1 9-30-2019
S-1 9-30-2019
S-1/A 10-15-2019
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1#
10.2#
10.3#
10.4#
10.5#
10.6#
8-K 10-29-19
8-K 9-25-2020
S-1/A 10-15-2019
S-1 9-30-2019
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws
Form of Common Stock Certificate
Warrant to purchase shares of common stock issued to Takeda
Company Limited, dated May 7, 2019
Warrant to purchase stock issued to Silicon Valley Bank, dated May
14, 2019
Warrant to purchase stock issued to WestRiver Innovation Lending
Fund VIII, L.P., dated May 14, 2019
Note Purchase Agreement, dated May 7, 2019, by and among the
Registrant and the other parties party thereto, as amended
Description of Registered Securities
Phathom Pharmaceuticals, Inc. 2019 Equity Incentive Plan
Form of Stock Option Grant Notice and Stock Option Agreement
under the Phathom Pharmaceuticals, Inc. 2019 Equity Incentive
Plan
Form of Restricted Stock Grant Notice and Restricted Stock
Agreement under Phathom Pharmaceuticals, Inc. 2019 Equity
Incentive Plan
Phathom Pharmaceuticals, Inc. 2019 Incentive Award Plan and form
of stock option grant notice and stock option agreement
thereunder
Form of Stock Option Grant Notice and Stock Option Agreement
under the Phathom Pharmaceuticals, Inc. 2019 Incentive Award
Plan
Form of Performance Share Unit Grant Notice and Performance
Share Unit Agreement under Phathom Pharmaceuticals, Inc. 2019
Incentive Award Plan
Phathom Pharmaceuticals, Inc. 2019 Employee Stock Purchase Plan S-1/A 10-15-2019
S-1/A 10-15-2019
Non-Employee Director Compensation Policy
10-Q 5-12-2020
Phathom Pharmaceuticals 2020 Bonus Plan
S-1 9-30-2019
10.7#
10.8#
10.9#
10.10# Letter Agreement, dated May 7, 2019, by and between Tadataka
S-1 9-30-2019
S-1 9-30-2019
S-1/A 10-15-2019
S-1 9-30-2019
8-6-2020
8-6-2020
10-Q
10-Q
X
3.1
3.1
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
10.3
10.4
10.5
10.6
10.1
10.7
Yamada, M.D. and the Registrant
166
10.11# Employment Letter Agreement, dated July 21, 2019, by and
S-1 9-30-2019
10.8
between David Socks and the Registrant
10.12# Amended and Restated Employment Letter Agreement, dated
S-1 9-30-2019
10.9
September 25, 2019, by and between Azmi Nabulsi, M.D., M.P.H.
and the Registrant
10.13# Employment Letter Agreement, dated June 25, 2020, by and
8-K 7-13-2020
10.1
between Todd Branning and the Registrant
10.14# Form of Indemnification Agreement for Directors and Officers
10.15† License Agreement, dated May 7, 2019, by and between Takeda
Pharmaceuticals Company Limited and the Registrant
10.16
Loan and Security Agreement, dated May 14, 2019, by and among
Silicon Valley Bank, WestRiver Innovation Lending Fund VIII, L.P.
and the Registrant
S-1 9-30-2019
S-1 9-30-2019
10.11
10.12
S-1 9-30-2019
10.13
10.17
Amendment to the Loan and Security Agreement, dated March 11,
10-Q 5-12-2020
10.2
2020, by and among Silicon Valley Bank, WestRiver Innovation
Lending Fund VIII, L.P. and the Registrant
10.18# Employment Letter Agreement, dated August 29, 2019, by and
S-1 9-30-2019
10.14
between Terrie Curran and the Registrant
10.19† Commercial Supply Agreement, by and between Takeda
10-Q 8-6-2020
10.1
Pharmaceuticals Company Limited and the Registrant, dated as of
April 30, 2020
10.20† Amendment No. 1 to Takeda License Agreement, dated September
10-K 3-30-2021
10.20
21, 2020
10.21† Supply and Packaging Services Agreement, by and between Sandoz
10-K 3-30-2021
10.21
10.22
10.23
10.24
GmbH and the Registrant, dated December 30, 2020
Amendment No. 1 to Commercial Supply Agreement by and
between Takeda Pharmaceuticals Company Limited and the
Registrant, dated as of December 1, 2020
Second Amendment to the Loan and Security Agreement, dated
March 11, 2021, by and among Silicon Valley Bank, SVB Innovation
Credit Fund VIII, L.P. and the Registrant
Third Amendment to the Loan and Security Agreement, dated May
26, 2021, by and among Silicon Valley Bank, SVB Innovation Credit
Fund VIII, L.P. and the Registrant
10-K 3-30-2021
10.22
10-Q
5-11-2021
10.1
10-Q 8-10-2021
10.2
10.25# Separation and Release Agreement dated June 4, 2021, between
10-Q 8-10-2021
the Registrant and Todd Branning
10.26† Commercial Supply Agreement with Catalent Pharma Solutions, LLC
10-Q 8-10-2021
entered into on July 2, 2021
10.27# Amended and Restated Non-Employee Director Compensation
10-Q 8-10-2021
10.28
10.29
Policy
Loan and Security Agreement, dated September 17, 2021, by and
among Hercules Capital and the Registrant
Warrant to purchase stock issued to Hercules Capital, dated
September 17, 2021
10.30† First Amendment to the Supply and Packaging Services Agreement,
by and between Sandoz GmbH and the Registrant, dated December
4, 2021
10-Q 11-8-2021
10-Q 11-8-2021
10-K
3-1-2022
10.30
10.31# Employment Letter Agreement, dated March 22, 2022, by and
10-Q 5-10-2022
10.32
between Molly Henderson and the Company
Form of Restricted Stock Grant Notice and Restricted Stock
Agreement under Phathom Pharmaceuticals, Inc. 2019 Equity
Incentive Plan
10-Q
8-1-2022
10.1
10.2
167
10.3
10.4
10.5
10.1
10.2
10.31† Revenue Interest Financing Agreement, dated May 3, 2022, by and
among NovaQuest Capital Management, Sagard Holding Manager,
Hercules Capital and the Registrant
Amendment to the Loan and Security Agreement, dated September
17, 2021, by and among Hercules Capital and the Registrant.
10.32
10-Q
8-1-2022
10.3
10-Q
8-1-2022
10.33# Amended and Restated Non-Employee Director Compensation
10-Q
8-1-2022
Policy
10.34# Transition and Separation Agreement and Release of Claims, dated
10-Q
8-1-2022
April 5, 2022, by and between the Registrant and Anthony Guzzo
10.35† Commercial Supply Agreement with Evonik Operations GmbH
10-Q 11-9-2022
10.4
10.5
10.6
10.1
10.36
entered into on August 1, 2022
Second Amendment to the Loan and Security Agreement, dated
September 17, 2021, by and among Hercules Capital and the
Registrant.
10.37† Joinder and Waiver agreement dated October 31, 2022 by and
among Hercules Capital, CO Finance LVS XXXVII LLC and the
Registrant
Consent of independent registered public accounting firm
Power of Attorney
Certification of Chief Executive Officer of Phathom Pharmaceuticals,
Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the
Securities Exchange Act of 1934, as amended
Certification of Principal Financial Officer of Phathom
Pharmaceuticals, Inc., as required by Rule 13a-14(a) or Rule 15d-
14(a) under the Securities Exchange Act of 1934, as amended
Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
23.1
24.1
31.1
31.2
32.1*
32.2*
101.INS Inline XBRL Instance Document – the instance document does not appear
in the Interactive Data File because XBRL tags are embedded within the
Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Label Linkbase Document
101.PRE Inline XBRL Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL
document)
# Indicates management contract or compensatory plan.
† Portions of this exhibit have been omitted for confidentiality purposes.
10-Q 11-9-2022
10.2
X
X
X
X
X
X
X
X
X
X
X
X
X
X
* These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities
Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation
language in such filing.
168
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
PHATHOM PHARMACEUTICALS, INC.
/s/ Terrie Curran
Terrie Curran
Chief Executive Officer
Date: February 28, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Terrie Curran
Terrie Curran
President, Chief Executive Officer and
Director (Principal Executive Officer)
February 28, 2023
/s/ Molly Henderson
Molly Henderson
Chief Financial and Business Officer
(Principal Financial and Accounting Officer)
February 28, 2023
*
Michael F. Cola
*
Frank Karbe
*
Heidi Kunz
*
Asit Parikh, M.D., Ph.D.
*
David Socks
*
Mark Stenhouse
*
James Topper, M.D., Ph.D.
*By: /s/ Terrie Curran
Terrie Curran, Attorney-in-fact
Director
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
February 28, 2023
Director
Director
Director
Director
Director
Director
169
[This page intentionally left blank]
MANAGEMENT
Terrie Curran
Chief Executive Officer & President
Azmi Nabulsi, MD
Chief Operating Officer
Martin Gilligan
Chief Commercial Officer
Joe Hand
Chief Administrative Officer
Tom Harris
Chief Development Sciences Officer
Molly Henderson
Chief Financial & Business Officer
Eckhard Leifke, MD
Chief Medical Officer
Larry Miller
General Counsel & Secretary
CORPORATE INFORMATION
Phathom Pharmaceuticals, Inc.
100 Campus Drive, Suite 102
Florham Park, NJ 07932
877-742-8466
info@phathompharma.com
ANNUAL MEETING
May 25, 2023 at 11:30 a.m. Eastern Time
The annual meeting of stockholders will be
held via live webcast at:
http://www.virtualshareholdermeeting.com/
PHAT2023
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
BOARD OF DIRECTORS
Michael Cola
Chairman of the Board
Former Chief Executive Officer,
Avalo Therapeutics
Terrie Curran
Chief Executive Officer & President
Frank Karbe
Chief Executive Officer, Better Therapeutics
Heidi Kunz
Former Chief Financial Officer,
Blue Shield California
Asit Parikh, MD, PhD
Chief Executive Officer & President,
MOMA Therapeutics
David Socks
Chief Business Officer, HilleVax, Inc.
Mark Stenhouse
Chief Operating Officer,
Prometheus Biosciences
James Topper, MD, PhD
Managing General Partner, Frazier Healthcare
LEGAL COUNSEL
Latham & Watkins, LLP
STOCK INFORMATION
Our common stock is traded on
The Nasdaq Global Select Market
under the symbol PHAT
TRANSFER AGENT
Address:
Computershare
PO Box 505000
Louisville, Kentucky 40233-5000
United States
Overnight delivery:
462 South 4th Street, Suite 1600
Louisville, Kentucky 40202
United States
Phone:
Toll free: 800.736.3001
Toll: 781.575.3100
Annual
Report
2022