On Wednesday, Stifel provided insights into Phathom Pharmaceuticals Inc.'s (NASDAQ: PHAT) shares recent strategic move to file a Citizen's Petition with the FDA. According to InvestingPro data, the company currently trades at $8.62, having experienced significant price volatility in recent months.
The company is seeking to align the exclusivity period for its VOQUEZNA tablets with that of the VOQUEZNA Dual and Triple Pak, which is currently set at 10 years. This action does not stem from a definitive FDA ruling on GAIN exclusivity, which relates to infectious disease products, but rather from a lack of substantial feedback from the agency despite ongoing discussions.
Phathom Pharmaceuticals believes that VOQUEZNA tablets should legally receive the same 10-year exclusivity as the VOQUEZNA Paks, based on the advice of legal and regulatory consultants.
The argument is that the exclusivity should follow the single active ingredient, vonoprazan, and that granting it would be in the spirit of the law, considering the tablets are indicated for the same conditions as the Paks.
While the FDA is not obliged to respond to the Citizen's Petition within a specific timeframe, the petition sets an informal deadline of approximately 180 days for the agency to offer a response. This approach is viewed as more efficient compared to litigation, which could be contentious and prolong the process for years. Currently, there is no formal position from the FDA to litigate against.
Phathom Pharmaceuticals' shares are currently reflecting a scenario where VOQUEZNA may face generic competition two years earlier than expected, potentially in August 2030, based on the existing formulation IP. The stock has declined about 19% over the past six months, trading well below its 52-week high of $19.71.
InvestingPro analysis suggests the stock may be undervalued at current levels, with analysts setting price targets ranging from $17 to $28. This anticipated generic erosion could significantly affect the company's valuation, with preliminary estimates suggesting a low double-digit value.
This is under the assumption that the terminal value could be maintained through a potential over-the-counter transition, similar to what has been granted to other proton pump inhibitors (PPIs).
Without a resolution, PHAT shares are expected to remain under pressure. The market and Phathom Pharmaceuticals are looking forward to some direction from the FDA in the upcoming quarters.
While the company maintains a strong current ratio of 5.73, indicating solid short-term liquidity, InvestingPro data reveals the company is rapidly burning through cash with negative free cash flow. Subscribers to InvestingPro can access 8 additional key insights about PHAT's financial health and market position.
In other recent news, Phathom Pharmaceuticals reported a significant revenue outperformance in its third-quarter earnings, primarily driven by its drug Voquezna. The company's net revenue of $16.4 million for Voquezna surpassed both analysts' and consensus estimates.
The increase was attributed to the robust growth in Erosive Esophagitis treatment and a surge in demand following the expansion of Voquezna's label to include Non-Erosive Reflux Disease. Voquezna's 10mg dose, approved for this condition, saw a 230% quarter-over-quarter rise in filled prescriptions.
In addition to the earnings results, Phathom announced a public offering expected to generate gross proceeds of about $130 million. The offering includes common stock shares and pre-funded warrants. The net proceeds will be allocated for the commercialization and further clinical development of Vonoprazan, marketed in the U.S. as Voquezna.
Following these recent developments, Guggenheim maintained a positive stance on Phathom Pharmaceuticals, reiterating a Buy rating and a stock price target of $28.00. Similarly, Goldman Sachs increased Phathom's price target to $12, maintaining a neutral stance. These updates from analysts reflect the company's strong performance and future prospects.
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