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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-07 · 381 added, 348 removed, 900 unchanged (45% of the section changed)

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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.

Vonoprazan generated peak net sales of approximately $850 million and continues to achieve volume growth during its tenth full year on the market since its approval in 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, or PHALCON-EE.

These data are supplemented by the extensive existing clinical data generated by Takeda as part of its 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.

Based on our qualified infectious disease product, or QIDP, designations for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, we received an extension of five years of new chemical entity, or NCE, exclusivity based on the vonoprazan component in those NDAs.

We believe the extended NCE exclusivity should apply to any other approved or future products containing vonoprazan we develop and for which we obtain FDA approval.

While the NDAs for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK were still under review by the FDA, in March 2022, we submitted an additional NDA for vonoprazan, under the brand name VOQUEZNA, 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.

In August 2022, following approval of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK but before launch, and while the NDA for VOQUEZNA for Erosive GERD was still under review, we announced that trace levels of a nitrosamine impurity, N -nitroso-vonoprazan, or NVP, were present in our initial commercial drug product for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK.

After identifying this impurity, and prior to launching VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, we submitted supplements to our approved NDAs with the goal of addressing this issue.

However, in February 2023, we received complete response letters from the FDA relating both to our Erosive GERD NDA and to the NDA supplements for our approved H.

The complete response letters formalized the FDA’s prior request that we provide additional stability data to demonstrate that levels of NVP will remain at or below 96 ng/day, the acceptable daily intake level (AI) for NVP established by the FDA, throughout the proposed shelf life of the product.

No additional deficiencies were cited by the FDA in the complete response letters.

In May 2023, we resubmitted our Erosive GERD NDA to the FDA, and in June 2023 we submitted new prior approval supplements to our approved H.

On October 27 and November 1, 2023, the FDA approved the prior approval supplements to our H.

pylori NDAs and our Erosive GERD NDA, respectively.

As a result, we initiated commercial launch for VOQUEZNA for both the Erosive GERD and H.

Subsequently, on November 1, 2023, the FDA approved vonoprazan, under the brand name VOQUEZNA, 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, as well as in combination with amoxicillin, with or without clarithromycin, for the treatment of H.

pylori infection in adults.

We initiated commercial launch for VOQUEZNA for both the Erosive GERD and H.

pylori indications, and VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK for treatment of H.

pylori infection in the fourth quarter of 2023.

We are also continuing to develop vonoprazan as a treatment for heartburn symptoms associated with Non-Erosive GERD.

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, and in August 2023, we announced successful completion of the 20-week extension period of PHALCON-NERD-301.

Based on the results of this study, in September 2023, we submitted an NDA

seeking approval of vonoprazan as a once-daily treatment for heartburn symptoms associated with Non-Erosive GERD in adults.

The FDA has assigned this NDA a Prescription Drug User Fee Act, or PDUFA, target action date of July 19, 2024, and if approved, we anticipate launching vonoprazan for this new indication in the third quarter of 2024.

In addition, in 2024 we plan to initiate a Phase 3 trial evaluating 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.

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 expand the clinical development of vonoprazan in the U.S.

into eosinophilic esophagitis, or EoE, the most common type of eosinophilic gastrointestinal disease.

Given the limited treatment options for EoE and vonoprazan’s demonstrated potential, we believe EoE is an important indication for future study and expect to initiate a Phase 2 trial evaluating vonoprazan as a treatment for EoE in adult and adolescent patients later in 2024.

In September 2023, we submitted an NDA seeking approval of vonoprazan as a once-daily treatment for heartburn symptoms associated with Non-Erosive GERD in adults.

On July 17, 2024, the FDA approved VOQUEZNA 10 mg tablets for the relief of heartburn associated with Non-Erosive GERD, the largest category of GERD.

We are independently commercializing VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK in the United States.

We plan to evaluate 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 and approved product candidate, vonoprazan, meeting with regulatory authorities, conducting our Phase 3 clinical trials of vonoprazan, preparing applications for regulatory approval for vonoprazan and preparing our 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, our follow-on public offering, our ATM offering, and our Revenue Interest Financing Agreement.

From our inception through December 31, 2023, we have raised aggregate gross proceeds of $90.3 million from the issuance of convertible promissory notes, $140 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, net proceeds of $268.1 million from the Revenue Interest Financing Agreement, net proceeds of $38.7 million from the sale of 3,929,116 shares under the ATM Offering and net proceeds of $141.4 million from the sale of 12,793,750 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 1,668,750 shares, at a price of $11.75 per share, after deducting underwriting discounts and commissions.

Our commercial launch continues to build momentum and early launch data shows strong physician and patient demand.

As of February 21, 2025, over 300,000 prescriptions for VOQUEZNA tablets, VOQUEZNA Triple Pak, and VOQUEZNA Dual Pak have been filled since launch.

These prescriptions were written by more than 20,000 prescribers.

In addition, due to increasing commercial demand, we continue to make progress in securing broad commercial coverage for VOQUEZNA with over 120 million, or over 80%, of total U.S.

commercial lives with access to VOQUEZNA tablets.

We continue to evaluate potential commercial partnerships for vonoprazan in Europe and Canada, expand development of vonoprazan into other indications, dosing regimens and alternative formulations and packaging, and evaluate the in-license or acquisition of additional clinical or commercial stage product candidates for the treatment of GI diseases in a capital efficient manner.

In May 2021, the FDA granted qualified infectious disease product, or QIDP, designations for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK and we thereby received an extension of five years of new chemical entity, or NCE, exclusivity based on the vonoprazan component in the applicable NDAs.

We believe the extended NCE exclusivity should apply to any other approved or future products containing vonoprazan we develop and for which we obtain FDA approval.

In December 2024, we submitted a citizen petition requesting that FDA update the Orange Book listings to reflect the same ten-year period of NCE exclusivity for VOQUEZNA as reflected on the VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK Orange Book listings.

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 and approved product candidate, vonoprazan, meeting with regulatory authorities, managing our clinical trials of vonoprazan, preparing for commercialization of our initial products containing vonoprazan, commercially launching our approved products, and providing other selling, general and administrative support for our

Our operations to date have been funded primarily through commercial bank debt, our revenue interest financing debt and various equity offerings, including our at-the-market offerings.

From our inception through December 31, 2024, we sold 34,737,032 shares of our common stock and 2,608,922 pre-funded warrants, generating net proceeds of approximately $543.3 million, after deducting underwriting discounts, commissions and offering costs.

As of December 31, 2024, we had cash and cash equivalents of $297.3 million.

Based on our current operating plan, we believe that our existing cash and cash equivalents together with the drawdown of the remaining $160 million under our Loan Agreement with Hercules together with anticipated product revenues, are sufficient to fund operations for at least the next twelve months and will be sufficient to fund our operations through the end of 2026.

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 and Security Agreement, as amended, or the Loan Agreement, with Hercules Capital, Inc.

or Hercules, together with anticipated product revenues, are sufficient to fund operations for at least the next twelve months and we believe will be sufficient to enable us to reach cashflow positivity .

Since inception, we have incurred significant operating losses.

Our net loss was $334.3 million and $201.6 million for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2023, we had an accumulated deficit of $928.7 million.

As of December 31, 2024, we had an accumulated deficit of $1.3 billion.

We expect to continue to incur operating losses for the foreseeable future.

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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 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.

We also agreed to make tiered royalty payments at percentages averaging 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.

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In addition, shipping and handling costs for product sales are recorded as incurred.

Finally, cost of revenue may also include costs related to excess or obsolete inventory adjustment charges.

Cost of revenue also includes costs related to excess or obsolete inventory adjustment charges.

Operating Expenses

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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.

We do not track total research and development expenses by indication.

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;

• Clinical development expenses:

external research and development expenses incurred under agreements with CROs, regulatory costs, and consultants to conduct and support our clinical trials of vonoprazan;

• Personnel related expenses :

salaries, payroll taxes, and employee benefits;

• Chemistry manufacturing and controls, or CMC, expenses:

costs related to the manufacturing of vonoprazan for our clinical trials;

We plan to continue to invest in our research and development expenses for the foreseeable future as we continue the development of vonoprazan.

• Consulting, professional and other costs:

external costs related to consulting and professional services and other research costs incurred;

• Stock-based compensation expenses :

stock-based compensation expense recognized for those individuals involved in research and development efforts.

The following table summarizes our research and development expenses for the years ended December 31, 2024 and 2023 (in thousands):

Clinical development and regulatory

Personnel related

Chemistry manufacturing and controls

Consulting, professional and other costs

Stock-based compensation

Total research and development expenses

We plan to invest in 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.

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;

• the efficacy and safety profile of the product candidate.

Selling, General and Administrative

Selling, general and administrative expenses consist of salaries and employee-related costs, including stock-based compensation, for personnel in commercial, 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 and commercialization activities.

We anticipate that our selling, general and administrative expenses will increase in the future to support our commercialization activities and research and development 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.

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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.

Revenue Interest Financing Agreement

Interest expense under the Revenue Interest Financing Agreement is based on the imputed effective interest rate derived from expected future payments and the carrying value of the obligation.

We recalculate 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 December 14, 2023, interest expense under the Hercules Loan consists of (i) cash interest at a variable annual rate equal to the greater of (a) 9.85% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 1.35% and provided that the cash interest rate shall be capped at 10.35% and upon Company achieving the certain milestones, the cash interest shall be decreased by 0.35%, (ii) payment-in-kind interest at a per annum rate of interest equal to 2.15%, 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.

From September 17, 2021 through December 13, 2023, interest expense under the Hercules Loan consisted 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% or 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.

Changes in future payments from previous estimates are included in current and future interest expense.

Loan Agreement with Hercules

From September 17, 2021 through December 13, 2023, interest expense under the Loan Agreement consisted 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% or the Interest Rate, (ii) payment-in-kind interest at a per annum rate of interest equal to 3.35%, and (iii) amortization of the 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.

Beginning on December 14, 2023, interest expense under the Loan Agreement consists of (i) cash interest at a variable annual rate equal to the greater of (a) 9.85% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 1.35% and provided that the cash interest rate shall be capped at 10.35% and upon Company achieving the certain milestones, the cash interest shall be decreased by 0.35%, (ii) payment-in-kind interest at a per annum rate of interest equal to 2.15%, and (iii) amortization of the 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.

Results of Operations

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Interest expense

Other expense

Other expense, net

Total other expense

Product revenues were $0.7 million for the year ended December 31, 2023 related to sales of VOQUEZNA which was launched in the fourth quarter of 2023.

Product revenues were $55.3 million and $0.7 million for the years ended December 31, 2024 and 2023, respectively, related to sales of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK which was launched during the fourth quarter of 2023.

Cost of Revenue.

Cost of revenue was $0.2 million for the year ended December 31, 2023.

In periods prior to receiving FDA approval for VOQUEZNA, we recognized inventory and related costs associated with the manufacture of VOQUEZNA as research and development expense and as such, the cost of goods sold and related gross margins are not necessarily indicative of future costs of goods sold and gross margin.

Therefore, the manufacturing costs related to the inventory build-up incurred before FDA approval

were already expensed in a prior period and are therefore excluded from the cost of goods sold for the year ended December 31, 2023.

These previously expensed costs were not material for the year ended December 31, 2023.

Cost of revenue was $8.0 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively.

In periods prior to receiving FDA approval for VOQUEZNA, we recognized inventory and related costs associated with the manufacture of VOQUEZNA as research and development expense and as such, the cost of revenue and related gross profits are not necessarily indicative of future costs of revenue and gross profit.

Therefore, the manufacturing costs related to the inventory purchased before FDA approval were already expensed in a prior period and are therefore excluded from the cost of revenue for the year ended December 31, 2024.

These previously expensed costs were not material.

Research and Development Expenses.

Research and development expenses were $34.1 million and $49.9 million for the years ended December 31, 2024 and 2023, respectively.

The decrease of $21.5 million consisted of a reduction of $24.8 million of clinical study related expenses, $4.6 million of chemistry manufacturing and controls, or CMC, costs related to vonoprazan and $1.8 million related to consulting and other research expenses, partially offset by increases of $7.8 million of personnel-related expenses and $1.9 million of regulatory expenses.

The decrease of $15.8 million consisted of reductions of $5.8 million related to lower stock-based compensation expense, $5.0 million of regulatory and clinical study related expenses due to the wrapping up of our PHALCON-NERD-301 Phase 3 daily dosing study, $4.3 million of lower CMC costs, and $0.7 million related to lower consulting, professional and other costs.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses were $290.7 million and $117.9 million for the years ended December 31, 2024 and 2023, respectively.

The increase of $16.9 million was due to increases of $31.1 million in personnel-related expenses and $0.6 million of legal and other expenses, offset by decreases of $13.3 million of professional services expenses for commercial, medical affairs and other services, $1.1 million of insurance expense and $0.4 million in consulting expense.

The increase of $172.8 million was due to increases of $109.4 million in commercial expenses related to the launch of VOQUEZNA product in late 2023, which includes $48.1 million of external project spend and $61.3 million in advertising and promotional expenses in support of our commercial launch of VOQUEZNA products, $55.5 million increase in personnel-related expenses primarily due to the hiring of the sales force in late 2023 and in early 2024, and an increase of $7.9 million in professional services and other consulting costs.

Other Income (Expense).

Other expense of $34.3 million for the year ended December 31, 2023 consisted of $42.0 million of interest expense under the Hercules Loan and Revenue Interest Financing Agreements, partially offset by $7.9 million of interest income on deposits.

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 $56.9 million for the year ended December 31, 2024 consisted of $72.0 million of interest expense under the Loan Agreement and Revenue Interest Financing Agreement, partially offset by $15.1 million of interest income related to cash held in money market funds.

Other expense of $34.3 million for the year ended December 31, 2023 consisted of $42.0 million of interest expense under the Loan Agreement and Revenue Interest Financing Agreement, partially offset by $7.9 million of interest income related to cash held in money market funds.

Interest expense increased due to a higher debt balance under the Loan Agreement as well as a higher liability related to our Revenue Interest Financing Agreement versus the prior period, partially offset by higher interest income due to higher rates and our increased cash position.

Liquidity and Capital Resources

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Loan Agreement with Hercules

On September 17, 2021, or the Closing Date, we entered into a Loan and Security Agreement, as amended, the Loan Agreement, with Hercules Capital, Inc.

(in such capacity, the Agent or Hercules), as administrative agent and collateral agent and as a lender and the other financial institutions that from time to time become parties to the Loan Agreement as lenders (collectively, the Lenders).

On September 17, 2021, or the Closing Date, we entered into the Loan Agreement with Hercules (in such capacity, the Agent or Hercules), as administrative agent and collateral agent and as a lender 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 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 million, all of which was funded on the Closing Date, or the First Advance, (ii) a second tranche consisting of up to an additional $50 million, (iii) a third and fourth tranches consisting of an additional total $50 million, which became available to us in May 2022.

On September 27, 2022, we 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.

On September 27, 2022, we 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 us has been moved until May 15, 2023, rather than December 15, 2022.

On May 9, 2023, we entered into the Third Amendment to Loan and Security Agreement, or the Third Loan Amendment, with the lenders, pursuant to which, among other things, (i) the second tranche availability was extended from through May 15, 2023, to through December 15, 2023, and became available on October 1, 2023, (ii) the third tranche availability was extended from through September 30, 2023, to through December 15, 2023, and became available on October 1, 2023, (iii) the effective date of the Performance Covenants was amended to provide an option to extend the covenant trigger date to May 15, 2024, subject to the achievement of the FDA approval of vonoprazan for Erosive GERD or the EE Milestone, prior to February 15, 2024, and (iv) the warrant agreement with Hercules was amended as described below.

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In connection with the Third Loan Amendment, a tranche extension amendment fee of $150,000 and a covenant extension amendment fee of $100,000 was paid to the Agent.

These fees have been

recorded as debt discount and are being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

On December 14, 2023, we entered into a Fourth Amendment to Loan and Security Agreement, or the Fourth Loan Amendment, with the lenders, pursuant to which, among other things, (i) increases the aggregate principal amount of the term loans from $200 million to $300 million;

These fees have been recorded as debt discount and are being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

On December 14, 2023, we entered into a Fourth Amendment to Loan and Security Agreement, or the Fourth Loan Amendment, with the lenders, which, among other things, (i) increases the aggregate principal amount of the term loans from $200 million to $300 million;

(ii) provides for the possibility of accessing the $200 million commitment through five additional tranches referred to as tranches 2 through 6, which are available subject to certain milestones and conditions:

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In connection with the Fourth Loan Amendment, an amendment fee of $250,000 was paid to the Agent and was recorded as a debt discount and being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

On March 15, 2024, we drew down the remaining $10 million available under the Second Tranche.

On June 14, 2024, we drew down the $25 million available under the Third Tranche.

Additionally, on December 14, 2024, we drew down the $25 million available under the Fourth Tranche.

The Term Loan will mature on December 1, 2027, or the Maturity Date.

The Term Loan bears (i) cash interest at a variable annual rate equal to the greater of (a) 9.85% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 1.35%, or the Interest Rate, and (ii) payment-in-kind interest at a per annum rate of interest equal to 2.15%.

We may make payments of interest only through the Maturity Date.

We may make payments of interest

only through the Maturity Date.

After the interest-only period, the principal balance and related interest will be required to be repaid in full on the Maturity Date.

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Additionally, the initial final payment fee for the first term Loan advance was amended to become payable on October 1, 2026.

As of December 31, 2023, the aggregate final payment fee for the first Term Loan Advance of $7.5 million and $2.2 million for the second Term Loan Advance, and have both been recorded within other long-term liabilities.

As of December 31, 2024, the aggregate $11.5 million of final payment fees includes the first Term Loan Advance of $7.5 million, $2.5 million for the second Term Loan Advance, $0.8 million for the third Term Loan Advance, and $0.7 million for the fourth Term Loan Advance have been recorded within other long-term liabilities.

Under the Fourth Loan Amendment, we 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 when such prepayment occurs prior to October 1, 2026, or 0.50% if such prepayment occurs on or after October 1, 2026.

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Revenue Interest Financing Agreement

On May 3, 2022, we 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, or the Initial Investors, pursuant to which we could receive up to $260 million in funding from the Initial Investors.

On May 3, 2022, we 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, together with NQ and Sagard, or the Initial Investors, pursuant to which we could 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 received an additional $160 million upon FDA approval of vonoprazan for treatment of Erosive GERD in the fourth quarter of 2023.

Additionally, on October 31, 2022, we entered into a Joinder and Waiver Agreement with the Initial Investors and CO Finance LVS XXXVII LLC, or 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, or the Joinder Agreement, in respect of the Revenue Interest Financing Agreement.

Additionally, on October 31, 2022, we entered into a Joinder and Waiver Agreement with the Initial Investors and CO Finance LVS XXXVII LLC, or the Additional Investor, and Hercules in its capacity as administrative agent and collateral agent for itself and the lenders under that certain Loan Agreement, or the Joinder Agreement, in respect of the Revenue Interest Financing Agreement.

Under the terms of the Joinder Agreement, we received $15 million in additional funding upon FDA approval of vonoprazan for Erosive GERD, or Approval Additional Funding, in the fourth quarter of 2023 and provides for $25 million in additional funding for achievement of a sales milestone, or Milestone Additional Funding, and, together with the Approval Additional Funding, or the Additional Investor Funding.

The Initial Investors waived their right of first offer for any Additional Investor Funding.

On December 23, 2024, CO Finance LVS XXXVII LLC agreed to assign and transfer to OC III LVS LX LP all of its rights, title and interest as an Additional Investor and in connection therewith, OC III LVS LX LP executed a Joinder Agreement.

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 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.

As of December 31, 2024, no additional funding is available under the Revenue Interest Financing Agreement.

Under the Revenue Interest Financing Agreement, the Initial Investors and the Additional 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 upon FDA approval for vonoprazan for an indication relating to the treatment of heartburn associated with Non-Erosive GERD, which occurred on July 17, 2024.

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.

In addition, at any time after April 30, 2024, 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.

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At-the-Market-Offerings

On November 10, 2020, we entered into an Open Market Sale Agreement SM , 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 million through the Sales Agent, or the 2020 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.

In November 2020, we entered into an Open Market Sale Agreement SM , 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 an amount registered under an effective registration statement through the Sales Agent.

In November 2023, we filed a shelf registration statement on Form S-3 which was declared effective by the SEC on November 17, 2023, which included an at-the-market prospectus pursuant to which we may, from time to time, sell up to an aggregate of $150 million of our common stock through the Sales Agent, or the 2023 ATM Offering.

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.

The sales agreement expired on November 9, 2023 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.

For the year ended December 31, 2023, we sold 1,514,219 shares of our common stock under the ATM Offering for net proceeds of approximately $14.1 million after deducting $0.4 million of issuance costs.

As of December 31, 2023, we utilized $39.9 million of the available $125 million under the 2020 ATM Offering.

On November 9, 2023, we entered into an Open Market Sale Agreement SM , 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 $150 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 9, 2023 and declared effective by the SEC on November 17, 2023.

We are not obligated to, and we cannot provide any assurances that we will, make any sales of the shares under the Sales Agreement.

As of December 31, 2023, we utilized none of the available $150 million under the ATM Offering.

Underwritten Public Offering

For the year ended December 31, 2023, we sold 1,514,219 shares for net proceeds of approximately $14.1 million after deducting $0.4 million of issuance costs.

No shares were sold during the year ended December 31, 2024.

As of December 31, 2024, all of the available $150 million under the 2023 ATM Offering remains available.

Underwritten Public Offerings

On May 23, 2023, we completed an underwritten public offering, in which we sold 12,793,750 shares of our common stock, which included the exercise in full by the underwriters of their option to purchase 1,668,750 shares, at a price of $11.75 per share for total gross proceeds of $150.3 million.

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We incurred an additional $0.4 million of offering expenses in connection with this public offering.

On August 20, 2024, we completed an underwritten public offering, in which we sold 8,695,652 shares of our common stock at a price of $11.50 per share and pre-funded warrants to purchase 2,608,922 shares of our common stock at a price of $11.499 per pre-funded warrant for total gross proceeds of $130.0 million.

The net purchase price after deducting the underwriting discounts and commissions and other offering expenses, was $10.77 per share or net proceeds of $121.8 million.

Funding Requirements

We expect such amounts will allow us to complete our ongoing Phase 3 clinical trial studying vonoprazan for Non-Erosive GERD (daily dosing), and commercial activities for VOQUEZNA for H.

pylori and Erosive GERD.

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 together with anticipated product revenues, are sufficient to fund operations for at least the next twelve months and we believe will be sufficient to enable us to reach cashflow positivity.

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.

We have based this estimate on assumptions that may prove to be inaccurate, and we could deplete our capital resources sooner than we expect and not reach cashflow positivity based on the amount and timing of product sales and operating expenses, among other factors.

Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Our future capital requirements will depend on many factors, including:

• 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 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 and timing of manufacturing for vonoprazan or any future product candidates, including commercial scale manufacturing for any approved product candidates;

• the costs, timing and outcome of regulatory review of future vonoprazan applications or such applications for 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 costs associated with hiring additional personnel and consultants as our business grows;

• 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;

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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.

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.

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.

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):

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Financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

Operating Activities

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The net cash used in operating activities for the year ended December 31, 2024 was due to approximately $251.5 million spent on ongoing research and development and selling, general and administrative activities and a $15.3 million net change in operating assets and liabilities.

The net change in operating assets and liabilities primarily related to a $35.7 million increase in accounts payable and accrued expenses (including interest, operating lease assets and liabilities), and a $51.0 million increase in accounts receivable, inventory, and prepaid assets and other current assets in support of our growth and continued launch of our commercial products.

The net cash used in operating activities for the year ended December 31, 2023 was due to approximately $124.0 million spent on ongoing research and development and selling, general and administrative activities and a $13.6 million net change in operating assets and liabilities.

The net change in operating assets and liabilities primarily related to a $6.9 million increase in accounts payable and accrued expenses (including interest, operating lease assets and liabilities, and clinical trial expenses), and a $20.5 million increase in prepaid assets and other current assets, accounts receivable, inventory, and other long-term assets, in support of our growth and commercial operations.

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.

Investing Activities

Net cash used in investing activities for the years ended December 31, 2023 and 2022 was primarily due to the cash we paid for acquiring property, plant and equipment.

Net cash used in investing activities for the years ended December 31, 2024 and 2023 was related to payments for acquiring property and equipment.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 was $367.6 million, due to $172.7 million of net proceeds from the Revenue Interest Financing Agreement, $155.6 million due to the proceeds from the sale of common stock, and $39.3 million from the issuance of debt under our Loan Agreement, as amended, with Hercules.

Net cash provided by financing activities for the year ended December 31, 2022 was $120.0 million, due to $95.4 million of net proceeds from the Revenue Interest Financing Agreement and $24.6 million of net proceeds from the issuance of common stock under the 2020 ATM Offering.

Net cash provided by financing activities for the year ended December 31, 2024 was $182.8 million primarily related to $59.4 million of net proceeds from the issuance of debt under our Loan Agreement, $121.8 million of net proceeds from issuance of common stock and pre-funded warrants in connection with the underwritten public offering completed in August 2024, and $1.6 million of proceeds from the exercise of stock options.

Net cash provided by financing activities for the year ended December 31, 2023 was $367.6 million, primarily due to $172.7 million of net proceeds from the Revenue Interest Financing Agreement, $155.6 million due to the proceeds from the sale of our common stock, and $39.3 million from the issuance of debt under our Loan Agreement.

Contractual Obligations and Commitments

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 of expenses related to the Commercial Supply Agreement during the year ended December 31, 2022.

We have no remaining minimum purchase obligation related to this agreement.

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 us to a minimum purchase obligation of approximately $3.2 million during the first 24-month period following the launch of the final product.

We have incurred $0.3 million of expenses under the agreement during the year ended December 31, 2023.

We have incurred $0.3 million of expenses under the agreement during each of the years ended December 31, 2024 and 2023.

As of December 31, 2024, €1.8 million, or approximately $1.9 million, remains of the minimum purchase obligation.

Additionally, on May 3, 2022, we 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.

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We received $100 million at the initial closing and an additional $175 million in fourth quarter 2023 following FDA approval of vonoprazan for treatment of Erosive GERD, or the Investment Amount.

In addition, we were eligible for $25 million in additional funding for achievement of a sales milestone.

Under the Revenue Interest Financing Agreement, the Initial Investors and Additional Investor 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 years ended December 31, 2023 and 2022.

As of December 31, 2024, no additional funding is available under the Revenue Interest Financing Agreement.

Under the Revenue Interest Financing Agreement, the Initial Investors and Additional 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 less any royalties already paid.

During the years ended December 31, 2024 and 2023 we made $2.6 million and no royalty payments, respectively, under the Revenue Interest Financing Agreement.

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.

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Revenue Recognition

Revenues from product sales are recorded at the net sales price, or transaction price, which includes estimates of variable consideration that result from (a) invoice discounts for prompt payment and distribution service fees, (b) government and private payor rebates, chargebacks, discounts and fees, (c) product returns and (d) costs of co-pay assistance programs for patients, as well as other incentives for certain indirect customers.

Revenues from product sales may vary due to rebates, chargebacks, discounts and fees provided under government and other programs, product returns and other sales-related deductions.

Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales.

The reserves are classified as reductions to trade receivable, net if payable to a customer or accrued expenses if payable to a third-party.

Where appropriate, we utilize the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as current contractual and statutory

requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

The amount of variable consideration that is included in the transaction price may be constrained and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

The reserves are classified as reductions to accounts receivable, net if payable to a customer or accrued expenses if payable to a third-party or related to product returns.

Where appropriate, we utilize the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

The amount of variable consideration that is included in the transaction price may be

constrained and is included in net product revenues only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Actual amounts of consideration ultimately received may differ from our estimates.

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We will adjust our estimates based on new information, including information regarding actual rebates, chargebacks and discounts for our products, as it becomes available.

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.

Revenue Interest Financing Liability

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See Note 6 "Revenue Interest Financing Liability" for additional details.

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, 2023, 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, performance-based awards, stock options, and ESPP awards.

Other Company Information

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 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 billion in non-convertible debt securities during the prior three-year period.

Smaller Reporting Company Status

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

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 (i) our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter.

Recent Accounting Pronouncements

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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.”

This annual report does not include an attestation report of our independent registered public accounting firm due to an exclusion for non-accelerated filers.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2023, we implemented processes and internal controls to record product revenue, cost of product revenues, accounts receivable, and inventory as a result of the FDA approval and the U.S commercial launch of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK.

The implementation of these processes resulted in material changes to our internal controls over financial reporting.

There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), identified in connection with the evaluation of such internal control that occurred during the fourth quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting during the fourth quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Oth er Information

Director and Officer Trading Arrangements:

Rule 10b5-1 Trading Plans

From time to time, our officers (as defined in Rule 16a-1(f) of the Exchange Act) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K).

During the three months ended December 31, 2024 , none of our officers or directors adopted , modified or terminated any such trading arrangements.

Disclosure Regarding Foreign Jurisdiction that Prevent Inspection

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Directors, Executive O fficers and Corporate Governance

The information required by this item will be contained in our Definitive Proxy Statement to be filed with the SEC in connection with our 2024 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, 2023, under the headings “Election of Directors,” “Executive Officers,” and “Corporate Governance,” and is incorporated herein by reference.

The information required by this item will be contained in our Definitive Proxy Statement to be filed with the SEC in connection with our 2025 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, 2024, under the headings “Election of Directors,” “Executive Officers,” “Corporate Governance,” and is incorporated herein by reference.

Insider Trading Policies and Procedures

We have adopted a formal policy against insider trading which provides guidelines to all of our directors, officers, employees, and consultants with respect to trading in our securities, as well as the securities of publicly traded companies with whom we have a business relationship.

This policy has been designed to prevent insider trading or even allegations of insider trading.

Code of Conduct and Ethics

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The information required by this item will be set forth in the section headed “Independent Registered Public Accounting Firm's Fees” in our Definitive Proxy Statement and is incorporated herein by reference.

Exhibits, Finan cial Statement Schedules

Exhibits and Finan cial Statement Schedules

All financial statements.

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Statements of Operations and Comprehensive Loss

Statements of Stockholders’ Equity (Deficit)

Statements of Stockholders’ Deficit

Statements of Cash Flows

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We have audited the accompanying balance sheets of Phathom Pharmaceuticals, Inc.

(the Company) as of December 31, 2023 and 2022, 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, 2023, and the related notes (collectively referred to as the “financial statements”).

(the Company) as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, stockholders' deficit and cash flows for each of the two years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024 , in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Reserve for Product Returns

Description of the Matter

During the year ended December 31, 2024, the Company’s net product revenues were $55.3 million.

As explained in Note 1 of the financial statements, net product revenue includes estimates of variable consideration for which reserves are established, including the reserve for product returns.

The Company provides customers a return credit in the amount of the purchase price paid by customers for all products returned in accordance with the Company’s returned goods policy.

The Company estimates its provision for sales returns based on available industry data,

including visibility into the inventory remaining in the distribution channel, and adjusts the transaction price with such estimate at the time of sale to the customer.

Auditing the Company’s measurement of the reserve for product returns was challenging due to (1) the significant judgment required in determining the estimated returns rate and inventory in the distribution channel that will not ultimately be sold to the end user and returned, and (2) the limited returns history on which the estimated returns rate is based.

The reserve for product returns is sensitive to the level of inventory in the distribution channel, which could exceed future market demand and be subject to return.

How We Addressed the Matter in Our Audit

To test the reserve for product returns, we performed audit procedures that included, among others, testing the accuracy and completeness of the underlying data used in the calculations and evaluating the assumptions used by management to estimate the Company’s reserves.

We tested the industry data used in the calculation of the estimated returns rate by inspecting industry publications.

In addition, we tested the Company’s analysis of inventory held at various stages in the distribution channel.

We obtained third-party confirmation of prescription data and tested inventory in the distribution channel reported by significant customers.

We also inspected agreements with significant customers to validate the rights of return and performed inquiries with management, including the Commercial and Legal departments, regarding any changes to the terms and conditions of customer contracts.

We also performed a sensitivity analysis over the Company’s returns rate to assess the effect of changes in assumptions.

/s/ Ernst & Young LLP

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Total current assets

Property, plant and equipment, net

Property and equipment, net

Operating lease right-of-use assets

Restricted cash

Inventory, noncurrent

Inventory, non-current

Other long-term assets

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Current liabilities:

Accounts payable (including related party amounts of $ 25 and $ 35 , respectively)

Accrued expenses (including related party amounts of $ 2,694 and $ 2,499 , respectively)

Accounts payable

Accrued expenses

Accrued interest

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authorized shares — 400,000,000 at December 31, 2024 and December 31, 2023;

issued shares — 57,970,044 and 41,723,308 at December 31, 2023 and December 31, 2022, respectively;

outstanding shares — 57,970,044 and 41,468,871 at December 31, 2023 and December 31, 2022, respectively

issued and outstanding shares — 68,518,238 and 57,970,044 at December 31, 2024 and December 31, 2023, respectively

Treasury stock — 19 shares at December 31, 2024 and December 31, 2023

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Operating expenses:

Research and development (includes related party amounts of $ 760 and $ 2,123 , respectively)

Selling, general and administrative (includes related party amounts of $ 55 and $ 0 , respectively)

Research and development

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense):

Other (expense) income:

Interest income

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PHATHOM PHARMACEUTICALS, INC.

Statements of Sto ckholders’ Equity (Deficit)

Statements of Sto ckholders’ Deficit

(in thousands, except share amounts)

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Stockholders’

Equity (Deficit)

Balance at December 31, 2023

401(k) matching contribution

Vesting of restricted shares, performance stock units, and restricted stock units

Vesting of restricted stock units

Stock-based compensation

ESPP shares issued

Issuance of common stock under ATM facility

Issuance of common stock from exercise of stock options

Issuance of common stock in connection with underwritten public offering, net

Issuance of common stock from exercises of stock options

Issuance of common stock and pre-funded warrants in connection with the underwritten public offering, net

Balance at December 31, 2024

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Stockholders’

Equity (Deficit)

Balance at December 31, 2022

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

Vesting of restricted shares, performance stock units, and restricted stock units

Stock-based compensation

ESPP shares issued

Issuance of common stock under ATM facility

Issuance of common stock from exercises of stock options

Issuance of common stock in connection with underwritten public offering, net

Balance at December 31, 2023

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Amortization of debt discount

Inventory reserve

Changes in operating assets and liabilities:

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Accounts receivable, net

Accounts payable and accrued expenses (includes changes in related party amounts of $ 184 and $ 1,139 , respectively)

Accrued clinical trial expenses

Accounts payable and accrued expenses

Accrued interest

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Cash flows from investing activities

Cash paid for property, plant and equipment

Cash paid for property and equipment

Net cash used in investing activities

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents and restricted cash

Net (decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash – beginning of period

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Settlement of 401(k) liability in common stock

Operating lease liabilities arising from obtaining right-of-use assets

See accompanying notes.

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On October 27, 2023, the U.S.

Food and Drug Administration, or FDA, approved the prior approval supplements to our new drug applications, or NDAs, for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK.

Additionally, on November 1, 2023, the FDA approved our NDA for VOQUEZNA tablets.

As a result, the Company initiated commercial launch for VOQUEZNA for both the Erosive GERD and H.

Food and Drug Administration, or FDA, approved the prior approval supplements to the Company's new drug applications, or NDAs, for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK.

Additionally, on November 1, 2023, the FDA approved the Company's NDA for VOQUEZNA tablets.

The Company initiated commercial launch for VOQUEZNA for both the Erosive GERD and H.

pylori indications, and VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK for treatment of H.

pylori infection in the fourth quarter of 2023.

Additionally, o n July 17, 2024, the FDA approved VOQUEZNA 10 mg tablets for the relief of heartburn associated with Non-Erosive GERD.

Liquidity and Capital Resources

From inception to December 31, 2023, the Company has devoted substantially all of its efforts to organizing and staffing the Company, business planning, raising capital, in-licensing its initial and approved product candidate, vonoprazan, meeting with regulatory authorities, managing the clinical trials of vonoprazan, preparing for commercialization of its initial products containing vonoprazan, commercial launch of approved products, and providing other selling, general and administrative support for these operations.

The Company has a limited operating history, generated limited revenue to date, and the sales and income potential of its business is unproven.

From inception to December 31, 2024, the Company has devoted substantially all of its efforts to organizing and staffing the Company, business planning, raising capital, in-licensing its initial and approved product candidate, vonoprazan, meeting with regulatory authorities, managing the clinical trials of vonoprazan, preparing for commercialization of its initial products containing vonoprazan, commercially launching its approved products, and providing other selling, general and administrative support for these operations.

The Company has a limited operating history, has generated limited revenue to date, 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.

From inception to December 31, 2023 , 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, the sale of 3,929,116 shares of common stock for net proceeds of approximately $ 38.7 million in its issuances of common stock pursuant to the Open Market Sale Agreement SM , or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $ 150 million, or the ATM Offering, and the sale of 12,793,750 shares of common stock for net proceeds of approximately $ 141.4 million in its May 2023 public 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.

The Company has funded its operations primarily through commercial bank debt, the revenue interest financing debt and various equity offerings, including the Company's at-the-market, or ATM, offerings.

In August 2024, the Company closed an underwritten public offering of 8,695,652 shares of its common stock and 2,608,922 pre-funded warrants for net proceeds of approximately $ 121.8 million (see Note 7 for additional information).

From inception through December 31, 2024 , the Company sold 34,737,032 shares of common stock and 2,608,922 pre-funded warrants, generating net proceeds of approximately $ 543.3 million, after deducting underwriting discounts, commissions and offering costs.

Management is required to perform a two-step analysis over the Company’s ability to continue as a going concern.

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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.

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 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.

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The preparation of the Company’s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues 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 net product revenues and research and development expenses, the valuation for the revenue interest financing liability, and various other equity instruments.

The most significant estimates in the Company’s financial statements relate to accruals for net product revenues and the valuation for the revenue interest financing liability.

In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.

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Our contracts with customers have standard payment terms.

The Company assesses the need for an allowance for doubtful accounts primarily based on creditworthiness, historical payment experience and general economic conditions.

The Company has not experienced any credit losses to date given our limited commercial operations with any of its customers, and has not currently recognized any allowance for doubtful accounts.

The Company assesses the need for an allowance for credit losses primarily based on creditworthiness, historical payment experience and general economic conditions.

The Company has not experienced any credit losses to date given our limited commercial operations with any of its customers, and has not currently recognized a material allowance for credit losses.

Concentrations of Credit Risk

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The Company is also subject to credit risk from our accounts receivable related to our product sales.

The Company monitors exposure within accounts receivable and records a reserve against uncollectible accounts receivable as necessary.

The Company extends credit primarily to pharmaceutical wholesale distributors.

The Company monitors exposure within accounts receivable and records an allowance for credit losses as necessary.

The Company extends credit primarily to wholesale distributors.

Customer creditworthiness is monitored and collateral is not required.

The amount of the allowance for credit losses is determined primarily on the basis of collection experience and known financial factors regarding specific customers.

The allowance for credit losses reflects the best estimate of expected credit losses of the accounts receivable portfolio determined on the basis of historical experience, current information, and forecasts of future economic conditions.

The Company determines its allowance methodology by pooling receivable balances at the customer level.

The Company considers various factors, including its previous loss history, individual credit risk associated to each customer, and the current and future conditions of the general economy.

These credit risk factors are monitored on a quarterly basis and updated as necessary.

To the extent that any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such customer.

The Company makes concerted efforts to collect all outstanding balances due from customers;

however, account balances are charged off against the allowance when management believes it is probable the receivable will not be recovered.

The Company does not have any off-balance-sheet credit exposure related to customers.

As of December 31, 2024 , three customers accounted for 81 % of the accounts receivable balance, with each of these individual customers ranging from 25 % to 31 % of the accounts receivable balance.

For the year ended December 31, 2023 , three customers accounted for 86 % of our product sales, with each of these individual customers ranging from 27 % to 30 % of our product sales.

As of December 31, 2023 , three customers accounted for 87 % of the accounts receivable balance, with each of these individual customers ranging from 28 % to 30 % of the accounts receivable balance.

For the year ended December 31, 2024 , three customers accounted for 69 % of the product sales, with each of these individual customers ranging from 22 % to 25 % of the product sales.

For the year ended December 31, 2023 , three customers accounted for 86 % of the product sales, with each of these individual customers ranging from 27 % to 30 % of the product sales.

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business.

The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs.

Inventory currently consists of bulk active pharmaceutical ingredients that will be used to manufacture vonoprazan tablets.

Inventory consists of bulk active pharmaceutical ingredients that are used to manufacture vonoprazan tablets and finished goods.

Inventory related to indications prior to regulatory approval has been included in research and development expense in the period of purchase.

The Company values its inventory at the lower of cost or net realizable value.

The Company measures inventory using actual cost under a first-in, first-out basis.

The Company states its inventory at the lower of cost or net realizable value.

The Company measures inventory cost using actual cost under a first-in, first-out basis.

The Company assesses recoverability of inventory each reporting period to determine any write-down to net realizable value resulting from excess or obsolete inventories.

Property, Plant, and Equipment, Net

Property, plant and equipment are recorded at cost, less accumulated depreciation.

During the year ended December 31, 2024, the Company recorded approximately $ 0.8 million of charges for inventory not expected to be sold prior to its expiration date.

No inventory adjustments or charges were recorded during the year ended December 31, 2023.

Property and Equipment, Net

Property 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.

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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.

The Company reviews long-lived assets, including property 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, 2023 and 2022 .

No impairment losses have been recorded for the years ended December 31, 2024 and 2023 .

Other Long-Term Assets

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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.

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.

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Subsequently, in October 2022, the Company entered into a Joinder Agreement with the Initial Investors and CO Finance LVS XXXVII LLC, or the Additional Investor, together as the Investors.

The net proceeds received under the transactions are recognized as short-term and long-term liabilities with interest expense based on an imputed effective rate derived from the expected future payments to the Investors.

The Company recalculates the effective interest rate each period based on the current carrying value and the revised estimated future payments to the Investors.

Changes in future payments to the Investors from previous estimates are included in current and future financing expense.

Changes in future payments to the Investors from previous estimates are included in current and future interest expense.

Revenue Recognition

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The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that it transfers to the customer.

Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must deliver and

which of these performance obligations are distinct.

Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct.

The Company recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.

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Product Revenue, Net

The Company sells its product to its customers in the United States.

The Company sells its product to its customers, primarily wholesale distributors, in the United States.

The Company’s customers subsequently resell the products to pharmacies and health care providers.

In accordance with ASC 606, the Company recognizes net product revenues from sales when the customers obtain control of the Company’s products, which typically occurs upon delivery to the customer.

as other incentives for certain indirect customers.

Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales.

The reserves are classified as reductions to accounts receivable, net if payable to a customer or accrued expenses if payable to a third-party.

The reserves are classified as reductions to accounts receivable, net if payable to a customer or accrued expenses if payable to a third-party or related to product returns.

Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

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Data Reporting, Inventory Management, Chargeback Administration and Service Level Commitment.

The Company estimates the amount of distribution services fees to be paid to the customers and adjusts the transaction price with the amount of such estimate at the time of sale to the customer.

The Company estimates the amount of distribution services fees to be paid to the customers based on a contractually fixed percentage of wholesaler acquisition costs and are calculated at the time of sale based on the purchase amount and the transaction price is adjusted with the amount of such estimate at the time of sale to the customer.

Estimated distribution service fees are recorded within accounts receivable, net on the balance sheets.

Prompt Pay Discounts:

The Company provides its customers with a percentage discount on their invoice if the customers pay within the agreed upon timeframe.

The Company estimates the probability of customers paying promptly and the percentage of discount outlined in the agreement, and deducts the full amount of these discounts from its gross product revenues and accounts receivable at the time such revenues are recognized.

The Company estimates the probability of customers paying promptly and the percentage of discount outlined in the agreement, and deducts the full amount of these discounts.

Estimated prompt pay discounts are recorded within accounts receivable, net on the balance sheets.

Product Returns:

The Company provides customers a return credit in the amount of the purchase price paid by customers for all products returned in accordance with the Company’s returned goods policy.

In the initial sales period, the Company estimates its provision for sales returns based on industry data and adjusts the transaction price with such estimate at the time of sale to the customer.

Once sufficient history has been collected for product returns, the Company will utilize that history to inform its estimate assumption.

In the initial sales period, the Company estimates its provision for sales returns based on available industry data including visibility into the inventory remaining in the distribution channel, and adjusts the transaction price with such estimate at the time of sale to the customer.

Once sufficient history has been collected for product returns, the Company will utilize that history to inform its estimate assumptions.

Once the product is returned, it is destroyed.

The Company does not record a right-of-return asset.

Estimated product returns are recorded as accrued expenses on the balance sheets.

A chargeback is the difference between the manufacturer's invoice price to the wholesaler and the contract price the wholesaler’s customer has negotiated directly with the manufacturer.

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The Company estimates the percentage of goods sold that are eligible for chargeback and adjusts the transaction price for such discount at the time of sale to the customer.

Estimated chargebacks are recorded within accounts receivable, net on the balance sheets.

Administration Fees:

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The Company estimates the amount of administration fees to be paid to PBMs and adjusts the transaction price with the amount of such estimate at the time of sale to the customer.

Estimated administration fees are recorded within accrued expenses on the balance sheets.

Rebates apply to:

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The Company estimates the percentage of goods sold that are eligible for rebates and adjusts the transaction price for such discounts at the time of sale to the customers.

Estimated rebates are recorded as accrued expenses on the balance sheets.

Coverage Gap:

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The Company estimates the percentage of goods sold under Coverage Gap and adjusts the transaction price for such discount at the time of sale to the customer.

Estimated coverage gap accruals are recorded as accrued expenses on the balance sheets.

The Company makes significant estimates and judgments that materially affect its recognition of net product revenue.

Claims by third-party payors for rebates, chargebacks and discounts frequently are submitted to the Company significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known.

The Company will adjust its estimates based on new information, including information regarding actual rebates, chargebacks and discounts for its products, as it becomes available.

The Company will adjust its estimates based on new information, including information regarding actual rebates, chargebacks, co-pays and discounts for its products, as it becomes available.

Cost of Revenue

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In addition, shipping and handling costs for product sales are recorded as incurred.

Finally, cost of revenue may also include costs related to excess or obsolete inventory adjustment charges.

In connection with the FDA approvals of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK , the Company began capitalizing inventory manufactured or purchased.

As a result, certain manufacturing costs associated with product shipments were expensed prior to FDA approval and, therefore, are not included in cost of goods sold during the current period.

These previously expensed costs were not material for the year ended December 31, 2023.

Cost of revenue also includes costs related to excess or obsolete inventory adjustment charges and other inventory write-offs.

In connection with the FDA approvals of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK, the Company began capitalizing inventory manufactured by or purchased from third parties.

Prior to receiving FDA approvals, manufacturing costs related to inventory purchased were expensed as research and development expense and therefore are excluded from cost of revenue during the current year.

The exclusion of these previously expensed costs did not have a material impact on cost of revenue in the current year.

Research and Development Expenses and Accruals

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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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of salaries, stock-based compensation, facilities and third-party expenses.

Selling, general and administrative expenses are associated with the activities of the commercial, executive, finance, accounting, information technology, legal, medical affairs and human resource functions.

Selling, general and administrative expenses consist of salaries and employee-related costs, including stock-based compensation, for personnel in commercial, executive, finance, accounting, information technology, legal, medical affairs and human resources functions.

Advertising and Marketing Costs

Advertising and marketing costs are expensed as incurred.

Advertising and marketing costs are included in selling, general and administrative expenses and were not material for the years ended December 31, 2023 and 2022 .

Advertising and marketing costs for the year ended December 31, 2024 was approximately $ 61.3 million, and are included in selling, general and administrative expenses.

Advertising and marketing costs were not material for the year ended December 31, 2023 .

Stock-Based Compensation

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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.

Pre-funded Warrants

The Company issued pre-funded warrants in connection with an underwritten public offering that were accounted for as a freestanding equity-linked financial instrument that met the criteria for equity classification under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

Accordingly, the Company classified the pre-funded warrants as a component of shareholders’ equity within additional paid-in capital.

The Company valued the pre-funded warrants at issuance, concluding that their sales price approximated their fair value, and allocated the net proceeds from the offering proportionately to the common shares and pre-funded warrants.

See Note 7 for further discussion related to the offering.

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.

For the years ended December 31, 2023 and 2022 , the Company has excluded weighted-average unvested shares of 34,503 and 686,703 , respectively, from the weighted-average number of common shares outstanding.

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding and pre-funded warrants for the period, without consideration for other potentially dilutive securities.

For the year ended December 31, 2024, basic shares outstanding includes the weighted average effect of the Company’s outstanding pre-funded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock.

For the years ended December 31, 2024 and 2023 , the Company had no weighted-average unvested shares and 34,503 , respectively, to exclude 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.

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 restricted stock units) would be antidilutive .

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016 -13, Financial Instruments — Credit Losses, or ASU 2016-13, which changes the accounting for recognizing impairments of financial assets.

Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses.

ASU 2016-13 also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination.

ASU 2016-13 is effective for annual periods beginning after December 15, 2022 (fiscal year 2023 for the Company), and interim periods within those periods, with early adoption permitted.

The Company adopted ASU 2016-13 effective January 1, 2023 .

The standard did no t have a material impact on the financial statements.

In November 2023, the FASB issued ASU 2023-07 – Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, which improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses.

The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment.

The Company adopted the guidance in the fiscal year beginning January 1, 2024 using a retrospective method.

See Note 10 for further detail.

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 accounting standards issued or adopted in year of 2023 that materially impacted or are expected to materially impact the Company's financial statements.

In December 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, which improves income tax disclosures primarily relating to the rate reconciliation and income taxes paid information.

This includes a tabular reconciliation using both percentages and reporting currency amounts, covering various tax and reconciling items, and disaggregated summaries of income taxes paid during the period.

For public business entities, the guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company intends to adopt the guidance in the fiscal year beginning January 1, 2025.

The Company is currently evaluating the effect of adopting this pronouncement on our financial statements and disclosures.

Balance Sheet Details

Property, Plant and Equipment, net

Property, plant and equipment, net, consist of the following (in thousands):

Property and Equipment, net

Property and equipment, net, consist of the following (in thousands):

Computer equipment and software

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Leasehold improvements

Construction in process

Total property, plant and equipment, gross

Total property and equipment, gross

accumulated depreciation and amortization

Total property, plant and equipment, net

Depreciation and amortization expense for both the years ended December 31, 2023 and 2022 was approximately $ 0.6 million.

No property, plant or equipment was disposed of during the years ended December 31, 2023 and 2022.

Total property and equipment, net

Depreciation and amortization expense for the years ended December 31, 2024 and 2023 was approximately $ 0.8 million and $ 0.6 million, respectively.

No property or equipment was disposed of during the years ended December 31, 2024 and 2023.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

Accrued research and development expenses

Accrued compensation expenses

Accrued professional & consulting expenses

Accrued sales discounts and allowances

Accrued research and development expenses

Accrued revenue allowances

Accrued other

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Total inventory, current

Raw materials, noncurrent

Raw materials, non-current

Total inventory

Raw materials consist of materials, including active pharmaceutical ingredients, to be consumed in the production of inventory related to FDA-approved products.

Prior to FDA approvals, all costs related to manufacturing were charged to research and development expense in the period incurred, therefore, inventory is not included as of December 31, 2022.

Inventory that is used for clinical development purposes is expensed to research and development expense when consumed.

Inventory, noncurrent includes inventory expected to remain on-hand beyond one year from the balance sheet date presented.

Related Party Transactions

Frazier is a principal stockholder of the Company with representation on the Board of Directors.

Frazier is compensated for their participation on the Board of Directors and as of December 31, 2023 and December 31, 2022 , the Company had $ 28,000 and $ 15,000 , respectively, outstanding accounts payable and accrued expenses related to these services.

For the years ended December 31, 2023 and 2022 , the Company incurred $ 55,000 and $ 15,000 , respectively, of expenses related to participation on the Board of Directors.

Frazier is also a principal stockholder in PCI Pharma Services, or PCI.

Starting in the third quarter of 2019, the Company engaged PCI for clinical manufacturing services.

As of December 31, 2023 and 2022 , the Company had $ 1.2 million and $ 1.1 million, respectively, in outstanding accounts payable and accrued expenses related to these manufacturing services.

For the years ended December 31, 2023 and 2022 , the Company incurred $ 0.6 million and $ 0.7 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 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, 2023 and December 31, 2022 , the Company had $ 1.5 million and $ 1.4 million, respectively, in outstanding accounts payable and accrued expenses related to these agreements.

For the years ended December 31, 2023 and 2022 , the Company incurred $ 0.1 million and $ 1.4 million, respectively, of expenses related to these agreements.

The Company has no remaining minimum purchase obligation related to these agreements.

Inventory, noncurrent includes inventory expected to remain on-hand beyond one year from the balance sheet dates presented.

Commitments and Contingencies

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Takeda may terminate the Takeda License if the Company challenges, or assists in challenging, licensed patents .

I n consideration of the Takeda License, the Company (i) paid Takeda $ 25 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.

I n consideration of the Takeda License, the Company (i) paid Takeda $ 25 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 initial public offering, or 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.

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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.

All Takeda Warrants were exercised in 2022.

During the year ended December 31, 2023 , the Company recorded $ 0.1 million of royalty expense under the Takeda License, which is included within accrued expenses as of December 31, 2023.

All Takeda Warrants were exercised by March 2022.

During the years ended December 31, 2024 and 2023, the Company recorded $ 5.5 million and $ 0.1 million, respectively, of royalty expense under the Takeda License, of which $ 3.0 million is included within accrued expenses as of December 31, 2024.

Purchase Commitments

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The supply agreement commits the Company to a minimum purchase obligation of € 2.9 million, or approximately $ 3.2 million, in the first 24-month period following the launch of the final product.

The Company has incurred $ 0.3 million and no expenses under the agreement during the years ended December 31, 2023 and 2022, respectively.

The Company incurred $ 0.3 million of expenses under the agreement during each of the years ended December 31, 2024 and 2023.

As of December 31, 2024 , € 1.8 million, or approximately $ 1.9 million, remains of the minimum purchase obligation.

Contingencies

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Lease Commitments

As of December 31, 2023 , 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 1 .3 years and 1 .7 years, respectively.

As of December 31, 2024, 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 0.3 years and 0.7 years, re spectively.

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.

The total rent expense for the years ended December 31, 2023 and 2022 was approximately $ 1.1 million and $ 1.0 million, respectively.

The following table summarizes supplemental balance sheet information related to the operating leases (in thousands):

Operating lease right-of-use assets

Total right-of-use assets

Operating lease liabilities, current

Operating lease liabilities, non-current

Total operating lease liabilities

The total rent expense for each of the years ended December 31, 2024 and 2023 was approximately $ 1.1 million.

Total short-term lease costs relating to leased vehicles was approximately $ 8.8 million for the year ended December 31, 2024, and was not material for the year ended December 31, 2023.

As of December 31, 2024, the future minimum annual lease payments under the operating leases were as follows (in thousands):

Year ending December 31:

Total minimum lease payments

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operating lease liabilities, current

Operating lease liabilities

Operating lease liabilities, non-current

Weighted-average remaining lease term (in years)

Weighted-average incremental borrowing rate

Operating cash flows for both the years ended December 31, 2023 and 2022 included cash payments for operating leases of $ 1.1 million, of which $ 0.1 million as of December 31, 2023 were prepaid lease payments.

Operating cash flows for the years ended December 31, 2024 and 2023 included cash payments for operating leases of $ 1.0 million and $ 1.1 million, respectively, of which $ 0.1 million as of December 31, 2024 and 2023 were prepaid lease payments.

Total debt consists of the following (in thousands):

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The Loan Agreement provides for term loans in an aggregate principal amount of up to $ 200 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 million, all of which was funded on the Closing Date, or the First Advance, (ii) a second tranche consisting of up to an additional $ 50 million, (iii) a third and fourth tranches consisting of an additional total $ 50 million, which became available to us in May 2022.

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 tranches consist of (i) a first tranche consisting of term loans in an aggregate principal amount of $ 100 million, all of which was funded on the Closing Date, or the First Advance, (ii) a second tranche consisting of up to an additional $ 50 million, (iii) a third and fourth tranches consisting of an additional total $ 50 million, which became available in May 2022.

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 was available to the Company and has been moved until May 15, 2023, rather than December 15, 2022.

On May 9, 2023, the Company entered into the Third Amendment to Loan and Security Agreement, or the Third Loan Amendment, with the lenders, pursuant to which, among other things, (i) the second tranche availability was extended from through May 15, 2023, to through December 15, 2023, and became available on October 1, 2023, (ii) the third tranche availability was extended from through September 30, 2023, to through December 15, 2023, and became available on October 1, 2023, (iii) the effective date of the performance covenants was amended to provide an option to extend the covenant trigger date to May 15, 2024, subject to the achievement of the FDA approval of vonoprazan for Erosive GERD or the EE Milestone, prior to February 15, 2024, and (iv) the warrant agreement with Hercules was amended as described below.

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These fees have been recorded as debt discount and are being amortized to interest expense using the effective interest method over the remaining term of the Term Loan .

On December 14, 2023, the Company entered into a Fourth Amendment to Loan and Security Agreement, or the Fourth Loan Amendment, with the lenders, pursuant to which, among other things, (i) increases the aggregate principal amount of the term loans from $ 200 million to $ 300 million;

On December 14, 2023, the Company entered into a Fourth Amendment to Loan and Security Agreement, or the Fourth Loan Amendment, with the lenders, which, among other things, (i) increases the aggregate principal amount of the term loans from $ 200 million to $ 300 million;

(ii) provides for the possibility of accessing the remaining $ 200 million commitment through five tranches referred to as the second through sixth tranches, which are available subject to certain milestones and conditions:

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$ 25 million available through December 15, 2024, (d) Fifth Tranche:

$ 50 million available, subject to the achievement of trailing three month net revenues greater than $ 60 million, or the Fifth Tranche milestone, through June 30, 2025, and (e) Sixth Tranche:

$ 50 million available, subject to the achievement of trailing three month net revenues greater than $ 80 million, or the Sixth Tranche milestone, through December 31, 2025;

$ 50 million available, subject to the achievement of a specified revenue milestone, or the Fifth Tranche milestone, through June 30, 2025, and (e) Sixth Tranche:

$ 50 million available, subject to the achievement of a specific revenue milestone, or the Sixth Tranche milestone, through December 31, 2025;

(iii) extends the interest only period and the maturity date from October 2026 to December 2027, (iv) reduces the cash interest rate from 10.75 % (floating 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 % to 9.85 % (floating rate based on the greater of (a) 9.85 % or (b) US WSJ Prime + 1.35 %), provided that the cash interest rate shall be capped at 10.35 % and upon the Company achieving the Sixth Tranche milestone, the cash interest floating rated shall be decreased by 0.35 % to 9.50 %, and (v) decreases the payment-in-kind interest rate from 3.35 % per annum to 2.15 % per annum.

In connection with the Fourth Loan Amendment, an amendment fee of $ 250,000 was paid to the Agent and was recorded as a debt discount and being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

In connection with the Fourth Loan Amendment, an amendment fee of $ 250,000 was paid to the Agent and was recorded as a debt discount and is being amortized to interest expense using the effective interest method over the remaining term of the Term Loan.

On March 15, 2024, the Company drew down on the remaining $ 10 million available under the Second Tranche.

On June 14, 2024, the Company drew down the $ 25 million available under the Third Tranche.

In addition, on December 14, 2024, the Company drew down the $ 25 million available under the Fourth Tranche.

T he Term Loan will mature on December 1, 2027 , or the Maturity Date.

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Additionally, the initial final payment fee for the first Term Loan Advance was amended to become payable on October 1, 2026.

As of December 31, 2023 , the aggregate final payment fee for the first Term Loan Advance of $ 7.5 million and $ 2.2 million for the second Term Loan Advance, have both been recorded within other long-term liabilities.

As of December 31, 2024 , the aggregate $ 11.5 million of final payment fees includes the first Term Loan Advance of $ 7.5 million, $ 2.5 million for the second Term Loan Advance, $ 0.8 million for the third Term Loan Advance, and $ 0.7 million for the fourth Term Loan Advance have been recorded within other long-term liabilities.

Under the Fourth Loan Amendment 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 when such prepayment occurs prior to October 1, 2026, or 0.50 % if such prepayment occurs on or after October 1, 2026.

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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.

In connection with the entry into the Third Loan Amendment, we amended the form of warrants to be issued upon drawdowns of future tranches such that the exercise price of such warrants shall be equal to the lesser (i) of $ 11.6783 , which was the trailing ten-day VWAP prior to entering into the Third Loan Amendment and (ii) the trailing ten-day VWAP preceding the date on which we drawdown future tranches.

In connection with the entry into the Fourth Loan Amendment, we eliminated the warrant agreement for all future tranches.

In connection with the entry into the Third Loan Amendment, the Company amended the form of warrants to be issued upon drawdowns of future tranches such that the exercise price of such warrants shall be equal to the lesser (i) of $ 11.6783 , which was the trailing ten-day VWAP prior to entering into the Third Loan Amendment and (ii) the trailing ten-day VWAP preceding the date on which the Company drawdown future tranches.

In connection with the entry into the Fourth Loan Amendment, the Company eliminated the warrant agreement for all future tranches.

The Warrant issued with the initial tranche was not modified as part of this amendment.

The exercise price and terms of the outstanding Warrant remain unchanged.

The initial $ 1.3 million fair value of the Warrant, the $ 9.7 million final interest payment fees and $ 3.5 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.

The initial $ 1.3 million fair value of the Warrant, the $ 11.5 million final interest payment fees and $ 4.6 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 Loan Agreement.

Future minimum principal payments under the Term Loan, including the final payment fees, as of December 31, 2024 are as follows (in thousands):

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Total term loan borrowings

During the years ended December 31, 2023 and 2022 , the Company recognized $ 17.1 million and $ 13.0 million, respectively, of interest expense, including amortization of the debt discount, in connection with the Hercules Loan Agreement.

During the years ended December 31, 2024 and 2023, the Company recogniz ed $ 23.2 million and $ 17.1 million, respectively, of interest expense, including amortization of the debt discount, in connection with the Loan Agreement.

As of December 31, 2024 and 2023, the Company had outstanding loan balance of $ 211.8 million and $ 148.1 million, respectively, and accrued interest of $ 1.7 and $ 1.1 million, respectively.

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Additionally, on October 31, 2022, the Company entered into a Joinder Agreement with the Initial Investors and CO Finance LVS XXXVII LLC, or the Additional Investor, and Hercules, together as the in vestors.

Under the terms of the Joinder Agreement, we received $ 15 million in additional funding upon FDA approval of vonoprazan for Erosive GERD, or Approval Additional Funding, during the fourth quarter of 2023, and provides for $ 25 million in additional funding for achievement of a sales milestone, or Milestone Additional Funding, and, together with the Approval Additional Funding, or the Additional Investor Funding.

Under the terms of the Joinder Agreement, the Company received $ 15 million in additional funding upon FDA approval of vonoprazan for Erosive GERD, or Approval Additional Funding, during the fourth quarter of 2023, and provides for $ 25 million in additional funding for achievement of a sales milestone, or Milestone Additional Funding, and, together with the Approval Additional Funding, or the Additional Investor Funding.

The Initial Investors waived their rights of first offer regarding the Additional Investor Funding and the Additional Investor and 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.

As of December 31, 2024 , no additional funding is available under the Revenue Interest Financing Agreement.

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 royalty rate is subject to a step-down on net sales exceeding certain annual thresholds and when the Company received FDA approval for vonoprazan for an indication relating to the treatment of heartburn associated with Non-Erosive GERD, which occurred on July 17, 2024.

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.

In addition, at any time after April 30, 2024, 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.

During the year ended December 31, 2023 , the Company received gross proceeds of $ 175.0 million before deducting transaction costs of $ 2.3 million, resulting in net proceeds of $ 172.7 million.

During the year ended December 31, 2023 , the Company received gross proceeds of $ 175.0 million before deducting transaction costs of $ 2.3 million, which resulted in net proceeds of $ 172.7 million.

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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.

As of December 31, 2024 , the effective interest rate of the revenue interest financing liability was approximately 12.51 %.

Changes in future payments from previous estimates are included in the current and future interest expense.

The carrying value of the revenue interest financing liability was $ 353.0 million and $ 306.9 million as of December 31, 2024 and 2023, respectively.

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Ending liability balance as of December 31, 2023

current portion

Long-term liability balance as of December 31, 2023

Liability balance as of January 1, 2024

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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 March 2023 .

The fair value of the founder shares at the date the repurchase right was granted was recognized as stock-based compensation expense on a straight-line basis over the vesting period.

As of December 31, 2023 and 2022 , no shares and 79,064 shares, respectively, of common stock were subject to repurchase by the Company.

As of December 31, 2024 and 2023 , no shares of common stock were subject to repurchase by the Company.

The amount of recognized and unrecognized stock-based compensation related to the founder stock was immaterial for all periods presented.

From inception through December 31, 2023, the Company sold 26,041,380 shares of common stock, generating net proceeds of approximately $ 421.5 million, after deducting underwriting discounts, commissions and offering costs.

This includes the May 2023 underwritten public offering, in which the Company sold 12,793,750 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase 1,668,750 shares, at a price of $ 11.75 per share for total gross proceeds of $ 150.3 million.

Underwritten Public Offerings

In May 2023, the Company sold 12,793,750 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase 1,668,750 shares, at a price of $ 11.75 per share for total gross proceeds of $ 150.3 million.

The net purchase price after deducting underwriting discounts and commissions was $ 11.08 per share, which generated net proceeds of $ 141.8 million.

The Company incurred an additional $ 0.4 million of offering expenses in connection with this public offering.

In August 2024, the Company sold 8,695,652 shares of common stock at a price of $ 11.50 per share and pre-funded warrants to purchase 2,608,922 shares of common stock at a price of $ 11.499 per pre-funded warrant for total gross proceeds of $ 130.0 million.

The net purchase price after deducting the underwriting discounts and commissions and other offering expenses, was $ 10.77 per share, which generated net proceeds of $ 121.8 million.

Certain affiliates of Frazier Life Sciences IX, L.P.

(collectively, "Frazier"), a significant stockholder and Dr.

James Topper, who currently serves on the Company's Board of Directors, shares voting

and investment power of the securities held by Frazier.

Frazier participated in the offering by purchasing pre-funded warrants on the same terms as all other investors at a purchase price of $ 11.499 , which represents the per share public offering price for the common stock less the $ 0.001 per share exercise price for each pre-funded warrant.

Each pre-funded warrant became exercisable upon issuance and will not expire until exercised in full.

The pre-funded warrants may not be exercised if the aggregate number of ordinary shares beneficially owned by the holders thereof immediately following such exercise would exceed a specified beneficial ownership limitation.

The pre-funded warrants were classified as a component of equity in the Company's balance sheets as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holders to receive a fixed number of shares of common stock upon exercise.

The Company valued the pre-funded warrants at issuance, concluding that their sales price approximated their fair value, and allocated net proceeds from the sale proportionately to the common stock and pre-funded warrants, of which $ 28.2 million was allocated to the pre-funded warrants and recorded as a component of additional paid-in capital.

As of December 31, 2024 , no ne of the pre-funded warrants have been exercised.

ATM Agreements

In November 2020, the Company entered into the Sales Agreement, pursuant to which, 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 2020 ATM Offering after deducting $ 0.8 million of issuance costs.

In February 2023, the Company sold 1,514,219 shares for net proceeds of approximately $ 14.1 million under the ATM Offering after deducting $ 0.4 million of issuance costs.

The Company utilized $ 39.9 million of the available $ 125 million under the ATM Offering prior to expiration in November 2023.

On November 9, 2023, the Company entered into an Open Market Sale Agreement SM , or the 2023 Sales Agreement, with Jefferies LLC, or the Sales Agent, under which the Company may, from time to time, sell shares of the Company's common stock having an aggregate offering price of up to $ 150 million through the Sales Agent, or the ATM Offering.

Sales of the Company's common stock made pursuant to the 2023 Sales Agreement, if any, will be made under the Company's shelf registration statement on Form S-3 which was filed on November 9, 2023 and declared effective by the SEC on November 17, 2023.

As of December 31, 2023 , the Company utilized none of the available $ 150 million under the ATM Offering.

A summary of the Company’s unvested shares is as follows:

Balance at December 31, 2022

Share vesting

Balance at December 31, 2023

For accounting purposes, unvested awards are considered issued, but not outstanding until they vest.

In November 2020, the Company entered into an Open Market Sale Agreement SM , or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which the Company may, from time to time, sell shares of common stock having an aggregate offering price of up to an amount registered under an effective registration statement through the Sales Agent.

In November 2023, the Company filed a shelf registration statement on Form S-3 which was declared effective by the SEC on November 17, 2023, which included an at-the-market prospectus pursuant to which the Company may, from time to time, sell up to an aggregate of $ 150 million of the Company's common stock through the Sales Agent, or the 2023 ATM Offering.

The Company is not obligated to, and cannot provide any assurances that the Company will, make any sales of the shares under the Sales Agreement.

The Sales Agreement may be terminated by the Sales Agent or the Company at any time.

For the year ended December 31, 2023 , the Company sold 1,514,219 shares for net proceeds of approximately $ 14.1 million after deducting $ 0.4 million of issuance costs.

No shares were sold during the year ended December 31, 2024.

As of December 31, 2024, all of the available $ 150 million under the 2023 ATM Offering remains available.

Common Stock Reserves

Common stock reserved for future issuance consists of the following:

Common stock warrants

Stock options, restricted stock units, and performance-based awards outstanding

December 31, 2024

Common stock warrants including pre-funded warrants

Stock options and restricted stock units outstanding

Shares available for issuance under the 2019 Incentive Plan

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The Company is authorized to issue up to 40 million shares of preferred stock.

As of December 31, 2023, and December 31, 2022 , there were no shares of preferred stock issued or outstanding.

As of December 31, 2024 and 2023 , 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’s 2019 Equity Incentive Plan, or the Existing Incentive Plan, provided 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.

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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.

On July 14, 2023, the Company completed a voluntary, one-time stock option exchange program, or the Option Exchange, pursuant to which eligible employees were able to exchange certain outstanding stock options granted under the 2019 Plan for a lesser amount of new RSUs issued under the 2019 Plan.

Participants in the Option Exchange received one RSU for every two shares of Phathom common stock underlying the eligible options surrendered.

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The Company is recognizing an additional $ 2.2 million of incremental expense related to the Option Excha nge to be recognized over a three-year vesting period.

As of December 31, 2023 , 1,110,376 shares remain available for issuance, which reflects 4,492,336 stock options, performance-based units, and restricted stock units, or RSUs, awards granted, and 2,558,662 of awards cancelled or forfeited, during the year ended December 31, 2023 as well as an annual increase of 2,086,165 shares authorized on January 1, 2023.

As of December 31, 2024, 1,578,888 shares remain available for issuance, which reflects 3,194,437 stock options and RSUs awards granted, and 762,646 of awards cancelled or forfeited, during the year ended December 31, 2024 as well as an annual increase of 2,898,503 shares authorized on January 1, 2024.

Performance-Based Units

During 2020, the Company granted the initial performance-based units, or PSUs, whereby vesting depends upon the approval by the FDA of vonoprazan for H.

During 2020, the Company granted the initial performance-based units, or PSUs, whereby vesting depended upon the approval by the FDA of vonoprazan for H.

pylori and then, or concurrent with, Erosive GERD.

As of December 31, 2023, the PSU milestones have been achieved upon FDA approval of vonoprazan for H.

The PSU milestones were achieved upon FDA approval of vonoprazan for H.

pylori and Erosive GERD during the fourth quarter of 2023.

As a result, stock- based compensation cost of $ 19.3 million was recognized within the statements of operations and comprehensive loss during the year ended December 31, 2023 .

The following table summarizes PSU activity under the 2019 Incentive Award Plan during the years ended December 31, 2023 and 2022:

Average Grant

Date Fair Value

Unvested balance at January 1, 2022

Unvested balance at December 31, 2022

Unvested balance at December 31, 2023

No stock- based compensation cost was recognized within the statements of operations and comprehensive loss during the year ended December 31, 2024 .

No PSUs were outstanding as of December 31, 2024 and 2023.

Restricted Stock Units

The following table summarizes RSU activity under the 2019 Incentive Award Plan during the years ended December 31, 2023 and 2022:

The following table summarizes RSU activity under the 2019 Plan during the year ended December 31, 2024:

Average Grant

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Unvested balance at December 31, 2024

Unvested balance at December 31, 2023

(1) The number of RSUs granted includes those exchanged in the Option Exchange (as defined above).

As of December 31, 2023 , the Company had $ 26.6 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.4 year s.

The total fair value of RSUs vested during the years ended December 31, 2023 and 2022 , was approximately $ 5.7 million and $ 0.9 million, respectively.

As of December 31, 2024, the Company had $ 18.7 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over a weighted-average period of 1.6 years.

The total fair value of RSUs vested during the year ended December 31, 2024, was approximately $ 12.4 million.

Employee Stock Purchase Plan

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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.

A total of 270,000 shares of common stock were 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:

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As of December 31, 2024, the total unrecognized compensation expense related to the ESPP was less than $ 0.1 million, which is expected to be recognized over a weighted-average period of approximately 0.5 months.

The Company established a 401(k) savings plan during the year ended December 31, 2020.

During 2020, the Company established a 401(k) savings plan.

The Company’s contributions to the plan are discretionary.

During the years ended December 31, 2023 and 2022 , the Company incurred $ 1.9 million and $ 1.3 million, respectively, of expense related to estimated employer contribution liabilities, which was based on a 75 % match of employees’ contributions during the periods.

During the years ended December 31, 2023 and 2022 , the Board of Directors approved employer matching contributions settled by contributing 135,956 and 101,540 , respectively, shares of Company stock .

During the years ended December 31, 2024 and 2023, the Company incurred $ 5.1 million and $ 1.9 million, respectively, of expense related to estimated employer contribution liabilities, which was based on a 75 % match of employees’ contr ibutions during the periods.

During the years ended December 31, 2024 and 2023 , the Board of Directors approved employer matching contributions settled by contributing 383,589 and 135,956 , respectively, shares of common stock .

Stock Options

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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.

Therefore, the Company 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.

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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.

A summary of the Company’s stock option activity and related information is as follows during the years ended December 31, 2023 and 2022:

A summary of the Company’s stock option activity and related information is as follows during the year ended December 31, 2024:

(in thousands)

Balance at January 1, 2024

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Balance at December 31, 2024

Options granted

Options exercised

Options cancelled (1)

Balance at December 31, 2023

Options exercisable as of December 31, 2024

Vested and expected to vest as of December 31, 2024

(1) The number of stock options cancelled includes those exchanged in the Option Exchange (as defined above).

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common stock for those stock options that had exercise prices lower than the fair value of the Company's common stock at December 31, 2024.

The total intrinsic value of stock options exercised for the year ended December 31, 2023 was approximately $ 0.1 million.

The total intrinsic value of stock options exercised for the years ended December 31, 2024 and 2023 was approximately $ 0.6 million and $ 0.1 million, respectively.

The estimated weighted-average fair value of employee and nonemployee director stock options granted during 2024 was $ 5.61 and during 2023 was $ 5.34 per option.

As of December 31, 2023 , the Company had $ 13.2 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.4 years.

As of December 31, 2024, the Company had $ 15.3 million of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.4 years.

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model were as follows:

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To date, our only source of revenue has been from the U.S.

sales of VOQUEZNA products , which the Company began selling in November 2023.

The Company records its best estimate of chargebacks, sales discounts and other reserves to which customers are likely to be entitled as contra accounts receivable charges on the balance sheet as of December 31, 2023.

During the year ended December 31, 2023 , we recognized $ 0.7 million of net product revenues related to sales of VOQUEZNA.

Sales allowances and accruals mostly consisted of distribution fees and rebates.

sales of VOQUEZNA products, which the Company began selling during the fourth quarter of 2023.

The Company records its best estimate of chargebacks, sales discounts and other reserves to which customers are likely expected to be entitled to as contra accounts receivable charges, and within accrued expenses if payable to a third-party or related to product returns on the balance sheets.

During the years ended December 31, 2024 and 2023, the

Company recognized $ 55.3 million and $ 0.7 million, respectively, of net product revenues related to sales of VOQUEZNA, VOQUEZNA DUAL PAK and VOQUEZNA TRIPLE PAK.

The following table provides a summary of the Company's revenue allowances and related accruals for the year ended December 31, 2024 which have been deducting in arriving at product revenues, net (in thousands):

Customer Credits, Discounts and Allowance

Rebates, Returns and Co-Pay Assistance

(contra accounts receivable)

(accrued expenses)

Balance as of January 1, 2024

Balance as of December 31, 2024

For the years ended December 31, 2024 and 2023 , the Company did no t record a provision for income taxes due to a full valuation against its deferred taxes.

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Ending balance

As of December 31, 2023 and 2022 , the Company has gross unrecognized tax benefits of $ 3,010 and $ 2,327 , respectively, none of which would affect the effective tax rate due to a full valuation allowance.

As of December 31, 2024 and 2023 , the Company has gross unrecognized tax benefits of $ 3.5 million and $ 3.0 million, respectively, 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.

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Due to the carryover of tax attributes, the statute of limitations is currently open for tax years since inception.

Segment Information

The Company's chief operating decision maker, or CODM, the Chief Executive Officer , manages the Company’s business activities as a single reportable segment.

The segment derives its current revenues from the sale of VOQUEZNA products.

Accordingly, the CODM uses net loss to measure segment profit or loss, allocate resources and assess performance.

Further, the CODM reviews and utilizes functional expenses (research and development, general and administrative, sales and marketing and stock-based compensation) to manage the Company’s operations.

Other segment items included in net loss are interest income, interest expense and other expense, which are reflected in the statements of operations and comprehensive loss.

The measure of segment assets is reported on the balance sheets as total assets.

The following table presents selected financial information with respect to the Company’s single operating segment for the years ended December 31, 2024 and 2023 (in thousands):

Product revenue, net

Cost of revenue

Research and development

General and administrative

Sales and marketing

Stock-based compensation

Interest income

Interest expense

Other expense, net

Segment net loss

EXHIBIT INDEX

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Description of Registered Securities

Form of Pre-Funded Warrant to purchase common stock

Phathom Pharmaceuticals, Inc.

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2019 Employee Stock Purchase Plan

Amended and Restated Non-Employee Director Compensation Policy

Amended and Restated Non-Employee Director Compensation Program

Amended and Restated Employment Letter Agreement, dated September 25, 2019, by and between Azmi Nabulsi, M.D., M.P.H.

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2024 Bonus Plan

Letter Agreement to Vonoprazan Commercial Supply Agreement, dated September 4, 2024, by and among Evonik Operations GmbH and the Registrant

Joinder Agreement dated December 23, 2024 by and among CO Finance III LVS LX LP and the Registrant

Phathom Pharmaceuticals, Inc.

Insider Trading Compliance Policy and Procedures

Consent of Independent Registered Public Accounting Firm

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis