On Thursday, H.C. Wainwright maintained a positive stance on Phathom Pharmaceuticals (NASDAQ: PHAT), reiterating a Buy rating and a $28.00 price target. Currently trading at $8.40, the stock sits well below analysts' consensus target range of $17-$28.
According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculation. The firm's analysis follows a Citizen Petition to the FDA regarding the Orange Book listings for Phathom's product VOQUEZNA, which includes vonoprazan tablets in 10mg and 20mg dosages.
The petition seeks to correct the listings to accurately represent a full 10-year New Chemical Entity (NCE) exclusivity period until May 3, 2032. While the company maintains a strong current ratio of 5.73, InvestingPro data indicates it's quickly burning through cash, with negative free cash flow of $248 million in the last twelve months.
The exclusivity period began with the approval of VOQUEZNA TRIPLE and DUAL PAK in May 2022 for the treatment of H. pylori infection, as part of the Generating Antibiotic Incentives Now (GAIN) Act. The Act grants extended exclusivity to drug products designated as qualified infectious disease products (QIDP). VOQUEZNA's approval for the treatment of erosive and non-erosive GERD (gastroesophageal reflux disease) does not involve antibiotic therapy, unlike the H. pylori indication.
H.C. Wainwright highlighted the significance of the GAIN Act in protecting the exclusivity of vonoprazan until May 2032, which would prevent prospective Abbreviated New Drug Applications (ANDA) and 505(b)(2) New Drug Applications (NDA) that could reference vonoprazan. The firm emphasized that while the exclusivity for the H. pylori treatment includes an antibiotic combination, the GERD and NERD treatments do not.
The firm concluded that the full 10-year NCE exclusivity might apply broadly to all VOQUEZNA tablet products, extending beyond the current patent term anticipated to last into 2030.
However, they noted that further progress and clarity on the exclusivity are pending and it's not yet certain if the 10-year NCE exclusivity will apply to any vonoprazan-containing product like VOQUEZNA tablets. Despite these uncertainties, H.C. Wainwright reaffirmed their Buy rating and price target for Phathom Pharmaceuticals.
Looking ahead, analysts project 74% revenue growth for the current fiscal year, though the company is not expected to be profitable this year. For deeper insights into Phathom's financial health and growth prospects, including 8 additional ProTips, visit InvestingPro.
In other recent news, Phathom Pharmaceuticals has been proactive in its strategic moves. The company recently filed a Citizen's Petition with the FDA, seeking alignment of the exclusivity period for its VOQUEZNA tablets with that of the VOQUEZNA Dual and Triple Pak, currently set at 10 years. This decision was made based on the advice of legal and regulatory consultants who believe that VOQUEZNA tablets should legally receive the same 10-year exclusivity as the VOQUEZNA Paks.
In addition, Phathom Pharmaceuticals reported a significant revenue outperformance in its third-quarter earnings, primarily driven by its drug Voquezna. The company's net revenue of $16.4 million for Voquezna surpassed both analysts' and consensus estimates. This increase was attributed to the robust growth in Erosive Esophagitis treatment and a surge in demand following the expansion of Voquezna's label to include Non-Erosive Reflux Disease.
The company also announced a public offering expected to generate gross proceeds of about $130 million. The net proceeds will be allocated for the commercialization and further clinical development of Vonoprazan, marketed in the U.S. as Voquezna.
In response to these recent developments, Guggenheim maintained a positive stance on Phathom Pharmaceuticals, reiterating a Buy rating and a stock price target of $28.00. Similarly, Goldman Sachs increased Phathom's price target to $12, maintaining a neutral stance.
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