Phathom Pharmaceuticals Inc
For the period ended Dec 31, 2024. Filed Mar 6, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 6, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
See the whole filing, with its images and exhibitsContents
Item 8. Report of Independent Registered Public Accounting Firm
Report of Inde pendent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Phathom Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Phathom Pharmaceuticals, Inc. (the Company) as of December 31, 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. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
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
We have served as the Company’s auditor since 2019.
Iselin, New Jersey
March 6, 2025
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.