Eton Pharmaceuticals, Inc.

Good afternoon and welcome to the Eaton Pharmaceuticals fourth quarter 2020 financial and operating results conference call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the company's request. At this time, I'd like to turn it over to David Krempa, Vice President of Business Development at Eaton Pharmaceuticals. Please proceed.

Thank you, Operator. Good afternoon, everyone, and welcome to Eaton's fourth quarter 2020 conference call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call. The release is available on our website, eatonpharma.com. Joining me on the call today, we have Sean Brinjelson, our CEO, Wilson Troutman, our CFO, and Paul Stickler, our Senior Vice President of Sales and Marketing. Before we begin, I would like to remind everyone that statements made during this call may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward-looking statements. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the company's filings with the SEC. Now, I will turn the call over to our CEO, Sean Brinkelsen.

Thank you, everyone, for joining us today. We have a lot of exciting topics to discuss as we share our 2020 results and look forward to 2021. 2020 was a transformative year for Eaton. We submitted our last four NDAs of our nine product pipeline and successfully completed our transition from an R&D stage company to a commercial organization. In addition, in recent months, we have seen two of our products commercially launched, and completed a major transaction with our oral liquid products. First, I'll start with the commercial launch of our lead product, Elkindi Sprinkle. Elkindi Sprinkle is the first and only FDA-approved granular hydrocortisone formulation for the treatment of adrenal cortical insufficiency specifically designed for use in children. Although the product launched in late Q4, promotional activities really accelerated in January after the holiday season. Our sales reps have been pleased with the initial reception they have received from physicians and nurses in the endocrinology community. Caregivers have been eager to learn more about Alkindi Sprinkle and how it can benefit their young patients. While the sales rep meetings to date have been mostly virtual, in recent weeks we've actually seen certain doctors welcome in-person meetings, and we expect the frequency of those meetings to increase in the coming months. While virtual meetings have been helpful to give us a broad reach in a short amount of time, we believe the improved quality of face-to-face interactions will lead to even faster adoption of the product. Many of these new patients are provided with a quick start, quote-unquote quick start, where we immediately fill their first script free of charge, while the administrative paperwork is facilitated by their physician's office, specialty pharmacy, and the payer. While this means the revenue benefit may lag a month or two behind new patient starts, our number one priority is is to get Alkindi Sprinkle to the patients in need, and we don't believe they should have to wait while the administrative paperwork is being sorted out. While it is still early, with only two full months of launch behind us, we are encouraged by our adoption rates we have seen thus far, and we believe we are on pace for our 2021 plan. We have seen an increased number of new patient scripts every month since launch, and March is on pace to show substantial growth over February. We continue to expect positive profit contribution throughout the year, and expect to have approximately 400 patients on the product by the end of 2021. Given this demand for Alkindi and due to inbound interest from physicians and patients, we decided to grow our Alkindi franchise and acquire the Canadian rights to the product, which we announced in January. We are now working to bring the product to Canadian patients as quickly as possible. Also pleased, secondly, to announce that Bausch Health has launched Aloe Preservative Free into all major U.S. retailers in February. This product is the first preservative-free ophthalmic approved for allergy conjunctivitis. The launch triggered a $1.5 million payment owed to Eaton, and we will also receive a double-digit royalty on sales of the product. Next, I'd like to discuss our recently announced transaction with Azzurri Pharmaceuticals. When we began assembling our neurology oral liquid products in 2018, we knew that we were working on important products for patients that address critical needs in the market, and as a result, they would have significant value, regardless of how we ultimately decided to monetize them. After much analysis and thought, it was clear to us, though, that partnering with Azurity was the most attractive way to capitalize on these assets. First, it allowed us to lock in a very attractive return on our investment, We will be entitled to receive up to $45 million in milestone payments, plus still receive royalties on sales of the product. Azurety is a leader in branded oral liquid products that successfully launched numerous oral solutions in recent years. Their experience and infrastructure in the space gives us confidence they are the best company to market these products. Lastly, it boosts our profitability, which as you know is one of our key priorities. In addition to the significant amount of cash coming in from the transaction, expenses will be reduced because Eaton will no longer need to invest in a neurology sales force and the associated product launch expenses. This drastically improves our company's profitability over the next couple of years and allows us to focus our commercial efforts on our orphan drug strategy. We expect to use the proceeds from the Azurety transaction to acquire additional orphan drug products in 2021. We are focused on finding products with attributes similar to Akindi, meaning products that are late stage, address critical unmet needs for orphan indications, have significant revenue potential, and can be commercialized with a targeted sales force. In addition to our three commercial products, we have six additional products that are under review with the FDA. We believe the regulatory reviews are going well, which should set us up for a number of exciting product launches in 2021. A few of the key potential product approvals include our orphan drug product, dehydrated alcohol, which is under FDA review and assigned a PDUFA date of May 27th. We've been engaged in standard review communications with the FDA and expect the product to be approved on its PDUFA date. Zonisamide oral suspension, which is now owned by Azurity and has a PDUFA date of May 29th. Upon the product's approval and launch, we will be entitled to receive a $5 million payment and a royalty on product sales. Topiramate Oral Solution, which is also owned by Azurity and has a PDUFA date of August 6th. Topiramate launch will also trigger a $5 million payment to Eaton, and we believe this product is also on track for approval for August 6th. As we look forward to 2021, I could not be more excited about our prospects. Eaton has never been stronger or better positioned than it is today. We now have three commercial products generating revenue. We have six additional products under review. many of which are expected to be approved and launched in the coming months, and our financial position has never been better. We are on the cusp of becoming profitable and sitting in a strong cash position, with even more cash expected to come later in the year when we realize additional product approvals. With that, we would like to now open up the call for your questions. Operator?