Eton Pharmaceuticals, Inc.

Good afternoon and welcome to the Eaton Pharmaceuticals second quarter 2022 financial results conference call. At this time all participants are in a listen only mode. Following the formal remarks there will be 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 would like to turn it over to David Krempa, Senior Vice President of Business Development and Investor Relations at Eaton Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Eaton's second quarter 2022 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 our call today, we have Sean Brinjelson, our CEO, and James Gruber, our CFO. In addition to taking live questions on today's call, we will be answering questions that are emailed to us. Investors can send their questions to InvestorRelations at EatonPharma.com. Before we begin, I would like to remind everyone that statements made during this call may contain forward-looking statements and 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 Brinjelson.

Thank you, David. Good afternoon, everyone, and thank you for joining us. I'm excited to talk with all of you today about our strong second quarter performance and the significant progress we have made in advancing our mission to be our leading rare disease company. I'd like to start today with our recent transaction to sell our hospital injectable products, including Biorphin, Resipress, and Cysteine Hydrochloride. This transaction, we sold these products to Dr. Reddy's Laboratories for payments that could total up to $50 million. We received approximately $5 million at closing and could receive additional payments of up to $45 million based on the achievement of certain milestones. While we have great confidence in the prospects for the Biorphin franchise, the launch of the vial and the bag products required a completely different sales force and commercial infrastructure than what we have in place, not to mention a significant financial investment. This transaction allows us to benefit from the potential success of BioOrphan through commercial milestone payments without having to use any of our resources to bring the full BioOrphan portfolio to market. With the completion of this sale, we are now 100% focused on rare disease products, an area in which we see vast opportunities. Rare disease products generally have higher revenue, higher margins, and higher returns on investment. Eaton is well capitalized to execute on this strategy, and our team is energized and excited about the product opportunities we see in the space. We are confident that Eaton will be able to use these proceeds from this transaction to expand our rare disease portfolio. Turning now to our second quarter results, I am pleased to report that we delivered another strong quarter of revenue growth. This was our sixth straight quarter of sequential growth in product sales and royalty revenue. We expect the streak to continue into the foreseeable future. We are also proud to report positive cash from operations of more than $2 million in the quarter. Our flagship product, Alpindi Sprinkle, is one factor driving this growth. Second quarter sales of the product were up 293% over the prior year period and up 34% from the prior quarter. Alkindi is the first and only hydrocortisone treatment specifically designed to provide accurate dosing for newborns and children with adrenal insufficiency. During the quarter, we attended a number of key industry conferences, participated in numerous patient advocacy group events, and hosted an advisory board of key opinion leaders in the pediatric endocrinology community. The feedback has been overwhelmingly positive as parents and physicians have clearly understand the critical need for the low-dose treatment options that Alkindi provides. While it is taking time to change some physician and parents' long-held habit of crushing or cutting tablets, we continue to see steady growth in new scripts. Growth is coming from new prescribers that have been writing Alkindi for the first time, as well as existing prescribers adding additional scripts for Alkindi after seeing positive results from their patients. We also have a number of new marketing initiatives that have recently been implemented or will be implemented later this year, which we hope will further accelerate this growth. We still have only converted a small percentage of the addressable market and believe the product has a long runway to grow for many years to come. Next, I will talk about curglumic acid tablets, the first FDA-approved generic version of Carboglu. In the six months it's been on the market, we have been actively engaged with prescribers in the metabolic genetic specialty. They are excited about our product, and in addition to the convenience of its room temperature stability, they are pleased to see a lower-cost treatment option. Eaton is committed to providing physicians and patients the full level of support services customary in the rare disease space. When we launched curglimic acid, we saw encouraging patient numbers right out of the gate, with the first quarter tracking ahead of expectations. During the second quarter, net patient ads came in below expectations, and we believe there were several one-time issues weighing on conversion. Based on acceleration of new patient ads in the third quarter, these one-time issues appear to be behind us. In fact, July was our highest month for new prescriptions to date. So we remain confident about the product's prospects for the full year and beyond, as well as in our ability to take a significant share of this market, which we estimate to be greater than $50 million per year. In addition to the strong commercial execution in the second quarter, I have been pleased with the progress we have made on our late-stage pipeline programs. starting with our Xeniohydrocortisone autoinjector program that is being developed for the treatment of adrenal crisis. As I mentioned earlier, through our work on Alkindi Sprinkle, we have actively engaged with physicians, patient advocacy groups, and parents in the endocrinology community. Through these interactions, it is clear that there is a huge need and great demand for our Xeniohydrocortisone autoinjector. Many parents and caregivers are afraid to use the Solucortif lyophilized kit that is the standard of care today. The complexity of the current treatment often limits the ability of children to participate in extracurricular activities when their parent or a trained health professional is not on site. The availability of the autoinjector would provide a huge quality-of-life benefit to adrenal insufficiency patients and their parents. The autoinjector is currently in development with our partner, CrossCheck. We're working hard to bring this product to market and believe an NDA could be submitted as early as next year. Recently, Crossject received a $60 million order from the U.S. government for a different molecule that is utilizing the same Xenio device, which we see as a strong vote of confidence for the technology overall. Eaton is also making progress in our dehydrated alcohol injection product for the treatment of methanol poisoning. While our NDA resubmission has taken longer than expected, we are in the process of fully addressing the FDA requests. We are nearly finished with the additional analytical testing required and expect to have the application resubmitted to the FDA shortly, which should allow for an approval and launch next year. We see a compelling opportunity for this product. The market has grown rapidly in recent quarters as the supply of the old grandfathered products has finally expired. Based on the latest IQVIA data, the market is at an annual run rate of approximately 80 million, and we expect it to continue to grow. If approved, we would be one of only two suppliers in this market due to the orphan drug exclusivity protections. We also recently saw the approval of zonicide or zonisamide oral suspension, the first and only FDA-approved oral liquid formulation of zonisamide, which is used to treat patients with epilepsy. We filed the product application with the FDA prior to our multi-product partnership collaboration with Azzurri Pharmaceuticals, which we announced last year. Under the terms of this agreement, Azurity will be responsible for commercializing Zonicide and Eaton will be entitled to receive a $5 million payment upon product launch or 90 days after approval, whichever occurs first. In addition, Eaton will receive a royalty on commercial sales of the product. These milestones, these payments together are more than 17 million, with our 17 million of cash on hand as of the end of the quarter and our growing product sales will enable us to finance our growth and continue investing in new high-value rare disease products. Since we have now established a strong presence in critical relationships with key opinion leaders in the specialties of pediatric endocrinology and metabolic genetics, we are actively looking at opportunities to acquire or develop more products in these specialties that would leverage our existing commercial presence and relationships. To that point, we have initiated work on two additional product candidates that would address critical unmet needs in our specialties. We believe both products would have large market opportunities and relatively fast development timelines. Because they would be developed internally, Eaton would retain 100% ownership with no royalty or profit share obligations. We plan to hold meetings with the FDA in the coming months to confirm the clinical pathway, and we hope to have additional details to share with investors later this year. Turning now to guidance. Following the divestiture of our hospital business, we expect 2022 revenue between $20 and $25 million, including licensing revenue of at least $10 million and product sales of $10 to $15 million. The work we've done in the first half of the year puts us in a strong position for the second half of 2022 and beyond. We're excited to be fully committed to the rare disease business. A couple of final points. Our two commercial products continue to grow rapidly and have a long runway. Our late-stage products are poised for product launches in 2023 and 2024. And on top of all of this, we are looking at a variety of compelling pipeline opportunities for both internal development and acquisition. We're excited for the road ahead, and we look forward to sharing additional details on future calls. With that, I'll turn it over to James. James.