Eton Pharmaceuticals, Inc.

Good afternoon, and welcome to the Eaton Pharmaceuticals first quarter 2024 financial results conference call. At this time, all participants are in 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 Krimpa, Chief Business Officer at Eaton Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Eaton's first quarter 2024 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 the remarks 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 Brynjolfsson.

Thank you, David. Good afternoon, everyone. Thank you for joining us today. After a strong finish to 2023, I am pleased to say we carried this momentum into 2024, delivering our 13th straight quarter of sequential product revenue growth. It has been a very productive start to 2024 for the company, and we have a number of exciting items to discuss today. In addition to posting record revenue sales in Q1, we also acquired a new commercial growth asset in PKU Gold Life. We launched antigen-owned capsules and more importantly submitted our new drug application for ET400. We were pleased to deliver another quarter of strong revenue growth and to do so while maintaining our discipline cost structure. Revenue from product sales grew by more than 50% year over year to $8.0 million, while our SG&A spending actually declined by 4% year over year. As you can see, now that we have our infrastructure in place, there is significant operating leverage in our business. We believe we could support a revenue level many multiples over our current run rate, with only a modest increase in our SG&A spending. This should allow us to deliver substantial earnings as we scale our revenue towards our goal of being a $100 million-plus revenue company in the coming years. Our record product sales in the quarter were driven primarily by strong growth in both coagulamic acid and alkindi-sprinkle. I remain very encouraged by the trajectory of our coagulamic acid product as it continues to exceed our expectations. We believe we have now captured more than 50% of the patient population, but the product continues to grow and we have added additional patients in Q1 and also additional ones in Q2. Hergulumic is a part of our metabolic portfolio that expanded from two products to four products in the first quarter as we launched neticinone capsules and acquired TKU Goliath. As you may know, neticinone capsules launched in February, and we were able to add a number of patients before the end of the quarter. The market for neticinone is estimated to be around 50 million annually. but there are already a number of competitors in the market, so we have modest expectations for this product. We view the opportunity similar to the way we view Betaine. Neither one offers a large revenue opportunity on its own, but they require very little incremental expense to commercialize since we already have the metabolic infrastructure in place. Perhaps more importantly, the expanded portfolio helps us strengthen our relationship and increase the frequency of interactions with high-value carglymic acid prescribers. And now, with our recent Golike acquisition, the tisinone and betaine can help drive additional opportunities to cross-cell Golike, which I will spend a few minutes talking about. I was very excited to close this acquisition in March, and I believe it adds another compelling growth asset to our metabolic portfolio. Golike is a medical formula for patients with phenylketonuria, also known as PKU. PKU patients lack the enzyme needed to break down phenylalanine, which is an amino acid-founding protein. For these patients, eating protein results in the buildup of phenylalanine, which can cause neurological problems, including seizures and brain damage. As a result, many of these PKU patients must take specialized, no- or low-protein medical formulas, such as PKU Golike. Just like our other metabolic products, Golike is distributed by a specialty distributor that handles dispensing and patient support. The product is typically covered by insurance, and it is prescribed by healthcare professionals. I believe GoLike is a compelling opportunity, and I'm excited about it for a number of reasons. First, GoLike is a very strategic fit with our corporate strategy and commercial infrastructure. The product serves an ultra-orphan population of an estimated 8,000 PKU patients in the United States. These patients rely on medical formulas, and the condition is managed by metabolic geneticists and their support staff, the same healthcare professionals that we are actively engaged with on our other metabolic products. Secondly, Golike is an attractive product that we believe has significant advantages over the competition. Historically, PKU patients have relied on medical powders that must be mixed and drank multiple times each day as meal replacements. Golike has a number of benefits. It comes in a convenient and ready-to-eat bar format. We believe it is significantly better tasting, is better smelling than competitor products, and it is a patented delayed-release amino acid technology designed to keep patients full for longer periods of time. And finally, Golike offered a compelling financial opportunity. We paid less than two times annual revenue for the product and expect to see significant revenue growth for years to come. Golike granules were launched at the end of 2022 and Golike bars were launched in mid 2023. So the product is still in its infancy stages of launch. We believe our larger commercial footprint and existing relationships with the metabolic community can help accelerate the product's adoption. The US market for PKU GoLike medical formulas is estimated to be approximately 100 million annually. With GoLike's attractive product benefits and our commercial infrastructure, our goal is to capture at least 10% market share or 10 million annually in the coming years. Our sales team launched the product under Eaton's ownership at the Metabolic Dietitians International Conference in mid-April And we received very strong interest and positive feedback from the dietitian community at the conference. This further reinforced our belief that GoLike provides an improved patient experience and should see significant growth in the years to come as we raise awareness and education in the community. Switching now to the endocrinology side of our business, Alkindi Sprinkle also posted record sales and significant growth in the quarter. As we discussed in our previous call, we recently introduced a sampling program, and our commercial team has been very active at medical conferences so far this year, including exhibiting at the Pediatric Endocrine Society meeting last week. We have seen growth in new patient prescriptions so far, and most patients who try Alkindi have a positive experience and remain on therapy. Eaton does, however, continue to see patients that choose to discontinue treatment due to the texture of the granules. As Alkindi continues to grow, we have a number of initiatives underway to lessen this discontinuation rate, including revamping our educational and administrative materials, but we also believe ET400 will most adequately address this issue. In addition to reducing discontinuation, ET400 will provide an important treatment alternative to the large contingent of patients that use a liquid product today. Either a suspension formulation from a compounder that is not FDA approved or their own version that they make at home by crushing tablets and mixing them with water. Or have been a resistant cell kidney sprinkle because they want to stay with a liquid dosage form. We believe that this portion of the population, which could include several thousand patients, will be pleased with the accurate dosing in a liquid form that ET400 will provide once it is approved. On our last call, I mentioned that we had passed our clinical study, which was the final hurdle in submission of the ET400 NDA. I am now thrilled to say that we submitted the NDA last week. We anticipate that the FDA will assign the application a 10-month review, allowing for potential approval during the first quarter of 2025. Our team has begun preparing launch activities in order to be in a position to efficiently and effectively commercialize the product shortly after approval. I remain confident that once approved, the commercialization of ET400 will significantly accelerate the company's growth trajectory, and we believe that ET400 and Alkidi Sprinkle will achieve combined peak sales of over 50 million annually. We also continue to make progress with ET600, a product candidate under development for the treatment of diabetes insipidus. ET600 is another new pediatric endocrinology product that we hope to launch soon after ET400. The product was passed as pilot bioequivalency study, and we are on track to run a pivotal study in the second half of this year. Our team expects to submit the NDA in early 2025 with potential approval near the end of 2025. I think it is clear that our five commercial products plus our attractive late-stage pipeline position us well for sustained long-term growth. That being said, we continue to look for business development opportunities that can propel us even further. Our business development team is currently focused on commercial revenue-generating products. Our available capital positions us for a large value-creating acquisition. And given our current valuation and expected growth, we would intend to use primarily debt for any such acquisition. As an example of our capacity, in April, we were the runner-up bidder in a bankruptcy auction for Iger Biopharmaceuticals' Zokinvi product. While we did not win the auction, we were able to quickly arrange committed capital within a matter of days to support a $46 million bid. While we submitted a competitive offer for the asset, at the end of the day, we are not interested in overpaying for any asset. Given our attractive current financial position, our strong organic growth potential, and the expectation for ET400 to deliver significant tailwind next year, we have the luxury of being able to remain extremely disciplined on M&A. While we would like to add a larger asset to the product portfolio, I am cautiously optimistic that we can do so. We certainly do not need to. Our existing portfolio and pipeline positions us to reach our profitability goals in the coming years. And with that, I'll turn it over to James, the Chief Financial Officer, to discuss the financials. James?