Eton Pharmaceuticals, Inc.

Good afternoon and welcome to the Eaton Pharmaceuticals fourth quarter 2025 financial 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. Chief Business Officer at Eaton Pharmaceuticals. Please proceed.

Thank you, Operator. Good afternoon, everyone, and welcome to Eaton's fourth quarter 2025 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, James Gruber, our CFO, and Ipek Trinkas, our Chief Commercial Officer. In addition to taking live questions on today's call, we will also be answering questions that are emailed to us. Investors can send their questions to investorrelations at eatonfarman.com. Before we begin, I would like to remind everyone that 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, Shawn Brunch-Elson.

Shawn Brunch- Thank you, David. Good afternoon, everyone, and thank you for joining us today. As you've seen, it's been a very active time at Eaton with a number of major developments in the recent weeks, and we have some exciting topics to discuss today. During the call, we'll review fourth quarter results, provide additional color on hemangio acquisition, and an update on our recent FDA approval and commercial launch of Dysmoda. We'll also cover growth trends in our on-market products and provide an update on clinical development programs And finally, we'll provide 2026 financial guidance and unveil our new long-term goals for the company. Let me start with our financial results. It was another strong quarter for Eaton, capping off an outstanding year. 2025 was truly another transformational year for our company. As we successfully launched three new products, Increlx, Galzen, and Kindivi, These were not minor products. They represent important cornerstones of our long-term growth plan. These new products helped us more than double our revenue in 2025 compared to 2024 and set us up for major growth in 2026 and beyond. Our fourth quarter product revenue was $21.3 million, an increase of 83% year over year. driven by continuing strong performance from Alkindi Sprinkle and the addition of revenue from Incrulex, Galzen, Condivi, and Condivi. Galzen and Incrulex have continued to be great success stories for Eaton. Both products were relaunched by Eaton in early 2025 and contributed revenue well beyond our initial expectations for the year. A key goal for us in continuing to drive strong revenue growth while maintaining our focus on profitability through disciplined cost management and expanding margins. And I'm pleased to report that we made meaningful progress on that in the fourth quarter as our adjusted EBITDA margin was 29%, a significant improvement from 18% in the prior year period. We also reported GAAP net income of $1.5 million and non-GAAP net income of $5.4 million. Looking ahead, we expect our profit margin profile to continue improving as revenue scales across our portfolio. And we will further discuss our profitability outlook later in the call when we communicate new long-term goals. Now let me turn to one of our most important recent developments. The approval and launch of our oral liquid formulation of Desmopressin Desmoda, which received FDA approval at the end of February for the treatment of central diabetes insipidus. Diabetes insipidus is a serious condition caused by inadequate production of the hormone vasopressin and treatment with Desmopressin is the standard of care. Dosing is patient specific and must be individualized and fine tuned over time. but there were historically no products available that could provide accurate low doses of desmopressin. As a result, clinicians and caregivers were forced to use workarounds including splitting or crushing tablets. As the only FDA approved liquid oral formulation Desmoda offers patients a treatment option that provides precision, consistency, and convenience, fulfilling a large unmet need frequently expressed to us by pediatric endocrinologists. Leveraging our established team of pediatric endocrinology rare disease specialists, we launched Desmoda within two weeks of FDA approval. While we are still in the early phases of launch, I could not be happier with how Desmoda launch is going. I believe this was the most well prepared we've ever been for a commercial launch. Our entire team was ready to execute on day one, and the initial demand and interest in the product has been incredibly encouraging. Our team has been hard at work promoting the product for two weeks, and we've already seen significant traction. Many institutions that were historically unreceptive to sales rep visits have reached out to us asking for meetings because they are interested in learning about the product. We've already seen a number of patients begin therapy in the first week and a half of launch. Another important aspect of the approval is that Desmodo received a clean label with no age restriction. In fact, the FDA's indication even includes adults. This means that our addressable market will not be solely the 3,000 to 4,000 children in the US. We will also be able to meet the therapeutic needs of the 9,000 to 10,000 adults living with central diabetes insipidus. Our historic market assessment and $30 million to $50 million peak sales forecast were based solely on the pediatric market. However, we believe there could be a meaningful incremental opportunity within the adult population for patients who have difficulty swallowing tablets, require precise and titratable dosing, or simply prefer a liquid option. While the percentage of adults needing a liquid or precise dose will likely be smaller, the population is roughly three times as large, so it could be a quite meaningful number of patients. This month we are launching a pilot initiative where our existing sales team will target high desmopressin prescribing adult endocrinologists. We will assess the opportunity over the next 90 days, and if we see traction with the adult patient community, we will expand our commercial efforts to fully capture this additional opportunity. Regarding pricing, The dosing varies by patient, but we believe we will net an average of approximately $80,000 per patient per year. As I said, it is still too early in the launch to say definitively, but all initial signs are pointing to a successful launch for Desmodo. For now, we're confirming our guidance of 30 to 50 million in potential peak sales. We should know more in the coming quarters and we'll update our outlook accordingly. Desmoda also benefits from strong intellectual property protection via multiple patents extending to 2044, which we believe positions the product as a critical long-term value driver for Eaton. Turning now to our other pediatric endocrinology assets. When we acquired Incrulex in December 2024, the product only had 67 patients on therapy. We saw a tremendous opportunity to increase awareness and education of severe primary insulin-like growth factor 1 deficiency, otherwise known as SPIGFD. In conjunction with our relaunch of Incrolex in January of 2025, we kicked off an extensive disease and therapy education campaign to complement physician engagement efforts of our seasoned pediatric endocrinology sales teams. This included targeted outreach to healthcare providers, strong conference engagement in endocrinology space, peer-to-peer presentations, and strategic collaboration with patients and patient advocacy groups. INCRELEX is approved for pediatric patients aged two and up and is highly effective at increasing height during critical development years. Because earlier diagnosis leads to better outcomes, increasing awareness and improving time to diagnosis are central to our strategy. Ensuring that every patient achieves their full therapeutic potential. We are already seeing encouraging progress. Since acquiring the product, we have meaningfully reduced the average age at which patients begin therapy and continue to see steady growth in the treated population. Based on ongoing discussions with physicians in the community, we remain confident that a significant opportunity for growth remains with the existing indication. We now have over 100 patients on treatment, and our goal is to reach 120 patients by year-end. So far this year, we have seen the number of patient age-outs and closures decline significantly from the level we saw earlier in the fourth quarter of 2025 prior to our last earnings call. Long term, we see a big opportunity in harmonizing the patient definition between the US and the EU. In the US, a patient meets the label criteria if their IGF-1 levels are more than three standard deviations below the median. In Europe, where INCRELEX is also available, the definition is two standard deviations below the median. And based on the European patient registry data collected over the past 15 years, We believe that Increlix is a safe and effective treatment for patients with IGF-1 levels between minus 2 and minus 3 standard deviations. We held a meeting with the FDA in December to discuss label harmonization, which we believe was positive. As a result, we submitted the final proposed study protocol to the FDA in February, and we expect to receive their feedback, either clearance to proceed or comments later this month. Once the FDA signs off, we will initiate the study with our CRO and we expect to see the first patient dose in the third quarter of this year. Our proposed study is an open-label study of approximately 30 patients tracked for five years or until they reach full adult height with a primary endpoint of change in average annual height velocity at month 12 compared to pretreatment height velocity. Given that it is an open-label study, if the data is as compelling and clear as we expect it to be, we believe there may be an opportunity to approach the FDA with interim data after a couple of years. The study is expected to cost approximately $1 million per year. If we are successful with this label harmonization, we believe that the Increlix market opportunity could increase five-fold in the United States. Also, in our pediatric endocrinology portfolio, we continue to see strong growth from our adrenal insufficiency franchise, Alkindi Sprinkle and Candivi. 2025 was Alkindi's fifth full calendar year on the market and its strongest year yet in terms of number of patients on therapy and number of new patient referrals. This momentum reflects the continued impact of our focused efforts to expand awareness and adoption of pediatric-appropriate hydrocortisone dosing and to reduce friction for both physicians and caregivers, making it easier for providers to diagnose, prescribe, and initiate therapy for children with adrenal insufficiency. Kindivi was developed to address the needs of patients that had an aversion to the texture of the Alkindi granules or who preferred a liquid option. and it is the first and only FDA-approved oral solution of hydrocortisone. Similar to this moda, the liquid dosage form allows for mixing and accurate dosing tailored to patient needs and does not require refrigeration, mixing, or shaking. Together, Alkindi and Kindivi allow us to offer physicians multiple pediatric-appropriate hydrocortisone options, enabling them to choose the formulation that best fits the needs of each child and caregiver. For our combined franchise, our target market is the estimated 5,000 children under the age of eight in the U.S. with adrenal insufficiency. We believe we have captured around 12% of the market to date, and there is still a long runway ahead of us. Eaton remains confident that the franchise can achieve peak annual sales of at least 50 million, which requires only around 20% market share, and we ultimately believe that Eaton can capture even greater market share if we are successful in expanding the Condivi's label. Condivi is currently approved for patients five and over, but we believe the largest unmet need is within children under five. The FDA restricted the age due to limited availability on safety data of the three active ingredients when these ingredients are used in combination. However, we've developed a new formulation which substantially lowers levels of these excipients, and Eaton held a meeting with the FDA in the fourth quarter where the agency indicated the receptive tool label expansion. The agency requested that we run a bioequivalency study and then submit our supplement to the existing NDA. Last week, we dosed the first patient in that bioequivalency study and now plan to submit the supplement as soon as the final study report is available, which we currently expect to be in the third quarter. The FDA indicated the submission would receive a 10-month review allowing for a potential launch by mid-2027. Next, I'd like to discuss our recent acquisition, which we are very excited about. Earlier this month, we announced the acquisition of Hemangiol, the only FDA-approved treatment for infantile hemangiomas that require systemic therapy. Infantile hemangiomas are noncancerous vascular tumors that typically appear shortly after birth and in severe cases can lead to serious complications including loss of vision, trouble breathing, or permanent disfigurement. An estimated five to 10,000 infants are treated with Hemangiol annually in the United States. We've been clear with our acquisition strategy. Eaton seeks opportunities where we can meaningfully add value to a product. We are unlikely to earn remarkable returns and create value for shareholders if we are purchasing assets only to maintain the status quo of their current level of revenue and earnings. We look for opportunities where a rare disease company with wide expertise in commercial infrastructure can unlock significant growth and profitability. Similar to how we successfully executed on Gallatin and Incrolix last year, we believe there's a significant opportunity for value creation with Hemangiol. Hemangiol had the product characteristics we looked for. It treats a rare condition with a small prescriber base. It is the only FDA-approved treatment in its class. It has strong safety and efficacy profile, and there's a meaningful opportunity to improve operational efficiency and margin performance. Our team is hard at work preparing for our May 1st relaunch of the product. One of the key opportunities we see is optimizing the product's distribution model with our dedicated rare disease infrastructure and proven go-to market capabilities. Currently, the product goes through the traditional pharma distribution model, utilizing the large national wholesaler's open pharmacy distribution and significant payer rebating. While this may make sense for higher volume products, we believe transitioning to our rare disease focus Distribution model can significantly lower costs, improve the patient and provider experience, and significantly strengthen the long-term economics of the product by reducing gross to net deductions. In addition, we will implement our best-in-class Eaton Cares patient support program, which we believe will improve the treatment journey for families and expand access to treatment. For instance, we will be offering our standard zero commercial copay for patients, where today most patients are paying $55 a month on their copay. Hemangiol will also establish a third strategic call point for us. The majority of prescribing occurs within pediatric dermatology, but care for these patients can also involve pediatric hematology oncology physicians who specialize in vascular anomalies. This is a high, highly concentrated specialty with roughly 400 pediatric dermatologists and a smaller number of specialized pediatric hematology oncology physicians actively managing these patients. While we look for other bolt-on opportunities within pediatric dermatology, the hemangio opportunity is certainly large enough on its own to justify the dedicated commercial effort. In tandem with the transaction, we are hiring seven new commercial employees that were previously working for the seller and fully dedicated to hemangiol. They will start with Eaton on April 1st, and we are excited to have them joining our organization. This existing team had done an excellent job growing hemangiol in recent years. And we believe their current relationships combined with Eaton's rare disease infrastructure, expertise, and capabilities will position the product for accelerated momentum following the relaunch in May. We were pleased that because of our strong cash flow generation to 2025, we were able to pay for the $14 million hemangiol acquisition entirely with cash on hand and avoid any dilution or incremental debt. This will make the transaction even more creative to our earnings. With our ongoing plans to streamline distribution, shrink the gross to net gap, optimize revenue, and expand access, we believe Hemangio can be one of Eaton's largest products in 2027. Now let me turn to Gallatin, which was another very impressive contributor for the year. When we acquired the product, we expected to be able to grow the product over time, but the product has actually performed well ahead of our expectations. When Eaton relaunched in March of 2025, we made major investments into physician education, patient awareness, and access support, and those investments are clearly paying off. Through Eaton Cares, we know that more people than ever are able to access their medication, and we have heard from many patients that were previously forced to take non-FDA-approved zinc supplements because they could not afford their copay obligations. They are very grateful to now be able to receive the FDA approved treatment. In addition, we have found that many patients and providers were unaware of the availability of Galazine or were unaware of the advantages of the prescription product. We have also seen renewed interest from patients and physicians. Now that we know that EatonCures will provide patients with access to medication regardless of potential insurance pushback or lack of insurance, physicians can prescribe the product with confidence and not worry that the patient will call them back in a week to complain about high copays or looking for alternatives. The benefit to physicians is twofold. First, they have increased comfort knowing that the FDA-approved Galzen is manufactured to pharmaceutical standards for quality, potency, and consistency, whereas the over-the-counter products are not. Second, patients taking the prescription product require periodic refills and return visits, so they have much better compliance with follow-up visits and regular lab monitoring and make any needed dose adjustments. Many over-the-counter users end up failing to return for regular visits contributing to worse patient outcomes. I am pleased to share that last week we reached 300 active patients on Galzen, a big accomplishment just one year after our launch. We still believe there are at least 800 Wilson disease patients in the U.S. taking zinc therapy, and potentially over 1,000, so most of the market still relies on the non-FDA approved zinc products. We view this as a substantial opportunity for us to potentially more than double our GALSIN patients in the coming years. Through our deep collaboration in the Wilson disease community on GALSIN, we have seen the strong desire for an extended release version of GALSIN and ET700 was developed to address this need. Currently, GALSIN must be taken three times per day with patients fasting both before and after each dose. It's an onerous schedule that can often lead to noncompliance, especially with the middle-of-the-day dose. Eaton has developed a proprietary patent-pending extended-release formula. Our clinical batches have been manufactured, and we are ready to initiate a proof-of-concept positron emission tomography, or PET, study to verify that our proprietary delayed-release formulation can effectively block copper absorption. The study should begin in April and we expect top line results later this year. If we are successful, we expect to initiate a dose ranging study and pivotal clinical trial in early 2027. If approved, we are confident that ET700 has the potential for more than 100 million of peak annual sales. We've also made strong progress advancing our internal pipeline And in fact, 2026 is set to be by far our busiest year ever in terms of clinical studies. ETEN has already touched on the anticipated studies for Candivi, INCRELEX label harmonization, and ET700. And we also plan to run PK studies on amglydia and ET800 later this year. Our goal is to submit the amglydia NDA by the end of this year and the ET800 NDA in 2027. So our pipeline for new product launches in the coming years remains very strong. Overall, 2025 was a standout year for Eaton, and we have set the stage for an even stronger 2026, which is reflected in our 2026 financial guidance. We expect 2026 revenue to exceed $110 million and to deliver an adjusted EBITDA margin of at least 30%. As we wrap up 2025 and set our plans for 2026, it was a good moment to reflect on how far we've come and where we are headed. A few years ago, I outlined three long-term goals for the company. Goal number one, to have 10 commercial products. Goal number two, to reach 100 million revenue run rate. Goal number three, to reach a $1 billion market cap. At this time, we had just three products when that goal was announced. We had only $20 million of revenue and $100 million market cap. While these goals may have seemed miles away from the outside, internally we have a strong conviction in the opportunity ahead of us and a belief that these goals were much more attainable than the market perceived them to be. I am pleased to share that we have now achieved two of these long-term goals. With the acquisition of Hemangiol, we have reached 10 commercial products. And as you have heard, we are expecting more than $100 million of revenue this year. While there is still work to do on the market cap goal, we are confident that if we continue executing our strategy and delivering consistent, profitable growth that we expect to achieve, the long-term value creation will be reflected in our stock price. I believe it's important to keep pushing the organization forward towards ambitious but achievable long-term goals. As a result, we are setting some new long-term goals today. First, we want to build the largest rare disease portfolio in the United States. Among the dedicated rare disease companies, we are already near the top in reaching 13 or 14 commercial products We'll position Eaton as having the largest portfolio of any dedicated rare disease company in the United States. We believe that this is very achievable in the coming years through both our internal pipeline and business development activities. Second, we want to exit 2027 at a $200 million revenue run rate. This requires roughly doubling our revenue over the next, within the next 24 months. And we see a very realistic path to doing this. Continued growth of Alkindi, Incralex, Galzen. A successful integration and relaunch of Comangeol. Strong launch of Desmoda. And the expected launch of Kdivi's expanded label in 2027. Plus, we remain confident that we can close at least one more product acquisition that will provide incremental revenue before the end of 2027. Third, we want to reach 50% adjusted EBITDA margin in 2028. Profit has always been a central focus of our company. Unlike many of our peers in the industry, we are not pursuing revenue growth at the expense of profitability. We've made continued progress in our profit margins and expect to continue to see improvement as we grow. Our adjusted EBITDA margins first turned positive from product sales in 2024 when we reported an 8% margin that grew to 20% in 2025, and we expect to be over 30% this year. With continued revenue growth, we expect to see the benefits of operating leverage that can drive us to 50% EBITDA margins in the coming years. With our existing base of commercial and operational infrastructure, as well as our products continuing to grow, an outside portion of that growth should fall to the bottom line. Our fourth and final goal is to reach a $500 million worth of revenue by 2030. Again, we believe that this is an achievable goal through our three-pillar growth strategy. First, our existing portfolio has strong organic growth prospects. This includes Increlx, Alkindi, Kdivi, Galzen, Desmoda. All of these products have achieved just a fraction of the market share that we think they can reach in the years ahead. Second, our existing pipeline has several large programs that could add significant revenue by 2030. This includes ET700, which we believe has peak revenue potential well in excess of $100 million annually on its own. Plus, our Increlix label expansion opportunity, MGLIDIA, ET800, and other programs in development that we have not yet announced. And finally, we will layer on more business development deals We believe we have proven our ability to close, integrate, and create significant value through acquisitions, and we begin and we expect to sign more deals like Increlix, Gallatin, and Hemangiol, which will further boost our revenue in the years to come. It's clear that we've come a long way over the last few years, but I truly believe that we are just getting started. We have found a proven winning strategy, assembled the right team, accumulated a diversified portfolio of growing products, and built an attractive pipeline to fuel long-term growth. We're in the best position we've ever been. Thank you for your continued support, and we look forward to keeping you updated on our critical developments in the months and the years ahead. With that, I'll hand it over to James, our Chief Financial Officer, to discuss the financials. James?