Eton Pharmaceuticals, Inc. Q3 FY2024 earnings call

Three-pillar strategy progress

• Organic growth: Commercial organization delivered 15th straight quarter of sequential product revenue growth.
• Pipeline: ET-400 accepted for review by FDA with a February 28 PDUFA date; ET-600's pivotal study initiated, with initial data readout expected near end of 2024.
• Business development: Signed asset purchase agreement to acquire Increlex, an FDA and EMA approved product for severe primary insulin-like growth factor 1 deficiency.

Sales force realignment

• Plan to split sales force into two units: ~12 rare disease specialists for pediatric endocrinology (promoting Increlex, ALKINDI SPRINKLE, ET-400) and 5 specialists for metabolic portfolio (promoting Carglumic Acid, etc.).

ET-400 updates

• Accepted for review by FDA with PDUFA date of February 28, 2025; manufacturing of initial launch inventory scheduled later in the quarter.

Product sales were up 40% year-over-year in the third quarter. ALKINDI SPRINKLE delivered 55% year-over-year growth. The metabolic portfolio, driven primarily by Carglumic Acid, saw revenue growth. Revenue for the third quarter of 2024 was $10.3 million, with net product sales at $9.8 million, up 40% from the prior year. ALKINDI SPRINKLE and Carglumic Acid were the main drivers of growth. Revenue contribution: Net product sales for Q3 2024 were $9.8 million out of total revenue of $10.3 million, with $0.5 million from licensing revenue.

Forward-looking statements

• Expect continued growth from existing portfolio, addition of Increlex and ET-400 to drive future growth.
• Aim to reach $100 million in revenue with expected launches of ET-400 and Increlex.
• Goal to reach $1 billion market cap by executing on strategy, developing and launching new products, and value-creating acquisitions.

Risks

• Regulatory approval delays for pipeline products like ET-400 and ET-600.
• Uncertainty in market acceptance of new products or acquisitions.
• Fluctuations in sales and financial performance due to various operational and external factors.

Q: Good afternoon, guys. Congrats on all the progress here and thanks for taking the questions. Obviously, you guys are well familiar with many of the potential and current prescribers of Increlex. Can you kind of let us in on what you heard from them as you were kind of doing your work on the product that got you very interested to pursue the deal?

A: Sure. Thanks, Chase. So we won’t be able to go too much into it before the deal closed. But obviously, we’re very excited talking about the opportunity. As you mentioned, we know a lot of the doctors. We’ve talked to them they’ve said it’s a very good product. It’s a needed product. There’s no other alternatives for these children. So it was a critical product. They wanted to make sure we kept it on the market and available to all these patients. I think they thought there was an opportunity for even more education and awareness within the community, and that’s what we intend to do. We think we’ve got a good presence, given relationships with the community, and we look forward to increasing the awareness education and we think the treatment within the population.

Q: And then to the extent that you can kind of before closing, first, kind of how we can think about Increlex on the top line under Eton ownership. It looks to be fairly – it have been fairly steady with some kind of recent fluctuations under Ipsen. Any thoughts on what you guys can do to potentially return the product to growth? And then on the expense side, how should investors think about kind of SG&A needing to increase as a result of this transaction?

A: Hi, Chase, this is Sean. So on the top line, we certainly don’t think it’ll be less than what it’s done historically. But the plan here is we have a dedicated sales team that is bringing that product really back to the forefront of these doctors’ minds as they have patients come in growth issues that Increlex is another tool within their bag, they can use to treat them. We know that at one point, there was just under 200 patients on product, and we think we can get back to that just by simple promotion and education and hopefully, the doctors will take the diagnose and administer it more broadly. So we’re looking at that as one lever. At some point, we’ll see Europe has far more patients than the U.S. and we’ll have to figure out what’s going on there and how that perhaps we can understand that perhaps to grow the market above the 200 patients. But those would be the initial steps. Our plan also include putting together an advisory board of medical doctors and leading health care providers that understand the disease state and will help us to make sure that patients are number one. Because the other company is patients first, then products and then services, patient support services in their order we want to help as much as we can. And then the second part of your question regarding the expenses, I guess, I’ll let either – maybe James, do you want to take that one?

A: Hey Chase, regarding SG&A, as Sean mentioned in his remarks, here in the U.S., we are going to increase by the – we’re expanded sales force. So there’ll be additional investment there. As David mentioned, there will be additional investment in market education to a decent amount of investment here in the United States. And then outside the U.S., a decent amount of investment in ex-U.S. infrastructure, logistics, decent amount of regulatory investment. So after the deal closes, we’ll provide a little more detail behind specific 2025, but decent amount of investment expect to next year.

Q: And then on Carglumic, I mean, you noted sequential growth again. Did you add a couple more patients in the quarter? And kind of do you think that growth can kind of continue sequentially? And then Sean, any engagement with FDA on ET-400 in the quarter? Or kind of what informs kind of the confidence that you mentioned in prepared remarks?

A: Sure. On Carglumic, maybe James, do you want to speak to that in terms of the sales revenue.

A: Yes. We’ve had – it’s been a great contributor of revenue growth for us to date. We’ve overachieved what we expected to from a market share standpoint. So while additional growth is certainly possible. The reason we’ve built up our internal pipeline has been so active in every day, is to bolster the product portfolio with additional products because we’re never going to say the product is not going to continue to grow, but it’s got limited opportunity from a go forward standpoint.

A: Yes. I think that’s fair. And really as we go forward with these new opportunities, we’re looking at patent protect, and IP projected true branded products and really hitting unmet needs. Carglumic, as you know, is an AB-rated version of Carbaglu. And so that offers I guess, another option for patients, but it wasn’t really filling an unmet need as Carbaglu met that. With that need met, it’s really just offering a lower price. But our real connection here is to bring in products that can address unmet needs. Like I always say, there’s over 5,000 rare diseases, most of which are ultra-rare, that’s the work we like to do. And to that point, ET-400 review is going very well in my opinion. We don’t have any open items at this time. And we’re expecting labeling in the near future. So once the label income and start coming in, we’re – we feel pretty good about the February 20 PDUFA date.