Q2 2020 Eton Pharmaceuticals Inc Earnings Call

At this time, all participants on the listen only mode.

Following the formal remarks, we'll open the call for your question.

Please be advised that this call is being recorded at the company's request.

This time I like to turn the call over to date Clamper Vice President business development at eating Pharmaceuticals. Please proceed.

Thank you operator, good afternoon, everyone and welcome to eat in second quarter 2020 Conference call. This afternoon, we issued a press release that outlines the topics we plan to discuss on todays call releases the bell.

Well on our website Eaton pharma dotcom.

Joining me on our call today, we have sharper gels and 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 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.

We see now I'll turn the call over to our CEO Shawn Johnson.

Thank you everyone for joining all we have a number of exciting topics to discuss today, including significant developments in our pipeline.

An update on our commercial progress and our plans for Eaton's first orphan drug launch later this year.

I'd like to start with an update on our 100 product due to a proprietary name change submission. The of T.J. has extended the target action date for the application through a few weeks from now specifically on September 15.

We've been told that there are no other deficiencies outstanding and we remain confident that the product will be approved very shortly.

Moving over to a few words regarding or deals 100 product as an outcome. Other covert 19 situation hand, sanitizer demand has skyrocketed.

Unfortunately this has also resulted in the production.

Well below grade Sanitizers with high levels of methanol.

The toxic impurity.

Has very strict limits in terms of all product quality.

Looked on treated methanol poisoning can cause both blindness and.

<unk> has issued recalls for over 100 different hand, Sanitizers a this year.

Also been a serious many serious adverse events through the methanol poisoning and ERP across the nation.

Our therefore pleased to communicate we submitted our deals 400 antidote in July and look forward to launching in the very near future.

We believe deals 100 represents a significant opportunity for our company and the current market for dehydrated alcohol injection is estimated to be an excess of 100 million annually.

We expect to be one of only two players in this market for a prolonged period of time.

Also in July we submitted in India for you to want to before which is our patent pending liquid formulation of isn't this semis.

Received strong interest from neurologists on this product and are excited to be one step closer to reaching the market.

So this amount is one of our three oral liquid epilepsy products, along with Lemaitre gene and Topiramate.

We expect to file the Topiramate idea in the coming months, which should allow us to launch all three epilepsy products next year.

With these filings we now have five products submitted to the of T. I and we expect two additional submissions to go in later this year.

These submissions are expected to translate into as many as six branded product launches between now and the end of next year, just truly unprecedented for company of our SaaS.

Turning to our commercial updates I'd like to start with by orphan.

Unfortunately, Coburn 19 continues to weigh on sales of by orphan surgical procedures and volumes or have started to rebound slightly from March and April lows, but hospital policies continue to restrict sales representatives from visiting with pharmacy directors and style.

Well this has created a challenge for driving new adoption, we are adjusting our plan to overcome these challenges and are in the process of implementing new targeting strategies or promotional campaigns that are expected to significantly drive higher by orphan sales and the second half of this year.

Another key catalyst to buy orphan adoption will be the launch of our vial presentation. We're on pace to submit a prior approval supplement later this year, which will allow us to launch the violent early 2021, we continue to her feedback from many institutions that fully support ready to use funnel upfront, but are resistant to utilize the gap fuels we.

I believe the biologics extra will help us achieve our long term goal of capturing 4 million of what we estimate to be a more than 20 million unit market opportunity.

Now a few words regarding all Kennedy sprinkle, which we believe to be the largest revenue product in our pipeline.

Okay, and the sprinkle as an orphan drug candidate under review with you. After you gave for treatment as a replacement therapy for pediatric at renal insufficiency.

Based on the review communications our partner has received from the update today, we believe the products should be approved on its produced the date of September 29, we've ordered launch inventory. We have added commercial staff with vast experience in launching ultra orphan drugs, we expect to be in a position to launch shortly after its approval.

As part of these prelaunch activities, we have engaged with key stakeholders and the pediatric endocrinology community.

Just last week, we held an advisory panel with leaders in the endocrinology industry and the feedback was overwhelmingly positive and they are anxiously awaiting a can all candies approval with though they experienced commercial team we have assembled at Eton and hearing from leading endocrinologists as we prepare for launch I'm more convinced than ever that al Candy will be a major success for the company.

Today, we're also pleased to announce that we've expanded our relationship with US WK holdings, an amended our credit facility.

Due to the strong progress in our pipeline over the last year, we were able to favorably renegotiate our existing credit facility.

Under this new terms the facilities available capacity will be increased an interest rate will be reduced when we reach certain performance metrics. We were already had a strong financial position prior to this renegotiation with quarter and cash of more than 10 million, but now we expect to have a total of 8 million a bunch up capital available at our option.

After the approval of all Candy next month.

This amendment provides us with even greater flexibility as we continue to pursue growth opportunities and invest in our product launches.

Before we open it up for Q1, I'd like to reiterate how proud I am of our teams achievements over the past months and how excited for eaton's future over the coming quarters. We've spent three years focused on aggressively progressing our pipeline candidates and D.A. filings and we're now on the brinker, realizing the fruits of that labor.

Five drugs currently submitted to the up to you we have laid the groundwork to begin to deliver significant revenue next year and more importantly earnings next year. My goal for the company has to reach profitability before the end of 2021.

With that we would like to now open up the call for your questions operator.

Thank you Sir.

As a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the pound key.

Please standby, while we compile the county roster.

I sure first question comes from Rob Selvaraju from H.C. Wainwright. Please go ahead.

Thanks for taking my questions. Firstly I was wondering could elaborate on.

Sure.

Commercial effort behind.

Oral yes focus product and if you could maybe give us sense of how we feel.

Fits into the treatment of the overall Uh huh.

The overall epilepsy treatment continuum, and how to be addresses a different need among epilepsy patients. So that by marketing all three of them, you're not necessarily marketing products the overlap with each other.

Hi, Rob My name is Paul Stickler adds I'm responsible for commercial operations here at Eton Pharmaceuticals, and thank you for your question. We are very excited about.

The portfolio Oh, anti epileptic drugs that we intend to bring to the market here very shortly.

And each of the three products are widely used products than the adult and pediatric space, but have all always been.

I guess missing a key delivery methodology and that is the oral liquid and Eaton is I'm going to be in a great spot to deliver those products to the space in the near future and we think that based upon the research that we've done that there should be a very reasonable uptake in this space.

In the in the targeted patient populations.

Okay, and then just very briefly on L. Candy Sprinkle a can you talk about the sales infrastructure that you expect to require in order to ensure an official launch of the product and in particular, if there is likely to be any specific strategy that you would need to employ.

In order to overcome many possible restrictions or special circumstances due to the presence of Tecogen 19 pandemic. Like for example, you know any restrictions you think there might be once the product is launched on the face to face sales promotion. Thank you.

Yes, Thank you Ron.

Yeah, we're planning for the worst, but hoping for the best really.

Of the mechanics of the personal promotion elements are a bit in flux at the moment as we're all aware related to the pandemic. We're currently planning for an efficiently designed and relatively low cost commercialization effort comprised of between four and seven sales representatives that we'll call on approximately half of the pediatric.

Just community or a little less than a thousand HC piece.

This target base will be the ones that predominantly prescribe warsi adrenal insufficiency patients.

We also intend to have a mix of both the personal promotion and non personal promotion and we're going to be as flexible as we need to be and obviously monitor and listen to the market in terms of our ability to get to that the key stakeholders.

Okay, and then lastly on VX 100 gets two items there.

You comment on what Youre pricing disposition would be for this product assuming approval.

Belterra has price its own hydrated alcohol product and then also if you plan to actively promote this product or simply makes a commercially available and let market demand do the right. Thank you.

Yeah, we've all this a sharper and you also know we've not determined pricing at this time I imagine that they'll do something will settle a as we get closer to launch.

We know there have been numerous hospitalizations over the past few months due to methanol poisoning and we know the market is a significant.

There are more than 100000.

Units of dehydrated alcohol some of its used not necessarily for methanol poisoning, but you know what has other uses as well so the.

You know the I would imagine that we'll have.

Some short of a.

Discount, but I don't think we'll have a large sales force oh, that's not something that is necessary for the product that so a product that hospitals have used in the past and over the years. This product was for many years a unapproved.

Our drug product and recently the regulations tightened up where you need to seek a product approval. So our indication. We think is very timely. It's one that we believe I mean, there are no explicit instructions on how to administer dehydrated alcohol to treat methanol poisoning. So.

Well, certainly having the label, which spelled that out for the physicians you know many of which are may not be all familiar with how to treat methanol poisoning.

We think is essential.

Thank you very much.

You're welcome.

Thank you next question comes from Andrew Dsilva from B. Riley FBR. Please go ahead.

Good afternoon. Thank you very much for taking my questions I, just a couple of quick ones as it relates to the that the previous question you answered.

Maybe just discuss a little bit more broadly about that.

It's 100 I know.

Acorn for example used to sell it under that definitely designation until Belcher.

Kind of got the FDA clearance to be the only one in the market and you did reference to 100000 units across multiple multitude of indications. So belches product is only for a cardio my outflows from a legal standpoint.

The other dusty product you're no longer on the on the market.

Is effectively belcher filling that hole 100000 unit need going forward and how do you think you play more broadly.

Within the dehydrate alcohol injection space once approval takes place a outside of just your particular indication.

Okay. So a couple of answers there one is the belcher product is indicated for actually it's a very narrow indication certainly the hundred thousand plus units that are used each year by hospitals are not for that per se.

So I imagine there is some off label usage, our product will be identical in terms of the filled volume and things of that nature.

So you know our product will be promoted.

As an antidote for methanol poisoning, that's the only way we sell any of our products is on label, but I don't know how hospitals ultimately it's up to the physician in their patients on how they end up using the product.

So you know at the end of the day, they'll probably be the splitting up the market to some extent.

And I would you know.

Probably would be roughly 50 50 in order to perfect World.

Okay, great. Thank you for the color there and just my last question as it related to a as it as it relates to buy orphan have you had any successful compounders as far as the cease and desist goes and where are you from the m. fuel a production standpoint.

Thank you very much.

Sure. Okay. So for the second part of your question. We are very close to filing of the vial. We're looking to exit the Abdul format and go into a vial format. We found across the board that hospitals are readily willing to switch to the vial of even if they have to switch off of a pre filled syringe supply.

By a compound or.

You know they we've had.

The feedback that that is that would be enough of a value proposition of our product will be price comparably to what you can buy from a compound or so we took pricing I'm off the table in terms of an issue and we believe that once we can communicate that message directly to the doctors have to the pharmacists and saw.

Which we have a new advertising campaign and promotional campaign that can do that without necessarily having the face to face interactions. We're going to see we're confident we're going to see us capture a large amounted to 4 million unit target that we're going for.

In terms of the status of the Oh, you know the letters and the cease and desist letters Compounders are known for just not wanting to follow the rules when it comes to those types of things.

You know, it's taken lawsuits in the past to remove them.

You know from the market on other products that have been approved Weve exchange correspondence with the of T.J.

You know they have communicated there.

You know desire to.

Not help.

Copies of approved products in the market. So that's really where our focus is ensuring that there are not copies. You know it really what we view as illegal copies or copies, which were made without FTC approval and there's no safety and efficacy with all these compounded products. We think it also risks a patient's lives.

But to have an FDA approved product that has been reviewed for safety and efficacy has a much longer shelf life. There's all the reasons in the world to use the product, especially when prices is really not an issue here. So the value proposition is tremendous it's a matter of now just getting that through the hospitals.

Great well hey, Thank you very much I congrats on all the success with the pipeline and no best of luck going into the end of Q3 and close not yet.

Appreciate it thank you.

Thank you next question comes from Brooks Oneil from Lake Street Capital. Please go ahead.

Thank you good afternoon, everyone.

I guess I'll start with the 100 and I'm, hoping you guys can give it's just a little more color on weather.

Name change was driven by Boucher was driven by the FDA or kind of.

What's going on.

Well the day as is a product goes through the approval process Theres a discussion about what especially if you want a brand that has.

It has to go through a division of the F.D.A. or piece DP and its saw it so division that has to.

Approve the name it's a process involved there.

This name was modified a letter point during the review process.

Due to agency questions once that name that was modified from what it originally was it.

Yeah, I guess, a decided that was worthy of a four week delay and are all our date or target action date.

Don't really view this as a big deal four weeks is not something that was going to affect the timing of the launch and the good news here, which I believe is truly good news is there are no. Other open issues that were aware of everything we've been told has been closed on the other sections and we're really just sort of finalizing this labeling piece so.

September 15th of four weeks from now we would expect approval and actually September will be a very exciting month. Because we're also as you know accepting expecting approval of our candy that month, and we have a number of other let's say.

Events and milestones were looking to achieve in September.

Great that's fantastic in.

My own view in the next two weeks in Edmonton Labor Day does is going to happen anyway. So.

Four weeks no big deal.

Exactly actually the Sameer. So we just reminded of the economics associated with the 100 approval I do you have recollection, that's maybe a.

Million plus milestone payment, then a 12% royalty, but am I in the ballpark on that.

That's correct. The milestone was paid on the launch of the product.

Okay great.

And then.

As we think about the hundreds I know you've gotten a couple of questions on this but.

I think you described the does the primary target that you guys are going after that that all poisoning and.

Recognizing a good portion of about 100 million established markets.

It's a focus of other orphan drug.

How do you side, the methanol opportunity obviously.

Relatively new here in response.

The cold, but I mean, do you think that's truly a 50 million dollar market opportunity or hundred million or.

No. It a lot of it will depend on how fast that market shapes off I'm. All we can do is take the number of units and all I think people know what the current pricing is you know we didn't create that market. Our mission is to be able to provide medicines that are affordable and available to all patients. So we would not go higher in price certainly.

As I said, we are we haven't settled on the exact price, but we want to be yeah. This is for us off a low volume product and you truly don't want to price the product either as a grandfathered or unapproved product, where you did no work and you know to bring something the market. Once you go and do the studies and.

You go through the process of getting something approved.

It really does cost many millions to do that so you do want to have some sort of return on your investments, especially when you've got not every product all is going to hit like you want.

I do believe that it will be.

You know some sort of a discount and I believe that we would target a 50% market share. So that's how we're looking at it.

Yes, I'll leave it at that.

Perfect.

Just a couple more real Pat.

Can be we're excited the seabed come to market.

Can you give us any color, whether you're seeing any inbound inquiries or initial orders for that product at this point.

Hey, Brooks this is Paul Stickler here.

At this point in time, we certainly have gotten a lot of interest and as our engagement with the pediatric endocrinology community has increased as well as our engagement with the advocacy groups in the area.

So we've got a lot of interest, but given the fact that the product is that you had available we haven't gotten any specific interest and getting product per se, particularly because of the knowledge of the PDUFA date being in late September.

Sure sure that makes sense. Thanks, a lot and then just my last one I think you mentioned the interest rate and.

On the SW case facility decrease is once you become EBITDA positive and.

Can you you mentioned I think John you hope to be both generating revenue and profits in 2021 can you help us sort of think about how the year, how you expect to your to unfold.

It is everything done it come together in Q4 do you think you can have some kind of a progression.

As we move through the year, they've kind of gets you to bad.

Profitability later in the year, well I think to all the big drivers will be all Kennedy sprinkle dehydrated alcohol as well as the neurology products. So hitting just two of those three will.

Allow us to achieve profitability in this let's say the second half of the year. So that is our goal.

We also are avoiding doing any dilutive deals I'm necessarily that would prevent us from being able to achieve profitability. So we're being careful about the types of deals doesn't mean, we wouldn't go for something if it was created a lot of value out there, but as soon as things stand today.

Now that that's what our models are showing us.

Great. That's very helpful. Thanks, a lot we'll talk so.

Thank you.

Thank you.

Sure no further questions in the queue at this time I'd like to turn the call over to Mr., Sean Brynjolfsson CEO for closing remarks.

Thank you and I'd like to thank everyone for joining us today as always.

We're always happy to communicate our progress. This has been an exciting quarter past couple of quarters as a matter of fact I think that.

Over the past few years, we've been developing it coming up to this point, we're now pivoting to a commercial organization.

Pivoting to a profit generating a revenue generating company.

So that is.

Something that we'll look forward to sharing with everybody in the coming quarters and take care, everyone be safe and we'll talk soon.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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