Q3 2020 Eton Pharmaceuticals Inc Earnings Call

Good afternoon, and welcome to the eating Pharmaceuticals third quarter 2020 financial and operating 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 would like to turn it over to David Krempa, Vice President of business development at Eton Pharmaceuticals. Please proceed.

Thank you operator, good afternoon, everyone and welcome to <unk> third quarter 2020 Conference call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call that really.

Release is available on our website Eaton pharma dotcom joining.

Joining me on the call today, we have Sean Bridge Elson, 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 Companys filings with the SEC.

Now I will turn the call over to our CEO, Sean projection. Thank you David and thank.

To everyone for joining us today I am excited to share with you. The many milestones that weve achieved since our last earnings call, including two FDA approvals multiple anda submissions and a successful equity financing.

These accomplishments set us up for a strong finish to 2020 and position Eaton for transformational.

There are 2021, as we launch our portfolio of products.

One of the most significant events. This quarter was the approval of our candy sprinkle for the treatment of adrenocortical insufficiency in patients under 17 years of age. We are extremely excited about opportunities commercial prospects than we have assembled a highly experienced.

Commercial team to lead the launch I will be discussing our acuity launch plans in more detail later in the call.

We were also pleased to see the approval of alleyway preservative free during the quarter. This product is the first preservative free or to see ophthalmic product approved for the treatment of itchy eyes caused by allergic conjunctivitis.

Bausch healthcare plans to make the product available by the spring allergy season, and eaten will receive a milestone payment upon commercial launch as well as an ongoing royalty on sales of the product.

During the quarter. We also made significant progress with our pipeline our announcement today that ephedrine injection has been accepted for filing by the.

It means that now all nine of our product pipeline candidates have been either submitted to the FDA or approved that would be six submissions pending three already approved this is a tremendous accomplishment by our team in a major milestone for the company I believe it's unprecedented to see a company of our age a little over.

Three years with this many anda submissions.

In recent weeks. We've also successfully closed an oversubscribed equity financing that provided us with gross proceeds of approximately $22.5 million. This transaction solidified our strong financial position and we still have an available $8 million undrawn on our credit facility.

Just WK holdings.

We are confident that our current financial position will be sufficient to take us to profitability, which we expect to reach by the end of 2021.

By orphan sales in the quarter continued to be impacted by COVID-19 related hospital restrictions and practitioners aversion to the MPL format.

With however, we remain committed to the product and are on track to submit the vial prior approval supplement by the end of this year. This would allow us to launch the vial in the first half of 2021 in preparation for the launch of the buy orphan vial next year, we've lowered the price of our amnio products in third quarter. This resulted in a onetime revenue adjustment.

Due to the shelf stock adjustment charge to account for inventory that was on hand with wholesalers at the time of the price change.

We remain very optimistic that the vial launch will accelerate adoption allowed by orphaned to be a meaningful revenue generator in 2021.

Turning now to our lead product candidate ever since the products.

Approval was announced in late September we have been inundated with inbound interest from both caretakers and pediatric endocrinologists across the country.

Faction with current treatment options and how excited they are to get their hands on now can be sprinkle. We're pleased to announce that we expect to have the product available before the end.

Next month.

We have now hired and fully trained our sales force of five representatives, which we believe is more than sufficient to effectively reach the approximately 800 pediatric endocrinologists in the U.S.

The sales reps were officially released into the field on October 20, Threerd and have already held or scheduled meeting.

Things with more than 120 endocrinologists.

The feedback from those meetings has been overwhelmingly positive and we expect to have patients enrolled immediately once the product becomes available.

Additionally, discussions with payers have gone very well based on our early discussions payers recognize the value of our country sprinkle.

I understand that there are no other treatment options to properly dose young adrenal insufficiency patients and they appreciate the potential ramifications of over or under dosing pediatric patients pricing has been set on a per milligram basis. So the cost of treatment will vary from patient to patient based on their individual dosing regimen, we have into at.

So an active patient assistance programs and we do not expect insurance reimbursement to be a major issue or challenge for patients. In fact, most patients should have a co pay of $25 or a loss.

Based on our current market research and ongoing dialogues with endocrinologists, we now believe the pediatric population for adrenal insufficiency.

Ill may be up to 10000 patients in the United States.

Overtime, we expect to capture the vast majority of patients in the age of the zero six range and a moderate amount of patients aged seven to 12 range before they eventually graduate to a higher strength tablet product.

Given the large and compelling opportunity I believe it is clear that the out candy launch.

Inch will be transformative for Eaton as a company and will quickly propel us to becoming a leading orphan drug company in the United States.

Future business development activities will be focused on adding a late stage orphan drug similar to all Kennedy to our portfolio.

While they are candy opportunity alone sets us up for a major tenant.

2021, we expect to have as many as six other meaningful product launches that deserve attention, including the following expected approval and launch of dehydrated alcohol injection in may where we expect to be one of two players and a 100 million plus product market.

The anticipated product approval and launch.

All three of our neurology oral liquid products.

The launch of elevated preservative free by Bausch Health early next year and finally, the launch of by orphan in a vial format.

With all these launches set for the coming weeks and months. There is no doubt we are at the most exciting time in Atens history as we stand here weeks before.

For the launch of Elk, Hindi I've never been more excited or confident about the prospects for Eaton with that we would like to now open up the call for your questions operator.

Okay.

Thanks.

Am I here to ask a question you all need to press Star then one one of your Touchtone telephone.

It.

A question from the can you. Please press the pound key please standby will be compiled the culinary roster.

Our first question comes from Andrew Dsilva with B. Riley Securities. Your line is now open.

Hey, good afternoon, Thanks for taking my questions and congrats on the.

Leasing approvals and.

It was a couple for me.

Just to start.

As we think about the upcoming launch of all candy.

Can you actually discuss pricing well can be I understand it's going to be very well based on the patient, but that'd be very useful and then you broke up a little bit I mean, my phone cut out what are the number.

In percentages of covered lives that are in the applicable domestically trokendi.

Thanks, Andrew for the question.

We had previously stated the patient population to be more than 5000.

Were further investigating into those numbers and we think it could be.

Up to 10000 patients in the U.S. and.

In terms of pricing, we're up its price on a milligram basis and what that means is that the pricing for each patient will be individual will be different it's not a one pricing fits all I.

I will say that were well under the mean orphan drug cost.

You us and we continue to believe the market opportunity to be in excess of $100 million. We do see a quick ramp up to achieving a meaningful market share in 2021.

Okay, and how is that 10.

Up to 10000 patient Thats.

Yes.

In the hundred correct.

Yeah. We've previously stated that the population is and.

An excess of 5000 now it seems like it's higher than what we our initial assumptions, which is a positive I can tell you our excitement for the project and for the the commercial prospects are actually much greater today than they were.

Or when we signed the deal.

Okay, that's great to hear and then.

I understand that the difference between the specialist and working with rock in the end.

And do you expect that outstanding will not run into any of the same.

Headwind related to come at 19.

I'm really.

Physician education, and just getting into.

Hospitals need to correct that decision makers.

I'll turn that question over to Paul is short on the answer is no I don't expect it and I don't think there's a comparable comparability between those two projects at all but one.

To provide a few comments on that thank you Sean Andrew. Thank you for the question I think the answer is that we anticipated the possibility of further healthcare provider shutdowns restriction restrictions and closures. Fortunately endocrinology has been one of the least affected so sub specialties in the United States, meaning that theyve been able to keep their Clint.

Nickel appointments in place remotely with that in mind, we were able to modify our resource allocation. For example, we've added more inside sales support moderated our outside sales support staff, we've enhanced our team's ability to interact with health care professionals remotely, while ensuring that we offer a strong nonpersonal promotional footprint all that said we're.

I'm very encouraged by our early interactions that we've had today.

So I think the you know the short answer there is that these these two products are very different for by orphan. There was a resistance to the fuel format that was not going to be overcome and regardless of whether there was covered or not covered certainly.

We told you Didnt help that launch, but when you for example look at the success of the ephedrine ready to use which is a out there other than another player that hit launch that they were able to ramp up pretty quickly and that was also a switch from compounders to a ready to use vial we.

We believe this comparability here and that the buy orphan.

We're very loyal will be an extremely successful product.

Just obviously going through we got to get through that conversion process, but.

The the real story here and the growth driver for the long term is going to be all kandi will be or rare disease franchise and other orphan drugs.

We'll be launching one of which will be launching next year.

That's perfect and then just the last couple ones for me put them together.

As it relates to all away.

Should we model in the upfront payment or the.

Now something coming in this quarter I was under the impression that there might be some.

Initial changing of inventory that might be recognized as revenue in that could fall into place.

2020 year.

And then you noted that you reduced the price.

Bylaws, Ken could you give a little more color.

Around the pricing change are you now effectively in line or below what the Compounders Surcharging, yes.

Actually that's that was the idea there are two reasons why we lowered the price for the fuel one is to make preparation for the vital.

While it has a higher cost to the vial versus an AMPU.

Yeah.

So the vial will be slightly higher price and then so by bringing that price of the fuel down to what compounders would charge for competent medication made all the sense in the world.

Certainly.

We think the vial will will be a premium product just as.

As the Ephedrine for example, ready to use.

Use is priced at a premium so.

So that's that piece of it and Im sorry, the second part of your question.

What was bosh and the milestone payments.

Yes.

Yes, I do that for I mean, if you're going to model it its or its really they've already announced or launching it.

Q1, so I would say that would I would follow their guidance and whether you put that in January or February that's up to you.

Okay perfect. Thank you very much and good luck closing out the year. Thank you.

Okay.

Thank you and as a reminder, if you'd like to ask a question. Please press star.

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Stand by all the check for any further questions.

Hi, guys I'm showing no further questions in the queue at this time I'd like to turn.

The call back to Sean.

Brian Johnson CEO for any closing remarks.

Thank you operator, and I'd like to thank everyone for taking the time to join us today.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program and you may now disconnect.

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