Q4 2020 Eton Pharmaceuticals Inc Earnings Call

Good afternoon, and welcome to the and Pharmaceuticals fourth quarter 2020 financial and operating results Conference call.

And as 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, Vice President and business development at Eton Pharmaceuticals. Please proceed.

Operator, good afternoon, everyone and welcome to Eaton's fourth quarter, 2020 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 Eton farm and dotcom.

Joining me on the call today, we have Sean from Jellison, our CEO Wilson Troutman, our CFO and Paul Stickler, our senior Vice President of sales and marketing before.

Before we begin I would like to remind everyone that statements made during this call may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contained and these forward looking statements. Please see the forward looking statements disclaimer and our earnings release and the risk factors and the company's filings with the SEC.

Now I will turn the call over to our CEO Sean <unk>.

Thank you everyone for joining us today, we have a lot of exciting topics to discuss as we share our 2020 results and look forward to 2021.

2020 was a transformative year for each and we submitted our last four NDA as of our nine product pipeline and successfully completed our transition from an R&D stage company to a commercial organization.

In addition in recent months, we have seen two of our products commercially launched and completed a major transaction with our oral liquid products.

First I will start with the commercial launch of our lead product they'll Kinder sprinkle.

Ah kidney sprinkle as the first and only FDA approved granular hydrocortisone formulation for the treatment of adrenal cortical and sufficiency, specifically designed for use in children.

Although the product launched in late Q4 promotional activity has really accelerated in January after the holiday season.

Our sales reps have been pleased with the initial reception and they've received from physicians and nurses and the endocrinology community.

Caregivers have been eager to learn more about <unk> sprinkle and how it can benefit their young patients.

The sales rep meetings today, that's been mostly virtual and in recent weeks, we've actually seen certain doctors welcome in person meetings and we expect the frequency of those meetings to increase in the coming months.

While virtual meetings have been helpful to give us a broad reach and a short amount of time, we believe the improved quality of face to face interactions will lead to even faster adoption of the product.

Many of these new patients are provided with a quick start quote unquote quick start where we immediately fill their first script free of charge, while the administrative paperwork is facilitated by their physicians office specialty pharmacy and the payer.

While this means the revenue benefit may lag a month or two behind new patient starts our number one priority is to get a kidney sprinkled to the patients in need and we don't believe they should have to wait while the administrative paperwork is being sorted out.

While it is still early with only two full months of launch behind US. We are encouraged by our adoption rates, we have seen thus far and we believe we are on pace for our 2021 plan. We have seen an increased number of new patient scripts every month since launch and marches on pace to show substantial growth over February and.

We continue to expect positive profit contribution throughout the year and expect to have approximately 400 patients on the product by the end of 2021.

Given this demand for all Kandi and due to inbound interest from physicians and patients we decided to growth can be franchise and acquire the Canadian rights to the product, which we announced in January.

We are now working to bring the product and Canadian patients as quickly as possible and also pleased.

And secondly to announce that Bausch health is launched alloy preservative free and to all major U S retailers and February this product is the first preservative free ophthalmic approved per allergy conjunctivitis, the launch triggered a $1.5 million payment owed to Eaton and we will also receive a double digit royalty on sales of the product.

Next I'd like to discuss our recently announced transaction with <unk> pharmaceuticals.

When we began assembling our neurology oral liquid products and 2018, we knew that we were working on important.

Products for patients that address critical needs and the market and as a result, they would have significant value regardless of how we ultimately decided to monetize them.

After much analysis and thought it was clear to us, though that partnering with authority was the most attractive way to capitalize on these assets.

First it allowed us to lock in a very attractive return on our investment we will be entitled to receive up to $45 million and milestone payments plus still receive royalties on sales of the product.

<unk> is a leader and branded oral liquid products and successfully launched numerous oral solutions in recent years.

Their experience and infrastructure and the space gives us confidence they are the best company to market. These products.

Lastly, it boosts our profitability, which as you know is one of our key priorities and addition to the significant amount of cash coming in from the transaction expenses will be reduced because eton will no longer need to invest and in neurology sales force and the associated product launch expenses. This drastically improves our company's profitability over the next couple of years.

And it allows us to focus our commercial efforts on our orphan drug strategy.

We expect to use the proceeds from the <unk> transaction to acquire additional orphan drug products and 2021, we are focused on finding products with attributes similar to other Kennedy, meaning products that are late stage address critical unmet needs for orphan indications have significant revenue potential and can be commercialized with a targeted sales force.

In addition to our three commercial products, we have six additional products that are under review with the FDA. We believe the regulatory reviews are going well, which should set us up for a number of exciting product launches in 2021.

Few of the key potential product approvals include our orphan drug product dehydrated alcohol, which is under FDA review and decided to do per date of May 27, we have been engaged and standard review communications with the FDA and expect the product to be approved on its prudent per day.

And <unk> oral suspension, which is now owned by authority and has a <unk> date of May 29.

Upon the product's approval and launch we will be entitled to receive a $5 million payment and a royalty and product sales.

Topiramate oral solution, which is also owned by authority and has a <unk> date of August six two Topiramate launch will also trigger a $5 million payment to Eaton and we believe this product is also on track for approval for August six.

As we look forward to 2021, I could not be more excited about our prospects Eton has never been stronger or better position than it is today and.

We have three we now have three commercial products generating revenue we have six additional products under review many of which are expected to be approved and launched in the coming months and our financial position has never been better we are on the cusp of becoming profitable and sitting on a strong cash position with even more cash expected to come later in the year when we realised.

Additional product approvals.

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

Thank you, ladies and gentlemen, and good luck to ask a question from Chris Dodd and one on your Touchtone telephone I'd like to ask a question crude price.

Rod and wire.

One moment for our first question.

Our first question comes from Andrew de Silva B Riley Securities. Your line is open.

Hey, Thanks for taking my questions good to hear your voices.

And just to start just.

It <unk>.

Last quarter, there was a shelf stock adjustment charge that took place.

Did that happen again during the fourth quarter or can you just maybe let us know either what by orphan or al Kindi product sales wharf and it borders. So we can have a sense of how each product strategy.

Yes, no and to the shelf stock adjustment was a onetime factor for a price reduction on by orphan and that will not recur.

And that was that was this is Sean is that was not al kindi related that had to do with.

By orphan, which by the way the sales and by orphan were.

Very strong over the past couple of months, we've been going up.

Significant percentages and so it looks like that product is getting some traction and the market and we're confident when we launched the bile.

And to see it.

Achieve our aspirations.

So the sales that were recognized in the fourth quarter.

<unk> and sales that you didnt recognize anything for al Kindi I remember, we previously discussed.

And so there were some there was some milk can do sales, but the.

And the reality is al Kindi launched in December.

And you've got holidays, there really wasn't it wasn't a profit.

Launch and the Sun status and getting a full months you're launching it.

And the middle of December so from my perspective, the real launch fell kinda started in earnest in January and that's where we had all the sales reps out there trained.

Communicating so having product on the shelf are and the warehouse, yes, we did have.

Some units.

Ship out, but it's different from.

Having it and the warehouse versus actively out there selling promoting and so on so.

And so that's that's really how I look at it.

We got we got it out the door and December but really the selling is really started in January and February and March.

Okay that makes sense and then.

Could you maybe just discuss the difference between the U S market for Al Kindi sprinkle relative to the Canadian market and I'm really interested and just be patient population and market dynamics as you would kind of consider pricing I would imagine it wouldnt be as.

As high as in the U S market, but if you could provide color.

And I'll turn that question over to Paul stick, where our senior Vice President of sales, Paul Hey, Thanks, Sean and good afternoon, Andrew Yes.

In terms of the Canadian market as a general rule.

It's about 10% the size of the United States market.

And and in Canada, there are some pricing controls in place and.

So when we completed the deal back in January with diurnal to gain the Canadian rights. We've started a process of building out a plan in terms of how we want to bring al kindi into that marketplace and.

We intend to move on that and the near future.

Okay and that makes sense and then just the last question for me and really want to better understand the neuro and neurology sale.

Should we expect payment streams to be recognized either as other income or actually as revenue.

And how do we calculate the Rev share profit share and milestone payments dose.

And as previously had with entities U.

Quiet and and license fee.

Thanks, Ron.

And Andy that'll be recognized as the top line and licensing revenue and like the $9 $5 million and we received in February for instance.

And then any milestone payments that we have going back out to their X development partners. We'd go through is like a profit share cost of goods sold.

Okay, perfect I'll take everything else offline. Thank you very much okay.

Thank you. Our next question comes from brands that Beringer.

Your line is open.

Thank you very much for taking my questions can you hear me.

Free cash.

So just very quickly on <unk> and can you comment on what you expect the change and receptivity at the hospital level to be given that you are now changing the formulation presentation of this drug away from the handful.

So that.

And the actual launch of the vial wouldn't occur earlier than the second half of the year.

What we have seen even though the product is in the <unk> is a significant increase in the past few months.

And the and the uptake I'm not sure exactly why that is but it's happening really every week, we're getting more products sold so that's a positive sign.

And again, the hospitals tell us give us the vial will switch completely so.

We are collecting and stability data can't rush that that's just a requirement the FDA want six months of stability and that's what we have to do so.

And then they get.

Several months to review it, but we are confident and that product and the ability to realize 4 million units a year and sales.

And then where we price the vial might be a slight premium to the IPO.

Yeah.

Yes.

To give us a sense of what the magnitude of sales could be associated with this product at 4 million unit annualized.

Given what you project as the price per vial.

What would that translate into as an annual sales figure.

Well the price per vial hasn't been determined but it likely would be comparable to what they're currently paying compounded which is and that five to $10 range.

So you can figure it out from there but.

Just kidding.

I think with having the and fuel will we will see a couple of million dollars of sales this year.

But the vial, assuming we launched the vial sooner, let's say in June or July.

That would be that would be changed but from a forecast from an internal standpoint, I'm, assuming we have the <unk> for the rest of this year and then we have the vial starting in the first quarter next year, it could be sooner than that but I'm not that's not how I work and normally will be more conservative and Hawaii.

And I'll provide forecast to the board.

Understood.

Secondly, with regard to the dehydrated alcohol product.

Can you give us a sense for some frame of reference regarding what do you expect to receptivity to be and your current thinking regarding pricing relative to the existing dehydrated alcohol preparation thats currently available.

Well I think the market and this isn't a product that requires detailing where planning and just contracting at all with wholesalers and distributors and they will go into the hospital to outlet.

From a pricing standpoint.

And we're.

And we're certainly not going to be more but we haven't determined where we're going to be.

And there'll be a slight discount off the correct.

But not.

Not too drastic either.

But we are on track we believe for approval.

On our producer day, and yes, I mean, all the product reviews are going well for that matter all of them seem to be on track for it to hit their <unk> dates.

Okay, and then just a couple of questions on Alkermes sprinkle.

Firstly can you comment on what specific metrics relating to the.

Launch and.

Continued rollout of al can be sprinkle and the United States, you expect to be able to provide on an ongoing basis going forward like for example, <unk>.

<unk> of unique prescribers and number of repeat prescribers and number of patients on therapy things like that.

I think the number one metric is.

Active patients on therapy so.

So the rest of it is more details, but active patients on therapy, you can translate that and to numbers.

We said and our press release, we expect to have more than 400 active patients on therapy and.

And I don't say 400, because I'm trying to get to 400, I believe we'll hit 400 easily but I don't know how much higher and it'll be it just depends on how quickly the uptake as you get to the tipping point, where the market starts to really turn.

But we're we're getting new patients every week.

Our forecasts and what we had communicated to the board prior to doing this deal is exactly the same we had a board meeting last week.

And.

And our head of sales Paul and his team are doing a fantastic job we have seasoned veterans.

And in the field they know the space and the doctors see the value of the products. So.

And I'm happy with the deal and happy with.

The initial launch and we'll provide some more color on that as we get a little bit more.

Under our belt in terms of sales experience and trajectory of the launch and so on and our next call.

Yes.

And then just to follow on from that.

Can you comment on patient receptivity to al Kindi sprinkle and the U S. So far.

Have you gotten any testimonials from patients relating to the ease of use of the product and their experiences with it for the share I'll, let Paul take that one Paul and thanks, Sean Hi, Ron Paul Stickler here, yes, the feedback that we've received.

Patients through multiple different sources has been very very positive and.

Particularly the parents and caregivers, who appreciate the fact that they no longer assets cut.

Adult strength doses of hydrocortisone.

And two quarters really makes a big difference and so their quality of life has been increase but most importantly, the safety.

Of our <unk> sprinkle has really been appreciated more and so we're quite pleased.

By that reception thus far.

And then lastly on Alloway I just wanted to get your updated thinking on that you're still looking at this and it's really only and incremental contributor to top line revenue, but also whether you'd heard anything coming out of Bausch health P&L regarding the performance of alloway since it was actually introduced to the market.

And I know that was very recently, but any feedback that you've gotten from bausch health that you can share would be helpful.

Yes, Ron we're very excited about the launch Bausch as you saw in their press releases are also very excited.

We don't have any further details to share about the launch trajectory as you noticed and only been a few weeks, but we will be reporting that throughout the year, when we receive a royalty payments and.

I think your first comment was correct, we don't expect it to be the largest product and our pipeline, but we think it will still be a meaningful royalty revenue that all contribute to us getting profitable by the end of the year.

Also say that if you go to your Walgreens or Cvs Youll find it on the shelf, it's on pretty much every shelf and.

Also available through all of the large retail stores. So that's not something many companies could claim Polish has the.

Wherewithal to get product on shelves quickly that was one of the reasons we did the deal.

That's something that would take a lot of effort for a smaller company.

Absolutely. Thank you very much.

Sure.

Thank you.

Ladies and gentlemen does that conclude today's conference. Thank you all participating you may all disconnect have a great day. Thank you.

And then.

Yes.

And with it.

And.

And.

Interest income.

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