Q1 2021 Eton Pharmaceuticals Inc Earnings Call

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Good afternoon, and welcome to the Eton There Pharmaceuticals first quarter 2021 financial and operating results conference call. At this time all participants are in a listen only mode. All in 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, Senior Vice President of business development and Investor Relations at Eton Pharmaceuticals. Please proceed.

Good afternoon, everyone and welcome to Eaton's first quarter 2021 conference call. This afternoon, we issued a press release that outlines the topics.

That we plan to discuss on today's call. The release is available on our website Eton pharma dot com joining.

Joining me on our call today, we have Sean Brent Johnson, our CEO Wilson Troutman, our CFO and pulse Pickler are 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 that involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward looking statements.

Please see the company's 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 Sean Bridge Allison.

Thank you David and thank you everyone for joining us today as we discuss our first quarter earnings results.

I'm pleased to share that we reported record revenue and more importantly profitability in the first quarter of 2021 the.

The strong earnings were a result of the years of hard work, we have put in since starting the company a few years ago with the recent launches of our Kinder sprinkle in alloy preservative free we now have three commercial products generating revenue for us in.

In addition, this quarter, we were able to monetize the work we put into our neurology oral liquids franchise with authority pharmaceuticals, but with the authority Pharmaceuticals transaction. This transaction brought in $9 5 million in the quarter and should provide us with payments of up to $45 million in the coming quarters and years. In addition to a single digit royalties on.

Future sales of the products.

I will start my remarks today with our lead product candidate sprinkle El Kenny as an orphan drug product for the treatment of adrenocortical insufficiency. It became commercially available in late Q4 and fully promoted in January after the holidays.

Our sales reps have already engaged with more than 90% of their initial targets in the pediatric endocrinology community. These engagements have been largely virtual through video conference calls and such but we've recently seen a growing group of physicians and hospitals, allowing for in person meetings.

Furthermore, we expect in person meetings to lead to drastically higher conversion rates and are therefore shifting our sales focus strategy to allocate more resources to states that are allowing in person meetings, we will be focusing nearly all of our sales efforts on accounts in states that are open. So that we can conduct as many in person meetings as Pos.

<unk> and as quickly as possible for example, with the northeast territories not accepting in person meetings that sales rep would be helping out in Texas, Florida or whichever states. We have scheduled in person meetings and we've got all hands on deck targeting the open states and as additional states open up the team's focus world rotate to the newly opened states.

Just to be clear there are some states, which aren't fully open that do accept visits and obviously, we would continue to visit those hospitals as well. So the key point here is really debt in person visits will take precedence over zoom calls, we find them far more effective than zoom calls when we find them far more informative for the.

Physicians as a lean and nimble company, we have the advantage of being able to quickly make these types of changes and rapidly adapt to the evolving landscape across the United States. We believe this strategy will produce stronger results than continuing to have sales rep pursue strictly zoom calls and our closed states for example, and I am very proud of how quickly our.

Team was able to implement this strategy.

As we discussed on our last call. We have implemented a quick start program that allows new prescriptions to be immediately filled for patients even while the administrative paperwork and reimbursement process is worked through behind the scenes, which may take a few weeks.

We think this is an important program to get patients in need treatment as quickly as possible, but it does mean that the revenue for those scripts can often lag that started treatment by a month or two we will continue to focus on generating as many new scripts as possible and we know that the revenue will follow I am pleased to report that we've already received more than 100, new patient scrip.

And we continue to work towards our goal of having more than 400, new patient scripts by the end of 2021.

Now a few words regarding <unk> hundred during the quarter, our partner Bausch health launched alloy preservative free and major retailers across the country. We've been pleased with the commercial launch efforts by Bausch, So far and given the initial sales data it looks like the product will be a success patients and doctors are excited to finally have a.

<unk> free allergy treatment available over the counter.

Our third commercial product is by orphan our ready to use phenylephrine injection by orphan sales continue to grow as more hospitals adopt the product and we believe that major market adoption will coincide with availability of both our vial and pre filled syringe presentations sales month over month continue to grow with final upfront, we would expect that to.

Increased dramatically once we offer these additional presentations however.

However, our vial manufacturer ran into delays due to government mandated capacity reservation for the COVID-19 vaccine production.

But we went ahead and executed a backup plan and expect to have the vial product available on 2022. In addition, we have made progress on the pre filled syringe line extension and we expect to have that product also on 2022.

Now turning to our pipeline products, we are approaching a very exciting period for our company and our pipeline. We have a total of six products under review at the FDA with four of those <unk> dates coming up in the next three months. We are our partners are engaged in regular communications with the FDA and we hope to have these products approved and launched very <unk>.

Shortly we expect to continue to replenish our pipeline with additional business development transactions in the near future. We remain active in our pursuit of high value additional late stage orphan drug products and look forward to transacting in the coming quarters with that I would like to turn the call over to Wilson Troutman, who will briefly walk through some of the.

Financials before we open up the call Wilson.

King.

Revenue was $11 9 million in first quarter of 2021, which included licensing revenues within surety pharmaceuticals, and boss shelf, along with our sales for the Kinder sprinkle by orphan and product royalties from alloy preservative free for the quarter.

Gross profit was $10 3 million or <unk>, 86% of sales for the first quarter of 2021 and reflected to eliminate cost of sales associated with our licensing revenue.

Research and development expenses for $0 9 million for the first quarter of 2021, which was five point, which was a $5 $4 million decline as compared to $6 $3 million of R&D expense from the same period in 2020.

The R&D expense.

In 2020 reflected $4 8 million used to acquire the licensing rights to <unk> sprinkle.

Given our pipeline products that we have filed with the FDA absent of new business development transactions, we expect R&D expenses in 2021 to remain well below the full year 2020 levels.

General and administrative expenses were $4 1 million for the first quarter of 2021 compared to $2 6 million for the same period in 2020.

This increase is primarily driven by higher selling marketing and distribution spending for a commercialization of El Kindi Sprinkle, which we launched in December 2020.

G&A expenses in the quarter included <unk> 7 million of noncash expenses for 2021 compared to <unk> 4 million for the 2021st quarter.

As a result of these factors our quarterly net income was $5 $1 million or <unk> 19 per share in the first quarter of 2021 as compared to a net loss of $9 <unk> million for the same period of 2020.

As for March 31, 2021, our cash balance was 20 $25 1 million.

Our strong cash position gives us room to launch our products and still pursue new business development opportunities.

We will now open up for questions operator.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Draw your question press the pound key please standby on for Paul Q&A roster.

Our first question comes from Andrew Desilva with be Ryan You May proceed with your question.

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

Couple of quick ones.

Related in neurology sales.

I believe that $5 5 million or so.

What was received at closing was actually an escrow where are we on the milestones related to adding maybe just refresh my memory on what those are.

Triggers are and then.

If you could just let us get a better understanding of what you think R&D should look like.

It continues obviously pretty volatile quarter to quarter.

Okay.

Sure Andy So the five five was held on that Australia, you're correct, we received $1 million of it already in Q2.

The remaining for five we expect to come through later this year when various.

Call them administrative.

Such as patent filings.

Certain things like that are accomplished throughout the year. So we still expect that to come through later this year.

Great and as far as R&D.

R&D I think Q1 was a fairly good run rate.

No other business development transactions in the year.

On the products have all been filed with the FDA and a lot of the expense last year. Besides the onetime al Kindi fees was NDA filing fees of $1 $5 million per product as well as some of the development work that went in pre filing so with the products filed no more fees on the horizon.

For Q1 rate will probably be what we see the rest of the year, except for any net new future business development transactions that may increase the R&D expense.

Okay that makes sense and then as it relates to the X 100 could you just refresh my memory on the market dynamic here I remember that there was originally only.

One player in the space I was curious if that changed at all and if there was a change in the law.

Pricing.

No. There's no change there was one other one current supplier dehydrated alcohol in the market and David different indication then our product.

But they are the only play in the market.

Okay, Great and then last question.

As it relates to the launch of boss.

Abnormally high allergy season, right now I was curious day.

Now that their launch are you seeing any sort of an uptick in efforts on their part and you for marketing and then.

Youre standing translate to.

Sales.

So what we've seen from Bausch so far as the Q1 results and as you remember the product launched in February. So it was really about a month on a half worth of sales. We were very happy with the results. We think they're doing well we think the product should be successful, but we have no insight into the April or early may sales.

On the product yet.

Okay perfect. Thank you very much best of luck on board.

Thanks, Andy Thanks.

Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Ram <unk> with <unk>.

You May proceed with your question.

Hi, guys. This is rob on for Rob.

Two questions from me, if I'm and congrats on the quarter.

So can you help us understand how large the Canadian market opportunity is from kidney sprinkle and what sort of level of infrastructure would you need to penetrate that territory effectively.

Hi, Rob My name is Paul Yes, the Canadian market roughly is about the 10th of the size of the U S market and so in terms of.

Infrastructure, we would really not need a whole bunch of people up there at this point in time.

I do think that based upon my prior experience that a very streamlined sales organizations in Canada can be very effective particularly in rare disease.

Thank you for that my next question. So how many can you help us understand I don't know if you have this data yet on it.

Repeat prescribers are there for all kidney sprinkle in the U S and how many patients have filled more than one prescription.

Yes.

So actually in terms of the repeat prescribers, we have a good number of repeat prescribers.

With pediatrics pediatric adrenal insufficiency.

The health care providers that treat that disease tend to treat a lot of them. So.

We've been very happy with the repeat orders that have been coming and.

What was the other part of the question again.

So how many patients have actually sold more than one prescription.

A reasonable percentage.

I'd say.

Under 50%.

Okay. Thank you for that.

My last question.

You've stated before that you are.

For a rare disease drugs and are you abandoning the more traditional specialty pharma model and what have you considered to be attractive target rare disease indications going forward.

Hi, Rob this is Sean so the.

The short answer to your question is we are firmly focused on rare disease.

Specifically orphan drugs the products allow us to have effective launches with minimal SG&A typically pricing advantages on rare disease and a smaller number of patients.

I guess to reach.

For a large pharma company you can invest a lot of resources and perhaps visiting general physicians offices, but that doesn't really work for smaller drug company.

No in terms of spec pharma I would say that we've got a royalty business debt represents those types of products. So we have other companies that we've partnered with and we'll continue to do that where it makes sense financially, but I would say going forward you really should think of us as a focused in the rare disease space.

Awesome, Thanks, guys and congrats again.

Thank you.

Thank you and that concludes our Q&A session, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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