Q4 2021 Eton Pharmaceuticals Inc Earnings Call

March 16, 2022

Good evening and welcome to the Eaton Pharmaceutical fourth quarter 2021 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 to your questions. Please be advised that this call is being recorded at the company's request. At this time, I'd like to turn the over to David Krimpa, Senior Vice President of Business Development and Investor Relations at Eaton Pharmaceutical. Please proceed.

Good evening and welcome to the Eton Pharmaceuticals fourth quarter 2021 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 to your questions. Please be advised that this call is being recorded at the company's request at this.

I'd like to turn it over to David Krempa, Vice Senior Vice President of business development and Investor Relations at Eton Pharmaceuticals. Please proceed.

Yes.

David Krimpa: Thank you, operator. Good evening, everyone, and welcome to Eaton's fourth quarter 2021 conference.

Thank you operator, good evening, everyone and welcome to <unk> fourth quarter 2021 conference call.

David Krimpa: 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, ethanpharma.com.

This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call. It release is available on our website Ethan farm and dotcom.

Speaker Change: Joining me on the call today, we have Sean Brinjalison, our CEO , Wilson Troutman, our CFO , and Kevin Guthrie, our Executive Vice President of Commercial Activities.

Joining me on the call today, we have Sean <unk>, our CEO Wilson Troutman, our CFO and Kevin Guthrie, our executive Vice President of commercial activities.

Speaker Change: In addition to taking live questions on today's call, we will be answering questions that have been emailed to us by investors.

In addition to taking live questions on today's call, we will be answering questions that have been E mailed to us by investors.

Speaker Change: Investors can send their questions to InvestorRelations at EdenPharma.com.

This can send their questions to Investor relations at <unk> pharma dotcom.

Speaker Change: Before we begin, I would like to remind everyone that statements made during today's 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.

Before we begin I would like to remind everyone that statements made during today's 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.

Speaker Change: please see the 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 .

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 Burke Johnson.

CEO: Thank you, David. Thank you, everyone, for joining us this evening. We have a number of exciting product launches and new initiatives in motion right now, so I'm excited to provide all of you an update today.

David Thank you everyone for joining us. This evening, we have a number of exciting product launches and new initiatives in motion right now so I'm excited to provide all of you an update today.

CEO: With the launch of ResyPress this week, we now have six commercial products in launch phase and an additional four products that have been submitted to the FDA and expected to be approved and launched in the coming quarters. I'll touch on each of them today, but I'd like to start first with our recent launch of carglymic acid, which occurred in December .

With the launch of Resi press. This week, we now have six commercial products in launch phase and an additional four products that have been submitted to the FDA and expect it to be approved and launched in the coming quarters I will touch on each of them today, but I'd like to start first with our recent launch of <unk>, which occurred in December .

CEO: We were very excited when we acquired this product late last year. It was clearly a great fit with our orphan drug business and we knew it would be an important product for our company. Although we are only three months into launch, I am pleased to report that we are trending well ahead of our initial projections for the launch.

We were very excited when we acquired this product late last year. It was clearly a great fit with our orphan drug business that we knew it would be an important product for our company. Although we are only three months into launch I am pleased to report that we are trending well ahead of our initial projections for the launch.

CEO: Our product is the first and only generic of Carboglue, which is used to treat elevated levels of ammonia in the body and is one of the most expensive treatments in the world.

Our product is the first and only generic of Carbo globe, which is used to treat elevated levels of ammonia in the body and is one of the most expensive treatments in the world.

CEO: The cost of treatment for many adult patients can exceed $1 million per year.

Cost of treatment for many adult patients can exceed $1 million per year.

CEO: So our lower cost alternative has received a welcome reception from patients, payers, and healthcare professionals.

So our lower cost alternative has received a welcome reception from patients payers and healthcare professionals.

CEO: Although we are fully substitutable and bioequivalent generic, our product actually has advantages over the branded product, including the fact our product does not require refrigeration while the brand product does.

Although we are fully substitutable and bio equivalent generic our product actually has advantages over the branded product, including the fact, our product does not require refrigeration, while the brand product does.

CEO: Additionally, our product has a 90-day shelf life after opening versus 30 days for the branded product, and we expect our labeling to be updated shortly to reflect that.

Additionally, our product is a 90 day shelf life after opening versus 30 days for the branded product and we expect our labeling to be updated shortly to reflect that we've already heard from patients that they find this to be a very valuable benefit.

CEO: We've already heard from patients that they find this to be a very valuable benefit.

CEO: Our strategy has been to actively detail the product directly to physicians and patient advocacy groups at medical conferences with our orphan drug sales force rather than trying to drive adoption through aggressive discounting with payers.

CEO: Payers often try to instigate a pricing war by requesting massive price discounts in exchange for sending volumes to your product, especially on generic products. Given our ability to use a sales force to directly talk to physicians and patient advocacy groups about the advantages of our product, we do not believe we need to engage in these aggressive pricing games.

Here's often try to instigate a pricing war by requesting massive price discounts in exchange for sending volumes to your product, especially on generic products given our ability to use our sales force to directly talk to physicians and patient advocacy groups about the advantages of our product. We do not believe we need to engage in these aggressive pricing games.

CEO: We believe this will be an attractive market for us long-term and are not interested in pursuing short-term revenue wins at the cost of destroying the long-term market economics.

We believe this will be an attractive market for us long term and are not interested in pursuing short term revenue wins at the cost of destroying the long term market economics we.

CEO: We believe the carbon glue market in the U.S. is more than $50 million annually, and our goal is to capture 25 to 35% of the market. We are very encouraged by the adoption we have seen in the first couple of months, and we believe we can reach our goal by the end of the year.

We believe the carbon market in the U S is more than $50 million annually and our goal is to capture 25% to 35% of the market. We are very encouraged by the adoption. We have seen in the first couple of months and we believe we can reach our goal by the end of the year.

CEO: We launched the product on December 20, so it did not have an impact on the fourth quarter results we are reporting today. But now that we have already added patients throughout the first quarter, we would expect to see significant revenue from the product starting in the second quarter of this year.

We launched the product on December 20th so it did not have an impact on the fourth quarter results. We are reporting today, but know that we have already added patients throughout the first quarter, we would expect to see significant revenue from the products starting in the second quarter of this year.

CEO: Now, turning to other drivers for 2022, one of the primary drivers will be our orthodrug Alkiddy Sprekel, which is indicated for the treatment of adrenal insufficiency in pediatric patients.

Now turning to other.

Drivers for 2022, one of the primary drivers will be our orphan drug <unk>, which is indicated for the treatment of adrenal insufficiency in pediatric patients.

CEO: Al-Kindi sales continue to grow in Q4 compared to Q3, however, we believe they can grow at a much faster pace, which is why we initiated a co-promotion agreement with Ptolemar late last year.

<unk> sales continued to grow in Q4 compared to Q3. However, we believe they can grow at a much faster pace, which is why we initiated the co promotion agreement with Telemark late last year.

CEO: We are pleased to announce this co-promotion partnership appears to be working, as we have already seen significantly higher rates of new prescriptions in recent weeks. Ptolemar's 62-person sales force was fully trained and out promoting Alkiddy Sprinkle in the field starting in the second half of January . They have now been promoting the product for almost 60 days, and we are seeing the benefits of this expanded reach. As expected, they have been able to conduct a significantly greater number of in-person meetings with doctors than we were able to do on our own.

We are pleased to announce this co promotion partnership appears to be working as we have already seen significantly higher rates of new prescriptions. In recent weeks Tomo 62 person sales force was fully trained and are promoting <unk> sprinkle and the field starting in the second half of January they have now been promoting the product for almost 60 days and we are seeing.

The benefits of this expanded reach as expected they have been able to conduct a significantly greater number of in person meetings with doctors than we were able to do on our own in fact last week, we saw record new.

CEO: In fact, last week we saw record new patient scripts, breaking the old record that was set just two weeks ago. And March is on track to be, by far, our highest month ever for new patient scripts.

Patient scripts breaking the old record that was set just two weeks ago in March is on track to be by far our highest month ever for new patient scripts. We believe the full benefit of the <unk> partnership will be even more apparent in quarters to come as <unk> been able to achieve a steady cadence of repeat doctors' visits that are often required to change physicians.

CEO: We believe the full benefit of the Ptolemar partnership will be even more apparent in quarters to come as Ptolemar is able to achieve a steady cadence of repeat doctor's visits that are often required to change physicians' prescribing habits.

Scribing habits.

CEO: In addition to the extra push from Ptolemar sales reps, we are in the process of implementing an expanded digital marketing campaign. We will have new branding and messaging with an enhanced focus on directly educating patients and caregivers about the benefits of precision dosing.

In addition to the extra push from toll more sales reps. We are in the process of implementing an expanded digital marketing campaign, we will have new branding and messaging with an enhanced focus on directly educating patients and caregivers about the benefits of precision dosing.

CEO: Next, I will turn to our two commercial hospital products, including our newest product, Launch Resi product.

Next I will turn to our two commercial hospital products, including our newest product launch for resi price <unk>.

CEO: Rezipress is our own ready-to-use formulation of ephedrine. The market for ephedrine injection in the U.S. was over $85 million last year and grew more than 20%. The vast majority of the market is still sold in a concentrated form that must be manually diluted prior to administration.

Resi presses, our own ready to use formulation of ephedrine the market for ephedrine injection in the U S was over $85 million last year and grew more than 20%. The vast majority of the market is still sold in a concentrated form that must be manually diluted prior to administration.

CEO: We expect the launch of ResiPress to help accelerate the adoption of ready-to-use products, and ultimately, we believe the majority of the market will convert to ready-to-use.

We expect to launch a resi press to help accelerate the adoption of ready to use product and ultimately we believe the majority of the market will convert to ready to use we have partner with extra in pharmaceuticals, a leading injectable drug company to commercialize our resi across Amp Youll extra has indicated to us that they have already seen strong initial interest from customers and.

CEO: We have partnered with XGen Pharmaceuticals, a leading injectable drug company, to commercialize our ResiPress ampule. XGen has indicated to us that they've already seen strong initial interest from customers and we are optimistic about the opportunity.

We are optimistic about the opportunity.

CEO: Our other commercial hospital product, BiOrphan Ampules, continues to see increased adoption every quarter. However, it is still at levels well below what we believe the opportunity is once we convert to the vial presentation, which is why we are working aggressively to convert both ResiPress and BiOrphan into vial format.

Our other commercial hospital product by orphan <unk> continues to see increased adoption every quarter. However, it is still at levels well below what we believe the opportunity is once we convert to the vial presentation, which is why we are working aggressively to convert both resi and.

And by orphan until vial formats, I am pleased to say that the manufacturing of registration batches of both products in vials occurred late last year and the initial data looks good. We're just waiting on the final stability data time points in order to submit the prior approval supplements, but I expect them to be submitted in the second quarter, which could allow for a launch of <unk>.

CEO: I'm pleased to say that the manufacturing of registration batches of both products and vials occurred late last year and the initial data looks good. We are just waiting on the final stability data time points in order to submit the prior approval supplements, but I expect them to be submitted in the second quarter, which could allow for a launch of both vials before the end of this year.

<unk> before the end of this year.

CEO: Turning now to our royalty products. In our royalty products segment, our partner, Azzurri Pharmaceuticals, launched Aprontia, our Coparamate oral solution, in December .

Turning now to our royalty products and our royalty products segment. Our partner has already pharmaceuticals launched a prime Tia or top topiramate oral solution in December we had found topiramate to be the most requested oral liquid from pharmacists. So we believe there is significant demand in the large market opportunity for the product.

CEO: We had found Topiramate to be the most requested oral liquid from pharmacists, so we believe there's significant demand and a large market opportunity for the product.

CEO: The launch triggered a $5 million payment to us, and we will receive a single-digit royalty on sales of the product. The $5 million payment was recognized as revenue in our Q4 results when it was achieved, but the actual cash payment was received in early January , so it was not included in our year-end cash balance.

The launch triggered a $5 million payment to us and we received and we will receive a single digit royalty on sales of the product the $5 million payment was recognized as revenue in our Q4 results. When it was achieved but the actual cash payment was received in early January . So it was not included in our year end cash balance.

CEO: In addition to all of this progress we've made on the commercial front, we've continued to advance our pipeline products and bringing them closer to approval.

In addition to all of this progress we've made on the commercial front, we have continued to advance our pipeline products and bringing them closer to approval.

CEO: Zonisamide Oral Suspension. This is a product approval that had been held up last summer because the FDA was unable to inspect the UK-based manufacturing site due to COVID-related travel restrictions.

<unk> oral suspension. This was the product approval that had been held up last summer because the FDA was unable to inspect the UK based manufacturing site due to COVID-19 related travel restrictions. However, the inspection has been completed it took place at the end of January and we believe it was a successful inspection that should allow the FDA to approve the product.

CEO: However, the inspection has been completed, it took place at the end of January , and we believe it was a successful inspection that should allow the FDA to approve the product application. Unfortunately, we have not received a new target action date to share with you at this time, but we hope to receive a decision from the FDA in the coming weeks or months. The approval and launch of zonisamide would trigger another $5 million payment to us from Missouri.

Implication. Unfortunately, we have not received a new target action date to share with you at this time, but we hope to receive a decision from the FDA in the coming weeks or months, the approval and launch of <unk> would trigger another $5 million payment to us for Missouri.

CEO: Secondly, Lamotrigine. Our partner completed the human factor study and submitted the results to the FDA in the fourth quarter. We believe the response fully addressed all of the FDA's questions from the complete response letter. The application has been assigned a new target action date of May 2022. The approval and launch of Lamotrigine would also trigger a $5 million payment for us.

Secondly, lamotrigine our partner completed the human factor study and submitted the results to the FDA in the fourth quarter. We believe the response fully addressed all of the Fda's questions from the complete response letter.

The application has been assigned a new target action date of May 2022, the approval and launch of Lamotrigine would also trigger a $5 million payment for us.

CEO: And cysteine, cysteine is our Paragraph 4 trial ongoing this week. I am actually in Delaware now attending the trial, so I appreciate everyone's flexibility to hold this call later than normal. We continue to feel strongly that the innovators' patents should never have been issued as our partner has been manufacturing the same cysteine product in the same format for more than 20 years now, well before Accela ever began working on the project.

And <unk> is our paragraph four trial ongoing this week I am actually in Delaware now attending the trials. So I appreciate everyones flexibility to hold this call later than normal we continue to feel strongly that the innovative patent should never been issued as our partner has been manufacturing the same <unk> product in the same format for more than 20 years now well before.

Or excel or ever began working on the project.

CEO: While we do not have a timeline for the judge's decision, our lawyers expect to receive it in the second half of this year. We believe we responded to the final minor request from the FDA in our application, which should allow our application to receive tentative approval as early as next month.

While we do not have a timeline for the judges decision our lawyers expect to receive it in the second half of this year. We believe we responded to the final minor requests from the FDA and our application, which should allow our application to receive tentative approval as early as next month.

CEO: As the first to file ANDA against the innovator, we should be entitled to 180 days of generic exclusivity if we successfully overturn their patents. The innovator's market is more than $50 million annually, so this would be a significant opportunity if we were able to prevail and launch the product.

As the first to file Anda against the innovator, we should be entitled to 180 days of generic exclusivity. If we successfully overturned their patents the innovators market is more than $50 million annually. So this would be a significant opportunity. If we were able to prevail and launch the product.

CEO: Finally, dehydrated alcohol. We are actively working on the resubmission to address the FDA's comments on the CRL. We held a meeting with the FDA in the fourth quarter and received feedback regarding exactly what the agency wanted to see in our response. It is taking us a little longer than originally anticipated to address those requests, but the dialogue with the FDA gave us increased confidence that we are fully addressing their points and providing them with an application that warrants approval and expect to have this wrapped up in the coming weeks.

Finally, dehydrated alcohol, we are actively working on the Resubmission to address the Fda's comments on the CRO, we held a meeting with the FDA in the fourth quarter and received feedback regarding exactly what the agency wanted to see in our response and it's taking us a little longer than originally anticipated to address those requests, but the dialogue with the FDA gave us increased confidence.

That we are fully addressing their points and providing them with an application that warrants approval and expect to have this wrapped up in the coming weeks.

CEO: I think it is undeniable that we are in the most exciting time in our history and an important inflection point as we launch all of these products that we worked so hard to develop.

I think it is undeniable that we earn the most exciting time in our history and an important inflection point as we launch all of these products that we worked so hard to develop our goal remains to achieve sustained profitability by the end of this year and we believe we are on a strong path to do so given the recent sales trends of <unk> acid and al Kindi.

CEO: Our goal remains to achieve sustained profitability by the end of this year, and we believe we are on a strong path to do so given the recent sales trends of cargloomic acid and alkindi.

CEO: We believe we can achieve at least $25 million worth of revenue this year, including 10 million of launch milestones from Missouri.

We believe we can achieve at least $25 million worth of revenue this year, including $10 million of launch milestones from authority plus potentially significant upside in the second half of the year from a number of items that could materialize for us, including the launch of by orphan <unk> successful outcome in the litigation.

CEO: plus potentially significant upside in the second half of the year from a number of items that could materialize for us, including the launch of biorphine, resipress vials, successful outcome in the litigation, and launch of our cysteine product, or receiving approval and launching dehydrated alcohol injection.

And launch of our <unk> product or receiving approval and launching dehydrated alcohol Inge.

<unk> injection, so with that I will now turn it over to Wilson to discuss our financial results Wilson.

CEO: So with that, I will now turn it over to Wilson to discuss our financial results. Wilson.

Wilson Troutman: Thank you, Sean. Eaton reported revenue of $6.1 million for the fourth quarter of 2021, which included a $5.0 million licensing fee with Azzurri Pharmaceuticals from the approval and launch of Aprontia to Pyramate Oral Solution. There was no material revenue for the fourth quarter.

Thank you Sean Eton reported revenue of $6 1 million for the fourth quarter of 2021, which included a $5 1 million licensing fee with as you already pharmaceuticals from the approval and launch of our prime tier two pyramid oral solution as.

There was no material revenue for the fourth quarter of 2020.

Wilson Troutman: Eaton's gross profit for the fourth quarter of 2021 was 5.8 million and reflected the impact of the Apprentia licensing fee and continued growth for our Alkindy Sprinkle product.

Eaton's gross profit for the fourth quarter of 2021 was $5 8 million and reflected the impact of the <unk> licensing fee and continued growth for out al can be sprinkled product.

Wilson Troutman: The gross profit for the prior year quarter period was not material.

The gross profit for the prior year quarter period was not material.

Wilson Troutman: Research and development expenses for the fourth quarter of 2021 were moderate at $0.7 million, compared to $3.4 million in the prior year period.

Research and development expenses for the fourth quarter of 2021 were moderate zero point $7 million compared to $3 4 million in the prior year period.

Wilson Troutman: R&D expenses in the fourth quarter of 2020 were elevated to a 1.4 million FDA filing fee for tapiramate oral solution, a 0.6 million milestone fee for the FDA filing acceptance of Reziprez, and expenses related to the biorphan vial and other products in development.

R&D expenses in the fourth quarter of 2020 were elevated due to a $1 4 million FDA filing fee for Topiramate oral solution 0.6 million milestone fee for the FDA filing acceptance of <unk> and expenses related to the by orphan vial and other products in development.

Wilson Troutman: General and administrative expenses for the fourth quarter of 2021 were $3.8 million in both the fourth quarter of 2021 and 2020.

General and administrative expenses for the fourth quarter of 2021 were $3 8 million in both the fourth quarter of 2021 and 2020.

Wilson Troutman: Fourth quarter 2021 expenses were slightly higher for increased compensation expenses and marketing research consulting, along with FDA product fees for Resiprez, offset by lower sales and marketing expenses associated with the Q4 2020 launch of El Kindy Sprinkles.

Fourth quarter 2021 expenses were slightly higher for increased compensation expenses and marketing research consulting along with FDA product fees from <unk> offset by lower sales and marketing expenses associated with the Q4 2020 launch adult kinda sprinkle.

Wilson Troutman: The fourth quarter of 2021 included $0.8 million of non-cash expenses.

The fourth quarter of 2021 included <unk> 8 million of noncash expenses.

Wilson Troutman: As a result of these factors, Eaton reported net income of $1.0 million for the fourth quarter of 2021, compared to a net loss of $7.7 million for the prior year period.

As a result of these factors Eton reported net income of $1 8 million for the fourth quarter of 2021 compared to a net loss of $7 7 million for the prior year period.

Wilson Troutman: Eaton reported diluted earnings per share of 0.4 cents in the fourth quarter of 2021, compared to negative 0.32, 32 cents in the

Eton reported diluted earnings per share of 0.4 cents in the fourth quarter of 2021 compared to negative 0.3 to <unk> 32.

In the prior year period.

Wilson Troutman: Cash and cash equivalents were $14.4 million as of December 31st, 2021. And we received the $5 million Azerti milestone payment for the Taviramate product launch in early January .

Cash and cash equivalents were $14 4 million as of December 31, 2021, and we received a $5 million as you already milestone payment for the <unk> product launch in early January .

Operator.

Speaker Change: Thank you. Ladies and gentlemen, if you have a question at this time, please press star, then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If a question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Speaker Change: And our first question comes from the line of Mitchell Kapoor with HC Wainwright. Your line is open, please go ahead.

And our first question comes from the line of Mitchell Kapoor with H C. Wainwright. Your line is open. Please go ahead.

Mitchell Kapoor: Hi, everyone. Thank you for taking the questions today. The first one is, you know, regarding Al-Kendi Sprinkle, could you just comment on any barriers to uptake your SING? If you are...

Hi, everyone. Thank you for taking the questions today.

First one is regarding out can be sprinkle could you just comment on any barriers to uptake youre seeing if you are seeing any.

Mitchell Kapoor: No. This is Sean. Thanks for the question. The Alkiddy sprinkle numbers are looking great. I'm very happy with the partnership with Polmar. We just had a record week of new prescriptions.

No. This is Shawn thanks for the question.

Can be sprinkled on Brazil, looking great I'm very happy with the partnership with <unk>.

Just had a record week of new prescriptions.

Sean Brinjalison: last week and we've seen that week over week so it's not a I believe it's it's a uh it's a good trend it's a positive trend I don't want to get

Last week, and we've seen that week over week. So it's not a I believe it's a it's a good trend it's a positive trend I don't want to get.

Sean Brinjalison: I don't want to overstate it, but right now we are feeling very optimistic about our Alkidney numbers, our ability to hit our goals, and to hit a significant number of patients this year. So, that's where we're at. There are some barriers, doctors and patients.

Two.

I don't want to overstate it but right now we are feeling very optimistic about our old kidney numbers, our ability to hit our goals.

Two.

Hit.

It had a significant number of patients this year. So that's.

Where we're at.

There are some barriers.

Doctors and patients are working through those.

Sean Brinjalison: working through those. For example, a barrier might be somebody's used to using the compounded product and you give them something that's different, they have to get used to that, they have to understand it, learn about it, and that whole process can take some time.

So like for example barrier might be somebody is used to using the compounded product and you give them something that's different they have to get used to that they have to understand it learn about it and that whole process can take some time some people and happens quick some people happens not so quick but we're starting to see the doctors prescribed.

Sean Brinjalison: Some people, it happens quick. Some people, it happens not so quick. But we're starting to see the doctors prescribe it. And there's also a shortage of compounded hydrocortisone, from what I understand, which is, you know, perhaps also helping, it's a good win for us.

And there's also.

A shortage of compounded hydrocortisone.

What I understand which is.

It's also helping.

Good win for us.

Speaker Change: Thank you for that detail. That's very helpful. And then could you give any detail regarding any potential milestone payments for various programs during 2022? I know you mentioned a couple of $5 million potential milestones, but if we could just kind of go through those, that would be helpful. Sure. I'll let's

Thank you for that detail that's very helpful.

And then could you give any detail regarding any potential milestone payments for various programs. During 2022, I know you mentioned a couple of <unk>.

$590 potential milestones that if we could just kind of go through those that would be helpful.

Sure I'll, let David take this one David.

Speaker Change: Sure, so the major milestones, as you cited, are the two Azure-related product launch milestones, the Lamotrigine and the Zonisamide. We get $5 million on the product launch for both of the products.

Sure so the major milestones as.

As you cited are that too it's already related product launch milestone C Lamotrigine and Thats <unk>.

We get $5 million on the product launch for both of the products.

Speaker Change: The zonisamide, we expect to be approved in the coming weeks or months, we said, as soon as the FDA processes that inspection and gives us a response. The lamotrigine, we have the target action date in May of 2022.

So knits in mind.

We expect to be approved in the coming weeks or months, we said as soon as the FDA processes that inspection and gives US a response the lamotrigine we have the target action date in May of 2022.

Speaker Change: Okay, great. And then could you just briefly comment on how you expect SG&A to trend in the coming quarter?

Okay, Great and then could you just briefly comment on how you expect SG&A to trend in the coming quarters.

Speaker Change: I think SG&A will be relatively flat going forward, you know.

I think SG&A will be relatively flat going forward.

Speaker Change: We should be spending a little bit less on the alkendi than we did in some of the periods in prior years Maybe a little bit more on card gloom it

Sure.

We shouldn't be spending a little bit less on the.

Al Kindi than we did in some of the periods in prior years.

Maybe a little bit more on <unk>.

Speaker Change: But I think it should net out relatively flat going forward, unless we have a major new product launch.

I think it should net out relatively flat going forward.

Unless we have a major new product launch.

Speaker Change: if something comes along. But for the near term, I would say relatively flat. Right. However, Mitchell, the Tollmark co-promotion commission, sales commission, will come out of the SG&A line. So you will see the SG&A line grow along with the Al-Kindi sales growing. But the actual operating costs, spending at the company, will be relatively flat. Right, because those commissions are volume-driven on the sales, correct?

Something comes along but for the near term I would say relatively flat however, Mitchell D. The.

<unk> co promotion.

Commission sales Commission will come out of the SG&A line. So you will see the SG&A line grow along with the <unk> sales growing.

The actual operating cost spending at the company will be relatively flat right because those commission should volume driven on the shares correct.

Perfect. Thank you very much.

Speaker Change: Thank you. And our next question comes from the line of Justin Walsh with B Reilly Securities. Your line is open. Please go ahead.

Thank you and our next question comes from the line of Jeff Walsh with B Riley Securities. Your line is open. Please go ahead.

Justin Walsh: Hi, congrats on all the progress. Thanks for taking the questions. Maybe to start with, with so many product launches you have going on, maybe you can give us a sense of which products you believe will fuel your growth in the near term versus taking a little bit longer to get off the ground.

Hi, Congrats on all the progress thanks for taking the questions maybe to start with.

So many product launches you have going on and if you can give us a sense of which products you believe will fuel <unk> growth in the near term versus taking a little bit longer to get off the ground.

Speaker Change: Sure. So, in the near term, carglymic acid numbers are looking good.

Sure.

So in the near term cargo Megass numbers are looking good.

Speaker Change: That's been a quick start, better than expected.

So that's been a quick start.

Better than expected.

Speaker Change: You know, our goal is to get approximately 25 patients, something like that. I think that we'll reach that.

Our goal is to get approximately 25 patients something like that.

I think that we'll reach that.

Speaker Change: probably by June , for example. And so that's a near-term driver. With the Alkindy numbers, we've been seeing week-over-week increases in the prescriptions, so I don't even know how high those numbers can get. We just set a record two weeks ago, an all-time record, and then last week we hit another all-time record in terms of number of scripts in a given week. So those numbers,

Probably by June for example.

And and.

So thats a near term driver.

With the al Kindi numbers, we've been seeing week over week increases in a prescription so I don't even know how high those numbers can get we just set a record two weeks ago.

An all time record and then last week, we hit another all time record in terms of number of scripts in a given week.

So those numbers.

Speaker Change: Again, it's hard for me to estimate how it's all going to turn out at the end of the day. I would say if you're thinking of products beyond those two, certainly we believe we're very close on the dehydrated alcohol. I think that product is coming through and we'll be having that submitted. It won't be a near-term growth driver because we still have to get a

Again, it's hard for me to estimate what when all of that's kind of how it's all going to turn out at the end of the day.

I would say if youre thinking of products beyond those two.

Certainly.

We believe we're very close on the dehydrated alcohol I think that product is coming through and will be.

Having that submitted it wont be.

Our near term growth driver, because we still have to get a.

Speaker Change: know, the approval and the launch and so on. But who knows when that could happen. I think it's possible it could happen at the end of the year. We are getting ready to submit the vial versions of Biorphin as well as ResiPress. I think everybody read the ResiPress press release. It's a great product.

The approval and the launch and so on.

And who knows when that could happen I think it's possible. It could have ended the year.

Or are getting ready to submit.

File versions by auction as well as the resi price I think everybody read the resi price.

The press release.

It's a great product that's needed.

Speaker Change: Certainly, there's an unmet need for ResyPress. There's another company that sells already to use, and that's done well, but we believe there's a lot more market there. So we think those two products will launch in, let's say, the third quarter.

Certainly there is an unmet or I should say the need for Rajiv.

There was another company that sells were ready to use and that's that's done well, but we believe there is a lot more market there.

So we think those two products will launch in the let's say the third quarter.

Speaker Change: The biorphan filing should go in in the coming weeks here, certainly by April , and I would expect that to be approved in the third or fourth quarter.

<unk>.

By orphan.

Filings should go in the coming weeks here.

Certainly by April and.

I would expect that to be approved.

Third or fourth quarter.

Speaker Change: Great, maybe we can jump off that for the next one. Just maybe you can expand a little bit and remind us of the importance of the vial conversion aspect, and also if you have some specific strategies for promoting that as soon as those vial presentations are made available.

Great maybe we can jump off that for the next one just maybe you can expand a little bit and remind us of the importance of the bioconversion aspect and also if you have some specific strategies for promoting that and as soon as final presentations are made available.

Speaker Change: Sure. So Biorphin is currently available in an ampoule. It's not a format that is popular in the United States. It's very popular in Europe .

Sure. So by orphan is currently available in an agile it's not our math.

Killer in the United States, it's very popular in Europe , but in the U S. It's just not they'll use that if they have nothing else, but right now they can still order from compounds.

Speaker Change: But in the U.S., it's just not, they'll use that if they have nothing else. But right now, they can still order from compounders, despite the fact that we have an approved product. There's an allowance, I guess, for the compounded phenylephrine. However, the benefits of having a

Despite the fact that we have an approved product there is theres no allowance I guess will be compounded.

Final upfront however, the benefits of having a three year shelf life, which is what our product has.

Speaker Change: three-year shelf life, which is what our product has, and putting that into a vial will make all the difference. We've done our own market research showing that 80% of the hospitals will purchase the vial instead of the compounded product.

Turning that into a vial will make all the difference we've done our own market research showing that 80% of the hospitals will purchase the vial instead of the compounded product it's been priced competitively prices right.

Speaker Change: been priced competitively, price is right, so that the format is right.

Format is right. So for example, if you have a vial of final airframe and you just need to withdraw that with the syringe and you can dilutive not dilutive and administrate so ready to use.

Speaker Change: So, for example, if you have a vial of phenylephrine, you just need to withdraw that with a syringe and you can dilute it. I'm not diluting, you can administer it. It's ready to use. With an ampule.

With an ampoule.

Speaker Change: you know, cracking open the ampule, you then need to withdraw, and you have to use a filter needle to prevent, you know, particulate contamination. That's an issue, and it's also an extra step. It's not.

<unk> opened the Amp Youll, you then need to withdraw a filter needle.

To prevent.

Particular contamination, that's an issue and it's also an extra step it's not.

Speaker Change: It's not the easiest thing in the world, and it's not something that practitioners really prefer. So that's really what's holding that one back.

Not the easiest thing in the world.

And it's not something that practitioners really prefer so that's really what's holding that one back.

Speaker Change: We're still seeing sales on it, so I just want to be clear. I believe, you know, many hospitals will just stock that as a backup, but for it to be the primary product, it needs to be in the vial, and better yet, it needs to be a prefilled syringe, which we are also looking forward to launching in the future. So, the market, we know, is more than 10 million units a year, so we think we could easily sell 4 million vials.

Seeing sales on it so I just wanted to be clear I believe many hospitals will just stock that as a backup but fortunately the primary product that needs to be in the vial and better yet is it would be a pre filled syringe, which we are also looking forward to launching in the future. So the market.

We know it's more than 10 million units a year.

So we think we could easily sell 4 million vials.

Got it.

Speaker Change: Last question from me, sort of wondering what your current appetite for bringing more assets into the portfolio is, or are you really more focused on your many launches that you're working

Last question for me.

Sort of wondering what your current appetite for bringing more assets into the portfolio.

Or are you really more focused on your menu launches that youre working on.

Speaker Change: That's a good question. We're always looking and certainly evaluating opportunities. I think that any drug company, you know, your pipeline is your

Yeah, that's a good question.

We're always.

Looking and certainly evaluating opportunities I think that any drug company. Your pipeline is your is your long term growth.

Speaker Change: is your long-term growth. It's your engine. For us, doing M&A and licensing activity is definitely an engine that drives growth.

It is certainly unique.

For us doing M&A in licensing activity is definitely.

In engine that drives growth.

Speaker Change: So we'll continue to do that. We're being a little, let's just say, I don't wanna say conservative, but we're definitely taking a close eye on these transactions because we are in a very strong position. So I don't feel a lot of pressure to have to go run out and do a deal right away. We wanna do good deals, right deals. Curulumic acid, wonderful deal. Very good example of the type of deals we're looking to do. We'll do more of those.

We will continue to do that we're being a little.

Let's just say I don't want say conservative but.

<unk>, taking a close eye on these transactions because we are in a very strong position.

Don't feel.

A lot of pressure to have to go run out and do a deal right away. We wanted to do good deals right deals <unk> acid wonderful deal very good example of the type of deals. We're looking to do we'll do more of those.

Speaker Change: And we're adding a lot of value for our partners, too, because we are doing what we say we are going to do.

And we're adding a lot of value for our partners too because we.

We are doing what we say.

We're going to do.

I would.

Speaker Change: We have a couple of product launches coming up here. We just launched the product this week. We have another launch coming in the second quarter. When those products are launched.

When we get this product we have a couple of product launches coming up here. We just launched the product. This week, we have another launch coming into others.

In the second quarter.

When those products are launched.

Speaker Change: Yeah, I wouldn't say it's one or the other. Obviously, we're focused on that. We're focused on growing the markets. But the deals will come when they come. We are always seeing and evaluating every week or probably one to two deals a week we look at. A lot of the stuff is too early stage for us.

I wouldn't say, it's one or the other obviously, where we're focused on that we're focused on growing the markets, but the deals will come when they come.

We are always seeing in evaluating every week or.

Probably one to two deals a week, we look at a lot of this stuff is too early stage for us.

Speaker Change: Um, but we do see some later stage, uh, uh, deals as well. So it has to be the right.

But we do see some later stage.

<unk> as well so it has to be the right fit strategically has to be at the right price I don't want to go too far out on a transaction.

Speaker Change: strategically has to be the right price. I don't want to go too far out on a transaction and just put the company at any kind of risk.

And and just put the company at any kind of risk. So we have to balance that theres certain sized transactions. We can do in the future we will be able to do larger transactions and we will do those.

Speaker Change: so we have to balance that. There's certain size transactions we can do. In the future, we'll be able to do larger transactions, and we'll do those. Certainly, I'm not worried about that, but everything is almost, think of it like an investment. If you're investing in your own portfolio, and you find a great stock, well, you don't put all your money on that one stock. You put a portion, but you don't want to put everything on it. That's kind of how we approach this. Awesome.

Certainly not worried about that but everything is almost think of it like an investment if you're investing in your own portfolio and you find a great stock we don't put all your money on that one stock.

You put a portion but you don't want to put everything on it.

That's kind of how we approached us.

Awesome.

Great. Thanks for taking the question.

Yes, my pleasure.

Yes.

Speaker Change: Thank you, and I'm showing no further phone questions, and you guys can continue with your email questions.

Thank you and I'm showing no further phone questions and you guys can continue with your email questions.

Speaker Change: David, Michelle, we have two questions that weren't covered already. The first one, I guess, is for Wilson. How should we think about the low R&D expense for the fourth quarter? What do you see as the go forward run rate for R&D?

David Michelle Yes, we.

We have two questions that werent covered already the first one I guess for Wilson, how should we think about the low R&D expense for the fourth quarter. What do you see as the go forward run rate for R&D and.

Wilson Troutman: In general, our R&D is kind of lumpy by nature because the largest drivers tend to be milestone payments or NDA filing fees that are not recurrent.

In general our R&D is kind of lumpy by nature, because largest drivers tend to be milestone payments or NDA filing fees that are not recurring.

Wilson Troutman: We will have some more R&D expense next year related to hospital product vial conversions and the Zinio auto-injector. So that should run higher than the level we experienced in the fourth quarter.

We will have some work.

R&D expense next year related to hospital product file conversions, the Jennie O auto injector, so that should run higher than the level, we experienced in the fourth quarter.

Speaker Change: Without any new projects or acquisitions, who would tend to expect that our R&D expense for next year would be roughly in the ballpark of the 6.2 million that we reported for 2021 year.

Without any new projects or acquisitions that would tend to expect that our R&D expense for next year would be roughly in the ballpark of the $6 2 million that we reported for 2021 year.

Speaker Change: OK, and the last question is for Sean. Can you comment on your thoughts about the stock price and what actions can be taken if you aren't satisfied with it?

Okay and then last question is for Sean can you comment on your thoughts about the stock price and what actions can be taken if you arent satisfied with it.

Sean Brinjalison: Yeah, good question.

Yeah.

Yes, good question.

Sean Brinjalison: very familiar trying to understand the stock market especially these days but one thing I do know

It's very familiar trying to understand the stock market, especially these days, but one thing I do know.

Sean Brinjalison: We've been over $10 a share, where we are today is...

We have been over $10 a share.

Where we are today is from my perspective.

Sean Brinjalison: from my perspective, in a much stronger position, stronger position cash-wise, product-wise, where we're seeing revenue coming in all around.

Strong much stronger position stronger position cash wise product wise.

What where we're seeing revenue coming in.

All round.

Yes.

Sean Brinjalison: team. We've added some really heavy hitters on the management side in our sales organization.

Team we've added some really.

Heavy hitters on the management side and our sales organization.

Sean Brinjalison: CEOs may say this because they feel like they're expected to say it, but I can honestly say we are undervalued. I believe the stock doesn't anywhere reflect the value of the product portfolio on pipeline.

We're.

<unk> may say save because they feel like they are expected to say it but I can honestly say, we are undervalued I believe the stock doesn't anywhere reflect the value of the product portfolio and pipeline.

Sean Brinjalison: I think that it will resolve itself soon because we'll start reporting results. Ultimately, when you're reporting strong results throughout 2022, which is what I expect, we're getting a lot of traction on our product.

I think that it will resolve itself soon because we will start reporting results and ultimately when you are you are reporting strong results throughout 2022, which is what I expect and Sean.

We're getting a lot of traction on our products. The market will have no choice. It really just has to do what it's going to.

Sean Brinjalison: The market will have no choice. It really just has to do what it's going to. You're going to go up. If you're reporting strong numbers, you're going up. If we reach our sustained goal of profitability by the end of the year and the stock is lagging, we'll do a buyback. I have no problems and am happy to do an aggressive stock buyback. I'll be a buyer myself.

Youre going to go up if youre, if youre reporting strong numbers youre going up and if we reach our sustained goal of profitability by the end of the year and the stock is lagging well do a buyback I have no problems and happy to do an aggressive stock buyback.

I'll be a buyer myself so.

Sean Brinjalison: So that's just that's how I see it. I'm not working. I'm not going to worry about it today You know the coming quarters here. We'll open our deals. You'll see well We're going to deliver results, and I think the stock price will take care of itself

So that's just that's how I see it.

I'm not I'm not going to worry about it today.

The coming quarters here.

You'll see what we're going to deliver results and I think the stock price will take care of itself.

And that's the last E Mail question, we had.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great rest of your evening.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great rest of your evening.

Speaker Change: ?Outro Music?

Okay.

[music].

Yes.

Okay.

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Speaker Change: Good evening and welcome to the Eaton Pharmaceutical 4th Quarter 2021 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 to 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 Krimpa, Senior Vice President of Business Development and Investor Relations at Eaton Pharmaceutical. Please proceed.

I'd like to turn that over to David Krempa, Vice Senior Vice President of business development and Investor Relations at Eton Pharmaceuticals. Please proceed.

David Krimpa: Thank you, operator. Good evening, everyone, and welcome to Eaton's fourth quarter 2021 conference.

Thank you operator.

Thank you everyone and welcome to <unk> fourth quarter 2021 conference call.

David Krimpa: 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, ethanpharma.com.

This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call. It relief is available on our website you can farm and dotcom.

Speaker Change: Joining me on the call today, we have Sean Brinjalison, our CEO , Wilson Troutman, our CFO , and Kevin Guthrie, our Executive Vice President of Commercial Activities.

Joining me on the call today, we have Sean <unk>, our CEO Wilson Troutman, our CFO and Kevin Guthrie Executive Vice President of commercial activities.

Speaker Change: In addition to taking live questions on today's call, we will be answering questions that have been emailed to us by investors.

In addition to taking live questions on today's call, we will be answering questions that have been emailed to us by investors investors can send their questions to investor relations at <unk> pharma dotcom.

Speaker Change: Investors can send their questions to InvestorRelations at EatonPharma.com.

Before we begin I would like to remind everyone that statements made during today's call may contain forward looking statements that involve risks and uncertainties that could cause actual results could 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 SEC.

Now I will turn the call over to our CEO , Sean Burke Johnson.

CEO: Thank you David. Thank you everyone for joining us this evening. We have a number of exciting product launches and new initiatives in motion right now, so I'm excited to provide all of you an update today.

Thank you David Thank you everyone for joining us. This evening, we have a number of exciting product launches and new initiatives in motion right now so I'm excited to provide all of you an update today.

Talk about each of them today, but I'd like to start first with our recent launch of <unk> acid, which occurred in December .

We were very excited when we acquired this product late last year. It was clearly a great fit with our orphan drug business and we knew it would be an important product for our company. Although we are only three months into launch I am pleased to report that we are trending well ahead of our initial projections for the launch.

CEO: Our product is the first and only generic of carboglue, which is used to treat elevated levels of ammonia in the body and is one of the most expensive treatments in the world.

Our product is the first and only generic of Carbo globe, which is used to treat elevated levels of ammonia in the body and is one of the most expensive treatments in the world the cost of treatment for many adult patients can exceed $1 million per year.

CEO: The cost of treatment for many adult patients can exceed $1 million per year.

CEO: So our lower cost alternative has received a welcome reception from patients, payers, and healthcare professionals.

So our lower cost alternative has received a welcome reception from patients payers and healthcare professionals.

CEO: Additionally, our product has a 90-day shelf life after opening versus 30 days for the branded product, and we expect our labeling to be updated shortly to reflect that.

Additionally, our product is a 90 day shelf life after opening versus 30 days for the branded product and we expect our labeling to be updated shortly to reflect that we have already heard from patients that they find this to be a very valuable benefit.

CEO: We've already heard from patients that they find this to be a very valuable benefit.

Our strategy has been to actively detailed the product directly to physicians and patient advocacy groups at medical conferences with our orphan drug sales force rather than trying to drive adoption through aggressive discounting with payers payers often try to instigate a pricing war by requesting massive price discounts in exchange for sending volumes to your.

Product, especially on generic products, given our ability to use of sales force to directly talk to physicians and patient advocacy groups about the advantages of our product. We do not believe we need to engage in these aggressive pricing games. We believe this will be an attractive market for us long term and are not interested in pursuing short term revenue wins at the cost.

CEO: We believe this will be an attractive market for us long-term and are not interested in pursuing short-term revenue wins at the cost of destroying the long-term market economics.

Destroying the long term market economics.

CEO: We believe the carboglue market in the U.S. is more than $50 million annually, and our goal is to capture 25-35% of the market. We are very encouraged by the adoption we have seen in the first couple of months, and we believe we can reach our goal by the end of the year.

We believe the <unk> market in the U S is more than $50 million annually and our goal is to capture 25% to 35% of the market. We are very encouraged by the adoption. We have seen in the first couple of months and we believe we can reach our goal by the end of the year.

CEO: We launched the product on December 20th, so it did not have an impact on the fourth quarter results we are reporting today. But now that we have already added patients throughout the first quarter, we would expect to see significant revenue from the product starting in the second quarter of this year.

We launched the product on December 20th so it did not have an impact on our fourth quarter results. We are reporting today, but know that we have already added patients throughout the first quarter, we would expect to see significant revenue from the products starting in the second quarter of this year.

CEO: Now turning to other drivers for 2022, one of the primary drivers will be our orthodrug, Alkiddy Sprekel, which is indicated for the treatment of adrenal insufficiency in pediatric patients.

Now turning to other.

Drivers for 2022, one of the primary drivers will be our orphan drug <unk>, which is indicated for the treatment of adrenal insufficiency in pediatric patients.

CEO: Al-Kindi sales continue to grow in Q4 compared to Q3, however, we believe they can grow at a much faster pace, which is why we initiated a co-promotion agreement with Tolmar late last year.

<unk> sales continued to grow in Q4 compared to Q3. However, we believe they can grow at a much faster pace, which is why we initiated a co promotion agreement with Telemark late last year.

We are pleased to announce this co promotion partnership appears to be working as we are already seeing significantly higher rates of new prescriptions. In recent weeks Tomo 62 person sales force was fully trained and are promoting <unk> sprinkle and the field starting in the second half of January they have now been promoting the product for almost 60 days and we have seen.

The benefits of this expanded rich as expected they have been able to conduct a significantly greater number of in person meetings with doctors than we were able to do on our own in fact last week, we saw record new.

CEO: In fact, last week we saw a record new of patient scripts, breaking the old record that was set just two weeks ago. And March is on track to be by far our highest month ever for new patient scripts.

Patient scripts breaking the record that was set just two weeks ago in March is on track to be by far our highest month ever for new patient scripts. We believe the full benefit of the <unk> partnership will be even more apparent in quarters to come as <unk> been able to achieve a steady cadence of repeat doctors' visits that are often required to change physicians.

CEO: We believe the full benefit of the Ptolemar Partnership will be even more apparent in quarters to come as Ptolemar is able to achieve a steady cadence of repeat doctor's visits that are often required to change physicians' prescribing habits.

Scribing habits and.

In addition to the extra push from Tome, our sales reps. We are in the process of implementing an expanded digital marketing campaign, we will have new branding and messaging with an enhanced focus on directly educating patients and caregivers about the benefits of precision dosing.

CEO: Next, I will turn to our two commercial hospital products, including our newest product launch, ResiProd.

Next I will turn to our two commercial hospital products, including our newest product launch for resi price.

CEO: Rezipress is our own ready-to-use formulation of ephedrine. The market for ephedrine injection in the U.S. was over 85 million last year and grew more than 20%. The vast majority of the market is still sold in a concentrated form that must be manually diluted prior to administration.

ASI presses, our own ready to use formulation of ephedrine the market fourth bedroom injection in the U S was over $85 million last year and grew more than 20%. The vast majority of the market is still sold in a concentrated form that must be manually diluted prior to administration.

CEO: We expect the launch of ResiPress to help accelerate the adoption of ready-to-use products, and ultimately, we believe the majority of the market will convert to ready-to-use.

We expect to launch a resi press to help accelerate the adoption of ready to use product and ultimately we believe the majority of the market will convert to ready to use we have partnered with <unk> pharmaceuticals, a leading injectable drug company to commercialize our resi press and fuel.

CEO: We have partnered with XGen Pharmaceuticals, a leading injectable drug company, to commercialize our ResiPress Ampule. XGen has indicated to us that they've already seen strong initial interest from customers and we are optimistic about the opportunity.

<unk> has indicated to us that they have already seen strong initial interest from customers and we are optimistic about the opportunity.

Our other commercial hospital product by orphan Npls continues to see increased adoption every quarter. However, it is still at levels well below what we believe the opportunity is once we convert to the vial presentation, which is why we are working aggressively to convert both resi and.

And by orphan <unk> formats, I am pleased to say that the manufacturing of registration batches of both products in vials occurred late last year and the initial data looks good. We're just waiting on the final stability data time points in order to submit the prior approval supplements, but I expect them to be submitted in the second quarter, which could allow for a launch of <unk>.

<unk> before the end of this year.

CEO: Turning now to our royalty products. In our royalty products segment, our partner, Azurity Pharmaceuticals, launched Aprontia, our Toparamate oral solution in December .

Turning now to our royalty products and our royalty products segment. Our partner has already pharmaceuticals launched a prime Tia or top topiramate oral solution in December we had found procurement to be the most requested oral liquid from pharmacists. So we believe there is significant demand in our large market opportunity for the product.

CEO: We had found Topiramate to be the most requested oral liquid from pharmacists, so we believe there's significant demand and a large market opportunity for the product.

CEO: In addition to all of this progress we've made on the commercial front, we've continued to advance our pipeline products and bringing them closer to approval.

In addition to all of this progress we've made on the commercial front, we have continued to advance our pipeline products and bringing them closer to approval.

CEO: Zonisamide oral suspension. This is a product approval that had been held up last summer because the FDA was unable to inspect the UK-based manufacturing site due to COVID-related travel restrictions.

The application has been assigned a new target action date of May 2022, the approval and launch of Lamotrigine would also trigger a $5 million payment for us.

CEO: And Cysteine, Cysteine is our Paragraph 4 trial ongoing this week. I am actually in Delaware now attending the trial, so I appreciate everyone's flexibility to hold this call later than normal. We continue to feel strongly that the innovators' patents should never have been issued as our partner has been manufacturing the same Cysteine product in the same format for more than 20 years now, well before Accela ever began working on the project.

Or excel or ever began working on the project.

While we do not have a timeline for the judges decision our lawyers expect to receive it in the second half of this year. We believe we responded to the final minor requests from the FDA on our application, which should allow our application to receive tentative approval as early as next month.

That we are fully addressing their points and providing them with an application that warrants approval and expect to have this wrapped up in the coming weeks.

CEO: I think it is undeniable that we are in the most exciting time in our history and an important inflection point as we launch all of these products that we worked so hard to develop.

I think it is undeniable that we are in the most exciting time in our history and an important inflection point as we launch all of these products that we worked so hard to develop our goal remains to achieve sustained profitability by the end of this year and we believe we are on a strong path to do so given the recent sales trends of <unk> acid and al Kindi.

CEO: Our goal remains to achieve sustained profitability by the end of this year, and we believe we are on a strong path to do so given the recent sales trends of cargloomic acid and alkindi. We believe we can achieve at least $25 million worth of revenue this year, including 10 million of launch milestones from Missouri.

We're receiving approval and launching dehydrated alcohol Inge.

<unk> injection, so with that I will now turn it over to Wilson to discuss our financial results Wilson.

CEO: So with that, I will now turn it over to Wilson to discuss our financial results. Wilson.

Thank you Shang Eton reported revenue of $6 1 million for the fourth quarter of 2021, which included a $5 1 million licensing fee with as you already pharmaceuticals from the approval and launch of our prime tier to pyramid oral solution.

There was no material revenue for the fourth quarter of 2020.

Wilson Troutman: Eaton's gross profit for the fourth quarter of 2021 was $5.8 million and reflected the impact of the Apprentia licensing fee and continued growth for our Alkindy Sprinkle product.

Eaton's gross profit for the fourth quarter of 2021 was $5 8 million and reflected the impact of the <unk> licensing fee and continued growth for al can be sprinkled product.

Wilson Troutman: The gross profit for the prior year quarter period was not material.

The gross profit for the prior year quarter period was not material.

Wilson Troutman: Research and development expenses for the fourth quarter of 2021 were moderate at $0.7 million, compared to $3.4 million in the prior year period.

Research and development expenses for the fourth quarter of 2021 were moderate and <unk> 7 million compared to $3 4 million in the prior year period.

Wilson Troutman: R&D expenses in the fourth quarter of 2020 were elevated to a $1.4 million FDA filing fee for tipiramate oral solution, a $0.6 million milestone fee for the FDA filing acceptance of Reziprez, and expenses related to the biorphan vial and other products in development.

R&D expenses in the fourth quarter of 2020 were elevated due to a $1 4 million FDA filing fee for Topiramate oral solution and 0.6 million milestone fee for the FDA filing acceptance of <unk> and expenses related to the by orphan vial and other products in development.

Wilson Troutman: General and administrative expenses for the fourth quarter of 2021 were $3.8 million in both the fourth quarter of 2021 and 2020.

General and administrative expenses for the fourth quarter of 2021 were $3 8 million in both the fourth quarter of 2021 and 2020.

<unk> fourth quarter 2021 expenses were slightly higher for increased compensation expenses and marketing research consulting along with FDA product fees from <unk> offset by lower sales and marketing expenses associated with the Q4 2020 launch adult kinda sprinkle.

Wilson Troutman: The fourth quarter of 2021 included 0.8 million of non-cash expenses.

The fourth quarter of 2021 included <unk> 8 million of noncash expenses.

Wilson Troutman: As a result of these factors, Eaton reported net income of $1.0 million for the fourth quarter of 2021, compared to a net loss of $7.7 million for the prior year period.

As a result of these factors Eton reported net income of $1 8 million for the fourth quarter of 2021 compared to a net loss of $7 7 million for the prior year period.

Wilson Troutman: Eaton reported diluted earnings per share of 0.4 cents in the fourth quarter of 2021, compared to negative 0.32, 32 cents in the

Eton reported diluted earnings per share of 0.4 cents in the fourth quarter of 2021 compared to negative 0.3 to <unk> 32.

In the prior year period.

Cash and cash equivalents were $14 4 million as of December 31, 2021, and we received a $5 million you already milestone payment for the <unk> product launch in early January .

Operator.

Speaker Change: Thank you. Ladies and gentlemen, if you have a question at this time, please press star then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Speaker Change: And our first question comes from the line of Mitchell Kapoor with H.C. Wainwright. Your line is open. Please go ahead.

And our first question comes from the line of Mitchell Kapoor with H C. Wainwright. Your line is open. Please go ahead.

Mitchell Kapoor: Hi everyone, thank you for taking the questions today. The first one is, you know, regarding Alkindy Sprinkle, could you just comment on any barriers to uptake your SING, if you are.

Hi, everyone. Thank you for taking the questions today.

First one is regarding out can be sprinkle could you just comment on any barriers to uptake youre seeing if you are seeing any.

No. This is Shawn thanks for the question.

Can be sprinkled on Brazil, looking great I'm very happy with the partnership with Paul marks.

Just had a record week of new prescriptions.

Sean Brinjalison: last week and we've seen that week over week so it's not a I believe it's it's a uh it's a good trend it's a positive trend I don't want to get

Last week, and we've seen that week over week. So it's not a I believe it's a.

It's a good trend, it's a positive trend I don't want to get.

Two.

I don't want to overstated, but right now we are feeling very optimistic about our old kidney numbers, our ability to hit our goals.

Two.

So you have a significant number of patients this year. So that's.

That's where we're at.

Sure.

There are some some barriers.

Doctors and patients are working through those.

So like for example, a barrier might be somebody is used to using the compounded product and you give them something that's different and they have to get used to that they have to understand it learn about it and that whole process can take some time.

Sean Brinjalison: Some people it happens quick, some people it happens not so quick, but we're starting to see the doctors prescribe it. And there's also a shortage of compounded hydrocortisone from what I understand, which is, you know, perhaps it's also helping, it's a good win for us.

People happens quick some people happens not so quick but we're starting to see the doctors prescribe it and there is also.

A shortage.

Compounded hydrocortisone.

From what I understand which is.

Also hoping.

It's a good win for us.

Speaker Change: Thank you for that detail. That's very helpful. And then, could you give any detail regarding any potential milestone payments for various programs during 2022? I know you mentioned a couple of 5 million dollar potential milestones, but if we could just kind of go through those, that would be helpful. Sure, I'll let.

Thank you for that detail that's very helpful.

And then could you give any detail regarding any potential milestone payments for various programs. During 2022, I know you mentioned a couple of <unk>.

$590 potential milestones, but if we could just kind of go through those that would be helpful.

Sure I'll, let David take this one David.

Sure so the major milestones as.

As you cited are that too it's already related product launch milestones, the lamotrigine and Thats <unk>.

We get $5 million on the product launch for both of the products.

<unk>.

We expect to be approved in the coming weeks or months, we said as soon as the FDA processes that inspection and gives US a response the lamotrigine we have the target action date in May of 2022.

Speaker Change: Okay, great. And then could you just briefly comment on how you expect SG&A to trend in the coming quarters?

Okay, Great and then could you just briefly comment on how you expect SG&A to trend in the coming quarters.

Speaker Change: I think SG&A will be relatively flat going forward, you know.

I think SG&A will be relatively flat going forward.

Sure.

Speaker Change: We should be spending a little bit less on the Alkindi than we did in some of the periods in prior years Maybe a little bit more on Kargulumik

We shouldn't be spending a little bit less on the.

Ill Kennedy than we did in some of the periods in prior years.

Maybe a little bit more on <unk>.

Speaker Change: But I think it should net out relatively flat going forward unless we have a major new product launch.

I think it should net out relatively flat going forward.

Unless we have a major new product launch.

Speaker Change: if something comes along. But for the near term, I would say relatively flat. Right. However, Mitchell, the Tollmark co-promotion commission, sales commission, will come out of the SG&A line. So you will see the SG&A line grow, along with the Alkindi sales growing. But the actual operating costs, spending at the company, will be relatively flat. Right. Because those commissions are volume-driven on the sales, correct?

Something comes along but for the near term I would say relatively flat however, Mitchell D. The.

<unk> co promotion.

Commission sales Commission will come out of the SG&A line. So you will see the SG&A line grow along with the <unk> sales growing.

But the actual operating cost spending at the company will be relatively flat right because those commissions are volume driven on the SaaS correct.

Perfect. Thank you very much.

Speaker Change: Thank you. And our next question comes from the line of Justin Walsh with B Reilly Securities. Your line is open. Please go ahead.

Thank you and our next question comes from the line of Jeff Walsh with B Riley's Securities. Your line is open. Please go ahead.

Hi, Congrats on all the progress thanks for taking the questions maybe to start with so many product launches you have going on and maybe you can give us a sense of which products you believe will fuel <unk> growth in the near term versus taking a little bit longer to get off the ground.

Speaker Change: Sure. So, in the near term, carglymic acid numbers are looking good.

Sure.

So in the near term cargo Megass numbers are looking good.

Speaker Change: That's been a quick start, better than expected.

So that's been a quick start.

Better than expected.

Speaker Change: You know, our goal is to get approximately 25 patients, something like that. I think that we'll reach that.

Our goal is to get approximately 25 patients something like that.

I think that we'll reach that.

Speaker Change: probably by June , for example. And so that's a near-term driver. With the Alkindi numbers, we've been seeing week-over-week increases in the prescriptions, so I don't even know how high those numbers can get. We just set a record two weeks ago, an all-time record, and then last week we hit another all-time record in terms of number of scripts in a given week. So those numbers,

Probably by June for example.

And.

So thats a near term driver.

With the al Kindi numbers, we've been seeing week over week increases in a prescription so I don't even know how high those numbers can get we just set a record two weeks ago.

An all time record and then last week, we hit another all time record in terms of the number of scripts in a given week.

So those numbers.

Again, it's hard for me to estimate what what all of it is kind of how it's all going to turn out at the end of the day.

I would say if youre thinking of products beyond those two.

Certainly.

We believe we're very close on the dehydrated alcohol I think that product is coming through and will be.

Having that submitted it wont be.

Our near term growth driver, because we still have to get a.

The approval on the launch and so on.

And who knows when that could happen I think it's possible. It could have ended the year.

Or are getting ready to submit.

File versions of by auction as well as the resi price I think everybody read the resi price.

Press release.

It's a great product it's needed.

Speaker Change: I should say the need for ResiPress, there's another company that sells already to use and that's done well, but we believe there's a lot more market there. So we think those two products will launch in, let's say, the third quarter.

Certainly there is an unmet or I should say the need for Rajiv.

There was another company that sells were ready to use and that's that's done well, but we believe there is a lot more market there.

So we think those two products will launch in the let's say the third quarter.

Speaker Change: You know, the biorphan filing should go in in the coming weeks or certainly by April , and I would expect that to be approved in the third or fourth quarter.

<unk>.

By orphan filings should go in in the coming weeks here.

Certainly by April and I would expect that to be approved.

Third or fourth quarter.

Speaker Change: Great, maybe we can jump off that for the next one. Just maybe you can expand a little bit and remind us of the importance of the vial conversion aspect. And also if you have some specific strategies for promoting that as soon as those vial presentations are made available.

Great maybe we can jump off that for the next one just maybe you can expand a little bit and remind us of the importance of the vial conversion aspect and also if you can.

Some specific strategies for promoting that as soon as final presentations are made available.

Speaker Change: Sure. So Biorphin is currently available in an ampule. It's not a format that is popular in the United States. It's very popular in Europe .

Sure.

<unk> is currently available in an agile it's not our math.

<unk> in the United States is very popular in Europe , but in the U S. It's just not they'll use that if they have nothing else, but right now they can still order from compound errors.

Despite the fact that we have an approved product there is theres no allowance I guess will be compounded.

Final offering however, the benefits of having a three year shelf life, which is what our product has.

Putting that into a vial will make all the difference we've done our own market research showing that 80% of the hospitals will purchase the vial instead of the compounded product it's been priced competitively prices right. So that the format is right. So for example, if you have a vial.

Speaker Change: been priced competitively, price is right, so that the format is right.

Final upfront and you just need to withdraw that with the syringe and you can dilutive not dilutive and administrative so ready to use.

With and <unk> fuel.

Cracking open the App you will you then need to withdraw the filter needle.

To prevent.

Particularly contamination.

That's an issue and it's also an extra step it's not.

Speaker Change: It's not the easiest thing in the world, and it's not something that practitioners really prefer. So that's really what's holding that one back.

Not the easiest thing in the world.

And it's not something that practitioners really prefer so that's really what's holding that one back.

Speaker Change: We're still seeing sales on it, so I just want to be clear. I believe, you know, many hospitals will just stock that as a backup. But for it to be the primary product, it needs to be in the vial. And better yet, it needs to be a prefilled syringe, which we are also looking forward to launching in the future. So the market, we know, is more than 10 million units a year. So we think we could easily sell 4 million vials.

Seeing sales on it so I just wanted to be clear I believe many hospitals will just stock that as a backup but fortunately the primary product that needs to be in the bile and better yet it needs to be a prefilled syringe, which we are also looking forward to launching in the future. So the market.

We know it's more than 10 million units a year.

So we think we could easily sell 4 million vials.

Got it.

Last question for me.

Sort of wondering what your current appetite for bringing more assets into the portfolio.

Or are you really more focused on your menu launches that youre working on.

Speaker Change: That's a good question. We're always looking and certainly evaluating opportunities. I think that any drug company, you know, your pipeline is your

Yes, that's a good question.

We're always.

Looking and certainly evaluating opportunities I think that any drug company. Your pipeline is your is your long term growth.

Speaker Change: is your long-term growth. It's your engine. For us, doing M&A and licensing activity is definitely an engine that drives growth.

It certainly is.

Engine for us doing M&A in licensing activity is definitely.

In engine that drives growth.

Speaker Change: So we'll continue to do that. We're being a little, let's just say, I don't wanna say conservative, but we're definitely taking a close eye on these transactions, because we are in a very strong position. So I don't feel a lot of pressure to have to go run out and do a deal right away. We wanna do good deals, right deals. Curcuminic acid, wonderful deal. Very good example of the type of deals we're looking to do. We'll do more of those.

We will continue to do that we're being a little.

Let's just say I don't want say conservative, but we're definitely taking a close eye on these transactions because we are in a very strong position.

Don't feel.

A lot of pressure to have to go run out and do a deal right away. We wanted to do good deals right deals Kirkland Lake asset wonderful deal very good example of the type of deals. We're looking to do we will do more of those.

Speaker Change: And we're adding a lot of value for our partners, too, because we are doing what we say we are going to do.

And we're adding a lot of value for our partners too because.

We are doing what we say.

We're going to do.

I would.

Speaker Change: We have a couple of product launches coming up here. We just launched a product this week. We have another launch coming in the second quarter. When those products are launched.

When we get this product we have a couple of product launches coming up here. We just launched the product. This week, we have another launch coming in the others.

Second quarter.

When those products are launched.

I wouldn't say, it's one or the other obviously, where we're focused on that we're focused on growing the markets, but the deals will come when they come.

We are always seeing in evaluating every week or.

Probably one to two deals a week, we look at a lot of the stuff is too early stage for us.

Speaker Change: Um, but we do see some later stage, uh, deals as well. So it has to be the right.

But we do see some later stage.

Deals as well so it has to be the right fit strategically it has to be at the right price I don't want to go too far out on a transaction.

Speaker Change: fit strategically, has to be the right price. I don't want to go too far out on a transaction and just put the company at any kind of risk.

And and just put the company at any kind of risk. So we have to balance that theres certain sized transactions. We can do in the future we will be able to do larger transactions and we will do those.

Speaker Change: So we have to balance that. There's certain size transactions we can do. In the future, we'll be able to do larger transactions and we'll do those. Certainly I'm not worried about that, but everything is almost, think of it like an investment. If you're investing in your own portfolio and you find a great stock, well, you don't put all your money on that one stock. You put a portion, but you don't want to put everything on it. That's kind of how we approach this. Awesome.

You put a portion but you don't want to put everything on it.

That's kind of how we approached us.

Awesome.

Great. Thanks for taking the question.

Yes, my pleasure.

Yes.

Speaker Change: Thank you, and I'm showing no further phone questions, and you guys can continue with your email questions.

Thank you and I'm showing no further phone questions and you guys can continue with your email questions.

David Michelle Yes, we.

Wilson Troutman: In general, our R&D is kind of lumpy by nature because largest drivers tend to be milestone payments or NDA filing fees that are not recurring.

In general our R&D is kind of lumpy by nature of the case, the largest drivers tend to be milestone payments or NDA filing fees that are not recurring.

Wilson Troutman: We will have some more R&D expense next year related to hospital product vial conversions and the Zinio auto injector. So that should run higher than the level we experienced in the fourth quarter.

We will have some work.

R&D expense next year related to hospital product file conversions, the Jennie O auto injector, so that should run higher than the level, we experienced in the fourth quarter.

Wilson Troutman: Without any new projects or acquisitions, who would tend to expect that our R&D expense for next year would be roughly in the ballpark of the 6.2 million that were reported for 2021 year.

Without any new projects or acquisitions, who with tend to expect that our R&D expense for next year would be roughly in the ballpark of the $6 2 million that we reported for 2021 year.

Speaker Change: OK, and then the last question is for Sean. Can you comment on your thoughts about the stock price and what actions can be taken if you aren't satisfied with it?

Okay and then last question is for Sean can you comment on your thoughts about the stock price and what actions can be taken if you arent satisfied with it.

Sean Brinjalison: Yeah, good question.

Hi.

Yes, good question.

Sean Brinjalison: very familiar trying to understand the stock market especially these days but one thing I do know

It's very familiar trying to understand the stock market, especially these days, but one thing I do know.

Sean Brinjalison: We've been over $10 a share, where we are today is...

We have been over $10 a share.

Where we are today is from my perspective.

Sean Brinjalison: from my perspective, in a much stronger position, stronger position cash-wise, product-wise, where we're seeing revenue coming in all around.

Strong much stronger position stronger position cash wise product wise.

What where we're seeing revenue coming in.

All round.

Yes.

Sean Brinjalison: team. We've added some really heavy hitters on the management side in our sales organization.

Team we've added some really.

Heavy hitters on the management side and our sales organization.

Speaker Change: CEOs may say this because they feel like they're expected to say it, but I can honestly say we are undervalued. I believe the stock doesn't anywhere reflect the value of the product portfolio and pipeline.

We're.

<unk> may say that the states because they feel like they are expected to say it but I can honestly say, we are undervalued I believe the stock doesn't anywhere reflect the value of the product portfolio and pipeline.

Speaker Change: I think that it will resolve itself soon because we'll start reporting results. Ultimately, when you're reporting strong results throughout 2022, which is what I expect and showing that we're getting a lot of traction on our product,

I think that it will resolve itself soon because we will start reporting results and ultimately when you're you are reporting strong results throughout 2022, which is what I expect and Sean.

We're getting a lot of traction on our products on the market will have no choice. It really just has to do what it's going to.

Speaker Change: The market will have no choice. It really just has to do what it's going to do. You're going to go up. If you're reporting strong numbers, you're going up. If we reach our sustained goal of profitability by the end of the year and the stock is lagging, we'll do a buyback. I have no problems and am happy to do an aggressive stock buyback. I'll be a buyer myself.

Youre going to go up if you are reporting strong numbers youre going up and if we reach our sustained goal of profitability by the end of the year and the stock is lagging will do a buyback I have no problems and happy to do an aggressive stock buyback.

I'll be a buyer myself so.

Speaker Change: So that's just that's how I see it. I'm not working. I'm not going to worry about it today You know the coming quarters here. We'll open our deals. You'll see well We're going to deliver results, and I think the stock price will take care of itself

So that's just that's how I see it not.

I'm not going to worry about it today.

The coming quarters here.

I will put our you'll see what we're going to deliver results and I think the stock price will take care of itself.

And that's the last E Mail question, we had.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great rest of your evening.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great rest of your evening.

Q4 2021 Eton Pharmaceuticals Inc Earnings Call

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