Q4 2023 Eton Pharmaceuticals Inc Earnings Call
Good afternoon, and welcome to Eaton Pharmaceuticals fourth quarter 2023 financial results conference call at.
At this time all participants are in a listen only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the company's request.
This time I'd like to turn it over to David Krempa, Chief business Officer at Eton Pharmaceuticals. Please proceed.
Thank you operator, good afternoon, everyone and welcome to Eaton fourth quarter 2023 conference call.
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 you can find the dotcom.
Joining me on our call today, we have Sean Johnson, our CEO and James <unk>, our CFO and.
In addition to taking a lot of questions on today's call. We will be answering questions that are emailed to us investors can send their questions to investor relations at Eaton farm a dotcom.
Before we begin I would like to remind everyone that remarks made during this call may contain forward looking statements and involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward looking statements.
Please see the forward looking statements disclaimer in our earnings release and the risk factors in the company's filings with the SEC.
Now I will turn the call over to our CEO Sean Brynjolfsson.
Thank you David Good afternoon, everyone. Thank you for joining us today.
Our strong fourth quarter delivered our 12th straight quarter of sequential product revenue growth and capped off an exciting and productive 2023 for Eaton.
2023 brought on a number of critical accomplishments and milestones for the company, including the expansion of our internal sales force, which helped us grow product revenue more than 130% to $26 million in 2023 from.
From $11 million in 2022.
Number two the commercial launch of methane in the acquisition of <unk>, which brought us from two commercial products at the start of the year to four approved products by the end of the year.
We also boosted our development pipeline through the advancement of <unk> 400, and the acquisition of <unk> 600.
And lastly, we reached positive operating cash flow in the second half of the year.
Turning to the specific fourth quarter results revenue was $7 3 million, an increase of 109% over the prior year quarter, while G&A expenses grew only 5% year over year.
Demonstrating our financial discipline and the attractive operating leverage in our business.
I'm also pleased to report that the fourth quarter was another quarter of positive operating cash flow.
Even without the benefit of any future acquisitions, we expect our current commercial products continued growth to allow us to reach positive GAAP net income at some point in 2024.
Ah kidney sprinkled once again delivered steady growth in the quarter. We continue to believe this growth can continue for many years to come as we are still only converted a small portion of the estimated 5000 patients under the age of 10, who suffer from adrenal insufficiency in the United States.
We are hoping to boost the growth rate with our sampling program, which just went live in February.
Pediatric endocrinology offices are now able to stock samples of our kidney sprinkle, so that newly diagnosed or converting patients can immediately start therapy in the presence of their position.
We've already seen a strong demand from physicians requesting samples and we expect the program to have a positive impact on our 2020 for growth.
Turning now to Columbia gas and Columbia gas. It also continues to do well and remains ahead of our initial expectations.
We believe we have captured over 50% of Kirk will make asset patients.
In the market for just over two years, while this already has a higher share than we expected. We have continued to see additional new patient conversions in the fourth quarter and a number already in the first quarter of 2024. So we expect it to continue and predict 2024 will be another year of attractive year over year growth for Kirkland Lake asset.
It appears that the brand company has understandably DM.
Emphasized it's promotion and support for the product so with our continued physician and patient support we believe we are well positioned to be the leading product in the market.
In addition, the launches of <unk> and now <unk> have further increased our interactions and entrenchment with potential Kirk looming prescribers.
The fourth quarter was better than second full quarter on the market and it continues to see growing adoption among patients. The overall market opportunity is much smaller than that of curriculum and gases and obtain faces more reimbursement pressure due to the competitive market environment. So it's not a major revenue contributor on its own but more importantly.
There has been a valuable tool for us to get in the door and initiate discussions with metabolic geneticists that can lead to her will make asset prescriptions.
Last month, we launched our third product in the metabolic space <unk> capsules statistical treats an ultra rare condition called tariffs anemia that is estimated impact 200 to 300 patients annually within the United States.
The current <unk> market is estimated to be around $50 million annually, and we believe our existing relationships and patient support services will allow us to take a meaningful share of this market. We have already added a number of active patients within the first few weeks of launch.
In addition to the strong commercial performance I am pleased with the recent progress we have seen with our pipeline. We had two positive clinical developments in recent weeks first on <unk> 400, I am pleased to report today that preliminary data shows that the product pass the pivotal Bioequivalence study you may remember that this was our last hurdle to <unk>.
NDA submission. So we can now plan to submit the NDA application in the second quarter of this year as soon as the final clinical study report is available this would allow for potential approval and launch of the product in the first half of 2025.
We continue to see very strong interest in our liquid hydrocortisone formulation and remain highly confident that ATI 400 will greatly accelerate our growth in the years to come and be a major value driver for the company.
We also received notice in February that we had been issued a patent on Edp 400 proprietary formulation. This is an orange book listed patents that will cover the product until 2043, and we have additional patents for the product currently under review with the United States Patent office.
Turning now to <unk> 600, the second clinical data point was I need to 600, and our product candidate that is targeting ultra rare condition called diabetes Insipidus. We can report now that the product has passed its pilot Bioequivalence study, we now plan to run the pivotal study in the second half of this year and given the results we saw in the.
<unk> study we are optimistic about the success of this pivotal study. If the study is successful we would be in a position to file the product's NDA in the first quarter of 2025.
Regarding dehydrated alcohol, we have been engaged in dialogue with the FDA, but unfortunately it seems the fda's latest request would require manufacturing of additional new batches collection of the collection of additional stability data.
In light of the potential generic competitors entering the market in late next year. It is not prudent use of Eaton capital or resources to undertake this additional work we will instead focus our resources on higher value programs with significant long term earnings potential that we feel will provide better risk adjusted returns on our investments we are also.
Exploring opportunities to out license the dehydrated alcohol asset in a transaction that would not require additional investment from Eaton would still but would still allow the company to share in the economics of the product was able to reach market.
In addition to our existing pipeline programs <unk> 400, 8600, and as any auto injector. We're currently exploring additional potential development programs, which we hope to communicate shortly.
As proud as we are about the 2023 results that we discussed today. We are just getting started and we are even more excited as we look forward to <unk> prospects for 2024 and beyond.
2024 is positioned to be a critical year as we continue to rapidly grow our business and gear up for the potential <unk> 400 launch in 2025. This year, we expect all of our commercial products to grow significantly we expect to further advance our pipeline, most notably with the high value submission of <unk> 400 NDA.
We expect to add additional commercial products through business development activities and we expect to reach positive net income on a GAAP basis at some point during the year.
We are well positioned and well capitalized to deliver on all of these plans. We finished the year with more than $21 million of cash on hand, and as you heard we generated positive operating cash flow in the second half of the year. This puts us in a very strong financial position to remain active and opportunistic on the business development front, we continue to see increased levels of.
Distress among many players in the industry and we remain optimistic that we will be able to capitalize on many opportunities. Even this year with that I'll turn it over to James Our Chief Financial Officer to discuss the financial results in greater detail James.
Thank you Sean.
Net product sales and royalty revenues for the fourth quarter of 2023 increased to 109% to $7 $3 million.
Third to $3 5 million in the prior year period, driven by growth in our can do sprinkle cargo with Mckesson and the commercial availability of debt taken anhydrous.
Total net revenues were also a $7 3 million for the fourth quarter of 2023 compared to $8 5 million for the fourth quarter of 2022.
The prior year period included a $5 million onetime licensing revenue item and milestone payment received from <unk> pharmaceuticals.
R&D expenses for the quarter were $1 9 billion compared to zero point $9 million in the prior year period.
General and administrative expenses for the quarter were $4 6 million compared to $4 4 million in the prior year period.
The slight increase in G&A expense was primarily due to personnel additions and we expect G&A expenses to remain relatively flat going forward.
Total company net loss for the fourth quarter of 2023 was $2 3 million or nine per basic and diluted share.
Compared to a net income of <unk> 9 million or <unk> <unk> per basic and diluted share in the prior year period.
Eaton finished the fourth quarter with $21 $4 million of cash on hand, and generated zero point $4 million of operating cash during the quarter.
This concludes our remarks on fourth quarter results and with that I will turn it back over to the operator for Q&A.
And thank you so much to our telephone audience. If you do have a question Crestar one one to get in the queue and wait for your name to be announced to remove your question simply press Star one again.
One moment.
Okay.
Again that is star one if you do have a question over the phone.
Alright, I don't see any questions now I will pass it back to David for any additional questions.
Thank you operator, we did receive a couple of questions via email that we can go over now.
First one is what are you expecting for operating expense growth in 2024, and what should we expect for gross margin.
So for operating expenses G&A should.
Should it be a slight increase from 2023 to 2024.
2023 came in at $18 $9 million, we should be right around $20 million for 2024.
R&D spend.
A little less predictable just due to the timing.
Study expenses, but with the continued development of <unk> 480, 602024, we should come in somewhere between four and $6 million.
For gross margin expectations in the current year.
We should be similar to where we ended 2023, if you adjust for the $1 million or it can be milestone payment that was in Q4 of last year. So between 60 and 65% margin profile for the current year.
And that should continue to increase as.
Our candy and Eaton for 100 make up a larger portion of our overall revenue.
Thanks, James The next emailed question is what's your confidence level in closing a business development acquisition this year.
This is Sean.
I feel very confident we will close a transaction commercial revenue generating products, we've got several.
Let's say the late stages.
So I would expect at that time.
We would also be providing some guidance for the year and this would be accretive to our existing revenue base.
The M&A environment or environment is actually quite strong as long as you are positioned to take advantage of it.
So it's.
We're not.
Struggling to find deals, it's just making sure we do deals at the right price and at the right time.
Thanks, Sean that is the end of our E. Mailed questions. Thank you everyone for joining us for our earnings call. We look forward to talking to you next quarter.
Thank you, ladies and gentlemen, with that you can disconnect. Thank you for joining.
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