Eton Pharmaceuticals, Inc. (ETON) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Eton Pharmaceuticals Third Quarter 2020 Financial and Operating Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded at the company's request. At this time, I would like to turn it over to David Krempa, Vice President of Business Development at Eton Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Eton's Third Quarter 2020 Conference Call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call. The release is available on our website, etonpharma.com. Joining me on the call today, we have Sean Brynjelsen, our CEO; Wilson Troutman, our CFO; and Paul Stickler, our Senior Vice President of Sales and Marketing. Before we begin, I would like to remind everyone that statements made during this call may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward-looking statements. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the company's filings with the SEC. Now I will turn the call over to our CEO, Sean Brynjelsen.

Thank you, David. Thank you, everyone, for joining us today. I am excited to share with you the many milestones that we've achieved since our last earnings call, including 2 FDA approvals, multiple NDA submissions and a successful equity financing. These accomplishments set us up for a strong finish to 2020 and position Eton for a transformational year in 2021 as we launch our portfolio of products. One of the most significant events this quarter was the approval of ALKINDI SPRINKLE for the treatment of adrenocortical insufficiency in patients under 17 years of age. We are extremely excited about ALKINDI's commercial prospects, and we have assembled a highly experienced commercial team to lead the launch. I will be discussing ALKINDI launch plans in more detail later in the call. We were also pleased to see the approval of Alaway Preservative Free during the quarter. This product is the first preservative-free OTC ophthalmic product approved for the treatment of itchy eyes caused by allergic conjunctivitis. Bausch Healthcare plans to make the product available by the spring allergy season, and Eton will receive a milestone payment upon commercial launch as well as an ongoing royalty on sales of the product. During the quarter, we also made significant progress with our pipeline. Our announcement today that ephedrine injection has been accepted for filing by the FDA means that now all 9 of our product pipeline candidates have been either submitted to the FDA or approved. That would be 6 submissions pending, 3 already approved. This is a tremendous accomplishment by our team and a major milestone for the company. I believe it's unprecedented to see a company of our age, a little over 3 years, with this many NDA submissions. In recent weeks, we've also successfully closed an oversubscribed equity financing that provided us with gross proceeds of approximately $22.5 million. This transaction solidified our strong financial position, and we still have an available $8 million undrawn on our credit facility with SWK Holdings. We are confident that our current financial position will be sufficient to take us to profitability, which we expect to reach by the end of 2021. Biorphen sales in the quarter continued to be impacted by COVID-19-related hospital restrictions and practitioners' aversion to the ampule format. However, we remain committed to the product and are on track to submit the vial prior approval supplement by the end of this year. This would allow us to launch the vial in the first half of 2021. In preparation for the launch of the Biorphen vial next year, we've lowered the price of our ampule product in the third quarter. This resulted in a onetime revenue adjustment due to a shelf stock adjustment charge to account for inventory that was on hand with wholesalers at the time of the price change. We remain very optimistic that the vial launch will accelerate adoption and allow Biorphen to be a meaningful revenue generator in 2021. Turning now to our lead product, ALKINDI. Ever since the product's approval was announced in late September, we have been inundated with inbound interest from both caretakers and pediatric endocrinologists across the country [indiscernible] repeatedly about the dissatisfaction with current treatment options and how excited they are to get their hands on ALKINDI SPRINKLE. We are pleased to announce that we expect to have the product available before the end of the -- the product available before the end of the month. We have now hired and fully trained our sales force of 5 representatives, which we believe is more than sufficient to effectively reach the approximately 800 pediatric endocrinologists in the U.S. The sales reps were officially released into the field on October 23 and have already held or scheduled meetings with more than 120 endocrinologists. The feedback from those meetings has been overwhelmingly positive, and we expect to have patients enrolled immediately once the product becomes available. Additionally, discussions with payers have gone very well. Based on our early discussions, payers recognize the value of ALKINDI SPRINKLE. They understand that there are no other treatment options to properly dose young adrenal insufficiency patients, and they appreciate the potential ramifications of over- or under-dosing pediatric patients. Pricing has been set on a per milligram basis, so the cost of treatment will vary from patient to patient based on their individual dosing regimen. We've also enacted patient assistance programs, and we do not expect insurance reimbursement to be a major issue or a challenge for patients. In fact, most patients should have a co-pay of $25 or less. Based on our market research and ongoing dialogues with endocrinologists, we now believe the pediatric population for adrenal insufficiency may be up to 10,000 patients in the United States. Over time, we expect to capture the vast majority of patients in the age 0 to 6 range and a moderate amount of patients aged 7 to 12 range before they eventually graduate to a higher strength tablet product. Given the large and compelling opportunity, I believe it is clear that the ALKINDI launch will be transformative for Eton as a company and will quickly propel us to becoming a leading orphan drug company in the United States. Future business development activities will be focused on adding late-stage orphan drug similar to ALKINDI to our portfolio. While the ALKINDI opportunity alone sets us up for a major 2021, we expect to have as many as 6 other meaningful product launches that deserve attention, including the following: expected approval and launch of dehydrated alcohol injection in May, where we expect to be 1 of 2 players in a 100-million-plus product market; the anticipated product approval and launch of all 3 of our neurology oral liquid products; the launch of Alaway Preservative Free by Bausch Health early next year; and finally, the launch of Biorphen in a vial format. With all these launches set for the coming weeks and months, there is no doubt we are at the most exciting time in Eton's history. As we stand here weeks before the launch of ALKINDI, I've never been more excited or confident about the prospects for Eton. With that, we would like to now open up the call for your questions. Operator?

[Operator Instructions] Our first question comes from Andrew D'Silva with B. Riley Securities.

Congrats on the recent approvals. Just a couple for me. Just to start, as we think about the upcoming launch of ALKINDI, can you actually discuss pricing for ALKINDI? I understand it's going to be vary well based on the patient, but that would be very useful. And then you broke up a little bit or maybe my phone cut out, what are the number and percentages of covered lives that are going to be applicable domestically for ALKINDI?

We -- thanks, Andrew, for the question. We had previously stated the patient population to be more than 5,000. We're further investigating into those numbers, and we think it could be up to 10,000 patients in the U.S. In terms of pricing, we're -- it's priced on a milligram basis. And what that means is that the pricing for each patient will be individual, will be different. It's not a one pricing fits all. I will say that we're well under the mean orphan drug cost in the U.S., and we continue to believe the market opportunity to be in excess of $100 million. We do see a quick ramp to achieving a meaningful market share in 2021.

Okay. And of that 10 -- up to 10,000 patients, that's 1,700, correct?

Yes. We've previously stated that the population is in excess of 5,000. Now it seems like it's higher than what we -- our initial assumptions, which is a positive. I can tell you our excitement for the project and for the commercial prospects are actually much greater today than they were when we signed the deal.

Okay. That's great to hear. And then I understand the difference between the specialists that you're working with for ALKINDI and Biorphen, do you expect that ALKINDI will not run into any of the same headwinds related to COVID-19, primarily physician education and just getting into hospitals to meet the correct decision-makers?

I'll turn that question over to Paul. In short, the answer is no. I don't expect it, and I don't think there's a comparable -- comparability between those 2 projects at all. But Paul, why don't you provide a few comments on that?