Eton Pharmaceuticals, Inc. ($ETON)

Good afternoon, and welcome to the Eton Pharmaceuticals Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded at the company's request. At this time, I'd like to turn it over to David Krempa, Chief Business Officer at Eton Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Eton's Fourth Quarter 2025 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 our call today, we have Sean Brynjelsen our CEO; James Gruber, our CFO; and Ipek Trinkaus, our Chief Commercial Officer. In addition to taking live questions on today's call, we will also be answering questions that are e-mailed to us. Investors can send their questions to investor relations at etonpharma.com. 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 and 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. Good afternoon, everyone, and thank you for joining us today. As you've seen, it's been a very active time at Eton with a number of major developments in the recent weeks, and we have some exciting topics to discuss today. During the call, we'll review fourth quarter results provide additional color on HEMANGEOL acquisition and an update on our recent FDA approval and commercial launch of this motor. We'll also cover growth trends in our on-market products and provide an update on clinical development programs. And finally, we'll provide 2026 financial guidance and unveil our new long-term goals for the company. Let me start with our financial results. It was another strong quarter for Eton capping off an outstanding year. 2025 was truly another transformational year for our company as we successfully launched 3 new products, Increlex, Galzin and Khindivi. These were not minor products. They represent important cornerstones of our long-term growth plan. These new products helped us more than double our revenue in 2025 compared to 2024 and set us up for a major growth in 2026 and beyond. Our fourth quarter product revenue was $21.3 million, an increase of 83% year-over-year driven by continuing strong performance from Alkindi Sprinkle and the addition of revenue from Increlex, Galzin, Khindivi and Alkindi. Galzin and Increlex have continued to be great success stories for Eton. Both products were relaunched by Eton in early 2025 and contributed revenue well beyond our initial expectations for the year. A key goal for us in continuing to drive strong revenue growth while maintaining our focus on profitability through disciplined cost management and expanding margins. And I'm pleased to report that we made meaningful progress on that in the fourth quarter as our adjusted EBITDA margin was 29%, a significant improvement from 18% in the prior year period. We also reported GAAP net income of $1.5 million and non-GAAP net income of $5.4 million. Looking ahead, we expect our profit margin profile to continue improving as revenue scales across our portfolio. And we will further discuss our profitability outlook later in the call when we communicate new long-term goals. Now let me turn to one of our most important recent developments. The approval and launch of our oral liquid formulation of Desmopressin Desmoda, which received FDA approval at the end of February for the treatment of central diabetes insipidus, Diabetes insipidus is a serious condition caused by inadequate production of the hormone vasopressin and treatment with Desmopressin is the standard of care. Dosing is patient-specific and must be individualized and fine-tuned over time, but there were historically no products available that could provide accurate low doses of Desmopressin. As a result, clinicians and caregivers were forced to use workarounds, including splitting or crushing tablets. As the only FDA-approved liquid oral formulation, Desmoda offers patients a treatment option that provides precision, consistency and convenience fulfilling a large unmet need frequently expressed to us by pediatric endocrinologists. Leveraging our established team of pediatric endocrinology rare disease specialists, we launched Desmoda within 2 weeks of FDA approval. While we are still in the early phases of launch, I could not be happier with how Desmoda watch is going. I believe this was the most well prepared we urban for a commercial launch. Our entire team was ready to execute on day 1 and initial demand of interest in the product has been incredibly encouraging. Our team has been hard at work promoting the product for 2 weeks and we've already seen significant traction. Many institutions that were historically unreceptive to sales visits have reached out to us asking for meetings because they are interested in learning about the product. We've already seen a number of patients begin therapy in the first 5 weeks of launch. Another important aspect of the approval is that Desmoda received a clean label with no age restriction. In fact, the FDA's indication even includes adults. This means that our addressable market will not be solely the 3,000 to 4,000 children in the U.S. We will also be able to meet the therapeutic needs of the 9,000 to 10,000 adults living with central diabetes insipidus. Our historic market assessment and $30 million to $50 million peak sales forecast were based solely on the pediatric market. However, we believe there could be a meaningful incremental opportunity within the adult population for patients who have difficulty swallowing tablets require precise and titratable dosing or simply prefer a liquid option. While the percentage of adults mating a liquid or precise dose will likely be smaller, the population is roughly 3x as large, so it could be a quite meaningful number of patients. This month, we are launching a pilot initiative where our existing sales team will target high Desmopressin prescribing adult endocrinologists. We will assess the opportunity over the next 90 days. And if we see traction with the adult patient community, we will expand our commercial efforts to fully capture this additional opportunity. Regarding pricing, the dosing varies by patients, but we believe we will net an average of approximately $80,000 per patient per year. As I said, it is still too early in the loss to say definitively, but all initial signs are pointing to a successful launch for Desmoda. For now, we're confirming our guidance of $30 million to $50 million in potential peak sales. We should know more in the coming quarters, and we'll update our outlook accordingly. Desmoda also benefits from strong intellectual property protection via multiple patents extending to 2044, which we believe positions the product as a critical long-term value driver for Eton. Turning now to our other pediatric endocrinology assets. When we acquired Increlex in December 2024, the product only had 67 patients on therapy. We saw a tremendous opportunity to increase awareness and education of severe primary insulin-like growth factor 1 deficiency, otherwise known as SPIGFD. In conjunction with our relaunch of Increlex, in January of 2025, we kicked off an extensive disease and therapy education campaign to complement physician engagement efforts of our season pediatric endocrinology sales team. This included targeted outreach to health care providers, strong conference engagement and endocrinology space, peer-to-peer presentations and strategic collaboration with patients and patient advocacy groups. Increlex is approved for pediatric patients age 2 and up and is highly effective at increasing height during critical development years. Because earlier diagnosis leads to better outcomes, increasing awareness and improving time to diagnosis are central to our strategy. ensuring that every patient achieves their full therapeutic potential. We are already seeing encouraging progress. Since acquiring the product, we have meaningfully reduced the average age of which patients begin therapy and continue to see steady growth in the treated population. Based on ongoing discussions with physicians in the community, we remain confident that a significant opportunity for growth remains with the existing indication. We now have over 100 patients on treatment, and our goal is to reach 120 patients by year-end. So far this year, we have seen the number of patient age outs and closures declined significantly from the level we saw earlier in the fourth quarter of 2025 prior to our last earnings call. Long term, we see a big opportunity in harmonizing the patient definition between the U.S. and the EU. In the U.S., a patient meets the label criteria if their IGF-1 levels are more than 3 standard deviations below the media. In Europe, where Increlex is also available, the definition is 2 standard deviations below the median. And based on the European patient registry data collected over the past 15 years, we believe that Increlex is a safe and effective treatment for patients with IGF-1 levels between minus 2 and minus 3 standard deviations. We held a meeting with the FDA December to discuss label harmonization, which we believe was positive. As a result, we submitted the final proposed study protocol to the FDA in February and we expect to receive their feedback either clearance to proceed or comments later this month. Once the FDA signs off, we will initiate the study with our and we expect to see the first patient dose in the third quarter of this year. Our proposed study is an open-label study of approximately 30 patients tracked for 5 years or until they reach full adult height with a primary endpoint of change in average annual height velocity at month 12 compared to pretreatment height velocity. Given that it is an open-label study, if the data is as compelling and clear as we expect it to be, we believe there may be an opportunity to approach the FDA with interim data after a couple of years. The study is expected to cost approximately $1 million per year. If we are successful with this label harmonization, we believe that the Increlex market opportunity could increase fivefold in the United States. Also in our pediatric endocrinology portfolio, we continue to see strong growth from our adrenal insufficiency franchise, Alkindi Sprinkle and Khindivi. 2025 was kind's fifth full calendar year on the market and its strongest year yet in terms of number of patients on therapy and number of new patient referrals. This momentum reflects the continued impact of our focused efforts to expand awareness and adoption of pediatric appropriate hydrocortisone dosing and to reduce friction for both physicians and caregivers making it easier for providers to diagnose, prescribe and initiate therapy for children with adrenal insufficiency. Khindivi was developed to address the needs of patients that had an aversion to the texture of the Alkindi granules or who preferred a liquid option and it is the first and only FDA-approved oral solution of hydrocortisol. Similar to Desmoda, the liquid dosage form laws for mixing and accurate dosing tailored to patient needs and does not require refrigeration mixing or shaking. Together, Alkindi and Khindivi allow us to offer physicians multiple pediatric appropriate hydrocortisone options, enabling them to choose the formulation that best fits the needs of each child and caregiver. For our combined franchise, our target market is the estimated 5,000 children under the age of 8 in the U.S. with adrenal insufficiency. We believe we have captured around 12% of the market to date, and there is still a long runway ahead of us. Eton remains confident that the franchise can achieve peak annual sales of at least $50 million, which requires only around 20% market share and we ultimately believe that Eton can capture even greater market share if we are accessible in expanding the Khindivi label. Khindivi is currently approved for patients 5 and over, but we believe the largest unmet need is within children under 5. The FDA restricted the age due to limited availability on safety data of the 3 active ingredients when these ingredients are used in combination. However, we've developed a new formulation which substantially lowers levels of these excipients and Eton held a meeting with the FDA in the fourth quarter, where the agency indicated the receptive to a label expansion. The agency requested that we run a bioequivalency study and then submit our supplement to the existing NDA. Last week, we dosed the first patient in that bioequivalency study and now plan to submit the supplement as soon as the final study report is available, which we currently expect to be in the third quarter. The FDA indicated the submission would receive a 10-month review aligned for a potential launch by mid-2027. Next, I'd like to discuss our recent acquisition, which we are very excited about. Earlier this month, we announced the acquisition of HEMANGEOL, the only FDA-approved treatment for infantile hemangiomas that require systemic therapy. Infantile hemangiomas are noncancerous vascular tumors that typically appear shortly after birth and in severe cases, can lead to serious complications including loss of vision, trouble breathing or permanent disfigurement. An estimated 5,000 to 10,000 infants are treated with HEMANGEOL annually in the United States. We've been clear with our acquisition strategy, Eton seeks opportunities where we can meaningfully add value to product. We are unlikely to earn remarkable returns and create value for shareholders if we are purchasing assets only to maintain the status quo of their current level of revenue and earnings. We look for opportunities we're a rare disease company with wide expertise and commercial infrastructure can unlock significant growth and profitability. Similar to how we successfully executed on Galzin and Increlex last year, we believe there is a significant opportunity for value creation with HEMANGEOL. HEMANGEOL had the product characteristics we look for. It treats a rare condition with a small prescriber base. It is the only FDA-approved treatment in its class. It has strong safety and efficacy profile, and there's a meaningful opportunity to improve operational efficiency and margin performance. Our team is hard at work preparing for our May 1 relaunch of the product. One of the key opportunities we see is optimizing the product's distribution model with our dedicated rare disease infrastructure and proven go-to-market capabilities. Currently, the product goes through the traditional pharma distribution model, utilizing the large national wholesalers open pharmacy distribution and significant payer rebating. While this may make sense for higher-volume products, we believe transitioning to our rare disease focused distribution model can significantly lower costs improve the patient and provider experience and significantly strengthen the long-term economics of the product by reducing gross to net deductions. In addition, we will implement our best-in-class Eton Cares patient support program, which we believe will improve the treatment journey for families and expand access to treatment. For instance, we will be offering our standard 0 commercial co-pay per patients where today, most patients are paying $55 a month on their co-pay. HEMANGEOL will also establish a third strategic call point for us. Te majority of prescribing occurs within pediatric dermatology, but care for these patients can also involve pediatric hematology oncology physicians who specialize in vascular anomalies. This is a highly concentrated specialty with roughly 400 pediatric dermatologists and a smaller number of specialized pediatric hematology oncology physicians actively managing these patients. While we look for other bolt-on opportunities within pediatric dermatology. The HEMANGEOL opportunity is certainly large enough on its own to justify the dedicated commercial efforts. In tandem with the transaction, we are hiring 7 new commercial employees that were previously working for the seller and fully dedicated HEMANGEOL. They will start with eaten on April 1, and we are excited to have them joining our organization. This existing team had done an excellent job growing HEMANGEOL in recent years, and we believe their current relationships combined with Eton's rare disease infrastructure, expertise and capabilities will position the product for accelerated momentum following the relaunch in May. We were pleased that because of our strong cash flow generation, in 2025, we were able to pay for the $14 million HEMANGEOL acquisition entirely with cash on hand and avoid any dilution or incremental debt. This will make the transaction even more accretive to our earnings. With our ongoing plans to streamline distribution, shrink the gross to net GAAP, optimize revenue and expand access, we believe HEMANGEOL can be one of Eton's largest products in 2027. Now let me turn to Galzin, which was another very impressive contributor for the year. When we acquired the product, we expected to be able to grow the product over time, but the product has actually performed well ahead of our expectations. When Eton relaunched in March of 2025, we made major investments into physician education, patient awareness and access support, and those investments are clearly paying off. Through Eton Cares, we know that more people than ever are able to access their medication. And we have heard from many patients were previously forced to take non-FDA-approved zinc supplements because they could not afford their co-pay obligations. They are very grateful to now be able to receive the FDA-approved treatment. In addition, we have found that many patients and providers were unaware of the availability of Galzin or we're unaware of the advantages of the prescription product. We have also seen renewed interest from patients and physicians. Now that we know that Eton Cares will provide patients with access to medication regardless of potential insurance pushback or lack of insurance Physicians can prescribe the product with confidence and not worry that the patient will call them back in a week to complain about high co-pays or looking for alternatives. The benefit to physicians is twofold. First, they have increased comfort knowing that the FDA approved Galzin is manufactured to pharmaceutical standards for quality potency and consistency, whereas the over-the-counter products are not. Second, patients taking the prescription product require periodic refills and return visits, so they have much better compliance with follow-up visits and regular lab monitoring and make any needed dose adjustments. Many over-the-counter users end up failing to return for regular visits contributing to worst patient outcomes. I am pleased to share that last week, we reached 300 active patients on Galzin, a big accomplishment just 1 year after our launch. We still believe there are at least 800 Wilson disease patients in the U.S. taking therapy and potentially over 1,000. So most of the markets still relies on the non-FDA-approved zinc products. We view this as a substantial opportunity for us to potentially more than double our 1,000 patients in the coming years. Through our deep collaboration in the Wilson disease community and Galzin, we have seen the strong desire for an extended release version of Galzin and ET-700 was developed to address this need. Currently, Galzin must be taken 3 times per day with patients fasting both before and after each dose. It's an onerous schedule that can often lead to noncompliance, especially with the middle of the day dose. Eton has developed a proprietary patent-pending extended release formula. Our clinical batches have been manufactured, and we are ready to initiate a proof-of-concept positron emission tomography, or PET study to verify that our proprietary delayed-release formulation can effectively block copper absorption. The study should begin in April, and we expect top line results later this year. If we are successful, we expect to initiate a dose-ranging study and pivotal clinical trial in early 2027. If approved, we are confident that 700 has the potential for more than $100 million of peak annual sales. We've also made strong progress advancing our internal pipeline and in fact, 2026 is set to be by far our busiest year ever in terms of clinical studies. Eton has already touched on the anticipated studies for Khindivi, Increlex label harmonization and ET-700 and we also plan to run PK studies on Amglidia and ET-800 later this year. Our goal is to submit the Amglidia NDA by the end of this year and the ET-800 NDA in 2027. So our pipeline for new product launches in the coming years remains very strong. Overall, 2025 was a standout year for Eton and we have set the stage for an even stronger 2026, which is reflected in our 2026 financial guidance. We expect 2026 revenue to exceed $110 million and to deliver an adjusted EBITDA margin of at least 3%. As we wrap up 2025 and set our plans for 2026, it was a good moment to reflect on how far we've come and where we are headed. A few years ago, I outlined 3 long-term goals for the company. Goal #1 to have 10 commercial products. Goal #2, to reach $100 million revenue rate Goal number 3 to reach a $1 billion market cap. At this time, we had just 3 products when that goal was announced. We had only $20 million of revenue and $100 million market cap. While these goals may have seen miles away from the outside, internally, we have a strong conviction in the opportunity ahead of us, and I believe that these goals were much more attainable than the market perceive them to be. I am pleased to share that we have now achieved 2 of these long-term goals. With the acquisition of HEMANGEOL, we have reached 10 commercial products. And as you have heard, we are expecting more than $100 million of revenue this year. While there is still work to do on the market cap goal, we are confident that if we continue executing our strategy and delivering consistent profitable growth that we expect to achieve the long-term value creation will be elected in our stock price. I believe it's important to keep pushing the organization forward towards ambitious but achievable long-term goals. As a result, we are setting some new long-term goals today. First, we want to build the largest rare disease portfolio in the United States. Among the dedicated rare disease companies, we are already near the top in reaching 13 or 14 key commercial products will position Eton as having the largest portfolio of any dedicated rare disease company in the United States. We believe that this is very achievable in the coming years through both our internal pipeline and business development activities. Second, we want to exit 2027 at a $200 million revenue run rate. This requires roughly doubling our revenue over the next -- within the next 24 months, and we see a very realistic path to doing this. Continued growth of Alkindi, Increlex, Galzin, a successful integration and relaunch of HEMANGEOL, strong launch of Desmoda and the expected launch of Khindivi's expanded label in 2027. Plus, we remain confident that we can close at least one more product acquisition that will provide incremental revenue before the end of 2027. Third, we want to reach 50% adjusted EBITDA margin in 2028. Profit has always been a central focus of our company. Unlike many of our peers in the industry, we are not pursuing revenue growth at the expense of profitability. We have made continued progress in our profit margins and expect to continue to see improvement as we grow. Our adjusted EBITDA margins first turned positive from product sales in 2024 when we reported an 8% margin, they grew to 20% in 2025, and we expect to be over 30% this year. With continued revenue growth, we expect to see the benefits of operating leverage that can drive us to 50% EBITDA margins in the coming years. With our existing base of commercial and operational infrastructure as well as our products continuing to grow and an outside portion of growth should fall to the bottom line. Our fourth and final goal is to reach a $500 million worth of revenue by 2030. And Again, we believe that this is an achievable goal through our 3-pillar growth strategy. First, our existing portfolio has strong organic growth prospects. This includes Increlex, Alkindi, Khindivi, Galzin, Desmoda. All of these products have achieved just a fraction of the market share that we think they can reach in the years ahead. Second, our existing pipeline has several large programs that could add significant revenue by 2030. This was ET-700,, which we believe is peak revenue potential well in excess of $100 million annually on its own. Plus our Increlex label expansion opportunity Amglidia, ET-800 and other programs in development that we have not yet announced. And finally, we will layer on more business development deals. We believe we have proven our ability to close, integrate and create significant value through acquisitions, and we begin -- and we expect to sign more deals like Increlex, Galzin, HEMANGEOL, which will further boost our revenue in the years to come. It's clear that we've come a long way over the last few years, but I truly believe that we are just getting started. We have found a proven winning strategy, assemble the right team, accumulated a diversified portfolio of growing products and build an attractive pipeline to fuel long-term growth. We're in the best addition we've ever been. Thank you for your continued support, and we look forward to keeping you updated on our price developments in the months and the years ahead. With that, I'll hand it over to James, our Chief Financial Officer, to discuss the financials. James?

Thank you, Sean. Our fourth quarter revenue increased 83% to $21.3 million compared to $11.6 million in the fourth quarter of 2024 and revenue was comprised entirely of product sales in both periods. Revenue growth in the quarter was driven primarily by increased sales of Alkindi Sprinkle plus the addition of sales from Increlex, Galzin and Khindivi. As we discussed previously, our third quarter revenue included a meaningful contribution from Increlex outside the U.S. tie to the transition of that business to a new licensing partner. Looking strictly at U.S. product sales. Our revenue grew sequentially by 8% in the fourth quarter relative to the third quarter. We expect our reported total revenue to resume sequential quarterly growth in the first quarter of 2026 and continue to ramp throughout the year. Cost of sales for the fourth quarter was $8.2 million compared to $5.2 million in the fourth quarter of 2024. Adjusted gross profit, which adjusts for the impact of acquired inventory step-up adjustments and intangible amortization, was $15.5 million in the fourth quarter of 2025 or 73% compared to adjusted gross profit of $6.8 million and 59% in the prior year period. The margin improvement was driven by favorable product mix as well as manufacturing cost efficiencies as the products grow. HEMANGEOL and Desmoda are both expected to have margin profiles well above our store company average so they should be positive contributors to future gross margins. We still see a slightly lower adjusted gross margin profile in early 2026, and due to margin dilutive orders of Increlex outside the U.S. as our licensing partner ramps up their distribution efforts in more countries. But on a full year basis, we expect adjusted gross margin to be comfortably above 70%, and this margin is expected to continue to ramp and reach between 75% and 80% in the coming years. R&D expenses for the quarter were $1.8 million, an increase of $2.7 million compared to negative $0.9 million in the prior year period. due primarily to increased expenses associated with our development activities. In addition, during the fourth quarter of 2024, Eton's ET 400 product was granted orphan drug designation by the FDA, which resulted in Eton receiving a $2.0 million refund of the NDA filing fee that was paid and expensed in a prior quarter. R&D expense for 2026 will depend on the timing and final protocol of the numerous studies that we have planned for this year, and we believe it will likely increase from the $7.8 million in 2025 and remained below $10 million for 2026. General and administrative expenses for the quarter were $8.9 million compared with $6.7 million in the prior year period primarily due to increased promotional and launch-related investments associated with the expansion of our product portfolio, an increase in compensation and benefit expenses due to increased general and administrative head count and an increase in FDA program fees. On an adjusted basis, which removes the impact of share-based compensation, transaction-related costs and other onetime expenses, G&A expense was $7.8 million compared to $5.8 million in the prior year period. We have talked extensively about the onetime increase of additional investments made in 2025 and support our long-term growth, driving increased spending in SG&A. However, we are pleased that the increased G&A investment was substantially less than our growth in revenue. One of the factors driving increased G&A spend is the FDA's annual program fees. For all NDA products, the FDA charges a program fee each year, exemption for products that have orphan designations if the parent company has gross sales of less than $50 million. Eton has previously received these exemptions and thus avoided the fees. However, starting with the October 1, 2025 annual program fees, Eton no longer qualified for an exemption. For the FDA's fiscal year 2026, the annual program fee is $442,000 per strength for NDA products. As of October 25, when the annual fee was assessed, Eton had 8 unique strengths for a total annual fee of $3.5 million. This annual fee is prepaid on October 1 and accounting purposes, the expense is amortized throughout the year. As a result, $0.9 million was recorded as an SG&A expense in Q4 of 2025. These program fees are estimated to drive an incremental $2.8 million increase in SG&A spend for 2026 over 2025. Regarding overall SG&A spending for 2026, we have 2 main growth drivers: FDA program fees and HEMANGEOL. The FDA program fees are estimated to add an incremental $2.8 million expense over 2025 and the HEMANGEOL acquisition is expected to add approximately $3.5 million in annualized SG&A spend and about $2.5 million in the partial year 2026. Separately from those 2 onetime step-ups, we believe that our base SG&A spending would have increased by less than 10% in 2026. Adjusted EBITDA for the fourth quarter of 2025 was $6.2 million or 29% of revenue compared to $2.1 million or 18% of revenue in the fourth quarter of 2024. Again, adjusted EBITDA will likely see large fluctuations quarter-to-quarter depending on the timing of inconsistent R&D expenses and ex U.S. Increlex orders, but we expect the full year adjusted EBITDA margin to be above 30%. Total company GAAP net income was $1.5 million for the quarter compared to a net loss of $0.6 million in the prior year period. Net income per basic and diluted share during the quarter was $0.06 and $0.05, respectively, compared to a net loss per basic and diluted share of $0.02 in the prior year period. On a non-GAAP basis, we reported net income of $5.4 million for the fourth quarter of 2025 compared to $0.7 million in the prior year period. and diluted earnings per share of $0.19 for the fourth quarter of 2025 compared to $0.02 per share in the prior year period. Eton finished the fourth quarter with $25.9 million of cash on hand. We had an operating cash outflow of $11.6 million in Q4 of 2025 compared to an operating cash inflow of $12.0 million in the previous quarter. The fourth quarter included $12.4 million of Medicaid rebate payments as multiple quarters' worth of Increlex rebates were paid in Q4, $3.5 million of the aforementioned FDA program fees and $1.4 million of inventory payments associated with the onetime transition of ex U.S. Increlex distribution in Europe. Looking forward, we expect to generate significant operating cash flow throughout 2026 and beyond. This concludes our remarks on fourth quarter results. And with that, I'll turn it back over to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Chase Knickerbocker of Craig Hallum.

Congrats on all the progress here. A lot to get to. But maybe just first on HEMANGEOL, you mentioned that, that could be 1 of your largest products in 2027 that implies quite a lot of growth from kind of the roughly $12 million in 2025 sales. Can you walk us through your assumption on how the assumptions on how the product gets there? What do you think from a volume perspective? And then what does that assume as far as any actions on price or gross to net improvements.

This is Sean. Thanks for the question. we believe we will increase the number of patients on product, partly that zero co-pay was preventing a lot of patients using the product that are previously had a higher co-pay amount and went to other alternatives. So we think that's part of it. That will certainly drive more patient adoption. We will be raising awareness working with the efficacy groups and certainly detailing the product that are much more aggressive level. We want to use that word, but to we want to be able to reach out and make sure that all the patients that can use a product, we'll get the product. And in terms of the pricing, we haven't made any final decisions on that. We'll launch it on first, and we'll see where we end up on that. But our philosophy has always been to be at the lower end of rare disease pricing. And so as a general rule, that's our approach. And it's largely based upon how many patients are out there and making sure that the pricing is competitive with the rare disease products out.

Got it. And maybe just on Desmoda on kind of how you see the pace to peak the value proposition is pretty similar to kind of the idea behind Khindivi. You obviously know all these physicians already selling to multiple assets. How do you kind of think about the time to peak sales as far as being potentially quicker here because of those dynamics?

Well, I don't know if I could comment too much on the time of peak sales, right? The launch has gone well. We're very pleased. We're getting scripts continuously. Doctors are very excited about the product. I will say, I believe the launch to peak sales will be far quicker than what we had in Alkindi. This is a very specific unmet need. Obviously, Alkindi, an unmet need in a bit of a different way. But unlike Alkindi, there were not a lot of compounders out there, compounding Desmopressin. So doctors are thrilled to have the product. We know that the uptake has been right according to the plan and not better. So I would say that it faster. We guided to that $30 million to $50 million hoping we're well on our way there in 6 months or so.

Got it. And maybe just last kind of 2-parter here. Maybe just one for James on how you see cash flow conversion from EBITDA in 2026? And then, Sean, just kind of lastly, on that $200 million run rate exiting 2027. Could you kind of delineate between what might come through BD and kind of how you see the existing portfolio today kind of performing to get to that run rate at the end of 2017.

Sure. Yes. Sure. James, well, I can take the first part.

Sure. We try to give some context on the Q3, Q4 cash flow at the end of 2025. 2026 will firmly be in positive operating cash flow territory. We do have -- we will have some timing commitments, namely with Increlex that will plan for the second half of the year. In the first half of the year, there should be not nearly as much as we experienced in Q3 of 2021. But some of the larger larger-than-average volume with study orders in Europe for Increlex. But other than that, we are firmly in positive operating capital territory. We will start making debt principal payments, which will be new in 2026. And versus 2025, but even with that, we'll be generating a lot of positive cash flow.

Okay. And then, Chase, regarding your question on the $200 million run rate, as you know, and as I think we've demonstrated throughout our the history of our company, we generally set goals which are achievable. We believe the $200 million run rate in the Q4 of next year is entirely achievable primarily based on what we have on deck. This doesn't really include new product deals, licensing that type of thing. We believe that manage will be a great product for the company. We believe Desmoda will continue to grow quickly. We're seeing higher sales than ever on and Alkindi and Khindivi. Those continue to increase. We're very pleased with the Increlex business and how that grows and it's been nice because we haven't lost as many the older patients, and now we're gaining momentum and going forward on that, that's been solid. And really all areas of the business are functioning well. There's a lot of growth prospects in the coming quarters in terms of the revenue and hitting the $200 million run rate in Q4 next year, I think, is entirely achievable. We will be providing further updates on future conference calls to try to better ascertain what's the number what can it be and that type of thing?

Our next question comes from the line of Madison El-Saadi of B. Riley Securities.

Congrats on a lot of positive updates here. Maybe to follow up on Desmoda. It sounds like you're having interest both de novo and from existing. Could you kind of characterize if the majority of interest is from the existing Alkindi population and how much of it is de novo. Also curious if you're seeing already some adult patient interest? And then secondly, on Increlex as you prepare for this registry study, just wondering if you had any payer discussions regarding potential internal payer reimbursements for the registry patients, if that something that's possible?

Sure. It's Matt. So I'm going to have pack our Chief Commercial Officer, answer the first part of your question with regards to Desmoda and the pediatric versus adult.

Madison, it's Ipek. So -- for -- I think you're right from our script, more than 97% -- 97%, 98% of our existing relationships. The pediatric anthology are actually the -- our target subscribers for central diabetes antivirus, which is for Desmoda. So these relationships are already there from the day 1 of launch, which was March 9, our team was already talking to these physicians. There's a lot of excitement from key riders, salt leaders, big institutions already in the past 2 weeks. What we are excited about is call points that our team traditionally have not gone after maturity adult anthologies like Sean mentioned. It is we gave our team 2 weeks ago when we launched the product, more than 3,000 new targets, and they just started going after those. We've talked to soften actually, who are big in the adult space. Some of them actually end up still keeping the pediatric patients. So they definitely see a role in it as a right therapy for several adult patients as well. And they also see the pediatric patients based on the region and institutions. So there is definitely a dual pet opportunity that is incremental to our existing relationships there.

And remind me the second part of your question.

And then on Increlex, if there's been any early payer to related to...

Yes, the payer discussions haven't happened because we feel it would be any different. If we get the label expansion, there shouldn't be any issues with payers right now. If a doctor has even prescribe something off like from time to time due to a medical need and can demonstrate that there will be reimbursement. But generally speaking, what we want to do is initiate that study as soon as possible. That protocol feedback should happen by the end of this month. And I am quite confident that we will be undertaking the study later this year as -- and obviously, it's going to have a huge impact on our acrylic sales. We are hoping that when we're -- portion of that way into the study is open label, we can go to the agency and get that label updated as soon as possible.

Our next question comes from the line of RK with H.C. Wainright.

This is RK from H.C. Wainright. Good afternoon, Sean and James. So I mean, obviously, there's a lot of things to chew here and all good stuff. In terms of the ongoing business, especially focusing on Galzin, you said you have already eclipsed 300 active patients at this point. And then within -- still about 500 remaining out there and possibly on OTC products. What portion of that is achievable in the immediate couple of quarters? And how much of that are you how much contribution of that are you assuming going into 2027 when you're trying to hit that $50 million per quarter on the fourth quarter.

Thanks, RK, for the question. We obviously did the 300 patients much faster than we had expected that continues to increase week over week. I'm going to ask Ipek actually to comment a little bit more on the second part.

RK, I think your diagnosis of the fact that the next chapter of growth needing to come from the OTC products is correct. We -- the good part is we -- in Wilson disease space, obviously, the centers of excellence are pretty established. And at this point, after a year into launch, we have pretty strong relationships and ongoing initiatives with several of these centers of excellent thought leaders and the top prescribers. So we do know where some of these patients, some of that population is. I think based on our projections, I am confident to say within that time frame that you mentioned, we will be able to get to half of that remaining population out there who are on therapy or some form that is not FDA approved between everything that we are doing in the field with these prescribers as well as the awareness and education initiatives that we are closely working on with the Wilson Disease Association, which is the key patient advocacy group and really, a lot of patients are very much in sync and present in that community as of this community.

Great. So my next question is on the label expansions or the indication expansions that you're trying to achieve. One is on the Increlex. What specific feedback do you need from the FDA at this point in terms of harmonizing the definition of SPIGFD and to get your study going? And the second part is on the Khindivi 1, if the patient population gets increased successfully below 85%, what sort of population are we assuming that you will have access to?

Sure. On the Increlex, we've already received feedback from the agency on the. We took the feedback and put that in the formula protocol. So they send you feedback at the general letter, they say we want to see this and this and this. then you formalize that in a scientific protocol that takes a number of weeks, then you submit it to the agency. They then should look at that, make sure that they feel you incorporate their thoughts and comments. And hopefully, when we get it back, there's few or no changes, if that's the case, which it should be, unless they change their mind, then our belief is we can start to study. We hope to have that protocol back by the end of this month. So that's that one. And then regarding the Khindivi formulation, we're -- well we should have that wrapped up the seat here shortly, get it submitted in the third, fourth quarter, maybe third quarter, I'm guessing third quarter submission and then it will launch next year. The population, it's really intended for under 5%. That's really what the whole product was about -- we believe -- I believe it will do an excess $20 million of additional revenue rather short quarter.

Okay. And then the last question is on the inventory burn off. How much is on the remaining inventory step-up from the Ipsen acquisitions and to be fully amortized through the P&L?

Yes, very little. There will be a slight amount remaining in early 2026, but a small fraction, we burned through most of it in 2025.

And that is all the time we have for Q&A today and does conclude today's conference call. Thank you for participating. You may now disconnect.