ETON - NASDAQ

Good day, and thank you for standing by. Welcome to the Eton Pharmaceuticals, Inc. Investor Day and Fourth Quarter 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, David Krempa, Chief Business Officer.

Hello, everyone, and welcome to Eton Pharmaceuticals, Inc.'s fourth quarter 2024 results and 2025 investor day conference call. Before we begin the presentation, please take a look at our Safe Harbor statement. Our comments today may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those presented. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the company's filings with the SEC. With that, I will now turn the call over to Sean Brynjelsen, our CEO, to begin the presentation.

Thank you, David, and thank you everyone for joining us today. It's an exciting time for us to be hosting this call and we have a lot of important items to discuss. We'll begin by reviewing our transformational last six months, our corporate vision, and our three-pillar strategy for long-term growth. And James will discuss our fourth quarter and full year 2024 financial results. After that, we will provide a deep dive into the significant potential we see with the recently closed Acrolex acquisition. Next, we will cover the outlook for our adrenal insufficiency franchise, I'll tell you about our latest acquisition, Galzum, and the untapped opportunity we see within Wilson Disease. Then discuss our recently announced AT600 clinical results and upcoming planned NDA submission. As well as the update on the rest of the pipeline including two new products that we are exposing for the very first time. We'll wrap up with James discussing our financial outlook for 2025 and beyond, and then we will open up for Q&A. Today, you will not only hear from me, but also the rest of our executive team. James Gruber, our Chief Financial Officer, David Krempa, our Chief Business Officer, and also Ipek Erwan, our Chief Commercial Officer. Okay. Let's get started. Our vision is clear. We want to build a large leading ultra-rare disease company that brings as many new treatments to patients as possible. We intend to do that by putting patients first. Eton Pharmaceuticals, Inc. operates on the philosophy that every patient that wants and needs their products will get it regardless of insurance status or access barriers. I believe we have one of the most generous, high-touch patient assistance programs in the industry. This goes beyond just zero-dollar copays. It includes free drug programs for under or uninsured patients and pre-bridge shipments while reimbursement paperwork is being worked through. Our laser-sharp focus is on the rarest of conditions which is an area where we think we can have the greatest impact on patients. All conditions our products target currently have fewer than ten thousand patients in the United States and some have even fewer than one thousand. Many of these patient populations have been overlooked by big pharma for years because of the smaller size of these opportunities. We are determined to fill these gaps. I take pride in being able to fulfill an unmet need and deliver new treatment options to these patients that have been overlooked for far too long. And we want to solidify that commitment as many times as possible. Eton Pharmaceuticals, Inc. is not a single product company. We now have seven treatments on the market, and we intend to continue growing that number bringing in as many new therapies to market as possible which allows us to make the greatest impact for patients. There are more than five thousand rare diseases out there without any current treatments, so there's a lot of work for us to do. And many patients that can benefit from even bringing new therapies to market. Over the last few months, we've acquired two high-value commercial products, Acrolex and Galzum, which will both have significant immediate impacts on our 2025 revenue. We've also added three late-stage pipeline assets. Which help us deliver even greater long-term growth. Eton Pharmaceuticals, Inc. continues to deliver with our existing business. Our commercial team continues to produce organic sales growth while also preparing for major product launches and integrating our new products. And our R&D and regulatory teams have made exceptional progress advancing our pipeline and have towards the market. Our strategy remains the same. The way we've grown the business to date is how we'll continue to grow it in the future. Since the launch of our product years ago, we've had a three-pillar growth strategy. Number one, organic growth of existing products. Two, development of internal pipeline programs. And three, external acquisitions and licensing transactions. Starting with organic growth of the products we've already launched, we've seen sixteen straight quarters of product revenue growth, that's every quarter since we launched Alcindi Sprinkle. And we believe Alcindi, Galzum, and Acrolex will have great organic growth prospects, will keep that streak alive. All three products have captured a relatively small percentage of their target market opportunities and have long runways ahead. Eton Pharmaceuticals, Inc. also has a strong track record of developing and progressing products internally with ET400 the best example of our internal competencies. With ET400, our team fully developed the product from scratch to FDA filing in a fast-paced and cost-effective manner. If approved, and we have every reason to believe that it will be, ET400 will add a very promising and high-revenue product to a portfolio for a fraction of what it would have cost to acquire a product with the same characteristics. However, our internal pipeline includes much more than AC400. We also expect to see near-term value realized from our other pipeline products including ET600, ET700, ET800, Amboybia, and Benilol. All of which we will talk about today. Finally, we will continue to pursue strategically aligned business development opportunities to acquire or license new products. This has been a crucial part of our growth story so far. And we've demonstrated success in identifying and acquiring undervalued products making these acquisitions pay off quickly. We begin with alkane and scrapulumic acid. Both of which had a very short payback period and will generate lifetime profits at many multiples of their purchase prices. We anticipate similar or better returns on our recently closed Acrolex and Galzum transactions. Our business strategy is proven, repeatable, and we expect to continue finding and acquiring attractive assets on a go-forward basis. In many ways, we are actually in a better position to execute on business development activities today than ever before. With our strong financial position, we have greater access to capital. Our increased commercial infrastructure and recent track record of commercializing rare disease products has made us an even more attractive partner. We expect acquisition and licensing transactions to remain a central part of the Eton Pharmaceuticals, Inc. growth story. Our commercial strategy is one of our core competitive advantages and makes us particularly well-suited to delivering life-saving treatments for patients suffering from the rarest of diseases. Concentrated prescriber bases mean a limited number of specialists. We could cover all of them with highly targeted efficient Salesforce efforts. Eton Pharmaceuticals, Inc. has also established longstanding relationships in the pediatric endocrinology and metabolic genetics communities. A significant advantage when trying to drive awareness and adoption. This also gives us a strong competitive edge when launching new therapies. It's also why the IncaLex acquisition was such a no-brainer. More than ninety percent of doctors who treat this condition were already our existing targets. Another distinctive confidence we bring is our meaningful partnership with patient advocacy groups. Many of the conditions we pursue are so rare that there is limited available information to parents of newly diagnosed patients. These parents turn to rely heavily on patient advocacy groups for education and updates on their condition, and new treatment options. Our strong partnership with these groups has helped drive increased awareness. We also work closely with key opinion leaders. They provide valuable insight into cutting-edge treatment practices. Our close work with these thought leaders also allows us to better understand the shortcomings of existing treatments. This allows us to identify areas of unmet need. For example, the idea for EP600 product candidate came out of discussions with leading pediatric endocrinologists. Our EAP and Cares program patient support program is a point of difference for Eton Pharmaceuticals, Inc. offering best-in-class personalized support for patients and offices and removes access and affordability barriers. Through Eton Cares, we operate zero-dollar copay for commercial patients. Quick start and bridge programs, a nurse hotline, monthly patient check-in, and exclusive distribution through a high-touch specialty pharmacy. We truly believe our commercial strategy sets us apart and would not be easy to replicate. We've intentionally curated one of the broadest ultra-rare disease portfolios in the industry. In fact, I cannot think of another player in the ultra-rare disease space that has thirteen approved or late-stage ultra-rare products in their portfolio. Of the thirteen products, seven are commercial, and that should increase to eight with the upcoming expected approval of VT400. Five of these thirteen products have been added in just the last six months. There were three acquisitions, Inc, and Bolivia, and Galzum, plus two new internal programs, ET700 and ET800, which we initiated last year and will discuss for the first time today. Here are the results that showcase the effectiveness of our strategy and the excellence of our execution. We've made tremendous progress over the past few years, growing from just three million of product sales revenue in 2021 to thirty-nine million in 2024. We are very proud of this accomplishment, but really are just getting started. Those of you who have followed us for a while know that we have ambitions to reach levels much higher than we are today. With the additions of Acrolex, Galzum, and EPUB400 on top of our existing approved products, we believe there's a clear path for us to reach a hundred million in revenue in the near term. And ultimately much higher level than that as our product pipeline comes to market in the coming years. We look forward to spending this morning explaining why we're so confident in the near-term growth opportunity and laying out additional details on how we plan to get there. We will be taking an in-depth look into the market opportunities for our new product, and our commercial strategies to ensure we can quickly unlock the next wave of growth for Eton Pharmaceuticals, Inc. Before we dive into our portfolio in more detail, I'll turn it over to James to discuss our record fourth-quarter results. James?

Thank you, Sean. I am pleased to share that the fourth quarter was another record quarter for Eton Pharmaceuticals, Inc. Representing our sixteenth straight quarter of sequential product sales growth. Revenue was $11.6 million all from product sales, representing a year-over-year increase of 59%. These strong results were driven primarily by the continued robust growth of both cargumic acid and alkene sprinkle. The IncraLex acquisition closed on December 19th and contributed less than $200,000 of revenue to the quarter. And the Galzum acquisition closed on December 31st, so our new products did not have a material impact on Q4 revenue. Gross profit increased by 78% year over year including the negative impact of stepped-up inventory values and increased IP amortization reported in the cost of goods sold. SG&A expense increased to $6.7 million in the quarter which included some one-time transaction costs related to the Incrilex product acquisition. In addition, investments in additional headcount and commercial infrastructure were made in the fourth quarter to support our three expected product launches in 2025. R&D expense for the quarter was a negative $900,000 as we were granted an orphan drug designation for ET400. Which resulted in a refund of the NDA submission fee which that we had paid and expensed in the second quarter of 2024. Operating income was a positive $600,000 in the quarter. Our full fourth-quarter results are available in our earnings press release that was issued this morning and for detailed full-year 2024 results and disclosures, please see the company's Form 10-K which was filed with the SEC earlier today. I'll now hand it over to our Chief Commercial Officer, Ipek Erwan, to discuss our recent acquisition of Increlex.

Thank you, James. When I joined Eton Pharmaceuticals, Inc. nearly four months ago, one of my key imperatives was the integration and relaunch of IncraLex. Which we closed in late December. We found IncraLex to be a uniquely compelling opportunity for Eton Pharmaceuticals, Inc. One, we are incredibly excited to add to our portfolio for three key reasons. One, its attractive therapy characteristics. Incorrect is used to treat pediatric patients two years of age and older who suffer from severe primary insulin-like growth factor one deficiency. Or SPI GFT. It is estimated that approximately two hundred children in the United States suffer from SBIGFD. We recently met with the mother of a former Incorrect patient. A college-age young lady now. This mom still remembers to this date, how Incolex made a difference for her daughter over the several years she was on therapy. She shared how on her last day of injection, her daughter was in bittersweet tears. Because IncraLex became such a big part of who she was. Her identity, and her daily routine. And now her journey was over. With her reaching her goals. This therapy truly serves a critical unmet need that is recognized both by healthcare professionals, patients, and caregivers. There are no other treatment alternatives for these patients. IncraLex is also a complex biologic product. Which makes it a highly durable asset. Given the relatively small size of the patient population, we believe it will be extremely unlikely to ever see a biosimilar competitor. The second reason that made such a compelling opportunity for us was its strategic and close fit with our commercial infrastructure, and go-to-market competencies. As Sean mentioned, we have spent the last four years building up strong relationships with the pediatric endocrinology community, through our efforts in commercializing Alkenda Sprinkles. We built a high-performing rare disease sales organization that was already calling on ninety-four percent of the IncRELEX prescriber targets. This team is now one hundred percent dedicated to pediatric endocrinology. We have developed deep partnerships with key professional societies and patient advocacy groups. We have strong omnichannel marketing capabilities in place, to complement our field sales team. Incrolex offered such an attractive opportunity to leverage all of these commercial competencies. Finally, in all our acquisitions, we want to be greatly confident that we can add significant value to the product. And unlock growth. Beyond just incremental. With IncraLex, we believe we have multiple avenues to do that. It starts with increasing adoption through focused sales and marketing. The previous ownership of IncraLex has significantly reduced promotional activities over the last five years. Among the pediatric endocrinology community, there are physicians today who thought the product was no longer in the market. And fellows in training who may not know this therapy exists. We see a huge unlock for us to leverage our existing infrastructure to increase awareness and education of SDIGFD and incrolex, and drive accelerated adoption. We've also made a price adjustment for our therapy. To align with its demonstrated value and the significant investments we are making in its commercialization. As Sean mentioned in our opening, we put patients first. Ensuring patient affordability will always be our non-negotiable priority. By expanding financial assistance options, including our zero-dollar copay program, and streamlining access pathways, we anticipate that we will improve patient ability to obtain and adhere to the treatment. The final avenue for creating value will be through the potential to broaden treatment access by harmonizing the US and European label. This would enable a broader patient population in the US to benefit from Incolex clinically. Our chief business officer, David Krempa, will speak to our plans in detail shortly. Now let's look at the history of Increlex revenue. Under Ipsen ownership, Incirlix peaked at one hundred and eighty-five active patients in the US. In 2012. But fell sharply following a product shortage in 2013 and never fully recovered. Around 2019, previous ownership corporate focus shifted. And the company decided to stop promoting the product. Then we acquired the product at the end of last year, there were sixty-seven active patients in the US. As you can see here, we estimate returning to the previous high of one hundred and eighty-five patients which would generate around fifty million dollars in annual revenue in the United States. We are confident that we have the right strategy plan, and capabilities in place to capture a much larger share of this market opportunity. A few weeks after closing our acquisition, we brought together a group of leading pediatric endocrinology thought leaders. With specific expertise in the treatment of severe primary IGF one deficiency, who also are intimately familiar with intralex. It was imperative for us to shape our US relaunch plan with their input and to gain their insights on our US label harmonization initiative. Historically, SBIGF has been an underdiagnosed and undertreated condition. Through our discussions, it was evident that there is low awareness among the pediatrician community about this condition. Which results in delayed diagnosis, and referral to pediatric endocrinology for appropriate treatment. Since there are various causes of short stature, when presented with a patient who is short in stature, an IgA found deficiency is not necessarily top of mind. There is also an ingrained habit of prescribing growth hormones for short stature patients. Which may not help through SBIGFT patients. Who have normal growth hormone levels. Because they are prescribed growth hormones, SBIGFT patients may miss their window to begin in CORELEX treatment. To reach their full growth potential. These patients are typically not reevaluated via IGF-one testing. Which leads to late therapy starts or therapy ineligibility. This discussion helped us sharpen our 2025 focus. Given our relationships in the community, and the coverage we already have with most of the doctors treating the condition, we see a prime opportunity to drive awareness among stakeholders especially at the key leverage points across the patient journey trigger therapy adoption and optimize patient outcome. There is also strong consensus among the thought leader community on how critical harmonizing the US and European labels would be. To appropriately diagnose and treat SBIGFT population in the US. Our brand strategy is straightforward in design yet impactful in effect. It is anchored around activating the most critical leverage points across a patient journey to drive awareness, adoption, and adherence. It starts by reengaging the pediatric endocrinology community to ensure all short stature patients are screened. For severe primary IGF one deficiency and they consistently and appropriately use IGF one testing to accurately diagnose SBIGST patients. Once these patients are diagnosed, our goal is that healthcare professionals use Incolex in all of their SBI JST patients. In addition to our dedicated sales force, we have omnichannel plans in place to deliver on this first pillar. Peer-to-peer education being a critical one. We also close to collaborate with key professional societies, such as the pediatric endocrine society, pediatric endocrine nursing society, and American Academy of Pediatrics. To maximize our healthcare professional reach. Our second key imperative is driving patient awareness and engagement. Receiving a diagnosis for an ultra-rare disease can be intimidating. And we want to make sure patients and families are equipped with knowledge on this diagnosis and are empowered to ask for Intralax. For their loved ones. With SBIGFT. We have solid partnerships in place with key patient advocacy groups such as Human Growth Foundation and MAGIC. To amplify our efforts. The final pillar of our strategy is to establish our company as the best-in-class partner in the severe primary IGF-one deficiency space. Offering the best therapy experience as possible to patients, caregivers, and healthcare providers in their journey. You already heard about the Eton Cares program. Which is also available to in collects patients. Offering a zero-dollar copay for eligible patients and best-in-class patients and office support. We will ensure that all pediatric endocrinology offices are aware of the access and affordability benefits of Eton Cares and caregivers take full advantage of these benefits to ease the disease burden for their families. Financially and emotionally. We've already built quite a bit of momentum in the past ninety days since day one of our acquisition. Our specialty pharmacy partner was fully operational ready to dispense, forty-eight hours after the acquisition closing. We immediately transferred sixty-seven current patients in one week. From multiple pharmacies. Our sales team was trained and deployed on the same day. Reaching over six hundred pediatric endocrinologists across the country. We are thrilled to report that as of mid-March, we are at eighty-one active patients. We activated personalized prescriber engagement and education campaigns to complement the efforts of our sales force. Of eleven rare disease specialists we are encouraged by the response and receptiveness of the physician community we are already seeing. We are now a mission alliance partner of the pediatric endo society and we'll have a strong company presence at upcoming national conferences. With PES, PENDS, ENDO, NAAP. Peer-to-peer education activities focusing on Incorrect. We've already started in January partnering with Human Growth Foundation in their endocrinology education days for physicians and key institutions. And will be participating in all of their patient demand. Through this year. The first ninety days of product launches are critical. Serving as a litmus test for our strategic planning and execution capabilities. It allows us to assess the effectiveness of our approach make necessary adjustments, and build momentum. We are highly confident that our performance during this phase not only validated our strategy, but also set the stage for future success of Incollect. With that, I'll now turn it over to our Chief Business Officer, David Krempa, to discuss a key growth initiative for Incorrect. The US label harmonization.

Thank you, Ipek. As Ipek mentioned, we see a tremendous opportunity in harmonizing the US and European labels. While Incrilex is approved for severe primary IGF one deficiency in both regions, the definition of what constitutes severe primary IGF one deficiency is different between the two regions. In both regions, there are two criteria that must be met. The first of which is based on height. In both regions, patients need a standard deviation score of less than or equal to negative three. The second criteria is based on a measurement of each patient's IGF levels. In the US, a patient must be at least three standard deviations below the median IGF level. In the EU, patients must be in the bottom two and a half percentile for their age and gender. You convert the two and a half percentile to a standard deviation score, it's approximately negative two. As you can imagine, a requirement of only negative two standard deviations rather than negative three results in a significantly greater patient population. Based on the current definitions, it's estimated that there are only two hundred patients in the US but more than a thousand in the EU. If the FDA were to adopt a broader definition, we estimate that the potential patient population in the US would expand from two hundred to approximately one thousand. We feel optimistic about the prospects for this realignment because we have compelling real-world data to show the safety and efficacy of Incrolex within this slightly broader patient population. As part of a post-approval commitment tied to its 2007 approval, European regulators required Incolex's owner to maintain a patient registry tracking long-term safety and efficacy of patients taking the drug. The registry has now collected more than fifteen years of data from over three hundred and fifty patients. We believe this data will allow us to provide compelling real-world evidence to convince the US FDA that Incolex is a critical effective, and safe treatment for patients that meet the height index criteria and have IGF levels that fall between negative two and negative three on the standard deviation score. We are currently aggregating the patient registry data to support a meeting with the FDA to discuss this topic in the middle of 2025. Assuming we reach alignment with the FDA, we would aim to submit a supplemental filing in the second half of this year. We expect the supplement to receive a six-month review which could allow for an updated label in the first half of 2026. While we are optimistic about the prospects for this label harmonization, it's only one of our many growth levers for Incolex. And we expect that the product will deliver significant long-term growth with or without the label change. When we acquired the product, it was at about a ten or eleven million dollar run rate in the US. Based on our optimized price, and the new patients we've already added this year, we think starting in the second quarter of this year, the product will be operating at around a twenty million dollar revenue run rate in the US. Proud of this quick progress but as you've heard, think we've only captured about forty percent of the patient population in the US. We think there is still much more to come. We were to capture all two hundred patients we estimate that the total revenue opportunity is around fifty-five million dollars. As Ipek mentioned, we're working hard to increase adoption of the product and early indications have given us confidence that we can drastically increase the share of patients on treatment and capture more of this fifty-five million dollar market. And of course, if we are successful harmonizing these labels, we think the market opportunity expands roughly fivefold. To more than two hundred and fifty million dollars per year. I hope it's now clear why we're so enthusiastic about this acquisition. Secured a durable biologic product at a fair price with multiple levers for growth. With our specialized pediatric endocrinology commercial team, and capabilities, we think we're well-positioned to capitalize on this opportunity. Now sticking with our pediatric endocrinology products. Let's talk about our adrenal insufficiency franchise of Aylkeny Sprinkle and ET400. Adrenal insufficiency or AI is a condition that occurs when one's body does not produce enough cortisol naturally. As a result, the patient must be on daily hydrocortisone replacement therapy for life. In 2020, we launched Yale King's Sprinkle a proprietary formulation of hydrocortisone granules that is FDA approved as a replacement therapy for adrenocorticoids insufficiency in patients under seventeen years of age. It was and still is the only hydrocortisone treatment specifically designed to help provide accurate doses for newborns and children. Addressing a significant unmet need. Prior to Elkinbi, the lowest dose of hydrocortisone was a five-milligram tablet. However, young children often need lower doses of one milligram or even less. Caregivers and patients were forced to split or crush tablets or utilize a compounded pharmacy to get a suspension. All of which can result in inaccurate dosing. LKINDY has been a game changer for many patients and their caregivers. Patients can now accurately dose as low as half a milligram. However, despite outcindy success, there remains a strong demand for an FDA-approved oral liquid product. The liquid formulation is ideal for many patients including those who dislike the texture of granules have difficulty swallowing tablets, or on a g tube. We continue to see very strong interest from patients and physicians that are eagerly awaiting an FDA-approved liquid. We believe the launch of ET400 will completely change the trajectory of this franchise, allowing us to rapidly capture a much greater portion of this large market. We believe there's around ten thousand PDFs AI patients in the US and we've conservatively stated that our target market is the younger half of this population. So roughly five thousand children zero to eight years old, where low dosing is most prevalent. At Altimodie's current average revenue per patient of forty-five thousand dollars per year this younger market alone represents an addressable market of more than two hundred million dollars. However, we do still expect to capture a meaningful portion of the older patients age nine through seventeen. Currently, sixteen percent of our alkyndy patients are over nine years old. Since introducing our kind in 2020, we've seen consistent steady growth with no signs of slowing. In fact, January this year recorded the second highest month of patient referrals since our product launch. We believe we still only captured a small piece of this five thousand or so target market. So the product has a very long runway ahead of it. The growth continues to come from both adding new prescribers and seeing increased scripts from existing prescribers. We believe having a sales force that is now one hundred percent focused on pediatric endocrinologists in 2025 will help further boost these metrics. We've been able to accomplish this continued growth despite a relatively high discontinuation rate for the product. We estimate that roughly forty percent of patients that start on alkyndy discontinue in short order. By far, the largest reason we hear is complaints about the texture of the granules. Many patients that discontinue end up going back to a compounded liquid product, that they find to be more convenient to administer. We estimate that the launch of ET400 would solve more than half of the discontinuation that we have historically seen without Kendi Sprinkle. Reducing these discontinuations would result in hundreds more active patients unfroze. This will be a nice benefit from ET400 but by far the even bigger opportunity is the thousands of that have never even tried out Kindi Sprinkle because they strongly prefer a liquid dosage form. Through our conversations with physicians and parents over the years, we need for a liquid product was abundantly clear. That's why we initiated the development of ET400 many years ago. We knew the compounded use was rampant, represented a huge market opportunity. But since compounded products aren't typically covered by insurance, their usage is not tracked very well in conventional datasets like insurance claims or IQVIA data. It was always challenging to fully quantify the usage. Last month, one of the adrenal insufficiency patient groups conducted a survey that finally helped quantify the market. A hundred and fifty-six caretakers in the US children four years old or younger, were asked how they give hydroporizone to their children. Thirty percent use tablets in a solid state, either to take the whole tablet or attempt to cut it in half or quarters. Twenty-eight percent reported using a liquid suspension from a company pharmacy. Another twenty-two percent reported making their own homemade suspension by crushing tablets, and dissolving them in water or food. And twenty-one percent reported using alkyndi sprinkle. A combined fifty percent reported using a liquid, either purchased from the compounding pharmacy or made at home. We believe this group represents the prime candidate to switch to ET400 upon approval. This verifies and adds some additional color to what we have already heard for years from patients and caregivers. We believe LKINDY plus an FDA-approved oral liquid like ET400 would have a good chance of serving this seventy percent of survey participants. Or approximately three and a half times the current LKND usage. In addition, we have heard from some doctors and caretakers that they would prefer a liquid formulation but are concerned about the dangers of the current unapproved compounded product and have reluctantly stuck with the tablets. So we do believe there will be some patients switching from the tablet bucket into ET400. Based on FDA guidance, once ET400 is approved, compounding pharmacies should not be allowed to compound hydroxychloroquine hydrocortisone in the manner that they currently do. However, the success of ET400 will not be reliant on any enforcement actions. We expect to take the majority of the compounded market regardless of whether or not the takes any action. The merits of the ET400 product stand on their own and provide a significant benefit over any compounded product in nearly every way. For example, ET400 is a true oral solution while the compounded product is a suspension. Means that the active ingredient is floating around in the liquid and must be shaken vigorously prior to each use. There have been many cases of caretakers not properly shaking the product which leads to the active ingredient settling at the bottom of the bottle. As a result, these caretakers were underdosing their childhood start of the month when they were pulling liquid from the top of the bottle. And then they were overdosing their child when they were at the bottom of the bottle. When they got to the bottom of the bottle where all the active ingredient had settled. Secondly, our product will be FDA approved and tested for safety and unlike compounded products. The FDA's own test has found that a shocking thirty-one percent of compounded products failed potency testing. This means the actual amount of drug in the compounded product did not match what was claimed by the pharmacy. We believe most doctors understand and appreciate the safety concern. And have a strong preference for prescribing FDA-approved products over compounded products whenever possible. However, the risks and differences between compounded products and FDA-approved products are not as well understood among parents. So in tandem with the ET400 launch, we will be implementing an awareness campaign to help educate caretakers on this subject. Thirdly, ET400 should drastically lower out-of-pocket costs for patients. Compounded products are usually not covered by insurance, and we have heard from patients that they are typically paying forty to eighty dollars per month for their countercyclicortisone. By contrast, we will be offering zero copays and free drugs for uninsured patients. Alkimbe Sprinkle has seen very strong reimbursement coverage of more than ninety-five percent and we expect to see a similar favorable status with ET400. So upon ET400's approval, we certainly hope that far pharmacies will be following FDA guidelines. That have been put in place to protect patient safety. As you can see, we will be offering a superior product that we are confident can win over the market either way. ET400's produce date is May 28th and we are fully prepared for launch in anticipation of approval. We have responded to all information requests and there are no deficiencies or requests outstanding. Operationally, we are ready to go. We've already manufactured our launch inventory, and we have our marketing campaign teed up and ready to go live. Our goal is to launch the product within one week of its approval date. ET400's launch has many things going in its favor that should position it for a quick uptake. For one, we already have very strong relationships with the existing adrenal insufficiency doc. When we first launched LKND in 2020, we were going into the market cold without relationships. Secondly, we were launching a known and trusted molecule in a preferred and widely used dosage form. This is not a product launch with complicated messaging that requires a heavy lift to educate the market and change prescribing habits. With these tailwinds, we expect to see significant patient conversion in the first twelve to eighteen months post-launch. However, it will not be an immediate revenue boost within the first few months of launch. We think many patients will switch to ET400 at their next regularly scheduled checkup which could take place one to three times per year. Many of these pediatric endocrinologists' appointments are two to four months out. Even a patient looking to convert immediately upon approval, take a few months to get an appointment and a new prescription. In addition, the first month shipment is often a nonrevenue bridge shipment or reimbursement paperwork is being handled. As a result of this, our expectations for revenue contribution from ET400 are relatively modest in 2025, but significant in 2026 and beyond. Based on all our market research, patient surveys, and extensive discussions with prescribers, we remain convinced that the franchise will combine for sales of more than fifty million dollars per year. I'll now hand it back over to Sean to discuss our exciting new Galton opportunity.

Thank you, David. Wilson disease is a rare genetic disorder that causes excessive copper accumulation. Ordinarily, when copper is ingested, it leaves the body through the urine, but patients suffering from Wilson disease do not metabolize copper normally. And their bodies essentially act like a sponge with the copper soaking it up and preventing it from leaving the body. This can lead to hepatic and neurological symptoms, and typically patients do not know about it or the consequences of dryer. Gelatin is FDA approved for the maintenance treatment of patients with Wilson disease. Who have been initially treated with a chelating agent. It is the only FDA-approved zinc therapy for Wilson disease. We were drawn to this acquisition because we saw significant opportunities for Eton Pharmaceuticals, Inc. to add value, grow the product, and improve outcomes for patients. First, we saw issues with patient support active and affordability, which we knew we could solve with our Eton Cares program. And provide a significantly superior patient experience. Secondly, lack of promotion for years led to low awareness and education, and despite the superior efficacy of Galizan patients were taking inferior unapproved supplements with no clinical safety or efficacy. Thirdly, there are complex barriers to entry for competition. The product side of action is in the intestine, and because of that, traditional blood level and bioequivalency studies, are not indicative of zinc bioavailability. Which would require considerable investment for a possible entry. Fourthly, this lifelong condition is severely underdiagnosed. We expect to see greater diagnosis rates in the future with increased genetic testing. And lastly, we saw a compelling opportunity for us to invest in Wilson disease and improve the therapy options for patients through the development of a next-generation product. ET700, which we will discuss today for the first time. Here is the market opportunity as we see it. Wilson disease is estimated to impact roughly one in thirty thousand people over approximately ten thousand people in the United States. Right now, we estimate that only around two thousand of these patients are diagnosed and actively on a therapy which is a very low diagnosis rate. And today, unfortunately, most patients are diagnosed for the first time when they are in their twenties and thirties. Symptoms start to present themselves after years of excessive copper buildup and this delayed diagnosis can lead to worse outcomes. Including neurological damage, liver failure, and sometimes requiring a liver transplant. Fortunately, with the increased frequency of genetic testing in recent years, more and more patients have started being diagnosed prior to symptoms and liver damage presenting. These patients can proactively start zinc therapy and see improved long-term outcomes. We expect to see this diagnosis rate continue to increase substantially in the future with more awareness, increased genetic testing, and even recently launched initiatives in some states to push for newborn screening for Wilson disease. Due to its milder side effect profile, we believe

We were pleased to find out last week that ET600 passed a pivotal clinical study. The product demonstrated pharmacokinetic equivalents to the reference tablet product in the study with seventy-five Pulte volunteers. ET600 is a proprietary formulation of desmopressant oral solution being developed to treat diabetes anticipates. Diabetes intifritis is a rare condition that can result in excessive urination of up to twenty times the volume of an average child. In addition to being a significant quality of life hindrance, if left untreated, diabetes and stiffness causes excessive dehydration, and can lead to organ damage and delighters such as growth in children. If approved, ET600 would be the only FDA-approved oral liquid formulation of desmopressin. Currently, Desmopressin is approved in tablet, nasal, and injectable forms. But none of those options provide for small precise and titratable doses needed for pediatric patients. As a result, many pediatric patients use unapproved liquid suspensions for palletting pharmacies or attempt to cut fractional tablets or resort to taking daily injections due to the low doses. Based on our discussions with doctors and our deep relationships in the pediatric endocrinology community, we believe in oral liquid formulation of desmocressin would address this patient need. Although the condition is unrelated to adrenal insufficiency, it has the same pediatric endocrinology prescriber base as Octavia Sprinkle VT400 and now Incolytics. Which make it a perfect strategic fit in these portfolio. The clinical study was the last remaining item needed for our NDA. So we are now finalizing the study report and preparing to submit the product's NDA in the coming week. Pre-launch commercial activities are on track as we plan for potential approval in the first quarter of 2026. The market opportunity for the product remains. We estimate there are roughly three thousand pediatric patients in the United States and we believe the product should reach peak sales of twenty to fifty million. David will now discuss the rest of the development pipeline.

Thank you, Sean. During the fourth quarter, we announced the acquisition of US rights to Angledia, or Gladys Berene Oral Suspension. Is under development for neonatal diabetes. Including as a very good strategic fit for Eton Pharmaceuticals, Inc. It serves a clear unmet need for an ultra-rare population of approximately three hundred children in the US. And it's within our existing pediatric endocrinology call point. While Amglidia has been approved in the EU since 2018, there are currently no approved oral treatments for neonatal diabetes in the US. Today, there's no way for infants to get the correct dose in an FDA-approved manner. They either have to get a suspension from a compounding pharmacy or crush the adult tablets to make a homemade suspension. It's a very similar story to ET400 and ET600 where Eton Pharmaceuticals, Inc. is bringing an oral liquid product to market for precise and accurate low doses for children. Neonatal diabetes is typically diagnosed within weeks of birth, and each patient must be titrated to a specific unique dose the precision dosing is extremely critical. The product's European owner, Amtech, has been running a post-approval patient study tracking the safety and efficacy of patients on treatment for the last five years. This data will be valuable to support our new drug application. The product has already been granted orphan drug designation by the FDA, and we have a meeting scheduled with the agency in April to get confirmation that they are in agreement with our clinical proposal. We've structured our licensing agreement such that no investment was required from Eton Pharmaceuticals, Inc. unless we receive positive FDA feedback at this meeting. We also have full access to the commercial supply chain and development data from the on-market European product. So once we've FDA buy-in on our regulatory pathway, we think we can quickly move towards NDA submission. Potentially as early as next year. If approved, we would expect to capture a good portion of the estimated three hundred patients in the US and we think the product could achieve sales of ten to thirty million dollars per year. Turning now to hydrocortisone injection. We have talked at length about the need for a better hydrocortisone injection for patients suffering from adrenal crisis. The current product is Solu Cortez, a kit that is a lyophilized vial or freeze-dried powder that must be reconstituted and mixed up prior to use. Then patients must extract and measure out the solution with a traditional syringe. This complicated process is particularly challenging for caretakers to implement during a potential life-threatening adrenal crisis situation. What we haven't talked about before today is our plan to go after the hospital channel. Which is a massive market with five point five million vials sold per year. Today, for the first time, we will discuss how we think we can win over this market with our new ET800 product candidate. I'll start first with

Thank you, David. Let's begin by taking a look at our non-GAAP gross margin percentage. Which we expect to improve over time. Starting with the first quarter of 2025, Eton Pharmaceuticals, Inc. will begin reporting adjusted non-GAAP earnings results. This is intended to provide investors with a clear picture of the earning power of our business without certain non-cash or one-time expenses. Our gross profit adjustments will include items such as the reversal of acquired inventory stepped-up values which represent a significant non-cash expense and the amortization of intangible assets related to product acquisitions. Eton Pharmaceuticals, Inc.'s adjusted gross margin declined slightly from 2023 to 2024, as cardlumic acid grew more than alcindy Sprinkle and made up a larger portion of the company's revenue in 2024 compared to 2023. However, in 2025, we expect to see a significant improvement in adjusted gross margins. The expected addition of revenue from higher-margin products such as Incrilex, Galzen, and soon to be ET400. Combined with the fact that lower-margin cardlumic acid make up a smaller percentage of the company's overall revenue. Will result in a significant increase in the company's adjusted gross margin. We expect 2025 adjusted gross margins to increase throughout the year with the full-year number at approximately seventy percent. As a reminder, cardlumic acid has a fifty percent profit share. As recorded as the cost of goods sold. So the product has reported gross margins in the mid-forties. Our high-growth products, Alcindi Sprinkle, Increlex, Gaussian, and ET400 all have or are expected to have adjusted gross margins in the range of seventy percent to eighty percent. We expect this favorable trend to continue over the long term, since our higher gross margin products will be the primary drivers of increased revenue coming years. They will make up an increasingly larger percentage of our total revenue. Based on our current expectations, we believe that we can reach an adjusted gross margin level of approximately seventy-five percent by 2028. Now turning to SG&A expenses. If you followed our story, you know that we pride ourselves on being fiscally responsible and being able to quickly grow revenue. While maintaining disciplined spending and striving for profitability. Our focus has always been on profitable growth rather than growth at all costs. And we are proud of our track record in this area. This graph does a good job demonstrating the leverage that is inherent in our business model. Over the last twelve quarters, product sales have grown more than four hundred percent while our SG&A has only increased by thirty-six percent. Almost all of our SG&A growth came in the fourth quarter of 2024 as we began making infrastructure investments ahead of our three planned product launches in 2025. Likewise, we expect SG&A expenses to increase throughout 2025. Due to the following: Our new dedicated five-person metabolic sales team which launched on January second, Investments in the relaunches of and promotional activities for both Increlex and Galzen. Investment in ET400 launch readiness activities, and we have added and plan to add additional corporate staff to support our growing portfolio including headcount and quality, regulatory, and finance. While we are forecasting increased SG&A in 2025, to support our significantly higher revenue, SG&A expenses will increase at a much slower rate than revenue, and we expect to return to a low rate of annual SG&A growth in 2026 and beyond. As you have heard today, we expect our continued organic growth and new product launches to deliver significant revenue growth in 2025. We expect revenue to steadily increase throughout the year with a few key drivers. US IncraLex revenue will begin contributing at its post-transition run rate in Q2. The Galzen relaunch transition is likely to be completed and start contributing material revenue in Q3. And ET400 should start contributing revenue in the second half of the year. With several product launches underway, we still have several moving parts in the coming months. We feel confident we can exit 2025 at an approximately eighty million dollar annual revenue run rate. With that, I'll turn it back over to Sean who'll wrap up the presentation and open the call for questions.

Thank you, James. The past six months have been truly transformational, laying a strong foundation for accelerated growth. The fourth quarter marked a record high in product sales, and our sixteenth consecutive quarter of sequential growth. We see a clear path to reaching a hundred million in annual sales in the near term. In addition, we've added several exciting new products, including IncaLex, which offers strategic alignment multiple growth levers to accelerate expansion, and it's already performing well during the first ninety days of launch. Not be happier on that. That particular launch. We're also excited about the huge leap for our adrenal insufficiency franchise. And with the relaunch of Galzen, this gives us the opportunity to unlock a vast opportunity beyond current usage within the Wilson disease space. Our pipeline is strong with the upcoming NDA submission for ET600 and the addition of Anglidia, as well as two other hydrocortisone pipeline candidates that potentially unlock a hundred and fifty million across hospital and retail markets. I'm proud that we've built such a strong portfolio of high-margin ultra-rare products while posting consistent revenue growth and keeping a focus on bottom-line profitability. But as much as we've accomplished, we're really only getting started in the process have never been brighter for Eton Pharmaceuticals, Inc. As we conclude today's presentation, I want to express my gratitude for your continued support and engagement. Your insights and questions are invaluable as we navigate our growth journey. Now let's open up the floor to some questions.

Thank you. Our first question comes from Chase Knickerbocker with Craig Hallum. You may proceed.

Good morning. Thanks for the comprehensive presentation here. A lot to kind of get through. I've got a lot of questions here. Maybe just to start, on IncraLex, you know, if you look at that kind of chart that you guys gave as far as the patient numbers that were on, you know, in the early years of Ipsen's launch, it looks like they were adding, you know, forty, sixty patients a year, you know, in the first couple of years there. You've already added fourteen so far in the two or three months that you've had the product. I mean, Sean, how quickly do you think you can get back to a hundred and eighty-five? I mean, you've made a lot of progress already so far so far. Maybe just help us think about kind of the pace to get there.

I've been getting over a hundred patients this year. So very achievable. Help how much further we go over a hundred patients, that will be determined, but I'm optimistic that it won't take as long as we initially thought. The product launch has gone very well as we had indicated. Many physicians weren't aware that the product was on the market. They're actually very excited and there are a number of patients that could be using this product that haven't had it in the past they've been given growth hormone, for example, but that's not really what they needed. And I think doctors needed to hear from us, you know, when it's appropriate. You know, constant education, constant reminder of what, you know, the product can do and how it can benefit. So we are we feel very good about the transaction. And we feel really good about the uptake. Right now, it's no sign of slowing.

And so maybe just to understand that uptake, a little bit better, I mean, how often are these patients seeing their physicians? Is this something where when you reengage with physicians, they quickly, you know, identified the patients that, you know, may have been misdiagnosed? Or I guess, how are you able to add kinda twenty percent to the patient so quickly?

Yeah. Ipek, maybe you could comment on that. Ipek's our Chief Commercial Officer. You know?

Hi, Chase. So I think in terms of the first part of your question, there is what we know from pediatric endocrinologists that we've been meeting with is they are seeing these patients every three to six months. So there's definitely now, it's been three months, so they are definitely going to be seen by their doctors, by their specialists. Because they are growing, if you look at the average age, these kids are definitely in a rapid growth stage of their lives. So we face the adjustments need to happen. So every this it's it's quite frequent visits that's, I have any.

Got it. Thanks. And Sean's phone. Good.

Oh, sorry. Go ahead, Sean.

Sean.

If we just think about the label expansion opportunity or label consolidation opportunity, how penetrated IncraLex is in those thousand patients in Europe where the label is broader and kinda what's the right way for us to think about if you are successful there. You know, what that penetration could look like here.

Yeah. So, Chase, I'm gonna turn this one over to David. He's done a lot of the analysis on it. I think he'd be the best person to answer that.

Mitch, Chase, there are significantly more patients on the product in Europe. Many multiples are coming in in the US. But it is still, you know, relatively low penetrated, and we think that's primarily due to the same general themes of the condition being underdiagnosed, undertreated, it's also not promoted in Europe. So they're facing the same issues. They have, I would say, a relatively similar penetration rate, just with about, you know, four or five times the number of patients.

Got it. And then on ET600, good to see a lot of detail there. You know, a similar opportunity to ET400 as far as the value proposition. I mean, what's the right way for us to think about penetration into those three thousand or so patients? You know, how many are on a compounded oral suspension today? Assume in that range that you mentioned from a twenty to fifty million in peak sales opportunity? And then can you give us a thought on pricing as far as kind of what you?

Sure. So the product would be the pricing, which be higher than what we currently charge for LKINDY because the number of patients is lower. So what we try to do is benchmark against other rare disease and orphan drug products and make sure that the pricing reflects the number of patients. So the general theory that, you know, if you have fewer patients, like eighty patients, for example, pricing per product gonna be much higher. But as an overall, we like to be at the lower end of working towards pricing. So with this product, I would imagine it would be a little bit higher than what we currently charge for Alcindi, which has five to ten thousand patients. This product has three thousand patients and, you know, we try to, to be fair and transparent across the board. Ultimately, our goal is to make sure all patients receive the product regardless, so the patient accessibility is number one if you find anything. That's what we're about.

Any thoughts on penetration there, Sean? Or what you think is reasonable? How many patients are on the floor? It's

penetration is going to be significant. A lot of these patients are already taking various forms of crushed or, you know, dissolved at suspension-type products. So I think the update is gonna be very quick. I think that RS were being, let's just say, conservative. But from what we've told, there's a lot of pent-up demand for the product. So if you're asking me about wrap rate, I won't give you that because it's, you know, Alcindor took a little time to ramp. We obviously think the oral solution's gonna ramp much faster than Alkinder ramp. But sometimes, but we have spent time with key opinion leaders in this area. And there aren't that many that treat diabetes and sifitas. So they all know of the product. They know it's coming. I would imagine that you're gonna see a very nice launch in short order. Hopefully, in the first quarter of next year.

And then, James, just last, and I'll jump in the back in the queue here. Can you give us maybe a little bit more granular details as far as what you're thinking from an SG&A perspective in 2025? You know, is twenty-five, thirty percent growth kind of the right way to think about it? And then as we kind of exit 2025 and you said, you know, kinda moderating SG&A growth from there, I mean, what's the right way to think about it longer term? Is it a kind of low double-digit, low teens kind of growth rate? Or mean, how are you thinking about the model longer term on SG&A?

Yeah. There will definitely be a bigger step up from 2024 to 2025 than when we look beyond 2025. You know, we started in Q4 of last year pretty heavy investment into selling marketing activity ahead of the three launches or relaunches in 2025. We split the sales force. We added those new five metabolic reps. So directionally, we're looking at probably the thirty to forty percent range in 2025. And then, you know, low double digits, even high single digits beyond 2025.

Great. Congrats on all the progress here, guys.

Thank you.

Our next question comes from Madison Delosati with B. Riley. You may proceed.

Hey, guys. Thanks for taking our question and thanks for the detailed update today. First on, Increlyx, kinda wondering what are the gating factors to this Increlex US EU label unification.

Maybe that would be helpful. And you mentioned Ipsen had recorded fifteen years of post-marketing data. Could you kinda typical minimum FDA requirement to lay out what is to be awarded one of these notifications and then a follow-up. Thanks. Absent. Thanks for the question. In terms of gating factors, one piece for us is just aggregating the data. From fifteen years to registry, so we're in the process of doing that. And then we're gonna have an FDA meeting in the middle of this year to discuss it and share our findings with the FDA, and have a discussion about what we wanna do and why we think we have very strong justification for it. I would say on the second part of your question, there's no clear framework of exactly what you need to get a legal authorization that's unique for every product. Especially in the ultra-rare disease products when you're talking patient populations. In the hundreds or up to a thousand, every case really is unique. So we're gonna have a discussion with the FDA, we're cautiously optimistic that they'll be receptive since we do have strong data to support it and it's been used that way in Europe for twenty years now.

Got it. That's very helpful. And then if I could ask I'll I'll also add I guess I'll add one thing, Madison. This is Sean. We have a very experienced, let's say, regulatory advisers on this. That know this product very well. They feel very optimistic about this label I guess you just call it update and getting approved. It makes sense for patients, first and foremost, and many years of the data and the science is there. This being used successfully in Europe with patients and the worst part is if it doesn't get approved, it's not about the revenue, the money, or anything else. The worst part is actually for patients. If my son suffered from this disease, it would be very sad if they weren't able to access it. Because you know, the insurance companies weren't reimbursing the label to follow exactly what's on there. So our goal, first and foremost, making sure this patient this product is available to patients in need.

Understood. Thank you, Sean. And then secondly, wanted to ask about the ET400 round similar to the prior discussion. Just kinda asked in a different way. Maybe it's an expectation during those first three months post-approval it's a bit slower. And then in this kinda second three months, as patients go back to their routine visits, do we start to see almost a bolus type ramp or would it be more of a kind of steady state growth quarter to quarter? Thanks.

Hey, Tim. Why don't you comment on that?

Madison, that took the first three months, you're absolutely correct. Yeah. So I think there is definitely going to be a slow second half of slower ramp up in the second half of this year once we get the approval just because those patients are coming back. And learning about the product, then we are also educating the PH kind of knowledge and. But after that, we definitely think that there is a pent-up demand here, so it's already fifty percent of the current the parents today are using some sort of a liquid hydrocortisone. So there is definitely going to be edge more accelerated ramp up that we are expecting the first half of 2026.

Understood. Thanks for taking our question, and congrats again on all the progress.

Thank you.