Good afternoon and welcome to the Eton Pharmaceuticals Second Quarter 2021 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the Company’s request. At this time, I’d like to turn it over to David Krempa, Senior Vice President of Business Development and Investor Relations at Eton Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone and welcome to Eton’s second quarter 2021 conference call. This afternoon, we issued a press release that outlines the topics that we plan to discuss on today’s call. The release is available on our website, etonpharma.com. Joining me on the call today, we have Sean Brynjelsen, our CEO; Wilson Troutman, our CFO; and Paul Stickler, our Senior Vice President of Sales and Marketing. Before we begin, I would like to remind everyone that statements made during this call may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward-looking statements. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the Company’s filings with the SEC. Now, I will turn the call over to our CEO, Sean Brynjelsen.

Thank you, David. Thank you everyone for joining us today as we discuss our second quarter earnings results. During the second quarter, we had a number of important accomplishments, including the approval of Rezipres, a ready-to-use formulation of ephedrine injection. For years, hospitals have had to manually dilute or compound concentrated ephedrine in emergency care situations. Now, with the approval of Rezipres, Eton is offering yet another value-enhancing option for physicians and caregivers. This is now our fourth FDA approval. And I’m very proud of our team and the hard work they’ve put in to achieve so many approvals in such a short period of time. Of the nine products in our pipeline, nearly 50% are now approved with the others under FDA review and approval expected over the next couple of weeks and months. Currently, there are over 6 million vials of the concentrated ephedrine injection sold annually in the U.S. market. As you can imagine, this would translate into a significantly higher number of ready-to-use doses, once they have been diluted for administration. We would expect to launch Rezipres at a slight premium to the ephedrine concentrate in the coming months. Eton also expanded our orphan drug pipeline in the quarter with the acquisition of the U.S. and Canadian rights to ZENEO Hydrocortisone. ZENEO is a proprietary needle-free autoinjector that is designed to quickly and safely deliver a rescue dose of hydrocortisone during an adrenal crisis. Since launching ALKINDI SPRINKLE, we have constantly heard patients describing an autoinjector as the number one unmet need for the adrenal insufficiency community. So, we are very excited to be able to work with Crossject to try to bring this treatment to the community as quickly as possible. This product is a perfect strategic fit with ALKINDI SPRINKLE. ALKINDI SPRINKLE is the daily maintenance treatment for pediatric AI patients, and ZENEO Hydrocortisone is the rescue treatment that AI patients are likely to carry with them, similar to how someone would carry an EpiPen for a different indication. The announcement of our deal has also helped further deepen our relationship with the AI community. Numerous physicians and patient advocacy groups reached out to express their excitement for the project, including some leading pediatric endocrinologists that had previously been hard to reach. Now, more on our ALKINDI SPRINKLE commercial launch. We were pleased to be able to initiate in-person meetings during the second quarter. Now, we are prioritizing in-person meetings and their frequency has surpassed our Zoom and telephone calls in recent months. We are finding in-person meetings to be significantly more effective than Zoom calls. Physicians are much more engaged when meeting face-to-face and they enjoy being able to see ALKINDI candidate samples, so they can feel comfortable knowing exactly what they are prescribing to their patients. As a result of this ability to now host more in-person meetings and the positive feedback we’ve received, we are planning to expand our field sales force. The ongoing feedback is clear, physicians and patients like ALKINDI. So, we believe increasing the reach and frequency of our in-person meetings with doctors will accelerate adoption of the product. To illustrate this point, to-date, we’ve only reached approximately 10% of prescribing physicians in-person. What that means is that we have a long runway of growth ahead of us. The Company is also seeing favorable support from payers that understand the critical need to dose precisely in pediatric patients. We are not aware of any patients that have had ALKINDI coverage rejected by their insurer. And many patients are starting with a quick start program where we immediately fill the prescription, so the child can begin treatment, and handle the paperwork and administrative aspects on the back end. This process has worked seamlessly with patients converting to their insurance coverage by the second monthly script. Currently, more than 90% of patients in treatment are being reimbursed for the product, and the remainder or newly added patients in the quick start are expected to convert to commercial coverage by next month. While the initial launch faced some COVID-related headwinds that limited our ability to get in front of doctors, the physicians’ reactions to in-person meetings and a strong payer support has confirmed our assumptions about the product and given us greater confidence in our long-term expectations which remain unchanged. While we had some delays in our pipeline during the quarter, in large part due to COVID-19 delaying the FDA’s international inspections, our team has proven that we are resilient, and I’m confident we will be able to achieve approval on these products in short order. The Company is looking forward to the new topiramate PDUFA date of November 6th. The product is manufactured at an already FDA-approved U.S. manufacturing site that was successfully inspected in late 2020. So, we do not expect any inspection issues during the review. We also continue to believe that the zonisamide application is fully ready for approval whenever the FDA can complete the foreign manufacturing site inspection. Unfortunately, we have not been given any indication of timing from the agency, but the manufacturing site has many other pending product applications, similar to ours. And we’re hopeful the agency will prioritize the site with a near-term inspection and allow these important products to get to patients. Regarding our dehydrated alcohol and lamotrigine products, we expect both product applications will have amendments filed shortly with the FDA. And after responding to these FDA questions, we believe approval of the product should occur early next year. Eton is excited for all four of these products to be approved and launched in the near future, which sets the Company up for very strong growth in 2022 and beyond. Before discussing financial results, we’d like to just summarize and thank our long-term shareholders for their continued support and their belief in the vision of the Company. I sincerely believe that Eton’s outlook has never been stronger than it is today for a number of reasons. One, the ALKINDI launch has taken stride, growing sales every week. Two, we’re on the cusp of launching our fourth commercial product. Three, we have four more potential product approvals lined up in the coming quarters. And lastly, we are fully funded with more than $25 million of cash today, plus more milestone payments expected to come in soon. Therefore, there is no need for external financing in the foreseeable future. With that, I would like to turn the call over to Wilson who will briefly walk through some of the financials before we open up the call for Q&A.

Thank you, Sean. Eton reported revenue of $3.1 million for the second quarter of 2021. Revenue included $2.5 million of licensing revenue related to the Company’s previously announced transaction with Azurity. In the prior year period, the Company did not record material revenue. General and administrative expense for the second quarter of 2021 was $3.3 million compared to $2.9 million in the prior year period. The increase was largely due to increased costs related to the commercialization of ALKINDI SPRINKLE. G&A expenses for the second quarter of 2021 included $0.7 million of non-cash expenses. R&D expenses for the second quarter of 2021 were $2.0 million compared to $1.6 million in the prior year period. R&D expenses in the quarter included a one-time $0.5 million payment related to the acquisition of U.S. and Canadian rights to ZENEO Hydrocortisone. Eton reported a net loss of $2.0 million, compared to a net loss of $4.7 million in the prior year period, resulting in a loss of $0.08 per share in the second quarter of 2021 compared to a loss of $0.23 per share in the prior year period. Eton finished the second quarter with cash and cash equivalents of $25.8 million. We remain confident that our current cash position is sufficient to allow us to launch our products and continue to pursue value-creating business development opportunities. With that, I would like to turn it over to the operator for Q&A.

Our first question comes from Jason, a private investor. Your line is open.

Hey, guys. So, there was some third-party media outlet that published something about labeling related to ALKINDI and the FDA getting involved. Curious if you guys are aware of that, and I don’t know if you have any comments there?

Yes. We are aware of it. Just for everybody on the call, this was a Google ad. We believe when we distributed the link, this was a sponsored link, that it was acceptable to provide a link to the risk information. It was now understood that that was incorrect. So, the risk information had to be a part of that whole thing. So, we removed the ad. And sometimes what happens on these things is certainly it was inadvertent and it wasn’t purposeful. I think it’ll be resolved. And obviously, we take these things seriously. We’re committed to regulatory compliance. And more importantly, we made the corrective measures.

Thank you. And as you guys look at where you’re at with the ALKINDI ramp, sort of going into the fourth quarter with this Delta variant propping up in certain parts of the country. And the complementary first month dose through this acceleration program that you have, I mean, should we be thinking about modeling sales over the coming quarters or months differently than say, how we might have thought of things a quarter ago?

That's a good question. It's difficult to determine, as many states and countries believe that the large number of vaccinated individuals and those who likely caught COVID means there is a strong population resistance to the Delta variant. In my opinion, there is significant fatigue regarding lockdowns, and people are eager to move forward. We are not really seeing a reversal in this trend, although there are some states where that might be the case. However, we believe we will continue to engage with prescribing doctors face-to-face in many locations. As mentioned in our opening remarks, we've only begun to explore this area, with face-to-face visits being about 10%. There is a lot of potential for growth. Each week, we are seeing an increasing number of patients, which is typical for an orphan drug product. We are working to change prescribing habits and connect with doctors who are open to shifting from their previous practices to more suitable treatments for this age group and these patients, which is crucial for their care.

Your next question comes from the line of Andrew D’silva from B. Riley Securities. Your line is open.

Hey. Good afternoon. Thanks for taking my question. Sorry if you answered this question. I actually got dropped off. I was having a bad connection for a second. But, if you could just give any color on product revenue breakout during the quarter? And then, how should we think about product revenue up-ticking in the back half of the year, now that you have obtained approval for Rezipres?

Hi, Andy. Thanks for the question. So, we didn’t break out product-specific revenue. But, as we’ve talked about in the past, obviously, ALKINDI is the biggest revenue driver going forward. The back half of the year, we expect ALKINDI to continue to ramp even more as we grow patients, and we talked about potentially increasing our sales force, which accelerates the revenue growth in the back half of the year.

Okay, perfect. And then, with Rezipres, is that a vial, correct, not the ampule formulation that was approved?

No. Actually, yes, this is a bit of a redo regarding Biorphen. It is an ampule, and we will offer it in a vial at some point. We believe we will have sales, and we are in the process of converting it. I think this conversion won't take nearly as long. Part of the reason the Biorphen vial conversion took a while is that we had nearly completed the site transfer at a facility in France, but the French government took it over for COVID vaccine production. So, we had to do the site transfer again to the U.S., which has extended the timeline. However, that is close to being completed. We believe that both Biorphen and Rezipres vials will be significant drivers and important products in the coming months, not years.

And then, as it relates to the ZENEO injector acquisition, first, are you aware of any competing hydrocortisone injections that are being developed? And then, could you talk about the market synergies with ALKINDI, as far as any differences in the target physicians or anything like that?

Shortly after we announced our deal, Antares Pharma revealed their own hydrocortisone emergency auto injector. They mentioned a market size of around 100 million. There is enough space for both products, but I will say that these types of products, particularly those with devices, don’t always launch on schedule. We believe our crosschecked device is not still in development; it is a complete, reliable, and user-friendly system. It’s needleless, which we think will appeal to patients, and we expect it will be preferred over a needle. It’s very easy to use—just two steps. I was able to activate and use it without any instructions. We are currently testing it. The product has been sought after by patients with adrenal insufficiency for several years. Antares working on a similar product validates our belief in the market's potential, and I think we will reach the market ahead of them. This is just my opinion.

Great, great color. And I understand a lot of the CRL and regulatory-related delays are tied to manufacturing or candidates to be sold. But, in general, is there anything else Eton can do, be it through bringing in additional development-focused specialists or reallocating your team members to that area of focus? I’m just looking at the CRL to approval rate, since you went public, it’s just not aligning with industry norms. I wonder if a greater investment in the area of oversight, would this enable you to resolve critical issues prior to CRL being issued, or at least be able to convey a potential holdup to us in advance?

It’s a fair question. Some of the products have been fully developed by our partners, so we had minimal involvement in their development and have submitted and received the CRL. With the 505(b)(2) products, the CRL process has become almost routine, similar to addressing a deficiency. Of the four products we've gained approval for, three had CRLs, if I recall correctly, and they eventually received approval. This situation is not akin to a new drug entity or a branded product being developed by a company like Pfizer, where a CRL can signal a potential halt due to clinical failures. The products we are developing are known to be effective for their intended use, which lowers our risk. Many CRLs stem from CMC or manufacturing-related issues, and we aim to minimize those. We have engaged a scientific consultant to assist in conducting thorough due diligence on many of our projects. We hope to improve our process and achieve a lower CRL rate, which is something that everyone wants. However, CRLs do arise; for instance, in the case of topiramate, I wouldn’t categorize it strictly as a CRL. We've provided additional information, and the FDA required more time, which is acceptable. I believe that product is well-positioned for approval.

Okay. Fair enough. Thank you very much. And best of luck going forward.

Sure. Thank you. Next?

Thank you. Your next question comes from the line of Ram Selvaraju from H.C. Wainwright.

I was wondering if you could provide a bit more granularity regarding what you expect to be the steady state size of the sales force to support ALKINDI SPRINKLE. And if you could also give us some visibility into how you anticipate the commercialization effort for ALKINDI SPRINKLE to be dovetailed with or complementary to the efforts you make with respect to the ZENEO auto-injector product?

Go ahead, Paul. I’m going to let Paul take this question. He’s our Senior VP of Sales and Marketing.

Thank you, Sean. Hi, Ram. I appreciate your questions. In terms of the steady state, it's really about figuring out how many key physicians we need to reach in the United States and whether we can engage them effectively. When we launched ALKINDI SPRINKLE, we were in a unique situation due to the pandemic, which caused us to shift resources. We focused on both inside and outside sales, always planning to adequately support the outside sales team. Now that in-person meetings have resumed, we’ve found that the productivity of those calls significantly exceeds that of virtual meetings. We anticipated this shift, and as the country has reopened, we expect to expand our team to between five and eight sales representatives for ALKINDI SPRINKLE. Regarding your question about ZENEO, there is significant potential for synergy between ALKINDI and ZENEO. The advocacy organizations and the adrenal insufficiency community have emphasized the critical need for an auto injector in emergency situations. We are engaging with the same physicians who may prescribe ZENEO in the future, and we've built strong relationships with them. Therefore, I believe this will create a beneficial collaboration, positioning us well to grow this product once it receives FDA approval.

I also wanted to visit the timing that you anticipate for the payment of future regulatory-related milestones from Azurity. Is it reasonable to expect that only the milestone related to the topiramate approval, which you now anticipate to occur in November of this year, will be the milestone that’s paid in 2021 and everything else that you expect from Azurity would most likely occur after the end of 2021, or is there a possibility that you could receive payments from Azurity beyond the topiramate approval-related regulatory milestone payment in 2021?

I believe it's a reasonable conclusion that the payment for topiramate will occur this year, with other payments likely happening in early 2022. For us, this isn't particularly significant since we have ample cash reserves. Receiving those payments, for instance in Q1, isn't materially important to us. While we prefer to receive them sooner, they are on their way. Our products are strong and reliable, FDA feedback has been positive, and importantly, these products are essential for patients. I am confident they are all set for approval in the upcoming months.

Okay. And then, with respect to the dehydrated alcohol injection product candidate, can you just clarify for us what type of review period you expect the FDA to assign to the application amendment, once it has been submitted?

Sure. I believe it will take about three months if they consider it a minor issue. A major issue usually takes six months. We think it will be minor, and we will respond to it soon. One of the requests was for additional stability data and similar information. There isn't much additional work required, just more literature and clarification on the indication. I'm providing you with a few examples of what was requested. We’re pleased with the progress and will meet with the agency to discuss what we plan to provide and ensure they are aligned with us. The dialogue has been positive, and I believe the product is in good condition.

Okay. And then, lastly, with respect to the Cysteine injection, can you just give us a little bit more background on what gives you confidence that you will prevail in this litigation?

Sure. Well, I know that in any litigation, the opposing side would like to make things complex. But the reality is, our partner, which you could say is us in a way, have been making this product for 20 years. Same formula, same specs, same everything, and somebody decides to come out and patent a formula that we’ve had on the market for a very long time. So, we have a very good position, a very strong position. There’s nothing new or novel, in my opinion, about what they’re trying to claim as new and novel. All these things were already part of our products. So fundamentally, it is, to me, immoral for companies to try patenting old products that have been on the market for decades and then try to secure a monopoly at extremely high prices and really abuse the U.S. healthcare system. So, we’re going to convey what the facts of the situation is. And the best way to win a case is to have the facts on your side. We believe the facts are on our side.

There are no other questions on the queue. Ladies and gentlemen, this does conclude today’s conference call. Thank you for participating. You may now disconnect.

Thank you.