Good afternoon and welcome to the Eton Pharmaceuticals’ Third 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 third 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. In addition to taking live questions on today’s call, we will also be answering questions that are emailed to us. Investors can send their questions to [email protected]. Before we begin, I would like to remind everyone that statements made during this call may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward-looking statements. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the Company’s filings with the SEC. Now, I will turn the call over to our CEO, Sean Brynjelsen.

Thank you, David. Thank you everyone for joining us this afternoon. As we're preparing for three new product launches and the initiation of a major co-promotion partnership in the coming weeks, I don't think there's ever been a more exciting time for me to talk to investors. We couldn't be happier with the way we are exiting 2021, the new acquisition of an approved, rare disease product, a major co-promotion arrangement launching in December and the upcoming launches of EPRONTIA and Rezipres. These major catalysts, combined with the expectation for at least three additional product approvals and launches next year, set us up for what should be a fantastic 2022. I will start with an Alkindi update and the exciting partnership with Tolmar that we announced this morning. Alkindi sales continue to grow month-over-month, quarter-over-quarter, and we believe they can grow even faster. So, we're implementing some major commercial changes. We are now about six months into holding in-person meetings with doctors. The feedback to us has been clear. Alkindi Sprinkle is critical to giving patients and doctors the ability to precisely treat adrenal insufficiency. However, changing doctors' prescribing habits has been a higher touch activity than we originally expected. For decades Pediatric endocrinologists have been using hydrocortisone tablets and are used to the status quo. We found that in-person demonstrations and multiple face-to-face interactions have been the key to making doctors comfortable changing their prescribing habits. Ultimately, it would have taken us a significant amount of time to convert the market to Alkindi. Given the capacity constraints in our current internal sales force, we had only reached approximately 10% of the physicians face-to-face. So, the very exciting announcement regarding our co-promotion with Tolmar increases our presence more than ten-fold. We believe this co-promotion partnership is a very attractive opportunity for Eton for a number of reasons. First, Eton will gain more than 60 new sales reps with existing and established relationships with pediatric endocrinologists. For comparison, we have less than five. So, this is a significant growth in terms of our ability to reach out and have multiple face-to-face interactions with physicians. These reps can make a difference on day one. Hiring our own large team of sales reps with intact relationships with doctors would have been extremely challenging, costly, and time-consuming. Secondly, based on the structure of the deal, we only pay for success. Tolmar receives a sales commission on the incremental sales of Alkindi. Furthermore, Tolmar has committed to hitting certain growth rates during the term of the agreement. A few other words regarding the deal structure, Eton retains ownership of the asset and is also responsible for the pricing, contracting, branding and the marketing strategies. And at the end of the three-year term, we expect sales to be well on their way to reaching peak conversion levels. And we still have approximately ten years left on the product’s patents. We expect this partnership to have a favorable impact on our earnings in 2022, due to both higher sales and lower expenses. Specifically, we will no longer need to take on the additional expense of expanding an internal salesforce, and the incremental growth produced by Tolmar above and beyond what we would have achieved on our own will more than pay for the sales commission they earn, which at the end of the day means more profit for all parties. Tolmar’s pediatric endocrinology salesforce has proven to be very successful. We are confident they are the right partner for Alkindi. Their sales reps currently sell Fensolvi, an orphan treatment for central precocious puberty, also known as CPP. This product was launched in May of 2020 has many characteristics similar to Alkindi, such as market size and position. Tolmar has been very successful in Fensolvi’s product launch despite the COVID challenges and has already seen over 1500 patients adopt the treatment just 18 months into the launch. Our current plan is to have the Tolmar team fully trained in promoting Alkindi in December. We believe this will provide a nearly immediate boost to the Alkindi growth rate, which should be evident in the first half of 2022. Next, I want to discuss our recent acquisition of carglumic acid tablets. You seldom find an attractive, rare disease product that is ready for immediate commercial launch. So, we are very excited about this opportunity. Our product is a therapeutic equivalent of Carbaglu, which is listed in the FDA's register as AB-rated. Our product is indicated for the treatment of hyperammonemia due to NAGS deficiency. Carbaglu is widely regarded as one of the most expensive drugs in the world. Based on the product’s recommended dosing and multiple media articles, we believe that the annual cost of treatment can exceed one million annually for some patients. Our generic version of Carbaglu will offer these patients a lower-cost alternative. NAGS deficiency is extremely rare. One recent published study found around 98 cases globally in existing literature. Given this small patient population, we believe the market may require individualized support for each patient. And we plan to offer robust patient services similar to what we currently provide for Alkindi patients. In terms of the market opportunity, Carbaglu is not tracked in IQVIA, but based on government spending data and some publicly reported financials, we estimate that the current sales of the product are more than $50 million annually. Our goal is to eventually capture 25% to 35% of these patients. Launch activities are currently underway and we expect to make the product available before the end of the year. With our existing infrastructure for Alkindi already in place, we expect very little incremental cost to commercialize carglumic acid. Now turning to the recent approval of EPRONTIA. EPRONTIA is indicated for the treatment of epilepsy and migraines, and was approved earlier this month. It is the first and only FDA-approved liquid formulation of topiramate. This was a product that Eton initiated internally back in 2018. And I'm very proud of all the hard work from our team that went into taking a branded product idea from that stage all the way to FDA approval in only three years. Truly rare within the branded drug NDA filings today. EPRONTIA was one of three neurology oral liquids we sold to Azurity earlier this year. Azurity will be responsible for marketing the product and expects it to launch later in the year. Eton will receive a $5 million payment upon launch, a royalty on product sales, and is also entitled to receive an additional $15 million in commercial milestones based on the sales of the three-product basket. The other two products in the Azurity transaction appear on pace for approval in the first half of 2022. The zonisamide application remains under FDA review, and we believe the only issue outstanding is the inspection of the product’s UK-based manufacturing facility. The agency was unable to inspect the facility prior to the application's original PDUFA date, and they now have assigned the application a new approval date of January 29. We hope to see the product approved on that date, but the FDA has yet to conduct or schedule its inspection of the UK facility. The third product, lamotrigine oral suspension, saw positive developments this quarter. Our partner successfully completed the human factor study and is expected to submit the results to the FDA later this month. This should allow for potential approval of the product in the first half of 2022. As a reminder, in addition to the $5 million milestone payments we expect to receive upon the EPRONTIA launch, we also are entitled to receive $5 million for each of the launches of zonisamide and lamotrigine. Finally, we had positive developments in our orphan drug candidate, dehydrated alcohol injection, after receiving a CRL letter from the FDA over the summer, Eton held a meeting with the FDA to discuss the letter and proposed responses. We believe the meeting was both productive and successful. We left the meeting feeling confident that we can deliver everything the agency has asked for and expect to submit the response in the coming months to allow for potential approval and launch in 2022. Before I turn it over to Wilson, I would like to thank our shareholders for their continued support. After four years of focus on development and regulatory activities, we are poised to see the fruits of our labor become apparent in very short order. It is clear that our prospects have never been stronger. The recent carglumic acid acquisition, and now the Tolmar co-promotion should allow us to deliver meaningful revenue in 2022 and beyond, more than we had expected just a month ago. With our very strong cash position, three new product launches in the coming months and the expectation for an additional three product approvals and launches next year, we are extremely excited as we look forward to the coming quarters. With that, I will turn it over to Wilson to discuss our financial results.

Thank you, Sean. Eton reported revenue of $0.8 million for the third quarter of 2021. There was no material revenue in the third quarter of 2020. Eton's gross profit for the third quarter of 2021 was $0.2 million and reflected the impact of the $0.4 million write-down for excess inventory of orphan ampule stock. The gross profit for the prior year quarter was not material. R&D expenses for the third quarter of 2021 were $2.7 million compared to the $2.8 million for the prior year period. R&D expenses in the third quarter of 2021 were elevated due to expenses related to the development of Biorphen and Rezipres vial container conversions. R&D expenses in the third quarter of 2020 included a one-time $1.5 million NDA filing fee. General and administrative expenses for the third quarter of 2021 were $3.3 million compared to $3.4 million in the prior year period. This decrease was largely due to elevated spending in the prior year period related to launch preparation activities for Alkindi Sprinkle. The third quarter of 2021 included $0.9 million of non-cash expenses. As a result of these factors, Eton reported a net loss of $6.1 million for the third quarter of 2021, compared to a net loss of $6.5 million in the prior year period. Eton reported diluted earnings per share of a negative $0.24 cents per share in the third quarter of 2021, compared to a negative $0.31 per share in the prior year period. Cash and cash equivalents were $22.7 million as of September 30, 2021. Eton expects to receive a $5.0 million milestone cash payment in December from the recent approval of EPRONTIA, which is a topiramate oral solution product.

Our first question is from Ram Selvaraju with H.C. Wainwright. Your line is open.

Hi, this is Boobalan dialing for Ram Selvaraju. Can you hear me okay?

We can, yes.

Okay, awesome. Great. So firstly, would you be able to provide any color in terms of Rezipres injection pricing?

The best way for me to answer that is that we believe the pricing will be in excess of where Biorphen is priced currently. We know that the hospitals pay around $15 to $20 for compounded ephedrine. Sometimes it can be lower, but from our surveys, from our data, that seems to be about where they've been. We know that there's another ready-to-use ephedrine on the market and we believe they charge a little over $20. So, we would imagine we're going to be somewhere a little less than that because it's in an ampule format, but it certainly will not be commodity pricing. We believe the value offered and the convenience along with the longer shelf life are all positive in terms of patient experience.

Great, thanks for the color. So, the co-promotion agreement with Tolmar Pharma is actually pretty exciting. I'm just curious whether the synergy in promoting can be impactful, but Tolmar is already promoting to the pediatric community.

Yes. So, I'll just repeat the question for anybody that couldn't hear. The question had to do with the synergies and the, I guess, the fit of Tolmar being able to promote Alkindi and Fensolvi. It really is primarily, mostly, let's just say the same call point. Certainly, these are pediatric endocrinologists. One of the reasons we did this deal, frankly, was that it was just a good strategic fit. The best kind of deal you can do is a deal that works for both sides. So, we know that Eton will benefit, but we also know Tolmar will benefit. And that's the kind of deal I like doing. I don't know that it would make sense for other companies, but for Tolmar, it certainly was a great deal for them. And for us, at least at this point in our history, it allows us the opportunity to save some expenses on that side and we believe they will be very successful. So, I have no doubt about it.

Great. So, one final question from me. So how should we think about the growth trajectory of the company for the year 2022 and beyond, given a couple of approvals coming up in the next few quarters?

Well, I think our press release and some of my words earlier touched on that. You work any, let's say, startup company, we're going into our fifth year soon, we've been up and running for over four years. It really takes at least three years to build your pipeline, to do the deals, to file, navigate the FDA. We're at a point now it really is an inflection point where you are going to see multiple products approved, multiple sources of revenue, and our ability to maybe do larger transactions. I couldn't be happier where we are in a nice cash position; we have no needs for going and raising additional cash. So, I'm very excited about the company. And we're attracting top talent within the organization. We would expect to expand our team in the coming months as the need arises.

Great. Thanks for taking my questions.

Yes, our pleasure.

I am showing no further questions in the queue. I will now turn the conference back to Mr. Krempa to address the email questions.

Thank you, operator. We do have a couple questions. I'll start. First one, how do you feel about your cash position? Is it enough to launch all these products you're planning to launch?

We feel great about our cash position. As I indicated earlier, we do have more than enough cash to launch all the products. We'll receive milestone payments for the oral solutions and we're really not even having to launch those. Those are done through Azurity. Those are Azurity products, but that cash inflow will also help us to launch other products that we've got in our pipeline. So, I think we've done a good job of balancing cost outlay with matching the revenue as it comes in. And I believe the carglumic acid launch, for example, should cost us very little; it's basically going to be a contracted product. And we don't imagine there will be a lot of detailing necessary. It's really a product that has a need. And we think the insurance companies will want a lower-cost product. I suppose I could also add that due to the fact that we've got additional revenue sources coming in, we really have reduced our cash burn and will reduce it over the coming quarters. I think our R&D expenses in the past quarter were a bit elevated because of some conversion products of Biorphen and Rezipres, we're converting those to vials. And I would say that will be a bit lower than what you saw in the third quarter. So, I think hopefully that answers the question.

Another question we had is where do you expect to price carglumic acid relative to the brand product?

Okay, everybody wants to know the pricing question. Well, we're still in the pre-launch discussions with payers. I think that has a large influence. But I would expect the price of approximately a 10% to 15% discount to the brand. I think that's generally what's done for our first generics. Our lower price should save the healthcare system millions of dollars. So, the value proposition is there. Given the dynamics in the market, and all patient support programs, and so on, we're not really expecting a race to the bottom like you see in some traditional products, when generics enter the market, you may end up with three, four, five generics at a given point. And you certainly end up at a commodity pricing level. But this is a little bit different. We certainly want to add the value of the lower priced option. But we still think it will be a high-value product.

We have one more they said, what is the sales commission being paid to Tolmar on the co-promote deal?

Well, I'm not going to disclose the exact rate for competitive reasons, but I would say that our margins remain attractive on the product, even after product costs of royalties to Diurnal and the sales commission to Tolmar. We still expect to be netting more than 50% of the sales. Tolmar, as I said earlier, is compensated on incremental sales above and beyond. At the same time, it'll be a meaningful product for them with meaningful revenue. I think that if you want to have a good partner, you really have to go in that as a partnership. So, at the end of the day, probably the best way for me to answer that is to say that we'll make more revenue. We believe we'll make more revenue, more profit by partnering with Tolmar than not partnering with Tolmar. So, you do this make or buy decision on whether you want to do something like this. And with Tolmar, it certainly made sense because they're already in that space. And so, yes, we give up something, but we're also getting something. And what we're getting is what we believe will be higher revenue than a go-it-alone strategy. I think that hopefully covers that question as well. Anything else?

That's it for the question. So, I'll turn it back to the operator, if there's any other questions on the phone.

Yes, sir. We do have a question from Ram Reddy, a private investor. Your line is now open.

Hi, Ram.

Yes, hi. When do you expect to report profit?

So, we would expect to be profitable next year. We had some profitability in the first quarter this year, but profitability is number one for me. From my perspective, that's what it's about. That's why we try to keep our expenses low. And since we'll be launching three products this quarter and we have another three products launching hopefully in the first half of next year, we would expect to be profitable at least for the second half of the year and perhaps even for the full year. That's about as precise as I can get. I hope that answers your question.

Good. Thank you.

You're welcome.

Thank you. As there are no questions at this time, presenters, do you have any final remarks?

No, I just, again, like to thank everyone for joining the call today. We always look forward to providing updates to the shareholders. And with that, I believe we can adjourn the call. I wish everyone happy holidays in the weeks and months to come.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.