Good afternoon, and welcome to Eton Pharmaceuticals' Fourth Quarter 2023 Financial 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, Chief Business Officer at Eton Pharmaceuticals. Please proceed.

Thank you, operator. Good afternoon, everyone, and welcome to Eton's fourth quarter 2023 conference call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call. The release is available on our website, etonpharma.com. Joining me on our call today, we have Sean Brynjelsen, our CEO; and James Gruber, our CFO. In addition to taking live questions on today's call, we will 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 remarks 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. Good afternoon, everyone, and thank you for joining us today. Our strong fourth quarter delivered our 12th straight quarter of sequential product revenue growth and capped off an exciting and productive 2023 for Eton. 2023 brought a number of critical accomplishments and milestones for the Company, including the expansion of our internal sales force, which helped us grow revenue more than 130% to $26 million in 2023 from $11 million in 2022. Number two, the commercial launch of Betaine and acquisition of Nitisinone, which brought us from two commercial products at the start of the year to four approved products by the end of the year. We also boosted our development pipeline through the advancement of ET-400 and the acquisition of ET-600. And lastly, we reached positive operating cash flow in the second half of the year. Turning to the specific fourth quarter results. Revenue was $7.3 million, an increase of 109% over the prior year quarter, while G&A expenses grew only 5% year-over-year, demonstrating our financial discipline and the attractive operating leverage in our business. I'm also pleased to report that the fourth quarter was another quarter of positive operating cash flow. Even without the benefit of any future acquisitions, we expect our current commercial products' continued growth to allow us to reach positive GAAP net income at some point in 2024. ALKINDI SPRINKLE once again delivered steady growth in the quarter. We continue to believe this growth can continue for many years to come as we have still only converted a small portion of the estimated 5,000 patients under the age of 10 who suffer from adrenal insufficiency in the United States. We are hoping to boost the growth rate with our sampling program, which just went live in February. Pediatric endocrinology offices are now able to stock samples of ALKINDI SPRINKLE so that newly diagnosed or converting patients can immediately start therapy in the presence of their physician. We've already seen a strong demand from physicians requesting samples, and we expect the program to have a positive impact on our 2024 growth. Turning now to Carglumic Acid. Carglumic Acid also continues to do well and remains ahead of our initial expectations. We believe we have captured over 50% of Carglumic Acid patients in the market for just over two years while this already is a higher share than we expected. We have continued to see additional new patient conversions in the fourth quarter and a number already in the first quarter of 2024. So we expect it to continue and predict 2024 will be another year of attractive year-over-year growth for Carglumic Acid. It appears that the brand company has understandably deemphasized its promotion and support for the product. So with our continued physician and patient support, we believe we are well-positioned to be the leading product in the market. In addition, the launch of Betaine and now Nitisinone have further increased our interactions and entrenchment with potential Carglumic prescribers. The fourth quarter was Betaine's second full quarter on the market, and it continues to see growing adoption among patients. The overall market opportunity is much smaller than that of Carglumic Acid, and Betaine faces more reimbursement pressure due to the competitive market environment. So it's not a major revenue contributor on its own, but more importantly, it's been a valuable tool for us to get in the door and initiate discussions with metabolic geneticists that can lead to Carglumic Acid prescriptions. Last month, we launched our third product in the metabolic space, the Nitisinone capsules. Nitisinone treats an ultra-rare condition called tyrosinemia that is estimated to impact 200 to 300 patients annually within the United States. The current Nitisinone market is estimated to be around $50 million annually, and we believe our existing relationships and patient support services will allow us to take a meaningful share of this market. We've already added a number of active patients within the first few weeks of launch. In addition to the strong commercial performance, I'm pleased with the recent progress we have seen with our pipeline. We had two positive clinical developments in recent weeks. First, on ET-400, I'm pleased to report today that preliminary data shows that the product passed the pivotal bioequivalence study. You may remember that this was our last hurdle to NDA submission, so we can now plan to submit the NDA application in the second quarter of this year as soon as the first final clinical study report is available. This would allow for potential approval and launch of the product in the first half of 2025. We continue to see very strong interest in a liquid hydrocortisone formulation and remain highly confident that ET-400 will greatly accelerate our growth in the years to come and be a major value driver for the Company. We also received notice in February that we have been issued a patent on ET-400 proprietary formulation. This is an Orange Book listable patent that will cover the product until 2043 and we have additional patents for the product currently under review with the United States Patent Office. Turning now to ET-600. The second clinical data point with ET-600 and our product candidate that is targeting an ultra-rare condition called diabetes insipidus. We can report now that the product has passed its pilot bioequivalence study. We now plan to run the pivotal study in the second half of this year. And given the results we saw in the pilot study, we're optimistic about the success of this pivotal study. If the study is successful, we would be in a position to file the product's NDA in the first quarter of 2025. Regarding dehydrated alcohol, we have been engaged in dialogue with the FDA, but unfortunately, it seems the FDA's latest request would require manufacturing of additional new batches, collection of additional stability data. In light of the potential generic competitors entering the market late next year, it is not prudent use of Eton's capital or resources to undertake this additional work. We will instead focus our resources on higher-value programs with significant long-term earnings potential that we feel will provide better risk-adjusted returns on our investments. We are also exploring opportunities to out-license the dehydrated alcohol asset and a transaction that would not require additional investment from Eton but would still allow the Company to share in the economics if the product is able to reach market. In addition to our existing pipeline programs of ET-400, ET-600, and ZENEO auto-injector, we are currently exploring additional potential development programs, which we hope to communicate shortly. As proud as we are about the 2023 results that we discussed today, we are just getting started, and we are even more excited as we look forward to Eton's prospects for 2024 and beyond. 2024 is positioned to be a critical year as we continue to rapidly grow our business and gear up for the potential ET-400 launch in 2025. This year, we expect all of our commercial products to grow significantly. We expect to further advance our pipeline, most notably with the high-value submission of ET-400 NDA. We expect to add additional commercial products through business development activities, and we expect to reach positive net income on a GAAP basis at some point during the year. We are well positioned and well capitalized to deliver on all of these plans. We finished the year with more than $21 million of cash on hand. And as you've heard, we generated positive operating cash flow in the second half of the year. This puts us in a very strong financial position to remain active and opportunistic on the business development front. We continue to see increased levels of distress among many players in the industry, and we remain optimistic that we will be able to capitalize on many opportunities even this year.

Thank you, Sean. Net product sales and royalty revenues for the fourth quarter of 2023 increased 109% to $7.3 million compared to $3.5 million in the prior year period, driven by growth in ALKINDI SPRINKLE, Carglumic Acid, and the commercial availability of Betaine Anhydrous. Total net revenues were also $7.3 million for the fourth quarter of 2023 compared to $8.5 million for the fourth quarter of 2022. The prior year period included a $5.0 million one-time licensing revenue item and milestone payment received from Azurity Pharmaceuticals. R&D expenses for the quarter were $1.0 million compared to $0.9 million in the prior year period. General and administrative expenses for the quarter were $4.6 million compared to $4.4 million in the prior year period. The slight increase in G&A expense was primarily due to personnel additions, and we expect G&A expenses to remain relatively flat going forward. Total company net loss for the fourth quarter of 2023 was $2.3 million or $0.09 per basic and diluted share compared to a net income of $0.9 million or $0.04 per basic and diluted share in the prior year period. Eton finished the fourth quarter with $21.4 million of cash on hand and generated $0.4 million of operating cash during the quarter. This concludes our remarks on fourth quarter results. And with that, we'll turn it back over to the operator for Q&A.

I don't see any questions now. I will pass it back to David for any additional questions.

Thank you, operator. We did receive a couple of questions via email that we can go over now. First one is, what are you expecting for operating expense growth in 2024? And what should we expect for gross margin?

So for operating expenses, G&A should be a slight increase from 2023 to 2024, 2023 came in at $18.9 million. We should be right around $20 million for 2024. R&D spend is a little less predictable just due to the timing of study expenses, but with the continued development of ET-400 and ET-600 in 2024, it should come in somewhere between $4 million and $6 million. For gross margin expectations in the current year, we should be similar to where we ended in 2023. If you adjust for the $1 million ALKINDI milestone payment that was in Q4 of last year, so between 60% and 65% margin profile for the current year, and that should continue to increase as ALKINDI and ET-400 make up a larger portion of our overall revenue.

Thanks, James. The next email question is what's your confidence level in closing a business development acquisition this year?

This is Sean. Well, I feel very confident we will close a transaction involving commercial revenue-generating products. We've got several, let's say, in late stages. So, I would expect at that time that we would also be providing some guidance for the year, and this would be accretive to our existing revenue base. The M&A environment is actually quite strong as long as you're positioned to take advantage of it. So, we're not struggling to find deals. It's just making sure we do deals at the right price and at the right time.

Thanks, Sean. That is the end of our emailed questions. Thank you, everyone, for joining us for our earnings call. We look forward to talking to you next quarter.

Thank you, ladies and gentlemen. With that, you can disconnect. Thank you for joining.