Good afternoon, and welcome to the Eton Pharmaceuticals Third Quarter 2025 Financial Results Conference Call. 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 Third Quarter 2025 Conference Call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today's call. The release is available on our website, etonpharma.com. Joining me on our call today, we have Sean Brynjelsen, our CEO; James Gruber, our CFO; and Ipek Trinkaus, our Chief Commercial Officer. In addition to taking live questions on today's call, we will 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 the 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. I'm thrilled to report another record quarter for the company with triple-digit year-over-year revenue growth. I look forward to discussing the underlying drivers in more detail and highlighting some of our initiatives that help deliver this growth. In addition, we will have made significant progress with our development activities, which are not reflected in this quarter's numbers, but will propel our revenue and earnings growth for many years to come. Third quarter product revenue was $22.5 million, an increase of 129% year-over-year and up 19% compared to the second quarter. It was our 19th straight quarter of sequential product revenue growth, driven by strong year-over-year growth from ALKINDI SPRINKLE and Carglumic Acid, as well as additions from the recently acquired products, INCRELEX and GALZIN, which are both tracking ahead of our deal models. ALKINDI SPRINKLE has delivered reliable growth for many years and shows no signs of stopping. Carglumic Acid had previously plateaued, but we had a few new patient adds in recent months that helped deliver the year-over-year increase, which was nice to see. In addition to delivering on the top line, we remain focused on profitability, and I am pleased to share that we generated $12 million of cash from operations in the quarter. Eton is committed to controlling our expenses, and I am proud to report that even though our revenue is growing rapidly, we were able to reduce our adjusted SG&A expense sequentially from the second quarter to the third quarter. Continued control of our operating expenses in tandem with strong revenue growth will position us for significant margin expansion. We reported adjusted EBITDA of $2.9 million in the quarter, and this figure was weighed down by some nonrecurring INCRELEX ex-U.S. transition costs that James will provide more details on. So we expect to deliver even stronger EBITDA in the quarters ahead. Now turning to product-specific commentary. I'll start with INCRELEX, which has been our largest revenue contributor this year. INCRELEX revenue and patient count continue to track well ahead of our original projections for the product. Prior to our acquisition, the product and the condition has suffered from low awareness. Our efforts to improve education and awareness have paid off, allowing us to deliver significant growth so far this year. Our commercial team has done an excellent job on the relaunch through our rare disease specialists' outreach to health care providers, our conference engagements, and peer-to-peer presentations, as well as collaborating closely with patients and patient advocacy groups, we have been able to substantially grow awareness and increase product usage in a matter of months. When Eton took the product over in December 2024, there were only 67 active patients on therapy. By August, we shared that we had reached our 100-patient goal five months ahead of schedule. We continue to add a number of new patient starts during the last three months, but we saw a higher number of patients age out and discontinued treatment during the same period, which resulted in our net active patient count remaining relatively flat around 100. In severe primary insulin growth like Factor 1 deficiency, success is partially measured not only by how many patients are on therapy, but in addition, what truly drives outcomes is how early the treatment begins and how well it's optimized. Early initiation during the critical growth window and appropriate vial utilization are key to maximizing efficiency during the treatment duration. Since we have inherited several older pediatric patients in December during transition, we saw a large group of age-outs coming through from that cohort. Our focus remains on both expanding new patient starts and driving growth through earlier diagnosis and optimized dosing to ensure every patient achieves their full therapeutic potential. We believe these efforts will increase the average duration of treatment. I expect to continue bringing new patients into treatment and continue growing the net patient count. As a reminder, INCRELEX is approved for pediatric patients aged two and up with severe primary IGF-1 deficiency. These are patients who present with extremely short stature and need IGF supplementation to grow. INCRELEX is very effective in increasing patient height during their growing years, but it's no longer needed once patients reach their adult height, which is typically around 18 years old. We believe with our ongoing educational and awareness campaigns, we will start seeing patients diagnosed earlier in life, which would likely lead to a longer duration of therapy. Eton is confident in the long-term growth opportunity for the product. And as we expect to continue converting more of the estimated 200 patients in the U.S. that meet the current label. In addition, we remain committed to expanding access to even more children in need through the harmonization of the U.S. and EU definitions of severe primary IGF-1 deficiency. Last month, we submitted a meeting request to the FDA with our proposed clinical study to support the harmonization. We expect to have the FDA's feedback by the end of December. And if they are in agreement, we would initiate the study in 2026. Given the European patient registry data that has been collected over the last 15 years, we believe that INCRELEX is a safe and effective treatment for patients with IGF-1 levels between minus 2 and minus 3 standard deviations. We are confident our proposed study would confirm that for the FDA. And if successful in harmonizing the labels, it could potentially increase the INCRELEX market opportunity roughly fivefold. ALKINDI was another major contributor to our Q3 revenue growth, and I am proud of the team's ability to continue generating consistent growth. As you remember, starting in January, we split our sales force into two teams, one of which is now 100% dedicated to pediatric endocrinology. We think that has contributed to ALKINDI SPRINKLE's strong year, and 2025 is the product's fifth calendar year on market and remains on pace to be the strongest year of its history by number of patients on therapy and number of new patient referrals. So far, we have not been seeing much, if any, cannibalization of ALKINDI from the launch of KHINDIVI. Though ALKINDI continues to see strong growth, we developed and launched KHINDIVI to address the needs of patients that did not like the texture of the ALKINDI granules or prefer the convenience of a liquid dosage form. KHINDIVI is the first and only FDA-approved oral solution of hydrocortisone. KHINDIVI allows simple and accurate dosing tailored to patient needs and does not require refrigeration, mixing, or shaking. The FDA approved KHINDIVI for patients five and over. The agency restricted the age due to a limited amount of existing safety data on three of the inactive ingredients in the formulation when being used in combination. Unfortunately, the largest unmet need for this product is among young children under five years old. As a result, the label restriction has weighed on the adoption of KHINDIVI. However, our team has been working on a plan to address this. When we first heard of the FDA's restriction this summer, we immediately developed a new formula with substantially lower levels of the excipients. In September, we held a meeting with the FDA to discuss this new formulation. We believe the meeting was successful as the FDA indicated they would be receptive to a label expansion with our revised formulation. In response, we will conduct a bioequivalency study, which is scheduled to start by January 2026, and I expect to submit the new formulation as a supplement to our existing NDA in the second quarter of 2026. The FDA indicated a 10-month review for the formulation, so this could allow for an approval by the first quarter of 2027. We believe this label expansion would significantly accelerate adoption of the product. Even with the current KHINDIVI label, we continue to see attractive long-term growth for our adrenal insufficiency franchise. Eton has only converted less than 15% of the estimated 5,000 target patients in the United States. So we see a long runway of growth ahead of us. We remain confident that ALKINDI and KHINDIVI can combine for peak sales of more than $50 million with the current KHINDIVI label and ultimately higher levels if the label is expanded. Another bright spot in our portfolio this quarter was GALZIN. As I mentioned, we're extremely pleased with this performance. It now has over 200 active patients, a number we originally set as our year-end 2025 target. The product is continuing to grow well ahead of our original expectations, and we couldn't be happier with the team's efforts to support this relaunch. During our eight months in the field actively commercializing GALZIN, we've been surprised by the low level of awareness that the product had both among physicians and patients. Even though GALZIN is the only FDA-approved zinc therapy for Wilson disease, many patients and prescribers were unaware of it, misinformed, or mistakenly believed the product was discontinued after a prior shortage in 2020 and subsequent lack of promotion. We view this low awareness as a positive for the long-term growth prospects for GALZIN. While we have work to do educating the market, it is clear that this represents a substantial growth opportunity as we inform patients, healthcare practitioners, and caregivers, and raise awareness of this critical medication. Our entry into Wilson disease has been warmly received by patients and health care providers. Before our relaunch, very few pharmacies stocked GALZIN, out-of-pocket costs were high, and there was a lack of support services to help patients navigate the insurance process. We have now implemented full patient support services, increased access to medication, and substantially reduced out-of-pocket costs for patients. These changes have resonated with the patient community, and we have heard strong positive feedback and appreciation for the new programs. In October, our team attended the Wilson Disease Association Annual Summit, where patients, caregivers, and leading physicians gathered to discuss diagnosis, treatment, and management of the disease. Our team was able to engage with numerous patients and prescribers, helping to drive awareness and give us the chance to better understand the struggles that patients and prescribers are dealing with. Working to understand the needs of patients, caregivers, and health care providers is a top priority for us and our vision to be a champion of those in the Wilson disease community. Our expanded access and patient support services have made a major impact on Wilson disease patients, but we think we can make an even greater impact on their lives with ET-700, our extended-release version of GALZIN. Currently, GALZIN is taken three times per day with patients fasting both before and after, and this cumbersome regimen leads to high rates of noncompliance. Eton has heard directly from patients and caregivers just how challenging the current dosing schedule is, and we know there's a very strong interest in an extended-release version. Eton is working quickly and making meaningful progress with our development of ET-700. We've already developed a proprietary formulation, filed our patents, and met with the FDA to discuss the regulatory pathway. We are now nearing production of clinical study supply and starting our clinical program with our positron emission tomography or PET study scheduled to begin in the first quarter. This study is a proof-of-concept study designed to verify that our proprietary delayed-release formulation is able to effectively block copper absorption in patients with less frequent dosing. We expect to receive top-line results from this study in the middle of 2026. And if positive, it would support the initiation of a dose-ranging and pivotal clinical study later in the year. Switching back to our pediatric endocrinology portfolio. During the quarter, we had another piece of good news when the FDA accepted our ET-600 NDA submission for review and assigned a February 25 PDUFA date. We developed ET-600 in direct response to an unmet need expressed by pediatric endocrinologists for an oral solution of desmopressin to treat central diabetes insipidus. If approved, ET-600 would be the first oral liquid formulation available and would allow for the small precise titratable doses required to treat pediatric patients. The review of the product appears to be proceeding well, and we scheduled the production of inventory at risk in preparation for an anticipated commercial launch shortly after the PDUFA target action date. Prelaunch marketing activities, including key thought leader engagements, advisory boards, and patient focus groups are also underway. We recently held an ET-600 advisory board with key opinion leaders at the National Endo Conference. We continue to hear positive feedback and strong excitement for the product. Since ET-600 shares the same pediatric endocrinology call points as ALKINDI, KHINDIVI, and INCRELEX, Eton can leverage our well-established relationships and existing commercial footprint, and we expect to be able to hit the ground running upon launch next year. Given the growth opportunity ahead for our commercial products and the attractive pipeline and label expansion opportunities discussed today, it is clear that our business is set up for very attractive long-term growth for many years to come. However, we believe that we can accelerate our growth through additional business development transactions. I remain confident that we have the necessary skills and capabilities to execute value-creating acquisitions and believe that our track record speaks for itself. We continue to explore opportunities to acquire additional strategically aligned ultra-rare disease products where Eton is positioned to add value. With $37 million in cash on our balance sheet and a diversified growing business that is already generating strong EBITDA, we have plenty of capacity to finance acquisitions, large or small. We'll continue to approach opportunities from a position of strength and with our customary discipline. 2025 has been a transformational year for us, highlighted by three high-value commercial product launches, record levels of product sales and profitability, and the submission of an NDA for ET-600. We continue to push full speed ahead to close out the year strong and position us for an even more impressive 2026. Next year, we expect a number of critical milestones, including continued strong revenue growth from ALKINDI SPRINKLE, INCRELEX, GALZIN, and KHINDIVI, increased profitability and operating margin expansion, the expected launch of ET-600, the submission of our revised formulation of KHINDIVI, the completion of our ET-700 pilot study, and the initiation of our INCRELEX label harmonization clinical study. As you can see, we have some very exciting and event-filled quarters ahead of us, and we look forward to keeping all of you up to date on our progress. We thank you for your continued support. And with that, I'll hand it over to James, our Chief Financial Officer, to discuss the financials.

Thank you, Sean. Our third-quarter revenue increased 118% to $22.5 million compared to $10.3 million in the third quarter of 2024, and revenue was primarily comprised of product sales in both periods. Third quarter revenue included $0.9 million of product revenue from the sale of finished product inventory to Ipsen and Esteve to facilitate the ownership transition of INCRELEX in certain European countries, and these sales are expected to be nonrecurring. In addition, $2.4 million of revenue was derived from an initial loading order of semi-finished INCRELEX inventory for Esteve. When Eton out-licensed the rights to ex-U.S. INCRELEX, it entered into a long-term supply agreement with Esteve, under which Eton will provide semi-finished goods to Esteve at a fixed transfer price. The company expects these ongoing purchases to produce roughly $2 million to $3 million of annual revenue. However, the ordering patterns may be inconsistent and not occur every quarter. Revenue growth in the quarter was driven primarily by increased sales of ALKINDI SPRINKLE and Carglumic acid, plus the addition of sales from INCRELEX and GALZIN. While Sean mentioned that the INCRELEX net active patient count was relatively flat, we saw a less favorable payer mix in the third quarter, which resulted in lower revenue per patient compared to the second quarter. Eton expects U.S. product sales to continue to grow sequentially in the fourth quarter compared to the third quarter. But given that some of the third quarter INCRELEX-related ex-U.S. revenue is not expected to recur, total product sales may be flat or slightly decline in Q4 relative to Q3. Cost of sales for the third quarter was $14.6 million compared to $4.0 million in the third quarter of 2024, an increase of $10.6 million, driven by increased sales volumes and approximately $7.4 million of costs associated with the transition of the ex-U.S. distribution of INCRELEX. Adjusted gross profit was $10.2 million in the third quarter, representing an adjusted gross margin of 45% compared to adjusted gross profit of $6.6 million and adjusted gross margin of 64% in the prior year period. Adjusted gross margin in the quarter was negatively impacted by INCRELEX ex-U.S. related costs, including the transition of ex-U.S. distribution and the supply agreement with Esteve. The company expects to report fourth-quarter adjusted gross margin of approximately 70%. R&D expenses for the quarter were $1.1 million, an increase of $0.6 million compared to the prior year period due primarily to increased expenses associated with our ET-700 and ET-800 development activities. General and administrative expenses for the quarter were $8.1 million compared with $5.3 million in the prior year period due primarily to an increase in product advertising and launch year promotional expenses, higher stock-based compensation expense, and an increase in compensation and benefit expenses due to an increase in general and administrative headcount. General and administrative expenses were down $1.6 million compared to the second quarter of 2025. On an adjusted basis, which removes the impact of share-based compensation, transaction-related costs, and other one-time expenses, G&A expense was $6.9 million compared to $4.3 million in the prior year period and $7.6 million in the second quarter of 2025, and we were pleased to see this sequential decline in spending. As we have discussed previously, the first half of this year had increased G&A expenses associated with our three product launches, and we expect adjusted G&A spending in the second half of the year to remain materially lower. Adjusted EBITDA for the third quarter of 2025 was $2.9 million compared to $2.0 million in the third quarter of 2024. Total company net loss was $1.9 million for the quarter compared to net income of $0.6 million in the prior year period. Net loss per basic and diluted share during the quarter was $0.07 compared to a net income per basic and diluted share of $0.02 in the prior year period. On a non-GAAP basis, we reported net income of $1.5 million for the third quarter of 2025 compared to $1.9 million in the prior year period and diluted earnings per share of $0.04 for the third quarter of 2025 compared to $0.07 per share in the prior year period. Eton finished the third quarter with $37.1 million in cash on hand, and we generated $12.0 million in operating cash flow during the quarter. This includes a $4.3 million payment received from Esteve for the international rights to INCRELEX. This concludes our remarks on third-quarter results. And with that, we'll turn it back over to the operator for Q&A.

Our first question comes from Chase Knickerbocker of Craig-Hallum.

James, could you provide us with the pro forma gross margins for the core U.S. business after excluding the $2 million to $3 million in OUS-related revenue from the inventory shipments and the associated costs included in COGS?

The adjusted GAAP gross margins, including the ex-U.S. INCRELEX activity, were 35%. The adjusted figure was 45%. If we exclude all of the ex-U.S. activity, it exceeds just over 70% for the quarter.

And then, Sean, maybe just as we think about that reacceleration for ALKINDI, is it truly just that kind of refocusing of the sales force solely on PDENO? Or are there kind of other drivers that you would point to as far as how that sequential revenue growth has accelerated so far through '25?

I believe the main factor was the focus of the PDENO group. Additionally, our physicians are confident in the product and understand its effectiveness. We have early adopters as well as late adopters, and we are now observing many late adopters who previously hesitated but now have faith in it. I expect that we will continue to add patients in the near future. While it is not a perfect product, that is why we introduced the liquid version. We aim to provide that, and we believe it will significantly boost growth next year. Currently, we are seeing a steady increase in ALKINDI patients, along with KHINDIVI patients. As mentioned earlier, we do not observe much cannibalization; rather, it is additive.

And then maybe just on INCRELEX. First, could you just give that gross adds number since August, just so we can kind of get a sense for demand generation? And then just second, on INCRELEX and additional thoughts or details that you can give us as far as that trial design that you submitted to FDA that we're waiting to hear feedback on kind of timelines, number of patients, that sort of thing, as far as how you're thinking?

So on the numbers, we're about where we were during our last call, which relates to the number of ads. While we had some people drop off, we're now seeing an increase in ads, including several new scripts just this past week. We're aiming to reach that 110 number by the end of next month. Overall, we're very satisfied with the product. We expected some slowdown, but the timing of when users join or leave the product has been a bit unpredictable. We saw a significant boost in Q1, which continued into Q2. Regarding the clinical aspect, we've made our submission and anticipate receiving feedback from the FDA in the coming weeks, which we believe will be positive. We hope to start enrolling patients in the first half of next year.

Last one for me. As we look ahead to 2026 and you prepare your budget, do you have any initial thoughts on your expectations for top-line growth next year? It seems that analysts are projecting growth in the mid- to high 20s percentage-wise. What are your initial thoughts on 2026?

Sure. I'll let David answer that one.

As we said on the prepared remarks, we expect significant growth to continue for INCRELEX, GALZIN, ALKINDI, and KHINDIVI. So we're expecting healthy growth, but we're not going to get into any directional guidance yet. When we report our Q4 numbers, we will have something to share with you.

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

Congrats on the progress and multiple positive updates. Question about the INCRELEX U.S. registry. Would this take place at the same sites that are active in the global registry trial? There are a few sites in that global registry that are U.S.-based.

Yes, Madison, it would be just the U.S. It would just be U.S. sites. We would not be enrolling folks overseas.

Would it be at separate sites that are activated in the global registry? I think there are about seven U.S. sites that are active as part of that global registry.

It would probably be different sites, Madison, if one of those sites did have a meaningful number of patients within that negative 2 to negative 3 standard deviation, we would consider adding them, but it will probably be different sites within the U.S.

Could you please share your thoughts on how you are prioritizing potential business development opportunities as we approach the end of this year and look towards next year and beyond?

We are currently strong and engaged in late-stage discussions with two parties, aiming to finalize something before the year ends, or shortly after. While nothing is official until we sign, these are ultra-rare disease products that align strategically with our goals. We believe they could significantly contribute to our revenue in the next 12 to 24 months. Pursuing the right acquisitions has always been a core aspect of our company strategy; we don’t make acquisitions without ensuring they’re the right fit. Regardless of these potential acquisitions, we will continue to grow, supported by a solid pipeline of internal products. I believe we will complete transactions that will lead to at least two additional product launches next year.

Our next question comes from the line of Swayampakula Ramakanth of H.C. Wainwright.

I have a quick question about INCRELEX. You mentioned that some patients discontinued treatment while you were bringing on new patients. What are the common reasons for discontinuation? Is there anything that your salesforce or additional detailing could do to address this and prevent patients from stopping the drug?

RK, primarily, it's patients aging out. So discontinuations is almost misleading. All the kids are going to be on it until they stop growing. So typically around age 18, they will age out; they no longer need it. So it is expected and normal, and you're always going to have it. That's the vast majority of the discontinuations. We see very little of what you'd think about as traditional discontinuations where somebody stops taking treatment before they reach their full adult or their full height, primarily because there's no other alternatives. It's not something like ALKINDI where they try to go to something else. So it was primarily age-outs. I think we are starting to promote and educate the market better. We think we are getting patients that are being diagnosed earlier. So their total duration on therapy is going to be longer. They're going to age out around 18 regardless of when they start. But if we can get them diagnosed and starting much earlier, that's going to lead to much better outcomes for the patients, and they're going to be on treatment much longer. So we think our average age is shifting much lower than it was when we inherited the business at the start of the year.

James, you mentioned a 70% gross margin expectation for the fourth quarter. Looking ahead to 2025 through 2029, as we introduce the new KHINDIVI formulation, how do you anticipate the gross margin will progress during that period?

RK, we have stated before, we think we can get to north of 75% by 2028. And how we get there is as the majority of our product revenue growth is concentrated in the products where we own more of the economics in KHINDIVI and ALKINDI and INCRELEX. That product mix shifts more towards those higher-margin products, which will continue to increase our margin profile over the next several years.

And then last question, Sean, in general, what is the pricing power you have with your products? Are you seeing any pressures from the government or from some of your private payers?

We always aim to keep our pricing on the lower end relative to the number of patients. Our company takes pride in appropriately pricing our products. We don't think that pricing discussions will solely focus on orphan drug products, as many of these diseases only have a few hundred patients. Therefore, pressure on those products is limited.

I'm showing no further questions at this time. I'd like to thank you for your participation in today's conference. This does conclude the program. You may now disconnect.