Eton Pharmaceutcials, Inc. Common Stock 2026 Q2 Earnings Call

Good afternoon, everyone, and welcome to Eton's second quarter 2026 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, Ipek Erdogan-Trinkaus, our Chief Commercial Officer, and Judy Matthews, our Chief Financial Officer. Before we begin, I would like to remind everyone that today's 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. We had an exceptional second quarter with record revenue, significant margin expansion, and important progress across both our commercial portfolio and pipeline. We also completed several strategic transactions that we believe will support Eton's continued long-term growth. I'll begin by highlighting a few of the quarter's key accomplishments. We once again achieved record revenue, delivering 99% year-over-year growth with contributions from across the portfolio. At the same time, we delivered significant margin expansion and accelerated adjusted EBITDA and net income growth. We established a strong commercial foundation in pediatric dermatology with the successful relaunch of HEMANGEOL, which is already performing ahead of our expectations.

We expanded our portfolio through the acquisition of U.S. rights to IMPAVIDO and the licensing of ASN-001, adding both a commercial rare disease product and a late-stage development candidate that we believe has the potential to become the largest product in our portfolio. Finally, we had a very productive few months on the R&D front. We submitted a PAS, Prior Approval Supplement, for the KHINDIVI label expansion, initiated the ET-700 pilot study, began preparations for the Amglidia label harmonization study, and also received Fast Track designation for Amglidia. Starting with the financials, it was another record quarter for Eton. Revenue reached $37.6 million, an increase of 99% year-over-year. HEMANGEOL had an exceptional relaunch quarter and was the largest contributor to our growth. Importantly, the strength was broad-based with continued momentum across our pediatric endocrinology franchise and Galzin.

Based on our strong second quarter performance and favorable outlook for the remainder of the year, we are once again raising our 2026 revenue guidance. We now expect full-year revenue to exceed $145 million, up from our previous guidance of more than $120 million. Profitability has always been a core focus at Eton, and that was apparent in our results this quarter. Adjusted EBITDA increased to $16.2 million or 43% of revenue, compared with $3.6 million or 16% of revenue in the prior year quarter. Even after new incremental expenses related to the ASN-001 transaction, which I will discuss in detail shortly, we now expect our full-year adjusted EBITDA margin to exceed 35%, up from our prior guidance of greater than 30%.

For the last several years, we've talked about the scalability and operating leverage inherent in our model. We're now seeing that play out in the financial results. As we continue to grow revenue, we expect an increasing proportion of that growth to translate into earnings. Longer term, we continue to believe this business can generate an adjusted EBITDA margin above 50%. Turning to our product portfolio. I'll start with the dermatology, pediatric dermatology, which has quickly become an important new franchise for Eton. We relaunched HEMANGEOL as planned on May 1st, and the product is performing ahead of our expectations. Historically, approximately 8,000 patients annually were treated with HEMANGEOL, and the patients accessed the product through 18 different pharmacies.

When we acquired HEMANGEOL, we saw a significant opportunity to streamline and improve that experience by moving patients to a single high-touch access model through Eton Cares, reducing patient out-of-pocket costs, accelerating access to medication, and providing 24/7 patient support. Transitioning an entire patient population to a new distribution model was a significant operational undertaking, particularly given the nature of infantile hemangioma treatment, where therapy typically lasts only about six months. We weren't simply transitioning a static patient population. We were simultaneously converting existing patients, onboarding newly diagnosed infants, and supporting patients completing therapy, all while introducing physicians and their office staff to an entirely new access and fulfillment model. We originally expected that transition to take three to four months. I'm very proud of our team's execution.

By the end of June, we estimate that approximately 95% of patients had transitioned to the new model well ahead of our expectations. Critically, this was accomplished while maintaining continuity of care for patients and their families. Today, every HEMANGEOL patient has access to the full Eton Cares patient support program. Previously, many families were paying approximately $55 per bottle, which in some cases could total more than $100 per month. Our goal is simple. Families dealing with infantile hemangioma shouldn't also have to worry about whether they can afford the medication their child needs. With the transition of existing patients largely behind us, our commercial attention is now shifting to the broader opportunity, helping ensure that more infants for whom HEMANGEOL is appropriate receive a therapy specifically developed and approved for infantile hemangioma, instead of relying on off-label adult formulations.

Those off-label products were not developed for infantile hemangioma and contain excipients such as alcohol, sugar, and other ingredients that are not appropriate for infants. In our conversations with physicians, we have consistently heard that the historical out-of-pocket cost of HEMANGEOL was one factor contributing to off-label prescribing. With Eton Cares and our $0 copay program now in place, we believe we have removed an important barrier to broader adoption and are well-positioned to drive continued growth. We are extremely pleased with the HEMANGEOL acquisition. It has quickly become our largest product and established Eton as a leader in the infantile hemangioma space. As we have spent more time with pediatric dermatologists, vascular anomaly specialists, and families, it has become clear that HEMANGEOL addresses only part of the treatment landscape.

For severe hemangiomas requiring treatment, HEMANGEOL is the established standard of care, and we estimate that population to be approximately 10,000 to 15,000 patients annually. Infantile hemangiomas affect more than 100,000 patients annually in the U.S. and exist across a broad spectrum of severity. This means that a significant number of infants with moderate infantile hemangiomas, we estimate 10,000 annually, are being treated off-label with ophthalmic timolol because there simply is not an FDA-approved topical therapy available. These timolol ophthalmic products were developed for glaucoma, not infantile hemangiomas, and present a number of practical limitations, including variable dosing, formulation challenges, the absence of FDA-approved labeling, and reimbursement limitations. To us, that represented both a clear unmet need, and we saw firsthand the evidence that physicians and families are looking for a better option.

That is what ultimately led us to ASN-001, which was specifically developed for infantile hemangiomas and is supported by clinical data. There are several reasons we are particularly excited about ASN-001. First, the potential patient population could be 2 to 3 times larger than HEMANGEOL. Second, ASN-001 is expected to be prescribed by the same healthcare professionals as HEMANGEOL, allowing us to leverage our existing commercial infrastructure and the strong relationships we have already been building with thought leaders in vascular anomaly centers. Third, as a new product launch, ASN-001 would not be subject to certain rebate dynamics that weigh on HEMANGEOL's gross to net. As a result, we believe ASN-001 will likely have more favorable net pricing economics for Eton. Put those factors together and we believe ASN-001 has a clear path to becoming the largest product in our portfolio.

To be clear, we expect ASN-001 to complement HEMANGEOL rather than compete with it. The two products address different segments of the disease spectrum and together would allow Eton to support physicians treating infantile hemangiomas across a much broader range of patients. With ASN-001 in our portfolio, we believe the addressable market could expand to approximately 20,000 to 30,000 patients annually. From a development standpoint, ASN-001 has already completed a phase III trial that showed compelling efficacy compared with placebo. Our final remaining development requirement is a bioavailability bridging study, which we plan to initiate in the coming weeks. The proposed study protocol has been reviewed by the FDA and consists of a 24-patient, 29-day study assessing the pharmacokinetics of ASN-001, and we expect that study to cost approximately $4 million over the next 12 months.

Following completion of the study, we expect to be ready to submit the NDA in the second half of 2027, allowing for a potential approval and launch in 2028. We believe the ASN-001 transaction, together with the HEMANGEOL acquisition earlier this year, demonstrates two defining aspects of Eton's strategy and capabilities. First is our ability to identify and execute highly strategic, potentially transformational transactions. at the end of 2024, INCRELEX represented a transformational acquisition and became our largest product. Now, in just the last 6 months, we have acquired and successfully integrated what has become our largest revenue-generating product while also adding what we believe is now our highest value pipeline program. We have accomplished both without external financing and while expanding profitability. We believe that combination demonstrates the strength of our business model and our disciplined approach to capital allocation.

We will continue pursuing commercial and development stage transactions that we believe can accelerate revenue and earnings growth and create significant long-term value for our shareholders. The second defining capability is what we believe to be one of Eton's greatest competitive advantages, our ability to thoughtfully enter new therapeutic areas and rapidly build leadership positions by leveraging the commercial capabilities we have already established. Pediatric dermatology is a great example. We entered the market with HEMANGEOL on May 1st. Just 90 days later, we expanded that franchise with ASN-001, a product that can leverage the same commercial organization, customer relationships, and foundational infrastructure. We have successfully executed this playbook before. We entered pediatric endocrinology with ALKINDI SPRINKLE and then expanded that platform with three additional high-value commercial products in the specialty. Similarly, we entered metabolics with Carglumic Acid and subsequently expanded the platform through additional transactions.