Eton Pharmaceuticals, Inc. (ETON) Earnings

Management highlights

- **Overall Q1 2026 Financial Performance • Total Q1 2026 revenue increased 40% year-over-year to $24.3 million (prior year Q1 2025 included $3.3 million in licensing revenue) • Gross profit increased 49% YoY to $14.7 million; adjusted gross profit (excluding acquired inventory step-up and intangible amortization) was $16.2 million, or 67% of revenue (down from 69% in Q1 2025, driven by dilutive ex-U.S. Increlex sales) • R&D expenses were $1.9 million, a $0.7 million YoY increase driven by higher clinical costs for Candivi label expansion and ET700 development • GAAP G&A expenses were $10.4 million, a $1.2 million YoY increase; adjusted G&A was $9.0 million, a $1.7 million YoY increase, with ~$0.9 million of the increase from FDA annual program fees (Eaton no longer qualifies for orphan drug PDUFA exemptions) and the remainder from incremental headcount • Adjusted EBITDA was $5.7 million, or 24% of revenue, up from $3.7 million (21% of revenue) in Q1 2025; net income was $1.6 million, compared to a $1.6 million net loss in Q1 2025 • Operating cash flow was $7.4 million; ending cash on hand was $19.7 million after the $14 million Hemangiol acquisition; the existing $30 million credit facility was amended to cut interest rates by 200 basis points with no change to maturity - **New Product Launch Updates • *Hemangiol*: The only FDA-approved treatment for infantile hemangiomas, formulated without alcohol or sugar (unlike off-label adult propranolol formulations). Eaton has overhauled distribution to a single specialty pharmacy model (reducing fragmentation and confusion), launched $0 copay support for commercially insured patients and expanded assistance for uninsured patients, expanded provider education and patient advocacy engagement. Approximately 60-65% of patient volume is expected to be near-zero revenue, resulting in an estimated $8,000-$10,000 average net price per full six-month treatment course. As of the call, ~60% of the existing 8,000-patient base has been transferred to the new distribution model. • *Desmoda*: The first and only FDA-approved oral desmopressin solution, enabling precise flexible dosing that eliminates the need for splitting or crushing tablets. Launch execution has exceeded expectations, with overwhelmingly positive feedback from leading pediatric endocrinologists at major recent conferences, and has opened access to new institutions that benefit the broader Eaton pediatric endocrinology portfolio. - **R&D Pipeline Progress • *Increlex Label Harmonization*: FDA has cleared the proposed clinical study to harmonize the U.S. severe primary IGF-1 deficiency definition with Europe's; the study will initiate in H2 2026, and successful label expansion could increase the U.S. market opportunity for Increlex fivefold • *ET700 (Extended-release zinc acetate)*: A double-blinded controlled pilot study in 36 healthy volunteers has initiated; top-line results are expected in H2 2026, and positive results could lead to a pivotal study in early 2027. Peak annual U.S. sales are projected to exceed $100 million if approved • *Candivi Label Expansion*: Final patient dosing is wrapping up for a bioequivalence study to expand the approved age indication below 5 years; results are expected in the next few months, with a supplemental NDA filing planned for Q3 2026 and potential approval in Q2 2027. Label expansion is expected to drive meaningful adoption improvement for the currently tepidly performing product • *MGLIDIA (Oral liquid glyburide for neonatal diabetes)*: An IND has been filed with the FDA; a bioavailability study is planned to initiate by July 2026, with an NDA submission targeted for Q4 2026, putting the program on track for a potential 2027 launch. There are no FDA-approved treatments for neonatal diabetes in the U.S., and the product fits Eaton's rare disease pediatric endocrinology focus. - **Long-Term Strategic Goals 1. Build the largest rare disease portfolio in the U.S. 2. Reach a $200 million annual revenue run rate by the end of 2027 3. Achieve a 50% adjusted EBITDA margin by 2028 4. Reach $500 million in annual revenue by 2030 • Management continues to pursue disciplined accretive product acquisitions to expand the portfolio, with strong cash and debt capacity available for transactions

Guidance

- Full-year 2026 revenue guidance has been raised to exceed $120 million, up from the prior guidance of $110 million, driven by Q1 outperformance, stronger-than-expected base business momentum, successful Desmoda launch, and updated Hemangiol launch expectations - Full-year 2026 adjusted EBITDA margin is expected to exceed 30%, maintaining prior guidance, with a target of 50% adjusted EBITDA margin by 2028 - Full-year 2026 adjusted gross margin is expected to be at least 70%, with a long-term target of 75-80% as new higher-margin products (Hemangiol, Desmoda) scale - Full-year 2026 R&D spending is projected to be above 2025's $7.8 million but less than $10 million, maintaining prior guidance - Ex-U.S. Increlex revenue is projected at $2-$3 million for full-year 2026, maintaining prior estimates

Segment performance

Eaton is a rare disease biopharmaceutical company with a single business unit focused on rare disease therapeutics, broken out by individual commercial products: 1. **Launched New Products (Q1 2026 to date)**: Desmoda (launched mid-Q1 2026 after FDA approval) and Hemangiol (launched mid-Q2 2026). No material revenue contribution from either in Q1 2026; Hemangiol is expected to have limited contribution to Q2 2026, with sizable contributions starting in Q3 2026. Desmoda has peak sales guidance of $30-$50 million, and Hemangiol could become Eaton's largest product by 2027. 2. **Existing Commercial Portfolio**: Total Q1 2026 product and royalty revenue was $24.3 million, a 73% year-over-year increase from $14.0 million in Q1 2025. Growth was driven by strong contributions from Increlex, Alkindi Sprinkle, Galzin, and Carglymic Acid, plus incremental sales from Candivi (launched mid-2025). Increlex is currently Eaton's largest product, with low single-digit millions of ex-U.S. revenue in Q1 2026, and full-year 2026 ex-U.S. Increlex revenue is projected at $2-$3 million. All core existing products continue to see strong steady growth, with significant remaining market share upside.

Risks & headwinds

- Hemangiol launch has multiple uncertainties: patient mix could lead to meaningful deviations from the estimated average net price, and the large-scale transfer of 8,000 patients from 17 prior dispensing pharmacies creates execution risk for continuity of care - Early launch dynamics for both Hemangiol and Desmoda are still developing, and actual sales contribution and uptake may differ from current projections - The Increlex label harmonization, Candivi label expansion, and ET700 and MGLIDIA clinical programs all face regulatory and clinical trial success risk, with no guarantee of eventual approval or market expansion - Eaton no longer qualifies for FDA orphan drug PDUFA exemptions, leading to permanently higher annual G&A costs relative to prior periods

Analyst Q&A

• Q: What drove the full-year revenue guidance increase, and what is the expected net price per patient and coverage outlook for Hemangiol? /

  A: The guidance increase was driven by a combination of Q1 outperformance, stronger-than-expected base business momentum, a successful Desmoda launch, and greater confidence in the Hemangiol launch. Management estimates 60-65% of Hemangiol patients will be near-zero revenue, resulting in an $8,000-$10,000 average net price per full six-month course, which is higher than the prior net price under previous ownership. It is too early in the launch to provide definitive data on coverage rates, but Eaton expects to maintain its historically strong product coverage.

• Q: What is Eaton's current largest product, and is all distribution handled through a single specialty pharmacy? /

  A: Increlex is currently Eaton's largest product, and it continues to grow. All products currently use a single specialty pharmacy partner (Inovo), and Eaton is satisfied with its performance. If Eaton's portfolio grows to the point that an additional partner is needed, management will add one, but no change is planned currently.

• Q: What learnings from the prior Galzin acquisition transition are being applied to the larger Hemangiol patient transition? /

  A: For Galzin, Eaton had to source all patients independently with no collaboration from prior pharmacies, but still exceeded patient acquisition expectations. For Hemangiol, Eaton has already secured collaboration agreements with most of the 17 prior pharmacies, and ~60% of the 8,000 existing patients have already been transferred. A key difference is that Hemangiol is a short six-month course of therapy (versus Galzin's lifetime chronic treatment), so rapid transfer of existing patients and quick acquisition of new patients is time-sensitive to avoid care disruptions.

• Q: What was the magnitude and margin profile of Q1 2026 ex-U.S. Increlex revenue? /

  A: Ex-U.S. Increlex revenue in Q1 was low single-digit millions, with a 2:1 COGS-to-revenue margin profile (dilutive to overall company margins). Full-year 2026 ex-U.S. Increlex revenue is still expected to total $2-$3 million, consistent with prior estimates.