Good afternoon and welcome to the Eaton Pharmaceuticals Second Quarter 2026 Financial Results Conference Call. At this time, all participants are in listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised this call is being recorded at the company's request. At this time, I'd like to turn the call over to David Krempa, Chief Business Officer at Eaton Pharmaceuticals. Please proceed.

Thank you, Operator. Good afternoon, everyone, and welcome to Eaton'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, EatonPharma.com. Joining me on our call today, we have Sean Brynjelsen, our CEO, Ipek Trinkaus, our chief commercial officer, and Judith 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 Eaton'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 Hemangiol, which is already performing ahead of our expectations. We expanded our portfolio through the acquisition of U.S. rights to InfoVito 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. And finally, we had a very productive few months on the R&D front. We submitted a PAS prior approval supplement for the Condivi label expansion initiated the ET-700 pilot study, began preparations for the INCRELEX label harmonization study, and also received fast-track designation for MGLIDEO. Starting with the financials, it was another record quarter for Eaton. Revenue reached $37.6 million, an increase of 99% year-over-year. Hemangiol had an exceptional relaunch quarter and was the largest contributor to our growth. But importantly, the strength was broad-based, with continued momentum across our pediatric endocrinology franchise and Gallatin. 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 Eaton, 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 Eaton. We relaunched Hemangiol as planned on May 1st. and the product is performing ahead of our expectations. Historically, approximately 8,000 patients annually were treated with Hemangiol and the patients accessed the product through 18 different pharmacies. When we acquired Hemangiol, we saw a significant opportunity to streamline and improve that experience by moving patients to a single high touch access model through Eaton 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 hemangial patient has access to the full Eaton 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 should 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 from whom hemangiol 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 contained excipients such as alcohol, sugar, and other ingredients that are not appropriate for infants. In our conversations with physicians, we've consistently heard that the historical out-of-pocket cost of hemangioma was one factor contributing to off-label prescribing. With Eaton Cares and our $0 copay program now in place, we believe we've removed an important barrier to broader adoption and are well-positioned to drive continued growth. We are extremely pleased with the hemangioma acquisition. It has quickly become our largest product and established Eaton as a leader in the infantile hemangioma space. But as we've spent more time with pediatric dermatologists, vascular anomaly specialists, and families, It's become clear that hemangiol addresses only part of the treatment landscape. For severe hemangiomas requiring treatment, hemangiol is the established standard of care and we estimate that population to be approximately 10,000 to 15,000 patients annually. But infantile hemangiomas affect more than 100,000 patients annually in the United States 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 isn't 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're particularly excited about ASN001. First, the potential patient population could be two to three times larger than hemangiol. Second, ASN001 is expected to be prescribed by the same healthcare professionals as hemangiol, allowing us to leverage our existing commercial infrastructure and the strong relationships We have already been building with thought leaders in vascular anomaly centers. And third, as a new product launch, ASN-001 would not be subject to certain rebate dynamics that weigh on Immanuel's gross to net. As a result, we believe ASN-001 will likely have more favorable net pricing economics for Eaton. Put those factors together and we believe ASN001 has a clear path to becoming the largest product in our portfolio. And to be clear, we expect ASN001 to complement hemangiol rather than compete with it. The two products address different segments of the disease spectrum and together would allow Eaton to support physicians treating infantile hemangiomas across a much broader range of patients. With ASN001 in our portfolio, we believe the addressable market could expand to approximately 20,000 to 30,000 patients annually. From a development standpoint, ASN001 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 ASN001. 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 hemangio acquisition earlier this year, demonstrates two defining aspects of Eaton's strategy and capabilities. First is our ability to identify and execute highly strategic, potentially transformational transactions. At the end of 2024, Incrylex represented a transformational acquisition and became our largest product. Now, in just the last six 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. And we've 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 Eaton's greatest competitive advantages, our ability to thoughtfully enter new therapeutic areas and rapidly build leadership positions by leveraging the commercial capabilities we've already established. Pediatric dermatology is a great example. We entered the market with Hemangiol on May 1st. Just 90 days later, we expanded that franchise with ASN001, a product that can leverage the same commercial organization, customer relationships, and foundational infrastructure. We've 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 Metabolix with Kerglimic Acid and subsequently expanded the platform through additional transactions. Importantly, we've been able to build these franchises while continuing to grow our existing portfolio and maintaining discipline around operating expenses. We've proven this is a repeatable strategy and one that Eaton is particularly well positioned to execute. We expect to enter a number of new specialties in the coming years. Ultimately, our mission is simple. Bring as many important rare disease therapies to patients as possible. Beyond infantile hemangioma, we've had a number of important developments across our commercial and development stage products. We won't have time to cover all of them this afternoon, but I'll highlight several of the most significant. And I'll start with our high performing pediatric endocrinology portfolio. Our adrenal franchise of Alkindi Sprinkle and Candivi continues to deliver the reliable, steady growth we've seen for more than five years. We have now exceeded 600 active patients and continue to grow. Last week, we announced that our new Candivi formulation successfully demonstrated bioequivalence to the reference product, Alkindi Sprinkle. As a result, we were able to submit our prior approval supplement requesting approval of a broader age range. Candivi is currently approved for patients five years of age and older. We continue to believe expanding the label to include patients under five would be an important catalyst for broader adoption and accelerate our path toward our goal of 1,000 active patients. We expect the expanded label to be approved in the first half of 2027. We also launched Dysmoda at the end of the first quarter and have been very encouraged by the early response from the endocrinology community who are glad to have the option of an oral liquid desmopressin solution to enable individualized dosing. Desmopressin dosing can vary significantly from patient to patient and often requires multiple dose adjustments throughout the treatment journey. Desmoda was specifically designed to address that need through precise, flexible dosing and that differentiation is resonating strongly with clinicians. Beyond the launch itself, Desmoda is also helping us establish relationships with adult endocrinologists, expanding our commercial reach beyond our traditional pediatric call point. We are continuing to invest in peer-to-peer education, engage key opinion leaders and build awareness through national and regional medical meetings which include a strong presence at the Endocrine Society Annual Meeting in June. These activities are supporting the Vizmodo launch while also strengthening our broader endocrinology platform and creating opportunities across Alkindi Sprinkle, Kindivi, and Incrylex. Incrylex also delivered strong year-over-year revenue growth during the quarter, and we continue to advance our label harmonization study, which we believe could substantially expand the product's long-term market opportunity. The FDA has signed off on our study protocol and we have executed an agreement with a leading CRO to initiate the study. Our team is now actively engaged in study startup activities with the goal of dosing the first patient by the end of the year. Rounding out our pediatric endocrinology portfolio is on Glydia. We recently received fast-track designation from the FDA which is designated or designed to facilitate the development and expedite the review of drugs intended to treat serious conditions and fill an unmet medical need. mGlidia is a liquid glyburide product used to treat neonatal diabetes, an extremely rare condition affecting only a few hundred children in the United States. While the product is approved and widely used in Europe, there is currently no approved oral treatment for neonatal diabetes in the United States. We are initiating the product's bioavailability study this month and plan to submit the NDA by the end of the year, allowing for potential approval and launch in 2027. Given the FastTrack designation, we intend to request priority review with our NDA submission. Now, moving on to our Wilson disease franchise. Galzin once again delivered strong revenue growth during the quarter as we continue to convert patients who have historically relied on over-the-counter zinc products. Despite the progress we've made since the relaunch, we believe we have converted less than half of the patients currently managed with zinc therapy. That leaves a substantial opportunity for continued growth. We're continuing to strengthen the franchise through our strategic partnership with the Wilson Disease Association, Deeper Engagement with Leading Centers of Excellence, and Expanded Participation at Hepatology Congresses. Combined with the differentiated support offered through Eaton Cares, we believe these investments position Galzin well ahead for sustained growth. Longer term, we see an opportunity to further expand our Wilson Disease franchise with ET700, our proprietary, patent-pending, extended-release formulation of Zinc Acetate. Our pilot study is currently ongoing. It is a double-blind, placebo-controlled clinical trial involving 36 healthy volunteers. The study will use PET scans with radioactive tracer copper to compare the effects of Galzin, ET700, and placebo on intestinal copper absorption. We expect initial results in the next month or two, with the full study report expected by the end of the year. If successful, The pilot study would support the initiation of a pivotal clinical study in early 2027. If ultimately approved, we believe ET700 could potentially exceed $100 million in peak annual U.S. sales. Lastly, I'll finish the portfolio discussion with another recent addition, Impovito. Impovito is the only FDA-approved oral therapy for severe forms of Leishmaniasis. A rare but potentially life-threatening parasitic disease that could cause severe skin lesions, disfiguring mucosal disease, or life-threatening visceral infection. As a life-saving treatment for an ultra-rare condition, ImpaVita was a strong strategic fit for Eaton, and we believe patients will benefit from expanded access through our Eaton Cares programs. Eaton will also begin distributing the product in the US in late September, and we expect ImpaVito to be another strong addition to our growing portfolio of orphan therapies. At the beginning of this year, we laid out three ambitious long-term goals for Eaton. First, to exit 2027 at a $200 million annualized revenue run rate. We now believe that Eaton is well ahead of this goal. Second, to achieve a 50% adjusted EBITDA margin in 2028. As noted, we have already exceeded 40% in the second quarter this year. And third, to reach $500 million in annual revenue by 2030. Clearly, with the addition of ASN001, Eaton expects to achieve or exceed this goal. Following our first half performance, the successful hemangiole relaunch, the addition of ASN001, and the continued strength of our broader portfolio, we believe we are well positioned to sustain momentum into the future. Just as importantly, our recent success has put Eaton in an even stronger position to continue pursuing value-creating business development opportunities. Our commercial track record has demonstrated to potential partners that Eaton can be an excellent partner for commercializing ultra-rare disease products in the United States. and our growing profitability has expanded our financial capacity, allowing us to pursue a broader range of transactions, including potentially larger opportunities. We remain incredibly excited about Eaton's future. We believe we are still in the early stages of building the leading rare disease company in the United States and our mission remains unchanged. to bring as many important therapies as possible to patients with rare diseases while creating significant long-term value for our shareholders. With that, I'll turn it over to Judy Matthews, our Chief Financial Officer, to discuss our financial results. Judy?

Thank you, Sean. Second quarter revenue increased 99% to $37.6 million compared to $18.9 million in the second quarter of 2025, driven by the addition of Imangiole, as well as strong year-over-year goals from Incrolux, Alkindi Sprinkles, Kindivi, Galvan, and Karbonic Acids. Gross profit for the quarter was $25.4 million compared to $11.9 million in the prior year period, an increase of 113%, primarily driven by higher product sales. Adjusted gross profit, which excludes the impact of acquired inventory step-up adjustments and intangible amortization, was $27.4 million in the second quarter of 2026, representing an adjusted gross margin of 73%. This compares to adjusted gross profit of $14.1 million and adjusted gross margin of 75% in the prior year period. The decrease in adjusted gross margin was primarily attributable to higher Inc. sales outside the U.S. which generate a negative gross margin. We expect full-year adjusted gross margin to exceed 70%, inclusive of a potential commercial milestone expected to be recorded in the fourth quarter of 2026 upon achievement of certain net sales thresholds for Elkindi, Sprinkl, and Kdivi. R&D expenses for the quarter were $1 million compared to $3.7 million in the prior year period. The decrease was primarily due to the Desmoda FDA filing fee incurred in 2025. We expect full-year R&D spending to be between $10 and $14 million, including the $3 million upfront licensing payment for ASN-001, which we expect to expense as R&D in the third quarter of 2026. General and administrative expenses for the quarter were $11.6 million compared to $9.7 million in the prior year period, an increase of 20%. On an adjusted basis, which excludes the impact of share-based compensation, transaction-related costs, and other one-time expenses, G&A expense was $10.2 million compared to $7.6 million in the prior year period, The increase was primarily driven by additional headcount to support the growth of our business with FDA fees accounting for $0.9 million of the year-over-year increase. Adjusted EBITDA for the second quarter of 2026 was $16.2 million or 43% of revenue compared to $3.1 million or 16% of revenue in the prior year period. We expect our full-year adjusted EBITDA margin to exceed 35% even after the potential commercial milestone referenced above and R&D expenses related to the ASM001 Licensing Payment and Bioavailability Study. Total company net income was $11.6 million or 35 cents per diluted share compared to a net loss of $2.6 million or 10 cents for basic and diluted share in the prior year period. On a non-GAAP basis, we reported net income of $14.3 million for the second quarter of 2026 compared to $1.5 million in the prior year period. Diluted earnings per share were 43 cents compared to 3 cents per share in the prior year period. Through the second quarter of 2026, We maintained a full valuation allowance against our net deferred tax assets. While our operating results have improved significantly, we remained in a cumulative loss position at quarter end for purposes of our valuation allowance assessment. If we continue to execute against our current forecast and exit this cumulative loss position during the second half of 2026, We may determine that some or all of the valuation allowance is no longer necessary. As of June 30, 2026, our valuation allowance was approximately $22 million. If the valuation allowance is released in a future period, the release would result in a significant one-time non-cash income tax benefit and a corresponding increase in reported GAAP net income in the period in which it is recorded. We ended the second quarter with $26.8 million in cash on hand after making a $3 million prepayment on our outstanding debt. We remain in a strong financial position and expect cash generated from operations to grow throughout the second half of the year. We will continue to prioritize the use of our cash reserves to fund accretive product acquisitions while accelerating the repayment of our remaining credit facility over the next six to 12 months. This concludes our remarks on second quarter results. With that, we'll turn the call back over to the operator for Q&A.

Thank you. If you'd like to ask a question, please press star 11. If your question hasn't been answered and you'd like to remove yourself from the queue, press star 11 again. Our first question comes from Chase Knickerbocker with Craig Hallam. Your line is open.

Great. Good afternoon. Thanks for taking the questions and congrats on a really great quarter here. Maybe just first from me on hemangiol. Can you give us a sense for what the net realized price is in the quarter? Now that we have a couple months under our belt, how does that compare to the kind of $8,000 to $10,000 per treated patient for a full course of therapy that you had kind of previously expected? And if you could give us a sense for volume, you know, we had a sense for kind of the patients that were on drug prior to the purchase. Is that pretty comparable in like 95% of of kind of the patients who were on prior were retained and, you know, we should be thinking about that volume kind of going forward. Thanks.

Chase, on the net pricing, we're still sticking with that $8,000 to $10,000 net price. On average, we think that's going to be our best estimate. You know, it moves around month to month, especially during this transition based on patient mix, but we still think it will be more or less in that $8,000 to $10,000 range. In terms of patient volume, yes, historically there's been 8,000 patients. We think we've converted all the patients now. We had 95% by end of June. We think we've got them all now. Now the commercial team's focus is on trying to grow that volume and convert some of the patients that historically have used the off-label adult product. So that'll be the game plan going forward.

Got it. Maybe just to follow up there, there's kind of a six-month turnover, obviously, in these patients as they roll off therapy. Can you just speak to kind of the efforts on getting in front of all of those providers now that the hemangial is under-eaten ownership and kind of the success of kind of how many of those physicians, those writers that you have been able to get in front of and kind of capture scripts subsequent to the change in ownership? And then second, just on ASN, 001. Could you just outline exactly the FDA feedback that your partner got around the bioavailability bridging study? Is that what's going to be considered the registrational study by FDA, or are they taking that clinical study in China into consideration as supportive evidence?

Thanks. Hi, Chase. I'll take that last question you have, and then Ipek can take the first part. So for ASN 001, This is the only study we need to run before we file it. The rest of the dossier is largely complete. This is, you can think of it almost as a bio, it's not exactly a bioequivalency study, but it's a demonstration that our product has absorption characteristics similar to a comparative product that's in the market today, and basically demonstrating that the and others. We view it as very straightforward and low risk. We're highly confident that we will be filing that product around the middle of next year. As we said in our earlier communications, we believe that product will be a very large product for the company, likely its largest product

Thank you, our next question comes from Gary Nachman with Canaccord Genuity. Your line is open.

Hey guys, this is Dennis Resnick, entrepreneur at Gary Nachman.

Thanks for taking our questions and congrats on the really strong quarter.

So just starting with the recent acquisition of ASM001, just talk a little bit more about the synergies you expect to leverage with the Hemangio franchise and how much of the infrastructure there could help out this product once approved. And then on the Impovito acquisition, the product's been available since 2016, so maybe just talk about what you know about the market already. and what you plan to do differently to ensure commercialization and growth and how big this product can get. And I've got one follow-up.

Ladies and gentlemen please stand by.

Ladies and gentlemen, please stand by. We're experiencing technical difficulties.

Hello.

You may begin. Gary, please repeat your question. Hey, guys.

This is Dennis Resnick. I'm here with Gary Nachman. Thanks for taking our question and congrats on the really strong quarter. So just starting with the recent acquisition of ASN001, can you just talk a little bit more about the synergies you expect to leverage with the hemangiole franchise and How much of the infrastructure there could help out once this product is approved?