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Item 5. Market for Registrant’s Common Equity

2026-03-19 compared with 2025-03-18 · 103 added, 53 removed, 92 unchanged (63% of the section changed)

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Risk Factors.

We are an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases.

We currently have seven commercial rare disease products:

INCRELEX®, ALKINDI SPRINKLE®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone.

The Company has six additional product candidates in late-stage development:

ET-400, ET-600, Amglidia®, ET-700, ET-800 and ZENEO® hydrocortisone autoinjector.

Eton is an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases.

We currently have eight commercial rare disease products:

INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone.

We have five additional product candidates in late-stage development:

ET-600, Amglidia®, ET-700, ET-800 and ZENEO® hydrocortisone autoinjector.

Results of Operations

We have realized revenues from the sale of our ALKINDI SPRINKLE®, Carglumic Acid, and Biorphen products in 2022, as well as the launch of Betaine in 2023, and the launch of Nitisinone and PKU GOLIKE® products in 2024.

We also realized revenue from the sale of our hospital products portfolio to Dr.

Reddy’s Laboratories S.A.

Reddy's”) in 2022, and the sale of our neurology product royalty streams to Azurity in 2023.

We anticipate continued growth of our commercialized products as well as commercializing additional product candidates in 2025 and beyond.

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

During the twelve months ended December 31, 2025, we had $80.0 million in total revenues that generated a gross profit of $42.7 million, compared to total revenues of $39.0 million during the twelve-months ended December 31, 2024 that generated a gross profit of $23.4 million during the period.

During the twelve-months ended December 31, 2025, we had product sales and royalties, net of $76.7 million, compared to product sales and royalties, net of $38.5 million during the twelve-months ended December 31, 2024, an increase of $38.2 million.

The increase in product sales and royalties, net was the result of increased sales volume of our INCRELEX®, ALKINDI SPRINKLE® and GALZIN® products in the current year.

Licensing revenue during the twelve-months ended December 31, 2025 was $3.3 million, compared to $0.5 million in licensing revenue during the twelve-months ended December 31, 2024.

The increase in licensing revenue during the twelve-months December 31, 2025 was due to $1.8 million from our out-licensing of INCRELEX® rights outside of the U.S.

and $1.5 million from the recognition of a development milestone event associated with our divestiture of DS-200.

During the twelve-months ended December 31, 2024, we recognized $0.5 million in licensing revenue associated with the sale of our DS-200 product candidate in September 2024.

Cost of Sales

During the twelve-months ended December 31, 2025, total costs of sales was $37.2 million, compared to $15.6 million in total costs of sales during the twelve-months ended December 31, 2024.

The increase in total costs of sales during the twelve-months December 31, 2025, was due to increases in INCRELEX® and ALKINDI SPRINKLE® product sales and higher commissions with respect to our out-licensing of INCRELEX® rights outside of the U.S.

Gross profit during the twelve-months ended December 31, 2025 was $42.7 million or 53.5% as a percentage of total net revenues, compared to gross profit of $23.4 million or 60.0% as a percentage of total net revenues during the twelve-months ended December 31, 2024.

The decrease in gross profit during the twelve-months ended December 31, 2025 was primarily attributable to higher commission with respect to our out-licensing of INCRELEX® rights outside of the U.S.

Research and Development Expenses

We currently have twelve employees that support our overall product development function.

The majority of our spend in research and development (“R&D”) expenses is to third parties we contract with to develop, test our products and the development of partner milestone payments.

During the twelve-months ended December 31, 2025, we incurred $7.8 million of R&D expenses, compared to $3.3 million during the twelve-months ended December 31, 2024.

The increase in R&D expenses was primarily due to a $2.2 million NDA filing fee for ET-600 and increased expenses associated with our ET-700 and ET-800 project development activities.

General and Administrative Expenses

General and administrative expenses (“G&A”) expenses consist primarily of employee compensation expenses, selling and advertising/promotional expenses, legal and professional fees, business insurance and FDA fees associated with approved products.

We anticipate that our G&A expenses will increase to support our business growth, particularly with respect to sales and marketing activities and additional personnel.

During the twelve-months ended December 31, 2025 and 2024, we incurred $35.8 million and $22.8 million, respectively, of G&A expenses.

The increase in G&A expenses during the twelve-months ended December 31, 2025 was primarily attributable to an increase in product advertising and promotional expenses, higher stock-based compensation expense and an increase in compensation and benefit expenses due to an increase in general and administrative headcount during the current year.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Net revenues of $39.0 million in 2024 included $0.5 million of licensing revenue from the sale of our DS-200 product candidate in September 2024.

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Our 2024 gross profit of $23.4 million was up from $21.1 million in 2023 primarily as a result of higher product sales for ALKINDI SPRINKLE® and Carglumic Acid.

For the years ended December 31, 2024 and 2023, we incurred $3.3 million and $3.3 million in research and development ("R&D") expenses, respectively, and $22.8 million and $18.9 million of general and administrative (“G&A”) expenses, respectively.

For the years ended December 31, 2024 and 2023, we incurred $3.3 million and $3.3 million in R&D expenses, respectively, and $22.8 million and $18.9 million of G&A expenses, respectively.

The $3.8 million increase in G&A expenses was primarily due to personnel additions to support our growing business as well as marketing spend on new products.

We incurred a net loss of $3.8 million and $0.9 million for the years ended December 31, 2024 and 2023, respectively.

General and Administrative Expenses

G&A expenses consist primarily of employee compensation expenses, selling and advertising/promotional expenses, legal and professional fees, business insurance and FDA fees associated with approved products.

We anticipate that our G&A expenses will increase to support our business growth, particularly with respect to sales and marketing activities and additional personnel.

Research and Development Expenses

We currently have eight employees that support our overall product development function.

The majority of our spend in R&D is to third parties we contract with to develop and test our products and development of partner milestone payments.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Net revenues of $31.6 million in 2023 included $5.5 million of licensing revenue from the sale of our neurology product royalty streams to Azurity in June 2023.

Net revenues of $21.3 million in 2022 included $10.0 million of licensing revenue, consisting of $5.0 million from Azurity on the launch of Zonisamide and $5.0 million from the hospital products sale to Dr.

Net product revenue of $26.1 million in 2023 increased by $14.8 million from $11.3 million in 2022 primarily as a result of product sales growth for ALKINDI SPRINKLE® and Carglumic Acid.

Our 2023 gross profit of $21.1 million was up from $14.3 million in 2022 primarily as a result of growth in ALKINDI SPRINKLE® and Carglumic Acid, as well as the sale of our neurology product royalty streams to Azurity.

For the years ended December 31, 2023 and 2022, we incurred $3.3 million and $4.0 million of R&D expenses, respectively, and $18.9 million and $18.6 million of G&A expenses, respectively.

The $0.7 million decrease in R&D was driven by hospital products development in 2022 that were sold and, therefore, did not recur in 2023.

The $0.3 million increase in G&A expenses was primarily due to personnel additions to support our growing business.

We incurred a net loss of $0.9 million and $9.0 million for the years ended December 31, 2023 and 2022, respectively.

General and Administrative Expenses

G&A expenses consisted primarily of employee compensation expenses, selling and advertising/promotional expenses, legal and professional fees, business insurance and FDA fees.

We anticipate that our G&A expenses will increase to support our business growth.

Research and Development Expenses

We had eight employees that supported our overall product development function.

The majority of our spend in R&D was to third parties we contracted with to develop and test our products in addition to development partner milestone payments.

Liquidity and Capital Resources

As of December 31, 2025, we had total assets of $92.1 million, cash and cash equivalents of $25.9 million and working capital of $22.1 million.

We believe that our existing funding and revenues from our approved products will be sufficient for at least the next twelve months of our operations.

However, our projected estimates for our product development spending, administrative expenses and our working capital requirements could be inaccurate, or we may experience growth more quickly or on a larger scale than we expect, any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations.

We believe that our revenues and cash flows from our product portfolio will be sufficient for at least the next twelve months of our operations.

However, our projected estimates for our product development spending, administrative expenses and our working capital requirements could change significantly, or we may experience growth more quickly or on a larger scale than we expect, any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we would expect to support our operations.

The following table sets forth a summary of our cash flows for the years ended December 31, 2025, 2024 and 2023 (in thousands):

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December 31, 2023

Net cash from operating activities

Net cash from investing activities

Net cash flows from financing activities

Net cash from (used in) operating activities

Net cash from (used in) investing activities

Net cash flows from (used in) financing activities

Net change in cash and cash equivalents

The decrease in cash from operating activities was primarily the result of an increase in prepaid expenses associated with FDA filing fees in addition to higher inventory purchases in the current year.

Investing activities in 2024 consisted of the purchase of product licensing rights associated with INCRELEX®, GALZIN® and PKU GOLIKE®, while investing activities in 2023 and 2022 consist primarily of the purchase of product licensing rights for Nitisinone and Betaine, respectively.

The increase in cash from financing activities was primarily the result of net proceeds received from expanding our credit agreement with SWK Holdings Corporation (“SWK”) in 2024 and proceeds received from the issuance of common stock in a private placement offering compared to repayment of long-term debt in 2023 and 2022.

See Note 6 — Debt for additional information on the SWK loan in Notes to our Financial Statements.

During the twelve-months ended December 31, 2025, 2024 and 2023, net cash from operating activities was $10.5 million, $1.0 million and $6.8 million, respectively.

The increase in cash from operating activities during the twelve-months ended December 31, 2025 was primarily due to higher cash collections from product sales, a filing fee refund from the FDA related to ET-400 and the collection of a licensing milestone payment.

The decrease in cash from operating activities during December 31, 2024 as compared to December 31, 2023, was primarily associated with an increase in prepaid expenses associated with FDA filing fees in addition to higher inventory purchases in the current year.

During the twelve-months ended December 31, 2025, 2024 and 2023, net cash used in investing activities was $0.3 million, $40.0 million and $0.8 million, respectively.

The decrease in net cash used in investing activities during the twelve-months ended December 31, 2025 was primarily attributable to one-time cash outflows for the business combination of INCRELEX® and the purchase of product licensing rights associated with GALZIN® and PKU GOLIKE®, which were cash outflows during the twelve-months ended December 31, 2024.

During the twelve-months ended December 31, 2023, we purchased the product licensing rights for Nitisinone.

During the twelve-months ended December 31, 2025 and 2024, net cash from financing activities was $0.8 million and $32.6 million, respectively, compared to net cash used in financing activities during the twelve months ended December 31, 2023 of $1.0 million.

The decrease in cash from financing activities during the twelve-months ended December 31, 2025 was primarily associated with net proceeds received from expanding our credit agreement with SWK Holdings Corporation ("SWK") and proceeds from common stock issued in a private placement offering in 2024.

During the twelve-months ended December 31, 2023, net cash used in financing activities primarily represented $1.2 million in debt repayments to SWK, partially offset by proceeds received from stock option exercises and employee stock purchase plan proceeds.

Non-GAAP Financial Measures

EBITDA, which is derived from GAAP income or loss from operations, then excluding interest, taxes, depreciation and amortization.

Adjusted EBITDA is defined as net income or before interest expense, income taxes, depreciation and intangible amortization, stock-based compensation expense, restructuring charges, acquisition and divestiture-related costs, and other non-recurring items, non-GAAP net income and non-GAAP earnings per share are used and provided by us as non-GAAP financial measures.

These non-GAAP financial measures are intended to provide additional information on our performance, operations and profitability.

Adjustments to our GAAP figures as well as EBITDA includes non-recurring acquisition or divestiture-related costs, fees related to refinancing activities, as well as non-cash items such as share-based compensation, inventory step-up expense, depreciation and amortization, non-cash interest expense, and other non-cash adjustments.

Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred.

We maintain an established non-GAAP policy that guides the determination of what costs or gains will be included in non-GAAP adjustments.

We believe that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of our financial and operating performance.

The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of our historical financial results and trends and to facilitate comparisons between periods.

In addition, these non-GAAP financial measures are among the indicators our management uses for planning and forecasting purposes and measuring our performance.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

EBITDA, adjusted EBITDA and non-GAAP net income, and the related per share amounts, were as follows (in thousands, except share and per share amounts):

GAAP net loss

Intangible amortization expense

Interest expense (including debt discount amortization and non-cash interest expenses)

Income tax expense

Other non-GAAP adjustments:

Inventory step-up expense (1)

Stock-based compensation (2)

Severance expense (3)

Acquisition/divestiture-related costs (4)

Total of Other non-GAAP adjustments

Adjusted EBITDA

GAAP loss before income tax

Non-GAAP adjustments:

Depreciation (5)

Intangible amortization expense (6)

Inventory step-up expense (1)

Stock-based compensation (2)

Severance expense (3)

Acquisition/divestiture-related costs (4)

Total pre-tax non-GAAP adjustments

Income tax effect of pre-tax non-GAAP adjustments (7)

Total non-GAAP adjustments

Non-GAAP Net Income

Weighted average number of common shares outstanding, basic

Weighted average number of common shares outstanding, diluted

GAAP income (loss) per share - Basic

Non-GAAP adjustments

Non-GAAP earnings per share - Basic

GAAP income (loss) per share - Basic

Non-GAAP adjustments

Non-GAAP earnings per share - Diluted

(1) During the twelve months ended December 31, 2025, we recognized in cost of sales $5,094 for inventory step-up expense primarily attributable to INCRELEX® inventory revalued in connection with this business combination.

(2) Represents share-based compensation expense associated with our stock option and restricted stock unit stock unit grants to our employees and non-employee directors and our employee share purchase plan.

(3) Represents severance and benefit expenses associated with role redundancy within commercial operations during the first quarter of 2025.

(4) Represents legal expense and other divestiture-related costs associated with the out-licensing of the INCRELEX® commercial rights in territories outside of the U.S.

(5) Represents depreciation expense related to our property and equipment.

(6) Intangible amortization expenses are associated with our intellectual property rights related to INCRELEX®, GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous and Nitisinone.

(7) Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the effective income tax rate for the period.

As discussed further in Note 14, we are in a full income tax valuation allowance position and the income tax effect on pre-tax non-GAAP adjustments is commensurate with the performance measure.

Critical Accounting Policies

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ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods.

To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps:

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and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

At contract inception, once we determine the contract falls within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.

At contract inception, once we determine the contract falls within the scope of ASC 606, we assess the goods promised within each contract and determine those that are performance obligations and assesses whether each promised good is distinct.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options.

Arrangements that include rights to additional goods that are exercisable at a customer’s discretion are generally considered options.

We assess whether these options provide a material right to the customer and, if so, they are considered performance obligations.

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Significant Financing Component – In determining the transaction price, we will adjust consideration for the effects of the time value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the licensees will be more than one year.

The Company sells its INCRELEX®, ALKINDI SPRINKLE®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products to pharmacy distributor customers which provide order fulfilment and inventory storage/distribution services.

The Company may sell products in the U.S.

to wholesale pharmaceutical distributors, who then sell the product to hospitals and other end-user customers.

Sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement, and delivery of individual shipments represent performance obligations under each purchase order.

The Company sells its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products to pharmacy distributor customers which provide order fulfilment and inventory storage/distribution services.

The Company uses a third-party logistics (“3PL”) vendor to process and fulfill orders and has concluded it is the principal in the sales to wholesalers because it controls access to the 3PL vendor services rendered and directs the 3PL vendor activities.

The Company has no significant obligations to wholesalers to generate pull-through sales.

For its INCRELEX®, ALKINDI SPRINKLE®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products, the Company bills at the initial product list price which are subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment.

For its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone products, the Company bills at the initial product list price which are subject to offsets for patient co-pay assistance and potential state Medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment.

Selling prices initially billed to wholesalers may be subject to discounts for prompt payment and subsequent chargebacks when the wholesalers sell products at negotiated discounted prices to members of certain group purchasing organizations (“GPOs”) and government programs.

The Company estimates the transaction price when it receives each purchase order taking into account the expected reductions of the selling price initially billed to the wholesaler/distributor arising from all of the above factors.

The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays, although INCRELEX®, ALKINDI SPRINKLE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone sales are not subject to returns.

The Company stores its INCRELEX®, ALKINDI SPRINKLE®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone inventory at its pharmacy distributor customer locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

The Company has developed estimates for future returns and chargebacks and the impact of other discounts and fees it pays, although INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone sales are not subject to returns.

The Company stores its INCRELEX®, ALKINDI SPRINKLE®, KHINDIVI TM , GALZIN®, PKU GOLIKE®, Carglumic Acid, Betaine Anhydrous, and Nitisinone inventory at its pharmacy distributor customer locations, and sales are recorded when stock is pulled and shipped to fulfill specific patient orders.

The Company recognizes revenue and cost of sales from products sold to wholesalers upon delivery to the wholesaler location.

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Compensation expense is recognized over the period during which services are rendered by consultants and non-employees until completed.

At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model (“BSM”).

The fair value of these awards and assumptions inputs are measured using the Black-Scholes option-pricing model (“BSM”).

The Company estimates the fair value of stock-based option awards using the BSM.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity