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Item 2. Management’s Discussion and Analysis

2021-11-16 compared with 2021-08-16 · 109 added, 77 removed, 197 unchanged (49% of the section changed)

17 unchanged sentences

consider other matters set forth in our SEC filings including the Risk Factors set forth in Part I, Item 1A of our 2020 10-K.

are a specialty pharmaceutical company focused on developing, acquiring, and commercializing innovative pharmaceutical

products and we have particularly targeted hospital injectable and pediatric rare disease products.

We seek to improve the formula,

delivery system, or safety of existing molecules in order to address unmet patient needs.

We pursue what we perceive to be low-risk

candidates where existing published literature, historical clinical trials, or physician usage has established safety and/or

efficacy of the molecule, thereby reducing the incremental clinical burden required for us to bring the product to

October 2019, we received FDA approval for Biorphen® which we are marketing in the United States.

Biorphen (phenylephrine HCl injection)

is an alpha-1 adrenergic receptor agonist indicated for the treatment of clinically important hypotension resulting primarily from vasodilation

in the setting of anesthesia.

In September 2020, the FDA approved our Alkindi Sprinkle product as a replacement therapy for pediatric

adrenal insufficiency (AI), including congenital adrenal hyperplasia (CAH) in patients from birth to less than 17 years of age.

the FDA approved EM-100, an eye allergy product which we sold to Bausch Health whereby we will receive royalties on sales of EM-100 which

was launched in late January 2021.

We received a $1,500 milestone payment from Bausch in accordance with the product launch for EM-100.

In February 2021, we sold three pediatric neurology products we had under development to Azurity Pharmaceuticals (“Azurity”)

and have received $12,000 in proceeds.

We anticipate additional revenues from Azurity based on various product-related milestones including

the commercial launch for these products which are currently under review with the FDA.

have established a diversified pipeline of product candidates in various stages of development, including multiple candidates that have

been submitted to the FDA for review.

Our product candidates are primarily focused on two core areas:

hospital-based products and pediatric

rare disease products.

We believe these candidates can address situations where patient needs are not being met by current FDA-approved

are an innovative pharmaceutical company focused on developing, acquiring, and commercializing rare disease products and certain hospital

injectable products.

We seek to improve the formula, delivery system, or safety of existing molecules in order to address unmet patient

We pursue what we perceive to be low-risk candidates where existing published literature, historical clinical trials, or physician

usage has established safety and/or efficacy of the molecule, thereby reducing the incremental clinical burden required for us to bring

the product to patients.

owns or receives profit share or royalty payments on six FDA-approved products:

Sprinkle® (hydrocortisone granules).

Alkindi Sprinkle is a replacement therapy for adrenalcortical insufficiency in pediatric

We commercialize the product with our internal sales force focused on pediatric endocrinologists and we estimate that approximately

10,000 children in the United States suffer from adrenal insufficiency.

Eton licensed the product from Diurnal Group plc in March

2020 and the product was approved by the FDA in September 2020 and launched in December 2020.

acid tablets.

Carglumic acid tablets are a generic version if Carbaglu®, indicated for the treatment of hyperammonemia due

to N-acetylglutamate Synthase (NAGS) deficiency.

The product was approved by the FDA and licensed by Eton in October 2021.

to market the product with our internal sales force and expect the product to be available in the fourth quarter of 2021.

(phenylephrine hydrochloride injection).

Biorphen is the first and only FDA-approved formulation of ready-to-use injectable phenylephrine.

The product is used for the treatment of clinically important hypotension resulting primarily from vasodilation in the setting of

We commercialize Biorphen under a co-promotion agreement with Xellia Pharmaceuticals.

Biorphen was approved by the FDA

in October 2019 and sales commenced at the end of 2019.

(ephedrine hydrochloride injection).

Rezipres is a ready-to-use formulation of injectable ephedrine indicated for the treatment

of clinically important hypotension occurring in the setting of anesthesia.

The product was approved by the FDA in June 2021 and

we expect to launch the product in the coming months.

Preservative Free® (ketotifen ophthalmic solution).

Alaway Preservative Free (formerly known as EM-100) is the first and

only FDA-approved preservative-free ophthalmic product for the treat of allergic conjunctivitis.

Eton sold the product to Bausch

Health and the product was approved by the FDA in September 2020.

Bausch Health launched the product early in 2021 and currently

commercializes the product via the over-the-counter channel and we receive a royalty on sales of the product.

(topiramate oral solution).

Eprontia is indicated for the treatment of epilepsy and migraine and is the first and only FDA-approved

liquid formulation of topiramate.

Eton sold the product to Azurity Pharmaceuticals as part of a multi-product transaction in February

The product was approved by the FDA in November 2021 and we will receive royalties on sales of the product and milestone payments

when certain launch and commercial success metrics are met.

Azurity Pharmaceuticals is expected to launch the product in the fourth

quarter of 2021.

February 2021, we sold three pediatric neurology products we had under development to Azurity Pharmaceuticals (“Azurity”)

and anticipate additional revenues from Azurity based on various product-related milestones including the commercial launch for these

Of these three products, Eprontia® (topiramate oral solution) was approved by the FDA in November 2021 and two are currently

under review with the FDA.

We have three additional product candidates under development, two of which have been submitted to the FDA.

encountered difficulty in creating significant market pull-through demand for Biorphen in 2020 and 2021 as our in-person sales calls

to key personnel at hospitals and surgical centers and introductory product presentation seminars were cancelled as a result of the COVID-19

We are working on other promotional efforts to drive further adoption in the market, but we expect that our Biorphen sales

and marketing efforts will continue to be adversely affected by the pandemic.

In September 2020, we reduced the selling price for Biorphen,

which we sell through wholesalers, and recognized a $192 reduction to revenue based on the shelf stock inventory held at our wholesale

These same adverse pandemic factors have adversely impacted our Alkindi Sprinkle sales in 2021.

of Operations

the three-month period ended June 30, 2021 we had $3,067 in revenues mainly from the Azurity milestones revenue of $2,500 discussed

above plus $567 in product sales and royalties which generated a total gross profit of $2,931 for the period.

$20 in net sales of Biorphen for the three-month period ended June 30, 2020 at a negative gross profit of $8 mainly as a result of the

impact of the COVID-19 pandemic which adversely impacted our promotion and in-person sales call activity.

the six-month period ended June 30, 2021 we realized $14,964 in revenues mainly from the $14,000 of Azurity and Bausch and other

milestone revenues discussed above plus $964 of product sales and royalties which generated a total gross profit of $13,238

for the period.

Revenues for the six-month period ended June 30, 2020 of $119 in net sales of Biorphen at a negative gross profit

of $11 mainly as a result of the impact of the COVID-19 pandemic which adversely impacted our promotion and in-person sales call

the three-month period ended September 30, 2021 we had $775 in revenues from product sales and royalties which generated a total gross

profit of $158 after recognizing a $432 cost of sales provision related to writing down slow-moving Biorphen inventories in the period.

For the three-month period ended September 30, 2020 we had negative net sales of $161 for Biorphen due to a $192 wholesaler price reduction

combined with low sales volume primarily as a result of the COVID-19 pandemic marketing and promotion factors discussed above.

This unfavorable

sales impact was partially offset by a negative cost of sales of $144 based on the profit/(loss) sharing agreement with our product development

partner for Biorphen.

the nine-month period ended September 30, 2021 we realized $15,739 in revenues mainly from the $14,000 of Azurity and Bausch and other

milestone revenues discussed above plus $1,739 of product sales and royalties which generated a total gross profit of $13,396 for the

For the nine-month period ended September 30, 2020 we realized a negative $42 in net sales of Biorphen mainly due to the $192

wholesaler price reduction noted above combined with low sales volume primarily as a result of the COVID-19 pandemic marketing and promotion

factors discussed above.

and Development Expenses

the three-month periods ended June 30, 2021 and 2020, we incurred $1,990 and $1,609, respectively, of research and development

(“R&D”) expenses.

The R&D expense reflects an overall $381 higher expense level in 2021 mainly due to increased spending for general product development partially

offset by decreased laboratory expenses in the 2021 period.

the six-month periods ended June 30, 2021 and 2020, we incurred $2,876 and $7,877, respectively, of R&D expense.

the three-month periods ended September 30, 2021 and 2020, we incurred $2,678 and $2,826, respectively, of research and development (“R&D”)

The R&D expense reflects an overall $148 lower expense level in 2021 mainly due to lower overall spending for product development.

the nine-month periods ended September 30, 2021 and 2020, we incurred $5,554 and $10,703, respectively, of R&D expense.

period included $4,764 in expense for the licensing payments for the U.S.

rights to Alkindi® Sprinkle.

The six-month R&D expense reflects an overall $5,001 lower expense level in 2021 mainly as a result

of the licensing payments noted for Alkindi Sprinkle in 2020.

We discontinued our laboratory operations at the end of March 2021.

The nine-month R&D expense

reflects an overall $5,149 lower expense level in 2021 mainly as a result of the licensing payments noted for Alkindi Sprinkle in 2020

and discontinuing our laboratory operations at the end of March 2021.

and Administrative Expenses

1 unchanged sentence

product marketing expenses, distribution expenses, business insurance, travel expenses and general office expenses.

the three-month periods ended June 30, 2021 and 2020, we incurred $3,266 and $2,921, respectively, of G&A expenses.

The $345 increase

in G&A expense was mainly due to increased product marketing/distribution and selling expenses related to Alkindi Sprinkle commercialization

partially offset by a lower level of legal expenses from our initiating a Paragraph IV patent challenge against Exela Pharma Science’s

Elcys product (cysteine hydrochloride injection) in 2020.

the six-month periods ended June 30, 2021 and 2020, we incurred $7,324 and $5,531, respectively, of G&A expenses.

The $1,793 increase

in G&A expense was mainly due to increased product marketing/distribution and selling expenses related to Alkindi Sprinkle commercialization

partially offset by a lower level of legal expenses from our initiating a Paragraph IV patent challenge against Exela Pharma Science’s

Elcys product (cysteine hydrochloride injection) in 2020.

the three-month periods ended September 30, 2021 and 2020, we incurred $3,327 and $3,429, respectively, of G&A expenses.

decrease in G&A expense was mainly due to a lower level of promotional expenses related to launching Alkindi Sprinkle and reduced

legal expenses from our initiating a Paragraph IV patent challenge against Exela Pharma Science’s Elcys product (cysteine hydrochloride

injection) in 2020 partially offset by increased product distribution and selling expenses related to Alkindi Sprinkle commercialization

and higher overall administrative expenses.

the nine-month periods ended September 30, 2021 and 2020, we incurred $10,651 and $8,960, respectively, of G&A expenses.

increase in G&A expense was mainly due to increased product marketing/distribution and selling expenses related to Alkindi Sprinkle

commercialization partially offset by a lower level of legal expenses from our initiating a Paragraph IV patent challenge against Exela

Pharma Science’s Elcys product (cysteine hydrochloride injection) in 2020.

and other (expense) income

had slightly higher interest expense level for the three and six-month periods ended June 30, 2021 as compared to the same periods in

2020 due to our borrowing an additional $2,000 under our SWK loan facility in August 2020.

had slightly higher interest expense for the three and nine-month periods ended September 30, 2021 as compared to the same periods

in 2020 due to our borrowing an additional $2,000 under our SWK loan facility in August 2020.

recognized a $181 gain from the sale of our laboratory equipment in May 2021 and also recognized a $365 gain from the forgiveness of

our SBA PPP loan in May 2021.

incurred a net loss of $2,016 and $4,730 for the three-month periods ended June 30, 2021 and 2020, respectively.

The decreased

loss in the 2021 period was mainly a result of increased revenues of $3,047 which were partially offset by increased operating

expenses as discussed above.

In addition, the gain from the sale of our laboratory equipment and the gain from the PPP loan forgiveness

contributed to the decrease in the net loss for the period.

realized net income of $3,100 and a net loss of $13,779 for the six-month periods ended June 30, 2021 and 2020, respectively.

The improvement in earnings in the 2021 period was mainly a result of increased revenues of $14,845 and lower product research

and development spending partially offset by higher general and administrative expenses for sales/promotion activities to support the

launch of Alkindi Sprinkle.

incurred a net loss of $6,094 and $6,504 for the three-month periods ended September 30, 2021 and 2020, respectively.

The decreased loss

in the 2021 period was mainly a result of increased revenues of $936 and $250 in lower operating expenses as discussed above.

realized a net loss of $2,994 and a net loss of $20,283 for the nine-month periods ended September 30, 2021 and 2020, respectively.

improvement in the loss level in the 2021 period was mainly a result of increased revenues of $15,781 and lower product research and

development spending of $5,149 partially offset by $1,691 in higher general and administrative expenses for sales/promotion activities

to support the launch of Alkindi Sprinkle.

In addition, the $181 gain from the sale of our laboratory equipment and the $365 gain from

the PPP loan forgiveness contributed to net income for the period.

following table sets forth a summary of our cash flows for the six-month periods ended June 30, 2021 and 2020:

cash provided by (used in) operating activities

provided by (used in) investing activities

flows from financing activities

in cash and cash equivalents

improvement in cash provided by operating activities was mainly due to the higher operating earnings in 2021 that were partially offset

by working capital changes when compared to the same period in 2020.

Investing activities reflected the $700 sale of lab equipment in

May 2021 and only nominal equipment spending requirements in 2020.

The change in financing activity cash flows was primarily the result

of the sales of our common stock for $7,756 in March and April 2020.

the PPP loan forgiveness contributed to the reduced net loss for the period.

following table sets forth a summary of our cash flows for the nine-month periods ended September 30, 2021 and 2020:

Nine months ended

September 30, 2021

Nine months ended

September 30, 2020

Net cash provided by (used in) operating activities

Cash provided by (used in) investing activities

Cash flows from financing activities

Change in cash and cash equivalents

improvement in cash provided by operating activities was mainly due to the reduced loss level in 2021 which was partially offset by working

capital changes when compared to the same period in 2020.

Investing activities reflected the $700 sale of lab equipment in May 2021 and

only nominal equipment spending requirements in 2021 and 2020.

The change in financing activity cash flows was primarily the result of

the sales of our common stock for $7,756 in March and April 2020 along with $1,965 in additional loan proceeds from our borrowing with

SWK Holdings in August 2020.

Accounting Policies

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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-Q

Item 2. Management’s Discussion and Analysis