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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-16 · 48 added, 114 removed, 192 unchanged (46% 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 2021 10-K.

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.

are a unique pharmaceutical company focused on developing, acquiring, and commercializing innovative pharmaceutical products that fulfill

an unmet patient need.

Since the formation of our company in 2017, we have used our expertise in business development, regulatory, and

product development to assemble a diversified portfolio of eleven products.

Six of our products have been approved by the FDA and commercially

We plan to continue growing our business through the acquisition of additional late-stage, high-value product candidates.

of Operations

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.

the three months ended March 31, 2022, we had $2,176 in revenue from product sales and royalties which generated a gross profit

We had total revenue of $11,897 for the three-month period ended March 31, 2021 which reflected Azurity and Bausch

milestone revenues for $11,000 plus product sales and royalty revenues which generated a total gross profit of $10,307 for the period.

and Development Expenses

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 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.

the three months ended March 31, 2022 we incurred $1,618 of research and development expenses (“R&D”) as compared to

the $886 for the same period in 2021.

The increase was primarily due to a $500 technical batch milestone fee to Crossject for Zeneo hydrocortisone

autoinjector development and continued development efforts for our other new product candidates.

and Administrative Expenses

1 unchanged sentence

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

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 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 $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 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

the three-month periods ended March 31, 2022 and 2021, we incurred $4,927 and $4,058, respectively, of G&A expenses.

The $869 increase

in G&A expense was mainly due to increased compensation expenses to support our product sales growth and increased legal expenses

on our Paragraph IV patent challenge related to L-Cysteine, partially offset by reduced product marketing expenses related to Alkindi

Sprinkle commercialization.

and Capital Resources

of March 31, 2022, we had total assets of $23.2 million, cash and cash equivalents of $15.2 million and working capital of $15.3

We had previously capitalized our operations from the June 2017 private placement of approximately $20.1 million of Series A

preferred stock which converted into shares of our common stock concurrent with our IPO in November 2018 and also the IPO which provided

us with net proceeds of $22.0 million.

In addition, we entered into a Credit Agreement with SWK Holdings in November 2019 whereby we

drew a $5.0 million loan amount at closing and an additional $2.0 million in August 2020.

In March and April 2020, we received net proceeds

of approximately $7.8 million from the sale of shares of our common stock, and in October 2020, we received net proceeds of approximately

$21.0 million from a public offering of our common stock at an offering price of $7.00 per share.

We believe that our existing funding,

revenues from our approved products and additional milestone payments expected to be paid in 2022 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.

following table sets forth a summary of our cash flows for the three-month periods ended March 31, 2022 and 2021:

Three months ended

March 31, 2022

Three months ended

March 31, 2021

Net cash provided by operating activities

Cash used in investing activities

Cash flows (used in) provided by 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.

decrease in cash provided by operating activities was mainly a result of the net income in the 2021 period partially offset by changes

in working capital as compared to the net loss in the 2022 period and favorable working capital changes – in particular, the collection

of the $5,000 milestone from Azurity related to the December 2021 product launch for EPRONTIA®.

The 2022 financing activity

was an initial payment on our loan principal (see Note 5) whereas the 2021 financing activity was the result of stock option exercises.

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