Eton Pharmaceuticals: An Evolving “Sum of the Parts” Story (NASDAQ: ETON)

Alina Lyssenko

I predict the future happiness of Americans, if they can stop the government from wasting the labor of the people under the guise of taking care of them. -Thomas Jefferson

It’s been almost a year since our last piece on Eton Pharmaceuticals (NASDAQ:ETON). The stock surged soon after article was posted but has been in removal mode ever since. The company released its second quarter results earlier this week. Given that it seems good to revisit this small cap name. An analysis follows below.

Stock chart

Looking for Alpha

Company presentation

Eton Pharmaceuticals is a commercial-stage biopharmaceutical company based in Illinois. The Company is focused on improving the formulation, delivery and/or safety of drugs approved using the 505(B)(2) regulatory pathway. The stock currently trades just under three dollars per share and sports an approximate market capitalization of $75 million. The company is in the early stages of bringing several products to market and has several more that it could potentially launch over the next year.

Royalty progression

May Company presentation

The company focuses on two main areas. There are royalty products. These are products that are managed by partners with established sales forces for which Eton will receive milestone payments as well as royalties on sales. There are orphan drugs that Eton will sell under its own brand that have the greatest potential to impact margins and profits. The company recently launched two drugs in this category.

    carglumic acid

May Company presentation

The first is carglumic acid tablets. If the company eventually hits its market share targets, that could represent revenue of around $15 million a year.

Sprinkle Alkindi

May Company presentation

Alkindi Sprinkle, as described above, is a much larger potential opportunity and management estimates that this product could potentially generate $100 million in annual sales. The product is ‘co-promoted‘ by Tolmar Pharmaceuticals through their more than 60 sales representatives.

The company had a Hospital Products division that was gearing up for several commercial launches. However, at the end of June, Eton sold rights and interests in the Biorphen, Rezipres and Cysteine ​​Hydrochloride products of this division to a subsidiary of Dr. Reddy’s Laboratories (RDY). This agreement came with an upfront payment of $5 million as well as potential additional payments of up to $45 million, depending on the achievement of certain event and sales milestones. This allows Eton to focus solely on its rare disease product portfolio.

Second quarter results

The company recorded the second quarter Numbers August 11. Eton reported a GAAP loss for the quarter of six cents per share. The consensus was for a slight profit for the quarter. Revenue was up more than 140% year over year to $7.4 million, which was slightly below expectations. It should be noted that most of the revenue came from milestone payments, including the net payment of $5 million for the disposal of assets from its hospital products division. Carglumic acid sales saw 100% sequential growth and Alkindi Sprinkle sales increased 34% from the first quarter of this year, but both are seeing very low numbers as they are at the start of the commercial launch phase.

Zonisade was approved in July and will be marketed by Azurity Pharmaceuticals. During the quarter, Eton made good progress addressing FDA concerns regarding its marketing application for dehydrated alcohol injection. The company plans to resubmit the application for the product later this year. Approval and launch is expected to take place in 2023. With approval, Eton would be one of only 2 suppliers in this approximately $80 million annual market due to orphan drug exclusivity protections.

Management also continues to advance the development of its ZENEO® hydrocortisone auto-injector. A marketing application for this product is expected to be filed with the FDA in 2023.

Analyst Commentary and Review

The company ended the second quarter with $17 million in cash and marketable securities on the balance sheet after posting a net loss of $1.6 million in the second quarter. The company is also eligible to receive an additional milestone payment of $5 million upon the launch of the recently approved Zonisade™ product. Approximately five percent of Eton Pharmaceuticals’ outstanding float is currently held short. There has also been no insider activity in stocks so far in 2022.

Several months ago, JonesTrading reissued a buy quote with a price target of $10 on ETON. This week, HC Wainwright did the same with a price target of $9. This is the only analyst firm activity I can find on this stock so far in 2022.


The only analyst firm that released projections caused the company to lose 39 cents per share on fixed income of $21.5 million for fiscal year 2022. For Y2023, that loss is expected to narrow to 8 cents per share. action as sales hit $37 million.

The company has launched a few key products since our last visit. The balance sheet looks in good shape given Eton’s low rate of cash burn, the upcoming payment of $5m for Zonisade’s recent endorsement and potentially $45m of its deal around its Hospital Product division. .

That said, its major commercial launches are still in their infancy and there’s little coverage or analyst projections around the company. The company is a complicated but potentially compelling story considering its just $75 million and multiple products on the market. Therefore, the actions seem to deserve a small ‘watch the article‘ as investors get more visibility around Eton’s sell ramp over the coming quarters.

If you can convince people that freedom is injustice, then they will believe that slavery is freedom.. -Stefan Molyneux

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