Eton outlines fivefold INCRELEX market opportunity and targets $50M peak adrenal franchise sales amid record Q3 growth

Earnings Call Insights: Eton Pharmaceuticals (ETON) Q3 2025

MANAGEMENT VIEW

* Sean Brynjelsen, President, CEO & Director, announced "another record quarter for the company with triple-digit year-over-year revenue growth" and highlighted that "third quarter product revenue was $22.5 million, an increase of 129% year-over-year and up 19% compared to the second quarter." He attributed this to "strong year-over-year growth from ALKINDI SPRINKLE and Carglumic Acid, as well as additions from the recently acquired products, INCRELEX and GALZIN, which are both tracking ahead of our deal models."
* Brynjelsen emphasized the company’s focus on profitability, stating "we generated $12 million of cash from operations in the quarter" and "were able to reduce our adjusted SG&A expense sequentially from the second quarter to the third quarter."
* He noted "INCRELEX revenue and patient count continue to track well ahead of our original projections for the product" and discussed the potential for expanded market opportunity, sharing "if successful in harmonizing the labels, it could potentially increase the INCRELEX market opportunity roughly fivefold."
* For ALKINDI SPRINKLE, Brynjelsen said "2025 is the product's fifth calendar year on market and remains on pace to be the strongest year of its history by number of patients on therapy and number of new patient referrals."
* Regarding KHINDIVI, he stated the company is pursuing a label expansion: "We believe the meeting was successful as the FDA indicated they would be receptive to a label expansion with our revised formulation."
* Brynjelsen highlighted GALZIN’s progress: "It now has over 200 active patients, a number we originally set as our year-end 2025 target."
* He outlined pipeline milestones, including the upcoming ET-700 clinical program and the expected launch of ET-600, noting "the FDA accepted our ET-600 NDA submission for review and assigned a February 25 PDUFA date."
* James Gruber, CFO, reported "third-quarter revenue increased 118% to $22.5 million compared to $10.3 million in the third quarter of 2024" and that "adjusted gross profit was $10.2 million in the third quarter, representing an adjusted gross margin of 45%." He provided further detail: "Adjusted EBITDA for the third quarter of 2025 was $2.9 million compared to $2.0 million in the third quarter of 2024."

OUTLOOK

* Brynjelsen stated "We expect to deliver even stronger EBITDA in the quarters ahead" and highlighted that "Eton expects U.S. product sales to continue to grow sequentially in the fourth quarter compared to the third quarter. But given that some of the third quarter INCRELEX-related ex U.S. revenue is not expected to recur, total product sales may be flat or slightly decline in Q4 relative to Q3."
* The company is pursuing several near-term development milestones, including the initiation of the INCRELEX label harmonization clinical study in 2026 and the planned label-expansion submission for KHINDIVI in Q2 2026.
* Gruber guided "the company expects to report fourth-quarter adjusted gross margin of approximately 70%."

FINANCIAL RESULTS

* Eton reported $22.5 million in third quarter revenue, primarily from product sales, including nonrecurring revenue from INCRELEX transition inventory sales.
* Cash from operations in Q3 was $12 million, with a cash balance of $37.1 million at quarter end.
* Adjusted EBITDA for Q3 was $2.9 million, with a total company net loss of $1.9 million and non-GAAP net income of $1.5 million.
* Adjusted gross margin was 45%, impacted by INCRELEX ex U.S. transition costs; Gruber noted that excluding these, the core U.S. business gross margin would have been "just over 70% for the quarter."
* Adjusted SG&A expense declined sequentially to $6.9 million from $7.6 million in Q2.

Q&A

* Chase Knickerbocker, Craig-Hallum: Asked about pro forma gross margins excluding ex-U.S. INCRELEX activity. Gruber responded, "if we remove all of that ex-U.S. activity, it's north of just over 70% for the quarter."
* Knickerbocker questioned ALKINDI’s growth drivers. Brynjelsen answered that "the big lever certainly was the focus of the PDENO group" and highlighted increased physician comfort and late adopter uptake.
* Knickerbocker inquired about INCRELEX patient adds and clinical trial design. Brynjelsen said "we're roughly where we were at on our last call," with new scripts offset by age-outs, and expects to hit "that 110 number by the end of next month." Regarding the trial, "we expect to get feedback from the FDA in the coming weeks" and hope to start enrolling patients in the first half of next year.
* Knickerbocker requested 2026 top-line growth guidance. David Krempa, Chief Business Officer, stated "we expect significant growth to continue" but did not provide specific guidance at this time.
* Madison Wynne El-Saadi, B. Riley: Asked about the INCRELEX U.S. registry and site selection. Brynjelsen replied it "would be just the U.S. It would just be U.S. sites."
* El-Saadi questioned business development priorities. Brynjelsen said "we've been in late-stage discussions with 2 parties" for potential ultra-rare disease product acquisitions, targeting "at least 2 additional product launches next year."
* Swayampakula Ramakanth, H.C. Wainwright: Asked about INCRELEX discontinuations. Brynjelsen explained "primarily, it's patients aging out" and emphasized the focus on earlier diagnosis for longer therapy duration.
* Ramakanth queried about long-term gross margin trajectory. Gruber said "we think we can get to north of 75% by 2028" as the mix shifts to higher-margin products.
* Ramakanth asked about pricing power. Brynjelsen responded "we're a company that prides itself on pricing products appropriately" and does not see significant pricing pressure.

SENTIMENT ANALYSIS

* Analysts maintained a positive and congratulatory tone, with questions focused on growth drivers, upcoming trials, and business development, but pressed for more specifics around future growth and margins.
* Management’s prepared remarks were confident and optimistic, emphasizing strong results and future milestones. During Q&A, the tone was steady and direct, with some hesitation to provide detailed forward guidance but reaffirmation of long-term growth confidence.
* Compared to the previous quarter, management’s tone remained confident, but Q&A exchanges this quarter reflected slightly more probing from analysts on sustainability of growth and specifics on new initiatives.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from emphasizing near-term revenue acceleration in Q2 to acknowledging the potential for flat or slightly lower total product sales in Q4 due to nonrecurring revenue in Q3.
* Strategic focus remains on expanding the INCRELEX market through label harmonization and accelerating adoption of ALKINDI and KHINDIVI, with new label expansion efforts and pipeline milestones highlighted this quarter.
* Analysts continued to focus on drivers of growth and margin improvement, but this quarter placed more emphasis on long-term margin trajectory and business development prospects.
* Key metrics showed sequential revenue and cash flow growth, while management reiterated expectations for margin expansion and profitability.
* Management’s confidence in pipeline execution and business development remained strong, with new details on timing and strategy for upcoming submissions and studies.

RISKS AND CONCERNS

* Management cited the nonrecurrence of certain INCRELEX-related ex U.S. revenue, which may lead to flat or slightly declining total product sales in the next quarter.
* Adjusted gross margin in Q3 was negatively impacted by INCRELEX ex U.S. transition costs, but management expects significant improvement in Q4.
* The restrictive KHINDIVI label for patients under 5 years old is a near-term headwind, with plans underway to address this through a new formulation and label expansion.
* Patient age-outs for INCRELEX represent an ongoing challenge to net patient growth, mitigated by efforts to drive earlier diagnosis and longer therapy duration.
* Management indicated continued focus on disciplined acquisitions to sustain long-term growth, with ongoing late-stage discussions but no deals finalized yet.

FINAL TAKEAWAY

Eton Pharmaceuticals delivered record revenue and cash flow in Q3 2025, driven by strong performance from its rare disease portfolio, particularly INCRELEX, ALKINDI SPRINKLE, and GALZIN. Management underscored the potential for transformational growth through INCRELEX label harmonization, pipeline launches, and margin expansion, while highlighting disciplined cost control and active exploration of strategic acquisitions. The company is positioned for long-term growth, with multiple near-term milestones expected to support continued revenue and profitability gains.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/eton/earnings/transcripts]

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