Executive Summary / Key Takeaways

• Eton Pharmaceuticals is rapidly transforming into a leading ultra-rare disease company, driven by a three-pillar strategy of organic growth, internal pipeline development, and strategic acquisitions, achieving its 19th consecutive quarter of sequential product revenue growth by Q3 2025.
• Recent high-value acquisitions like INCRELEX and GALZIN are significantly exceeding initial projections, fueled by revitalized commercial efforts and Eton's patient-centric "Eton Cares" program, positioning the company for an $80 million annual revenue run rate by Q3 2025.
• The company's core technological differentiation lies in developing and commercializing proprietary liquid and extended-release formulations that address critical unmet needs for precise dosing, improved compliance, and enhanced safety in pediatric and rare disease populations.
• A robust late-stage pipeline, including ET-600 (PDUFA Feb 2026), ET-700 (extended-release GALZIN), and ET-800 (ready-to-use hydrocortisone), promises to further accelerate growth and margin expansion, with multiple label expansion opportunities for existing products.
• Despite increased SG&A investments to support recent launches, Eton maintains a strong focus on profitability, projecting adjusted gross margins to reach 70% in Q4 2025 and over 75% by 2028, supported by a favorable shift towards higher-margin products and disciplined expense management.

A Patient-First Approach to Ultra-Rare Disease Leadership

Eton Pharmaceuticals, Inc. is rapidly establishing itself as a specialized pharmaceutical company dedicated to developing and commercializing treatments for ultra-rare diseases. Incorporated in 2017, the company's foundational strategy is built upon three interconnected pillars: fostering organic growth from its existing portfolio, advancing a robust internal pipeline, and executing value-accretive external acquisitions and licensing transactions. This disciplined approach has consistently delivered results, marked by 19 consecutive quarters of sequential product revenue growth through the third quarter of 2025.

The company's vision centers on "putting patients first," ensuring that "every patient that wants and needs their products will get it regardless of insurance status or access barriers." This philosophy is embodied in the "Eton Cares" program, which offers comprehensive support including zero-dollar co-pays, free drug programs for uninsured patients, and pre-bridge shipments. This high-touch model is a significant competitive advantage, particularly in the niche ultra-rare disease market where patient populations are small—often fewer than 10,000, and sometimes even under 1,000, in the United States. These underserved markets are frequently overlooked by larger pharmaceutical players, allowing Eton to fill critical gaps.

Eton operates in a competitive landscape alongside other specialty pharmaceutical companies like BioMarin Pharmaceutical Inc. (BMRN), Amicus Therapeutics (FOLD), Ultragenyx Pharmaceutical Inc. (RARE), and PTC Therapeutics Inc. (PTCT), all vying for market share in rare and genetic diseases. While larger rivals like BioMarin and Ultragenyx often boast broader portfolios, stronger innovation speed, and more extensive R&D resources, Eton carves out its niche through specialized formulations and a highly targeted commercial strategy. Eton's focus on pediatric treatments and user-friendly designs, such as ready-to-use liquids, offers a distinct value proposition that can lead to stronger customer loyalty and potentially superior margins in its chosen segments. However, Eton's smaller scale can result in higher operational costs and a slower pace in resource-intensive areas like gene therapy compared to its larger, more diversified competitors. Indirect competition also arises from generic manufacturers and emerging biotech firms leveraging advanced technologies like AI in drug discovery, which could accelerate competitor innovation and potentially make treatments "substantially more accessible" or "notably faster to develop," posing a long-term challenge to Eton's market positioning and profitability.

Technological Edge: Precision Formulations for Unmet Needs

Eton's core technological differentiation lies in its expertise in developing proprietary formulations that address critical unmet needs in rare disease treatment, particularly for pediatric populations. The company's innovation focuses on enhancing drug delivery, improving dosing accuracy, and increasing patient compliance through specialized liquid and extended-release formats.

A prime example is ALKINDI SPRINKLE, a proprietary hydrocortisone granule formulation launched in 2020, which was specifically designed to provide accurate doses as low as half a milligram for newborns and children with adrenal insufficiency. This directly addresses the historical challenge where caregivers were forced to split or crush adult tablets, leading to inaccurate and potentially dangerous dosing. Building on this, KHINDIVI (ET-400), approved in May 2025, is the "first and only FDA-approved oral solution of hydrocortisone" for pediatric adrenal insufficiency. This ready-to-use liquid formulation eliminates the need for refrigeration, mixing, or shaking, offering administration simplicity and precise dosing tailored to individual patient needs. While initially restricted to patients aged five and older due to concerns over inactive ingredients in younger children, Eton is actively developing a revised formulation with substantially lower excipient levels. A bioequivalency study for this revised formulation is slated for January 2026, with an NDA supplement submission in Q2 2026, targeting approval by Q1 2027. This initiative aims to expand the label to the critical under-five age group, where the largest unmet need exists.

Further demonstrating its formulation prowess, Eton is developing ET-700, an extended-release version of GALZIN for Wilson disease. This proprietary formulation aims to reduce the current burdensome regimen of taking zinc three times daily with fasting, and potentially lessen gastrointestinal side effects. A proof-of-concept PET study is scheduled for Q1 2026, with top-line results expected by mid-2026, supporting a potential NDA submission in 2027. Similarly, ET-800 is a proprietary ready-to-use liquid hydrocortisone formulation targeting the hospital market for adrenal crisis. This innovation eliminates the need for manual reconstitution of lyophilized vials, a process that can lead to medical errors and consume valuable time in emergency settings. Registration batches for ET-800 are scheduled for summer 2026, with an NDA submission anticipated in late 2026 or early 2027.

These technological advancements are not merely incremental improvements; they form a crucial competitive moat for Eton. By offering superior, patient-friendly formulations, Eton enhances patient outcomes, drives compliance, and differentiates its products from less convenient or unapproved alternatives, including compounded medications. The FDA's own tests have found that "a shocking thirty-one percent of compounded products failed potency testing," highlighting the safety and accuracy advantages of Eton's approved formulations. This technological leadership directly contributes to stronger market positioning, higher average selling prices (ASPs), and ultimately, improved financial performance and long-term growth.

Transformational Growth: Commercial Success and Pipeline Acceleration

Eton's recent financial performance underscores the effectiveness of its strategic initiatives and technological focus. For the three months ended September 30, 2025, the company reported total net revenues of $22.46 million, contributing to $58.67 million for the nine months ended September 30, 2025. This robust growth is a testament to the company's ability to integrate and revitalize acquired assets while maintaining strong organic performance. Product sales and royalties, net, surged by $28.52 million for the nine months ended September 30, 2025, compared to the prior year period.

The acquisition and relaunch of INCRELEX (mecasermin injection) in December 2024 has been a significant catalyst. Previously suffering from declining patient numbers and low awareness, Eton's focused commercial efforts, leveraging its dedicated pediatric endocrinology sales force, reversed this trend. The active patient count for INCRELEX grew from 67 in December 2024 to over 100 by August 2025, exceeding the year-end goal ahead of schedule. The product is now operating at an approximate $20 million annual revenue run rate in the U.S. A major growth lever is the pursuit of U.S. and EU label harmonization for severe primary IGF-1 deficiency (SPIGFD). The EU's broader definition (IGF levels approximately 2 standard deviations below median vs. -3 in the U.S.) could expand the U.S. patient population from an estimated 200 to over 1,000, potentially increasing annual sales from $60 million to nearly $300 million. Eton plans to initiate a clinical study in 2026 to support this expansion, with FDA feedback expected by December 2025. Strategically, Eton out-licensed international INCRELEX rights to Esteve Pharmaceuticals for an upfront payment of $4.3 million, eliminating the need for global infrastructure investment and allowing focus on high-value U.S. launches.

The Adrenal Insufficiency Franchise, comprising ALKINDI SPRINKLE and KHINDIVI, continues to be a strong growth driver. ALKINDI SPRINKLE has shown consistent, robust growth, with 2025 on pace for its strongest year of new patient referrals. The combined franchise recently surpassed 500 active patients. While KHINDIVI's initial FDA approval was restricted to patients aged five and older, limiting its immediate adoption, Eton is aggressively pursuing a label expansion for younger children. This strategic move is critical, as approximately 60% of ALKINDI patients are under five. Management remains confident that ALKINDI and KHINDIVI combined can achieve "peak sales of more than $50 million with the current KHINDIVI label and ultimately higher levels if the label is expanded." This franchise directly competes with unapproved compounded hydrocortisone products, offering superior accuracy, safety, and affordability through the Eton Cares program.

The Wilson Disease Franchise, anchored by the acquisition and relaunch of GALZIN (zinc acetate) in March 2025, has also exceeded expectations. GALZIN, the "only FDA-approved zinc therapy for Wilson disease," reached over 200 active patients by Q3 2025, surpassing its original year-end target. Eton addressed historical issues of low awareness, limited access, and high out-of-pocket costs that led many patients to use inferior over-the-counter supplements. The Eton Cares program, offering $0 co-pay and direct shipment, has been "extremely well received by patients, physicians, and patient advocacy group partners." The pipeline candidate ET-700, an extended-release version of GALZIN, aims to improve patient compliance by reducing the three-times-daily dosing burden and lessening GI side effects, with a potential to generate "more than $100 million in annual revenue."

Eton's Metabolic Portfolio, including PKU GOLIKE, Carglumic Acid, Betaine Anhydrous, and Nitisinone, continues to provide steady revenue and cash flow. While these products demonstrated solid year-over-year growth in Q1 2025, their relative significance is expected to "be muted" going forward due to the rapidly increasing contributions from higher-margin pediatric endocrinology products.

The company's pipeline is rich with future growth catalysts. The New Drug Application (NDA) for ET-600 (desmopressin oral solution) was accepted by the FDA in July 2025, with a PDUFA date of February 25, 2026. This product, if approved, would be the "first oral liquid formulation available" for central diabetes insipidus, addressing a significant unmet need for precise dosing in pediatric patients and is projected to achieve "peak sales of twenty to fifty million." Amglidia (glyburide oral suspension) for neonatal diabetes mellitus, acquired in November 2024, targets an ultra-rare population of approximately 300 children in the U.S. An FDA meeting in April 2025 provided a feasible clinical pathway, with a potential NDA submission as early as 2026, aiming for $10 million to $30 million in annual sales. Additionally, ET-800, a proprietary ready-to-use liquid hydrocortisone formulation for the hospital market, is scheduled for registration batch manufacturing in summer 2026, with an NDA submission expected in late 2026 or early 2027. This product targets a substantial hospital market of 5.5 million vials per year, valued at over $100 million.

Financial Strength and Strategic Outlook

Eton's financial performance reflects its strategic execution. The company achieved a gross profit of $7.86 million in Q3 2025 and $29.64 million for the nine months ended September 30, 2025. Adjusted gross margin, though impacted by nonrecurring INCRELEX ex-U.S. transition costs in Q3 2025 (45%), is projected to rebound to approximately 70% in Q4 2025 and reach 75% by 2028. This expansion is driven by a favorable product mix shift towards higher-margin offerings. Operating expenses, while increasing in 2025 to support multiple product launches and expanded commercial infrastructure, saw adjusted General and Administrative (G&A) expenses decline sequentially from Q2 to Q3 2025, demonstrating disciplined cost control.

Profitability metrics are also improving, with adjusted EBITDA reaching $2.9 million in Q3 2025, following $3.1 million in Q2 2025 and $3.7 million in Q1 2025. The company expects "even stronger EBITDA in the quarters ahead" as nonrecurring transition costs subside. Eton's liquidity remains robust, with $37.12 million in cash and cash equivalents as of September 30, 2025. This, combined with growing product revenues, is expected to fund operating expenses and capital expenditures for at least the next twelve months.

The company generated $12.0 million in operating cash flow during Q3 2025, contributing to $22.08 million for the nine months ended September 30, 2025.

Looking ahead, Eton projects reaching an $80 million annual revenue run rate in Q3 2025, a quarter ahead of previous guidance, and anticipates exiting 2025 at approximately an $80 million annual revenue run rate. Management sees a "clear path to reaching $100 million of revenue in the near term and much higher levels as our pipeline products come to market." The company is actively engaged in business development, with "late-stage discussions with 2 parties" for potential acquisitions, anticipating "at least 2 additional product launches next year."

Risks and Competitive Dynamics

Despite its strong growth trajectory, Eton faces several risks inherent in the specialty pharmaceutical sector. Regulatory hurdles, such as the age restriction on KHINDIVI and the need for a clinical study to expand the INCRELEX label, can impact market penetration and timelines. Competition from unapproved compounded products, particularly for adrenal insufficiency, poses a challenge, though Eton's FDA-approved, accurate, and affordable formulations offer a superior alternative. Supply chain dependencies on a small number of third-party manufacturers for key products also present a risk.

Eton's competitive positioning is strengthened by its "patient-first" philosophy and the Eton Cares program, which directly addresses historical access and affordability issues that have plagued rare disease treatments like GALZIN. This approach differentiates Eton from competitors and even from the prior commercialization efforts of its acquired products. While larger pharmaceutical companies may have greater R&D budgets, Eton's targeted approach to identifying and developing niche formulations for specific unmet needs allows it to create strong competitive moats through intellectual property and specialized market expertise. The company's management believes it would see "minimal impact from any of the tariff proposals discussed to date" and that the White House's most favored nation policy would not "have a meaningful impact" due to its U.S.-centric sales and appropriate pricing for orphan drugs.

Conclusion

Eton Pharmaceuticals is executing a compelling growth story, strategically transforming its portfolio through a blend of organic expansion, targeted acquisitions, and innovative pipeline development. The company's patient-centric philosophy, coupled with its expertise in developing proprietary, user-friendly formulations, provides a strong competitive advantage in the ultra-rare disease market. Recent financial performance, marked by triple-digit revenue growth and improving profitability, underscores the success of its strategy.

With a robust pipeline poised for multiple launches and label expansions, Eton is well-positioned to achieve its near-term revenue targets and continue its trajectory as a leader in rare disease treatments. While regulatory and competitive challenges persist, Eton's disciplined approach to business development, commitment to patient access, and focus on technological differentiation are critical drivers for sustained long-term value creation. The company's ability to convert pipeline assets into commercial successes and further expand its high-margin product portfolio will be key indicators for investors monitoring its journey towards becoming a dominant force in the ultra-rare disease space.