SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 26, 2020
Date of Report (Date of earliest event reported)
ETON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
|(State of||(Commission||(I.R.S. Employer|
|incorporation)||File Number)||Identification Number)|
21925 W. Field Parkway, Suite 235
Deer Park, Illinois 60010-7208
(Address of principal executive offices) (Zip code)
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
|[ ]||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|[ ]||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|[ ]||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|[ ]||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading symbol(s)||Name of each exchange on which registered|
|Common Stock, par value $0.001 per share||ETON||NASDAQ Global Select Market|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [X]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]
Item 1.01 Entry into a Material Definitive Agreement.
On March 26, 2020, Eton Pharmaceuticals, Inc. (“Eton” or the “Company”) entered into a Securities Purchase Agreement (“Purchase Agreement 1”) with Opaleye L.P., a Delaware limited partnership (“Opaleye”) pursuant to which Opaleye sold 2,000,000 shares of Eton Common Stock, par value $0.001 per share (“Common Stock”) for a purchase price of $3.00 per share or an aggregate of $6,000,000.
Purchase Agreement 1 also includes customary representations, warranties and covenants by the parties, including, but not limited to, representations by Eton related to its business and its authority to enter into the agreement and by Opaleye related to its accredited investor status. The 2,000,000 shares of Common Stock issued to Opaleye constitute approximately 10.1% of the number of shares of the issued and outstanding Common Stock of Eton after giving effect to the issuance.
Also on March 26, 2020, the Company entered into a Purchase Agreement (“Purchase Agreement 2”) with certain investors to issue a total of 600,000 shares of Common Stock also at a purchase price of $3.00 per share or an aggregate of $1,800,000.
Purchase Agreement 2 also includes customary representations, warranties and covenants by the parties, including, but not limited to, representations by Eton related to its business and its authority to enter into the agreement. The Common Stock to be issued under Purchase Agreement 2 will be registered under the Company’s existing shelf registration statement on Form S-3 declared effective by the Securities and Exchange Commission December 16, 2019. The 600,000 shares of Common Stock to be issued pursuant to Purchase Agreement 2 will, when issued, constitute approximately 2.9% of the issued and outstanding Common Stock after giving effect to the issuance (and including the issuance of the 2,000,000 shares of Common Stock under Purchase Agreement 1). The Company expects that Purchase Agreement 2 will close and the 600,000 shares will be issued on or about March 31, 2020.
A copy of the opinion of Croke Fairchild Morgan & Beres LLC relating to the legality of the issuance of the securities being offered under Purchase Agreement 2 is attached as Exhibit 5.1 hereto.
Also on March 26, 2020, the Company entered into an amendment (the “Amendment”) of its Credit Agreement (the “Credit Agreement”) with SWK Funding LLC dated November 13, 2019. The Amendment modified certain provisions of the Credit Agreement to allow the Company to make an additional draw of up to $2,000,000 by deleting one of the conditions precedent to making additional draws.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in the first two paragraphs of Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
The issuance of the shares of Common Stock pursuant to Purchase Agreement 1 is exempt from registration under the Securities Act of 1933, as amended (the “Act”), in reliance on exemptions from the registration requirements of the Act in transactions not involved in a public offering pursuant to Section 4(a)(2) of the Act and Rule 506(b) of Regulation D, as promulgated by the SEC thereunder.
Item 8.01 Other Events.
On March 27, 2020, the Company issued a press release announcing acquisition of U.S. Marketing rights to Pediatric Orphan Drug Alkindi ® Sprinkle and entry into Purchase Agreement 1 and Purchase Agreement 2. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits
|5.1||Opinion of Croke Fairchild Morgan & Beres LLC.|
|10.1||Securities Purchase Agreement dated March 26, 2020 by and between the Company and Opaleye L.P.|
|10.2||Purchase Agreement dated March 26, 2020 by and among the Company and Certain Investors|
|10.3||First Amendment to Credit Agreement dated as of March 26, 2020 by and between the Company and SWK Funding LLC, as Agent.|
|23.1||Consent of Croke Fairchild Morgan & Beres LLC (contained in Exhibit 5.1 above).|
|99.1||March 27, 2020, Press Release|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Date: March 27, 2020||By:||/s/ W. Wilson Troutman|
|W. Wilson Troutman|
|Chief Financial Officer and Secretary|
|(Principal Financial Officer)|
Croke Fairchild Morgan & Beres LLC
180 N LaSalle St, Ste 2750
Chicago, IL 60601
March 27, 2020
Eton Pharmaceuticals, Inc.
21925 W. Field Parkway, Suite 235
Deer Park, IL 60010-7208
Attn: Board of Directors
We have acted as counsel to Eton Pharmaceuticals, Inc., a Delaware corporation (the “Company”), in connection with the offering of an aggregate of 600,000 shares of the Company’s common stock, $0.001 par value per share (the “Shares”), pursuant to the Purchase Agreement dated March 27, 2020 (the “Purchase Agreement”), by and among the Company and each investor identified on the signature pages thereto. The Common Stock is registered and to be issued pursuant to the Registration Statement on Form S-3 (File No. 333-235329), originally filed with the U.S. Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), on December 2, 2019 and declared effective on December 16, 2019 (the “Registration Statement”), and the related Prospectus (as defined below). The Registration Statement and the prospectus included therein, including the documents incorporated by reference therein, are referred to herein as the “Base Prospectus.” The final prospectus supplement, dated March 27, 2020, to be filed with the Commission pursuant to Rule 424(b)(5) under the Securities Act, is referred to herein as the “Final Prospectus Supplement”. The Base Prospectus and the Final Prospectus Supplement are collectively referred to as the “Prospectus”.
In rendering this opinion, we have examined the Registration Statement, the Prospectus, and such other documents and reviewed such questions of law as we have deemed advisable in order to render our opinion set forth below. In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, that all parties (other than the Company) had the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments, that all such agreements or instruments have been duly authorized by all requisite action (corporate or otherwise), executed and delivered by such parties, that such agreements or instruments are valid, binding and enforceable obligations of such parties, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In providing this opinion, we have further relied as to certain matters on information obtained from public officials and officers of the Company.
As a result of and subject to the foregoing, we are of the opinion that the Shares have been duly authorized for issuance, and upon the issuance and delivery of the Shares against payment of the consideration therefor, the Shares will be validly issued, fully paid and non-assessable.
Our opinion expressed above is limited to the General Corporation Laws of the State of Delaware, as currently in effect, and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction.
This opinion letter is expressly limited to the matters set forth above, and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the Shares, the Registration Statement or the Prospectus.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to being named under the caption “Legal Matters” contained in the Prospectus. In giving this consent, we do not hereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Croke Fairchild Morgan & Beres LLC
Eton Pharmaceuticals Announces Acquisition of U.S Marketing Rights to Pediatric Orphan Drug Alkindi® Sprinkle
-Estimated Market Opportunity of Greater than $100 Million
-Alkindi Sprinkle NDA has been Assigned a September 29, 2020 Prescription Drug User Fee Act Date
-Alkindi Sprinkle has been Granted Orphan Drug Designation for Adrenal Insufficiency in Pediatric Patients
-Eton Executed $7.8 Million Equity Financing and $2.0 Million Amended Credit Facility to Support Alkindi Sprinkle Transaction
DEER PARK, Ill., March 27, 2020 (GLOBE NEWSWIRE) — Eton Pharmaceuticals, Inc (Nasdaq: ETON), a specialty pharmaceutical company focused on developing and commercializing innovative drug products, today announced that it has acquired U.S. marketing rights to Alkindi® Sprinkle from Diurnal Group plc (AIM: DNL).
Alkindi Sprinkle’s New Drug Application (NDA) is currently under review with the U.S Food and Drug Administration (FDA) for approval 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 application has been assigned a Prescription Drug User Fee Act (PDUFA) date of September 29, 2020.
“Alkindi Sprinkle represents a transformational acquisition for Eton and a major step forward on our journey to become a leader in pediatric rare disease products. This product represents the largest market opportunity within our pipeline and adds a major near-term product launch,” said Sean Brynjelsen, CEO of Eton Pharmaceuticals. “We are excited to be partnering with Diurnal to bring Alkindi Sprinkle to pediatric patients, and we plan to immediately begin launch activities to ensure its commercial success.”
“We have been impressed by Eton’s enthusiasm and vision for the product throughout the Alkindi Sprinkle partnering process,” said Martin Whitaker, CEO of Diurnal Group plc. “If approved, Alkindi Sprinkle will provide a major breakthrough in the US as the only licensed treatment specifically designed for use in children with adrenal insufficiency, where there is a significant unmet patient need.”
|●||Advances Eton’s leadership in pediatric rare diseases products. Alkindi Sprinkle is a strong strategic fit with Eton’s existing pediatric portfolio. Eton is committed to developing and bringing to market innovative products that are designed to address unmet needs for pediatric patients by improving product safety, efficacy, or treatment adherence through precision dosing and improved routes of administration.|
|●||$100 million market opportunity. Eton estimates approximately 5,000 pediatric patients suffer from adrenal insufficiency in the United States, and current FDA-approved treatment options do not offer physicians the ability to properly dose and titrate for many of these pediatric patients.|
|●||High-value product with strong intellectual property protection. Alkindi Sprinkle has been granted Orphan Drug Designation from the FDA and has been issued three U.S patents extending to 2034.|
|●||Major near-term product launch. Alkindi Sprinkle’s NDA has been assigned a PDUFA date of September 29, 2020.|
Alkindi® Sprinkle Overview
Alkindi Sprinkle is a taste neutral sprinkle (granule) formulation of hydrocortisone seeking approval 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. If approved, Alkindi Sprinkle would be the first Adrenal Insufficiency replacement therapy specifically designed and developed for children.
Adrenal insufficiency is a condition in which the adrenal glands do not produce adequate amounts of cortisol and is often caused by Addison’s Disease or Congenital Adrenal Hyperplasia (CAH). Insufficient levels of cortisol in children may cause delayed or stunted physical development, reproductive irregularities, and can be potentially fatal.
Hydrocortisone is currently the standard of care for adrenal insufficiency, however oral hydrocortisone is only FDA-approved in high-strength tablet formulations designed for adult patients. The lowest tablet strength currently available is 5mg, but many pediatric patients require significantly lower doses and the flexibility for precision titration. To address this unmet need, caregivers are often required to attempt to split tablets into fractional doses, which exposes patients to the significant risk of over- or under-dosing. Alkindi Sprinkle will be available in strengths of 0.5mg, 1mg, 2mg, and 5mg to provide patients with optimal precision and flexibility.
The FDA has granted Alkindi Sprinkle Orphan Drug Designation and as a result, the product is expected to receive seven years of Orphan Drug Exclusivity after approval. In addition, Diurnal has been issued three formulation and method of use patents in the United States which extend out as far as 2034. All three patents are expected to be Orange Book listed after the product’s approval. The safety and efficacy of the product is supported by six clinical, bioequivalence, and safety studies conducted by Diurnal prior to the submission of the product’s NDA.
The product was approved in Europe in 2018 under the trade name Alkindi and has been launched in select countries throughout Europe. Diurnal has seen very high rates of Alkindi adoption among newly diagnosed adrenal insufficiency patients in the countries where the product is available.
Eton believes the market opportunity for Alkindi Sprinkle in the United States is greater than $100 million annually.
Upon execution of the agreement, Eton paid to Diurnal $3.5 million of cash and issued Diurnal 379,474 shares of Eton common stock, representing approximately $1.5 million based on Eton’s average fifteen-day trailing stock price. Upon commercial launch of the product with Orphan Drug Exclusivity granted, Eton will pay to Diurnal a cash milestone payment of $2.5 million.
Diurnal is entitled to commercial milestone payments upon Alkindi Sprinkle’s achievement of certain net sales thresholds, including:
|●||$1 million when net sales exceed $10 million in a calendar year|
|●||$4 million when net sales exceed $25 million in a calendar year|
|●||$7.5 million when net sales exceed $50 million in a calendar year|
|●||$12.5 million when net sales exceed $100 million in a calendar year|
|●||$20 million when net sales exceed $200 million in a calendar year|
In addition, Diurnal will receive a tiered royalty ranging from a low double-digit to high teens percentage on net sales of Alkindi Sprinkle.
In conjunction with the Alkindi Sprinkle transaction, Eton has executed agreements to raise $7.8 million from the sale of 2.6 million shares of common stock at $3.00 per share. The equity financing was led by Opaleye Management. In addition, Eton’s credit facility with SWK Holdings was amended to allow Eton the immediate option to draw $2 million of debt financing and the option to draw an additional $3 million after the approval of Alkindi Sprinkle. The financing proceeds will be used to support current and future licensing payments to Diurnal, as well as Alkindi Sprinkle-related launch expenses.
About Eton Pharmaceuticals
Eton Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on developing, acquiring, and commercializing innovative products. Eton is primarily focused on hospital injectable and pediatric oral liquid products. The company’s first commercial product, Biorphen, is the only FDA approved ready-to-use formulation of phenylephrine injection and was launched in December 2019. The company has an additional eight products under development, including three that are under review with the FDA.
About Diurnal Group plc
Founded in 2004, Diurnal is a UK-based specialty pharma company developing high quality products for the global market for the life-long treatment of chronic endocrine conditions, including congenital adrenal hyperplasia and adrenal insufficiency. Its expertise and innovative research activities focus on circadian-based endocrinology to yield novel product candidates in the rare and chronic endocrine disease arena.
Statements contained in this press release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements associated with the expected ability of Eton to undertake certain activities and accomplish certain goals and objectives. These statements include but are not limited to statements regarding Eton’s business strategy, Eton’s plans to develop and commercialize its product candidates, the safety and efficacy of Eton’s product candidates, Eton’s plans and expected timing with respect to regulatory filings and approvals, and the size and growth potential of the markets for Eton’s product candidates. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Words such as “believes,” “anticipates,” “plans,” “expects,” “intends,” “will,” “goal,” “potential” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon Eton’s current expectations and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include, without limitation, risks associated with the process of discovering, developing and commercializing drugs that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such drugs. These and other risks concerning Eton’s development programs and financial position are described in additional detail in Eton’s filings with the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made. Eton undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.