雅虎香港財經 Revance Therapeutics, Inc. (NASDAQ:RVNC) Q3 2023 Earnings Call Transcript
Revance Therapeutics, Inc. (NASDAQ:RVNC) Q3 2023 Earnings Call Transcript November 8, 2023
Revance Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-1.63 EPS, expectations were $-1.1.
Operator: Welcome to the Revance Therapeutics Third Quarter 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we will hold a question and answer session. [Operator Instructions]. As a reminder, this call is being recorded today, Wednesday, November 8, 2023. I would now like to turn the conference call over to Jessica Serra, Head of Investor Relations, Communications and ESG for Revance. Please go ahead.
Jessica Serra: Thank you, operator. Joining us on the call today from Revance are Chief Executive Officer, Mark Foley, President, Dustin Sjuts, and Chief Financial Officer, Toby Schilke. During this conference call, management will make forward-looking statements, including statements related to guidance, positive adjusted EBITDA, adjusted gross margins, operating leverage, blockbuster potential. The financial impact of OPUL exit, the impact of our pricing strategy and adoption, our competitive market position, our potential value creation, additional therapeutics approvals, plans related to the timing of launch and payer coverage of DAXXIFY for cervical dystonia, international expansion, relationships with providers, our commercial success, injector, consumer and patient preferences and behavior, the efficacy duration and safety of DAXXIFY, the benefits of our products and strategy, our strategic partnership shifts and strategy, timeline, goals and planned operations.
Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of risks and uncertainties. Factors that could cause results to be different from these statements can be found in our Risk Factors section of our recent SEC filings. Revance undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in its expectations. Also on today's call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our earnings release to meet accessible. With that, I will turn the call over to Mark Foley, Chief Executive Officer of Revance. Mark?
Mark Foley: Thank you, Jessica. Good afternoon, everyone, and thank you for joining our third quarter 2023 financial results conference call. Before I cover our results for the quarter, I'm pleased to announce the appointment of Erica Jordan to the position of Chief Commercial Officer of Aesthetics. In this role, Erica will lead our commercial efforts in aesthetics and will be focused on driving growth and synergy across both DAXXIFY and the RHA Collection, developing and executing our loyalty and engagement programs and helping drive our international expansion strategy. Erica's appointment comes at a critical time as we focus our efforts on DAXXIFY's launch, and I look forward to working closely with her across our different strategic initiatives.
Erica is an accomplished Health Care Executive and her strong leadership skills, combined with their extensive commercial experience will be a welcome addition to the executive team. Now turning to our results. Q3 was a pivotal quarter for Revance as we saw the positive impact of our new pricing strategy on DAXXIFY's launch continued to drive growth in the RHA Collection and made great progress with our DAXXIFY PrevU program for cervical dystonia, which was launched in September following FDA approval. Also important was our $50 million drawdown of debt from Athyrium Capital at a fixed rate of 8.5%, which further bolstered our cash position to $300 million as of the end of Q3. Product revenue for the third quarter more than doubled to $54.1 million from the same period last year, primarily due to the launch of DAXXIFY and continued growth of the RHA Collection.
As outlined at our recent Investor Day, we believe our progress across aesthetics and therapeutics, focus on capital allocation, and path to positive adjusted EBITDA in 2025 all position us for long-term value creation for our stakeholders. Let's begin with aesthetics. We delivered $22 million in Q3 DAXXIFY sales and $71 million in total DAXXIFY sales during the first year following FDA approval, surpassing the total first year sales of all BOTOX Cosmetic competitors combined. This was a tremendous accomplishment, particularly considering that DAXXIFY has only been on the market for two full quarters and was launched under a measured strategy, which initially focused on our existing RHA accounts. Our early progress underscores the innovation and differentiated performance profile of DAXXIFY and the market's strong interest in a novel long-acting neuromodulator.
We knew that the early stages of launch would be an important learning opportunity and, as such, designed a PrevU program to leverage real-world clinical insights to inform our market positioning and enhance our launch efforts. Through PrevU, customer outreach and engagement, and recent independent survey results from 225 injectors, we gained several key validations and learnings. First, DAXXIFY's differentiated performance profile is clear, including its fast onset, long duration, and the appearance of improved skin quality. In fact, of the attributes surveyed, these were the top three reasons injectors cited for switching to DAXXIFY from their first choice short-acting toxin. Second, injectors are using DAXXIFY broadly across the face with high satisfaction rates.
Based on the independent survey, more than 80% of injectors and patients were satisfied or very satisfied with their aesthetic results from DAXXIFY. And lastly, based on provider feedback, there is a significant opportunity to achieve broader product adoption by reducing DAXXIFY's price premium. As we have learned, there is a strong linkage between price and product expectations. DAXXIFY's higher acquisition cost and accordingly higher price to the consumer has led to elevated consumer expectations, price sensitivity, and a more involved switch discussion. In surveying our customers, we also heard that they believe DAXXIFY is a better product, but that at a premium price, challenges to deeper adoption exist. However, many practitioners also indicated that if DAXXIFY's price was more competitive with other toxins, they would be able to convert a larger percentage of their customers.
Based on the consistency of this feedback, we made a strategic decision to adjust DAXXIFY's price. Now with DAXXIFY's differentiated performance profile, attractive price point, and strong economic opportunity for the provider, we believe the product is positioned to provide meaningful value to both injectors and consumers. Further, long-term, we continue to expect to realize an attractive U.S. DAXXIFY adjusted gross margin rate of over 80% as our business scales and as our supply chain matures. Since the rollout of our new pricing strategy on September 1st, the team has been focused on re-engaging with existing accounts in order to help them realize the full value of DAXXIFY and gain more experience with the product. So far, we've been encouraged by the feedback we've received from our customers on the price change and with the positive trends in purchase volumes and account reorders.
Notably, the third, the number of DAXXIFY vials sold in Q3 increased by 10% from the prior quarter with Q3 revenue of $22 million offset by lower average selling price. Revenue from reordering accounts and vials sold to reordering accounts were also up 25% and 43% respectively over the prior quarter with the majority of the increase coming from September. Further, revenue from reordering accounts represented approximately two-thirds of DAXXIFY revenue for the third quarter, the majority of which came from September. We are still in the early stages of implementing our new pricing strategy, but are very encouraged by the momentum we are seeing. At the core, we believe that our peptide-formulated toxin provides meaningful differentiation that both customers and injectors will come to appreciate and value with more experience.
Currently, over 2,500 accounts have ordered DAXXIFY, leaving us with significant headroom for growth. Turning to the RHA collection. Q3 revenues totaled $32.1 million, up 23% year-over-year despite softness in the broader filler market where market research indicated that filler patient spend was down in the low-teens year-over-year due to inflationary pressures on consumer spending. Our strong relative-to-performance continues to be supported by new account growth, the introduction of DAXXIFY, and a robust and deep engagement with customers. In Q3, we hosted several live RHA training sessions at our Nashville Experience Center with a focus on injection technique and Salesforce training. Collectively, our strong efforts have allowed the RHA collection to gain the most market share in the HA filler market through Q3 of 2023, while most other brands have remained flat or have declined.
Overall, we're very pleased with our innovative and leading product portfolio, opportunity for growth and position in the market where we ended the quarter with over 6,500 accounts. Moving to our services offerings, as we covered it Investor Day, we've made the strategic decision to exit our OPUL payments business in order to prioritize our capital allocation. In preparing for OPUL's wind-down by the end of Q1 2024, we have ceased R&D and reduced SG&A-related spend. As a result, we expect to free up approximately $20 million per year, which provides us with the flexibility for reinvestment for OPEX reduction. In summary, we are encouraged by the progress we've made and the steps we've taken to maximize our opportunity in aesthetics across our portfolio.
For DAXXIFY, we've listened to our customers and made the necessary changes to our pricing strategy to position the product for meaningful share gain over time. For the RHA collection, we continue to drive partnership and engagement with providers, gaining share in a crowded filler market. And while we've made the decision to exit the OPUL payments business, we remain committed to growing our loyalty and partnership capabilities in support of realizing Revance's blockbuster potential in the U.S. aesthetics market. For the balance of the year, we remain confident in our ability to continue to drive growth as we implement our new DAXXIFY pricing program, deliver deeper and broader adoption of the RHA collection, and ensure robust engagement with our growing customer base.
I'll now turn the call over to Dustin for an update on our therapeutics business and strategic partnerships. Dustin?
Dustin Sjuts: Thank you, Mark. We're pleased to have received the highly anticipated FDA approval of DAXXIFY for cervical dystonia in Q3, marking our first approval in the therapeutics market and the official start of our therapeutics franchise. With approval, we have the unique potential to disrupt a well-established $2.5 billion U.S. therapeutic toxin market and to address a large patient population with significant unmet needs. Revance has an opportunity to address the unmet need of the three primary stakeholders in the CD market; patients, providers, and payers. Most patients experience symptom reemergence as early as eight to ten weeks with conventional neuromodulators but cannot be treated until 12 weeks due to label and reimbursement restrictions.
Providers are also known to be conservative in treating this complex condition as there are potential side effects associated with botulinum toxin treatments. For these reasons, physicians cautiously optimize toxin dosing over two to four cycles to minimize side effects. From payers' perspective, botulinum toxins are the 12th most costly medical benefit drug category and managing spend is top of mind. Our ongoing engagement with payers indicates that DAXXIFY's differentiated clinical profile and price point is especially compelling. Given these market dynamics, we believe that DAXXIFY's strong efficacy, long duration, favorable safety profile, particularly in key areas such as dysphagia and muscle weakness, and attractive pricing all work together to offer a strong value proposition for stakeholders.
For a condition that has no cure, providers can safely enhance treatment outcomes for their patients with a novel formulation. Payers gain the opportunity for category cost management with a treatment that can result in lower drug costs, fewer treatments, and lower procedural costs compared to other treatment options. And most importantly, patients can benefit from more days of symptom relief and potentially fewer treatments per year at a lower out-of-pocket cost. For all these reasons, we are excited to see this product into the therapeutics market, which has not seen a new neuromodulator in over 12 years. We are pleased with our approved label, which will be key to supporting optimal treatment plans for patients. As a reminder, our ASPEN clinical program studied two dose groups, the 125 unit and 250 unit doses, which demonstrated a median duration of 24 weeks and 20.3 weeks respectively.
In treating cervical dystonia, it's important to note that physicians often titrate doses to optimize outcomes for patients. That's why we're pleased to see that our approved label contains data from our ASPEN open label study, which includes individualized dose adjustments for patients with up to four treatment cycles over a 52-week period at doses higher than the initial Phase 3 study. With the inclusion of this data, we believe our label gives physicians flexibility to optimize individualized treatment plans for their patients. Following FDA approval, we launched our PrevU program, which will include 30 practices with the objective to treat and observe patients through two or three injection cycles in order to understand optimal dosing and treatment intervals and to optimize the integration of the product into their treatment routine.
We've made great progress with the program so far. Approximately 20 practices have treated more than 150 patients, and interest has been strong on the product's potential. So far, we've seen injectors switch patients to DAXXIFY from all approved neuromodulators, allowing us to collect a wide range of patient and provider experience we are looking for. Initial doses have ranged from 100 to 500 units, with the majority at 200 units or above. Injectors continue to share important real-world clinical insights on achieving optimal treatment plans for CD patients with DAXXIFY, which will help inform our training and education and commercial efforts at full launch. As we continue to make great progress with PrevU, the team is also working in parallel to engage in robust discussions with the top 50 commercial payers about the clinical and economic benefits of DAXXIFY.
We have already secured coverage and reimbursement for approximately 70 million commercial lives, which includes the largest U.S. payer, along with undifferentiated coverage from a top 10 payer with no dosing limitation, giving us confidence in DAXXIFY's potential to disrupt the category. Expanded discussions have also taken place with the Medicare MACs and Federal VA and Department of Defense channels as we seek to maximize market access for DAXXIFY. We are making great progress on securing coverage across all payer channels, and our permanent J-Code will be granted by the time we launch mid-year 2024. As we move into Q4, we've begun solidifying our therapeutics commercial infrastructure. We have planned to have the first wave of hiring completed by the end of the year and a balance during the first half of 2024.
The infrastructure build-out includes our field reimbursement, medical affairs, and sales leadership teams. In total, we plan to start with about 40 people within our therapeutics organization and be ready to launch DAXXIFY for cervical dystonia in mid-year 2024. Finally, we are pleased to see continued progress in our strategic partnerships. In July, Fosun Pharma received their BLA acceptance for DAXXIFY for cervical dystonia, which followed the BLA acceptance of DAXXIFY for Glabellar Lines in April. Fosun anticipates approvals for both indications in China in 2024. With that, I'll turn the call over to Toby to cover our third quarter financials.
Toby Schilke: Thank you, Dustin. Total revenue for the third quarter 2023 was $56.8 million, representing a 95.7% increase from the same period last year driven by the launch of DAXXIFY and increased sales of the RHA collection. Revenue for the third quarter included $54.1 million of product revenue and $2.7 million of service revenue. Turning to OpEx, in connection with our planned exit of the OPUL payments business by the end of Q1 2024, we recorded restructuring charges of $95.2 million as of September 30, 2023, and expect to record an additional $3 million in charges through the three months ending March 31, 2024. GAAP OpEx for the third quarter was $196.1 million, compared to $106.5 million for the same period in 2022. Excluding costs of revenue, depreciation, amortization, stock-based compensation, restructuring and impairment charges, non-GAAP operating expenses were $69 million for the third quarter, compared to $72.3 million for the same period last year.
For the nine months ended September 30, 2023, non-GAAP operating expenses were up 15%, compared to the same period last year, while total product revenue more than doubled during the same period, demonstrating continued operating leverage within our business. As noted at Investor Day, the restructuring and impairment charges related to the exit of the payments business resulted in a revised 2023 GAAP operating expense guidance of $545 million to $585 million, and non-GAAP operating expense guidance of $315 to $335 million. Further, we expect our 2023 non-GAAP R&D expense guidance to be between $75 and $85 million. As a reminder, our 2023 non-GAAP OpEx guidance primarily reflects increased investments in our aesthetics commercial infrastructure.
We ended Q3 with over $300 million in cash, cash equivalents, and short-term investments, which reflects the proceeds from the $50 million in notes issued to Athyrium Capital. As Mark mentioned, we are pleased to be executing from a position of financial strength, and with our top-line growth and disciplined capital allocation, we are focused on delivering positive adjusted EBITDA in 2025. Also, as outlined at our Investor Day, we expect to provide product revenue guidance in the first half of 2024. Finally, Revance's shares of common stock outstanding as of October 31, 2023 were approximately $87.8 million, with $95 million fully diluted shares, excluding the impact of convertible debts. And with that, I'll turn the call back over to Mark.
Mark Foley: Thank you, Toby. With the launch of DAXXIFY as our top priority, we've leveraged customer feedback and learnings from our early launch to remove a key barrier to broad-based adoption, thereby unlocking the product's full-value proposition and long-term market potential. And the early signs from our efforts have been encouraging. We continue to be focused on executing on our launch while driving growth and synergies across our aesthetics portfolio. As we look to the balance of the year and out into 2024, we believe that there's tremendous opportunity for Revance. In addition to the launch optimizations that are underway in our aesthetics business, we're also making headway in our first therapeutics opportunity, as well as our strategic partnerships.
Together with our disciplined capital allocation and strong financial position, we believe we have the fundamentals in place to deliver growth and long-term value for all of our stakeholders. With that, I will now open the call up for questions. Operator?
Operator: Thank you. [Operator Instructions] First question comes from Seamus Fernandez with Guggenheim Partners. Your line is open.
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