Revance Therapeutics, Inc. (NASDAQ:RVNC) Q2 2022 Earnings Conference Call August 9, 2022 4:30 PM ET

Company Participants

Jessica Serra – Head-Investor Relations and ESG

Mark Foley – Chief Executive Officer

Toby Schilke – Chief Financial Officer

Conference Call Participants

Operator

Welcome to the Revance Therapeutics Second Quarter 2022 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 Q&A session to ask questions at followed by 1 on your touchtone phone. As a reminder, this call is being recorded today, Tuesday, August 9, 2022.

I would now like to turn the conference call over to Ms. Serra, Head of Investor Relations and ESG for Re. Please go ahead.

Jessica Serra

Thank you, Bella. Joining us on the call today from Revance are Chief Executive Officer, Mark Foley; President, Dustin Sjuts and Chief Financial Officer, Tony Schilke.

During this conference call, management will make forward-looking statements, including statements related to the regular responses and potential Ugafortabotelin on toxins for injection Angeline antitherapeutic indications, potential indications for rare density to the sect of RG collection and Opel platform, consumer prefaces with benefits to us, practices and patients of our products and services, our financial performance, 2022 guidance, expected cash runway, strategic priorities and capital allocation plans, our market and revenue opportunity or potential growth and our business strategy, planned operations and commercialization plans. Our actual results of the tonnes could differ materially from that anticipated in such forward-looking statements as a result of these risks and uncertainties. Factors that could cause results to differ from these statements include factors the company described in the section titled Risk Factors in our quarterly report on Form 10-Q filed with the SEC today, August 9, 2022. 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.

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 second quarter 2022 financial results conference call.

We are very pleased with our performance in the second quarter, highlighted by our best RHA quarter-to-date and solid account growth across our pillars and Opel relational commerce platform. These results reflect the continued success of our launch and also the strength and resilience of the facial injectables market. We’re also excited to announce the launch of RHA redensity the first and only FDA-approved dermal filler for dynamic perioral or lip lines. identity is the latest innovation to our RHA Collection, which now includes 4 distinct pillars that meet a broad range of consumer and practice needs.

As a result of the progress we made in the first half of the year, including the resubmission and acceptance of our BLA for DaxibotulinumtoxinA for injection and our strong commercial traction, we look forward to our September 8 PDUFA date and the prospect of entering the new growth phase. As a reminder, the FDA designated our BLA as a Class II resubmission, which has a 6-month review period and includes the required reinspection of our manufacturing facility. As we’ve previously communicated, we did not intend to provide details regarding our ongoing interactions with the agency. However, in light of the information we received this morning regarding the likelihood that the agency could satisfy the foyer requests on our manufacturing inspections prior to our PDUFA date, we would like to provide everyone with the regulatory update so that all investors have access to the same information. First, I’m pleased to report that the FDA completed their inspection of our manufacturing facility from July 11 to July 15. Next, the corrective and preventative actions completed in response to the 5 observations from the previous Form 483 that we received in July 2021 related to our pre-approval inspections have been reviewed by the FDA and are considered closed. Lastly, the conclusion of the reinspection of our manufacturing facility in July, the agency provided us with a Form 483 that included 3 observations. For transparency and reference, we’ve included a summary of the observations in our earnings press release and Form 10-Q. A couple of points I would like to make about the 3 observations on Form 483 we received on July 15, 2022. First, it does not include any of the 5 observations that were outstanding from our previous Form 483 related to our pre-approval inspection. You’ll recall that these observations were the focus of our resubmission and as previously stated, are considered closed. Second, we are confident in our responses, which we have already provided to the FDA, and I’m proud of our team for the timely turnaround. We continue to expect the decision from the agency by the date of September 8, which is just 1 month away. Obtaining approval remains our top corporate priority for 2022, and our team is prepared and eager to launch our flagship drug product once approved. As a reminder, on approval, we will have the opportunity to expand our access to the $3.2 billion U.S. facial injectables market, which according to the latest Decision Resources Group report includes neuromodulator sales of $1.7 billion and dermal filler sales of $1.5 million. Further, according to the American Society of — last surgeons, neuromodulators and dermal fillers remain the top 2 most performed minimally invasive aesthetic procedures. Historically, the market has grown at high single to low double digits and has held up well against macroeconomic headwinds, such as the economic recession in 2008 to 2009. — even with the COVID pandemic in 2020, we saw a shape recovery in the following year when practices reopened. Over the mid- to long term, the U.S. market is expected to grow at a compound annual growth rate of 8% to $4.7 billion by 2026. Given the current economic environment and questions surrounding its potential impact on the facial injectables market, I’d like to make a few comments. To date, based on the accounts that we are calling on, we haven’t seen an impact on activity that would be beyond typical seasonality trends. You’ll recall that the second and fourth quarters are usually the busiest times of the year for procedures compared to the first and third quarters. However, should macroeconomic factors begin to impact consumer spending in our target accounts, we take comfort in the resilience of the facial injectables market prior downturns and more importantly, are uniquely positioned in the market versus other manufacturers. First, we are still in our launch phase with the RHA Collection. Second, we are bringing new innovations to the market, including today’s launch of RHA redensity and the launch of our next-generation neuromodulator with approved. And third, we have a differentiated go-to-market strategy that is focused on the prestige segment. Now let me turn to therapeutics. The approval of DaxibotulinumtoxinA for injection for glabellar lines would allow us to unlock our opportunities in multiple movement disorders. We have a strong pipeline in this category with our completed Phase III program for cervical dystonia and our completed Phase II program, upper limb spasticity. The clinical data in both of these programs demonstrated activity line in FOXA for injection efficacy and median duration of effect of up to 24 weeks. We will be ready to file a supplemental BLA for cervical dystonia shortly after the FDA’s approval of our long-acting neuromoculator in Cabela lines. As a reminder, cervical dystonia would be our entry point into the over $900 million U.S. muscle movement disorder category that is expected to grow to $1.4 billion in the U.S. by 2026. The — in summary, we feel very good about the growth of our base business, our expanding RHA collection and our pipeline in aesthetics and therapeutics, pending approval of DaxibotulinumtoxinA for injection for podular lines. With that, I’ll turn the call over to Duston, who will cover our performance in the second quarter. Dustin? Thank you, Mark. We’re very proud to have delivered our best quarter of RHA sales in Q2, totaling $25.5 million, a 50% increase year-over-year. This brings our first half 2022 RHA sales of $46.3 million and cumulative sales since launch to over $130 million. These are solid results, independent of a neuromodulator telling us that RHA is a product that stands on its own. During the second quarter, we saw healthy demand and productivity across our accounts. awareness and adoption continued to be driven by our targeted sales and marketing initiatives, world-class training and education programs and most importantly, high injector and consumer satisfaction. At the quarter end, we have over 4,000 accounts across our portfolio, representing a strong base of practice partners, all anticipating the PDUFA date of September 8 for DaxibotulinumtoxinA for injection. We are also excited to continue to bring new innovation to market with the launch of RH identity. — redensity was approved by the FDA through our partner, — taking SA and is the first and only FDA-approved dermal filler for both superficial dermal and dermal injection of periorited or lift lines. It has the most stretch compared to RHI 3 and 4 and a shallow injection depth, allowing it to adapt to the highly dynamic movement areas of the live. With redensity injectors can soften or fine-tune the appearance of Lipline, a challenging area to treat prior to the introduction of redensity — and like the rest of the RHA Collection, the product is designed to closely resemble the natural HA found in this gin. — results look natural and can last through 12 months. With redensity now in the market, we have 4 dynamic formulations of fillers that offer a wide range of injection depths across the continuum of consumer needs. RHK redensity for fine-tuning lips, RHI for softening facial lines, RHI for refined smoothing of wrinkles in fold and RHA 4 for natural volume for severe fold, deeper deficits. In fact, we are the only company to have introduced 4 pillars to market within 2 years. Consistent with the launch of RHA 2, 3 and 4, we completed preview, our early training and education program with practice partners, and we’re very encouraged by the positive feedback we’ve received. Injector said redensity is different than anything they have had on their cells, it’s easy to inject and its ability to correct very fine lines around the mouth, billable weight in existing products. They believe the product is essential and excited to have her density complement their fill and lineup. Consumer feedback has also been very positive and loves a smooth and natural look with redensity. RHT redec is also currently being evaluated in a clinical trial by our partner, — taking SA for the correction of infaorbital hollows or tear trough. This is another delicate area of the phase that is challenging to treat, and we’re excited about the prospects of a potential label expansion for Artavanity. Turning to Opel. We continue to make progress in driving adoption and building membership capabilities during the second quarter. Gross processing volume or GPV, for Q2 was $166 million, up 23.2% year-over-year. On a trailing 12-month basis, GPV totaled over $600 million at the end of Q2. As a reminder, we believe GPV is an important indicator of our future revenue potential in the U.S. aesthetics payment processing market, an opportunity that exceeds $0.5 billion per year. We will continue to focus on new features and account growth for Opel to not only deepen our relationships with our practice partners, but also unlock additional revenue potential for Avance. In summary, we feel really good about how our aesthetics portfolio is poised for additional growth, particularly with the addition of DaxibotulinumtoxinA for injection in Gabella line, if approved. Our attention is focused on our September 8 PDUFA date. We are very much looking forward to introducing a differentiated performance profile of our next-generation neuromodulator to the U.S. aesthetics market. Consistent with our approach to the launch of the RHA Collection, the commercial launch of DaxibotulinumtoxinA for injection will be preceded by our preview program with elite practice partners. Finally, we recently participated in the 2022 Toxins International Conference, where we presented data on DaxibotulinumtoxinA for injection that included new data demonstrating the unique properties of our novel excipient peptide. Our poster showcases how the positively charged exipiatpeptide combined directly to the core neurotoxin and can enhance the binding of the neurotoxin to intact morose. — new data underscore DaxibotulinumtoxinA for injection, innovative formulation and our commitment to the advancement of research of neurotoxins in both aesthetics and therapeutic indications.

With that, I will turn the call over to Toby to cover our second quarter financials.

Toby Schilke

Thank you, Dustin. Total revenue for the second quarter of 2022 increased 51% from the same period in 2021 to $28.4 million, primarily driven by increased sales of the RHA Collection. Revenue for the second quarter included $25.5 million of product revenue, $1.7 million of collaboration revenue and $1.2 million of service revenue. Turning to operating expenses. We continue to execute on our corporate priority of disciplined capital allocation, in addition to our ongoing cash preservation measures. — operating expenses for the second quarter were $86.2 million compared to $89.1 million for the same period last year. Excluding depreciation, amortization and stock-based compensation, our non-GAAP operating expenses were $62.0 million, an 8% decline over the same period last year due to lower SG&A expenses and lower R&D costs related to clinical trial and regulatory activities. For the 6 months ended June 30, 2022, non-GAAP operating expenses were down 7% compared to the same period last year. And as a reminder, we project R&D expense in 2022 to be primarily driven by manufacturing costs for DaxibotulinumtoxinA for injection, which according to GAAP accounting standards, our expense as the period cost until the drug product is approved. As for our operating expense outlook, we maintain our previously announced GAAP and non-GAAP expense guidance for 2022. Turning to our balance sheet. Our total cash, cash equivalents and short-term investments as of June 30, 2022, were $233.8 million. Recall that we enhanced our financial flexibility earlier this year with the closing of a $300 million note purchase agreement with Ethereum Capital. We issued the first $100 million note payable on the closing of the agreement in March 2022. Pending the approval of DaxibotulinumtoxinA for injection, we will have the option to initiate issue another $100 million note until September 2023. An additional option of uncommitted borrowings of up to $100 million is available upon commercial revenue target achievement. We believe we have the cash runway into 2024 with the additional $100 million in committed notes available, subject to the FDA approval of our neuromodulator. Finally, Revance’s shares of common stock outstanding as of July 29, 2022, or approximately $73.1 million with 80.7 million fully diluted shares, excluding the impact of convertible debt.

And with that, I’ll turn the call back over to Mark.

Mark Foley

Thank you, Toby. Our commercial track record since launching 2 years ago continues to give me confidence in our people, strategy and our innovative portfolio of products and services. Importantly, it also gives me confidence in our ability to successfully launch daxibotulintoxin injections, if approved, and to begin realizing our therapeutic potential post approval. I’d like to thank the clinical, manufacturing, operations and regulatory teams for the successful resubmission of our BLA and for their hard work in preparing for the recent reinspection of our manufacturing facility. I’d also like to thank the commercial team for the excellent performance in the first half of the year. We look forward to the tremendous opportunities ahead into updating you on our progress along the way. With that, I will now open the call up for questions. Operator?

Question-and-Answer Session

End of Q&A

Our Q&A session and today’s conference call. Thank you for your participation. You may disconnect at this time.