To your question on switch versus new patients, given that cervical dystonia is an orphan indication, this is mainly a switch population. So there’s not a lot of new people moving in, even though there’s an opportunity, certainly, for new patients to come in, this is largely going to be a switch patient, which is great because it’s going to be easy for both the patient and the injecting physician to know what that prior treatment cycle looked like. And so, any incremental benefit that you can provide either on the duration, symptom control, or safety is going to be very well received. And these are very active communities too that share information pretty readily. And so, we think that, since this is the real first true new innovation in this category in a while, that we’ll get a fair bit of visibility within that community.
But we do expect it’s going to be much more of a switch patient. Now I did talk a little bit about the phasing. I do think with a switch patient and a new product, they’re going to start conservatively on the dose. They’re going to want to make sure that they aren’t introducing any unnecessary side effects, and then they will start to dose escalate in subsequent visits, and that’s why it will take them a little while to just build that confidence to be able to lean in more aggressively.
Operator: The next question comes from David Amsellem with Piper Sandler.
David Amsellem: Apologize if I missed any color here since I joined late. I wanted to ask you about competitive dynamics in both the toxin and the filler spaces. So, regarding the toxin space, you have the Hugel asset that gained approval. And then, as you look at the filler space, you’ve got Evolus coming into the market next year. And I guess my question here is how you’re thinking about pricing as both categories get more crowded. That’s number one. Number two, at what point do you see practices, sort of the larger practices, I should say, not carrying everything? What you see from a lot of practices is they sort of offer essentially all of the key options as it relates to facial injectables and at what point do they start picking and choosing more and freezing certain players out? How do you think about that going forward?
Mark Foley: Listen, on the competitive dynamics, first off, it’s a big market that’s got healthy growth. And as you’ve seen, different companies are finding their own place in the market. We’ve chosen to take an innovation strategy with the belief that we can carve out a pretty healthy part in the market by bringing performance attributes that are different from the others. And I do think as more competitors come into the market, to your second question, practices are going to need to make some decisions about how many they carry because, in the absence of a real performance benefit, I think increasingly they’re going to ask themselves, from an inventory management standpoint, why do I need to carry all of them? Is there something that this product gives me that I can’t get with the others?
So as we’ve come in and we’ve learned more about DAXXIFY, in particular, again, not just the duration, but the onset and skin quality, we think that we’re going to be able to compete very effectively based on a performance profile that we think will resonate certainly with a reasonable subset of the market and certainly one that allows us to hit our target of blockbuster potential in the US aesthetics market. And so, we believe that that’s going to be our way to win. We’ve adjusted our price, so that we’re able to offer this to our accounts and they can offer it to their consumers at a price that is competitive. And so, these practices and these patients are able to get incremental value for the dollar spend. And that’s sort of how we think about competition.
And so, as some of the newer players come in, we think, if anything, they’re likely going to compete probably more in other segments of the market. And because of bundling and loyalty and services, we do think that the US market’s a little bit more insulated compared to some of the other international markets and should allow for a full value play across that. And then same on the filler side. Listen, the RHA Collection of fillers has been in the market for a long time. The Teoxane franchise is very well known, highly regarded, it’s the least modified of the fillers. And as a result, the performance attributes, we believe, when we go in or are able to win business, we win it not on price, but we win it based on the quality of the product. And so, we think that’s ultimately going to be our strategy and we know that there will be different ways that different companies compete.
But to close out then on your second question, I do think that accounts will start to increasingly pick and choose. And in the absence of bringing something of differentiation either on the services or on the product side, I think that it will be harder for them to carry all the products.
David Amsellem: If I may sneak in a follow up, as both spaces get more crowded, do you envision outright price competition or scenarios in either or both of the spaces where your hand just gets forced on price? How do you think about that?
Mark Foley: I think that already exists today, David. I don’t know that newer player coming in, offering perhaps more price incentive, because – there are competitors out there today that lean in pretty heavily on price, and whether it’s direct price or samples or other things like that, I think you already have a pretty competitive market and pricing has been pretty resilient. And again, I think it comes down to the fact that there are other things that come into this than price. It’s the product quality, it’s what other services. I think we’ve got a pretty competitive market already and there are definitely some players that, either as a strategy or on a quarterly basis, lean heavily on incentives that directly tie into a better deal and the market has been pretty resilient there.
Operator: The following question comes from Terence Flynn with Morgan Stanley.
Daniel Ziment: This is Dan on for Terence. Just a little bit on the market. I know you spoke to the filler side, but any color on the toxin market would be helpful, maybe just kind of what you saw in 1Q and how you’re thinking about over the course of this year. Just on the OpEx side, maybe just a little more on kind of the savings progression that you’re seeing over the course of this year and just kind of how that’s going?
Mark Foley: I’ll take the first one and then flip the second one on OpEx over to Toby. But the toxin market has been pretty resilient. I think if you look back at other points in time, even when there was some economic stress around 2008, the toxin market was not impacted to the same level as the filler market. And I think it has to do with a few things. It’s a lower cost procedure. Once consumers get used to getting their toxin and sort of their wrinkles not coming back as soon as they start to show, it’s a lot more obvious. Whereas fillers, they tend to last 12 to 18 months. It’s a little bit more of a subtle change. And so, at times, it’s easier for them to perhaps push out treatment a little bit longer. And so, we continue to see the toxin market is being healthy.
And again, we would expect that to continue to grow, certainly as all the underlying fundamentals continue to play out. And so, we think we’ll continue to see the kind of high-single-digit growth that we’ve seen historically on the toxin market. Toby, I’ll throw it over to you on the OpEx savings.
Tobin Schilke: It’s a great question. When we commented on the prepared remarks, we talked about non-GAAP OpEx from continuing operations, and we noted an increase year-on-year. That’s partially because we took a step up on the field force to support our aesthetics and increased, obviously, ahead of the cervical dystonia launch. So that’s been offset. And when you look at it, instead of a year-on-year, but a sequential basis from continuing operations excluding the impact of OPUL, you can compare – I think it was $91.7 million in Q4 of non-GAAP OpEx excluding OPUL from continuing operations to $73.6 million of non-GAAP OpEx in Q1 2024. And the team did an analysis, we think about 40% or so was driven by efficiency initiatives that we’ve had across the company to deliver that.
There is some seasonality to spend in Q4 that’s related to increased aesthetics activity, but we feel that the efficiency initiatives that we’ve put into place in the last several quarters are starting to pay dividends.
Operator: The next question comes from Serge Belanger with Needham & Co.
Serge Belanger: Mark, the first question is about the – your all net pricing is actually – over the first quarter, if it changed and whether you expect it to change over the remainder of 2024 as volumes grow. You also talked about, on the other side, the consumer prices have been coming down and becoming more in line with the other products. Was the couponing strategy to help that movement down to be comparable to your competitors?
Mark Foley: On the net pricing side, listen, this was solely related to the consumer coupon. So, we had to take our gross revenue of $24.1 million, reduce it by $2 million to $22.1 because of the value of the consumer coupon that we ran. And so, net pricing going forward, we will continue to report on net pricing. Based on some of the different initiatives that we do, there could be some gross to net impacts on that. But as we said, ideally, we would structure future programs in a way that it’s either more of a revenue deferral or a sales and marketing expense where possible. But this was a great one that we wanted to pilot and evaluate, and we saw the desired effect. It was very well received at the practices where we rolled it out.
In talking to them, they were able to – that conversion discussion with the patient was much easier, and that helped get more patients exposed to DAXXIFY, which we think will create the necessary stickiness that we want over time. And so, that was more on the services activation, more consumers. In terms of consumer pricing coming down, that wasn’t related or connected to the consumer coupon. When we rolled out the lower price to accounts, since we don’t ultimately control what they charge to the consumer, we were hoping that they would pass that savings along. But it doesn’t happen overnight. You have some accounts that were happy charging a premium and wanted to stay the course. And then you had others who sort of – we’re trying to figure that out.
But we listened to the market, we made the price change, so that they could offer DAXXI at a price that’s in line with other toxins, so that the switch discussion or the discussion with the patient becomes much easier. Hey, I can give you this new peptide powered toxin. It’s the latest innovation in the toxin space. It’s not going to cost you anymore. And oh, by the way, you’re likely going to see it kick in quicker, last long and you’ll observe some better skin quality. And that has made for a much easier switch process. And so, we’ve been encouraged by the fact that is coming down, but that’s untethered from the consumer coupon. The consumer coupon program went out to a subset of accounts where it’s this overall price strategy, but we feel – and again, with all my visits, people are saying this has just really made things easier, people are loving DAXXIFY and this change has made it much easier to switch patients.
Serge Belanger: When we’ve conducted aesthetic consumer surveys, DAXXIFY typically comes in last of all the toxins in terms of awareness, and obviously, it’s the newest product, so that’s not surprising, but curious what you see in your own surveys and what you’re doing to increase that awareness of the product to drive additional demand.
Mark Foley: Listen, obviously, coming into the market where we are, the first thing that we wanted to do is to make sure that we got the providers in a good spot. Because if we spent a lot of awareness dollars with the consumer and they went into accounts that either didn’t offer DAXXIFY or accounts that weren’t happy with DAXXIFY, that wasn’t going to create a good ROI. So, that’s why we spent the last two quarters really focused on. re-engaging these practices that already were trained on DAXXIFY, saw the promise and the benefit, but given the pricing, struggled with sort of patient expectations. And so, we thought that was first and foremost. We’ve been supporting the brand with some digital and social, but we’ll be upping and increasing our spend there in those areas, now that we have a broader user base.
We have some internal KPIs exactly around that, brand awareness, share of voice, all of these things. We understand and appreciate the need to support the brand at the consumer level from an awareness standpoint, but we also think that making sure that these practices have the tools at the practice level to be able to engage customers in a discussion around something new is also a really good ROI. But, yeah, we will increase some of our social and digital efforts to create more awareness.
