Revance Therapeutics, Inc. (NASDAQ:RVNC) Q4 2022 Earnings Call Transcript

Revance Therapeutics, Inc. (NASDAQ:RVNC) Q4 2022 Earnings Call Transcript February 28, 2023

Operator: Welcome to the Revance Therapeutics Fourth Quarter and Full Year 2022 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following managements’ prepared remarks, we will hold a Q&A session. As a reminder, this call is being recorded today, Tuesday, February 28, 2023. I would now like to turn the conference over to Jessica Serra, Head of Investor Relations and ESG for Revance. Please go ahead.

Jessica Serra: Thank you, Jack. 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 2023 guidance, cash flow breakeven, and future revenue and expenses, our value creation on growth potential, the efficacy and duration of DAXXIFY, our ability to draw on our debt, our regulatory submissions and approvals, our entry into the therapeutics market, our commercial success, consumer preferences and behavior that benefits to us practices and consumers of our products and services, consumer outcomes, the supply of manufacturing of DAXXIFY, sales team growth and our strategy, planned operations, services strategy and commercialization plans and timing.

Our actual results and the events €“ timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. Factors that could cause results to be different from these statements include factors the Company describes in the section titled Risk Factors in our Annual Report on Form 10-K filed with the SEC today, February 28, 2023. 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 fourth quarter and full year 2022 financial results conference call. 2022 was a landmark year for Revance with strong execution on our strategic priorities, we not only delivered outstanding financial results for the year, but also positioned ourselves for significant value creation going forward. Highlighting our many achievements was the approval of DAXXIFY. The approval makes DAXXIFY the first and only peptide formulated neuromodulator with long-lasting results and the first true innovation in neuromodulator formulation in over 30 years. Moreover, the product efficacy and median duration of six months has been achieved by using a similar amount of core active ingredient as that of the leading competitor.

DAXXIFY’s approval not only enhances our competitive positioning in the facial aesthetics market, but also lays the foundation for our entry into therapeutics. As previously communicated, we initiated the introduction of DAXXIFY to the aesthetics market through our planned early experience preview program in December. Thus far, we’ve been very pleased with the strong initial uptake and positive feedback from both injectors and consumers. Our strategic priority for 2022 €“ our second strategic priority for 2022 was to drive the top line growth of our RHA Collection of dermal fillers. Through our focused execution and with the introduction of new innovation RHA Redensity, we increased adoption, enhanced account productivity, and are very pleased to report a 51% revenue increase from last year.

Turning to our third strategic priority. We made meaningful progress in enhancing our customer relationships to our Services Segment. Our core belief is that by complementing our products with value-added services, we can develop deeper and lasting relationships with our practice partners. Over the past few years, we’ve taken important steps to become an authorized payment facilitator so that the OPUL platform can support meaningful features and functionalities. Practices are currently using OPUL to process payments at competitive rates, customized checkout options through a catalog of over 7,000 SKUs and generate data insights. What has taken us longer than expected to get to this stage of our platform’s development, which led to an impairment charge that was recorded in Q4.

We are making progress and will continue to develop our services offering as part of our long-term strategy to unlock additional value for our aesthetics portfolio. In Q4, we ended the year with over 5,000 accounts across our aesthetics portfolio up from 3,000 accounts from one year ago. Prudent capital allocation was our fourth priority, and I’m pleased to report that the combination of effective cash management and strategic financings have allowed us to execute on our priorities and launch DAXXIFY from a position of strength despite the challenging financial market backdrop. Finally, investing in our people and culture is always a priority for Revance. So much so that our initiatives in these areas continue to be reflected in our annual company goals for which a portion of our executive and corporate bonuses are based.

To that end, we’re very pleased to achieve over 100% of our diversity and inclusion and people goals, which covered talent attraction, culture assessment, D&I educational programs, and women in leadership. We’re also looking forward to publishing our second ESG report shortly. In addition to all these important accomplishments and our strong financial results for the quarter and year, we continued to make progress across several areas of the business in the early months of 2023. The FDA recently accepted our sBLA for DAXXIFY for the treatment of cervical dystonia, and we were provided with the PDUFA date of August 19, 2023. This new indication if approved would be our first step towards unlocking DAXXIFY’s potential in therapeutics. On approval, we look forward to launching an early experience program similar to the DAXXIFY and RHA PrevU programs, followed by full commercial launch in 2024.

We expect to leverage these learnings to inform our launch plans and DAXXIFY pipeline strategy in therapeutics. On the corporate side, I’ll touch on a few Board and management changes. Earlier today, we announced the appointment of Dr. Vlad Coric, Chairman and CEO of Biohaven as an Independent Director with an effective date of March 1. Vlad is the seasoned pharmaceutical executive who brings a 22-plus year track record in biotech value creation, particularly in the area of neurology. His appointment will further enhance the collective skillset of our strong and diverse Board and will help support our innovation and market expansion efforts. Vlad’s appointment also coincides with the retirement of Phil Vickers prior to the company’s 2023 Annual Meeting.

Phil has been instrumental in shaping our scientific progress over the past eight years, and on behalf of both management and the Board, I would like to thank him for his service and wish him all the best in the future. I’d also like to welcome Amie Krause as our Chief People Officer effective March 13. Amie brings over 25 years of experience in human capital management and will be stepping into this critical role as Justin Ford, Senior Vice President, Human Resources and Head of People retires. Amie will build on the great work and progress that Justin and his team have made over the past six years. I’d like to thank Justin for his invaluable leadership in supporting our rapid growth as a company, tracking great talent, and in shaping our inclusive and diverse workplace culture.

In summary, I’m proud of all that we were able to accomplish in 2022, setting the stage for another exciting and important year. We look forward to growing our U.S. aesthetics franchise by successfully launching DAXXIFY and driving deeper adoption of the RHA Collection, while also continuing to enhance our services offerings. At the same time, we are eagerly awaiting our first anticipated therapeutics approval and our actively preparing for our market entry. With that, I’ll turn the call over to Dustin. Dustin?

Dustin Sjuts: Thank you, Mark. I’m very pleased to see the progress our entire organization has made, specifically our strong sales results underscored by our commercial strategy and our consistent execution. Starting with the RHA Collection, we saw strong demand in Q4 resulting from numerous training events in Nashville, focused on the unique real logic properties of the RHA Collection, targeted consumer activation campaigns, and the benefit of RHA Redensity in further customer engagement and adoption. These efforts were also amplified by DAXXIFY’s approval and resulted in $34.8 million of revenue in Q4, up 46% from last year. For the year, total RHA sales were $107 million, up 51%. The RHA Collection is currently the fastest growing HA filler brand in the competitive U.S. filler market.

Photo by National Cancer Institute on Unsplash

Our success is a function of both our targeted strategy and the uniqueness of the product. From the way it’s manufactured to its performance profile, RHA offers injectors important versatility in treating a wide range of patient needs, and as a result has become a product that can stand on its own independent of a neuromodulator. The approval and launch of DAXXIFY will therefore introduce a new dynamic for the RHA Collection. We’re excited to begin seeing synergies from our differentiated suite of products and services. We ended the quarter with over 5,000 accounts across our aesthetics portfolio. Further, our Fintech Platform generated $179 million of gross processing volume or GPV for the quarter and $665 million of GPV for the year. On the infrastructure side, our prior approval supplement for Ajinomoto Biopharma Services remains on track, and we continue to anticipate potential approval in 2023.

Once approved, Aji will serve as a fill finished contract manufacturer, an important part of our supply chain to meet the anticipated demand for DAXXIFY. Turning to DAXXIFY. We are very pleased with the progress of our PrevU program, our early experience program, which kicked off in December and included approximately 400 practices. These select partners were extremely engaged and excited about the exclusive opportunity to be one of the first to experience DAXXIFY. After being selected to participate in PrevU, many of them leveraged the busiest time of the year for aesthetic procedures to pre-schedule injections to capitalize on the pent-up demand for this new innovation and to accelerate the opportunity to gain real world clinical insights.

We continue to be very encouraged by the high level engagement surrounding DAXXIFY from both the PrevU group and our broader revamp partners. And with thousands of patients treated thus far, we feel very good about the feedback we’ve received and are encouraged by the high interest among injectors and consumers to experience DAXXIFY. Since DAXXIFY is the first and only peptide stabilized neuromodulator, in addition to being the only aesthetic neuromodulator to receive U.S. approval prior to any international or therapeutic approvals, PrevU is essential in delivering on our pre-launch objectives. Number one, delivering optimized outcomes for consumers by generating real world clinical experience with DAXXIFY. Number two, enhance the injector’s ability to switch patients to DAXXIFY by ensuring seamless integration into their current practice routine.

Each are core to ensuring we understand how to best meet the needs of our practice partners and to unlock the true potential for DAXXIFY. Unique to Revance, our commercial strategy is focused on the practice and provider first. We continue to believe that these providers have the power to drive consumer choice and ultimately the adoption of our portfolio. There’s an increasing opportunity for Revance to shape provider behavior by pursuing a stronger and deeper partnership. To do this, our goal is to break the current product commoditization with our innovation, value proposition and no advertising pricing policy, all designed to arm our partners with what they need to optimize aesthetic outcomes and at the same time enhance their profitability.

Picking the right partner at the right time is critical to accelerating adoption of our portfolio within the highly competitive U.S. aesthetics marketplace. With our deep versus wide strategy, we’ve leveraged our PrevU program first with the RHA collection, and now at DAXXIFY. Following the completion of DAXXIFY PrevU, we expect to kick off our elite partner launch phase in late March, which focuses on a thoughtful rollout to existing customers, leveraging live training and education programs to be held at our Nashville headquarters. Over the past two years, we’ve learned that our Nashville Experience Center has been a valuable and differentiated asset for driving early product adoption, strong customer engagement and continued partnership.

For this reason, Nashville remains central to our commercial strategy and we are continuing to invest in expanding our training and education facility to support our commercialization efforts. We plan to also augment our onboarding process by evaluating virtual training options, as well as a forum for sharing best practice insights. To further capitalize on our market opportunity across the aesthetics portfolio, we are on our way to adding approximately 50 additional sales roles in late Q1 early Q2 with the expectation that they’ll be productive by Q3. Throughout the rollout of DAXXIFY, we expect to adhere to our strategy of building meaningful partnerships with our customers by going deep into accounts versus wide in order to optimize product adoption and penetration.

As you may know, there are roughly over 40,000 aesthetic practices in the U.S. and no shortage of new entrants, and not all accounts behave the same. Past aesthetic launch experience coupled with our learnings of the RHA collection, prove our greatest return is from targeted accounts that are willing to quickly switch patients to our product portfolio and align with our broader prestige value proposition versus the large number accounts that focused on sampling, dabbling, or primarily making decisions driven by deal of the day pricing programs. This approach aligns with our prestige strategy, optimizes our leverage and unlocks our ability to scale. We are looking forward to furthering our track record of success in commercial execution with our introduction of DAXXIFY and the continued growth of our comprehensive revamp aesthetics portfolio.

With that, I’ll turn the call over to Toby to cover our fourth quarter and full year financials.

Toby Schilke: Thank you, Dustin. Total revenue for the fourth quarter 2022 was $49.9 million, representing a 92% increase from the same period last year due to increased sales of the RHA collection and sales of DAXXIFY during the PrevU program. Total revenue for the full year 2022 was $132.6 million, representing a 70% increase from the same period last year, primarily due to higher RHA collection sales. Revenue for the fourth quarter included $34.8 million of RHA collection revenue, $11 million of DAXXIFY revenue, $2.9 million of service revenue, and $1.2 million of collaboration revenue. Before I cover our operating expenses, I’d like to take note of a few items on our cost of product revenue. Recall, in accordance with GAAP that we have been expensing manufacturing costs related to DAXXIFY as a period R&D item until the product was approved.

When our prior approval inventory is used, we expect our cost of product revenue for DAXXIFY to increase. In addition, our cost of product revenue for the fourth quarter reflected an increase in the purchase price of the RHA collection associated with a one-time charge for 2022 and other manufacturing royalty and distribution costs related to DAXXIFY. Turning to OpEx. GAAP OpEx for the fourth quarter and full year 2022 were $194.3 million and $474.5 million respectively compared to $87.6 million and $352.5 million for the same period in 2021. GAAP OpEx for the year exceeded our previously announced guidance range of $375 million to $400 million, primarily due to two non-cash charges that were recorded in the fourth quarter. The first charge was an impairment loss to our services segment of $69.8 million.

The charge resulted from a reduction in the internal segment forecast and growth rates driven by the performance of the service segment and the delay in the development of certain platform features and functionalities. The analysis also reflected the decrease in current valuation of the broader payment sector. The second charge was a one-time accelerated amortization expense of $11.7 million for our legacy HintMD developed technology asset. This expense was associated with the sunsetting of the platform, following the migration of customers to OPUL. Excluding the cost of revenue depreciation, amortization, stock-based compensation, and our impairment charge, non-GAAP OpEx were $72.8 million for the fourth quarter and $267 million for the year, which was in line with the midpoint of our previously announced guidance range of $260 million to $280 million.

While we recognize an impairment charge to our services segment, we continue to believe that services offerings such as OPUL will further enhance our competitive positioning and align with our prestige market strategy. Looking ahead, we expect our 2023 GAAP OpEx to be $460 million to $480 million and non-GAAP OpEx, which excludes cost of revenue depreciation, amortization and stock-based compensation to be $320 million to $340 million. Our 2023 non-GAAP research and development expense is expected to be $80 million to $90 million. Our guidance for non-GAAP OpEx primarily reflects increased investments in our aesthetics commercial infrastructure, including sales team expansion, DAXXIFY and RHA commercial investments and biosimilar partnership investments.

Turning to our balance sheet, we took important steps to strengthen our financial position and our flexibility over the course of the year through strategic financings. We ended Q4 with $340.7 million in cash, cash equivalents and short term investments. As we previously indicated, with our current cash position, the committed $100 million tranche €“ dollar tranche two purchasing agreement, and our anticipated revenues and expenditures, we believe our U.S. aesthetics portfolio will be funded to break even. Finally, Revance’s shares of common stock outstanding as of February 16, 2023 were approximately $83 million with $92 million fully diluted shares excluding the impact of convertible debt. And with that, I’ll turn the call back over to Mark.

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Q&A Session

Mark Foley: Thank you, Toby. In closing, I’d like to take this opportunity to express my deep appreciation to the entire Revance organization for all their hard work and dedication in getting us to this important point in the company’s history. We continue to believe that we have the potential to annually deliver at least $1 billion of revenue over time in the U.S. aesthetic market with the assets we’ve assembled, and that DAXXIFY will be the cornerstone for our revenue growth. We look forward to another eventful year as we launched DAXXIFY into the U.S. aesthetics market and begin our journey into therapeutics. With that, I will now open the call up for questions. Operator?

Operator: Certainly. David Amsellem with Piper Sandler. Your line is open.

David Amsellem: Thanks. Can you guys hear me? Hey, can you hear me? Sorry about that. Okay, perfect. Thank you. So yes, just a couple. So first, as you’re thinking about the landscape for DAXXIFY, can you just talk about how you’re thinking about the evolution of pricing, particularly to the extent that we see another entry that’s the huge our product. How you’re thinking about that? I know you’re thinking about DAXXIFY more in the prestige practice arena. Maybe is looking at it differently, but how are you thinking about competitive dynamics in particularly pricing? So that’s number one. And then secondly, it might be an obvious question, but to the extent that we see sort of a bounce back at some point in the filler space, what does that mean for RHA in terms of its trajectory, considering you’ve been, at least so far, fairly insulated from the headwinds? Can you talk about that? Thank you.

Mark Foley: Sure. So first on your question about evolution of pricing and as other competitors come into the market, how do we think about that interplay? We’ve taken a little bit of a differentiated approach from the standpoint that we’ve got. Transparent pricing, we don’t bind anybody to contract they €“ at the time of their purchase can decide which of the tiers they want to purchase. And we heard this from practices when they were €“ when we were talking to them about, what would they like to see from a partnership perspective. We’ve done that with our RHA product line, we’ve also launched DAXXIFY with that same sort of pricing tier. And as a reminder, we have a no advertised pricing policy. So we’re trying to find ways that we can break the commoditization of the facial injectable market and put the injector back at the center and let them have a discussion with their patient about what’s the best outcome for their patient, less driven by necessarily price and more about the outcome.

And David, as you pointed out, we’re very focused on this prestige strategy, which doesn’t have to be everything to everybody. We’re going after those accounts that, again, don’t necessarily depend on driving patient volume solely on price and that appreciate the ability to offer premium products and differentiation. So we don’t necessarily see the introduction of new competitors into the market in terms of changing our philosophy. There’s already a price segment in the market that exists, and thus far, we feel like the strategy that we’ve taken and the ability to offer consumers with the differentiated product offering and practices and opportunity to recapture some additional margin is the right strategy. Of course, we’ll be continued to be mindful of the market dynamics, but now that we also have DAXXIFY in the market, we have the ability to create some additional programs tied to our broader product portfolio.