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.

So we’ll continue to evaluate that. But our strategy at launch is very similar to what we’ve done with the RHA product line. In terms of the bounce back in the filler space, we continue to get asked on each call whether or not we’re seeing any macroeconomic impact in our business, and thus far, we haven’t. And again, we are targeted or very focused on a much smaller group of providers. And thus far, we have not seen an impact of the economy on the facial injectable usage in the accounts that we’re calling on. And we continue to monitor that. Certainly, it’s possible we could face that sometime in the future, but a bounce back to us, given that we’re not seeing really an impact in terms of volumes in the accounts, I’m not sure would have a meaningful impact on us at this point.

David Amsellem: Okay. Thank you.

Mark Foley: Great. Thanks, David.

Operator: Chris Shibutani with Goldman Sachs. Your line is open.

Unidentified Analyst: Hi, this is Roger on for Chris. So our question kind of pertains to the patient volume mix that you were seeing and anticipate in the future. You mentioned earlier that the greatest amount of value you guys are deriving is coming from practices that are willing to switch quickly as opposed to those with more capturing deal of the day type events. So as you think about the future, do you think the dynamics are going to influence that in terms of you’ll be focusing more on patients who are switching from BOTOX. Or how do you think about capturing the patients who are new starters?

Mark Foley: So I think that, Roger, our strategy as we’ve articulated before is really targeted that prestige segment, we’ve set of the 40,000 accounts that we estimate in the U.S. that do facial injectables that about a third of those really fit into our strategy. As of the end of Q4, we said that we’re in roughly 5,000 accounts out of that, call it, 12,000 to 15,000 account levels. So we are very focused on targeting those injector accounts that we believe are aligned with our strategy. And so ours is less about going out and trying to capture consumers, but more about treating the consumers that reside in those prestige practices. We believe strongly that these leading injectors and practices heavily influence the choice that these consumers make when they come into the practices.

So the profile of consumer that we’re going to end up switching over to DAXXIFY is going to be reflected and who the existing consumers are that are already within those practices. There’s no doubt that any time new innovation comes into the market, it sparks and it stirs consumer interest. But we would think that the practices that provide DAXXIFY are going to end up getting the number of new patients that come in because they’ve heard about it. But again, our strategy is much more focused on arming these practices with all the information they need to provide a really good experience and outcome with DAXXIFY and let consumers know that that’s an option that they provide

Operator: Annabel Samimy with Stifel. Your line is open.

Annabel Samimy: Hi. Thanks for taking my question. So I guess, going back to €“ I guess, the strategy of going deeper as opposed to wider. So I guess, we’ve spoken in the past and you mentioned that could be a potential headwind. Do you really see that as a headwind? If you’re going to be going deeper in these accounts, first of all. And second then you mentioned also that in the €“ you started getting orders €“ you’ve got orders from the 400 participants in the PrevU. Have you started seeing reorders from them? And you also mentioned maybe some other partners, so have people started ordering outside of this PrevU yet, because of some level of desire to get ahead of the whole DAXI trend? So maybe you can just start with that.

Mark Foley: Sure. The deeper versus wider strategy is something that we’ve been very consistent with going back to the RHA. If you look at it, the onboarding pace of new customers on the RHA fillers has been pretty consistent over time, where we’ve added roughly 500 new accounts per quarter, all with the goal of let’s make sure that when we introduce somebody to our products that they get trained the right way, they get the right information to be successful, and that, again, we can drive stickiness. And so that’s been a long term part of our prestige strategy. And so that’s very consistent with what we plan to do with DAXXIFY. And as we’ve stated previously, we plan to target those accounts that we have an existing RHA relationship with first, because we have a relationship with them.

And we think anytime you’re introducing a new product, making sure that that onboarding process is robust, engaged and that we are working to get it integrated into the practice versus just the sampling thing is the right strategy. And so if you look at our PrevU program, it was really designed to give us additional insights into practice integration, clinical outcome, real word usage, so that when we did go to full commercial launch, which we will kick off later this quarter towards the end of March. We can take some of those learnings and make tweaks or modifications to the information that we share. And so we’re very pleased with how PrevU is going the learnings that we have and we continue to be very much on target for our overall launch plan and strategy.

With regards to the €“ and I don’t know that we’ve ever said that that’s a headwind, I just think that that’s always been the strategy and fits very well in that prestige of targeting those accounts. With regards to the PrevU, as you’re aware, we rolled out the PrevU program to approximately 400 accounts in December. These accounts are €“ accounts that were very anxious and eager to get DAXXIFY, had a lot of patience, ready to use the product when they brought it in. And we’ve certainly had a fair bit of reorders on those accounts. But it’s really provided that platform for learning and education to inform the broader market launch, which we plan to roll out again in late March.

Annabel Samimy: Great. And will you give €“ be giving us reorder metrics going forward?

Mark Foley: Well, we haven’t historically done that with RHA. We’ve talked more about account side of it. We’re very early in that side of it. And so we’ll continue to assess what we think makes sense as we have more data to inform that process. But if we look at what we’ve historically done, we’ve given the number of accounts that we have from an aesthetics portfolio standpoint. So I think that’s a good baseline. And then as we get more information, but we’re super early, we really like what we’re seeing and it’s very consistent with the strategy that we’ve mapped out. And so as we have information that we think is informed of going forward, we’re €“ we’ll look to share that.

Annabel Samimy: Okay. And then one last question, if I can switch to therapeutically. So obviously, you’re going to be approaching a potential approval this year. Can you talk about some of the commercial and specifically payer efforts that you have underway on how you’ll be, I guess, pitching a premium product to market that doesn’t always use logic and pharmacoeconomics, when they’re making their access decisions? So if you could just help us understand that play out.

Mark Foley: Sure. So €“ absolutely. Yes, we tried to cover some of that in our prepared comments. So with our PDUFA date in August this year, our hope is that we’ll get approved on our PDUFA date and we will launch something very similar to the PrevU program that we’ve done with RHA and with DAXXIFY. All with this goal of trying to really figure out what’s going to be the best way to drive depth and penetration. And this will give us an opportunity to engage with payers. It’ll give us an opportunity to get a lot of real world clinical use. Obviously, there’s a compelling value proposition to be made with a longer lasting toxin in these debilitating conditions. And we think this collective body of information will help inform our €“ the details of our go-to-market strategy and probably more importantly, even our pipeline strategy in terms of what other trials do we invest in from an indication expansion.

And so we’ll learn a lot through our PrevU phase later this year assuming approval, and then we’ll use that to inform our 2024 commercial launch strategy.

Annabel Samimy: Got it. Thank you.

Operator: Seamus Fernandez with Guggenheim Securities. Your line is open.

Seamus Fernandez: Great. Thanks so much, and sorry for the miss earlier. Just a couple of quick questions. I was just hoping that if you might, obviously, the consensus after the impressive fourth quarter uptake that I think really surprised relative to expectations, maybe it surprised you guys as well. But wanted to just get a sense, obviously consensus numbers have risen, what is your comfort with sort of the revenue range that sits out there today? I think given the initial uptake there definitely is a bias to get quite excited about that early launch trajectory. Just wanted to get a better sense of how to think about, I guess, as some would say, the rhythm of the numbers as we move through the balance of the year. And maybe if you could just provide a little context on the importance of Aji really coming online and the timing of Aji coming online to the contribution to the revenue potential for DAXI this year.

Mark Foley: Yes. Thanks, Seamus. It’s hard obviously to give guidance at this point, we’re €“ what two-quarter or two months into our PrevU launch, and so it’s very early. But there’s nothing that we’ve seen in the PrevU launch strategy that changes our optimism for the opportunity going forward or our strategy. And if we kind of take a step back when we look at it, we’ve talked about the fact that we think with the collection of assets that we have and the aesthetics franchise between our RHA, DAXXIFY and services segment that we can get to $1 billion of revenue in the U.S. aesthetics market. So we feel very good about where we are in that journey. It’s just €“ it’s hard to give any guidance right now given that we are so early in this journey.

What I will tell you is that we have a significant number of accounts who are very interested in getting trained and getting onboarded with DAXXIFY. We know that they have €“ within those practices a number of consumers who are very interested in getting DAXXIFY treatment. And that’s before, we’ve really amplified the awareness that’s out there. So we feel like we’re very well positioned in the PrevU program. We’ve been encouraged by the learnings that we’ve had and the experience that we’ve seen from both the injectors and from the consumers. I just think it’s a little early for us to give any commentary about how we feel about guidance given where we are in that phase. On the Aji side, we’ve long talked about what our supply chain strategy is.

Newer California, where we make both our drug substance and limited drug product, we said is not configured to meet the expected demand of DAXXIFY. So we early on signed a partnership with Ajinomoto down in San Diego as a full finish contract manufacturer. The post-approval supplement was filed in 2022. We feel very good about where we are in that process and approval in 2023. They have been making product all along the journey prior to their approval. We do need them to come online in 2023, but we feel very good about where they are in that process to date. We’ve also signed an agreement with Lyophilization Services of New England, because we believe that in order to meet the longer term demand that we’re going to need them to come online as well.

And so we need them to come online in 2025. And we continue to be encouraged by the progress that they’re making. So we feel very good about where we’re positioned right now. We’ve got a fair bit of inventory that we built in advance of our approval in the Newark site, and we also feel good about where Aji is in terms of their process as well.

Seamus Fernandez: Great. And if I could just ask a follow-up question, would €“ if you don’t mind, could you just provide maybe a little bit of color on where the ASP is and sort of the unit-to-unit match up relative to BOTOX and/or at least where it was in the fourth quarter. And if you can continue to provide updates with regard to where the ASP sits on a relative basis going forward.

Mark Foley: Sure. So maybe I’ll start with the second part, the unit-to-unit. So on the unit-to-unit side, if you look at our labeled indication for glabella line treatment, it’s 40 units of DAXI in the glabella, which is the indicated dose. And that has a core amount of active neurotoxin, a 0.18 nanograms. And if you compare that to example for BOTOX, they’re labeled indication for glabellar lines is 20 units, which also has 0.18 nanograms. And so what we have seen in practices is that they are looking to deliver basically the same amount of core neurotoxin that they’re used to with other neuromodulators. And so if you compare it, again, to the market leader, we’re about a two to one. If you look at our pricing of two vials to everyone vial of the market leader, we believe our pricing probably to the practice comes in at anywhere from maybe a 10% premium to a 40% premium, depending on where they are, are two vials to their one vial on the €“ and that depends on what they buy for and what level they buy.

We’ve got four different levels that practices can buy at with our product, and it has to do with the volume that they purchase at any given point in time. And so our internal ASP will fluctuate based on the mix of how these practices buy, but it’s the same pricing for everybody based on how they choose to buy. And again, that volume purchase is going to vary probably on a quarterly basis.

Seamus Fernandez: Okay. Great. Maybe if I could just ask one final question. As we think about the €“ sort of opportunity in therapeutics, how do you expect sort of the launch in therapeutics to compare to the launch in aesthetics? I presume it’ll be quite a bit slower a little bit more paced than aesthetics, but just wanted to get maybe a little bit of color on how you’re thinking about the uptake in the therapeutics market. And I’ll jump back into queue. Thanks.

Mark Foley: Sure. I’ve got Dustin here with me. Maybe I’ll throw that one over to him.

Dustin Sjuts: Yes. I think there’ll be a lot of similarities in terms of how we look at learning from our providers in that space and ensuring that we have the key opinion leaders aligned with key clinical insights. So like with cervical dystonia, we will have a PrevU launch period, which will allow KOLs to kind of hone in on what is that re-treatment interval that they’d like to bring back that cervical dystonia patient. As you know, with that disease state, there’s a variety of disease progressions that also participate in different units, different €“ or excuse me, different dosages, different treatment intervals. And I think we will we’ll use our PrevU strategy similarly in cervical dystonia to kind of leverage those. I think what’s unique about obviously therapeutics, but specifically cervical dystonia, is obviously the use is fairly concentrated, right?

So we’ll be able to get it in the hands of the KOLs early in PrevU build that data set that’s required to continue to in kind of increase the confidence in the larger population. And with cervical dystonia, a 1,000 CD injectors really make up nearly 70% of the overall volume. So it’s highly concentrated and we’ll focus in those areas first with our deep strategy as well.

Operator: Stacy Ku with Cowen. Your line is open.

Stacy Ku: Hi, thanks for taking our questions and congratulations on the progress. So our first question is around the very early any anecdotal feedback. We understand it’s very early, but we appreciate any commentary from the PrevU program clinicians. We know it’s still early for longevity, but any specific commentary on the onset of efficacy or aesthetic feel, appreciate some details. And then for the second question, we’re wondering if you could add any additional details regarding the pacing on how you get to each level of aesthetic accounts. Maybe provide some timing or metrics around how you’ll expand focus from the 5,000 accounts to the target 10,000 to 15,000 potential aesthetic accounts. What are the logistics as you move through the initial bolus of demand? Thank you.

Mark Foley: Sure. So Stacy, on the anecdotal feedback, we’ve been very encouraged by what we’re hearing from the injectors and from the patients. As you pointed out, we are early €“ we’re €“ what two months into the PrevU program, and so it’s probably early to get any duration feedback per se. But thus far, the patient response has been very consistent with what we would expect and what we’ve seen in the clinical trials. And given the size and the scope of our clinical trial program and some of the Phase 2 work that we’ve done and the area, we would expect that to be very representative of what we’re seeing. And so again, it’s early, but we’re encouraged and it’s continued to reinforce that the strategy we’ve put in place is the right strategy.

In terms of the pacing and the timing and the metrics, we’re going to be a little bit more cautious in terms of what we share for competitive purposes. As you can imagine, it’s a very competitive market that is out there. But what we did say is we would go into this PrevU program for a quarter and then we would initiate our full commercial launch. And so we do expect to kick that off in late March. And as we’ve talked previously, we do think that there’s a better experience or onboarding process that we can deliver here in our Nashville headquarters. And so we’re going to have a bias and an affinity to drive people into Nashville as we think that that’s going to yield more stickiness over time. And so that, that process will start this quarter.

And then I think as we get into kind of our Q1 earnings, we’ll be able to give a little bit more information as we’ll have a bigger body of evidence. But at this time, we’re not going to get into any more specifics around the timing and the metrics other than to say that we’re tracking as planned and as we previously communicated, and that we’re going to kick off our full commercial launch with a bias towards those RHA customers starting on late March with the training here in Nashville.

Unidentified Analyst: Thank you.

Mark Foley: Sure. Thanks.

Operator: Balaji Prasad with Barclays, your line is open.

Balaji Prasad: Hi, good evening, and thanks for the questions. Couple from me. Firstly with regard to the guidance, can you help me understand if you still have limited visibility to provide guidance, at least on the filler side thought we would see some color around there and maybe your account penetration expectations for DAXI for the year, one. Two, with regard to the sales force side, I mean, we know last year that there was widespread challenges across industries to hire labor. Do you still see those challenges? And if so, it does mean that you’re paying more than the current market prices for these hires. If so, that could help by explain some of the OpEx for this year, which seems to be higher than what we had expected earlier. Thanks.

Mark Foley: Sure. So I’ll take the first one and then maybe I’ll kick the second one over to Dustin to talk about the sales force side and then maybe even Toby on some of the OpEx and what’s underpinning that. But on the guidance for the fillers, hey, listen, we hear you that we’re €“ what two years into our filler launch and that we certainly have a lot more visibility. We’ve been onboarding about 500 accounts a quarter, and so we’ve been very pleased with the traction and the growth that we’ve seen in that market taken into account seasonality. I think the challenge that we have is we know that DAXXIFY is going to introduce yet another new dynamic. When the reps were only selling RHA, it was much easier to estimate and forecast what we thought additional growth might look like.

But now those same reps are going to circle back and they’re going to be the ones that will be introducing DAXXIFY into those accounts. And so in the near-term, we may although it’s €“ we’re not sure, we may see a slowdown in new account adds, for example, however, there’s certainly also some accounts that we’ve not been successful in getting a foothold in. But DAXXIFY might open that door, so we might see some of that as well. And we have roughly 50 new salespeople that we’re going to be adding in Q2 that we expect to be fully up and running by Q3. And so we have a couple of cross currents this year that’s just really hard for us to know exactly what we think that that RHA profile is going to look like. But again, if you up level, we feel very good about our ability to grow RHA this year.

We feel very good about our ability to launch DAXXIFY into the market. We believe we’ve got the right strategy. And as I mentioned earlier, we believe that we can drive our U.S. aesthetics franchise with the products and services that we have to over $1 billion in revenue over time on an annual basis. Dustin, why don’t you comment on the hiring process.

Dustin Sjuts: Yes. Thanks, Mark. And if we look back at kind of the hiring we’ve had to do in the past, right? Two years ago, we were hiring a large sales force for a new product, a dermal filler in the middle of COVID without kind of a track record for success commercial execution. So a new entrant into the market. We’re successfully able to hire that and recruit the individuals that were able to deliver outstanding results the past two years. And now we’re in a very different situation with the approval of DAXXIFY, the progression of our services strategy alongside the success of RHA. We have been very, very pleased with the talent that is coming in for the kind of the hiring both for the managers as well as the hiring events for the sales force.

We’ve been excited about those that have had experience in the space as well as those outside that are encouraged about the opportunity we have in front of us. And from a compensation perspective, we are at market rates. We haven’t had to as you mentioned significantly increase of package based off of the environment. We obviously have competitive rates with the market. So I don’t know, Mark, if you want to turn it over to Toby on the OpEx side?

Mark Foley: Yes. Toby?

Toby Schilke: Sure thing. You know what, as we talked about during the prepared remarks, our non-GAAP OpEx was $267 million for 2022, and that was in line with the mid-point of our guidance range of $260 million to $280 million for 2022. If there is any additional compensation for the sales reps, it’s earned compensation for over delivery on their commissions. So we feel pretty good about the guidance we gave and the delivery and when we exceeded our GAAP OpEx that was related to the non-cash charges that we talked about in the prepared remarks.

Mark Foley: Yes. And I mean, Balaji, as it relates to this year versus last year, we’ve got obviously therapeutic that we’re starting to ramp up for. We’ve got some supply chain investments that we’re making. We’ve got the biosimilar to BOTOX, and so we have a number of initiatives that are outside of the standard normal aesthetics operating model. But we think those are the right investments to be making at this point. We feel we’re in a very good cash position to launch DAXXIFY and have the right priorities. But those are some of the things that are driving, and certainly sales force expansion is adding to that, but it’s some of those other factors that are driving increased spend.

Balaji Prasad: Thank you, all.

Mark Foley: Sure.

Operator: Tim Lugo with William Blair, your line is open.

Lachlan Hanbury-Brown: Hey guys, this is Lachlan on for Tim. Thanks for taking the question. I guess I was wondering if you could just elaborate on the Q4 numbers and was that purely just the sales to the 400 accounts in Q4. Were there any one-time events that added to that? Just trying to think about setting my expectation for a sort of a run rate heading into early 2023. And then may have missed this in the prepared remarks, but can you just talk about the plans for hiring the therapeutic sort of field team and when you would expect to be doing that and how big it is?

Mark Foley: Sure. So I’ll take the first one, maybe kick the second one over to Dustin. So on the Q4 numbers, most of the DAXXIFY revenue that we generated, I think that’s what you’re referring to came as a result of the 400 PrevU accounts that we onboarded in December. And that group bought the product to take advantage of what was one of the busiest times of the year and the fact that they were going to be some of the early ones to actually get the product and therefore had to sort of a window of time to be one of the few people in their area that that had it. And so it’s hard to know given that we’re only two months into the launch with that group to know how that’s going to settle out in terms of overall usage going forward.

And so I know we got a lot of questions when we did our pre-announcement in early January around is it stocking, is this usage, it’s not stocking in the traditional sense that there was no middleman or third-party. It reflects what those accounts thought that they were going to be able to use and whatever timeframe they thought. There are incentives in our purchasing program where if you buy more volume at the time of purchase, you do get better pricing. So there might have been some folks that were trying to get better pricing, but it’s still early. Again, I come back to we’re very encouraged by what we’re seeing in the market, but it’s hard to really know with that initial 400 group, how that’s going to inform the behavior of the future accounts going forward.

Dustin Sjuts: I’ll take the therapeutic side. We are currently have the therapeutics, the market access head, and the head of marketing in place. If you look at kind of as we’ve progressed towards that PDUFA date and anticipated approval, we’ll continue to expand kind of the market access efforts as well as our medical affairs efforts align with our PrevU strategy and look forward to kind of updating more on the field sales sizing and others as we get closer to that date.

Operator: Terence Flynn with Morgan Stanley, your line is open.

Terence Flynn: Great. Thanks so much for taking the questions. I guess, the first one is, I’m just trying to understand the comments around the Nashville training center in terms of the second phase of the rollout here, are you implying that there’s going to be a bottleneck in terms of the number of people that you can actually bring to Nashville and flow through that site? And then the second question was, I know in the past you’ve talked a lot about the €“ having a differentiated strategy because you have both RHA filler and that now DAXXIFY. So any latest thoughts or color on a potential bundling strategy and how that might be rolled out over the course €“ back half course of the year? Thank you.

Mark Foley: Sure. So, Terence, on your first question around Nashville and bottleneck, I mean, we think there’s a proper way to onboard accounts, which is to engage them at a deep level to make sure that we’ve shared all the learnings that we have from some of the folks around how they message this to patients and what they go. We think Nashville is the right way to do that. There’s no doubt that we have a limit to how many people that we can ultimately run through Nashville and any given training standpoint, but we are investing in building out more capacity here in Nashville, and we are also going to explore virtual training options as well with a bias towards Nashville. And so I would look at this more of a thoughtful measured rollout versus necessarily having any bottlenecks that we don’t think we can work our way through.

And I think that the first phase given that we’re just kicking off the commercial launch with a very €“ focus on Nashville is the right way to go and is the right long-term strategy. And again, we’ll continue to look at ways that we can build out more capacity here in Nashville. And then like I said, also with the virtual training options, and as we get deeper into the launch, I think the collective learnings will allow hopefully for more of a rapid onboarding and realize too that exposing somebody’s DAXXIFY’s step one. The step two is the field salespeople need to schedule time to go into that practice, bring samples, set up a DAXXIFY day, so there’s some logistics as well that will play into this on the backend with our sales reps and why we think it’s important to add to that group.

And so we look at this less of a bottleneck and more as what we think is a very thoughtful and responsible way to onboard accounts with the goal of driving longer-term stickiness. In terms of now that we’ve got both the toxin and a filler and bundling and different things, we will of course look at ways over time to reward customers that lean in more with us. Right now, our strategy is very much giving accounts sort of a democratic way to buy and get best pricing whenever they purchase our product. But certainly over time we will look at ways to find partnerships that make sense because we do have both a toxin and a filler, we think in the near-term, having both of those will open doors for us and give us an opportunity to ask for more business, either on the toxin side or on the filler side if for example, we have strength in one of those areas, but not the other.

Operator: Douglas Tsao with H.C. Wainwright, your line is open.

Douglas Tsao: Hi, good afternoon, and thanks for taking the questions and congrats on the progress. So maybe it’s a starting point on therapeutics. Mark, should we think that the addition of Vlad Coric to the Board, is a signal of renewed interest in starting a migraine program?

Mark Foley: Yes. I wouldn’t overly read into it. I mean, we’re looking at continuing to add expertise to the Board that we think is going to be really good for our overall business. If you look at Vlad’s background and the experience that he has in, he’s an MD, so adding an MD to the Board makes a lot of sense. He comes out of clinical practice and then he’s got extensive experience in the overall pharma space with the focus on neurology. So I think he can help us think through a lot of our strategy around indication expansion, go-to-market strategy in those markets, and a variety. So I wouldn’t overly read into it. I just think we’re fortunate to have Vlad join the Board of note dermatologist. So he also will get the aesthetic side of the business. But obviously somebody with his experience and the success that he’s had in the market is going to be another important voice around the Board table, and we’re excited to have him as part of the team.

Douglas Tsao: Yes. No, I mean, I have to say, I think his experience features for itself and he is a great addition. Also on therapeutics, maybe just talk about the plan sort of rollout of in CD, obviously it’s a much more concentrated market, but it sounds like you’re still sort of going to go through a PrevU process. I guess maybe talk a little bit about how it will sort of differ from or similar as well as differ from what you’ve done in aesthetics. Thank you.

Dustin Sjuts: Yes. This is Dustin. I’ll kind of handle that a little bit. I think it’s a little early to go into too many specifics on it. So I think the similarities are it’ll be the key KOLs that are going to drive kind of that our ability to build that faculty base to educate the broader market, in terms of the setup, in terms of what we’ll be looking for in that disease state, you’re going to be looking at re-treatment intervals, right? When would they like to bring those patient back? How are they handling different patient disease states, just like they did in the clinical trial with a real world setting, which allows us to have a little bit more freedom for the provider to do what they currently do, right? So as you’ll remember in our clinical trials, you had specific doses that they were using.

We’re in clinical practice, they may assess the patient, they may know that they’re €“ they’ve been on a certain toxin and now they’re going to move them to DAXI so they have more freedom. And so we’ll leverage that opportunity for real world insights to inform our broader rollout and to educate the faculty.

Douglas Tsao: Okay. Great. Thank you so much.

Mark Foley: Yes. Thanks.

Operator: We have time for one final question. Serge Belanger with Needham & Company, your line is open.

Serge Belanger: Hi, good afternoon. Thanks for squeezing me in here. I guess the first question on the DAXXIFY PrevU program, you had a great start with the initial training of 400 providers in December. Just curious if you kept that pace up through January and February and I guess how many providers you expect to well have been trained by the time you launch late in the first quarter. And then secondly in terms of therapeutic indications or there’s still plans to run a Phase 3 program in upper limb toxicity, and when could that get underway? Thanks.

Mark Foley: Great, Serge. So on the DAXXIFY PrevU program hopefully we didn’t miscommunicate on this, but the plan all along was to run the PrevU program for a quarter with a select small group of injectors, and that’s 400. So we’ve not added any additional account since we did the programs in December where we onboarded the roughly 400 accounts as part of PrevU. And the whole goal there was to get experience in a very controlled setting to figure out, what insights we can glean from again how they’re positioning this with patients, how they’re pricing it, how they’re using the product, all those things. So there have not been any additional ads as part of the PrevU program that the full commercial launch will now commence in late March, again with a focus on in-person national training.

So that will kick off now the full commercial launch. And we look forward to getting that underway in late March with a focus on our existing RHA accounts. On the therapeutic indication side, we mentioned in our prepared remarks that our goal is to use the cervical dystonia approval to build clinical experience that will help inform our future therapeutic strategy. So we think we’ll learn a lot in this small number of concentrated accounts that are used to dealing with a number of these muscle movement diseases, cervical dystonia will inform a lot around again what Dustin was mentioning previously. What is the patient response, how often do they bring them back? Are they seeing greater symptom relief during that timeframe between when they bring them back and how we think that plays.

And based on that information, I think that will give us a lot more clarity about what other indications we want to prioritize, how aggressively when we want to go after them, what also the payer engagement and experience is going to influence that as well.

Serge Belanger: Okay. One last one. I know the focus is on the U.S. launch, but if you’ve given any more thoughts to European plans for DAXXIFY. Thanks.

Mark Foley: Thanks. Yes, I €“ hey, right now we feel like we’ve got more than we can bite off with the U.S. launch. It’s the biggest market. We’ve got an established field force. We’ve got over 5,000 accounts. We’ve got relationships with. The pricing is the best in this market, and so that’s going to be our focus for now. There’s no doubt that the international market opportunity provides us with additional growth opportunities as we go forward. And so we’ll be very thoughtful about how we move into some of those markets as we move our way through. So stay tuned. But for now and certainly for 2023, our primary focus is going to be on the U.S.

Serge Belanger: Great. Thank you.

Mark Foley: Great.

Operator: That concludes the Revance Therapeutics fourth quarter and full year 2022 financial results and corporate update conference call. We thank you for your participation. You may now disconnect.

Jessica Serra: Goodbye.