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

Revance Therapeutics, Inc. (NASDAQ:RVNC) Q4 2023 Earnings Call Transcript February 29, 2024

Revance Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to the Revance Therapeutics Fourth Quarter and Full Year 2023 Financial Results and Corporate Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded on Wednesday, February 28, 2024. I would now like to turn the conference call over to Jessica Serra, Head of Investor Relations, Corporate Communications and ESG for Revance. Please go ahead.

Jessica Serra: Thank you, operator. Joining us on the call today from Revance are: Chief Executive Officer, Mark Foley; and Chief Financial Officer, Toby Schilke. During this call, management will make forward-looking statements, including statements related to the impact of our pricing and strategy on DAXXIFY on adoption, expectations and timing related to product adoption and reorders, our product pipeline, consumer needs, preferences and behavior, the benefits and value to us, practices and consumers of our products, including the efficacy, duration and safety of our products, 2024 guidance, cash flow at even, positive adjusted EBITDA, future capital expenditures, funding our business and capital allocation plans. Our strategic priorities, our anticipated success are blockbuster growth potential, our market opportunity and expectations, provider partnerships, the wind down of OPUL, our strategy, plant operations, international expansion, strategic partnerships and commercialization plans and timing.

Our actual results and the 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 these results to be different from these statements, include factors the company describes in the section called Risk Factors in our annual report on Form 10-K to be filed with the SEC today, February 28, 2024. Revance undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in its expectations. Also on today’s call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our earnings release. 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 2023 Financial Results Conference Call. I’ll first cover our overall performance in our Aesthetics and Therapeutics businesses before turning the call over to Toby to review our financial results and 2024 guidance. 2023 was an important year for Revance. We realized several pivotal milestones, including the launch of DAXXIFY and aesthetics and the FDA approval of DAXXIFY for cervical dystonia in addition to achieving record product revenue of $213 million, up 80% year-over-year. From a balance sheet perspective, we ended the year on a strong financial position with $254 million in cash, cash equivalents and short-term investments.

Combined with our commercial progress to-date, we believe we are well positioned to deliver on our strategic priorities for 2024, which I will cover later in the call. Turning to DAXXIFY for our Aesthetics business. We generated total sales of $95 million in our first 5 quarters of launch, exceeding the combined sales of the last 3 neuromodulators to enter the market in the same launch time frame. We also gained important real-world feedback from the early stages of our DAXXIFY launch, which informed our updated pricing and provider engagement strategy, better positioning us for broader adoption and long-term success. As a reminder, we revised DAXXIFY’s pricing in September of last year to be more competitive and to facilitate greater trial and adoption.

Since adapting our strategy, we began to see the desired impact with regards to usage, reorder rates and customer perception with that momentum continuing into Q1. From a sales volume perspective, Q4 vials sold were up 22% compared to Q3 and importantly, more than 2/3 of Q4 revenue came from existing accounts. Based on our current focus on existing customers, we believe this reflected deeper product adoption. We ended the year with over 3,000 DAXXIFY accounts, which is less than 10% of the total number of U.S. aesthetic accounts and less than 1/2 of our existing account base, underscoring our significant runway for growth. Since the rollout of our new pricing and provider engagement strategy, we have focused our efforts on existing DAXXIFY customers since these accounts have already been trained, have experience with the product, and in most cases, are RHA customers.

And from a reputational and foundational perspective, we believe it’s important to gain their support. Previously, we indicated that we expect this reengagement plan to take approximately 2 quarters before turning our focus to new account activation in the beginning of Q2. Beyond pricing, we consistently hear from customers that DAXXIFY is a great product and offers a compelling value proposition because of its unique peptide formulation, fast onset, long duration and ability to enhance the skin’s appearance. To that end, we recently introduced new brand messaging for DAXXIFY, which highlights the product’s full range of benefits and ability to deliver an optimal overall aesthetic look. The new messaging, along with expanded sales tools and materials was shared with our sales team at our National Sales Meeting in January, and has been very well received.

Based on feedback and in support of our new pricing strategy, we recently removed our no advertised price policy, which was implemented in the introductory phase of our product launches. However, as we move to broaden our share and brand awareness, it is important that we empower practices to market and promote the Revance product portfolio. During the fourth quarter and into Q1, we also expanded and augmented our marketing tools, marketing materials, sales force training and customer education programs. We have and will continue to increase our visibility with customers and KOLs, the advisory boards, congresses, podium presence, media events and thought leadership. Further, in February, we executed one of several planned promotional programs, a patient coupon program, which has been very well received and aligns with our goal of driving greater practice and consumer experience with DAXXIFY.

Turning to our filler business. The RHA Collection continues to be vital to our aesthetics franchise and foundational to the long-term growth of DAXXIFY, 3 years into launch, the RHA Collection is still the fastest-growing HA filler in the U.S., sitting at about 10% market share, which was largely achieved independent of a neuromodulator. We believe RHA’s success can be attributed to not only our strong execution, but more importantly, it’s leading innovation. RHA is designed to more closely resemble the natural hyaluronic acid found in the skin, which we believe distinguishes the collection from other competitive offerings. Further, the collections range of utility continues to expand with new SKUs and indications, including RHA Redensity for lip lines; RHA 4 for cannula use; and more recently, RHA 3 for lip augmentation and lip fullness.

The lips are the most frequently treated area for dermal fillers and the recently approved label expansion provides us with new opportunities to train on RHA’s leading innovation and injection techniques. We look forward to launching the new lip indication in Q2. In 2023, we were pleased to deliver a 20% year-over-year RHA revenue growth despite softness in the U.S. filler market and while we launched DAXXIFY and work through our strategy changes. As we move into 2024, we look forward to continuing to drive healthy growth across both DAXXIFY and the RHA product line through a combination of new account activation and deeper penetration, while also beginning to unlock portfolio synergies. Across DAXXIFY and RHA, we ended the year with over 7,000 aesthetic accounts, up from 5,000, 1 year ago.

Now let me turn to our compelling opportunity in therapeutics with the approval of our cervical dystonia indication. Due to DAXXIFY’s unique and differentiated profile, we look forward to addressing the unmet needs of patients, physicians and payers in this category. Based on a published study in the Journal of Neurology, 88% of CD patients experienced symptom reemergence between injections, with symptom recurrence happening as early as week 8. Since patients can’t get reinjected until 12 weeks due to label and reimbursement restrictions, this can leave CD patients with significant treatment gaps when considering both the delayed onset of action and early wear off. Based on our clinical trial data and early PrevU experience, we believe that DAXXIFY has the potential to provide patients with better symptom control, along with a compelling safety profile.

As toxins are the 12 most costly medical benefit drug category, payers are also motivated to find alternatives that offer both clinical value and that can lower the cost of therapy. Based on DAXXIFY’s clinical performance, bile price and the dosing used in our clinical trial, there’s an opportunity for meaningful savings to payers, which we believe is why we’ve seen such strong commercial coverage at such an early stage in our launch. Taken all together, we believe DAXXIFY’s strong efficacy, long duration and favorable safety profile, coupled with its attractive pricing, have the potential to disrupt the current CD treatment landscape, which has remained largely unchanged for 30 years. Following FDA approval in August 2023, we subsequently launched our CD PrevU program to leading clinicians in order to optimize treatment outcomes for patients and to ensure smooth practice integration.

To-date, we have treated more than 300 patients across approximately 30 practices, which is in line with our plan. As the majority of CD patients experienced symptom breakthrough, most patients treated to-date in the PrevU program are those who are uncontrolled on their current toxin. And switching these patients to DAXXIFY, physicians have reported that they are using a wide range of doses in their effort to optimize treatment outcome. In addition, DAXXIFY’s safety profile continues to be encouraging even in the presence of escalating doses. To-date, approximately 1/3 of patients have completed their first treatment cycle and are now in their second treatment cycle. As a reminder, with the new toxin, physicians tend to start patients at the lower end of the dosing range before titrating them up over subsequent treatment cycles in order to find the optimal balance between symptom control and safety.

Despite being early in the dose optimization journey, when surveyed, 94% of PrevU physicians who have been in the program since its inception, indicated that they perceived DAXXIFY to last longer than other toxins based on their first treatment cycle. In summary, we’ve been very encouraged to see real-world clinical results, including safety, efficacy and duration in line with those seen in our ASPEN Clinical Program. We remain on track to initiate a targeted commercial launch midyear, having received our permanent J-code in early January. Importantly, we’ve also made significant progress on the payer front, already securing 25 of the top 30 plans covering over 50% of commercial lives. This impressive achievement reflects not only the team’s ability to execute, but also DAXXIFY’s differentiated clinical profile and attractive economic profile for payers.

Also, we’ve recently operationalized our patient reimbursement support services to minimize potential hurdles to adoption. In addition, we have launched our patient affordability program to ensure out-of-pocket costs do not impede access to therapy. On the commercial infrastructure side, our therapeutics team will include about 40 people across sales, medical affairs, market access and reimbursement. We believe we have the appropriate resources to target the concentrated CD physician population where 70% of patients are treated by the top 20% of physicians or about 1,000 injectors. As announced earlier today, the therapeutics commercial organization will be led by Dr. David Hollander, our Chief Medical Officer, who has taken on the expanded role of Global Therapeutics’ Franchise Lead, reporting directly to me.

I’m confident that David’s deep experience in all stages of the product life cycle, in addition to building strong teams will add significant value to our therapeutics franchise. As PrevU continues to advance, we look forward to presenting 2 posters and abstracts on our ASPEN program at the American Academy of Neurology in April. With that, I’ll turn the call over to Toby to cover our fourth quarter and full year financials and our 2024 financial guidance.

Tobin Schilke: Thank you, Mark. The press release and the 10-K we issued today details our financial results in full, so I will only go over the highlights on this call. Total revenue for the fourth quarter and full year 2023 were $69.8 million and $234 million, up 40% and 77%, respectively, from the same periods last year. Total revenue for the fourth quarter included $58.5 million of product revenue, $2.3 million of service revenue and $9 million of collaboration revenue. On the product side for DAXXIFY, we delivered $24 million in sales in Q4 and $84 million in sales in our first full year of launch in 2023. For the RHA Collection, fourth quarter and full year 2023 revenue were $34.5 million and $128.6 million. Sales were up 20% for the full year, driven by deeper and broader account penetration.

Quarterly sales were down 1% year-over-year, primarily due to higher-than-normal RHA sales recorded in Q4 of 2022. This dynamic resulted from both the introduction of the RHA Redensity SKU, and the launch of DAXXIFY, where early access to DAXXIFY was prioritized among accounts that have ordered RHA. Regarding OPUL, our services business, substantially all payment processing was stopped as of January 31, 2024, and we are on track to complete the wind down of the business by the end of Q1, providing cost savings of approximately $20 million this year. We recognized $9 million of collaboration revenue in Q4 related to our Biosimilar to BOTOX program with Viatris. The revenue is reflective of the progress made in our collaboration effort. Note, that since the inception of the program, we have received a total of $60 million from upfront and milestone payments, which have been shown as deferred revenue on our balance sheet.

The revenue was recognized primarily from the deferred revenue balance. Turning to OpEx. We are pleased to see our 2023 GAAP and non-GAAP operating expenses of $550.8 million and $319 million come in on the low end of our previously announced guidance, underscoring our continued efforts of disciplined capital allocation and cost controls. Further, we continue to see operating leverage within our business. Full year 2023 non-GAAP operating expenses increased 19% from 2022, while total product revenue increased by 80% during the same period. On the balance sheet side, our current cash position, operating plan and anticipated revenues provide us with multiple levers to appropriately fund our commercial growth while maintaining our path to breakeven positive adjusted EBITDA in 2025.

Finally, Revance’s shares of common stock outstanding as of February 16, 2024 were approximately 88.2 million, with 97.7 million fully diluted shares, excluding the impact of convertible debt. Before I turn the call back to Mark, I’d like to review our 2024 revenue and OpEx guidance in greater detail. We recently provided our product revenue guidance, which includes sales of DAXXIFY and RHA of at least $280 million for 2024. Our guidance assumes continued market share growth for the RHA Collection and DAXXIFY aesthetics, and modest revenue contribution for the launch of DAXXIFY for cervical dystonia. Further, our guidance takes into consideration normal seasonality. As a reminder, the U.S. facial injectables market experiences traditional seasonality where Q1 and Q3 are typically slower periods during the year compared to Q2 and Q4.

Turning to our OpEx guidance. We expect our 2024 GAAP OpEx to be between $460 million to $490 million and our non-GAAP OpEx to be between $290 million to $310 million. You will note that we are aiming to deliver increased year-over-year product revenue growth while at the same time decreasing our operating expense levels. The midpoint of our 2024 non-GAAP operating expense guidance represents a 6% reduction from last year, driven primarily by the divestiture of our OPUL payments business in addition to organizational streamlining and operational efficiencies. Further, we expect our non-GAAP SG&A expenses to be between $240 million to $255 million. And with that, I’ll turn the call back over to Mark.

Mark Foley: Thank you, Toby. Before we conclude, I’d like to review our strategic priorities for 2024. First and foremost, we will focus on delivering at least 32% growth on the top line while effectively managing spend to reach positive adjusted EBITDA in 2025. To reach this goal, we plan to execute on our commercial objectives for DAXXIFY and RHA, launch DAXXIFY for CD midyear and maintain our disciplined capital allocation while continuing to drive operational efficiencies. The proof points of our commercial strategy continue to provide us confidence in the trajectory of DAXXIFY and RHA. For DAXXIFY, in particular, the ongoing positive trends in adoption and improving customer sentiment reinforces our belief in our blockbuster potential in the U.S. aesthetics market.

Further, we are on a path to realizing our future growth opportunities in therapeutics, the international expansion of DAXXIFY and strategic partnerships with Fosun and Viatris. Combined, these represent access to a $5 billion market opportunity outside of the $4.2 billion U.S. facial injectables market. With that, I will now open the call up for questions. Operator?

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Q&A Session

Operator: [Operator Instructions] And our first question today is from the line of David Amsellem of Piper Sandler.

David Amsellem: Just have a couple. So first, I wanted to drill down more on the top line guidance. And I guess I’ll just ask it plainly. How realistic do you think the implied assumptions regarding DAXXIFY are for ’24? There’s clearly expectation here that there’s going to be aggressive expansion of the sales footprint. I just wanted to get your thoughts on what gives you that level of confidence? Is it a greater footprint among — a significantly greater footprint among newer accounts? Is it deeper penetration within existing accounts? How are you thinking about that mix and just your overall level of confidence? That’s number one. And then secondly, on the fillers and RHA, it is more of a long-term question, but how are you thinking about competitive dynamics with Evolus looking to enter the market, less about this year and more about the long-term dynamics in the context of a potentially more crowded space?

Mark Foley: Yes. Thanks, David. This is Mark. On the top line growth, we obviously feel very good about the $280 million guidance that we put out there for top line. As we stated on our JP Morgan reannouncement that we’d expect a little more of that to come from RHA and a little bit less to come from DAXXIFY. And so we feel very good. I mean if you look at where we are, in our launch last year, the back half where we made some of the strategy changes in the pivots, we didn’t see the normal launch trajectory because we were doubling back to those existing accounts to cement the relationship and try and address kind of what their concerns and issues were. As we saw going into Q4, we were getting really good feedback from accounts that the pricing change removed an important barrier to adoption.

And with the way that we’ve leaned in and are prioritizing some of the other engagement strategies, we feel very good about the way that, that is going. We have stated that we would expect to see normal seasonality in this business, but our growth will come from a combination of new account adds, along with ongoing reorders. And as we noted in Q4, more than 2/3 of our revenue came from reordering accounts, which I think points to the stickiness of the product in those accounts where we’re able to secure. So we feel very good about where we are. And again, particularly with how early we are in the DAXXIFY side. I would also note that we mentioned that we’re in about 3,000 DAXXIFY accounts at the end of the year and we have an account base of 7000 accounts.

So even before we go outside of our existing account base, we have a number of accounts that we’ve got relationships with that we can broaden, and there will be opportunity for bundling and cross-selling to as we move forward. On the filler dynamics side, the nice thing about the Teoxane partnership is that we were able to bring in the market sort of the latest innovation in filler technology, but one that has years and years of experience. And so we feel very good about — if you look at how RHA and Teoxane has performed internationally in a very competitive market, how they’ve been able to continue to take share and to grow it. And with our expanded portfolio of different RHA filler lines and the expanded indications, we feel very good about how we’re positioned in the market.

Also given where we are in our journey, we have plenty of opportunity to continue to grow our share, and we’ve been the fastest-growing share taker over the last 3 years, and we feel very good about the technology and where we’re positioned in the market.

Operator: Our next question today is from the line of Stacy Ku of TD Cowen.

Stacy Ku: We did have a few. So just first, broadly for Q2, a little bit of a follow-up on the last question. Give a sense, as you broaden out what kind of clinicians or accounts you’re hoping to target? Are they going to be the RHA existing accounts? Just characterize your plans a bit more. And I’m curious if you expect the sales force will have the ability to go beyond 500 accounts roughly per quarter? So, just curious if you’re targeting the same amount of training that you’ve kind of focused on recently? And I have a follow-up.

Mark Foley: Sure, Stacy. So on the number of accounts, as we kind of look at Q2 and where we’re going to go. We frankly give a lot of latitude to the sales managers and the sales reps. Obviously, the market continues to grow and expand, and there’s a wide range of different providers. Obviously, those that we have a relationship are a natural starting point for us because we know the accounts, and they know us. And so we would expect that, that would be the initial priority. But having said that, we also know from the RHA launch, there were a number of accounts that were certainly intrigued by DAXXIFY, but for whatever reason, weren’t willing to engage with RHA at the time. And we think that, that’s going to be a great entry point for us for some of these accounts that are excited to offer DAXXIFY and the innovation that it offers in the market.

So I think it will be a mix, and I think you’ll see some variability across geographies. As you know, we started more with kind of a [prestige] strategy that was really tailored and targeted towards the top 1/3 of accounts. But I think now that we’ve adjusted our pricing to be more in line, if anything, it’s opened up a broader aperture and a broader account opportunity for us. So it’s really about qualifying those accounts that are willing to lean in with us that see the value that are going to promote and support the product. And again, given sort of the number of accounts that we still have to go — we feel good about it. In terms of the sales force and the training and the number of accounts, again, I think that if you look back, we never had a target, for example, with the RHA filler line to open up 500 new accounts per quarter.

It just turned out that was sort of what the field force could digest between continuing to support existing accounts and try and go deeper, along with opening up new accounts. And then obviously, we believe very strongly in medical education and training. And given the profile of our products and sort of the innovation that underlines them, we believe that the best way to — for people to get the full value is through training and education. So that will be an important part of it. And so, it’s I think really hard right now to say for sure exactly what that account ramp is going to look like, partly because we have existing relationships, too, that we’re going to go into. But when we’ve done the roll up and put together our plan, we feel very good about the guidance that we put out there.

Stacy Ku: Understood. And then just briefly on kind of the ongoing relationship repair with these accounts, are you willing to discuss in more detail what’s working, where we see these accounts are increasing orders versus maybe that roughly 1/3 or so of accounts where there’s a little bit more reticence. So just trying to understand where we are and if we’re seeing any early signals in kind of the repair overall?

Mark Foley: Yes. I mean we like the signals and the signs that we’re seeing. Again, we’ve talked about the percentage of revenue in Q4 that came from reordering accounts, which we think is a good indicator for people leaning in, seeing the value in the strategy, appreciating the adjustment in price. And frankly, appreciating that we’re listening and making actionable changes to it. And so it’s early, we’ll continue to provide metrics and data that we think are representative of trends, not just points in time. And so as we move forward, we’ll continue to share things that we think are helpful, but again reflect what we’re seeing. But we’re encouraged by what we continue to see as we’ve moved into the new year.

Operator: Our next question today is from the line of Balaji Prasad of Barclays.

Mark Foley: Balaji?

Operator: Balaji Prasad of Barclays, your line is now open, if you’d like to proceed with your question. I’m afraid we’re getting the audio from Balaji’s line. So afraid we’ll have to move on to Chris Shibutani from Goldman Sachs.

Karishma Raghuram: Karishma on for Chris Shibutani. I was wondering if you could help us frame the discussion around cervical dystonia. How should we think about the positioning of the product in regards to payers and the impact of the permanent J-code on the ramp of revenue generation and the adoption curve?

Mark Foley: Sure. Well, in the cervical dystonia market, in the U.S., it’s about a $340 million market. Most of these patients are existing patients. So a lot of the patients that we have seen in our PrevU program and that we expect to convert over to DAXXIFY are going to be switch patients. What’s interesting for cervical dystonia, there’s no cure. And so it’s really a management of the symptoms, and toxins are really the frontline therapy to manage it. Interestingly, as we pointed out in our prepared remarks, is that over 80% of these patients see symptom reemergence before they can get reinjected prior to Week 12. And so given the data that we generated in our ASPEN clinical program, our ability to potentially give them many more symptom-free days, both from an early onset of action, along with a good duration profile has been incredibly well received by both clinicians and payers.

And so, we’re trying to go forward in a measured way because within the neurology community, they tend to be conservative. They’re going to start low on the dosing, and then they’re going to dose them up over time. But as we mentioned in our prepared remarks that when asked — when asking our PrevU physicians, what they thought of the duration profile, their perception of the duration profile of DAXXIFY, 94% of them felt that it was longer lasting. And so we have an opportunity to be the first really truly novel therapy in CD in over 30 years. On the payer side, what makes it interesting for payers is that based on the dosing ranges that we saw in our cervical dystonia clinical program is that we were seeing more one-to-one dosing with other toxins.

And based on the current vial price that we have, when you do one-to-one dosing, there’s a material discount for these payers. And so the payers are looking at this saying, wow, this is a product that can deliver results that are similar to or better than conventional toxins and there’s that type of price break. We love it, which is why we think we’ve seen such robust adoption in the commercial lives covered. So we’re already over 50% coverage on commercial lines before we even get started into the launch side of it. We do want to be measured because we know as we move into the full launch, what’s going to regulate this is the way that physicians treat these patients, which is they will start low, either switch patients. They’ll monitor them through their first 12-week cycle.

And then if the symptoms are managed, they won’t go up any further. If not, they’ll continue to up the dose. And so we just want to give time for that learning process to take place over multiple cycles. But we think that this is really an encouraging gateway for us into the broader therapeutics market, and we really like where we’re positioned.

Operator: Our next question today is from the line of — sorry, Annabel Samimy of Stifel.

Jack Padovano: This is Jack on for Annabel. So could you provide a little bit more color on how you’re changing your communications with physicians, so that they’re fully aware of your new price changes? Have you only really been circling back to the accounts that you have an existing relationship with? Or have you kind of broadened that message such that new accounts can kind of gain some increased brand awareness?

Mark Foley: Yes. So on the pricing change, given our focus on existing accounts, we’ve really allowed that to happen much more through the rep side of it because, again, our primary goal in these first 2 quarters were to solidify the foundation with many of these accounts that are existing customers on the RHA side, went through training, know how to inject the product but had feedback for us on how we could improve things. And in some cases, they’ve got product on the shelf that needs to be worked through before they turn into a reordering account. And so rather than blast out the pricing to everybody, we thought it was best to allow those reps to go back in to reengage, to explain the rationale and work with these accounts on the different pull-through.

As we start to move forward and go to more of a new account activation in Q2, then we’ll be much more forward leaning on the pricing. And it’s not to say that we aren’t open about the pricing. But given the strategy, it’s been more driven at the rep level and their ability to get back into these accounts and reengage. And then as we go forward, we’ll be able to more broadly disseminate that information.

Operator: Our next question today is from the line of Alana Lelo of Guggenheim.

Alana Lelo: Just quick ones. First one regarding the patient coupon program. I’m just wondering if you can provide any color on kind of what that looks like and any metrics that you can share so far on how that has driven increased patient interest in DAXI? And then with the removal of the no advertised price policy, again, any impact you’re seeing from that yet? And any metrics that you can share from that angle?

Mark Foley: Sure. Well, it’s probably premature to share any metric. I think, it’s something we can share in more detail on our Q1 Earnings Call. But the patient coupon is basically $75 off for the consumer that was redeemable through the practice. And so, with purchases, the practice received a number of those coupons that they can use. And all this is designed to stimulate trial use and experience with our belief that the more injectors get comfortable with the product and the more that patients experience the look that there’s going to be a bias and a desire to continue to get retreated with DAXXIFY. And as we’ve said in the past, we’re going to continue to pilot a number of these different initiatives. We’ve had different types of programs like this in the past, whether it’s for people to qualify for one of our guru trainings or different influencer events or other types of programs.

And so, these are fairly common in the industry, and we’re going to pilot a number of these. But we’ve been very pleased to see the receptivity of this both at the account level and on the patient level and it’s having the desired effect of generating more trial usage and experience. In terms of the removal of NAPP, our no advertised pricing policy, this has also been very well received. Obviously, in a B2B/B2C business it’s important that practices are able to drive awareness in a way that’s linked to their practice. And so by removing this, this allows practices to more actively promote sort of the range of Revance product lines across RHA and DAXXIFY. And we’ve gotten a lot of kudos from accounts who sort of felt like, geez, I want to do a better job of promoting this.

I’m excited about the product. And I’d like to be able to tell more customers about it. And if I’m limited in some cases to in-office advertising. Only then, I feel I’m missing out on opportunities to drive more awareness. And so again, it aligns with the pricing change that we’ve made, and we’ve been encouraged by what we’re seeing so far there.

Operator: Our next question is from the line of Tim Lugo of William Blair.

John Boyle: This is John on for Tim. Just one from us. So I was just wondering if the team could provide commentary on the comfort level with the current debt structure?

Mark Foley: Sure. Toby, do you want to hit that one? Comfort level on the current debt structure.

Tobin Schilke: Oh, yes. Sorry about that. I didn’t hear the question. Yes. I think, when you take a look at what we’ve been trying to achieve over time and the operating leverage that we’re generating through 2023, decisions we’ve taken to streamline our business with the reduction of OPUL and kind of moving towards a profitability that we feel is in sight with the guidance we’ve given, both from a top line perspective and the OpEx perspective of having EBITDA positive in 2025 feel like that really unlocks a lot of options with sort of our capital stack. Clearly, we’ll always take prudent measures to finance the business and manage our maturities. But we feel like the first thing to do is prove out the business model, continue the track record of success that we’ve had growing DAXXIFY, RHA with the cost structure that we’ve outlined here, and that will unlock continued opportunities through either organic or sort of other financing alternatives.

Operator: Next question today is from the line of Terence Flynn of Morgan Stanley.

Terence Flynn: Great. Maybe a 2-part for me on DAXXIFY. I know earlier this year, you had talked about one of the things you guys were working through was the — trying to help practices with some of the prior inventory at a higher cost. And so just maybe talk us through where you are in that process? And then the second question is, I think during your prior remarks, Mark, you mentioned bundling. I think that’s the first time we’ve heard about a potential to bundle DAXI and RHA. So just wondering is that something that’s currently out there in the marketplace? Or is that something that’s being contemplated? And then how would that work, I guess, effectively? And how do you think about the impact of that on this year’s revenues?

Mark Foley: Sure. So first, in terms of working with those customers and some that had made perhaps product on the shelf at higher cost, that’s why, again, we focused these 2 quarters on going back to those existing accounts. I would say we’re a good way through that, majority of the way through that, partly because the reps were incentivized to go and engage with those accounts, figure out how we can get them back on track and work with them to develop a strategy to remove some of the barriers and obstacles to getting back on board. So I feel we’ve made a really good, really good progress there. And that’s why I think when we go into Q2, hopefully, we’ve sort of worked our way through those accounts that were existing users, those that are going to get on board with us, we’ve had an opportunity to reengage them, and then we can start moving forward sort of with a clean slate.

On the bundling side of it, both with RHA and with DAXXIFY, we wanted those products to stand on their own. It doesn’t help to try and put together bundling programs until people are sort of fully bought into both individual products. We don’t want the incentive for them to try a product is just — because of discounting, we want them to buy into the products because they believe in the value and they see the value. And then what we can do is look to how do we create additional incentives for these accounts to go deeper and broader with us once they’re embedded. So to your question, we really haven’t done anything yet on the bundling side, but that is something that we do plan to kick off as we move throughout the year, where there will be additional incentives for practices, whether it’s different benefits that they get or pricing, when we link the 2 together and they’re willing to give us a greater share of their business in return for some additional value.

And so we just want to make sure that we’re establishing the products based on their own merit first and then can find ways to unlock that. And we do think that that’ll be a source of future opportunity for us as we take those accounts that might be RHA accounts only or DAXXIFY accounts only, and figure out how we can create mutual alignment with those accounts to grow our share.

Operator: Our next question today is from the line of Navann Ty of BNP Paribas.

Navann Ty: A follow-up on to the previous one. Could you clarify on what is left to do on the account reengagement? And maybe if you can touch base on the priorities and if we would see any strategy tweaks with the new Chief Commercial Officer and the Global Therapeutics Franchise Lead?

Mark Foley: Sure. I think, you were asking kind of where we are and kind of the reengagement strategy. And so that’s something we said is going to be a priority up and through the end of Q1 before we kick off sort of more traditional launch dynamics, where new account activation will be an important part. Not that it isn’t today, but it will take much more of a prominent role going forward. And so, given where we are now at the end of February, we’ve made really good progress through that, and you’ll see us again move to a more normal launch cadences as we get into Q2. On the leadership side, as we previously announced, we promoted Erica Jordan into the Chief Commercial Officer role over Therapeutics. Erica joined the organization in sort of the spring of last year and was doing a lot of strategic work for us on the commercial side.

So she has spent a lot of time with the organization understanding the strategic priorities, work streams and stuff. And so we feel very fortunate to have her leading our aesthetic efforts, and she’s doing a great job and has really been intimately involved with a lot of the streamlining efforts that we have made. And we think her background is uniquely suited to help us get to where we need to go on the aesthetic side. On the Therapeutic side, as we announced, we added the additional responsibility to Dr. David Hollander, our Chief Medical Officer, Global Franchise Head for the Therapeutics group. And I think given his background and experience being an M.D., particularly within the neurology community, we think that not only does he have the gravitas from a leadership and skill set, but we think being an M.D., and with our targeted launch, he’s going to really help ensure that we position this thing the right way, that we’re understanding the subtleties around how physicians are using it, and how best to position ourselves for the future growth.

And so David’s always been close to the program, but more on the medical side, and now in sort of the leadership side, we feel really good to have him in that role. As we said, it’s going to be a targeted launch. We’ll start with about 40 commercial folks across sales, reimbursement, market access, and medical affairs. And we’ve got a lot of the leaders already in place in that functional area that David’s already had a chance to work with. And so we feel that we’ve got the right infrastructure in place to execute on our plan.

Operator: Our next question today is from the line of Serge Belanger of Needham & Company.

Serge Belanger: A couple of questions on the upcoming DAXI launch in cervical dystonia. It looks like you’ve made some significant — securing the coverage, at least on the commercial side. Maybe just talk about the nature of that coverage, how it compares to the other neurotoxins, whether it will impede usage outside of cervical dystonia? And maybe just cover also your plans and time lines for Medicare coverage?

Mark Foley: Sure. So on the coverage side of it, if you look it’s about 60% of the overall CD lives. We’re over 50% already. And within that, about almost 2/3 of that coverage is going to be first line therapy. So we feel like at least in CD coming into the market, we’ve got a really strong position within the commercial payer community in terms of our ability to compete effectively and not have any step edits or limits. Within the commercial category, maybe 14% will have a step edit. And so we’ll continue to work to knock that down with additional payer data. Right now, we don’t have a lot of payer data to go back to those. And so we really like sort of the response that we’ve gotten in the adoption, and we’ve made great progress with a lot of the top groups there.

On the Medicare side, we already have 100% coverage. On the Medicare side, that’s about 20% of the market. And then same thing on the Federal side, and we have a little bit more work to do on the Medicaid side of it. But all in all, the team has made tremendous progress in terms of the overall coverage side of it. With respect to spontaneous use, obviously, we can only promote for CD, but there are a number of the coverage policies which are agnostic to the toxin. So you have some that will look at toxins as sort of a general category, and if you get toxin coverage within that payer network, then they leave it up to the physicians to ultimately use the product in a way that they see fit. Others will allow for coverage of other indications with additional data.

It doesn’t need to be indication data, it can be additional data. And then some are very rigid in terms of only covering those indications where you have an FDA approval. So we feel like we’re really well positioned in cervical dystonia, and we’re also encouraged by some of the payers that are looking at this as sort of a generic category where the approval of DAXXIFY will allow the payers to ultimately manage the category the way that they think makes the most sense, along with the clinicians.

Operator: [Operator Instructions] And our next question is from the line of Uy Ear of Mizuho.

Charles Wang: This is Charles on for Uy. I guess, I had a question about the expanded label for the [RHA3] launch. And just do you think that’s going to be a modest contribution to the sales in this year?

Mark Foley: Sure. Well, I mean, the nice thing about the indication is you can teach, train, market, promote to it. And given that lips is the most commonly performed HA filler procedure, having that ability to directly target, promote, teach, train and go after it definitely helps. And so it’s another thing to talk about, and I think it speaks to the ongoing innovation pipeline that Teoxane is bringing forward in the RHA line. And so it’s just yet another thing for us to get in front of customers to talk about. It allows us to get behind it from a promotional standpoint. So listen, I don’t think it’s the kind of thing that’s going to create step function difference in the growth, but it does all help and contribute to the ability for us to have something else to talk to customers about, and to get trial perhaps in accounts that maybe have not yet leaned in.

And it fits also really well with Redensity which is used for perioral lines. And so it’s a nice combination of using RHA3 for a lip fullness and then using RHA Redensity for the areas kind of around the lips. And so it just, again, gives us yet more to talk about with our customers more reason to engage and more reason to get trial.

Operator: Thank you. And this will conclude the Revance Therapeutics Fourth Quarter and Full Year 2023 Financial Results and Corporate Update Conference Call. Thank you all for joining. You may now disconnect your lines.