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spk03: Good day and thank you for standing by. Welcome to the RVL Pharmaceuticals fourth quarter 2021 earnings results and business update call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question and answer session. Just a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to speaking today, Lisa Wilson, Investor Relations for RVL. Please go ahead.
spk01: Thank you, Operator. Welcome to RVL Pharmaceuticals' fourth quarter 2021 business update call. This is Lisa Wilson, Investor Relations for RVL. With me on today's call are RVL's Chief Executive Officer, Brian Markison, Chief Operating Officer, J.D. Schaub, and Chief Financial Officer, Andy Einhorn. This afternoon, the company issued a press release detailing financial results for the three months ended December 31, 2021. This press release and a webcast of this call can be accessed through the investor section of the RVL website at rvl.com. Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent are regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to RVL's management as of today and involve risks and uncertainties, including those noted in this afternoon's press release and are filing through the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. RVL specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. During this call, we refer to non-GAAP measures such as adjusted EBITDA. For reconciliation of adjusted EBITDA to net income or loss, please see the tables at the end of our press release. The archived webcast of this call will be available for 30 days on our website, rvl.com. For the benefit of those who may be listening to the replay or archived webcast, This call was held and recorded on March 30, 2022. Since then, RVL may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filing. And with that, I'll turn the call over to RVL CEO, Brian Markison.
spk05: Brian Markison Thanks, Lisa, and good afternoon, and thank you for joining our call. While 2021 is in the rearview mirror I believe it is important to look back at a few major milestones. First, we completely reshaped our company from a mixed, branded, and generic specialty pharma company to a growth story focused in ocular medicine and periocular rejuvenation. Our flagship product of NEEQ, indicated for the treatment of acquired ptosis or droopy eyelid, was introduced during the height of the pandemic and throughout last year our eye care team has built a market for a new treatment that can improve vision and lift one's eyelids. Beyond surgery, there was no effective treatment for ptosis, and it was rarely discussed between the patient and provider due to the fact that there was no solution. With the introduction of UpNIC, that situation has changed. Over the last year, we have established safety and efficacy and we have grown the brand every month and every quarter. Now, we are poised to embrace the aesthetic market. We launched in February with a team of 50 experienced territory business managers, and we're off to a great start. If you've seen the headlines in our press release, we expect first quarter sales to range between $5.5 to $6 million, which is a meaningful step up from our fourth quarter last year. We are also reaffirming our guidance for the fourth quarter of this year, which we previously stated would be between $20 and $25 million. It is also noteworthy to mention our expanding relationship with Santan as they take on more territory beyond the major markets that are already under our license agreement and have bought out the approval milestones for Japan, China, and the EU. They have been a terrific partner and are obviously fully committed to developing the brand. Now, I'd like to turn the call over to Andy, who will cover our financial results in greater detail. Andrew?
spk04: Thank you, Brian. I'll begin by providing commentary on our quarterly results of continuing operations specific to the fourth quarter of 2021. A reminder that our quarterly information and highlights can be found in today's earnings press release. With respect to our full year 2021 results, see our release and our annual report on Form 10-K filed with the SEC earlier this afternoon. As mentioned on our previous calls, our 2021 operating results do not break out the results of our legacy business. Our continuing operations generally consist of revenues and expenses related to UPNIC and include the general and administrative expenses of running our business, while 2020 results include Osmolex, which we divested in January of 2021. Net product sales in the 2021 fourth quarter were $3.1 million, up $2.1 million, or 224%, versus Q4 of 2020, and up $900,000, or approximately 39%, over the third quarter of 2021. Q4 2020 also included half a million dollars of Osmolex net product sales. Total revenues for the fourth quarter of 2021 increased $1.7 million over the fourth quarter of 2020 to $2.9 million, primarily due to the year-over-year increase in up-neek product sales partially offset by a true-up of accrued royalties. Our total cost of goods sold decreased $400,000 to $1.1 million in the fourth quarter of 2021 versus Q4 2020, primarily driven by the absence of Osmolex. Selling general and administrative expenses increased $4.9 million to $23.7 million in the fourth quarter of 2021 versus 2020. This increase was the result of our expansion of our sales force, higher marketing spend associated with the expanded launch of UpNIC, partially offset by lower securities litigation costs, which we accrued in 2020. Additionally, our fourth quarter 2021 SG&A included one-time expenses of $3.3 million associated with the issuance of new debt and equity in October of last year. Going forward, we expect up-neek promotional expenses, a significant component of our SG&A expense, to increase as we continue our targeted efforts in the eye care market and initiate our launch into the medical aesthetics channel. R&D expenses decreased by $3 million to $1.1 million in the fourth quarter of 2021 versus 2020, primarily reflecting lower spending on our baclofen and from lower headcount costs. There were no asset impairments in the fourth quarter of 2021. However, in the fourth quarter of 2020, we took an impairment charge of $28.9 million due to a delay in the anticipated launch of our baclofen. Total other non-operating activities were a source of net income of $3.3 million in the fourth quarter of 2021, largely reflecting a $5.6 million gain from the change in the fair value of warrants issued in October of 2021 from the equity raise, and that was offset by a change in the fair value of the notes we issued in October 2021. These non-operating adjustments on both our long-term debt and our warrants result from accounting determinations and elections that require us to measure and remeasure the fair value of these instruments each quarterly reporting period. For more information regarding the accounting for these instruments, please refer to our 2021 annual report on Form 10-K. In the fourth quarter of 2020, the total loss from other non-operating activities was $300,000.00. Our net loss from continuing operations in Q4 2021 was $19.7 million, compared to a net loss of $51.8 million in 2020. Our adjusted EBITDA loss was $15.2 million in the fourth quarter of 2021, compared to an adjusted EBITDA loss of $18 million in the fourth quarter of 2020. Before I conclude my remarks, I'd like to turn briefly to our balance sheet and liquidity. At December 31st, 2021, we finished the year with cash on hand of $40.4 million, and the aggregate principal amount of our long-term and short-term obligations was $57.4 million, which includes an aggregate principal amount of long-term debt of $55 million, the principal maturities of which do not commence until March 2024 and extend through October 2026. our long-term debt is reflected on our balance sheet at fair value of $46.2 million. During the first quarter of 2022, we received an aggregate of $5 million from contingent milestone payments related to our legacy business divestiture. As Brian mentioned, we amended our license agreement with Santan Pharmaceuticals to expand territories covered in the license and allow Santan to buy out certain regulatory milestones. This will result in an additional $15.5 million to be received in the second quarter of 2022. Importantly, under our note purchase agreement, subject to the satisfaction of certain conditions, including a minimum net product sales target for UpNIC, we can draw up to an additional $20 million of notes. With that, I'd like to turn the call over to JD.
spk06: Thank you, Andy, and good afternoon, everyone. Today, we'd like to update you on recent highlights from our expanding launch of UpNIC and provide additional details on trends and market insights. First, I'd like to recognize the sales teams on tremendous acceleration through the first quarter of the year. More impressive when you consider how challenging the first few weeks of the year had been amidst the COVID resurgence. Within the eye care segment, we have continued to see momentum build. As of this past Friday, 12,746 physicians have written a paid prescription for UpNIC, an increase in our total prescriber base of almost 2,200 prescribers since year-end 2021. Additionally, in February, we launched the virtual Up program, an adaptation of our Up Plus program for clinicians in states that do not allow physician dispensing of pharmaceutical products, notably Texas and New York. Appropriate clinicians in these states can now partner directly with us, leveraging our pharmacy as a dispensing partner. Similarly, through this past Friday, we now have just about 1,000 eye care practices as direct or virtual Up Plus partners across the country. Moving forward, our efforts in eye care will remain focused on building depth in our practices while helping to establish daily prescribing habits and reinforcing the functional impact that acquired ptosis can have on vision. Moving now to our aesthetic launch, which is about eight weeks new. That team hit the field in February, and as the Q1 revenue estimate highlights, is off to an incredible start. I'll touch on a couple of early data points to help frame where we are through eight weeks. As of this past Friday, we have activated just over 1,000 aesthetic practices, which does include about 50 practices who participated in the Early Ambassador Program in late December and January of this year. The receptivity has been tremendous. and the team has done an equally impressive job of balancing new account opening with the importance of education and integration. The average order size is between two to three cases of product. Again, each case represents 12 45-count boxes. In all, over 10 percent of these practices have already placed a reorder, in some cases multiple reorders. This all highlights the robust response to this product in the aesthetic channel and the huge opportunity we continue to believe exists for Upnique. It's important to note that unlike the rest of the aesthetic industry, hoping for some conversion and penetration of 40,000-plus aesthetic practices, we are not encumbered by a competitive market basket. The entire aesthetic market is open to us, and we are barely scratching the surface at this point with product in about 1,000 locations. As we move forward, remember, we're building a new market. So unlike most new product introductions, this involves a commitment on our part to helping aesthetic physicians understand the condition, what to look for, how to talk about it, and most importantly, integrate something new into already busy practices. We will be focused on continuing to balance the need to add new accounts with the time and energy to engage deeply with existing practices around education and integration. In short, we continue to see this as a tremendous opportunity in aesthetics. There is nothing else like it for the eyes. The business model fits perfectly with the profile of these practices, and the product provides an almost instantaneous result with no downtime, providing aesthetic clinicians with industry-leading margin per minute for the diagnosis and treatment, with incredible potential for repeat purchases. In closing, we have built a strong foundation which has us poised to deliver continued growth on par with the expectations we have set. We look forward to keeping our head down and just executing on the plan, and continuing to provide updates in the months and quarters ahead.
spk05: Thanks, J.D. Clearly, we're off and running. And before we turn to Q&A, I'd like to point out that when considering the non-dilutive cash committed and received to date that Andy mentioned, and the expectation that we will meet the performance hurdle to pull down the $20 million tranche from Ethereum, we believe we now have the cash runway to execute our strategy and are now in the driver's seat for if and when we go back to the capital markets. So with that operator, let's open the call for questions.
spk03: At this time, to ask a question, please press star 1 on your telephone. And to withdraw your question, just press the pound key. Once again, that's star 1 for questions. One more for questions. Our first question will come from Louis Chen from Cantor Fitzgerald. You may begin.
spk00: Congratulations on all the progress this quarter, and thanks for taking my questions here. So I have two for you. First one is could you help us understand that ramp from your first quarter 2022 sales guidance of $5.5 to $6 million to the fourth quarter 2022 sales of $20 to $25 million? And then second question is if you could talk about where you expect your mix of optometrists and ophthalmologists to shake out and why that's important to you. Thank you.
spk05: Yeah, no, thanks for the call. And I think I'll answer the first part and then turn it over to JD. But starting with the mix in ophthalmology, optometry, right now optometry is about 62% of the total eye care scripts. Ophthalmology, obviously, the balance, 38%. It is important, but, you know, we've said from the very beginning that optometry would probably be be the major driver in eye care for us, and also from a numbers perspective, they clearly outnumber ophthalmology, and this is also a product that's very easy for them to get their hands around, and also if they'd like to make a little bit of margin as well. So it's been relatively stable at those percentages for the last three months, and I think that's probably where it will shake out as we go forward in time. Now on the ramp question, I'll have JD pop in, and then we'll tag team it if we need to.
spk06: Yeah, thanks, Brian. Well, I think, number one, obviously some really strong acceleration coming out of last year. And I think when we look at the first quarter and the next three quarters, one of the things that I think is also relevant to the first quarter is, that's just two months of aesthetic sales from field activity. So it's not even yet a full quarter. And so as we think about our ability to continue to accelerate as we move from Q1 into Q2 and then obviously the back half of the year, I think we feel good about how that shakes out moving into the second quarter. What are the drivers of continued acceleration? Well, we talked about points of sale. When you look at both sides of the business, we're still only in a very small fraction of potential accounts. And I think that's going to continue to be a driver of not just growth, but also accelerating growth as we move through the year. And then consumption at a per practice level. Obviously, as a new market, there's no analog. This isn't something that any of these clinicians on both the aesthetic and eye care side are doing each and every day in terms of assessing eyes and lids and treating with a simple solution like UpNIC, acquired ptosis patients. And I think as we continue to ramp awareness in a new channel, raise the noise level, continue to drive enduring educational content, and really get physicians comfortable that this is a safe product, it's okay to use, how to speak the language, and confidence in using it, and ultimately what we've seen is a tremendous patient response, the product sort of stands on its own from that standpoint, that that's gonna also drive continued consumption on a per practice level. So hopefully that gives you a good feel for what we're seeing and how we expect it to translate from the first quarter through year end.
spk00: Thank you very much.
spk05: Thanks, Luis.
spk03: Our next question comes from Douglas from AC Wainwright. Your line is open.
spk02: Hi. Good afternoon, and congrats on all the progress, guys. Maybe as a starting point, I think Katie said that you have activated a thousand practices so far in aesthetics. In terms of, I guess I have two questions. In terms of where you're seeing orders, are those largely from those ambassador practices initially? So we've really not seen those initially activated practices start to translate into revenues. And then just maybe some perspective, that 1,000 that you've activated, what's the number, sort of your target number of activated practices by the fourth quarter? Thank you.
spk06: Yeah, I'll start, and then, Brian, feel free to fill in. So I think, number one, going to the ambassadors, yes, I think, you know, they've had an extra, you know, six weeks on average with the product. So we are seeing some really strong momentum in those practices in terms of early utilization and increasing consumption. And I think that's obviously something we're paying close attention to as we move through newly activated points of sale with the field beginning their activities and through the month of March, which we still have a couple of days left. The big bulk of accounts that have been opened through the course of February and March, they are revenue generating in the sense that they've been opened or activated and they've purchased their first cases for the practice. But I think as a function of are they starting to use it and are they comfortable with it, That really is a variable that's dependent upon how the team is scheduling and planning the in-service, the lunch and learns, and the time to educate and get practitioners, be it injectors, staff, MDs, up to speed, providing the early education, and really getting them going. And I think that's something where, you know, look, you can think about it like over the last, you know, maybe it's 500 accounts in February and about 500 accounts in March. On average, each of those accounts has maybe had product in the practice for a total of 10 days. So again, it's really early, but I think what's most encouraging, Doug, is the receptivity, right? So we're taking a product into a new channel where we obviously have a strong foundation and continued momentum being eye care, and introducing it to a group of clinicians that have never really used something like this before, and we're not hearing no's. And I think that speaks to the growing awareness and enthusiasm for the opportunity to add a new category to the aesthetic practice around lid position, lid height, opening the eyes, and what that can mean to a meaningful number of patients in that practice setting.
spk02: Okay. And then just in terms of the universe of targeted, you know, the number of accounts that you'll be targeting by year end, In aesthetics?
spk06: Yep. So we're targeting about 4,000, but I think the way that we're looking at kind of our progression is heavily dependent on the field. And I think one of the things that has started to happen as we've gotten out there with a team in the aesthetic channel is the noise has raised significantly, and it's a very connected channel. And so what that has done is it's begun to generate quite an increasing influx of white space or even accounts in geographies where we have BDMs promoting the product who are hearing about it, wanting to learn about it, and bring the product into their practice. And that's not something that we've really contemplated as we think about the forecast and moving through the year, but it is something that could put us on an even higher trajectory from a total aesthetic account standpoint.
spk05: Doug, the other thing to keep in mind, as JD mentioned, we're introducing a brand-new product. It's not an established category, if you will, which is what we love because we don't have competition. our team needs to be in the account. They need to in-service the complete account, and we need to develop a cadence with the practice for use and then reorder. And, you know, for the early accounts in our ambassador program that had the product an extra month, we've already seen some very healthy reorders, and some practices that integrated more quickly where the product is intuitive, they're already beginning to reorder as well. So, You know, I think there's a little bit of caution on our side to make sure that we just don't open too many accounts that we can't get to and in service. However, you know, again, as J.D. mentioned, we are getting inundated with demand. So I think it's a really good problem to have.
spk02: Okay, great. That's really helpful.
spk05: Thanks, Doug.
spk03: And as a reminder, that's star one for questions, star one. Our next question, Greg Fraser from Cura Securities. Your line is open.
spk07: Good afternoon, guys. Thanks for taking the questions. I was wondering if you could comment on how you expect the mix of sales between aesthetics and eye care to evolve this year, and maybe you can comment on the anticipated mix in the 20 to 25 million of sales in Q4.
spk05: Yeah, and so, Greg, it's a great question, and We hope to be able to give a lot more color as the year goes on. I believe that aesthetics will certainly outstrip eye care by the end of the year. You know, I think, you know, look, going forward in time, I would expect aesthetics to be very meaningfully more of a contributor to the revenue line than eye care. simply when you look at the uptake we're already receiving in aesthetics and the fact that we've barely hit 1,000 accounts, and we're not limited by a predefined market, let's say a filler or a toxin, so the entire aesthetic universe is open to us. I would like to be more specific, and as you know, we have a forecast internally, but it's too new to give you any real precision around the ultimate mix But I would say by the end of the year, we could be looking at a 70-30 aesthetic to eye care mix. And then going forward, probably we'll see aesthetics inch up above 70-30. And again, that's very rough and it's very early goings, but we're happy to keep updating this as we go because we know we're the only ones that have the data.
spk07: Yep, that's really helpful. Thank you. And then I'm curious if you expect different average utilization for aesthetics versus medical patients.
spk05: Yeah, great question, and I wish I could crystal ball this because in eye care, you know, the average age of our patient today is 60 years roughly. As we, you know, fly into aesthetics, you know, we're going to be grabbing a lot of millennials, and, you know, we think the utilization pattern with millennials is is going to be very different than it is with, you know, the average 60-year-old. We're getting great persistency, better than we thought early on in eye care, and we're just too new in aesthetics. I can tell you, though, that the few millennials that we have spoken to that have tried the product and have had it now for at least a month, they use it every day. I don't expect that to be the norm, but it certainly is encouraging.
spk07: Got it. Thanks very much, and congrats on the progress.
spk03: Yep. Thank you. And once again, that's Star 1 for questions, Star 1. I'm on for questions. And I'm not showing any further questions in the queue. I'll turn the call back over to Brian for any closing remarks.
spk05: Well, thanks, everyone, for joining the call. We're very excited here at RVL Pharmaceuticals, and stay tuned. A lot more to come. Thank you.
spk03: And this will conclude today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
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