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spk03: Good morning, everyone. My name is Todd, and I will be your conference operator. At this time, I'd like to welcome everyone to the RVL Pharmaceuticals first quarter 2023 financial results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. At that time, if you have a question, please press star and one on your telephone keypad. As a reminder, this conference call is being recorded today, May 11th, 2023. It is now my pleasure to turn the floor over to Ms. Lisa Wilson, Investor Relations for RVL Pharmaceuticals. Please go ahead.
spk00: Thank you, Operator. Welcome to RVL Pharmaceuticals' first quarter 2023 financial results and commercial 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 Principal Accounting Officer, Mike DiPietro. This morning, the company issued a press release detailing financial results for the three-month-ended March 31, 2023. This press release and a webcast of this call can be accessed through the investor section of the RVL website at rvlpharma.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 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 today's press release and the company's filings with the Securities and Exchange Commission. 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 financial measures such as adjusted EBITDA loss. For a reconciliation of adjusted EBITDA loss to net loss, please see the tables at the end of today's press release. The archived webcast of this call will be available for 30 days on RVL's website, rvlpharma.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on Thursday, May 11, 2023. Since then, RVL may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to RVL's CEO, Brian Markison. Brian Markison Thank you, Lisa.
spk05: With the first quarter in the rearview mirror, we are now past the one-year mark in our aesthetic launch, and we remain truly excited about the prospects for UpNIC Brand. Our cash-paid multi-channel strategy is beginning to pay dividends as we leverage the P&L to drive growth. Our eye care business continued to grow, which is remarkable considering that there has been no personal promotion in this sector for over six months. We believe that that is testimony to the efficacy, safety, and ultimately patient satisfaction with the brand. It is also meaningful that there is no competition. When examining our aesthetic progress, we once again see a strong reorder pattern emerge as practices learn how to integrate a novel product into their daily routine. Our sales professionals were heavily focused on helping accounts cycle through inventory during the first quarter and also increased our total new accounts. Later in the call, JD will walk through the specific metrics behind our performance. Telemedicine will also begin to play a meaningful role in our business over time, especially for those patients who do not wish to visit a provider. We are in the early phase of this strategy where our partners are optimizing their approach behind a calculated spend. In the very near future, their advertising should become more prominent. JD will also describe our new e-commerce platform called Elevate, which will open a whole new line of communication with our providers and, most importantly, their patients. Finally, I'd like to add that we reached an agreement on a special protocol assessment, or SPA, with the FDA for our baclofen. We will now ramp up our effort to partner the brand and deliver value for this important asset. And with that, I'd like to turn the call over to Mike for more specifics around our financial performance in the quarter. Mike?
spk04: Thank you, Brian. Good morning, everyone. I'll begin by sharing comments on our results specific to the first quarter of 2023. A reminder that our quarterly information and highlights can be found in today's earnings press release. We expect to file our quarterly report on Form 10-Q later in the day. Net product sales relating entirely to APNIC increased by $2.9 million to $8.8 million in Q1 from an increase in sales volume. Royalty and licensing revenues were $15.5 million in the prior year quarter, reflecting San 10 milestones unique to that period. There were no royalty or licensing revenues in the first quarter of 2023. Total cost of goods sold for Q1 increased by $0.2 million to $2.3 million. This increase was also due to higher volumes. Our gross profit percentage from product sales was 74% in Q1, as compared to 64% in the prior year quarter. The year-over-year improvement in product margin reflects a lower royalty expense inclusive of contingent earn-out obligations and from improved overhead absorption driven by higher volumes. SG&A expenses decreased by $7.6 million or by nearly one-third to $16.2 million in Q1. The decrease in SG&A was primarily driven by $5.6 million in lower net compensation and training costs, mostly due to the absence of an eye care sales force in the 2023 period, by $0.9 million in lower legal, insurance, and other professional fees, by $0.5 million in lower share-based comp, and finally, from $0.4 million in lower marketing costs. R&D expenses for Q1 decreased by $0.3 million to $0.6 million, mostly reflecting lower share-based comp. Unique to Q1 and classified among SG&A, we incurred $0.6 million in debt repayment fees. Notably, in Q1, we again kept to our long-standing commitment to keep total operating expenses, or TOE, in check. After adjusting for non-recurring or exceptional items and non-cashed share-based comp, our first quarter monthly TOE spend was just above $5 million, well below the $7 million ceiling we've set for ourselves. Moving below operating income, total other non-operating activities in Q1 2023 contributed $1.3 million of income. as compared to income of $1.5 million in the 2022 period. Non-operating income in each of the reporting periods was primarily attributable to the receipt of $5 million in cash from Allura related to contingent milestone payments earned in connection with the sale of our legacy business. In both periods, this non-operating income was partly offset by aggregate losses recognized from the change in fair value of our debt and warrant liability. Lastly, our adjusted EBITDA loss for Q1 was $8.7 million, nearly 60% lower than the comparable EBITDA loss of $18.9 million in the prior year quarter. Finally, turning to our balance sheet and liquidity. At March 31st, we held cash of $33 million and had senior secured indebtedness with principal maturities of $70.7 million. In the year-to-date 2023 period, there are a few developments to share regarding our liquidity. In February, we received $5 million from Allura related to a contingent milestone. In March, we forwarded that $5 million on to our lenders in satisfaction of mandatory repayment conditions under our debt. The repayment reduced the principal of our second tranche notes by $4.3 million, thereby reducing our overall debt principal with Ethereum from $75 million prior to $70.7 million at present. On March 8th, we entered into a second amendment to our debt to secure the immediate reduction of a minimum cash requirement from $15 million previously to $12.5 million going forward. Lastly, and effective April 15th, our lender's commitment to issue third tranche notes expired as we did not achieve the associated revenue target. As mentioned previously, there continue to be many variables in play that will likely influence our cash runway and our related compliance with financial covenants. Our near-term commercial development, in particular in light of increasingly challenging macroeconomics, continues to play an important factor. And with that, I'll turn the call over to JD for some added color. JD?
spk01: Thanks, Mike, and good morning, everyone. As you heard from Brian, we continued to make solid progress with our multi-channel strategy in the first quarter. Notably, the 49% year-over-year revenue growth was anchored by significant operating leverage, as our sales and marketing investments decreased about 35% within the same period. Again, in the first quarter, we saw steady growth across key aspects of our unique business, sequentially and year-over-year, in both aesthetics and eye care, highlighted by the following. Total net revenue for the quarter was split approximately 60-40 between aesthetics, which includes telemedicine, and eye care, which includes the pharmacy. Specific to the pharmacy... Paid prescriptions reached another all-time quarterly high, up about 2% sequentially versus Q4, and 11% year over year, totaling 15,415 for the quarter. Total paid prescribers reached 19,869, an increase of 8%, or 1,455 new unique prescribers versus year-end 22. Specific to aesthetics, total purchasing accounts increased over 500 in the first quarter to over 4,800 in total as of March 31st, representing an increase of about 12 percent versus year-end. In the quarter, reorder revenue comprised over 55 percent of the aesthetic revenue contribution, also inching up as a percent of quarterly sales versus Q4. At quarter end, cumulative reordering accounts totaled over 1,800 out of 4,834 total unique locations, just under 40%, and an increase of more than 300 reordering locations since year end. Wrapping up some introductory commentary, we remain excited by the growth prospects for UpNIC in the quarters ahead. Clearly, our data suggests increasing patient demand, as evidenced by the growth in reorder as a percent of revenue, new patient starts, and refill prescriptions. This is a product that patients want and continue to repurchase. Looking ahead, we remain focused on continuing to drive growth while maintaining discipline in our financial management and capital allocation as we drive towards cash flow breakeven as quickly as possible. Now I'll share some additional updates on our overall progress in aesthetics, along with some insights on the upcoming launch of our next generation technology platform. As we move further into 2023, our strategic priorities remain anchored in growth from the aesthetic channel. As described previously, our sales effort continues to evolve towards a heavier emphasis on supporting penetration within existing accounts versus the opening of new accounts. While we do expect to steadily grow our new location presence, we also recognize the importance of our team's efforts to help our customers integrate UpNIC. As a novel treatment category within the medical aesthetic setting, we are committed to helping our partner practices implement new processes to incorporate UpNIC. To that end, we have begun to roll out a streamlined onboarding and integration process. We piloted this initiative with select accounts in recent months, and the feedback has been positive. Not only do the practices appreciate the time and effort to provide such support, but we have also been able to further highlight the outsized patient opportunity within each practice through the process. As an aside, the pilot screened about 10,000 patients across these select practices. 80% of which, just under 8,000, self-diagnosed as TOTIC, all of which aligns with historical data and research to support the large addressable market we believe is out there. We have trained the first network of UPNIC educators, representing a diverse group of plastic surgeons, dermatologists, and nurse injectors who are tasked with expanding peer-to-peer education through programs highlighting the tremendous opportunity UPNIC represents. These programs are beginning to build on a national scale, and we are thrilled to have augmented our provider educational efforts in such an impactful way. We continue to see a growing number of independent studies and publications make their way into the eye care and aesthetic congresses and journals. Just last month, the first vehicle-controlled study highlighting patient outcomes and quality of life was published by Dr. Lee and colleagues in the Journal of Plastic, Reconstructive, and Aesthetic Surgery. We see these independent presentations and studies as robust third-party validation. which furthers a growing body of clinical evidence, elucidating the broader impact of potential outcomes achieved with UpNIC. I'd like to now spend a minute highlighting the pending launch of our next-generation tech platform, aptly named Elevate. Today, we can facilitate one-off ordering by providers with no further capabilities to connect new patient starts to additional support and or refills. That presents the core of this new platform, whereby we will soon be able to connect every new patient start in a practice to a standing prescription at our wholly owned pharmacy, making the ongoing utilization of UpNIC via subscription and or discounted refills for increased use a possibility, all while maintaining the ongoing business relationship with each practice or provider. This platform is truly novel and represents what we believe will be a tremendous value proposition for both our provider partners and their patients. Moving now to another layer of our multi-channel strategy, we continue to engage with our select telemedicine partners, expanding access and awareness as we build. Through the first quarter, our partners have begun to develop the foundation by beginning to expand advertising and optimization of their investments. There has been limited time to assess, but the early data suggests this channel will serve as a critical access point for the majority of patients that do not seek traditional treatments in a provider's office. As previously mentioned, we view this segment as evolving more meaningfully through the back half of this year and beyond, as our partners thoughtfully expand their rollout and the investments they're making in the months ahead. In closing, we continue to be motivated by the ongoing progress and results. we have established a strong foundation which sets us up for continued growth while further positioning us to expand the portfolio through strategic opportunities as they arise. We remain focused on delivering this growth and supporting our customers and patients with the service, support, and products that deliver real value across the spectrum. We look forward to our next update in a few months, and I'll turn the call back to Brian for any closing remarks.
spk05: Thanks, JD, and thanks, everyone, for listening to our prepared comments. And what I'd like to do now is turn it back to the operator, and we're happy to take questions.
spk03: Operator? Thank you. At this time, the floor will be open for your questions. If you would like to ask a question, please press star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1. To ask a question, our first question comes from Louise Chin with Cantor Fitzgerald.
spk08: Hi. Congratulations on all the progress this quarter, and thanks for taking my questions. I had a few for you. So I wanted to ask you if you have any thoughts in terms of additional products you might want to add to your portfolio and the timing of that. Secondly, curious if it's too early to ask you when you might achieve EBITDA break even or at least what kind of sales level you need in order to get there. And then lastly, just more color on the impact of economic headwinds that you'd expect that to continue for the rest of the year.
spk05: Thank you. Thanks, Louise, and good morning. It's great to hear your voice. On the topic of business development, we, I would say we're highly focused on getting something done in the near future. I can't be more specific than that, but, you know, we're, right now is Salesforce driven model primarily. And we have a great product and a really, really outstanding team. And clearly we have capacity and we're acutely aware of the, you know, sort of the burden on the P and L of a single product company and a launch. So, you know, as you could see the leverage we're trying to pull through the P and L here, can only get much better if we bring in more products. And JD and I are completely focused on that. So as far as the break-even point and what the sales level needs to be, I think it's a little early for me to give that kind of guidance because we're still optimizing the model. And remember, we don't have an analog, right? So we are managing the P&L very carefully. We have no competition. We're building a business and focused on a reorder cadence right now while we expand new openings. So I think, you know, every quarter gets us closer and closer, but I don't want to give guidance right now on that aspect of it. And the third question on headwinds, I think, you know, it's there. I can't really tell you that. We're horribly concerned right now because we're so underpenetrated given the entire market. I think J.D. wants to add a little color to that.
spk01: Yeah. I mean, look, we talk to a lot of providers. We're in practices every day. I can't say that we see an acute downturn or slowing, Louise. I mean, you do hear probably more of a leading perspective in different practices, but it's anecdotal at best. And I think everybody continues to believe, at least from a provider standpoint, there hasn't really been a slowing yet. I think it's on everybody's mind, but we're yet to see it. And I think historically, you know, this industry has proven quite resilient and at least for that large swath of patients that are existing aesthetic patients.
spk08: Thank you.
spk03: Thank you. Once again, as a reminder, if you would like to ask a question, please press star 1 at this time. We'll go next to John VanderMusten with Zacks SCR.
spk02: Thank you, and good morning, Brian, JD, and Mike. Are there any seasonal or timing factors that came into play in the first quarter?
spk05: Now, John, we don't really think we've encountered any of that in the first quarter. But again, you know, given our – go ahead.
spk02: And margins were a bright spot in the first quarter. Do you see gross margins being stable from here at about 74%? And do you anticipate any more cost reductions on the operating side?
spk04: Yeah, John, we're continuing to hold. I think the mid-70s is where we are. I don't see that growing a ton, but I do see us holding to that.
spk01: And then from an operating cadence around expenditures – I think Brian highlighted it. We are being diligent about where we're putting our dollars and trying to squeeze the greatest impact on growth and continued momentum as possible. So where we don't see a real driver of return, you'll continue to see us whittle away at things. If we feel like we've got an opportunity to allocate dollars somewhere to help what we're trying to do in an accelerated manner, I think you'll see us try to figure out how to do that too.
spk02: Okay. And so if we look at first quarter, SG&A, R&D, they should be pretty much the same as we move through second, third, and fourth quarter, I guess. Is that what you're indicating?
spk01: Yeah. Yep. I think that's pretty fair.
spk04: I think in the first quarter we only had maybe one aberrant item. There's about $600,000 of fees that we incurred with that debt pay down that are sitting in SG&A. But other than that, John, I think that is the model for the remainder of the year.
spk02: Okay. And, J.D., you touched on this a bit in your part. What are the – and this is regarding Elevate and what we – need to see here before that's launched? Any kind of steps or things you need to achieve before that gets launched? And then where will the elevated customer come from when you go looking for that individual?
spk01: Yeah, so we'll start with the top. So look, it's a technology platform. So our steps to go live right now all revolve around really final testing, both internally as well as we've begun that process externally with different accounts. So that's really what we're focused on. And then certainly we've got to run through the training. We're treating it like a product launch, because I think this significantly enhances what we're trying to do within each practice, integrating a new technology with UpNIC, but also here in terms of the ongoing opportunity and taking the burden of continued utilization off of certainly the provider, but also the patient a bit, too, because they don't have to run back to the practice to get additional prescriptions and boxes of product. But we feel good about cutting over on a clean quarter at the start of Q3, and I think we're really excited for it. The customer base is really going to be focused around aesthetics, and it's everybody. At the end of the day, we've designed this to create a deeper partnership. I think it becomes scalable as we think about other products that we might bring into the business over time. And, look, you know, we've had a lot of conversations, as I'm sure you can imagine, with providers, and intuitively, you know, it's a no-brainer, right? We're kind of saying, look, we're enhancing and developing this technology that sort of takes any future burden off of the time and investment you make to diagnose and treat patients with MEKT. on that first fill. And then we take over from there and we maintain an ongoing business relationship with that provider through a connected account platform that we've been developing as part of this as well. So it is a unique opportunity for us. And at the end of the day, right, you know, we're a couple years into this, you know, between our direct dispense model and our pharmacy business, You know, I'd have to imagine, you know, there's upwards of a couple hundred thousand patients and growing that have initiated therapy, and I'm triangulating a fair amount there because we don't have visibility, but just based on, you know, reorder cases, obviously we have visibility in the pharmacy, and we understand the stickiness based on that data of this product. I think it really opens up a tremendous inflection for for the business as we begin to transition customers to the new platform.
spk02: All right, great.
spk03: Thanks, J.D. That's all for me. Appreciate it. Thank you. Our next question comes from Balaji Parsad with Barclays.
spk06: Hi, everyone. Good morning. This is Michaela on for Balaji. Thanks for taking our questions. Just wondering, could you talk a bit more about how you're thinking about the future competitive landscape and impact on the market? Really, just any thoughts on how this may evolve as well. Thank you.
spk05: Yeah, thanks, Michaela. I think we don't have any direct competition. And in fact, we think we, or APMIC, I should say, is a perfect complement to many of the treatments that are out there. Now, where we do compete is for a share of the wallet or the pocketbook, if you will, and that's something that, you know, we need to work on as we're creating a new category that hasn't existed. You know, J.D. will just walk through the Elevate program, and I think it's going to be a meaningful advantage for us to be able to communicate and get product to patients that without them having to come back to the med spa or to the practice to get another box or a refill. And also lets us work and communicate with patients directly on behalf of the providers through our pharmacy. So the competitive landscape is fierce when you look at overall dollars, but we're not a toxin, we're not a filler. You know, we don't need to do loyalty programs to get market share. We just need to quietly build our category because we have a one of a kind product that patients really enjoy and it makes them look better and feel better.
spk06: Great. Thanks so much.
spk03: Thank you. As a reminder, if you would like to ask a question, please press star one at this time. Our next question comes from Jorge King with HC Rainway.
spk07: Hi, good morning. Thanks for taking my question, Jorge King, on behalf of the Duck File. I'm just curious. Some of the questions have already been asked. So I'm just curious of what you think of Elevate and its impact for the company. Do you think it's going to be more immediate compared to their own marketing approach?
spk01: Yeah, hi, Jorge. Thanks for the question. This is JD. Yes, I think no doubt, right? And look, there's some elements of execution that go with supporting the belief that the impact is more immediate. But at the end of the day, as soon as we're able to get an account transitioned and set up within the new platform, they can begin to parse through historical prescribing data in the practice and upload all of those patients into this new system, whereby our pharmacy is now able to communicate and begin that reactivation process around refills, et cetera. And then obviously on the go forward, every new product start should be immediately updated placed with a standing prescription, which gives us ongoing connectivity and continuity each and every day. So there's a lot of reasons to believe the impact is going to be immediate, I think, to what scale. We'll learn pretty quickly, and obviously within about, you know, four to six weeks of go-live, you know, we'll have another earnings call and I think be able to further elucidate the impact that the rollout's having on the business in the early days. Guy, that's helpful. Thank you.
spk03: Thank you. At this time, we have no further questions in queue. I'd like to turn the call back over to Brian Markison for any additional or closing remarks.
spk05: Thanks, Operator. And once again, thanks, everyone, for listening in and participating on our call today. We are certainly excited about the future for the company and of Neek as we advance our programs, particularly Project Elevate, our new e-commerce portal, and as we look to add assets to the product lineup and leverage our team. Thank you.
spk03: This concludes today's call. Thank you for your participation. You may disconnect.
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