Revance Therapeutics, Inc.

Welcome to the Re-Advanced Therapeutics fourth quarter and full year 2021 financial results and corporate update conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ensure that we have ample time to address everyone's questions during the Q&A session, we will ask for a limit of one question and one follow-up question per person. To ask a question at that time, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference call, please press star zero for operator assistance. As a reminder, this call is being recorded today, Monday, February 28, 2022. I would now like to turn the conference call over to Jessica Serra, Head of Investor Relations and ESG for Revance. Please go ahead.

Thank you, Victor. Joining us today on the call from Revance are Chief Executive Officer Mark Foley, President Dustin Suess, and Chief Financial Officer Toby Schilke. During this conference call, management will make forward-looking statements, including statements related to the regulatory process and potential approval and timing of approval for doxyglodulone toxicity for injection and glabella lines, as well as in therapeutic indications, plans related to the RJ collection and opal platform, our financial performance, processing volume runway, 2022 guidance, expected cash runway, strategic priorities and capital allocation plans, our market and revenue opportunity, and the market demand for our products and services, and our business strategy, planned operations, and commercialization plans. These forward-looking statements are based on the company's current expectations and inherently involve significant risks and uncertainties. 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. 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 Advance. Mark?

Thank you, Jessica. Good afternoon, everyone. Thank you for joining our fourth quarter and full year 2021 financial results conference call. 2021 marked Revance's first full commercial year, and we could not be more pleased with our execution, ending the year with over $72 million across our products and services. These results were led by our RHA collection, the latest advancement in hyaluronic acid thermal filler technology that continues to gain share in the large and growing U.S. filler market. We now have over 3,000 accounts in the U.S. across our Dermal Filler and FinTech platform, which generated over half a billion dollars in gross payment volume for the year. Our focus on innovation and our customers will continue to be core to our ability to scale in the years ahead. Coming into 2021, we have five key strategic priorities. Obtaining FDA approval for daxibotulinum toxin A for injection for the treatment of glabellar lines following the deferred action of our PDUCA date in November of 2020. Strong commercial execution. Advancement of our therapeutics franchise. Discipline capital allocation. And a focus on our people, culture, and diversity and inclusion. I would like to take a moment to review how we track on these priorities as well as provide some recent updates. First, while we did not receive FDA approval for our neuromodulator product as we had anticipated, we made meaningful progress in advancing our regulatory path. Earlier today, we announced that we have successfully manufactured three consecutive drug substance lots and one drug product lot as required by the FDA for the qualification of our new working cell bank. The completion of the manufacturing activities paves the way for the resubmission of our BLA for daxibotulinum toxin A for injection for glabellar lines as soon as possible. You'll recall that based on our Type A meeting with the agency in December, a complete response to address the outstanding observations related to, one, the qualification of our new working cell bank, and two, our drug substance manufacturing process required us to qualify our new working cell bank by producing three consecutive drug substance lots and one drug product lot. This qualification process was already underway at the time we announced our Type A meeting results, and we are very pleased to have completed the qualification activities in a timely manner. We are now working on our resubmission package and will provide an update once we have resubmitted our BLA. As we have indicated previously, and based on our Type A meeting, a reinspection of our manufacturing facility will be necessary once our resubmission is accepted by the agency. Further, based on FDA regulations, Once the resubmission is accepted, the agency has up to six months to complete its reinspection of our facility along with the review of our resubmitted VLA. We remain focused on getting our neuromodulator product approved as soon as possible and look forward to engaging with the agency to facilitate this process. As I already addressed our commercial execution in my opening remarks, I will now turn to our third strategic priority for 2021, the advancement of our therapeutics franchise. In 2021, we successfully completed both our Aspen Phase III clinical program for cervical dystonia and our Phase II clinical program for adult upper limb spasticity. The completion of our cervical dystonia clinical program marked the second successfully completed Phase III program for doxibotulinum toxin A for injection, demonstrating that the drug was generally safe and well tolerated with an extended duration profile across both therapeutic and aesthetic indications. For our adult upper limb spasticity indication, we completed the Phase II clinical program and also held a productive end of Phase II meeting with the FDA, which informed the requirements for a Phase III program for this indication. Given our progress, we are poised to file a supplemental BLA in cervical dystonia following the approval of daxibotulinum toxinate for injection in glabellar lines. For our adult upper limb spasticity program, given some of the cash conservation measures that we had implemented late last year due to the delayed approval of our neuromodulator, we have paused the commencement of that phase three program and will continue to evaluate the proper timing for its initiation. Turning to capital allocation, we have been disciplined in evaluating and pursuing opportunities that will generate the highest return for our stockholders. To that end, we have been prudent in our efforts to balance growth and costs throughout the year, particularly following our CRL to maximize our financial flexibility. These ongoing efforts have allowed us to end the year with cash into 2023. Finally, in spite of the challenges presented by our remote and hybrid work policies due to the COVID-19 pandemic, we have worked hard to foster employee engagement while also creating a strong culture that embraces diversity and inclusion. These priorities involve programs and initiatives across all levels of the organization. Of note, we successfully met our corporate diversity and inclusion goal for the year, spanning across talent acquisition and internal educational and leadership forums. Before I turn the call over to Dustin to walk us through our fourth quarter operational achievements, I would like to review our strategic priorities for 2022. First, our primary goal remains gaining FDA approval for Daxibotulinum Toxin A for injection in globular lines as soon as possible. We're actively working on a resubmission, which will bring us one step closer to that goal. Our second priority is to continue to drive top-line growth for our products and services which will continue to be anchored by the RHA collection of thermal fillers in 2022. Third, we plan to drive deeper penetration of our Opal relational commerce platform now that we have completed the payback migration and are able to expand the platform's functionality. Fourth, we will continue to focus on disciplined capital allocation to drive long-term value for our stockholders. Fifth and finally, we will continue to invest in our people and our culture upon which our success is built. I'm thankful for all the efforts and dedication of the Revance organization in 2021, and I look forward to our shared success in 2022. With that, let me turn the call over to Dustin, who will cover our performance in the fourth quarter.

Dustin? Thank you, Mark. Let me start by echoing your appreciation to everyone in the organization for all the hard work and progress we've made during the year across both aesthetics and therapeutics. In 2021, we capped off our first full year of commercialization by recording over $70.8 million in total RHA sales. These results were driven by RHA's innovative technology and the strong execution across our revamped aesthetic strategy, which continues to differentiate revamped from other competitors. In the fourth quarter, RHA sales totaled $23.8 million, representing an increase of 138% over our first launch quarter. supported by new account growth, increased account productivity, and the impact of traditional seasonality. The second and fourth quarters are typically the strongest periods for aesthetic procedures in each calendar year. We're excited to build on RHA's momentum in 2022, particularly as we leverage cross-selling opportunities in our products and services, and as we introduce RHA Redensity to our collections. You'll recall at the end of 2021, our partner, Chioxane SA, received FDA approval for RHA Redensity, which was previously referred to as RHA1. The approved indication for the treatment of moderate to severe dynamic perioral rites or lip lines further augments the versatility of the RHA collection, providing injectors with a wider range of treatment options. The product was well-received by investigators in clinical trials, and we look forward to launching Redensity in the second half of the year. The RIT collection now includes four distinct formulations that are dynamic, natural, and adaptable. And we are currently working with Teoxane to bring new filler innovations to the market that will enable us to continue to fulfill the unmet needs of both injectors and consumers. Turning to our FinTech platform, an important highlight of 2021 was the launch of Opal. Opal is designed to help aesthetic practices optimize operations while enhancing consumer relationships. It's the first of its kind relational commerce platform for the aesthetics industry. Initial launch features include seamless payments, practice reporting, and analytics, and customizable checkout options containing a catalog of over 6,000 SKUs. We are currently developing new features to enhance adoption and retention. The team is leveraging practice insights to develop membership programs that will be meaningful to both practices and consumers. We began 2021 with a payment processing run rate of over $200 million, and through increased account penetration, we were able to nearly triple that run rate to almost $600 million at year end. As we previously indicated, payment processing volume is a key performance indicator for our fintech platform. Going forward, we'll be providing our gross payment volume, or GPV, defined as the total dollar amount of all transactions processed in the period through our OPAL and HintMD platforms net of refunds. For the full year 2021, our GPV was $506 million. In 2022, our goal is to continue to grow our accounts develop new features, and complete the migration of our legacy HintMD customers to Opal. With that, I'll turn the call over to Toby to cover our fourth quarter and full year financials.

Thank you, Dustin. We are pleased to report strong financial results for the fourth quarter and for the year. Revenue for the fourth quarter and full year 2021 was $26.0 million and $77.8 million in compared to $11.1 million and $15.3 million for the same period in 2020. Revenue growth on a quarterly and annual basis was driven primarily by increased sales of the RHA collection of dermal fillers. Revenue for the fourth quarter included $23.8 million of product revenue from the RHA collection of dermal fillers, $1.6 million of collaboration revenue from our partnership with Beatrice, and $0.5 million of service revenue from our fintech platform. For the year, 2021 revenues included $70.8 million of our product revenue, $5.7 million of collaboration revenue, and $1.3 million from our fintech platform. Operating expenses for the fourth quarter and full year 2021 were $87.6 million and $352.5 million for the full year. Excluding depreciation and amortization and stock-based compensation, non-GAAP operating expenses were $63.3 million for the fourth quarter and $265.8 million for the year. As previously mentioned, Our capital allocation at this time is focused on obtaining FDA approval for Daxibotulinum Toxin A for injection, driving top line growth with our products and services, expanding and deepening our customer relationships through Opal, and investing in our people and culture. We have also taken prudent steps to conserve and preserve cash by pausing non-critical hires, deferring a phase three clinical program for upper limb spasticity, as well as other therapeutic pipeline activities, and pausing international regulatory and commercial investments for daxibotulinum toxin A for injection, with the exception of our collaboration with Fosun in China. Due to these efforts, our GAAP and non-GAAP operating expenses for the year were below our previously announced guidance ranges. Looking ahead, we expect 2022 gap operating expenses to be $375 million to $400 million, and our non-gap operating expenses, which exclude costs of revenue, depreciation and amortization, and stock-based compensation, to be $260 to $280 million. Further, we expect non-gap research and development expenses be $100 million to $110 million. R&D expenses in 2022 are primarily driven by manufacturing costs for daxibotulinum toxin A for injection, which, according to GAAP accounting standards, are expensed as a period cost until the drug product is approved. Turning to our balance sheet, cash, cash equivalents, and short-term investments, as of December 31st, 2021, for $225.1 million, which we believe is sufficient to fund our planned operations into 2023. Finally, Revance's shares of common stock outstanding as of February 17th, 2022, were approximately 71.5 million, with 78.2 million fully diluted shares, excluding the impact of convertible debt. And with that, I'll turn the call back over to Mark.

Thank you, Toby. In closing, we have a differentiated commercial strategy that is delivering the desired results while also allowing us to forge inroads into elite aesthetic practices that will provide us with a strong commercial foundation for our neuromodulator once approved. Our main priority for 2022 is obtaining FDA approval for Daxibotulinum Toxinate for injection in glabellar line, which should not only accelerate our growth in aesthetics, but will also pave the way for us to advance our therapeutics opportunity by filing a supplemental BLA for cervical dystonia. I'd like to thank all of our stockholders for your continued support of revamps. I look forward to updating you on our progress in the new year. With that, I will now open the call for questions. Operator?

As a reminder, to ask a question, you need to press star 1 on your telephone. And to withdraw your question, just press the pound key. Our first question will come from Ken Casiatore from Callen. You may begin.

Thanks so much. Great to hear all the progress, guys. Mark, just wondering on the timing of the refiling, can you help us characterize that? Is it weeks or is it months? Can you put a little bit of a context around? It would be great. And then is there anything else from the or we're just waiting here on the filing for the working cell bank, the qualification of it. Thanks so much.

Yeah, Ken, so for the first one, the timing, we're not going to give specifics on it, but clearly the long lead item was the qualification work related to the new working cell bank. So at this point, it's a little bit more administrative in nature to just pull everything together. And as we indicated, we will definitely put out a public announcement once we have refiled the BLA. So obviously, this is a high-level focus for us. And again, it's more administrative in nature at this point. In regards to the 483s, you know, previously we said there were five 483s. In our responses to the agency, items three through five, the agency indicated our responses appeared sufficient. And then for items one and two is what we went into the type A meeting for. And in that type A meeting, coming out of that, you know, what the FDA wanted to see was the qualification of the new working cell bank with three consecutive drug substance and one drug product. that. So, you know, that's what we've been working on providing. You know, in the actual complete response, you know, we will need to just sort of update the clinical portion of our applications, you know, from a safety perspective. And as it relates to the name, just another name search on that. But that's pretty much it. And we've been aware of that. And, you know, we're working on those activities in parallel.

Great. Thanks so much.

Our next question will come from the line of Seanis Fernandez from Guggenheim. You may begin.

Hey, Dara. This is Alana. I'm for Seamus. Thanks for taking our question, and congrats on a quick turnaround with the Working Cell Bank. So we just have a question regarding, you know, any potential range of options that you're considering for financing the company beyond 2030. And in particular, any interest in a royalty transaction that would not only raise capital but validate the potential peak sales around DAXY. Any call on that would be great. Thank you.

Thanks, Alana. This is Toby Schilke. You know, as we noted on the call, we have sufficient cash to fund our operations into 2023. Given our revenue profile and late stage that we are with DAXE, we have optionality. Obviously, extending our cash runway is a key priority. And we'll take a thoughtful approach for a variety of financing strategies to balance where we are with our cash needs. So while we can't comment on the specifics, we are taking this as a top priority.

Awesome. Thank you very much.

Our next question, I'll call the line of David Emslin from Piper Sandler. You may begin.

Hey, thanks. So just a couple on RHA. With the approval, I think that's the RHA1 SKU. Can you talk about the extent to which that could provide an incremental bump in the sales trajectory or just talk about that opportunity in general? And then secondly, just a broader question about the market here. Obviously, you had a good first year, and the product's growing. I know you've said in Europe the share is something like 9% or 10%. Do you think that's where peak share could be in the United States? Do you think it could be higher? How do you think about that in general? Thanks. Thanks.

Thanks, David. I'll have, you know, Dustin answer the first part of that, and maybe I'll take a crack at a little bit of the back part of it.

Sure. So, yeah, thanks, David. So, we're really excited about the approval of RHA Redensity, which you agreed, which you did mention was formerly called RHA1, as the only approved filler for dynamic perioritids or lip lines. You know, the parallel region is a bit challenging to treat because of the structure and the facial anatomy. So we feel that RHA Redensity will give us a unique opportunity and add yet another tool in the toolbox for our injectors. RHA is built off of a technology that allows it to mimic the most natural HA that continues between RHA 2, 3, and 4 and RHA Redensity. So we look at this being a nice addition. and it allows us to continue to kind of talk about our innovation profile. As it relates to kind of volume, as you'll imagine, lip lines and small, more superficial areas isn't a high-volume utilization of a filler, nor is it the first thing most people come in for. We feel like it's a nice icing on the cake that allows us to continue to kind of highlight the portfolio. And within the filler space, you see that we'll constantly use this constant stream of innovation to keep being relevant, training new injectors, allow us to continue to highlight that technology. So with that, I'll talk it over to Mark, pass it over to Mark.

Yeah, just to thank David on your comments about market share. You know, what we've previously said that, you know, dioxane in their top five EU markets had roughly a 10% share. And You know, our share of the market right now depends a little bit on, you know, kind of what data you're looking at for the market. The last data we had was, you know, sort of 1.1 billion in the U.S. And so, you know, we're trending towards a high single-digit penetration right now. You know, the market continues to grow, so we've been encouraged by what we've seen there. You know, we certainly don't feel that there are constraints in our opportunity in terms of, you know, penetration that's, you know, going to be limited to where the octane is in their top market. and partly because there's fewer competitors in the U.S., and we do think that once our neuromodulators prove that it's going to allow us to compete certainly more effectively from a bundling standpoint and meeting all the needs of the injector. So we certainly are pleased with where we are from the start, and we do believe that once our neuromodulators prove that it's going to give us additional opportunity to continue to drive deeper into these accounts.

Okay, helpful. Thank you.

Thank you, David.

Our next question comes from Annabelle Samimi from Stiefel. You may begin.

Hi, all. Thanks for taking my question. Congratulations on the progress. I suppose you're not commenting on the timing of the resubmission, but in the past you've talked about hoping to get a launch before the end of the year and approval by the end of the year. Are you still... planning on that if everything on the regulatory front goes according to plan following resubmission. And then secondly, on, you know, Revance has been making quite an effort building up the aesthetics platform and working closely with practices with OPAL and the FinTech platform. And it may be premature to ask this, but would any of these activities be precluded from when you start adding therapeutics indications, and have you given any further thoughts whether aesthetics and therapeutics should be under the same umbrella? Thanks.

Good questions there, Annabelle. So let me try and work through them. So on the launch timing, you know, we continue to be ready and prepared for launch, you know, when it happens. You know, what we've said is Following the resubmission, we would expect to get a new six-month BDUPA clock given the agency's indication that a reinspection will be required. And given sort of where we are with the qualification of the cell bank, we're certainly hopeful to get our application in as soon as possible. And sort of with a six-month clock after that, 2022 is very much a priority for us in terms of getting DAXI approval. Shifting over to kind of the aesthetics, therapeutics, FinTech, you know, once we move into therapeutics, does it in any way challenge our ability to continue to focus on the aesthetic initiatives that we've laid out? No, we don't believe so at all. I mean, you know, the FinTech platform, we believe, sort of stands on its own and is an important part of our products and services offering in the facial injectable category. You know, the one thing that we've long talked about is that there will be price linkage between aesthetic and That's the same with all the other competitors that are in that market. We think there's a lot of value that we can unlock on the therapeutic side. We're going to continue to try and build a great aesthetic franchise. Once we file our supplemental BLA for cervical dystonia, we'll start to build out that Of course, we're always going to be thoughtful about how we build the right shareholder value long-term. Today, we really like where we're positioned, and we think that the value proposition for a long-acting neuromodulator has never been better in terms of the opportunity and I think the recognition of in the competitive community that, you know, having a long-acting neuromodulator is going to be an important asset to have longer term. So we'll continue to evaluate that and see what we think makes the most sense. But, you know, right now we're very focused on, you know, kind of the plan as we've laid it out.

Great. Thank you.

Our next question will come from Lajie Prasad from Barclays. You may begin.

Good evening. Thanks for the questions. A couple of questions from me. Firstly, on the supplemental BLA, can you help us understand what kind of timelines would you need to file it, assuming DAX is approved? Is it a question of a couple of months or longer? One. Two, also on the non-GAAP R&D that you guided towards, the manufacturing costs being expenses, What kind of inventory is this for? Is it around six to nine months or more than a year? And a linked question, what happens to the inventory in case the BLA filing gets further delayed? Hopefully we don't reach there, but in case it happens, what would happen to this inventory? Thanks.

Yeah, this is Mark. I'll try and take maybe one and three and then hand it over to Toby for two. You know, the SPLA filing for cervical dystonia is teed up to be filed after we get approval for Baxibotulinum Toxamate for injection for glabellar lines. Given that we've already wrapped up that phase three program, you know, we would expect to submit you know, not too long after the approval of the glabellar lines indication. So, you know, we think that that is something that we can accomplish in a reasonable timeframe given, you know, sort of the time that we've had to prepare that application. And then on the, you know, the inventory that we've manufactured thus far, you know, we've got a three-year dating on the product that we've manufactured. So, you know, we continue to feel like we're in a good position to be able to leverage and use that inventory. Obviously, it depends on timing, but, you know, we've got, you know, a good amount of inventory with good dating on it. So we feel we're in a good position there. Hoping for number two?

Yeah, perfect. And just to expand on Mark's comments on the inventory, we have both drug substance and drug product inventory, and they each have sequential dating on them, so that further extends that. If you were to look, we just filed our Form 10-K, and we break down our R&D expenses a bit further. And if you were to look at the back schedule there, of the approximately $99 million of non-GAAP R&D expenses in the year 2021, 40% of that was on manufacturing costs. The balance was between global development costs and clinical expenditures. The opal development costs will continue to be, we estimate, to be flat year on year looking into 2022, whereas the clinical expenditures will continue to decline as we're not executing clinical trials, and that will be offset by the manufacturing costs for Daxi that are expensed in the period according to GAAP.

Thank you all.

Thanks for watching.

Our next question will come from Tim Luzzo from William Blair. You may begin.

Thanks for the question, and congrats on what sounds like a productive Type A meeting. Can you talk at all how the sales force has shifted over the past two quarters following the CRL? I know RHA has done well. However, I assume there may have been some attrition given the delayed launch.

Hey, Tim. This is Dustin. Actually, our sales force is a really good place. We did not see any kind of break in trend as it relates to kind of turnover after the CRL. I think we feel confident that the revamped aesthetic strategy is a portfolio strategy, of course, anchored by DAXY. But those that have come into the organization see the value of RHA. They see the value of Opal. They see the value of how we're approaching the market for advanced aesthetics and are waiting and willing and ready and excited to sell Daxi upon approval. So we did not see a kind of significant turn. Of course, at the end of the year, for all sales organizations, you typically have some kind of turnover. We feel that it's been within healthy ranges and didn't see – a significant change. We just hosted our team here live in our national global headquarters and training center. It was the first time our team got to see kind of the kind of high-tech investment we've made toward the ejection centers, InnovateU, and others. And they left extremely excited and energized to sell RHA, Opal, and are prepared upon DACI approval.

Good to hear. And maybe give us a little more granularity on the Q1, Q2 growth You know, I know coming out of COVID, utilization and visits have been very strong across the aesthetics industry. You know, for these kind of typically seasonally strong quarters, are they going to be kind of turbo boosted this year?

This is Mark. I mean, you know, historically, you know, as Dustin mentioned in the prepared mark, there is seasonality in the business. And normally Q4 to Q1, you'll see a decline of, you know, kind of mid-teens to high teens. Given sort of the growth that we've seen in the market, you know, I think that Q4 benefited from that. So on a relative basis, even though Q1 is likely going to be up, on a relative basis, Q4 to Q1, that's Probably a reasonable trend that you see. And again, we would expect kind of Q4 to be back up. So obviously, we're still in the earlier stages of launch and sort of there's headwinds and tailwinds. Obviously, you know, once DAX is approved, that will be a tailwind. But, you know, that's the normal seasonal trend, even with the growth that we've seen in the market.

All right. Thank you.

Our next question will come from Douglas Sile from H.C. Wainwright. You may begin.

Hi. Good afternoon. Thanks for taking the questions. Just one clarification. So in terms of the manufacturing runs that have been completed, have you also completed the needed analytical work to characterize those runs, or is that part of the work that needs to be done in terms of putting together the resubmission? Thank you.

Yeah, Doug, so we have completed the analytical work associated with those manufacturing batches. So we've completed the manufacturing activities related to those batches.

Okay, great. Thank you so much. Congratulations.

Our next question will come from the line of Serge Bellinger from Needham. You may begin.

Hi, this is Robert on for Serge. Thanks for taking my question. Just in terms of the Opal platform, how do you expect it to grow in 2022? Do you see Daxi as a growth driver for the platform when it gets on the market?

Yeah, thanks. This is Dustin. I'll start with the Opal platform. Yeah, we're definitely excited about Opal. As you know, we're in that next phase of now having a new platform, a new technology with new features, and building on the foundation of what those features can add in terms of value for our current customers. We're also focusing this year on migrating those HintMD customers over to the new platform while also testing out these new features and expanding it. Of course, DAXY has a lot of pent-up demand and excitement in the marketplace and will have impact on Opal. We do see the value of all of these items kind of being a bit delinked in the sense of Opal has a standalone value, RHA has standalone value, DAXY has standalone value, but then the combination can help all three in the right account. So we're excited to continue the progression of Opal and bringing more value and services to the customers.

Thank you.

Thank you. And I'm not showing any further questions in the queue. I'd like to turn the call back over to Mark for any closing remarks.

Thank you, operator. In the coming weeks, we plan to participate in the Cowan Healthcare Conference. We welcome your requests for meetings at this event or directly through us. Feel free to reach out to Jessica if you'd like to schedule some time. With that, I would like to thank all of you for participating in today's call.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.