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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