- By George Ronan
California-based Revance Therapeutics Inc. (RVNC) is soaring on the back of the company releasing data from one of its lead development programs. At the midway point -of the session in the U.S., the company is trading at a circa 40% premium to its preannouncement market capitalization at $36.30 a share with a market cap of $1.19 billion.
The intrinsic value of RVNC
That is a substantial move for a company of Revance"s size and is one that, even given the implications of the just reported data, seems outsized at a glance. Take a look a little bit deeper, however, and the reasoning behind this magnitude of response becomes clear.
Here is what just happened and what it means going forward.
The drug in question is called RT002, also known as injectable DaxibotulinumtoxinA. Revance was investigating it as part of two phase III clinical trials as a potential therapy for improvement in a type of facial wrinkle known as a glabellar line. These are the short vertical lines found between the eyebrows that extend up the central forehead and are often the first wrinkles to appear on the forehead.
They are also some of the primary target lines of the current gold standard in the noninvasive rejuvenation space - Botox, which is currently marketed by Allergan PLC (AGN).
Basically, Revance developed RT002 as a potential competitor to Botox and as part of an attempt to wrestle market share from Allergan"s circa $2 billion in annual U.S. revenues from the asset.
As per the latest results, it looks as though the company has a strong chance of being able to do exactly that.
The two phase III clinical trials involved a total of more than 600 individuals in the U.S., with the patient populations split into two groups - those who received RT002 and those who received a placebo.
As per the results, more than 75% of patients who received the active drug reported at least a two-point improvement in the severity of their glabellar lines, while practically nobody in the placebo arm reported an improvement.
That is a pretty good result and would likely be enough in and of itself to give the company a chance of attracting some of Allergan"s Botox revenues toward its own balance sheet, but the good news does not stop there.
The drug beat the placebo by a substantial amount at every measured time point against all secondary endpoints that assessed glabellar lines up to 24 weeks. Furthermore, wrinkle severity returned to baseline after around 27 weeks -- or more than six months -- subsequent to the initial injection.
Right now, the standard efficacy period for Botox is around 12 weeks, or three months.
For this drug to essentially double this efficacy period and, importantly, to do so with just one injection, is a major advantage, one that could serve to completely unseat Botox as the lead asset in this space - assuming it picks up approval in the U.S. going forward.
So what"s next?
There is a safety trial underway and the company needs to complete this trial before it can submit a New Drug Application to the Food and Drug Administration. Current estimates suggest the trial should wrap up at some point during the third quarter of next year and, beyond that, Revance expects to file for approval in the early part of 2019.
There is also a strong chance Allergan may move to buy the asset, or the entire company, so as to avoid facing competition in this sector long term.
That is what investors are likely hoping for right now as they are buying into (and subsequently pushing up) this company.
Disclosure: The author has no positions in any of the stocks mentioned in this piece.
This article first appeared on GuruFocus.
The intrinsic value of RVNC