Revance Therapeutics Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 15 speakers on the call.

Operator

Welcome to the Revance Therapeutics Third Quarter 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in listen only mode. Following management's prepared remarks, we will hold a question and answer session. As a reminder, this call is being recorded today, Wednesday, November 8, 2023. I would now like to turn the conference call over to Cheska Serra, Head of Investor Relations, Communications and ESG for Revance.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Joining us on the call today from Revance are Chief Executive Officer, Mark Foley President, Dustin Suess and Chief Financial Officer, Toby Schulke. During this conference call, management will make forward looking statements, including statements related to guidance, Positive adjusted EBITDA, adjusted gross margin, operating leverage, blockbuster potential, the financial impact of Opel Exit, The impact of our pricing strategy on adoption, our competitive market position, our potential value creation, additional therapeutics approval, Plans related to the timing, launch and payer coverage of Daxify for cervical dystonia, international expansion, relationships with providers, our commercial success, Injector, consumer and patient preferences and behavior the efficacy, duration and safety of DASify the benefits of our products and strategy Our strategic partnership shifts and strategy, timeline, goals and planned operations. Our actual results and the timing of events could materially from those anticipated in such forward looking statements as a result of risks and uncertainties. Factors that could cause results to be different from these only mode.

Speaker 1

Statements can be found in our Risk Factors section of our recent SEC filings. Reliance 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 to the extent accessible. With that, I will turn the call over to Mark Foley, Chief Executive Officer of Revance.

Speaker 1

Mark?

Speaker 2

Thank you, Jessica. Good afternoon, everyone, and thank you for joining our Q3 2023 financial results conference call. Before I cover our results for the quarter, I'm pleased to announce the appointment of Erica Jordan to the position of Chief Commercial Officer, Aesthetics. In this role, Erica will lead our commercial efforts in aesthetics and will be focused on driving growth and synergy across both Daxify and the RHA collection, Developing and executing our loyalty and engagement programs and helping drive our international expansion strategy. Erica's appointment comes at a critical time as we focus our efforts on Daxify's launch and I look forward to working closely with her across our different strategic initiatives.

Speaker 2

Erica is an accomplished healthcare executive and her strong leadership skills combined with her extensive commercial experience will be a welcome addition to the executive team. Now turning to our results. Q3 was a pivotal quarter for Revance as we saw the positive impact of our new pricing strategy on Daxify's launch, Continued to drive growth in the RHA collection and made great progress with our edaxify preview program for cervical dystonia, Which was launched in September following FDA approval. Also important was our $50,000,000 drawdown of debt from Ethereum Capital At a fixed rate of 8.5%, which further bolstered our cash position to $300,000,000 as of the end of Q3. Product revenue for the Q3 more than doubled to $54,100,000 from the same period last year, Primarily due to the launch of Daxify and continued growth of the RHA collection.

Speaker 2

As outlined at our recent Investor Day, We believe our progress across aesthetics and therapeutics, focus on capital allocation and path to positive adjusted EBITDA in 2025 all position us Let's begin with aesthetics. We delivered $22,000,000 in Q3 DAXIFY sales And $71,000,000 in total Daxify sales during the 1st year following FDA approval, surpassing the total 1st year sales of all BOTOX This is a tremendous accomplishment, particularly considering that Daxify has only been on the market for 2 full quarters And was launched under a measured strategy, which initially focused on our existing RHA accounts. Our early progress underscores the innovation And differentiated performance profile of DAXSify and the market's strong interest in a novel long acting neuromodulator. We knew that the early stages of launch would be an important learning opportunity and as such designed a preview program to leverage real world clinical insights To inform our market positioning and enhance our launch efforts, through preview, customer outreach and engagement In recent independent survey results from 225 injectors, we gained several key validations and learnings. First, Daxify's differentiated performance profile is clear, including its fast onset, long duration and the appearance of improved skin quality.

Speaker 2

In fact, of the attributes surveyed, these were the top three reasons injectors cited for switching to DAXIFI from their first choice short acting toxin. 2nd, injectors are using DAXIFY broadly across the face with high satisfaction rates. Based on the independent survey, more than 80% of injectors And patients were satisfied or very satisfied with their aesthetic results from Daxify. And lastly, based on provider feedback, There is a significant opportunity to achieve broader product adoption by reducing Daxify's price premium. As we have learned, there is a strong linkage between price And product expectations.

Speaker 2

Vaxify's higher acquisition cost and accordingly higher price to the consumer has led to elevated consumer expectations, Price sensitivity and a more involved switch discussion. In surveying our customers, we also heard that they believe Dactify is a better product, But that at a premium price, challenges to deeper adoption exist. However, many practitioners also indicated That if Daxify's price was more competitive with other toxins, they would be able to convert a larger percentage of their customers. Based on the consistency of this feedback, we made a strategic decision to adjust Stackify's price. Now with Stackify's differentiated performance profile, Attractive price point and strong economic opportunity for the provider, we believe the product is positioned to provide meaningful value to both injectors and consumers.

Speaker 2

Further, long term, we continue to expect to realize an attractive U. S. Daxify adjusted gross margin rate of over 80% As our business scales and as our supply chain matures. Since the rollout of our new pricing strategy on September 1, the team has been focused on reengaging with existing accounts In order to help them realize the full value of Daxify and gain more experience with the product. So far, we've been encouraged by the feedback we've received from our customers on the price change And with the positive trends in purchase volumes and account reorders.

Speaker 2

Notably, the third, the number of DAX 5 vials sold in Q3 increased by 10% from the prior quarter with Q3 revenue of $22,000,000 offset by a lower average selling price. Revenue from reordering accounts and vials sold to reordering accounts were also up 25% And 43% respectively over the prior quarter with the majority of the increase coming from September. Further, revenue from reordering accounts represented approximately 2 thirds of Daxify revenue for the Q3, the majority of which came from September. We are still in the early stages of implementing our new pricing strategy, but are very encouraged by the momentum we are seeing. At the core, we believe that our Formulated toxin provides meaningful differentiation that both customers injectors will come to appreciate and value with more experience.

Speaker 2

Currently over 2,500 accounts have ordered Daxify leaving us with significant headroom for growth. Turning to the RHA collection. Q3 revenues totaled $32,100,000 up 23% year over year Despite softness in the broader filler market, where market research indicated that filler patient spend was down in the low teens year over year Due to inflationary pressures on consumer spending, our strong relative to performance continues to be supported by new account growth, The introduction of Dactify and our robust and deep engagement with customers. In Q3, we hosted several live RHA training at our Nashville Experience Center with a focus on injection technique and sales force training. Collectively, our strong efforts have allowed the RHA collection to gain the most market share in the filler market through Q3 of 2023, while most other brands have remained flat or have declined.

Speaker 2

Overall, we're very pleased with our innovative and leading product portfolio, opportunity for growth and position in the market where we ended the quarter with over 6,500 accounts. Moving to our services offerings. As we covered at Investor Day, we've made the strategic decision to exit our Opal Payments business In order to prioritize our capital allocation, in preparing for Opal's wind down by the end of Q1, 2024, we have ceased R and D and reduced SG and A related spend. As a result, we expect to free up approximately $20,000,000 per year, which provides us with the flexibility for reinvestment Or OpEx reduction. In summary, we are encouraged by the progress we've made and the steps we've taken to maximize our opportunity in aesthetics across our portfolio.

Speaker 2

For Dactyphi, we've listened to our customers and made the necessary changes to our pricing strategy to position the product for meaningful share gain over time. For the RHA collection, we continue to drive partnership and engagement with providers, gaining share in a crowded filler market. And while we've made the decision to exit Opal Payments business, we remain committed to growing our loyalty and partnership capabilities in support of realizing Revance's blockbuster potential in the U. S. Aesthetics market.

Speaker 2

For the balance of the year, we remain confident in our ability to continue to drive growth as we implement our new Dactyfi pricing program, Deliver deeper and broader adoption of the RHA collection and ensure robust engagement with our growing customer base. I'll now turn the call over to Dustin for an update on our

Speaker 3

Thank you, Mark. We're pleased to have received the highly anticipated FDA approval of Daxify for cervical dystonia in Q3, marking our first approval in the therapeutics market and the official start of our therapeutics franchise. With approval, we have the unique potential to disrupt a well established $2,500,000,000 U. S. Therapeutic toxin market And to address a large patient population with significant unmet needs.

Speaker 3

Revance has an opportunity to address the unmet need of the 3 primary stakeholders In the CD market, patients, providers and payers. Most patients experience symptom reemergence as early as 8 10 weeks with conventional neuromodulators, but cannot be treated until 12 weeks due to label and reimbursement restrictions. Providers Also known to be conservative in treating this complex condition as there are potential side effects associated with botulinum toxin treatments. For these reasons, physicians cautiously optimize toxin dosing over 2 to 4 cycles to minimize side effects. From payers' perspective, botulinum toxins are the 12th most costly medical benefit drug category and managing spend is top of mind.

Speaker 3

Our ongoing engagement with payers indicates that DAXI's differentiated clinical profile and price point is especially compelling. Given these market dynamics, we believe that DAXI's strong efficacy, long duration, favorable safety profile, particularly in key areas such as aphasia and muscle weakness And attractive pricing all work together to offer a strong value proposition for stakeholders. For condition that has no cure, Providers can safely enhance treatment outcomes for their patients with a novel formulation. Payers gain the opportunity for category cost management And most importantly, patients can benefit from more days of symptom relief and potentially fewer treatments per year at a lower out of pocket cost. For all these reasons, we are excited to see this product into the therapeutics market, which has not seen a new neuromodulator in over 12 years.

Speaker 3

We are pleased with our approved label, which will be key to supporting optimal treatment plans for patients. As a reminder, our Aspen clinical program studied 2 dose groups, The 125 Unit and 250 Unit doses, which demonstrated a median duration of 24 weeks 20.3 weeks respectively. In treating cervical dystonia, it's important to note that physicians often titrate doses to optimize outcomes for patients. That's why we're pleased to see that our approved label contains data from our Aspen open label study, which includes individualized dose Adjustments for patients with up to 4 treatment cycles over a 52 week period at doses higher than the initial Phase 3 study. With the inclusion of this data, we believe our label gives physicians flexibility to optimize individualized treatment plans for their patients.

Speaker 3

Following FDA approval, we launched our PREVIEW program, which will include 30 practices with the objective to treat and observe patients Through 2 or 3 injection cycles in order to understand optimal dosing and treatment intervals and to optimize the integration of the product into their treatment routine. We've made great progress with the program so far. Approximately 20 practices have treated more than 150 patients and interest has been strong on the product's potential. So far, we've seen injector switch patient to DAXIFY from all approved neuromodulators,

Speaker 2

allowing us

Speaker 3

to collect a wide range of patient and provider experience we are looking for. Initial doses have ranged from 100 to 500 units with the majority at 200 units or above. Injectors continue to share important real world clinical insights on achieving optimal treatment plans for CD patients with DAXA5, Which will help inform our training and education and commercial efforts at full launch. As we continue to make great progress at preview, The team is also working in parallel to engage in robust discussions with the top 50 commercial payers about the clinical and economic benefits of DAXIFY. We've already secured coverage and reimbursement for approximately 70,000,000 commercial lives, which includes the largest U.

Speaker 3

S. Payer along with Undifferentiated coverage from a top 10 payer with no dosing limitation, giving us confidence in Daxify's potential to disrupt the category. Expanded discussions have also taken place with the Medicare MACs and Federal VA and Department of Defense channels as we seek to maximize market access for DAXA5. We are making great progress on securing coverage across all payer channels and our permanent J code will be granted by the time we launch mid year 2024. As we move into Q4, we've begun solidifying our therapeutics commercial infrastructure.

Speaker 3

We have planned to have the first wave of hiring completed by the end of the year The balance during the first half of twenty twenty four. The infrastructure build out includes our field reimbursement, medical affairs and sales leadership teams. In total, we plan to start with about 40 people within our therapeutics organization. We'll be ready to launch DaxaPhi for cervical dystonia in mid year 2024. Finally, we are pleased to see continued progress in our strategic partnerships.

Speaker 3

In July, Fosun Pharma received their BLA acceptance For Daxify for cervical dystonia, which followed the BLA acceptance of Daxify for the motor lines in April. Fosun anticipates approval for both indications in China In 2024. With that, I'll turn the call over to Toby to cover our Q3 financials.

Speaker 4

Thank you, Dustin. Total revenue for the Q3 2023 was $56,800,000 representing a 95.7% increase From the same period last year, driven by the launch of Daxify and increased sales of the RHA collection, Revenue for the Q3 included $54,100,000 of product revenue and $2,700,000 of service revenue. Turning to OpEx. In connection with our planned exit of the Opal Payments business by the end of Q1 2024, We recorded restructuring charges of $95,200,000 as of September 30, 2023 And expect to record an additional $3,000,000 in charges through the 3 months ending March 31, 2024. GAAP OpEx for the Q3 was $196,100,000 compared to $106,500,000 for the same period in Excluding costs of revenue, depreciation, amortization, stock based compensation, restructuring and impairment charges, Non GAAP operating expenses were $69,000,000 for the 3rd quarter compared to $72,300,000 for the same period expenses were up 15% compared to the same period last year, while total product revenue more than doubled during the same period, Demonstrating continued operating leverage within our business.

Speaker 4

As noted at Investor Day, The restructuring and impairment charges related to the exit of the payments business resulted in our revised 2023 GAAP operating expense guidance of $545,000,000 to $585,000,000 and non GAAP operating expense guidance of $315,000,000 to $335,000,000 Further, we expect our 2023 non GAAP R and D expense guidance To be between $75,000,000 $85,000,000 As a reminder, our 2023 non GAAP OpEx guidance Primarily reflects increased investments in our Aesthetics commercial infrastructure. We ended Q3 with over $300,000,000 In cash, cash equivalents and short term investments, which reflects the proceeds from the $50,000,000 in notes issued to Ethereum Capital. As Mark mentioned, we are pleased to be executing from a position of financial strength and with our top line growth And disciplined capital allocation, we are focused on delivering positive adjusted EBITDA in 2025. Also, As outlined at our Investor Day, we expect to provide product revenue guidance in the first half of twenty twenty four. Finally, Revance's shares of common stock outstanding as of October 31, 2023 were approximately 87,800,000 with 95,000,000 fully diluted shares excluding the impact of convertible debt.

Speaker 4

And with that, I'll turn the call back over to Mark.

Speaker 2

Thank you, Toby. With the launch of Daxify as our top priority, We've leveraged customer feedback and learnings from our early launch to remove a key barrier to broad based adoption, thereby unlocking the product's full value proposition And long term market potential and the early signs from our efforts have been encouraging. We continue to be focused on executing on our launch, While driving growth and synergies across our aesthetics portfolio. As we look to the balance of the year and out into 2024, We believe that there's tremendous opportunity for Revance. In addition to the launch optimizations that are underway in our aesthetics business, We're also making headway in our first therapeutics opportunity as well as our strategic partnerships.

Speaker 2

Together with our Capital allocation and strong financial position, we believe we have the fundamentals in place to deliver growth and long term value for all of our stakeholders. With that, I will now open the call up for questions. Operator?

Operator

Thank When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Seamus Fernandez Guggenheim Partners, your line is open.

Speaker 3

Great. Thanks for the question. So, I was just hoping you guys could help frame The Q4 for us to some degree and we're about halfway through the quarter at this point, but we've also got holidays kind of coming in. That being said, this also tends to be the strongest quarter of the year along with the 2nd quarter. So Just trying to get a little bit of a color on, should we think about that $22,000,000 as having been Sort of operational with the price change for the full quarter basically that you sort of adjusted the price For folks who had already purchased DAXI, and so we're actually seeing a full quarter at the revised price In the Q3 and so we can actually anticipate that the price change, which should have a positive impact, Will actually result in growth quarter over quarter, in the Q4 for DAXI specifically?

Operator

That's my first question.

Speaker 2

Yes. So thanks, Seamus. So yes, I mean, listen, we expect Q4 to be a seasonally up quarter as it has historically been and we would continue we would expect to continue to see growth In our products, including Daxify Q3 to Q4. As we previously said, we're implementing these changes and in implementing these Pricing changes were circling back up with those accounts that have been trained. In some cases that have product on the shelf and that we sort of need to reengage sort

Speaker 5

of under the new strategy. And we think that's the right formula to

Speaker 2

create long term We think that's the right formula to create long term stickiness and a good foundation to build on. We're encouraged What we're seeing, we obviously laid out some of the metrics that we're looking at with regards to the increase in the number of vials that we saw on a quarter over quarter basis, The percentage of revenue that was made up of reordering accounts in the quarter, and we continue to see that carrying through into Q4. So we would expect that Q4 is going to be up Q3 over Q4, particularly for Daxify. We would expect that we'll see the seasonality in this business where Q4 is a stronger quarter. And we're going to continue our focus.

Speaker 2

We're engaging those accounts that we have a relationship with that have already been trained and continue to work our way through that as we build what we believe is the right foundation Going forward.

Speaker 3

Great. And can you guys can you provide us a little bit of color just in terms of where you have the sense that your market share is At this point in the overall market, AbbVie makes statements on their conference call that they're not seeing much impact, but it's a little bit hard Triangulate some of the comments from competitors. So it would be helpful to understand what you guys are seeing from a market share perspective in the toxin market?

Speaker 2

Yes. So on the toxin side of it, again, we see data sources that we've got proprietary data sources that represent a much Smaller sample size, that data would show that we're kind of in the 2% to 3% range. But again, it's going to represent a smaller portion of that. Obviously, you got to look at sort of how you annualize that. And as we said, we're actually really pleased with how well we performed our 1st year of launch, dollars 71,000,000 in the first Full 12 months, only 2 of those was really full quarters of launch, which outpaced all other BOTOX competitor launches the 1st year combined.

Speaker 2

So I think it's less about where we are today and more about where we are going, but we did see that we did increase our share As we've moved into Q3 based on the number of vials that we're placing.

Speaker 3

Great. And maybe just one final question. As we think about the RHA filler franchise, we also kind of captured in our own surveys similar dynamics To what you were commenting on in your prepared remarks, just trying to get a better understanding of The sort of filler dynamics, you're maintaining your actual sales, clearly growing share With the RHA fillers, again, just how should we think about 4th quarter? Should we think about that as strongly sequentially up Or kind of tempered by the economic impacts that we're seeing already?

Speaker 2

Yes. I mean, it's hard to know for sure, Seamus. I mean, we are hearing, as we said, it's interesting. Toxins are proven to be pretty resilient as we've seen in prior economic fillers are a little bit more impacted because they're a little bit bigger ticket items and a little bit more on the considered side. Again, we would see we would expect to see Q4 is a seasonally up quarter.

Speaker 2

Hard to know for sure exactly what impact the consumer will have. But as we pointed out before, we had Healthy growth year over year 23%. A lot of the competitors in this space saw little to no growth We declined and so we had the leading market share growth on a year over year basis. So importantly, we feel like we're still early. We estimate we're probably in the 9% to 10% market penetration.

Speaker 2

And so given that we're still only in roughly 6,500 accounts, we have plenty of room and for growth, and we continue to see that the RHA collection is being broadly appreciated for the value that it delivers. Yes. We do think that we'll continue to see some consumer impact with the current economic environment. But again, we would expect to see Q4 to be up Based on a seasonal basis.

Speaker 3

Great. Thanks, guys. Appreciate it.

Speaker 2

Thank you.

Operator

We'll now turn to Chris Shibutani with Goldman Sachs. Your line is open. Hi.

Speaker 6

This is Roger on for Chris. Two quick questions from our end. One on the therapeutic side, Can you comment on whether patients in the real world setting are also seeing longer lasting duration coupled with lower rates of side effects Just astagia and muscle weakness. And then for our second question, I was wondering if you could comment a little bit about your go to market strategy in light of the pricing update. So I think recall, like previously, you've mentioned that you'll target the base of accounts you've accumulated through the RHA filler line.

Speaker 6

This quarter, you've grown by another 500 accounts. Is this level of growth expected to be more measured going forward? Or how do you think about your go to market strategy and accelerating that level of growth? Thanks.

Speaker 2

Great, Roger. Thanks for the question. I'll have Dustin hit the first one on the therapeutic side.

Speaker 3

Jeffrey, it's really early, Roger, for us to say on the duration side, as you know, we're not through that 12 to 16 weeks kind of timeframe or 12 to 20 week timeframe on the therapeutic side. So We'll be able to get more information as we kind of get through preview, but so far the excitement has been good. There has been some anecdotal stuff around on sort of action, which we've seen that in Aesthetics side as well too. On the kind of safety side, we haven't seen anything that's concerning, but I can't say that that's comparative at this point. Majority of the patients interestingly that have been put on the product have switched because they had breakthrough pain with or breakthrough symptoms with their other neuromodulators.

Speaker 3

And so it will be a unique For us to understand how Daxify helps them in those cases. I'll turn it back to Mark.

Speaker 2

Yes. And on the go to market strategy with pricing change, I mean, it's more of the same. We're focused on those accounts that have obviously already been trained on Daxify have some experience, Because they have an appreciation for what it takes to embrace the product to bring it into the practice. But now with this new pricing strategy, they can get a lot more with it, without having price be a barrier to adoption. And so we'll continue to focus on those accounts that have already been trained, Work with them to pull through product.

Speaker 2

And then there'll be a combination of continuing to go out to those RHA customers and opening some new accounts. Given the onboarding process where we want them to get trained, sampled, experience with the product, it will naturally be a little bit more measured. And again, this is all about Laying the right foundation for future growth over time, similar to what we've done with the RHA filler line.

Operator

Okay, great. Thank you so much.

Speaker 2

Great. Thank

Operator

you. Our next question comes from Balaji Prasad with Barclays. Your line is

Speaker 5

open. Hi,

Speaker 1

everyone. This is Mikaela on for Balaji. Thanks for taking our questions. Just one quick one. One for follow-up.

Speaker 1

Could you provide any specific color around the feedback you're hearing around this new pricing strategy that was revealed in September? Just really looking to understand, what people are Like some of the comments are saying. Thanks.

Speaker 2

Sure. I mean, I think we're getting a lot of head nodding and support for Just recently at the, ASDS meeting, which is a big dermatology conference in Chicago and had an opportunity to engage with a number Different derms, some that are customers and some that are not customers and walk them through the logic and the feedback and everything that we've had and everybody completely agrees. And I think when we continue here, university people are saying, listen, I believe it's a better product. I really like the fast onset skin quality and duration is definitely something that Patients are looking for, but some of them that had experience were just saying they struggle a little bit with how to position it with patients, how much of a premium to charge and acknowledge that The higher the premium on the price, the higher the expectation on the patient side to the point where it could be Connected from the data that we've seen in the clinical trial and what's been replicated out there in the market. And so I think people are saying this is the right Strategy, it's going to allow me to engage with the product to really understand how best to use it without having to take an economic hit.

Speaker 2

And then going forward, I can then figure out where it fits in my practice, whether or not to take a premium. Many of them acknowledge that their Patients come in 2 times a year or less. And so given the maximum value is something that they're also focused on.

Speaker 7

Thanks, Mikhail.

Operator

We now turn to David Amsellem with Piper Sandler. Your line is open.

Speaker 8

Hey, thanks. So just got a couple. So first, Regarding the new pricing strategy, can you talk to what that's done for you regarding New accounts, in other words, accounts that have yet to use DAXIFI, what's been the receptivity and what's been the Level of growth in new accounts since you have implemented the pricing the new pricing structure For DAXIFY, so that's number 1. And then on the therapeutic side for DAXIFY, I think in the past, Mark, you alluded to Payer coverage, not by indication, but more by category. And I guess where I'm going with this is, how does that play out as it relates to potential off label use Of the AXIS-five beyond cervical dystonia?

Speaker 8

Thanks.

Speaker 2

Yes. Thanks, David. I'll hit the first one and then let Dustin hit the second one. So in terms of the new pricing strategy and new accounts, I mean, when we went into the market, if anything, we Received a little backlash in the community because we weren't onboarding all the accounts that wanted to experience Daxify. And so we had a backlog of accounts that really wanted to try Daxify, but the reps were focused on initially targeting the RHA customers selling RHA doing those things.

Speaker 2

And So in Q2 or at Investor Day, we talked about the fact that we had less than 2,000 ordering Daxify accounts and now we're Over 2,500. So we're clearly onboarding new accounts. If anything, I think this streamlines the onboarding process and the messaging for new accounts that don't have an experience, Because we can share with them the journey. Hey, here was the clinical trial data. Here was the market research.

Speaker 2

Here's sort of the initial pricing And how accounts roll that out to patients and here with some of the feedback. And so our suggestion to them is you now have an opportunity to price this On par with your other toxins, get real world experience, give your patients more value for the same price and then you can decide over time again whether to take premium, Whether to bring them back at the same frequency as the existing neuromodulators and give them sort of more good days or fewer wrinkle days, Or for those patients that come in 2 times a year or less which is a majority you can give them a better outcome. And so I think it's going to really crisp The onboarding message for new accounts and they'll benefit from the learnings of the others. And then why don't I hand over to Dustin for the therapeutics.

Speaker 3

Thanks, David. So as we kind of mentioned earlier, a lot of the majority of the payers in the space do cover bots across all indications Once they approve kind of the coverage, and we've seen some of that in our early conversations as we saw with one of our top 10 payers, which gave an Encumbered kind of access to Daxify across all indications. So I think the payer landscape for Daxify will allow For off label use as appropriate, as the provider sees the deemed fit. And I think in terms of kind of the quantification of that, I think it's early to tell. I think they'll leverage the Aspen data that we have.

Speaker 3

They'll leverage some of the other data on ULS to determine what's the right thing to do. But there has been significant inbound interest from providers Across all indications kind of in the neuromodulator space. And so we look forward to continuing to provide the data that we can and we'll see what that entails in terms of Their confidence to utilize it in other areas.

Speaker 8

That's helpful. Thank you.

Speaker 9

Thanks.

Operator

Our next question comes from Stacy Ku with TD Cohen. Your line is open.

Speaker 10

Hi. Thanks so much for taking our questions. So first, just to clarify something from your prepared remarks. Seems like some practices need to work through their already existing Doxify supply. So is that the right way to think about it as you're kind of going back to accounts and talking about Re pricing, as we think about kind of the impact to sales?

Speaker 10

That's the first question, just a clarification. The second, is more of a longer term question. So some of our KOLs that have really already adopted Doxify, they mentioned the consumer awareness is Still really low. So how can you balance kind of this expansion of other accounts trying to expand Daxify adoption, but then And of the KOLs that have already adopted it, how can you expand usage there? So kind of curious your thoughts there on how to balance Maybe a larger scale DTC to patients and when that might be appropriate.

Speaker 10

And then finally, just curious your thoughts on potential neurotoxin market entrants. So both longer acting and shorter acting, do you expect any impact? Thank you so much.

Speaker 2

Thanks, Stacy. So on the Daxo supply, so yes, that is true that for some of the accounts that we are circling back up with that already have product on the shelf where they paid higher prices, We're partnered with those accounts to figure out how we can work through that inventory, get them to price it to the patients In line with their conventional toxins to get more experience and to make that an easier switch discussion. And so that is taking some time. And as you can imagine, if They have product on the shelf and kind of figuring out what that engagement plan is, what the strategy is to pull it through and how to do that. And that's why we Said previously that that's the target and the focus is to go back to these accounts because they do have experience, their staff has been onboarded, they've been They've gone through the messaging side of it.

Speaker 2

And so that is an ongoing focus of the reps in addition to onboarding new accounts And for those that have already worked through product to make sure that they've implemented the new messaging. In terms of the KOLs and the consumer awareness. Listen, we've been supporting the brand kind of more on the digital side of it, but our view is That in this early phase of launch and having such a small number of Daxify accounts, we want to be thoughtful about the spend that has good ROI. So if we do nothing but activate consumers, and they go into practices that don't have DAXI and haven't been trained on DAXI, then it's not a good Use of our resources and our time. So a lot of our focus and effort are focused on kind of in office practice conversion materials.

Speaker 2

And increasingly, we're looking at ways that we can better support those accounts that have to actify so that we can amplify Their voice and drive more consumers into practices that have Docsify on board. And that will Be a continued area of focus, but I think you should expect in the near term, it's going to be more targeted and linked to those accounts that we have a relationship with versus just broad based DTC. And then lastly, your question on the overall competitive market. To your point, there's a couple of new entrants out there. You've got another Sort of Korean toxin that's looking to come into the market depending on what happens with their PDUFA date.

Speaker 2

We believe that they'll compete effectively in the short acting category. And so I would say that that probably has less of an impact on us and perhaps more of an impact on others. And then there's QM1114 that's out there that's got a long acting liquid formulation. We think actually having more Awareness in the market about the importance of duration and long acting makes sense and will be helpful. They received a CRL, so it's a TBD in terms What their next steps are, what their path is.

Speaker 2

But we continue to see a very robust market that continues to grow. And Based on where we are in our launch evolution and journey, we continue to feel that we've got plenty of room to run.

Speaker 10

Thank you. Very helpful.

Speaker 2

Thank you.

Operator

Our next question comes from Annabel Samimy with Stifel. Your line is open.

Speaker 9

Hi. Thanks for taking my questions. Just following on your communication strategy with Injectors about the pricing strategy, it doesn't seem like all are aware of it. So, do you have a sense how many Accounts, you've been able to double back on and how many you have left? What percent of your former accounts have you doubled back on?

Speaker 9

And again, how many how has it changed adoption of the new accounts? And then secondly, at the R and D Day, you had several Early adopting injectors that sort of adapted to the DAX-five profile and started getting more optimal responses. Where do you feel you are in that process with other injectors and adopters and have newer adopters been having different experiences Then the original adopters just with word-of-mouth and I guess maybe peer to peer. So maybe you can just comment on that as well.

Speaker 2

Yes. So I think Annabel, it's hard to really know how what percent of those That we've onboarded and that have tried DAXI that we've successfully introduced the new pricing program and that have reengaged. I think it's going to vary by territory and probably by rep On that side of it, I would like to hope that most of them are aware, and that if they aren't that it will be a near time priority for the field So it's hard to know, but that is a priority and that's obviously where we think the greatest return is going to be in the near term. In terms of kind of where we are in terms of onboarding new accounts that didn't have a DAC that don't have a Dacify experience, So far, and it's early, I think that that onboarding process is more streamlined because that messaging is very crisp. It's easy to understand.

Speaker 2

I think it's easier for when we talk about practice integration, how do the people in the staff talk about it? It's a very different switch discussion if you're saying, hey, listen, I've got a product It has these attributes and features, but I'm going to offer to it at a price that's in line with what you're used to paying. I think that that is a Again, much easier and we've heard that from the practices that, that talk track makes a ton of sense. And so again, while it's early, We like what we're seeing. We talked about in our prepared remarks the percentage of revenue made up from reordering accounts and increase in the number of We saw on a quarter over quarter basis.

Speaker 2

So again, we continue to have high confidence based on the ongoing discussions that we're having with Existing and potential new customers about this change and the excitement about really trying and experiencing DAXI.

Speaker 9

Okay. And if I could just have a follow-up on the therapeutic side. I mean, I guess, how should we think about the adoption curve? I know initially you're doing this selective training Of physicians. But barring reimbursement delays, which I don't think you should have any with the J code, which is The schedules are pretty established.

Speaker 9

Do you think that there could be less hesitation for physicians to use this given that it's not so much of an aesthetic So an art on someone's face as opposed to a real clinical outcome that patients can feel. So how do you Think that adoption curve would sort of compare to what you've seen in aesthetics adoption?

Speaker 3

Thanks, Annabel. This is I think when we thought a lot about that in terms of adoption curves and you see so many different things that go into it on the aesthetic side, I think you do see some of those things in the therapeutic side, but a little bit less as it relates to kind of different toggles in that journey. Think it will determine how quickly our reps can get into those offices, how they can work them through. As you know, getting the prior authorization, all bonds need Prior authorization regardless of coverage. And so I think it'll just be how quickly does that uptake.

Speaker 3

The early Providers in our preview program have been excited to use it. They're using it on a variety of different patients. So we anticipate When we get our field force higher than others, we'll be able to drive that. But typically, the adoption curves are slower here in cervical dystonia than what you See in aesthetics, but now in aesthetics, you've got so many different variables. And so, we will continue to kind of analyze that Look forward to getting this data back in preview to then be able to provide what we think will be the right kind of adoption metrics on the therapeutic side.

Speaker 9

Okay, great. Thank you.

Speaker 3

Thanks, Dave.

Operator

Our next question comes from Tim Lugo with William Blair. Your line is open.

Speaker 11

Hey, this is Wachlan on for Tim. Thanks for taking the questions. I guess first, just Toby, yes, it looks like you're sort of being pretty disciplined on the expense side, but you've obviously got the restructuring and then ramping up with the CD launch. So should we be thinking about The Q3 numbers is reasonable run rate for the next few quarters or are there more changes to expect there? And then on the therapeutic side, I think you said out about 150 patients.

Speaker 11

I know you mentioned you're targeting 30 practices. Did you have a target patient number in mind? And are you Sort of generating revenue from these patients through insurance during the preview program?

Speaker 4

Thanks. This is Toby. I'll take your first question and turn it over to Mark and Dustin. So On the expense side of things and the guidance, we've provided annual guidance of 315 to 335 from a non GAAP perspective for the course of 2023. And obviously, then That is the extent of our guidance right now.

Speaker 4

However, as Mark and I have said on our prepared remarks, the Axik from the Opel business provides us some optionality with the $20,000,000 that we're annually investing in the Opel business. So More to come on that one.

Speaker 3

This is Dust. On your second point, We've treated more than 150 now. You mentioned revenue from these patients. I want to be clear that these are patients that have been sampled. The goal of this program is not to Generate revenue potentially through this channel or in the early phases.

Speaker 3

Now will some of these providers begin to start testing when we have that permanent J code and others Utilization kind of in a non sample setting, we do think that will happen in the 1st part of next year, but ultimately that will be Relatively slow because it is those 30 providers. I think as we start unlocking larger channels like federal and others, we'll be able to provide Some more kind of input as it relates to kind of what that adoption looks like. But from an overall preview perspective, we'd anticipate anywhere between 202.50 or so patients That are going to be utilized through this program. And remember, it's not just to push patients to the first start, but it's really in cervical distillate to get them to experience a Couple of different treatments because of that titration that typically happens. A lot of these patients that are actually being put on to DAXIFI have already been titrated at Significantly higher doses than their starting dose of other neuromodulators.

Speaker 3

And so they're coming back in now with AXA-five with a dose that potentially is different than What they they're on now today with some of the neuromodulators. And so it will be understanding that trajectory over a couple of cycles, not just first starts like we saw on the aesthetic side.

Speaker 11

Great. Thanks.

Speaker 5

Thank you.

Operator

We'll now turn to Oi Ih with Mizuho. Your line is open.

Speaker 12

Hey, guys. Thanks for taking my question. Can you talk a bit about On the patients level, whether the new pricing strategy is being passed on to the patients and at what level? I just wanted to get a better sense. That's my first question.

Speaker 12

And I guess in the this quarter, it seems that you've increased about 500 accounts. And just wondering if that's driven primarily by RHA or more or by Daxify? Thanks.

Speaker 2

Yes, Oui. So first on The pricing program and whether or not that that's being passed on to the patients, I mean, that's our expectation and that's the positioning that we're taking and the whole justification and rationale for the price change that we took based on feedback, which was, Now for the price change that we took based on feedback, which was, hey, I like the products. As I start attaching a premium, It makes for a longer and more involved switch discussion and then sometimes expectations. And so when we onboard new accounts or when we go back to accounts, we let them know that we've really adjusted this price so that you can price it to patients at the same level as your current toxins And get familiarity and experience and get more comfort with it. So that is the hope.

Speaker 2

I'm sure not all accounts follow that. Some perhaps take maybe a modest premium or whatever, but that was the whole reason that we made the change. And I would say a majority of them are doing that and we think that that's the right way to get A lot more familiar and experienced with the product, because there are going to be subtleties with all these products that they need to sort of really optimally work our way through. And then second question?

Speaker 12

I just wanted to know The account increase in the quarter, whether that was driven more by REJ?

Speaker 2

Yes. We said last quarter, we said we were at around 6,000 accounts. Now we're at 6,500 accounts. That's total. And then we said on at earnings Investor Day that we have less than 2,000 DAXIFY ordering accounts.

Speaker 2

And then this quarter, we're 2,500. So I think you're seeing good growth in the Daxify accounts. So that's going to probably represent A lot of the growth in the quarter.

Speaker 12

Okay. Thank you.

Speaker 2

Great. Thank you.

Operator

We'll now turn to Serge Belanger with Needham and Company. Your line is open.

Speaker 13

Good afternoon and thanks for taking my questions. First one, can you talk about how the 3rd quarter was Trending in terms of vial volumes ahead of the price change? And then secondly, When you launched this product, you launched it with a catchy DTC advertising of breaking up with BOTOX. I think emphasizing the switch opportunity for DAXI, just curious now with The lower price, whether you think you're better positioned to catch the new patients coming into the aesthetic market? Thanks.

Speaker 3

Yes. Thanks, Serge. Maybe I'll

Speaker 2

take the second one first. In terms of kind of how we're positioned in the marketplace with this Price change and what does that mean for adoption and the DTC program that we did. As I mentioned earlier, we believe that the best way to Switch a patient is at the practice level. If the practice is bought into, I like this product, I believe it's something that I want to offer my Patients because I think there's value that I can provide to them that they're not currently getting out of their conventional neurotoxin. We believe that the credibility that the injector has Far and away is more valuable than a consumer coming in and asking about something that is new.

Speaker 2

So we spent a lot of our time and effort Arming sort of the entire staff with materials about this new product and then the value for the injector is they see that Hey, I can give my patients something that they don't have today. Most of them are trying to figure out how do I give them the best value for the dollar. And then over time, it will give them another option in terms of something they can either charge a premium for once they have experience and feedback from patients or You'll give them more value knowing that most of them come in less than 2 times a year. So, we're going to continue to lean in At the practice level to make sure that they have the right tools on the switch. And we think that the pricing lever was a biggie in terms of facilitating that switch.

Speaker 2

So it's less about trying to capture new and more about allowing them giving them the right tools to switch the patients over. In terms of Q3 volumes and where we're tracking, I mean, most quarters are going to be back end loaded to the 3rd month of the quarter anyways. That's just the way that this business is. Obviously, we talked about the fact that September made up a majority of the reorder revenue, both in terms of the vials And the dollars on that side of it and reordering accounts made up roughly 2 thirds of the revenue. So we saw what we Believe a really good early signs, particularly when we compared it to June, which was the 3rd month in Q2.

Speaker 2

And so we like what we saw in terms of the impact of that. And so We believe based on the feedback that we received that this was the right move and we made the right move what we believe was the right time based on having enough information to influence that. But again, we like what we're seeing out there.

Speaker 13

Okay. Maybe I'll sneak in one more. 4th quarter is a big quarter for aesthetics and there's a few neurotoxin players that have Prominent product days during the quarter, just curious if there's a if you're planning to have a DAXI day during the quarter?

Speaker 2

Yes. The sort of these days that competitors use to try and incentivize sort of Patient couponing and bulk purchasing from accounts have been around for a while. And obviously, we've weathered that on the RHA filler side over the last Several years and that's not been a cornerstone of our strategy. We've tended to lean in with product differentiation in training and education and we continue to feel That's the right way to go. So I wouldn't expect anything from us in Q4 in terms of the DAXI day.

Speaker 2

We're going to continue to really focus on getting on boarded with this new pricing strategy, allowing them to give their patients the experience that we think they're going to love once they get more familiarity with the product. And so That's really what we're focused on in Q4.

Speaker 3

Thank you.

Speaker 2

Great. Thanks, Serge.

Operator

Our next question comes from Douglas Tsao with H. C. Wainwright. Your line is open.

Speaker 7

Hi, good afternoon and thanks for taking the questions. Just, Mark, I think you said it, but I just want to make sure it's Clear. In terms of what you saw in September, after the price change, so From a total revenue basis, did you see sufficient or sort of increase in units to offset the lower price that you were adding?

Speaker 2

Yes. I think as we showed in our press release 2, we saw units increase 10% on a quarter over quarter basis, and revenue came in at $22,000,000 versus 22.6 So we saw a nice healthy uptick of an increase of 10% units, but that was offset by the price adjustment that we made.

Speaker 7

Well, I guess I'm trying to understand what

Speaker 3

you thought

Speaker 2

in September.

Speaker 7

So in September,

Speaker 2

I mean, so when you think

Speaker 7

about your business, I mean

Operator

Go ahead.

Speaker 2

What were

Speaker 3

you going to say, Mark?

Operator

I was just going to say, so specific to Cinnabar,

Speaker 7

Did you see that increase in units to make it sort of a better month from an Absolute revenue standpoint or was it ultimately and was it materially higher than what you saw for the most part?

Speaker 2

Yes. I mean, we as I mentioned, September tends to be a busier month. So it's really hard to know in a vacuum exactly what it would be since we weren't in the market September of last year, we did look at June as a proxy for September to say that's the 3rd month of another quarter. And again, we like the trends that we saw. Most of our reorder revenue and our reorder vials sold did come in September.

Speaker 2

And so We're attributing that to the price adjustment and the how customers embrace that change.

Speaker 7

Okay. And maybe I'm parsing words a little bit, but I'm an equity research analyst, so that's what we do. In terms of your commentary about needing to reengage or reengaging with customers, I'm just curious, were you having A trouble sort of having or was the dialogue somewhat cut off after people had some experience or perhaps were having some frustrations with DAX Plan nearly going?

Speaker 2

Yes. So I mean, I think we definitely had some accounts where we had some that leaned in heavily where DAXI is majority CareWallet, they figured out the product. They love the look that they get. Their patients love it. Even the premium is working and they're really happy with it.

Speaker 2

So We've got a number of those accounts where that's working. But we definitely have some accounts that trialed the product, treated sort of a select number of patients, Had some come back that expressed, hey, I'm not sure that the performance profile is worth it for the cost. And then for practices, if they didn't dose them right, if they didn't set the right expectations, if they didn't take before pictures so that they could compare the baseline, That hit a point where they just said, this is hard and now I've got to spend extra time kind of educating the patients or taking them up. And so as we've gone back into this account, sort of hit this point of, I like it, I think it's a better product, but the Practice integration piece of it is more challenging. This is where we got the feedback and it really resonated with them where that reengagement is okay.

Speaker 2

If I can price it in line with the other toxins and your price to me as such where I'm not having to eat margin, then I'm willing to lean in and get experience then I can figure out where this fits. And so that's that reengagement piece. And in some of these accounts that had sort of stalled a little bit or reserved it for Specific subsets of patients, our goal is obviously to get broader adoption and that's that reengagement piece. And if they had some product on the shelf, then they would work through, Okay. Let's talk about how we pull that through.

Speaker 2

Let's talk about how many patients we treat. Let's talk about making sure that you've got message consistency, all those things.

Speaker 7

Okay, great. Thank you so much. That's helpful.

Speaker 2

Great. Thanks, Doug.

Operator

We now turn to Terence Flynn with Morgan Stanley. Your line is open.

Speaker 5

Hi, thanks for taking the question. I guess 2, probably for Toby, is just any more clarity on timing of how you're thinking about the revenue guidance for 2024? Is that Early January event, is it in conjunction with Q4 results or is it later in the year? And then how should we think about the DAXIFI gross margin progression As we head into 2024? Thank you.

Speaker 4

Great questions, Terence. So haven't been specific on the timing of our guidance right now except for the first half of twenty twenty four. And right now, I think that that's the Appropriate guidance to give on that particular timing. Regarding sort of the gross margin profile, if you were to look at sort of our GAAP Gross margin profile that was sort of reported in Q1, Q2, Q3, Revance's GAAP gross margin has been pretty consistent about 73%, 68%, 70% -ish percent over the past several quarters. And again, that's largely The Q3, obviously, the mix between Q2 and Q3 of RHA and DAXI was relatively the same Q2 versus Q3.

Speaker 4

And so we had lower prices for Daxify starting in September, but we were able to offset that with efficiencies that we were found through the supply Shane, to maintain that gross margin profile. One of the things that as we start to Utilize the prior approved product, the product that was expensed versus capitalized, We expect there will be some flux upwards on our on sort of the cost of goods sold for DAXIFY. However, that will be partially offset by going into Adji and other manufacturers That are actually much cheaper on a unit economic perspective. So we expect some fluctuation around the margin, but generally trying to offset those. And the larger thing is making sure stabilizing prices.

Speaker 5

Thank you.

Operator

Our last question comes from Navane Thai with BNP Paribas. Your line is open.

Speaker 14

Hi, good evening. Thanks for taking my question and thanks for the color so far on the price change. Just an additional some additional ones from me. Do you have an estimate on how long it will take for the sales force to Reengage on pricing with the existing accounts that have been trained and have experience? Or what percentage of existing accounts have been We're engaged versus your target.

Speaker 14

Thank you.

Speaker 2

Thanks, Demanja. I don't necessarily have a great number. Again, if you look at through the end of Q2, we said we are less than 2,000 accounts. So I'm hoping that A number of these accounts have been contacted by the reps to inform them of the new price change to reengage. And As we said before, that reengagement process in a given territory can take a little while as they work through each of their different accounts.

Speaker 2

And listen, I'm sure there are some that may not be sort of in a position to reengage. They might say, hey, come back in a little bit. But I would say most of the accounts that we've onboarded have been contacted. And then the question is where they are in that reengagement process, and I just don't know.

Speaker 3

Thank you, Demian.

Operator

Ladies and gentlemen, this concludes our Q and A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.

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Earnings Conference Call
Revance Therapeutics Q3 2023
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