Revance Therapeutics Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 13 speakers on the call.

Operator

Welcome to the Revance Therapeutics Second Quarter 20 24 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 and A session. To ensure that we have ample time to address everyone's question, we will ask each person to limit themselves to one question and one follow-up. As a reminder, this call is being recorded today, Thursday, August 8, 2024.

Operator

I will now hand the call over to your host, Lawrence Watts with Revance Therapeutics. Please proceed.

Speaker 1

Thank you, operator. Joining us on the call today from Revance are President and Chief Executive Officer, Mark Foley and Chief Financial Officer, Toby Schulke. During this call, management will make forward looking statements, including statements related to expectations related to product adoption and reorders, consumer needs, preferences and behavior, the benefits and value to us, practices and consumers of our products, including the efficacy, duration, skin quality and safety of our products, future therapeutics expansion, 2024 guidance, positive adjusted EBITDA, future capital expenditures and anticipated revenue, our strategic priorities, our anticipated success, our ability to grow and take share, our market opportunity and expectations, our strategy, planned operations and commercialization plans and timing of those plans. Our actual results and 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 our annual report on Form 10 ks and our quarterly report on Form 10 Q.

Speaker 1

ReVent 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. Reconciliations of GAAP to non GAAP measures are included in our earnings release. With that, I will turn the call over to Mark Foley, President and Chief Executive Officer of Revance. Mark?

Speaker 2

Thank you, Lawrence. Good afternoon, everyone, and thank you for joining our Q2 2024 financial results conference call. The Q2 of 2024 was another period of continued progress for Revance led by our aesthetics division and the implementation of our strategy to bring Daxify to a broad audience based on strong product attributes and competitive pricing. Daxify continued to show strong growth in the 2nd quarter with aesthetic units sold up 65% year over year and net product revenue of $28,700,000 which was up 27% year over year. Importantly, feedback from the field continues to be positive and reveals that not only our existing practices reengaging with Daxify but the new account ads are accelerating due to Daxify's price comparability and appealing product attributes namely increased duration, fast onset and improved skin quality.

Speaker 2

Importantly, now that consumers have been through several treatment cycles, we are starting to see patient preference drive both injector utilization and new account interest. In the Q2, we were encouraged by strong reordering activity as existing aesthetic accounts represented more than 3 quarters of Daxify revenue in the quarter and consumer pricing coming in line with competitor prices and a meaningful uptick in unit sales on both an annual and quarterly basis without the benefit of couponing. Turning to our filler offerings, the RHA collection also experienced healthy growth compared to last year despite overall filler market softness. Starting in April, we launched RHA3 for lip augmentation and fullness, the number one filler procedure performed in the U. S.

Speaker 2

To support the launch of the lip indication, we activated consumer and beauty editor experiences, conducted HCP training events and introduced our 3 promotions. Along with these activities, we rolled out a campaign around lips worth framing as well as beauty of savings promotional activities. We continue to believe that the quality and differentiated performance profile of the RHA portfolio combined with our commercial team's ability to execute provides a stable foundation for our ongoing growth initiatives. RHA collection net product revenue was $36,600,000 in the Q2 of 2024 representing a 15% year over year increase. Lastly, at the end of the 2nd quarter accounts across Revance's aesthetics portfolio totaled over 7,500.

Speaker 2

The company also ended the quarter with over 3,700 accounts that have ordered DAXIFY which leaves us with significant runway to further expand our number of accounts and ordering base going forward. Further in the quarter, we were pleased to launch our first portfolio initiative, the beauty of savings program, which was designed to provide additional incentives to accounts that purchase both RHA and Axify. This program has been well received and we look forward to continuing to not only grow our account base but use programs like these to deepen our penetration in existing accounts. Now let me turn to our therapeutic franchise. In May, we announced the commercial launch of Daxify for the treatment of cervical dystonia marking our entry into the $2,700,000,000 U.

Speaker 2

S. Therapeutic neurotoxin market. As such DAXIFY for cervical dystonia provides a significant opportunity for Revance and marks the culmination of our decades long mission to bring our unique innovation to the therapeutics market. Although toxins remain the standard of care for cervical dystonia, patients struggle to achieve sustained symptom relief in between treatments. This is due to the fact that toxin treatment can only occur every 12 weeks based on product labeling and reimbursement guidelines, even though the therapeutic benefit of current toxins typically wears off 8 to 10 weeks after injection.

Speaker 2

As a result, this frequently leaves patients with unmanaged symptoms that can lead to significant pain, social stigma and the inability to drive or work. Daxify is the 1st and only peptide formulated long lasting neurotoxin that offers the potential to improve the duration of symptom control with a favorable safety profile providing patients and physicians with a compelling new treatment option for painful and disabling chronic condition. Following our CD approval in August 2023, we launched a preview early experience program with the objective of optimizing treatment outcomes and ensuring smooth practice integration. In May, we announced our full U. S.

Speaker 2

Commercial launch. Initial market response has been encouraging and supportive of our hypothesis that there is an unmet need for a long lasting neurotoxin to address the large percentage of patients with symptom breakthrough on current toxin regimens. Furthermore, preview practices continue to treat patients and importantly continue to report compelling clinical results with DAXIFY. To that end, physicians report that patients in their second and third treatment cycles are experiencing long duration and a safety profile consistent with our Phase 3 Aspen program. In preview, Daxdiphy was shown to deliver 12 plus weeks of sustained symptom control for patients that previously had experienced early symptom breakthrough with conventional toxins and up to 16 weeks or more for many other patients.

Speaker 2

The majority of these early preview accounts are also now purchasing Daxify. In the second quarter, we also added a greater number of new accounts to our existing preview injectors and of the total number of accounts that have ordered to date over 40% have already reordered DAXIFI second time. On the payer and reimbursement front, access to Daxify continues to increase reaching more than 240,000,000 lives covered with commercial coverage increased to 84% of total lives. Additionally, Daxify has been placed on the national formulary for the Department of Veteran Affairs and Department of Defense. And Daxify for cervical dystonia is also covered by each of the 12 Medicare administrative contractors with greater than 30,000,000 Medicaid lives now covered.

Speaker 2

While we continue to make major strides in our mission to bring Daxify to underserved U. S. Cervical dystonia patients, we continue to anticipate that initial revenues will be modest given the conservative nature of treating physicians, reimbursement dynamics and CD market size. Longer term, we remain bullish on Daxify's potential in the cervical dystonia market and in subsequent therapeutic indications. Now let me hand the call over to Toby to cover our Q2 financials.

Speaker 3

Thank you, Mark. Our press release and our Form 10 Q detail our financial results in full, so I will only go over the highlights on this call. Total net revenue for the Q2 ended June 30, 2024 was $65,400,000 compared to $54,400,000 for the same period in 2023, representing an increase of 20% due to an increase of DAXI Fi and RHA collection volumes despite a soft filler market. Net revenue for the Q2 ended June 30, 2024 included $36,600,000 of RHA collection revenue, dollars 28,700,000 of DAXUPY revenue. Additionally, we had $100,000 of collaboration revenue amortized from our deferred revenue balance related to our Viatris collaboration.

Speaker 3

Total net revenue for the 6 months ended June 30, 2024 was $117,300,000 compared to 100 point $2,000,000 for the same period in 2023. Total GAAP operating expenses for the 3 6 months ended June 30, 2024 were $99,900,000 $198,700,000 respectively. Excluding the cost of product revenue, stock based compensation, depreciation and amortization, non GAAP operating expenses for the 3 6 months ended June 30, 2024 were $74,800,000 and $148,500,000 respectively. Revance continues to expect 2024 total net product revenue, which includes sales of Daxify and RHA Collection to be at least $280,000,000 Revance now expects 2024 GAAP operating expenses from its continuing operations to be between 430,000,000 dollars to $460,000,000 down from $460,000,000 to $490,000,000 This updated outlook is primarily driven by lower actual and projected stock based compensation. Revance expects our non GAAP operating expenses from continuing operations to be in the lower end of a range of 290,000,000 dollars to $310,000,000 Revance continues to expect non GAAP SG and A expenses from continuing operations to be between $240,000,000 to $255,000,000 On the balance sheet side, our current cash position, dollars 232,200,000 of cash, cash equivalents and short term investments as of June 30, 2024, in combination with our operating plan provides us with multiple levers to achieve positive adjusted EBITDA in 2025.

Speaker 3

Finally, Revance's shares of common stock outstanding as of July 31, 2024 were approximately $104,800,000 with approximately 113,800,000 fully diluted shares, excluding the impact of convertible debt. And with that, I'll turn the call back over to Mark.

Speaker 2

Thank you, Toby. In the second half of twenty twenty four, we remain focused on delivering net product revenue of at least $280,000,000 while managing spend to reach positive adjusted EBITDA in 2025. We are encouraged by the unit and sales gains across both Daxafy and the RHA collection and by the early response we are seeing to our cervical dystonia launch and therapeutics. In short, we are focused on execution and on delivering on our stated goals. With that, I will now open the call up for questions.

Speaker 2

Operator?

Operator

The first question comes from the line of Seamus Fernandez with Guggenheim. Please proceed.

Speaker 4

Thanks for the question. So, just wanted to get a sense for how you see us advancing towards the at least $280,000,000 guidance number. 3rd quarter historically has been a challenging quarter for aesthetics, but we're a good way through the Q3. So just trying to get a sense of how you think the Q3, how we should be thinking about that, kind of flat quarter over quarter with the second quarter? Or should we anticipate that it could be down somewhat, which certainly would imply a robust step up in the Q4 to make that $280,000,000 revenue number on the basis of the regular weight business.

Speaker 4

So just trying to get a better sense of what proportion of that or how we should be thinking about that sequentially. And then separately, can you just help us understand a little bit better that how we're likely to see the with the additional coverage, the VA coverage, do you see that as an opportunity to accelerate the therapeutic opportunity into 2024 or should we still be thinking about 2024 as a very modest contribution? Thanks.

Speaker 2

Great. Thanks, Seamus. So on your first question in terms of how to think about the 280 and sort of how to model that. As we don't give quarterly guidance, but as we sit here today through the end of Q2, we've delivered kind of roughly 40% of that number and so we're looking to deliver 60% in the back half. I would break it into components.

Speaker 2

RHA is a little bit more mature product line for us. And so that's going to move a little bit more consistently with the normal seasonality of the business plus some growth in it. Whereas obviously where we are with Daxify and the new pricing and the messaging that we have and given that we're in a smaller number of accounts, we would expect to see sequential growth quarter on quarter with Q4 seasonally being the largest quarter of the year. And so we like where we're positioned. We're very pleased with the Q2 that we delivered.

Speaker 2

And so that's kind of how we think about moving through the balance of the year. Also we've got CD which is starting to come online, which gets to your second question, but that will always start to contribute more as we move to the back half of the year and that's something that we didn't have in the first half of the year. In terms of additional coverage and you talked about sort of the VA and Department of Defense, I mean all this is going to help, but yes, we would expect the revenue to be modest

Speaker 5

for therapeutic this year. Just even though we've made

Speaker 2

great strides on the reimbursement side, through on the back end just through on the back end just takes time and it's conservative user group that tends to treat a few patients, watch, make sure that they can get paid because it's buy and bill. And so again, we really like what we're seeing clinically, but we think the commercial impact from a revenue standpoint will be modest. But obviously, as we move through the balance of the year, we'll start to step up.

Speaker 4

Great. And if I can just have one additional question. Galderma is talking about bringing competition into the international markets, international marketplace and we have an approval in Australia. Trying to get a sense of how you see the competitive landscape evolving with longer acting, botulinum toxin in the next couple of years? And do you see a path towards potentially monetizing your asset in international markets as the right approach?

Speaker 4

I know historically, we've talked about keeping this as a global brand as for potential sale, should an outside acquirer be interested? But just wondering if non dilutive efforts are under consideration at

Speaker 1

this point? Thanks.

Speaker 6

Yes. So why don't

Speaker 2

I start with the second one first in terms of kind of how we think about growth opportunities outside of the U. S. Listen, we're going to continue to be pragmatic and make what we think are good business decisions. We think that there's certainly huge opportunity outside of the U. S.

Speaker 2

We've filed for approval in Australia and we've demonstrated that with, for example, our Fosun partnership that having the right partnership might make sense. And so we will continue to actively evaluate options on that side of it. And if it turns out that going down that path, we think makes more sense for the business, then that's an option for us certainly on that side of it. And again, we as we kind of get a little bit more mature in the U. S.

Speaker 2

Market, we think it's also going to enhance sort of the value and the opportunity internationally. In terms of competition on the long acting side, listen, we think that right now anything that raises visibility to the opportunity to have a longer lasting product is going to sort of lift all boats on that side of it. So we would welcome that dialogue and discussion. The great thing about DAXIFI is it's more than there's a lot more about the product than just duration. Given the peptide formulation, what we're seeing is not just past onset, but really the skin quality effect we think is unique.

Speaker 2

And as we've described before, we're able to get the extended duration with the same amount of core toxin. And why is that important? Well, it's important because as you start to increase the amount of toxin that you deliver in order to get extended duration, you have the ability to potentially lose control over where it goes and sort of the look that you're going for. And so, the nice thing with itself. And so again, we think it's going to help grow that overall category and given our novel peptide formulation, we think we're going to be really well positioned.

Speaker 2

So yes, international provides a good opportunity for us in terms of the different ways that we think about it. And we actually think that more talking about long duration is going to be a good tailwind for us.

Speaker 4

Great. Thanks guys.

Speaker 2

Thanks, Ed.

Operator

Thank you. The next question comes from the line of Chris Shibanti with Goldman Sachs. Please proceed.

Speaker 5

Great. Thank you very much. A couple of questions in terms of your margins and spending. On the margin front, can you just give us a sense, it looks to see if you're trying to be very mindful of operating expenses, because I think going to that EBITDA breakeven line, maybe help us understand how gross margins are progressing and what factors perhaps might be in there as you're increasing, I would presume some of your volumes in anticipation of therapeutic launch? And then secondly, on the marketing effort and spend, your commentary included the launch of what seems to be sort of more of a bundling type approach.

Speaker 5

Can you help us understand whether that is influencing the shape of spending as we think about the next several quarters going forward. Obviously, there would theoretically be a good return on that as a strategy familiar to the marketplace. But help us understand some of the push pulls across that achieving the EBITDA breakeven at the gross margin level and then the spending on marketing? Thank you. Great.

Speaker 2

Thanks, Chris. Toby, why don't I turn it over to you to talk about the margin, the spend gross margin, a little bit on the marketing and then I can build on that on the marketing in terms of the programs and what

Speaker 4

we're seeing.

Speaker 3

Perfect. Thanks. Great question, Chris. So we reported about 73% gross margin and about 72% for the first half of twenty twenty four. When you take into account the 0 cost inventory associated with Daxify that was expensed prior to approval, gross margin profile is within sort of around 70% combined for RHA and Daxify.

Speaker 3

And as you think about the levers to improve that margin, which we've long term guided to over 80%, it's twofold. One is the volume shift towards DAXIFI, which is a higher margin product than RHA. RHA, we partner with, tioxane S. A. And so that is generally at a fixed gross margin because that's how they get their economics for the innovation that they have brought in the RHA collection of fillers.

Speaker 3

So as the mix shifts and Daxapai continues to grow in terms of volume, you will see that margin increase that way. Secondly, drilling down into Daxapai, we've taken steps and invested over the last several years to move Daxify to more efficient production methods. So as we scale our production in Aji, in the U. S, our contract manufacturer, And then also further on, as we get approved in LS and E TCI facility in New Hampshire, we'll be able to further improve our gross margins with Doxify with the size and scale from those facilities that they're able to produce versus our facility in Newark.

Speaker 2

Yes. And then on the marketing side, Chris, I mean, we sort of have a steady state spend right now on the marketing and I think programs like we ran in Q1 around the coupon and what you're seeing now with the beauty of savings around portfolio designed to create more leverage in accounts where we already have a relationship, we think is going to help us drive deeper and create more stickiness in the brand. And so we obviously can flex that. We're using some of these programs to better inform where we want to lean in more, but we like what we're seeing and we've got a variety of things that we're doing independent of that around social, digital, because one of the things that we're also starting to see with Daxify is, in the beginning it was really incumbent around the injector to kind of do a lot of the promotional work. But now as consumers are getting more experiencing the benefits of the product, they're asking for by name.

Speaker 2

And so from a KPI standpoint, we're seeing good healthy growth and awareness. We're seeing good healthy growth in terms of media share of voice. And so we're seeing a lot of the desired results. And so we've got amount of sort of steady state marketing built into it that we think sufficient to drive the revenue growth targets that we have and we'll continue to optimize that as we move out through the balance of the year.

Speaker 5

Thank you. That's helpful. Thanks.

Operator

Thank you. The next question comes from the line of Stacy Ku with TD Cowen. Please proceed.

Speaker 7

Hey, thanks so much for taking our questions. We have a few. So first, can you characterize those 3,700 plus accounts that you added for Doxify? That's up from what we believe around 3,500 in Q1. So as you're broadening in accounts, are you just focused on getting lower accounts that are more high quality?

Speaker 7

Or is it just the Salesforce was launching both new the new filler option and Docsify as well? So just help us understand the accounts added for Q2. And then a follow-up on that, as you're broadening the Daxify launch, you talked last quarter about the expectations and targets for new accounts. How do you feel about kind of the expectations you've set? Where are you there?

Speaker 7

Obviously, can't disclose. I'm guessing you're not going to disclose your own KPIs, but just help us understand how the broadening of the DaxFFY launch is going in your view. And then last, for RHA, is the Q2 performance mainly ascribed to the lip launch? And is that why you might expect some growth into Q3 and Q4? Just help us understand the cadence of RHA launch for the rest of the year.

Speaker 7

Thank you.

Speaker 2

Sure. So let me just make notes here. So really in terms of new account adds, we actually I believe and Toby keep me honest on this, I think we're around 3,000 DAXI at the end of Q1. And so we're saying now that we've got 3,700. So actually, we've seen good nice acceleration in new accounts on Daxify and we think it speaks to the change in strategy.

Speaker 2

So we're encouraged with what we're seeing and that is a part of our strategy to drive the necessary revenue through the balance of beer. Again, it's a combination of going deeper as people experiment and get comfortable with where Daxi fits in their practice to go deeper and then drive some of these new ones. And so actually we were very encouraged with sort of the new account adds that we saw. In terms of the target for new accounts, obviously with kind of the growth initiatives that we have in place, it will be an important part of our strategy. But where we said we're roughly 7,500 aesthetic accounts since the end of Q2, 3,700 accounts DAXify.

Speaker 2

We still have a long ways to go in terms of market penetration. And so we think the nice thing is we've got again a long runway. And so right now we're tracking where we want to be in terms of that mix of new accounts. But we also saw a good strong volume in reordering accounts. We said that roughly 3 quarters over 3 quarters of our revenue came from reordering accounts.

Speaker 2

So that's how we think about the phasing in the target for new accounts. In terms of RHA and the lip launch and the impact that that had, I think that part of it is, Stacy, as you're aware that when we made the change in the Daxi strategy, we indicated that we were spending more time doubling back with accounts to go deeper. And so now that we've sort of moved beyond that phase, we've been able to focus more now on the lip launch in RHA3 and the portfolio. So we think that we've got a very good foundation of RHA. We're doing a lot more on the clinical training.

Speaker 2

And actually there's some noise out there in the market around people not wanting to look artificial. And one of the great things about the RHA portfolio is that it's the least modified of the different hyaluronic acid fillers out there. It's designed to leave a very natural look. And so we think that that's speeding into this as well. So I think it's just we've hit our stride with Daxify in terms of the messaging and the pricing.

Speaker 2

Certainly, let's help and now that we think that we can start to leverage the synergies between the 2, that's how we think about the back part of the year.

Speaker 7

Okay. That's incredibly helpful. If I could ask just a quick follow-up then based on your responses. Just for that relaunch, I think many investors are looking for a signal that there is a recovery, that things are kind of going the right way now that you've kind of changed your pricing strategy. So do you think that Q3, you'll still see some kind of signal

Speaker 8

of the recovery? Or is it

Speaker 7

really going to be a Q4 event where it's seasonally strongest? Thanks so much.

Speaker 2

Thanks, Stacy. No, I mean, I think we commented earlier that we would expect our product line to follow more seasonality with some growth, whereas with Daxitide given where we are that we'll see sequential growth through the balance of the year. We saw pretty meaningful growth on a year over year basis, 65% even though Q2 last year was a launch order for us. And as we look at coming into Q3 and Q4, we're now going to be starting to look at an ASP level too that's going to be comparable. And so I think that that will even show stronger performance on a year over year basis.

Speaker 2

So we would expect again again, sequential quarterly sequential growth with Daxify. But as we saw the quarter over quarter and the year on year growth both in units and in revenue, we're encouraged with the trend that we're seeing.

Speaker 7

Okay. Thanks so much for the follow-up. Thanks.

Speaker 2

Thanks, Stacy.

Operator

Thank you. The next question comes from the line of Balaji Tresada with Barclays. Please proceed.

Speaker 6

Good afternoon. This is Xiao on for Balaji. Thanks for taking our questions. First of all, could you give us a timeline for the upcoming Fosun approvals in China and the expected milestone payments associated with the approvals? And what's your follow on commercialization plans?

Speaker 6

Thank you. And in addition to that, could you also talk about the pricing dynamics for Dexipi between the aesthetic end and the therapeutic pricing? Because on the therapeutic end you have to do the pricing and net price close to non negotiation with the payers and on the aesthetic end you will give the discounts like to the cash discount. So how would you balance the aesthetic pricing and therapeutic pricing? Thank you so much.

Speaker 2

Thanks. Tobey, do you want to take the Fosun and the milestones?

Speaker 3

Yes, Marco. Sorry about that. I was just so on the Fosun, we submitted our Fosun, excuse me, submitted the GL indication for the Chinese regulatory authorities in April of 2023 and cervical dystonia indication in July of 2023. Fosun has guided on the markets to say that they expect a 12 or a 14 to 16 month approval timeframe for both of those indications. So, we expect that, that will be happening and we're working hard with Fosun to support them for approvals of both indications in this calendar year.

Speaker 3

In terms of upfront payments, since the history we signed the contract in December of 2018, we received a total of $38,000,000 subject to Chinese withholding tax of 10%. And we have additional $222,000,000 of contingent milestone payments. So we would expect that there will be some milestones. We haven't given the exact figures on per company policy of what we would expect for approval in China for both glabellar lines and the cervical dystonia approval.

Speaker 2

And then for your question regarding the pricing linkage between therapeutics and aesthetics, yes, I mean, even though that it's the same BLA, the pricing will be the same, which different for us as we launched in aesthetics first. And so the ASP that we're driving in aesthetics is going to form the basis for what we charge in therapeutics. And so we've already taken that into account and we've set up our different reimbursement contracts and everything around that. And so that will continue to be linkage between the 2.

Speaker 6

Thank

Operator

you. Thank you. The next question goes to the line of David Amsellem with Piper Sandler. Please proceed.

Speaker 9

A couple of quick ones for me. First, can you talk about the competitive landscape in the filler space, particularly with another entrant coming in and just how you see things evolving over time? Do you think that the market ultimately is going to be able to accommodate a more crowded competitive landscape? So that's number 1 on the fillers. And then turning over to Daxify and therapeutics, This is going back a few years where you had, I think, cast more of a wide net in terms of different development programs in the therapeutic setting.

Speaker 9

Obviously, you're looking to balance that out with control and spend. But I'm wondering over time, particularly as you get to profitability, how are you thinking about other indications for Daxify in therapeutic settings and how much of a priority that is? Thanks.

Speaker 2

Sure. Thanks, David. So on the competitive entrance side, particularly on fillers, I think this is where the product profile really matters, the breadth of indications and again the breadth of the product itself. And we'll continue to see competition there, but I think there's a reason that some products stand out more than others in terms of the performance. And as we talked earlier, given the way that the RHA products are constructed and more natural, we think it fits really well and for what people are looking and there's some differences in the product line, particularly with like RHA Redensity and others that we're hearing a strong brand preference for.

Speaker 2

So we think that not only having the filler line, but having a toxin to partner with it are also going to be really helpful in terms of going into accounts and providing a compelling bundle that works for them. And so, we feel very good. And again, we're still early innings in terms of penetration. In terms of Daxify and therapeutics, you're right, we're trying to be thoughtful about how we invest in the therapeutic category, what's the right timing to launch additional indications given that it takes a while from start to finish. So we think really CD is a great entryway into that to lay the foundation for further growth.

Speaker 2

And in the muscle movement category, which is upper and lower limb spasticity and cervical dystonia, That's collectively a $1,000,000,000 market opportunity in the U. S. And so we believe we're going to learn a lot in the cervical dystonia launch, and we'll be able to partner with these clinicians in terms of next steps. We have completed, as we talked about before, Phase 2 program for upper limb spasticity. We had our end of Phase 2 meeting, so we know what the program would look like to activate the Phase 3.

Speaker 2

And so it's just a function of when do we think it's the right time to lean in on that. And then we've done also an IIT and migraine to generate some of the early data there to inform that strategy. And so we think long term there's a very healthy opportunity. It's just a matter of to your point earlier, what's the right timing and we're continuing to evaluate that.

Speaker 9

That is helpful. Thank you.

Speaker 5

Thank you.

Operator

Thank you. The next question comes from the line of Annabel Samimy with Stifel. Please proceed.

Speaker 8

Hi. Thanks for taking my questions. So I just want to confirm, have you washed out all of the accounts that had purchased under the prior price change? Is there still any impact lingering, I guess from the sort of, I don't know, so called coupon that you offer them to sort of make them whole on that? So that's the first question.

Speaker 8

And second is, can you talk a little bit about the loyalty program, the Beauty plus Savings? Is this volume based or is it as soon as they order the products together? How exactly are they incentivized here? And then anything on the consumer side in terms of more comprehensive couponing for the actual patients? Thanks.

Speaker 2

Thanks Annabel. So in terms of the kind of where we are with the coupon that we ran in Q1 that sunset at the end of April and so that's done and so there's no lingering effect there because of the timeframe for redemption on that. So that's fully pulled through and done. And we recognized primarily the offset of that program in Q1. And it was effective.

Speaker 2

People really liked the program. It did what it was intended to do, which is to drive more patient trial and experience and engagement from the injector side of it. It was obviously less than optimal from a revenue perspective because we had to take the full But we'll take those learnings forward in terms of how we think about subsequent programs. The beauty of savings was kind of a halo program that cut across our promotions, DAXI promotions and bundling promotions.

Speaker 1

And a

Speaker 2

lot of what we're doing right now is we are linking sort of purchases to training events since we found that a lot of the injectors particularly given the unique performance profile of our products really appreciate and find a lot of value in training and education particularly when we can bring in sort of leaders in the industry that they can spend time with. And so that's been a big part of the beauty of savings. And then certainly on the bundling side, there's some additional economic advantages to folks that lean in at certain levels across the portfolio. And we like what we're seeing and we're seeing additional share in those accounts where we've been able to roll that out. In terms of the kind of how we think about go forward couponing and what we're going to do, we're continuing to evaluate sort of what the return is.

Speaker 2

We don't have anything right now that's planned to be rolled out, but we're continuing to evaluate other ways that we might want to incentivize consumer engagement and programs and that sort of stay tuned on that.

Speaker 8

Okay. And if I could just squeeze one more in on the therapeutic side. I mean, you have stated a number of very positive statistics. You have your 84% commercial coverage. You're working with Medicare plans or Medicaid plans.

Speaker 8

You have the foreign defense veterans. And then you are even stated a reorder rate. So I guess I'm curious if there was any residual revenues for therapeutics and the Daxpine number? I'm just a little surprised that you have all these progress and you're not reporting any revenues at all.

Speaker 2

Yes. Well, I think if you first off, when you look at the metrics we gave around the aesthetics side, so we saw 65% year over year unit growth. So almost all of the Daxi revenue is being driven by aesthetics. We didn't launch until May. And so there was a limited amount of time.

Speaker 2

And again, the way that these practices by even that CD is still a pretty small market, it's $340,000,000 in the U. S. These practices don't buy in volume. They buy to treat patients on the buy and bill. And again, even though you've got reimbursement in place, they want to make sure that when they run it through their own system that they're getting paid.

Speaker 2

So they'll tend to treat 1, 2, 3 patients and then wait the full reimbursement cycle before they see if they're going to get paid. And so while we like what we're seeing clinically, we like the progress that we're making on the reimbursement side. It's a conservative group and a lot of these practices only see a certain number of these. And so we again, we just think it's going to take us time. I think we're pointing to sort of clinical utility and value that Daxify brings, but it's just going to take a little while to unlock some of the revenue that's going to be associated with it.

Speaker 8

Okay, great. Thank you.

Speaker 5

Thanks, Dana.

Operator

Thank you. The next question goes to the line of Tim Lugo with William Blair. Please proceed.

Speaker 10

Hey guys, this is Lachlan on for Tim. Thanks for taking the questions. So Mark, I was wondering, can you talk about any changes in how Daxify is being used by the existing accounts since the price change? I mean, have they beyond just using it more, have they changed the way they use it, use it more off label or different doses or anything? And second, Toby mentioned the soft filler market, and I think we've seen that sort of some softness across aesthetics with competitor reports as well.

Speaker 10

So just wanted to get your latest thoughts on sort of the state of the market for both toxins and fillers and if there's anything in particular either driving the weakness or that you think could bring an end to it? Thanks.

Speaker 2

Thanks, Lachlan. So in terms of DAXI and how it's being used, I think with all these products, the more familiar they get with it, the more comfortable they get and that's toxins and fillers across. And so certainly the more people use it, the more comfortable. And while we are on label for a certain reconstitution, a And so I think we're finding that within any given practice they're adapting what they believe is the best way to deliver to get the outcome that they want. We run Phase 2 trials in upper facial lines and what we hear in the marketplace is that injectors are comfortable using DAXI in a similar fashion to the other neurotoxins.

Speaker 2

And so I don't know that we're necessarily seeing much of a change in terms of where they use the products. I think they're comfortable with where they use it, but I think it's more in the function of like how do they reconstitute, how do they dose. We've definitely seen some learning with the forehead, for example. We've heard that Daxify appears to be more precise. So where you deliver it, it stays, you see less diffusion.

Speaker 2

And so for the forehead, which is a broader area, we hear that some accounts, for example, are doing more injection points, but just smaller delivery to make sure that they get the desired outcome. And I think the forehead is one of those areas that people need to take a little bit more time to figure out. But then we'll see range. Some are solely the full dose. Some have moderated their dose a little bit.

Speaker 2

Some adjust their dose maybe a little different in glabellar lines versus forehead. And so the good news is, as I think that with any new product there's going to be its own unique personality in particularly with a product like ours that has a very different formulation with the peptide. But I think universally what we're hearing for those accounts that are seeing the positive impact and the reinforcement is that they're saying it's different. What I'm seeing in terms of the onset skin quality, it's different than I can't get with the others. And that's kind of where we see the real stickiness.

Speaker 2

And so we'll continue to try and make sure that we do everything we can to support these accounts and get them the proper training. In terms of the overall market dynamics in terms of the soft filler market, yes, I think it's a combination of just some of the market dynamics out there and some of the spend challenges that some consumers are having. And then certainly on the filler market, we've heard a little bit about the concern about looking artificial and not natural. And as I said previously, we think that that fits really well with RHA product line because again, it's the most natural, it's got an indication around dynamic wrinkles and folds, meaning it's designed to move naturally with facial expression and make sure it looks very natural. And we're still in a small number of accounts, so we have the benefit of being in growth mode.

Speaker 2

The toxin market seems to be pretty steady. And I think we've seen that in past times with even an economic downturn in 2,008. And I think it's a lower cost treatment procedure. And I think once people get used to the outcome, it's a little bit like hair color where they feel now they need my wrinkles to back and go. So the toxin market feels more stable and steady.

Speaker 2

The filler market has been a little more soft. But obviously with the print that we put up in Q2, we feel like we've got the product line and the strategy and the execution to continue to drive good growth.

Operator

Thank you.

Speaker 2

Great. Thanks a lot.

Operator

The next question comes from the line of Yuri Ihrer with Mizuho. Please proceed.

Speaker 11

Hey, guys. Thanks for taking our questions. So, I guess my first question is, would you be able to share with us the market share that you've gained in this quarter as you did in the previous quarter for Daxitlhy as well as for RHA? And secondly, what percentage of the 15% year over year growth in RHA came from the LIPS product? And thirdly, I just want to make sure, did you guys add any account overall at all?

Speaker 11

Because the press release says over 75, 100 accounts and that was what was reported in the Q1? Thanks.

Speaker 2

Yes. So let me hit that one first. Tobey, do you want to comment just on the account side of things, Because I think that there was an error on our side there.

Speaker 4

Yes. I think

Speaker 3

yes, and I appreciate the question, Louis and Stacy. Before I finish it, we would like to draw your attention to a numerical error on the 2nd quarter release. We should have said that we ended the 2nd quarter at over 8,000 aesthetic accounts and over 42, 100 accounts that have ordered Daxify. I apologize about that. And I speak to Stacy's confusion earlier in your confusion, U.

Speaker 3

S. So again, it should be 8,000 aesthetic and 4,200 Daxify accounts. Thanks.

Speaker 2

Thanks for clarifying that, Tobey. So Uli, on your question on the market share side of it, we're one of the few companies that reports or has reported market share in the past. So I think it's a little harder to necessarily compare it and there's always the debate about what the source is. But if you look at the unit growth that we saw with Daxify, the revenue growth that we've seen with Daxify, Daxify, I mean, I think it's fair to conclude that we're continuing to see good healthy metrics around what that looks like. And then on the RHA side, the same thing given that the market filler softness and growing 15% year over year, we continue to take share on that side of it.

Speaker 2

And so I think from our perspective and in discussions with investors, I think what they're most focused on is independent of sort of what's happening in the market, are you growing and are you seeing good healthy metrics. And so we feel good about sort of the metrics that we're putting up. And even in a market that has seen a little bit of softness, the overall growth there. In terms of the 15% year over year growth and question about much of that is attributed to LIPs, that's really hard to know because, even though we have an indication for RHA3 for LIPs, we do know that practices use a variety of different SKUs to treat the lips. They have their own sort of preference on it.

Speaker 2

And then secondly, it's hard to know whether or not the product they use, where it's used in the face. We saw good healthy growth across the portfolio of the RHA product line. We obviously leaned in and did some other promotions and incentives and training around RH3. And so while that certainly was something that we're able to leverage to create excitement and engagement, we saw that translate into broader usage across the Phase 2.

Speaker 11

Okay. Thanks.

Speaker 2

Great. Thank you.

Operator

Thank you. The next question comes from the line of Surjit Belanger with Needham and Company. Please proceed.

Speaker 12

Hey, good afternoon. I guess first one from Mark. We're soon coming up on the 1 year anniversary when you change the pricing and marketing strategy around DAXI. So just curious where the price per valve now stands relative to where we were a year ago and whether you expect that will change over the second half of the year. And then similarly again on pricing, but on the consumer side, now that we're at 1 more quarter since you dropped restrictions on advertised pricing, what kind of movements you've seen there from your injector customers?

Speaker 12

Thanks.

Speaker 2

Yes. Thanks. So on the pricing on the year over year, we feel really good that we fit sort of the right balance right now in terms of the price that we're charging our actual injectors. And so that's settled into a nice spot and you could see that reported in reflected in the Q2. So we've seen good steady pricing right now at the new levels.

Speaker 2

It will move a little bit because we still have the tiered pricing based on how much they buy that can influence sort of that range. But we like where we're situated from a pricing standpoint to the practice. The next question is that how well is that being translated to the consumer and are they taking sort of that lower price that we're giving to them and passing along to the consumer. And I would say that's taken a little bit more time, but now we do see that our pricing is coming much more in line with competitor pricings from a consumer standpoint, which is ultimately what we wanted to have happened so that we're getting out of this whole pay at a premium price, the product has to have an elevated set of performance expectations above and beyond sort of the attributes that it has, which are helping drive adoption. And so we've been encouraged by seeing that pricing that we're giving to the injector passed along to the consumers and we'll continue to monitor that, but we like where that's also situated.

Speaker 2

And so we're encouraged as we come up to sort of the annual point where we made the price change, I think that it will also allow us to show healthy year over year gains on that as well from a revenue standpoint. In terms of the advertised pricing, no advertised pricing, yes, I think that if we look at our awareness trends, the promotional trends that we're seeing, I just I think that our injectors appreciate it because they want to be able to talk about it. They want to be able to say, hey, I'm a I've got this next generation toxin, come ask me about it. And so I think that that's also feeding into some of the increases that again we're seeing in awareness and some of the growth trends that we're seeing.

Speaker 12

Thank you.

Speaker 5

Great. Thanks, Serge. Thank you.

Operator

The next question comes from the line of Navane Thi with BNP Paribas. Please proceed. Hi, thanks for taking my question. First, can you discuss the fillers market recovery in H2? And do you need that market recovery to reach the revenue guidance?

Operator

And second, a follow-up to a previous question. What is the contribution of RHA 34 Lips to RHA outperforming the fillers market? Thank you.

Speaker 2

Thanks, Devon. So in terms of the filler market health, again, even in the midst of what I would say was a softer filler market, the first half of the year and certainly in Q2, we drove really healthy revenue. And so listen, we think that the market is going to continue to be robust in that longer term, the growth dynamics will be there. And so we're continuing to focus on delivering on the revenue plan independent of the market backdrop. And so we're hoping that interest rates drop a little bit that that will drive a little bit healthier consumer and things like that.

Speaker 2

But so far when we post check with the field and the customers out there, we feel good about where we're situated today. I don't know that I have anything incremental to add on the RHA3 and sort of where it was on LIPs. I mean, lifts being the number one procedure, it certainly helps that we were able to lean in with that. But injectors were already treating lifts with other products. And so it wasn't like we opened up necessarily a new indication that wasn't getting treated.

Speaker 2

It allowed us to bring a spotlight and to promote lips with the RHA3. So it definitely helped with engagement. We had sort of a whole thing about lips worth framing that drove social media and digital opportunities and content sharing. But it's hard for us to sort of really know, given as I said before that some people will use other SKUs than RHA treated treats the lips and we don't always know exactly where they use it. But it was certainly helpful for sure and we'll continue to leverage that going forward.

Speaker 2

It wasn't just a Q2 initiative.

Operator

Thank you. That's helpful. Thanks.

Speaker 9

Thanks a lot.

Operator

Thank you. That concludes today's conference call. Thank you. You may now disconnect your line.

Speaker 5

Great. Thank you.

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Earnings Conference Call
Revance Therapeutics Q2 2024
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