Evolus Inc (EOLS) 2022 Q2 法說會逐字稿

Greetings. Welcome to the Evolus Second Quarter 2022 Earnings Call. (Operator Instructions) Please note that this conference is being recorded.

I will now turn the conference over to your host, David Erickson, Vice President, Investor Relations. You may begin.

Thank you, operator, and welcome to everyone joining us on today's call. With me today are David Moatazedi, President and Chief Executive Officer; and Rui Avelar, Chief Medical Officer and Head of R&D.

Our prepared remarks today will include forward-looking statements within the meaning of United States securities laws, and management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statements.

Additionally, today's discussion will include non-GAAP financial measures, which should be considered in addition to and not as a substitute for or an isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC and on our Investor Relations website at evolus.com.

Lastly, following the conclusion of today's call, a replay will be available on our website at evolus.com.

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

We are very pleased to share with you our results for the second quarter of 2022, which reflected above-market growth, increased market share and disciplined operating expense management.

Sales grew to a record $37.2 million, and our lead sales and marketing metrics demonstrated growing brand awareness and continued strong adoption of Jeuveau. During the quarter, we continued to carefully manage our overhead expenses, investing the majority of incremental spending in activities to support sustained growth in the U.S. and establish our presence in Europe. And we remain in a strong cash position funded to be on profitability.

We expect 2022 to be another strong year of growth for Evolus, even in an environment with greater macroeconomic headwinds. Based on our year-to-date performance and our confidence in a resilient and fundamentally strong aesthetic neurotoxin market, we continue to believe we can achieve the upper end of our full-year sales guidance range of $143 million to $150 million. This equates to a year-over-year growth rate approaching 50%.

Now, I'll get into some of the details. In the second quarter, we grew total sales 42% year-over-year in an aesthetics market that continues to demonstrate strong demand. Our U.S. sales growth rate was at least double the estimated market growth rate. New account growth during the quarter was again very strong, and we added nearly 590 new customers, bringing our total account base to more than 8,100 with the reorder rates that continues to run above 70%.

This expanding customer base creates a pipeline for future growth, because our experience shows that new customers typically start out with small orders, then over time as they gain confidence with the product and our unique co-branded marketing benefits, we see our market share expand steadily. Supporting this observation is Guidepoint Qsight aesthetics data that provides analysis from point-of-sale across more than 800 practices.

This data shows that over the last 12 months, Jeuveau has reached the #1 or #2 toxin share position within practices that have adopted our product. And while our customer base has expanded rapidly to over 8,100 accounts, we are still only selling to less than 1/3 of the aesthetic neurotoxin customers in the U.S. This, combined with the greatly underpenetrated toxin market, leaves room for significant opportunity in the coming years.

We are continuing to see excitement for our co-branded streaming TV advertising, which is available to our largest customers. Customers earn these ads by committing a large portion of their toxin business to Jeuveau. During the second quarter, we completed production on a large bolus of these ads, which have recently begun airing. In the second quarter, we ran a total of 750 digital billboard and streaming TV marketing campaign that generated more than 250 million media impressions. These ads serve the dual purpose of promoting our customers' businesses, while continuing to build the Jeuveau brand.

We have now completed 8 consecutive quarters of advertising through our co-branded media program, and the cumulative effect of that advertising is driving brand awareness. In fact, among a representative panel of aesthetics consumers, aided awareness of Jeuveau has now reached #2 in the market, ahead of both Dysport and Xeomin. And this recognition has occurred in just 3 short years since we first launched.

Jeuveau brand awareness is also continuing to drive patients into practices for treatment. Membership in our Evolus Rewards program, of which the largest demographic is millennials and younger, grew to nearly 390,000 by the end of the quarter, up from 335,000 last quarter. Through the first half of the year, approximately 180,000 rewards had been redeemed compared to 100,000 for the first half of 2021. This puts us on track to nearly double the number of redemptions over last year, illustrating the power of this program to motivate consumers and their loyalty to Jeuveau.

Now we know there is a great deal of interest in how the current economic environment might affect its growth trajectory of the toxin market and the behavior of aesthetic consumers. So I'd like to take a moment to discuss some of the trends we are seeing. As you know, we stay very closely connected with our customers, because we're not just selling them a product, but we're engaging in long-term relationships designed to help them grow their practices. And we have very good visibility into the engagement of consumers enrolled into our loyalty program. In the second quarter, we did not observe signs of slowing as measured by purchasing patterns across our customer base or consumer engagement in our loyalty program.

Third-party data that tracks overall procedural volumes suggested a slight slowdown in growth compared to the first quarter, but still trending in line with historical averages. Since the end of the second quarter, growth trends have remained strong, and we have not seen any meaningful change in customer purchasing patterns. Additionally, our customers are not reporting any material differences in patient volumes or spending habits when it comes to neurotoxin products.

We continue to believe the fundamentals of the toxin market are strong and that the low penetration rate we see today will continue to increase over time. We are also encouraged by the overall resilience of the aesthetic neurotoxin market, which has demonstrated positive annual growth over 15 years, even during the last recessionary periods of 2007 through 2009. The only exception to this was in 2020 when practices were closed due to COVID.

Neurotoxins are one of the most affordable aesthetic procedures and a phase of the choice, patients are more likely to stretch out the interval between treatment than to stop getting them altogether.

All of this gives us confidence that Evolus can grow at a faster pace in the toxin market and continue to gain share by leveraging our unique business model focused on the cash pay aesthetic market and targeting the millennial consumer using our cost-effective digital platform.

Building on our momentum, several weeks ago, we launched Switch Your Tox and Love Evolus Forever, our largest promotional campaign to-date. The Switch program is a strategic investment designed to sustain our growth and drive further market share gains in 2023 and beyond. Switch is designed to simply increase Jeuveau usage by injectors and their patients. Customers who purchase a minimum amount of Jeuveau by the end of the third quarter will receive 60 reward certificates in the amount of $160 per new Jeuveau consumer to be used over 2 consecutive treatments.

This reward represents a meaningful patient discount over competitors' incentive programs. And we think it will be quite attractive to new consumers. The rollout of this program has just begun. And while early feedback has been quite positive, the results of Switch will unfold over the next several quarters as customers sign up and customers come in for their 2 treatments.

Now turning to Europe. Beginning this quarter, we will begin the launch of Nuceiva, initially to customers in Great Britain and Germany, which are the 2 largest markets in that region and represent nearly 40% of the European market. Our early efforts will focus on introducing our company and our product at local aesthetics meetings, and initial sales are expected to be modest as we build our presence. Longer term, we expect Nuceiva to be an important contributor to our growth as we expand to additional European countries, as well as Australia in 2023.

And now, I'll turn the call over to Rui Avelar for a brief update. Rui?

Think you, David. If you followed Evolus for any length of time, you know we're acutely focused on millennial consumers. They're digitally savvy. They consider aesthetic medicines to be part of everyday life and are willing to spend money to prevent aging. While this demographic is future growth driver of the aesthetic toxin market, interestingly there is very little published on millennials in the medical literature.

In June, Dermatological Surgery published a new post-hoc analysis on our Phase III trials comparing millennial patients to non-millennials. And we believe this is the first paper on millennials in glabellar lines. This paper was based on pool data from our 3 studies totaling 737 patients. It also included some important subjective metrics such as Global Aesthetic Improvement and Subject Satisfaction.

As you'd expect, the average age between the 2 groups was different, 28 versus 58. By comparison, the baseline severity of glabellar lines at maximum frown was similar, 72% severe in the millennials and 76% in the non-millennials. However, there was a difference in the number of patients with severe glabellar lines at rest, only 3% of millennials compared to 23% in the non-millennials. It's this process of aging and permanent wrinkle formation that the millennials are trying to prevent or delay.

We already know that Jeuveau works well in non-millennials, and this came out clearly in the studies. When we looked at efficacy in millennials as measured by a 1 point or greater improvement on the glabellar line scale at maximum frown, we found that by day 2, 60% were already responders, and surprisingly by day 7, 14 and 30, the responder rates were 100%. At the end of the study, day 150, over 40% of millennials were responders. A similar pattern emerged when we looked at Global Aesthetic Improvement with 100% responder rates at day 7, 14 and 30, and at the end of the study, 62% of subjects felt aesthetically that they were still improved or much improved.

Finally, looking at subject satisfaction, by day 2, 62% of millennials were responders and day 7, 14 and 30, 100% were responders. Even at the end of the study, day 150 or 5 months, subject satisfaction was still high at 79%. The safety profile did not demonstrate any differences between the 2 groups, and there were no serious adverse events related to the drug.

So, in conclusion, we already knew that Jeuveau worked very well in non-millennials, and now we have data that shows Jeuveau works even better in millennials, our target demographic. Lastly, just a quick update on the Phase II Extra-Strength study. We recently announced the completion of enrollment, patient follow-up is ongoing, and we remain on track to complete the trial by the first half of 2023.

Back to you, David.

Thanks, Rui. As you've heard us say, we aspire to become a multi-product aesthetic company. And during the quarter, we took a step in that direction by investing in the future growth opportunity. We've entered into an exclusive licensing agreement with a 3D printing company with unique biomaterials capabilities for a $2 million investment.

This agreement gives us the global rights to develop their technology for aesthetic applications. Evolus will fund and work closely with their team to conduct the research, and we will be responsible for predetermined payouts when certain development and commercial milestones are reached. The combination of their technology and biomaterials capabilities and our R&D expertise could lead to novel product concepts that generate new market opportunities. While this is still early stage, we are excited about its potential and we look forward to providing updates at appropriate intervals.

Before we move to the financials, I'd like to provide an update on our CFO search. Prior to Lauren's departure, we hired a very experienced interim CFO to help oversee our strong internal finance and accounting team. Having an interim CFO on board has enabled us to take our time to ensure we find the right person to fill the position. Over the past several months, we've met with a number of very strong candidates, and I expect we'll be able to announce our new CFO in the very near future.

With that, I'll hand the call over to David Erickson to take you through the financial information.

Thank you, David. We are very pleased to deliver another very strong quarter, and I'd like to call your attention to several noteworthy items, including a 42% increase in net revenues, a growth rate well in excess of the estimated toxin market growth rate, a gross margin profile that will improve dramatically within the next 60 days. And this is the first quarter where we ended in a net positive cash position. I'll provide more detail about each of these in the next few minutes.

Net revenues for the second quarter this year were $37.2 million compared to $26.1 million a year ago, which was a growth rate of 42%. Looking at just the U.S. sales, which excludes $0.7 million of international sales in the year ago period, our growth rate was 46%. Year-over-year sales were driven primarily by higher volumes and a slightly higher average selling price. Overall, the pricing environment for neurotoxin products in the U.S. remains strong.

Our reported gross margin for the second quarter was 55.4% and our adjusted gross margin, which excludes the amortization of intangibles, was 57.4%. In mid-September, our settlement royalty obligations to AbbVie will end. At the same time, our settlement royalty obligations to Medytox will decrease significantly to a mid-single digit rate calculated on a global net sales. These changes are expected to dramatically lift our fourth quarter adjusted gross margin to the range of 68% to 71%. This fourth quarter step up will result in a blended full-year adjusted gross margin of 58% to 61%.

Reported selling, general and administrative expenses for the second quarter were $36.9 million compared to $33.4 million in the first quarter. This incremental spending was in line with our expectations and due to increased personnel costs and increased commercial activities. We are continuing to carefully manage expenses, which gives us the flexibility to direct incremental dollars towards business growth initiatives. This quarter, SG&A expense included $3 million of non-cash stock-based compensation.

Our GAAP operating expenses for the second quarter were $58.5 million compared to $49.4 million in the first quarter. Operating expenses this quarter included the $2 million payment related to the licensing agreement David described a few moments ago, which was expensed as in-process research and development.

Non-GAAP operating expenses for the second quarter were $35.4 million compared to $31.0 million in the prior quarter. The sequential step-up in the second quarter was expected, and we remain on track with our full-year non-GAAP operating expense guidance of $135 million to $140 million. Our non-GAAP loss from operations in the second quarter was $14.1 million compared to $10.3 million reported in the first quarter. As a reminder, both non-GAAP operating expenses and non-GAAP loss from operations exclude stock-based compensation expense, revaluation of the contingent royalty obligation, depreciation and amortization, and the $2 million IPR&D charge.

Turning to the balance sheet. We ended the second quarter with $84.5 million in cash compared to $106.7 million at March 31, 2022, for a difference of $22 million. The major pieces in that $22 million include $14 million of inventory payments to support the growth of the business, a combined $6 million of net royalty payments, $2 million for the licensing agreement and interest payments of approximately $2 million. The balance was a net positive of $1.3 million as cash collected slightly exceeded cash used to operate the business. This is the first quarter with net positive cash and keeps us on a path to achieving sustainable positive cash flow. As a reminder, we have one final $5 million settlement payment due in the first quarter of 2023, which will satisfy our total settlement milestone obligation.

We continue to expect that our existing cash balance will fund our current operations through cash flow breakeven. As a reminder, the $50 million tranche on our Pharmakon debt facility is available, and we can borrow it at any time during 2022 with no additional restrictions or covenants. The second tranche provides us with financial flexibility as we explore opportunities to expand our product portfolio.

Before I turn the call back over to David, I'd like to summarize our 2022 guidance, all of which remains unchanged from last quarter. Full year sales at the upper end of $143 million to $150 million. This is based on our year-to-date performance and our confidence in a resilient and fundamentally strong aesthetic neurotoxin markets. This guidance also assumes a minimal contribution from international markets.

Full year adjusted gross margin between 58% and 61%, with a fourth quarter step-up to 68% to 71%, concurrent with the decrease in settlement royalty rates. And full year non-GAAP operating expenses between $135 and $140 million. This is driven mainly by continued investments in the growth of Jeuveau in the U.S., plus the Nuceiva launch expenses in Europe. Other modeling assumptions include quarterly interest expense of $2.3 million and full year weighted average shares outstanding of approximately 56 million.

Back over to you, David.

Thank you, David. In conclusion, the investments we are making in 2022 to grow our company and build our brand are fueling above-market growth, which puts Evolus on track for another very strong and successful year. We have earned the #1 or #2 share position in accounts that we support with our unique business model and increasing consumer brand awareness. While we have rapidly grown our U.S. presence since we launched our product 3 years ago, we have an opportunity to expand our customer base much farther. And we are on the cusp of broadening our geographic footprint into 2 of the largest markets in Europe, followed by additional European countries and Australia in 2023.

On the product front, we are building a pipeline with our Phase II Extra-Strength study and an investment in a promising new technology. Overall, we believe we have a tremendous amount of momentum and are positioned for continued growth and success. We greatly appreciate the support of our customers, employees and shareholders, and we look forward to sharing our results in the quarters ahead.

With that, we're ready to take questions.

(Operator Instructions) Our first question is from Louise Chen with Cantor.

Congratulations on all the strong execution this quarter. So I had a few for you. I wanted to ask you what the market opportunity or your latest thinking on the market opportunity for Extra-Strength Jeuveau. Will there be a pricing differential and how much additional sales could this add? And then, I just want to ask you how you're preparing for the launch of Nuceiva in Europe. And what is the market opportunity here and how do you expect the ramp to be? I know you gave some color already but just curious if you could provide a little bit more details there.

And the last question is, any additional updates on business development opportunities to expand your product portfolio? Could we see something else this year and how much capital do you have to deploy towards business development?

Why don't I take the first part of the Extra-Strength, and I'll let Rui talk about what you can expect from a clinical profile standpoint going forward. We had outlined on a prior call that following research we did with our customer base to better understand how they would perceive the role of an Extra-Strength when they currently use the original strength of Jeuveau with a profile similar to what you've seen with the 40-unit dose, whether you want to look at products under development or products in market, I think you'll find that the efficacy profile of the 2 are very similar. So we tested against that profile. And what we learned is, one, there's very high interest in an Extra-Strength dose of Jeuveau. As a matter of fact, 86% of customers that we polled here said that they were interested in it.

When you dig a layer further and beyond interest and you ask them about utility of the product, what we learned is the large majority of their use will continue to be the original strength. They see applications for Extra-Strength, but that will be the minority of their use. And by being in a position where we have both the original and the Extra-Strength with our cash pay advantage and the flexibility that provides us, we think that gives us a unique opportunity to capitalize on this market and its potential going forward.

I'll let Rui provide a little bit more color on what to expect clinically.

Sure. From an expectation, just a kind of base at everyone where things are right now. If we look at competitive products that have longer duration implications such as DAXI, we see about -- we see somewhere between 23.5 to 24 weeks duration. That's looking at a 1-point glabellar line improvement. When we look at our results with 20 units, we already come in with 21 weeks duration as opposed to 40 units of DAXI. It's also really important to consider that we did mostly severe patients, and the DAXI was mostly moderate patients. So we did a tougher population.

So from an outcomes perspective, we feel pretty confident that if we reach 24 weeks as a minimum that we're in a very good position, especially given what you just shared, David, that most want to have access to a longer duration, but that the majority of the utility would actually be the original. So we'd be in a position to have both.

And I think I'll underline a key point Rui made. In the end, we're talking about weeks of difference, not months of difference, if you look at the clinical data that's been published thus far. Of course, we'll learn a lot more as we get the products into market.

Moving on to Europe. Look, I'm very excited about what we're building in Europe. I've spent quite a bit of time there. Rui, who is sitting next to me, has done the same. We've found a partner in Germany that we've now trained on the product. Their sales force carries a portfolio of other products in aesthetics. And they're out there now preemptively talking about Nuceiva in Germany, which is the single largest market in Europe. And we've also hired up our own sales organization in the U.K. So when you put those 2 markets together, they represent nearly 40% of the European market. So it's an important starting point for us as we build.

Couple of things that excite me about. The first is, we're the first neurotoxin to enter that market just as we were in the U.S. in nearly a decade. And there's a lot of interest from the physician community. But the key difference is, we now have 3 years of learnings in the U.S. that the team in Europe has captured by spending time here and with some of our successful sales representatives that we're translating over there in Europe. And we're starting to see early interest that's very positive. Of course, we've said it, you should expect a modest ramp, mainly that's because we want to be thoughtful about one, [our burn], and number two, about the uptake of the product.

So, we do expect minimal revenue contribution in the back half of this year from Europe. But stepping back from it, Europe is the second largest market in the globe. The market opportunity for neurotoxin is over $0.5 billion, and we expect that over time we can build a meaningful presence in Europe with our neurotoxin. So we're excited about the ramp. We'll update you as we get into market. I will be spending some time in Europe as well as we get prepared for that ramp. And the team has done a very nice job there of building up our capabilities in order to have a meaningful presence in those 2 markets as we enter.

On the business development side, as you know, we hired a Head of Corporate Development, the gentleman Christos Monovoukas has been with the company now approaching 2 quarters. And clearly, he is 100% dedicated to our corporate development function which, as we've outlined before, we're very focused in terms of our goals from a corporate development standpoint. We're interested in commercial stage assets that line up in existing durable spaces in aesthetics, and we are actively looking at assets that we feel could be enabled under our Evolus platform.

And we're looking at pipeline assets that we believe could create meaningful value in this category if we develop them over time. We think we have a unique R&D capability here at aesthetics under Rui's leadership and the team beneath him who's developed a number of technologies on the device and drug side in aesthetics. And with that, those capabilities, we believe that some of those complex development programs could be unlocked. And one of those is evidenced by the deal we just announced this quarter, which will take some time. It's early stage, but it presents a meaningful opportunity for us as we unlock the value there.

So we feel great about the progress we're making on the business development front. But I'll reiterate, we're very pleased with our singularity and focus. That's what's enabled us to drive the success we've had thus far. We don't feel that we're in a rush to do anything, but we are capitalized with the $50 million tranche available to us through Pharmakon in order to put that to use in the event that there is an opportunity that presents. So we'll keep you updated as we make progress.

Our next question is from Annabel Samimy with Stifel.

Congratulations on continued momentum here. So, I just want to dig into your growth strategies here. I think at some point you're talking about going deeper rather than broader. And we have seen from our own research and you've sort of confirmed right now that in the accounts that you have penetrated, you're #1 or #2. And you've got some pretty deep penetration there. So, is the idea now that the way that you're going to get the growth is just, again, start broadening the accounts that you're going to start reaching. Just can you talk about a little bit about those growth strategies and how the Evolus program is, I guess, allowing you to do that? So that's the first question.

The second question I have is on the consumer side, you have a new, I guess, a consumer loyalty -- consumer program, coupon program. Is this going to change the cost of the program to your -- Is that a similar type of, I guess, patient or consumer assistance program that you've offered before? And then, the third question I have is, maybe more on the dynamics of where you're getting your most traction with accounts? Is it still over-indexed to the medi spas and is that where you're seeing most of the couponing rather than dermatologists and plastic surgeons who don't seem to be seeing as much impacting, at least from what we've gotten that patients or consumers still are more influenced by their recommendations rather than any couponing programs? So maybe you can provide a little bit of color there.

Great. I found it interesting that we were looking at the Guidepoint Qsight data, which I shared earlier as part of my opening remarks. And then, just in that window of time as we were reviewing our data, we had the opportunity to look at your research, which further validated that the share that we have with an existing account in your research at least was about 4x higher than our general market share in the category. So it validated exactly what we're seeing as well. With the one nuance being, I think your research was focused on derma and plastic versus medi spa, our business over-indexes against the medi spa universe.

So putting that aside, I think it was nice to see another set of data that validated what we commented on, which is what we've always believed. When Jeuveau into a practice, it's an incredibly high quality product. And when they start utilizing the product, your confidence level rises significantly. And when you layer on the co-branded media benefits, what you start to see is, this brand approaches the #1 market share in a lot of these practices, and it's grown significantly over the last 12 months. It's a combination of the precision profile being better understood through a lot of medical training that we've been providing to practices, as well as the co-branded media benefits. And so, we're gaining greater confidence in our ability to expand share.

And to your point, what that then leads to is, well, how do we go wider? We're in 1/3 of practices today that are using neurotoxins. And how do we expand that footprint to continue to build against the remaining 2/3 that don't currently utilize our product? And they've been using the competitive set.

There is a few prongs that answers. So let me just start with the macro view and then work down to what we're doing within the quarter.

On a macro level, we've been engaging in a significant amount of medical education. When we do continuing medical education program, we've been recruiting several thousand injectors that includes many derms and plastics as well as noncore. And we know that the noise level around Jeuveau is increasingly positive within the derma and plastic community if you look back over the trend over the last number of quarters. So we believe we're on the right track. In terms of increasing the level of interest in our brand, we still have a long way to go.

The second is our sales force, we've expanded slightly over the last several quarters in order to support the demand we've been receiving, but also open up capacity for us to go wider. And that team is also supplemented by an inside sales team that has also been expanded in order to support that effort of increasing our breadth. And so, we expect that to continue to deliver growth for us. And you've seen that in the results around new accounts where we clipped up near 600 new accounts where historically, if you look back, we're generating about 400 new customers, roughly a quarter, we've now clipped up to new heights. I expect that to continue to persist as the business continues to perform with our expanded footprint.

The last one within the quarter, we're very excited about the Switch Your Tox program. It serves multiple purposes. The first is, it's designed to increase our market share within customers that are in early stages of using our products or accounts that are in some stage of considering working with Evolus. We believe it creates a tipping point type of effect. The reason we say that is because one of the challenges we know with customers that bring on Jeuveau into their practice initially is how do I initially position this with my existing users. It's much easier, of course, to introduce a new product to new consumers coming in the practice. The challenge for new customers is introducing it to their existing customer base. And I think you see that reflect in your research.

The Switch Your Tox program is designed to make it simple to switch patients that are using existing toxins over Jeuveau. It gives the account a crutch. It gives them the confidence that if you switch your tox, you'll love Evolus. They can speak to their own experience using our product, and it gives the consumer a financial incentive. Rather than earning $20 or $30 off of the loyalty program for their existing toxin, they can earn $160 off the 2 consecutive treatments.

And we know the macroeconomic environments in the back of consumers' mind and with $160 off, that's a meaningful savings. And we're confident that once the consumer is engaged with the brand, they become a loyalist. We see that reflect in our consumer loyalty data. So it does 2 things. It converts patients immediately, which will drive our market share as we go wider and deeper within customers, but it also creates a loyalty within that practice that the practice can build on to continue to expand our customer base. That's why we believe this is not just an investment for the third quarter but beyond, because it really does reap dividends. We've seen that reflected in our market share expansion within existing accounts over the last 12 to 18 months. This is simply a program designed to accelerate that within accounts that are in earlier stages of consideration.

As you think about modeling this, from a gross margin standpoint, you should assume, clearly the coupons come at a cost. That's a gross margin costs, but those gross margins, we provided our full-year guidance. It's reflected within that guidance level, so won't impact how that program works, but it will be facilitated through the existing loyalty program. So, for the practice, they really don't have to do anything more than purchase product, and then the dollars that they receive for those $160 in savings, they go directly to the same consumer loyalty program that these practices are currently using in their offices. So, it's very simple to execute for our field. It's turnkey for the consumer, they get it immediately at the point of sale. And we believe the simplicity of that and the frictionless approach that we've taken will facilitate a strong uptake of the program.

Our next question is from Marc Goodman with SVB.

Yes. A couple of questions. First of all, can you give us a sense of how you're thinking about third quarter versus second quarter traditionally? And usually, it's a step down, just for the market in and of itself on an absolute basis, but obviously the past couple of years have been a little funky. So if you can talk about that a little bit. Second of all, in business development, are you considering devices as well? I heard you mentioned devices, and I wasn't sure whether you're considering that in the past. And then, I guess, the last question, thinking about the growth of the market for the full year today versus how you were thinking about it 3 months ago and you're thinking about next year, any different than how you were thinking about it 3 months ago?

First, on the seasonality question. As you mentioned, prior 2 years, the third quarter seasonality that we've seen historically in this category just hasn't been present as consumers weren't traveling in the prior several years. The third quarter was far more resilient than what we've seen in the past. This quarter is a bit different. And we know consumers are traveling. You see airlines are at capacity in terms of their ability to support the influx of travel here in the third quarter. And I suspect that the traditional seasonality that we've seen prior to COVID is likely back in play. And that's what we're assuming.

That being said, look, we're gaining market share in this category. And so, our business may not follow the traditional seasonality, but I suspect you'll see that reflected in the numbers for the third quarter for different aesthetic manufacturers. And of course, we don't guide on this specific quarter, but you have a sense for what we expect to do on the year. So, clearly that means we expect the third and the fourth quarter to be meaningful quarters for us in terms of the growth trend that you'll see.

On the corporate development side, just to clarify, not all devices plug in the wall. Like when you think about devices, facial fillers are a medical device. And so, to clarify, we haven't said exactly what devices we're looking at, but we have not prioritized anything that plugged in the wall. But we do have the capability to develop drugs as well as Class II or III devices. This team has developed those types of technologies in the past. And so, we have the latitude to do that over time, but we're going to continue to be selective against products that don't require a combination of capital and consumables, at least in the near term for our corporate goals.

For 2023, at this point in time, we have not provided guidance. We're continuing obviously, like you are, to closely watch the market. We're really pleased with what we're seeing in terms of the resilience of the neurotoxin market. As you know, I operated in that space during the last recession, and this category of toxins has been very resilient through macroeconomic headwinds. And here, we have another catalyst, which is the millennial generation that's coming in at a faster rate than we had during the last recession. And I do believe that that's going to create a tailwind even in that economic environment potentially that we could face coming forward. So we feel good about the prospects for 2023, but we'll give you an update as we get closer to the end of the year. It's how we think about next year.

Our next question is from Greg Fraser with Truist Securities.

I want to follow up on the comments on growing the customer base. Do you have a target for the number of practices that you'd eventually like to have as customers? And do you anticipate having to expand the commercial team over time in a more material way than you've done in the past to help grow and service the customer base? And then, on the recent publication of the post-hoc analysis, I'm curious how you plan to leverage that publication to further drive Jeuveau adoption among the key segment of the market?

Well, I'll let Rui take the first -- the second question, and then I'll address the customer base.

Sure. So, yes, we do plan to take advantage of the millennial paper. It really was interesting. If you try and glocal search, we couldn't find a paper on millennials and glabellar lines. We could find one on forehead but not on glabellar lines. The nice thing about that paper is that, because it's a Phase III, it's of very high quality. And because it's on glabellar lines and within the study, it's completely on label. So we can actually leverage that paper, both with the sales force and with a very clinically savvy medical affairs group.

Greg, thanks for the question on the customer base. Couple of comments there. The first is, when we think about the customer, we think about our 3 dimensions. One is, of course, the traditional field-based support. The second is inside sales, which runs at a fraction of the cost of the field force. And then, of course, the last one is digital and how we can automate the way that we service customers. You see that we've been adding modestly into our field base. Obviously that's a much higher cost to add a sales rep into an account. And so we closely scrutinize that expense.

And we've been building capabilities that enable us to generate revenue from a digital standpoint that will continue to build. And we believe that as we continue to expand our customer base, there is a long tail in anesthetics of, call it, roughly 20,000 customers. And we believe with digital automation, we can be very efficient in supporting that customer group and building our business and then setting that digital footprint into inside sales to support them as they get larger and then modestly continue to increase the field base over time. But we don't anticipate any significant increase in sales force. We like the model we've built, and we think we can accommodate our growth with this incremental approach to field based.

Our next question is from Serge Belanger with Needham & Company.

Just a couple of questions from me. David, you highlighted the spending habits were resilient. There have been no meaningful changes so far. But curious if the staff shortages that we've seen in other -- that we see have been pretty commonplace have affected operations in the aesthetics offices, and whether that could add to the seasonality that we should expect in the third quarter?

And then, secondly, going back to the follow-up on the European launch. I'm not sure if you've covered this, but maybe if you can talk about the pricing dynamics and whether there'll be any limitations to adopting some of the co-branding marketing tools that you've been using for Jeuveau in U.S.?

Starting out with spending habits and staff shortages. We experienced staff shortages in the first quarter, and you saw these practices are pretty creative about how they work around that. I don't expect the third quarter to be too different. That being said, having spent some time recently in the field, look, these doctors are finally taking vacation a bit. So they are taking some time off so that traditional seasonality that I mentioned to Marc, I think, is in play here for the third quarter, but nothing unique as it relates to COVID that should be slowing down the market from what we see at this point in time.

As far as European pricing dynamics, certainly Europe is a lower price point than the United States. And I think that's reflected in the market value. Procedural volume might be similar between the U.S. and Europe, yet the market value for toxins in Europe relative to the U.S. is about a quarter of the size. So as a result of those pricing dynamics, clearly there's a lower ASP. And we've reflected that in terms of our investment and the market potential that comes from it. But we feel that those are challenges that we went into, well aware of, and we feel that we can overcome those and build a meaningful business there. But over time, of course, U.S. will continue to represent a large majority of our revenue, but Europe is going to be a contributor to our growth as we go forward.

Lastly, on capabilities in Europe, this is a drug, as you know, and advertising a drug is not allowed in Europe. So, some of the co-branding media that we have in the United States that will translate to Europe, but a lot of the messaging around how the products use, the precision dynamics, the support on that level, as well as some of our digital capabilities we've been able to carry over to Europe that creates a lot of efficiency for that team.

Our next question is from Douglas Tsao with H.C. Wainwright.

Congrats on the results. David, I think you mentioned that in most of your accounts, you've taken over the first or second position. I'm just curious, how long does it typically take from when you bring an account online to you gaining that level of penetration?

Thanks, Doug, for the question. It's a great one. What we're seeing is that the time to ramp is shortening. It's shortening because the capabilities we have and also the efficiency of our reps gaining -- getting that account to gain comfort with the product. So, I couldn't give you a specific number of quarters on average, but we are seeing a faster ramp. As a matter of fact, when I look at our lead indicators on our business, our leading indicators are performing stronger than revenue. The revenue is a trailing indicator to what we're seeing. And that's what gives me confidence to say that we're seeing some of these metrics moving up into the right a bit faster than we're seeing revenue doing that.

And that's evidenced by the number of new accounts, the repurchasing patterns, the increasing amounts that existing accounts are purchasing, all of those metrics. And then finally, the lagging indicator within the leading indicator group is consumer loyalty, the number of redemptions we're seeing go through our consumer loyalty program. All of those are rising at a faster clip than what we're seeing with our revenue, which to me is an indicator that there's greater interest of Jeuveau in the U.S. and more accounts are interested in coming in.

Number two, when they get in, they are growing at a faster clip than we're seeing that represented within our existing account base, purchasing more than they were prior. And then of course, you're seeing the influx of new customers, both injectors as well as consumers on both sides. So it's hard to isolate it to CBM versus the field footprint and the digital. I think it's all of it, working in harmony together that's starting to drive that growth. And then you layer on a bit more scale that we've added into the back half of the year, and we feel that gives us a really strong -- gives us really strong momentum in the back half to exit the year.

And maybe as a follow-up, David, when we think about the growth that you've experienced in the first half of this year, I mean, how much is coming from accounts that were added in 2022? Or is that still something that we should look ahead to, or you should stand to benefit from in the second half of this year?

Yes. So new accounts contribute very little to our growth within a quarter. New accounts are really a longer-term play and contribute to our growth over time. So, I think you should think about that new account as part of what drives later '22 as well as '23 revenue.

Our next question is from Uy Ear with Mizuho.

Just have a few. I think you guys mentioned the growth for Jeuveau this quarter was driven by higher price as well as volume. Just wondering if you can perhaps quantify it, provide more color as to what percent came from volume and from price, if possible? And, I guess, my second question is, I was wondering like what you are seeing on millennial spending pattern that may be similar or different from the parents that would sort of give a cushion to, I guess, the growth in that segment, if there is a recession.

So, first on the price. Price represents a small single-digit part of the overall growth. The majority -- large majority of this is volume. But what's important about prices, it shows the value part of our story that we've consistently been able to increase our ASP as we've entered the market, and we've added more around the value part of the equation. And you're seeing that, that consistently quarter-on-quarter where price continues to play a role as it moves further upward.

As far as the consumer segmentation, first point, we have not seen any difference among segments in terms of their continued use of Jeuveau. We've segmented our consumer loyalty program. We don't see any impact within any of the consumer segment groups. We do know that the millennial segment prioritizes experiences over other activities, and we do believe that that segment will continue to be very resilient with a high discretionary spend and high income power. With the low unemployment rate, we expect that that is going to be an important part of the long-term growth.

As a matter of fact, when you look at our consumer loyalty program, all of half of patients now in our loyalty program as of the second quarter are millennials. So, our focus from the beginning has been to build a brand around this younger generation, and you're seeing those results reflected in the utilization of our product. I do believe when we get into practices, they think of Jeuveau as the product for the next generation. And that positioning is really taking a stronghold, whether you look at it in utility through our consumer loyalty program, or you start to see it in our advertising and then the respective brand awareness that comes from that.

So, we're really pleased with that segment, and we believe that it's not just a short-term play, it's long-term. The millennials today represent about 1/3 of consumers in this category. Over the next several years, that'll represent the majority. And of course, over time, they are the single largest consumer segment in the U.S. today as it relates to their spending patterns. It's a very meaningful segment that provides a long-term tailwind for us as we build our brand around that category.

We have reached the end of the question-and-answer session. And I will now turn the call over to management for closing remarks.

Thank you, operator. If you missed any portion of this call, a replay will be posted to our website later today. Thank you for joining us. We appreciate your interest in Evolus and we'll be available if you have additional questions.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.