Evolus Inc (EOLS) 2021 Q3 法說會逐字稿

Greetings. Welcome to the Evolus Third Quarter 2021 Earnings Conference 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 of 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; Lauren Silvernail, Chief Financial Officer and Executive Vice President, Corporate Development; and Rui Avelar, our Chief Medical Officer and Head of Research and Development.

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 the 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 statement.

Additionally, our discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in 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.

Thank you, David, and good morning. We are very pleased to share with you our results for the third quarter of 2021, which reflects increasing sales momentum, strong oversight of fixed operating expenses and disciplined cash management. For the quarter, we delivered record revenue of $26.7 million, which represents 58% growth over comparable U.S. sales in the third quarter of 2020. Most impressive is our quarter-over-quarter growth of 5%, reflecting continued market share gains during what is typically a seasonally down quarter. Overall, the U.S. aesthetic market conditions remain quite favorable and demand for toxin products among new and existing patients continues to be strong.

Through October 2021, we continue to see strong growth in our Evolus Consumer Rewards program, where registration currently stands at more than 240,000 consumers, a doubling since the end of last year. Our business continues to over-index to millennial and younger patients, which now represent nearly 40% of our user base in the loyalty program, markedly higher than the overall category where millennials and younger represent less than 30% of toxin use. The millennial segment is the future growth driver for the aesthetic market as this consumer group is the largest generation today with over 70 million consumers in the U.S. alone. This underpenetrated demographic is comprised of savvy consumers who are beauty conscious, with fewer barriers to seeking treatment than prior generations. Additionally, these consumers are active on social media, which plays directly to our marketing and digital capabilities.

During the third quarter, we added more than 500 new Evolus customers, bringing our total account base to more than 6,500. We're also efficiently servicing these accounts through a combination of field and in-house sales professionals, while continuing to direct product reorders to our digital platform where the majority of our orders continue to be placed. One of the differentiating features of Evolus' business model is a strategy specifically designed to help our customers grow their toxin businesses, and one of the key features of that strategy is our co-branded marketing program. Since we are the first company in the toxin category to offer co-branded marketing, I thought it would be helpful to take a few moments to help bring it to life.

Co-branded marketing, or CBM, is a service we offer to our higher volume customers that enables them to create personalized advertising campaign featuring their practice alongside Evolus and Jeuveau brands. Customers can select from a range of advertising options, including digital, billboards, and now the fourth quarter, new streaming television ads. All of these options provide accounts with a custom advertising offering to target consumers in their local market. Each media program runs for a specified length of time and the campaign results are measured and provided to each practice. The more Jeuveau our customer purchases, the more advertising value they receive.

Our CBM program has grown quite a bit since we first introduced it a little over a year ago. To date, we placed over 1,000 billboards across the U.S., making Evolus one of the largest purchasers of outdoor media across industries. This volume growth is resulting in greater economies of scale by lowering our per-unit advertising costs.

Co-branded marketing is working. In the third quarter, our CBM presence increased significantly. We ran more than 850 individualized co-branded marketing campaigns across the United States, which resulted in more than 395 million media impressions. Both of these metrics are nearly double our second quarter levels, which positions us well as we build the Jeuveau brand for the millennial consumer.

The benefits of our CBM program are many. Not only does local advertising help build account awareness, but it also directly connects consumers with Jeuveau injectors. Additionally, co-branded marketing serves as a call to action to both the new user considering her first treatment and existing patients as a reminder to schedule return visits. This type of promotion also creates awareness among potential accounts, incentivizing them to inquire how they can become Jeuveau injectors. Ultimately, this exclusive program helps Evolus create deep and lasting relationships with our key accounts, while also helping promote our brands.

Lastly, earlier today, we announced we are investing in a Phase II program to study an extra-strength dose for extended duration of Jeuveau. Given our aesthetic-only business model, Evolus is uniquely positioned to capitalize on this opportunity, which should set us up for continued market share gains. Now I'd like to turn it over to Rui Avelar, our Chief Medical Officer and Head of R&D, to provide further detail about this exciting new program.

Thank you, David. I'm pleased to announce that we've initiated an extra-strength Jeuveau program, starting with a Phase II study. As background, all companies with an FDA approved neurotoxin have conducted studies to look at the effect of increasing dose on duration. And it's now fairly well accepted that indeed increasing the dose of a given neurotoxin does increase its duration of effect. It also changes the product's performance profile in other ways, and this study will help us understand that additional dimension.

Since our commercial launch of Jeuveau, we've learned a great deal about how our product performs clinically in the real world. The feedback from clinicians is that Jeuveau is very precise. One of the main safety concerns regarding clinical studies with toxins is around the potential for local and distance spread of the drug, and we believe that the precise nature of the Jeuveau makes it well suited for a glabellar line indication at a higher dose.

As a company, we've never been shy about taking our competitors. In our initial entry into the market, we conducted the largest head-to-head Phase III trial in aesthetics against the market leader. This enabled everyone to easily compare Jeuveau to BOTOX across various metrics at every data point from the start of the study to the end at 150 days. These results were presented at several medical meetings and published in peer review journals.

We're very excited about our extra strength program and we're well on our way, having already started as a study initiation work. We have an open IND in place and expect to enroll our first patient in the first quarter of 2022. This program is designed to give us the flexibility to pursue a longer duration indication on label. In this Phase II glabellar line study, there will be 3 arms with the currently approved 20 units of BOTOX cosmetic, 20 units of Jeuveau and 40 units of extra strength Jeuveau. The study will be a prospective, double-blind, randomized, active control design and will follow patients up to 1 year. We'll provide additional details about the study in the first quarter. Back to you, David.

Thank you, Rui. As much as we're excited about this Phase II program, we believe that current 20-unit dose of Jeuveau will remain the flagship use of our product in the future. The overall subject satisfaction from the original study using the 20-unit dose was over 90%. While this satisfaction rate is very high, we believe an extra strength of Jeuveau increases options for those consumers who may desire a different performance profile and longer duration. We look forward to providing updates on our progress in future quarters.

Before we get into the financials, I want to provide a brief update of our expansion into Europe next year. We are continuing to finalize our launch plans, and the introduction of Nuceiva remains on track for early next year. Our initial entry will focus on several of the larger, more attractive markets, including the U.K., Germany and France. In these markets, we will build on our customer experience and learnings from our U.S. launch. As we gain traction in these initial markets, we plan to open additional markets, utilizing a combination of direct and distributor sales model. As a reminder, the European toxin market represents a $470 million opportunity. We're excited to enter this market where we will be the newest company to enter in more than a decade. With that, I'll turn the call over to Lauren for some additional financial information.

Thank you, David, and good morning, everyone. I would like to start by echoing David's comments and say how pleased I am with how well this team executed in the third quarter. As he mentioned, we reported quarterly net revenues of $26.7 million, up 58% compared to U.S. net revenue in the third quarter of 2020 and up 5% on a sequential quarter-over-quarter basis despite a negative market growth rate.

You may recall that the third quarter is typically the lowest quarter in the aesthetic toxin industry due to seasonality. Compared to the third quarter of last year, the majority of our sales growth in the third quarter of this year was driven by higher volumes. Overall, the pricing environment for neurotoxin products in the U.S. remains quite stable with 2 competitors, including the market leader, raising price in Q3 by 3%.

Moving down the P&L. Our reported gross margin in the third quarter was 54.2%. Our adjusted gross margin in the third quarter, excluding the amortization of intangibles, was 56.9% and comparable with both the first and second quarters of this year. We continue to expect our full year 2021 adjusted gross margin, which includes settlement royalties and excludes onetime payments, to be in the range of 54% to 57%. As a reminder, beginning in mid-September of next year, the royalty we pay on net sales drops to a mid-single-digit rate. As a result, beginning in the fourth quarter of 2022, we expect our adjusted U.S. gross margin to exceed 70%.

Selling, general and administrative expenses on a GAAP basis for the third quarter of 2021 were $31.7 million, up from $21.9 million during the third quarter of 2020. The majority of this increase was driven by co-branded marketing such as billboards, digital media and content creation to build the Jeuveau brand alongside our customers. For the third quarter of 2021, SG&A expense on a GAAP basis included $2.4 million of noncash stock-based compensation expense.

Our non-GAAP loss from operations in the third quarter of 2021 was $14.3 million as compared to $6.5 million in the third quarter of 2020. The increased loss from operations of $7.8 million in Q3 was driven principally by investments in co-branded marketing expenses. Non-GAAP loss from operations excludes stock-based compensation, revaluation of the contingent royalty obligation and depreciation and amortization.

From a balance sheet standpoint, we ended the quarter with $107.8 million in cash compared to $131.7 million at June 30, 2021, a difference of $23.9 million. Cash collections from customers during the quarter were particularly strong with cash collected approximating our reported net sales for the quarter.

During the third quarter, we scheduled a $15 million milestone payment under our settlement agreement. Excluding this payment, royalties and cash received from accessing our at the market, or ATM program, our operating cash burn was approximately $8 million. This reflects our continued focus on carefully managing overhead expenses and investing closer to the customer to fuel our sales growth. Overall, we feel we're in a very solid cash position.

As we look out a couple of quarters, I want to remind you of $40 million of previously disclosed cash obligations, including a $20 million payment to the Evolus founders in the fourth quarter of this year, a $15 million settlement payment in Q1 of next year and our final $5 million settlement payment in Q1 2023. We made our first royalty payments under the settlement agreements during Q3 2021. These royalty payments will continue to be calculated at their current rates until the rate drops in mid-September of 2022.

During the third quarter of this year, we sold approximately 725,000 common shares under our ATM program for net proceeds of approximately $8.2 million at a weighted average price of $11.67 per share. We have not accessed the ATM since August. And at this time, we have no plans to sell additional shares under the ATM. For the third quarter, our weighted average shares outstanding were 55.0 million. And for modeling purposes, we suggest to use approximately 50 million shares for the full year 2021. With that, I turn the call back to David.

Thank you, Lauren. Before we move to Q&A, I'd like to formally welcome Jessica Novak to the Evolus leadership team. Jessica has recently come aboard as Senior Vice President, Human Resources and brings extensive experience in organizational development, talent development and HR strategy across many different industries. We look forward to her leadership as we continue to execute on our growth plans.

In closing, our strong performance this quarter on the heels of a great second quarter positions us for a record finish to 2021. More importantly, these results reinforce that we have the right strategy and are continuing to execute against it. We believe our differentiated business model centered on the fast-growing millennial market and in true partnership with our customers will enable us to continue to outpace the market growth rate. And based on solid financial footing, we believe we are positioned for further growth and value creation as we continue to increase our market share in the U.S., expand our global footprint into Europe and further differentiate our competitive position with our extra strength clinical development program. With that, we're ready to take questions.

(Operator Instructions) Our first question comes from the line of Louise Chen with Cantor.

Congratulations on the sales this quarter. So I'd ask a few questions for you. On the extra strength Jeuveau, what kind of R&D spend are you anticipating for that? And when will that fall into place? And then what is the incremental revenue opportunity you expect from this extra strength? And then I have a bigger picture question for you is, what is the penetration of aesthetic toxins today globally and in the U.S.? And where do you think that, that could go over time?

With regard to the cost of the extra strength study, that will be approximately $2 million during 2022. With regard to additional sales, I think it's a little bit early to predict that as we're in, in Phase II at this point.

Great. And to the second part of your question, Louise, we operate in a highly underpenetrated and fast-growing market. The consumer penetration rate we estimate in the U.S. is approximately 6% and when you look at that younger demographic of millennials, they have far fewer barriers to entering this market than the prior demographics had in the past. And so we believe that's part of what's fueling the faster growth in this market, in addition, of course, to the Zoom boom that we're all seeing accelerating the interest in aesthetics.

Our next question comes from the line of Annabel Samimy with Stifel.

I had a few actually. I guess the first is the growth of the overall market. Can you talk a little bit more about the dynamics? It doesn't seem like there was a tremendous amount of seasonality this quarter as we've seen from BOTOX almost being flat quarter-over-quarter. So I just wanted to sort of understand some of the competitive dynamics and how you feel you're advancing as far as market share.

Second one, see if you can give us a little bit more granular detail about the impact of the co-branding and some of the metrics that you might be able to share as far as directing patients, Jeuveau patients to those practices and the benefits there. And then finally, on the long-acting toxin or rather the extra strength toxin, I guess, to understand it a little bit better, are you feeling comfortable doubling the dose of this toxin specifically because there is such a precision in this, and you don't have a concern about spread because, I guess, the idea of just doubling the dose could generate different effects on the face as opposed to just longer duration? So I just want to understand how you're feeling comfortable with that.

Great. Annabel, thanks for the question. Maybe I'll take the first 2 around the market and then co-branded media metrics and then turn it over to Rui to answer your question around the extra strength program that we have. In terms of overall market, clearly, this has been a very strong market this year. You saw the market leader reported late last week and reported, as you pointed out, just a small decline of minus 3 points. Our business sequentially grew 5 points. So I think there's about an 8-point spread there that we feel very good about. And that if you look at our revenue in the second quarter, you saw that we got our feedback under us. The majority of that revenue came from accounts from the back half of last year placing an initial order, and so I give a lot of credit to the team for their focus in Q2 of reengaging customers.

And now in Q3, you see that we've added another dimension because not only are we continuing to work with existing customers, but we're expanding our footprint by adding 500 new accounts. And I think you're starting to see the share accelerate in terms of our share gain. And we believe this is the early innings of us in the relaunch phase of Jeuveau, and we feel that we're on a strong trajectory. But overall, you're right, this market is -- has a very healthy growth profile. And as we've always said, we could do well in this category and continue to build our brand. You may see the same from others in this space.

As far as co-branded media, we continue to track all metrics. We've reported several of them. You'll see them posted on the -- on our Investor Relations site, a full updated presentation later today which shows the progress we've made on co-branded media since the first quarter of this year, where the number of campaigns has increased from just over 100 to over 800 campaigns now from the first quarter all the way to the end of the third quarter.

So we're clearly accelerating our traction in terms of these campaigns. And we're seeing that the impressions we're creating during that same window of time has significantly increased as well. And there are more metrics, and we'll continue to provide more color with time. But as you know, Annabel, building a brand is not a 1- or 2-quarter effort. It's a multiyear effort. And as we've always said, we're building a brand for the millennial demographic, and we believe our co-branded media strategy, not only is it targeted in a local market around the consumer and also targeted to the millennial, but it's also targeted around a practice that's using Jeuveau. And so that we have confirmation that once that consumer is going in and asking for the product, they're going into an account that has the experience using it. So we're very pleased with the early metrics we're seeing around co-branded media, but that's something we'll continue to provide more color on as time goes on. I'll pass over to Rui to talk about the extra strength.

Sure. Thank you, Annabel, for the question. And I think you actually summarized it really nicely. That's basically it. When you double the dose, increasing a product can be an issue when we think about spread, both local and distant. Just as a piece of trivia, if you look at the August 2014 release from the FDA, when they printed and gave the guidance on toxin studies in the face, there's a whole page on concerns about adverse events and maybe list 50 potential adverse events. So given the fact that where perception and the feedback from the doctors that our product seems to be very precise, it just seems to fall very well to study in a higher duration or a higher dose type of scenario.

The thing that we really do want to understand is not just the safety profile but also there's a performance trade-off. So we know that from feedback, clinicians and consumers or patients like the feel of Jeuveau when they're treated with it. They say that it feels less heavy, and there's a lot of descriptive language that of why they like it. What we want to understand is, when you use a higher dose, what does that performance feel like? And do they like that feel, that trade-off of giving away potentially that kind of natural light feel to potentially some different performance attributes.

So this study allows us to be able to understand clinically how patients feel and if they prefer this versus the other. Again, I think David summarized it nicely. The 20 units that we have right now, we know works really well. And the feedback that we get both from patients and KOLs is that they like this product. We also know that there are some doctors who are experimenting with higher doses. So we wanted to do this in a more controlled fashion, and it just makes sense to do it in a Phase II capacity.

Our next question comes from the line of Marc Goodman with SVB Leerink.

Just to continue on with the overall market. David, can you just talk a little bit about like how Galderma and Merz, I mean what's going on here behind the scenes, who's gaining share? Who are you taking share from? It seems like the market, like you said, obviously, the growth rate was big year-over-year. But quarter-to-quarter, it was probably flattish. We're assuming fourth quarter will be up a little bit. So how are you assuming we end the year for total sales in this market in the U.S. And maybe you can give us a sense for how October has gotten off to a start in the fourth quarter.

Great. Thanks, Marc. First, I think as it relates to the other toxins, it's tough to speak for those because those are private companies that we don't have great visibility to their performance. But it's fair to say that since the COVID recovery in the back half of last year, this market has been on an accelerating growth trend. And you see that the typical seasonality in the third quarter that you would see where, generally, you'd see potentially a double-digit decline sequentially, you didn't see that from the market leader. And that's a sign of the resilience of this market, which continues to be strong. And we're very optimistic about that trend carrying forward into the close of the year.

And we're also very optimistic about our prospects because not only do we benefit from the overall market growth, we believe that a combination of our co-branded media and our effort to go wider is enabling us to deliver faster growth than the market overall procedure. So I think, Marc, you're hearing from us, we feel really good about our business. I think what we say internally is we feel like we found the right recipe in terms of how we get out and promote our brand and the effort that the team has behind it. And in many ways, we feel the winds at our back and we just need to execute at this point and continue to deliver some strong quarters here.

Can you talk about October at all?

Yes. I think as I was saying before, I think the same trends have carried through that we've been observing, which is very strong demand. We recently held a customer meeting where we had nearly 100 customers present at an off-site. And I can tell you that as I walked around that meeting, it was consistent that the dialogue was around either adding additional injectors to absorb the additional demand coming into practices or practices were looking to expand and add new facilities for 2022. And that was a consistent theme across the board that the demand is picking up for these accounts and they're looking at ways to absorb it. And I think those are very, obviously, great problems to have in this market right now.

And that's probably one of the biggest challenges that we see when we're advertising in the co-branded media that these consumers want to get in. This is a 15-minute quick in-office procedure. It's not a typical medical procedure where they're willing to wait months to get into a practice. They want to get in within a matter of a couple of days. And so clearly, building up the ability to absorb the demand is going to be an important part of how this market evolves over time. But I do believe that we're on the right path that you've got this market at a stronger pace here of growth than we've ever had it. We estimate this market this year will annualize at about a $1.8 billion revenue range. And we may even update that guidance as we come out of Q4 based on the strong run rates we're seeing.

Our next question comes from the line of Vamil Divan with Mizuho Securities.

Apologies if I missed some of this, just been juggling a few different company announcements this morning. So one on your extra strength program here. Can you just talk a little bit about what your sort of target profile would be for that? And initially, the doctors have gotten used to Jeuveau and maybe because of the precision, some at least to us have mentioned that they don't last quite as long as BOTOX trying to get this sort of more in line with their BOTOX, the performance they're seeing from BOTOX. Or is it maybe more trying to get even longer duration than that, maybe closer to what Revance has reported with -- so just a little bit more understand there would be helpful.

And then the other part was more around the millennial demographic delta you guys are focusing on. Can you maybe just give us a sense of the share of your sales that are coming from the millennials or any sense of sort of market share split in the millennial population versus the non-millennial population?

Great. Great questions, Vamil. Why don't I start with the millennial and I'm going to make one quick comment and turn it over to Rui on the extra strength program that we have. For millennials, one thing we track is the percent of millennials that are in our consumer loyalty program. And we did report that 40% of consumers in our Evolus Rewards program are millennial age or younger. And that compares to less than 30% for the overall toxin market.

So we feel very good about our advertising and our branding positioning well against that millennial segment. And we hear that consistently when we're out in the field with customers that the millennial consumers respond very well to our advertising. They respond well to the brand positioning. And we're seeing that, of course, being pulled through now in co-branded media where, with over 800 campaigns that we individualize around the country and nearly 400 million media impressions, clearly, that's also starting to build the brand awareness for Jeuveau. And we think all of these collectively, as you know, Vamil, over time really have a building effect. And that's how other major brands in this aesthetic category were created. It wasn't overnight. It was over time. And I think we're on the right track to building a new brand in the space that's targeted against this younger demographic. And that's really what makes us unique as the newest player in the toxin category.

Moving over to your questions around the extra strength. Maybe I'll just start with a couple of comments around the key learnings that we've had over the last couple of years in the market. The first is, there is a segment of injectors in the U.S. that are playing with dose. They have been for a number of years. It's a small segment, but they have been playing with doubling and even more increasing the dose of existing approved neurotoxins in the U.S., and they're seeing a direct correlation to increasing the dose and the higher and the longer duration of effect. But they're also seeing different properties that come with that as well, and I'll let Rui speak to that.

The second is there are now publications with all toxins showing a direct correlation between higher doses and duration. So we feel very confident that there's a direct correlation there based on a very large study conducted with the market leader showing that. And as you know, we did our own head-to-head study in the past. So we have a lot of confidence in terms of how our currently approved Jeuveau dose compares against the market leader.

And lastly, there is a bit of confusion in this market, and there has been because the focus has been around duration without trade-offs. And we believe that based on the learnings, there are trade-offs in the end. And just as there are with pharmaceutical products, if you increase the dose, there is likely some benefits, but there's trade-offs that come with that. And we think doing a study to show that is going to be important. But most importantly, I think we're well positioned to do that.

We're an aesthetic-only company, which gives us a latitude to optimize the value of not only our 20-unit dose, but a future potential dose at a higher level. Enabling a consumer to start with a 20-unit, which we believe will be the flagship, but they have an option to move to a higher dose, if in fact, she's looking for different properties. And so we did believe this is the right time to do it. And based on where the market is today, I think we'll be the company that could provide that clarity around what the trade-offs are. Rui?

Sure. And I think David summed it up pretty nicely. But just to hit your question straight on, in particular, the first point, it has been very well established now how Jeuveau compares to BOTOX in terms of duration. The largest head-to-head study bears that out very nicely. It was 540 patients. And if you look at the responder rates over time, you could see that we end up with higher responders on a relative basis. When you do the actual duration calculation, pretty similar. Actually, Jeuveau is about a week longer than BOTOX in duration, if you look at the CSRs in those materials. And that's been pretty consistent. There have been other Phase III studies. There was another glabellar line study before ours that was before it became Jeuveau during our diligence. And that pattern is being pretty consistent, that Jeuveau either lasts as long, if not a little bit longer in those Phase III studies.

In terms of the product profile that we're looking for, it's very -- it's like David said, we're looking to have a look at a product that may have a longer duration. And we're trying to understand that trade-off between duration and how it feels clinically for the patient. The other thing that's quite confusing in the marketplace right now is ultimately the definition of duration. We've seen a lot of companies take liberties in terms of how they're defining duration. So we're looking to see how that plays out, too. And this study helps us understand those attributes.

Our next question comes from the line of Douglas Tsao with H.C. Wainwright.

Just a couple of questions for me. So first, I'm just curious, percentage of your overall revenue is now coming from accounts that are participating in the co-branded marketing program.

It's a great question. Yes, I'll answer that one and you can add your follow up. We're not disclosing the details around CBM for competitive purposes. Obviously, it's a large part of our business. We did say that there's over 500 customers that participated in co-branded media, and it's growing at a fast rate. And you know that we have a little over 6,000 customers now that have purchased Jeuveau in the U.S. So you have some context around the penetration of the program. But in terms of revenue, we're not disclosing that just yet. Next question?

Okay. And then just in terms of just to understand in terms of the extra strength program, so is the focus to run the Phase II, see what you learn and then proceed to do a study that you might submit to the FDA for a label change.

Go ahead.

Yes. So right now, we're -- just like you said, we're -- we want to see what 40 units looks like. We want to understand the duration profile, which we expect to be longer. This is -- we've all seen that when we double the dose that we get longer duration. But more importantly, we want to understand how patients feel about it, what it feels like clinically when you have it. What -- we know 20 units. We know patients are happy with 20 units, and we know the clinicians are very happy with 20 units. And we've seen, like I said, there are KOLs there are physicians who are experimenting and playing with the higher doses. So we wanted to do it in a more controlled fashion. And then -- sorry, you made one more point at the end there.

Well, I was just curious if you were intending to then run a Phase III study for a label change.

That's right. So that's the flexibility in the program. We can understand if it makes sense to continue forward. So we have the flexibility to decide if we want to continue the program and take it all the way through to a label. And this day will be submitted to the FDA as a Phase II study.

Okay. And then just, Rui, just how many patients are going to participate in the study?

This right now, it's -- we're looking at about 120 patients in 3 arms.

Our final question comes from the line of Greg Fraser with Truist Securities.

Have you seen any changes in behavior by the market leader in terms of customer programs or initiatives to protect share that might create headwinds for Jeuveau and the other players? And my second question is on SG&A, which was up more than expected. It sounds like the growth was driven in part by the CBM program. Should we look at that 3Q level as a new run rate from which you'll grow?

Yes, I'll start with the first question just around the competitive activity and then turn it over to Lauren to address our spend rate. Look, the market leader continues to deliver revenue at all-time highs. I think, in the second quarter, you saw all-time high revenue for them, and then in the third quarter for that season, also an all-time high. So you're seeing very strong trends overall. You saw them also raise price in the summer, both Allergan as well as Galderma raised price 3%. So you're seeing all the signs of a very healthy market and, of course, us over indexing in terms of our performance relative to the overall market rates, which, look, you'd expect that given the profile product we have and where we're investing in co-branded media to drive a greater acceleration of our business. I'll turn it over to Lauren to speak to the spend associated with it.

Great. Yes, we did spend more in the third quarter, investing very close to the customer really in the CBM programs that we've been talking about. And the majority of the increase in SG&A is driven by that CBM spend. And I think your other part of that question was, will that continue? We do believe it will continue into Q4.

At this time, we have reached the end of the question-and-answer session. Now I'll now turn the call back over to Mr. Erickson for any closing comments.

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

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