Revance Therapeutics Inc (RVNC) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Revance Therapeutics 2014 first-quarter financial results conference call. (Operator Instructions). As reminder, this conference call is being recorded.

I would now like to turn the conference over to Ana Petrovic. Ma'am, you may begin.

Thank you. Joining us on the call today from Revance Therapeutics is Chief Executive Officer and President Dan Browne; and Chief Financial Officer and Executive Vice President of Corporate Development, Lauren Silvernail.

Earlier today, Revance Therapeutics released financial results for the quarter ended March 31, 2014. If you have not received this news release, or if you would like to be added to the Company's distribution list, please sign up at the Company's website, revance.com, or call Westwicke Partners at 415-513-1281.

During the course of this conference call, Revance management will make forward-looking statements, including, but not limited to, statements related to Revance Therapeutics' financial performance, clinical development, business strategy and goals, plans and prospects, potential benefits of our product candidates and our technologies, and our future financial performance.

These forward-looking statements are based on the Company's current expectations, and inherently involve significant risks and uncertainties. Our actual results and the 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 results to be different from these statements include factors the Company describes in section entitled forward-looking statements in its press release of today.

Revance cautions you not to place undue reliance on forward-looking statements, and undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in its expectations.

I will now turn the call over to Dan Browne. Dan?

Thank you, Ana. Good afternoon, everyone, and thank you for joining our first-quarter 2014 earnings conference call. This afternoon, we will break down our comments as follows: I will start off with comments regarding our recent achievements, followed by an update on our clinical programs. Then I will turn the call over to Lauren to give a more detailed analysis of our first-quarter financial results and our expectations for the remainder of the year. Next, I will outline our upcoming clinical milestones, and wrap up the call with closing remarks. We will then open the call up for questions.

In the first quarter, we successfully completed our initial public offering, which brought in just under $99 million in net proceeds to the Company. This capital is enabling us to continue our late stage clinical programs and execute our corporate objective to build Revance into a premier dermatology company. We are focused on leveraging our proprietary TransMTS peptide technology across multiple indications and dose forms.

Our core objective is to develop and commercialize our portfolio of botulinum toxin compounds that will address a large and growing aesthetic and therapeutic botulinum toxin market, expected to exceed $4.3 billion by 2018.

As a reminder, we currently have two late-stage product candidates. Our lead asset is RT001, a novel topical botulinum toxin in Phase III for the treatment of crow's feet lines. Other indications for RT001 in clinical development include prophylactic treatment of chronic migraine and hyperhidrosis, or excessive sweating, a dermatologic condition which typically presents in the underarms, hands, feet, and face.

Our second asset is RT002, which is designed to be a more targeted and longer-lasting injectable toxin for the treatment of frown lines. We recently announced positive results from our first RT002 clinical trial. We believe RT001 and RT002 represent a large commercial opportunity addressing multiple aesthetic and therapeutic conditions, with three anticipated launches beginning in 2017, and the potential to reach annual sales in North America of $500 million and beyond.

Importantly, we expect to achieve our potential through a targeted specialty selling organization in North America. We believe we will be the first to market with a topical neurotoxin, expected to launch in 2017. We have all of our rights to all assets across all geographies and all indications for both topical and injectable dose forms.

I am incredibly pleased with the recent progress we've made. These highlights include: last month, the announcement of positive results from our first injectable RT002 clinical trial in frown lines. Earlier in the quarter, we initiated our RT001 open-label Phase III safety study in crow's feet lines. We also continue to make significant progress on our manufacturing capabilities for both drug product and drug substance, including CMC, analytics, and commercial-scale fill-finish operations.

Our achievements in clinical programs and progress on our operations capacity for RT001 is our testament of our ability to execute on all facets of our business and deliver on our stated goals.

And, finally, as we just announced last night, we added Mark Prygocki, former president of Medicis Pharmaceuticals, to our Board of Directors, and as Chair of our Audit Committee. Mark brings a wealth of financial, operational, and industry experience to our Board. Under his leadership, Medicis grew to become a multibillion-dollar enterprise, and was acquired by Valeant in 2012 for $2.6 billion. We are thrilled to welcome another outstanding business leader with a proven track record to our Board, and we look forward to Mark's contributions to Revance.

Now turning to the clinical programs, looking at the topical RT001 candidate, we started our Phase III open-label safety study for RT001 in crow's feet lines in the first quarter. The open-label safety study will enroll up to 1800 patients. And it is a critical step in our path to an anticipated BLA in the USA, and the associated MAA filing in the European Union. Both are on track to file in 2016. We expect to release interim data from our open-label study next year, in 2015, and anticipate final data in 2016.

Additionally, we are currently conducting start-up activities for our first RT001 Phase III US pivotal trial in crow's feet lines. The study will have a similar design to our successful Phase IIb studies and will enroll approximately 170 subjects. We expect to report results in the second half of this year, 2014. We also plan to report results from our European and second US RT001 Phase III pivotal trials in 2015.

Moving on to our injectable product candidate, RT002, in April we announced exciting data from our open-label, dose-escalating, Phase I/II study in frown lines. This study enrolled 48 patients across four dose groups. The dosage used in the trial ranged from approximately half the label dose to approximately twice the label dose of commercially available neurotoxins based on potency assays commonly used in the industry.

All subjects had severe to moderate wrinkles at baseline, measured using the four-point glabellar line severity scale. RT002 met both primary efficacy and safety endpoints of the trial. Specifically, the results showed that 94% of subjects were rated with none our mild wrinkle severity at maximum frown, four weeks post-treatment, as assessed by the clinical investigator. 83% of subjects assessed themselves as achieving none or mild wrinkles at maximum frown at the same time point.

In the final cohort, the only one where duration of effect was measured, RT002 achieved median duration of 7.3 months based on both the investigator and subject assessments. Across all cohorts, RT002 was shown to be generally safe and well-tolerated throughout the study, with minimal adverse events. An independent data safety committee composed of neurology, dermatology, and internal medicine experts reviewed the data after each cohort. They confirmed that each dose was safe, and approved each successive higher dose throughout the trial.

Importantly, there was no evidence of spread of the neurotoxin beyond the treatment site at any dose. Adverse event rates did not change in frequency, severity, or type with increasing doses. This data is particularly compelling, as it is completely consistent with the preclinical data that was published in 2012. As all of you know, botulinum toxin is a very well-characterized molecule, and there are established qualitative and quantitative preclinical models to show both safety and efficacy.

We used these standardized models and compared RT002 to the leading commercially available botulinum toxin products. In these studies, RT002 demonstrated duration of effect between 1.6 times to over 2 times longer than the comparator. The studies also showed that the spread of drug beyond the treatment site was significantly less than what was seen with other injectable toxin products.

Based on the results from the first RT001 clinical trial and previous findings from the clinical data, we plan to start a Phase II active comparator study, with the results expected next year, in 2015. We believe our topical RT001 and injectable RT002 product candidates illustrate the potential of our proprietary technology platform and the innovation of our late stage pipeline portfolio.

Once approved, we expect RT001 and RT002 to expand the market by offering superior results and satisfying unmet needs in a large and growing aesthetic and therapeutic dermatology space. We look forward to updating you on important milestones across our portfolio throughout the remainder of this year.

With that, I will turn the call over to Lauren to discuss the financials and 2014 outlook.

Thank you, Dan, very much, and good afternoon, everyone. Starting with the balance sheet, we ended the first quarter in a strong position, with a cash balance just short of $88 million. During the quarter, our operating cash burn was $22 million, including a payment under our Medicis settlement agreement of $7.1 million.

As you update your models after this call, we caution you from projecting a similar cash burn during the remaining three quarters of 2014, as the payment under the Medicis settlement agreement was a one-time payment that increased our burn rate for the first quarter of 2014 only. Importantly, our full-year 2014 cash burn guidance of $75 million to $85 million is unchanged, and we continue to believe we have sufficient cash to fund our operations for at least the next 15 months.

Turning to the P&L, our SG&A expense has increased year-over-year due to the cost of operating as a public company. R&D expense in the first quarter of 2014 was relatively unchanged compared to last year. We anticipate our R&D expense will increase during 2014 due to expenses related to our expanding Phase III clinical activity. In total, we anticipate we will be within our previously guided full-year 2014 operating expense.

I'd also like to provide some color on our interest expense below the line. For the first quarter of 2014, interest expense totaled $9.8 million. Interest expense in 2014 included cash and non-cash components. Cash interest in the first quarter of 2014 was $372,000. Non-cash interest expense for the same period totaled $9.5 million, and for the most part was incurred at the IPO upon the conversion of our 2013 notes into common stock. We expect our interest to decrease substantially in future periods.

Turning to our net loss, in the first quarter of 2014 we had a net loss of $21.4 million, which was primarily comprised of $11.6 million in operating expenses, plus the non-cash interest expenses of $9.5 million which we just discussed. Looking at our shares outstanding, to use in your models, as of March 31, 2014, our common shares outstanding were 18.65 million, and our fully diluted shares outstanding -- not on a Treasury basis -- were 20.1 million.

Turning to guidance, as I just mentioned, our outlook for the year is unchanged. Based on our current operating plans, we are reiterating our cash burn guidance, which again we expect to be in the range of $75 million to $85 million for the full fiscal year. Cash burn in 2014 again is anticipated to include the $7 million we have already paid under the Medicis settlement agreement, the full-year debt service of $10 million to $11 million, the costs incurred in the first quarter related to our IPO, and the incremental costs of being a public company going forward.

And with that, I'd like to thank you very much for your attention, and turn it back over to Dan.

Thank you, Lauren. A couple of comments. Here at Revance, our focus is on execution. We are delivering on our promises and building momentum for the future. We announced positive results from our first RT002 clinical trial in frown lines; we initiated our RT001 open-label Phase III safety study in crow's feet lines; and we've continued with steady progress on our manufacturing capabilities for both our drug product and drug substance. And we've added yet another proven leader with extensive healthcare and dermatologic knowledge, Mark Prygocki, to our Board of Directors.

Looking ahead at our next milestones, we plan to report results from the first RT001 Phase III pivotal trial during the second half of this year, 2014, followed by multiple Phase III catalysts from our pipeline in 2015.

In closing, we are pleased with our progress. I hope you've been able to sense the enthusiasm the team has for the goals that we've set for ourselves for this year. We are executing on our strategy to build a premier dermatology company and commercialize our novel neurotoxin products, targeting a growing market which is expected to exceed $4.3 billion by 2018.

We look forward to providing updates on future calls. With that, thank you all for your joining us today, and I now open it to questions. Operator?

(Operator Instructions). Ken Cacciatore, Cowen and Company.

Congratulations, guys, with all the progress that you've been making. I just had a couple questions around the head-to-head study of 002. If you could give us how much -- any nuance behind that, in terms of maybe doses that you are planning on taking forward, maybe a little bit about trial size, a little bit more on the design. And then I had a follow-up question.

Ken, this is Dan. We are obviously trying to digest the data coming back from this Phase I/Phase II study. I think, at a high level, we will most likely look at a couple of doses to be determined, and then an active comparator arm, and then a placebo arm. Beyond that, I would want to refrain from commenting to a specific study size. We would expect duration to be comparable to what we saw in the earlier trial, and that's how we would power those studies accordingly.

We think, from a development perspective, the next best step for us is to highlight the advantages of a longer duration, not versus a placebo, but to an active commercially available toxin. And that's how that trial will be designed.

Okay, great. And then I was just wondering in terms of it, it's -- clearly the early data is very exciting. And I don't know if it's capital-limiting, but have you thought about parallel development, looking at 002 as you are doing this study, to move it forward in maybe a therapeutic indication, or to somehow try to elucidate the product in other indications as we are waiting for even the completion of a head-to-head against an active?

I think, given the clinical data that we released, we are actively looking at what's the best therapeutic indication that would highlight both things: it's not only longer-duration, but the ability to control diffusion of the drug. So we are evaluating a number of potential therapeutic indications. We want to remain focused on the dermatologic perspective, but we think an additional therapeutic indication for RT002 would obviously enhance the value of that technology in a therapeutic indication.

Great. Thanks so much.

David Amsellem, Piper Jaffray.

Thanks. Just a couple. So, first, any latest thoughts on timing of a European partnership on either 001 or 002? Now, you've talked about it in the past, but has anything changed there? And maybe just remind us what your preferred scenarios are in terms of partnerships.

And then, secondly, in terms of therapeutic indications for either 001 or 002, are you wedded to the idea of partnering out in the US the therapeutic indications? Or is that something that, down the road, you may look to keep, and build additional sales and marketing infrastructure around? How should we think about that? Thank you.

Great. Hi, David. Thanks for the question. This is Lauren Silvernail. As far as partnering, we continue to look at what we have, and really want to assess the exact right time to partner. For us, we're sure it's not right now. And we think as we continue to generate data, each time we do, we're pleasantly surprised by what we find. And we think that continuing to build value in the franchise, and partnering at the right time to help us with the commercial side and the launches around the world makes sense. And so that's really an unchanged, I guess would be a shorter answer to that.

With regard to the United States or North America, and outside of dermatology and our core four that go with that, we continue to assess. When you look at us and our abilities, we will be on the commercial side a specialty pharmaceutical company. And anything that is a specialty, as we grow, we should consider. So we will continue to look at that with an open mind. Down the road, we don't see ourselves as a large primary care player.

And so as we look at each indication -- and we are evaluating very heavily at this time what are the right indications for us on the therapeutic side with toxins -- you should think of us as considering that for post-dermatology; or along with dermatology, as the business grows.

And let me turn it over to Dan, in case there's anything he'd like to add back to that.

No, David. I think it's not a question of if, but a question for when. But we want to stay laser-focused on our core. And the value of this platform is our ability to be nimble, and neither partner by geography or by therapeutic indications. We know these neuromodulators play a role in both, and I think it's just a question of when we've generated the appropriate clinical data to get a transaction that's meaningful enough for us to move forward with it.

Okay, thank you.

(Operator Instructions). David Maris, BMO Capital Markets.

I have a simple question. You've mentioned the data that's coming in the second half of the year. Did you -- did I miss it, or did you not say when in the second half of the year?

David, at this point, we haven't given any more specific guidance than the second half of this year. We're getting ready to move, obviously, in the third quarter, but it will be the second half of this year.

Well, then, can you give us a little update on the gating factors for when it would be earlier, when it would be later?

I think, David, it's just a matter of getting all those startup activities in line and making sure that we've got everybody appropriately trained. We want to work around the summer months. You want to make sure you are funneling patients into the right intervals; you're not missing follow-up visits. I think it's just a matter of the clinical regulatory teams checking all the boxes, and make sure that we appropriately execute that trial so we can deliver that data that people are expecting later in the year.

Great. And was there anything in the long-acting data in the response from investors that you thought was surprising? Or do you think that everyone had a pretty good handle on it?

Our sense is, we didn't talk about it a lot on the road show, because we didn't have the data at that time. We had some indirect feedback from the center that duration felt like it could be longer. And I think, for us, is just to stay under the radar screen, and not talk about the data until we had it in hand. And I think the challenge for us now is -- how do we take that 7.3 months and now turn it into the next study design that is meaningful in a way that compare the advantages and features of this product versus the commercially available product?

And our view is, even though that trial is relatively small, it is highly informative, given how much is already known about the molecule; how well-characterized glabellar lines have been evaluated through multiple sponsors. And now we have good preclinical, and, now, clinical data, to really develop and design and execute a clinical trial that highlights why RT002 is something demonstrably different.

Great. Well, thank you very much.

Thank you. There are no further questions in queue at this time. I'd like to turn the call back over to Dan Brown for closing remarks.

We thank you for your interest in following the Revance story, and we look forward to communicating with you on future calls. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.