Revance Therapeutics Inc (RVNC) 2014 Q2 法說會逐字稿

Welcome to the Revance Therapeutics Second Quarter 2014 Financial Results Conference Call.

At this time, all participants are in a listen-only mode. Following the management's prepared remarks, we will hold a Q&A session.

(Operator Instructions).

As a reminder, this conference is being recorded today, August 12, 2014. I would now like to turn the conference over to Leigh Salvo with Westwicke Partners. Please go ahead.

Thank you, and thank you for joining us on the call today. Joining me is -- at 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 June 30, 2014. If you have not received this news release or you'd 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 limited to, statements related to Revance Therapeutics' clinical development of our product candidates, business strategy and goals, plans and prospects, additional indications and potential benefits of its product candidates, and its technology, regulatory risks, future FDA guidance and ability to obtain regulatory approval, financial and operational guidance, and uncertainties and future 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 the section entitled Risk Factors in its annual report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on March 28, 2014, and subsequent quarterly reports on Form 10-Q.

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'd now like to turn the call over to Dan Browne. Dan?

Thank you, Leigh. Good afternoon, everyone, and thank you for joining our second quarter 2014 earnings conference call.

I'd like to start our call by addressing the FDA draft guidance document issued last week, then move to a second quarter discussion, including our recent achievements and clinical development progress, then I'll turn the call over to Lauren to discuss our second quarter and first half results, along with the guidance for the remainder of the year. I'll provide some closing remarks and then we'll open it up for questions.

So, let's start with the FDA's recently posted draft botulinum toxin guidance. I'd like to share our perspective to the draft guidance as it relates to Revance and also review the results of the dispute resolution process which we concluded with FDA in 2012. And most importantly, I'd like to address our plans going forward.

Last Tuesday, the FDA issued draft guidance for our industry regarding the development of botulinum drug products for upper facial lines. It was issued by the FDA only for the purpose of receiving public comments. This is a new document, but there is nothing new beyond our discussions with the agency today. Even after the guidance is finalized, it does not bind the FDA or industry.

As the FDA states in the draft guidance, guidance documents do not establish legal responsibilities; instead, the guidance describes the agency's current thinking on a specific topic. The FDA states in their fact sheet, FDA Good Guidance Practices, "Although guidances are not legally binding, they show stakeholders one way to reach their regulatory goal; however, stakeholders are free to use other approaches that satisfy the relevant law and regulation."

Revance has historically interacted with the FDA's division of dermatology and dental products, which is the same division that issued the draft guidance. Based on our interactions over the years, the draft guidance reflects our understanding of the agency's recommendations and expectations.

The development plans we've established for our product candidates will provide the data necessary to respond to the FDA guidance and supply all of their information needs. This is really good news for us.

As we've said all along, the only area where the Revance program differs is in the measurement of the primary efficacy endpoint in crow's feet lines at rest rather than at smile. Our development program's primary endpoint measures the effect of our product with the face at rest. However, our development program does measure the effect of RT001 at smile as an additional endpoint in both the Phase 3 program and by other tests to demonstrate the mechanism of action of botulinum toxin.

You may ask yourself, "Why would we continue to use at rest?" Well, it's really simple. We believe that the scientific evidence supports that the improvement at rest is the most clinically meaningful aesthetic benefit desired by patients.

Furthermore, it's the primary reason that consumers seek treatment for wrinkles and lines around their eyes. Getting rid of these lines and wrinkles makes the face look frozen; this is not what consumers want.

We truly believe that offering consumers a differentiated and meaningful benefit will expand the market for botulinum toxin products. That's what we're all about. We've been very data-driven since we started the Company, and it's what we believe will be the basis for an approvable product.

That's why, when we are looking at measuring the improvement of crow's feet lines at rest, it is a better choice as a primary endpoint and it is included in our development program. As we expect other toxin companies are doing their own development work, we are working with our advisors to provide comments to draft guidance.

It's important to note that the FDA guidance process in which industry is allowed to comment can be long and a multi-year process. We will continue to consult with the agency as we progress through our clinical development plans.

Now, turning to the dispute resolution. Revance has had a thorough discussion with the Division of Dermatology and Dental Products of the FDA, and ultimately we went through the formal dispute resolution process with the Office of Drug Evaluation in 2012. These discussions centered on the proposed indication and the primary endpoint measurement.

We've had extensive discussions of the at rest assessment as an alternative to the at smile approach detailed in the draft guidance. The outcome of the dispute resolution was that the FDA agreed that we were free to proceed with Phase 3 trials, which we are doing now. The FDA also agreed that our indication could be based on a primary endpoint for crow's feet lines at rest.

In addition, the FDA clarified the need to demonstrate that the mechanism of action depends on the effect of a toxin on the muscle being treated. The agency observed, as it usually does, that the final assessment, including the appropriate labeling, will depend on the total review of the information submitted to the US Biologic License, or the BLA. Although we can't provide assurances that the FDA will ultimately approve our BLA, our program will move forward based on the office level outcome of the dispute resolution.

So, what does this mean for Revance today? Well, this is draft guidance from the FDA. Our alternative approach regarding the primary endpoint was discussed with the FDA, and we believe it meets the statutory and regulatory requirements to complete our Phase 3 clinical trials. Our plans are underway and they will remain so.

Our program is moving forward based on the outcome of dispute resolution and our understanding of the FDA's expectations and recommendations. Our development strategy for RT001 topical botulinum toxin in crow's feet lines remains unchanged. Data from the first pivotal topical study is expected at the end of this year.

Our second US pivotal Phase 3 study and a European study are on schedule with results anticipated in 2015. Our open label safety study is ongoing, concluding in 2016, with an anticipated BLA and European Marketing Application, or MAA, filings by the end of 2016.

Our clinical efficacy endpoints will be based on measurement of improvement in the appearance of crow's feet lines at rest as the primary endpoint, with the measurement at smile as an additional endpoint. We believe at rest is the appropriate, clinically meaningful primary endpoint measured to support approval of this topical product. We will remain laser-focused on transforming the aesthetic and therapeutic neurotoxin markets by commercializing our novel and injectable botulinum toxin candidates.

Now, let's move forward to the Revance second quarter. Our performance reflected continued execution on our strategy to build a premier specialty biopharmaceutical Company. In late June, we completed a 4.6 million share follow-on offering, which provided Revance with $131 million in net proceeds. Combined with our IPO from February, Revance has raised approximately $250 million in gross proceeds during the first half of 2014.

We are now sufficiently well capitalized to leverage our proprietary TransMTS peptide technology across multiple indications and dose forms, with multiple critical path studies underway or in development. I'd like to thank the investors who supported the Company's initiatives and have shown confidence in our development strategy, leadership team and ongoing progress towards commercialization.

In the near-term, the additional capital enables us to move forward on trials for our topical candidate, including the completion of Phase 3 pivotal studies for crow's feet lines in the US and in Europe, as well as Phase 2 study in hyperhidrosis, or excessive sweating.

For an injectable toxin which is designed to be more targeted and longer-lasting, we intend to use the additional capital raised to proceed with Phase 2 active comparator trial for the treatment of frown lines, or glabellar lines.

The financing also allows us to initiate clinical development for additional aesthetic and therapeutic indications for both topical and injectable neurotoxins, all of which may deliver significant competitive advantage over commercially successful products on the market today. It is important to note that Revance has all of our rights to all assets across all geographies, all indications for both of these topical and injectable dose forms.

I'd now like to offer an update on the recent developments for RT001 for the use in treating crow's feet lines. We have estimated the topical product for crow's feet lines could significantly expand the cosmetic treatment.

Consumers who had the option for a painless, efficacious alternative to injectables, we continue to do market research, and to date we have qualitative and quantitative data from over 900 consumers and more than 300 physicians.

This research demonstrated that our topical product addresses current barriers to injectables and brings new users into the category in expanding treatment among existing users of botulinum toxin. Consumers and physicians alike want the more natural, softer look that is highly differentiated from the stereotypical of a frozen-faced look that deters many patients from entering treatment. Breaking down these barriers and expanding the market is a key aspect of our product positioning.

Earlier this year, we initiated the long-term safety study for crow's feet lines, and we continue to be on track to report the US topical Phase 3 pivotal data by the end of this year. We expect to be the first topical botulinum toxin to launch commercially in the United States.

In support of our topical product, our manufacturing, quality, clinical and regulatory teams are on track to complete all the necessary work to file our BLA and MAA before the end of 2016. I'm encouraged by the growing number of additional aesthetic indications ideally suited for the treatment with a topical drug product, including the forehead, upper lip, neck and decolletage.

Along with our aesthetic indications, we plan to move forward with the Phase 2 clinical trial for a therapeutic indication using topical for excessive sweating in the underarms. We will continue to explore other indications that lend themselves to a mid-dermal delivery of botulinum toxin, thus providing a painless topical alternative to the injectable products on the market today.

Moving on to RT002, for the treatment of frown lines, in April we reported positive injectable data. These results indicated that 94% of subjects were rated with none or mild wrinkle at maximum frown four weeks post treatment.

More importantly, patients in the final cohort of the study demonstrated a median duration of effect of 7.3 months. We believe this nearly two-fold increase in duration versus the currently marketed products could transform the neurotoxin treatment market.

We are very encouraged by the initial reaction by physicians to the recent injectable data. Since the study was completed, we've had the opportunity to present our findings at multiple clinical meetings in the aesthetic medicine space, including the American Society of Aesthetic Plastic Surgery in April, the International Facial and Plastic Surgery meeting in May, and the Cosmetic Surgery and Aesthetic Dermatology meeting in June. At each of those events, our injectable data was exceptionally well received.

In addition to the podium presentations, we conducted initial market research to gain feedback on the data and solicit input into the design of our RT002 clinical program. Again, the feedback was overwhelmingly positive. In interviews with more than 25 key opinion leaders across four core specialties, the consistent response was that duration of effect in the six to seven months, and I quote verbatim, "was game-changing" and would cause them to change their current purchase habits.

Many clinicians indicated that duration of six to seven months fits into their current consumer habits of visiting the office about twice a year for other aesthetic treatments. Since the market data showed that the majority of consumers retained visible results at the six-month time point, they believe that the results were compelling enough that consumers would switch from their current injectable botulinum toxin to an injectable RT002 product.

Many physicians also indicated that an injectable could expand the market along those consumers who don't want repeat treatments every three to four months, for example, among men, who represent a relatively small portion of the market today.

Based on the results from the first injectable clinical trial and previous findings from pre-clinical data, we plan to begin a Phase 2 head-to-head active and placebo comparator clinical trial against the market leader, Botox, with results expected in 2015. The study will be powered to show longer duration and is expected to include approximately 250 to 300 subjects.

We have every reason to believe our promising injectable duration data can extend across other aesthetic and therapeutic indications. Because of this, next year we plan to initiate our first injectable clinical trial for a therapeutic indication in which longer duration brings significant treatment advantage for those patients.

Finally, after a thorough search process, I'm pleased to announce that we've added Arthur Bertolino to our executive leadership team today as the Executive Vice President and Chief Medical Officer. Art comes to Revance with nearly 30 years of experience, including more than 13 years in global biotech and drug development.

In addition, he has substantial clinical and regulatory experience across aesthetic and medical dermatology. He is a board-certified dermatologist. Art and his clinical team will drive the achievement of upcoming milestones in our topical and injectable program.

With the addition of Art to our team, I am confident we can direct the Company through the next stages of product development and towards commercialization of our botulinum toxin products across both injectable and topical dose forms.

With that update of the business and clinical trials, I'll now turn the call over to Lauren to discuss the first half financials and the outlook for the second half of 2014.

Thank you very much, Dan. Starting with our cash balance, we ended the second quarter in a strong cash position with $203 million, including $131 million in net proceeds from our June public follow-on offering. Our cash burn for the second quarter of 2014 was $15.9 million, and for the first half of 2014 was $37.3 million.

Turning to the P&L, our non-GAAP operating expense, excluding stock-based compensation, depreciation and amortization, for the second quarter of 2014 was $11 million, and for the first half was $21.3 million.

SG&A expenses increased for both the second quarter and year-to-date 2014 as compared to the same periods in 2013, due to the increased costs of operating as a public Company. Included in SG&A is non-cash stock-based compensation of $900,000 for the second quarter of 2014 and $1.2 million for the first half.

R&D expenses increased slightly for the quarter and year-to-date 2014 as compared to the prior year same periods due to the start of our Phase 3 open label safety study and increased manufacturing development in the first half of 2014, offset by higher RT001 clinical costs in the second quarter of 2013. Included in R&D expense in the second quarter of 2014 is non-cash stock-based compensation expense of about $600,000, and for the first half of 2014, $1.1 million.

A comment on P&L expense for non-cash stock-based compensation. We've been public for just a few months, so for modeling purposes I wanted to let you know our stock-based comp expense for the month of June was about $620,000, which represents a level to base your modeling on going forward.

Interest expense for the second quarter of 2014 was $267,000. Interest expense for the first half was $10.1 million, including non-cash interest expense of $9.6 million in the first quarter from conversion of notes at the IPO.

Net loss for the second quarter was $13.3 million, and our June year-to-date net loss, including non-cash interest expense, was $34.7 million. Our common shares outstanding as of June 30, 2014 were 23.5 million, which included 4.6 million shares issued in our follow-on offering. Our diluted -- our fully diluted shares outstanding include issued warrants and options not on a treasury base and totaled $25.6 million at the end of the second quarter of 2014.

Turning to our guidance, very pleased to let you know we have more than two years of cash on hand. Based on our results year-to-date and our expectations for the second half, we're reiterating our cash burn guidance for 2014 today. We believe we are on track to meet our full year 2014 cash burn guidance of $75 million to $85 million.

In addition to the incremental costs of being a public Company, cash burn for the full year is anticipated to include the following -- $7 million in cash paid under the Medicis settlement agreement; debt service of $10 million to $11 million; and costs related to Revance's IPO and follow-on offering, including capitalized financing costs paid in cash of $4.6 million.

We continue to anticipate our non-GAAP operating expense will be between $55 million and $60 million for 2014. We do expect our operating expenses to be higher in the second half of 2014 than the first half due to higher R&D expenses, including clinical trials and related.

For the purpose of modeling shares and EPS, our weighted average shares outstanding for the second quarter were 19.4 million.

For the balance of 2014, assuming no material issuances of equity, we anticipate that our weighted average shares outstanding will be approximately $18 million to $19 million for fiscal year 2014 and $23 million to $24 million in the third and fourth quarters of 2014.

We are pleased with our operational progress throughout our business as we enter the second half of 2014, with a strong balance sheet, a continued focus on execution and a plan in place to achieve our 2014 and 2015 milestones. And with that, I'd like to thank you and turn it back to Dan.

Thank you, Lauren. Our successful IPO and follow-on offerings have provided us with sufficient capital to pursue our development initiatives, successfully complete our Phase 3 program and continue to pursue commercialization for both our topical and injectable toxin products.

Looking ahead to the upcoming milestones, I would like to reinforce we are on track to report the first US pivotal results for the topical Phase 3 trial for crow's feet lines by the end of this year. As I said earlier in regards to the FDA's recent draft guidance, there is no new information here. There was no surprises in the information that was provided.

Our alternative approach regarding the primary endpoint for this Phase 3 trial was discussed with the FDA, and we'll move forward confidently based on the outcome of that dispute resolution.

In 2015, we anticipate reporting results from our second US Phase 3 pivotal trial and as well as from our European Phase 3 pivotal trial for a topical treatment of crow's feet lines. We plan to complete the physical -- excuse me, the pivotal Phase 3 program and anticipate filing the BLA and MAA in 2016. Also, in 2015 we'll report results from our Phase 2 active comparator for RT002 injectable for frown lines and results from our topical Phase 2 study for excessive sweating.

Finally, we plan to meet with investors in San Francisco this month and the Midwest next month. We're looking forward to seeing some of you during those events and to updating you on the important milestones across our product portfolio throughout the second half of this year. With that, thank you all for joining us today, and I will now open it up for questions. Operator?

Thank you. (Operator Instructions).

Thank you. And our first question is from Ken Cacciatore with Cowen and Company. Your line is open.

Thanks, Dan. I just wanted to go back to your review of the -- your understanding of the dispute resolution. I just want to make sure that you are going to engage with the agency. I know you are going to through the -- probably the formal process of commenting to the draft guidance, but the way you portrayed it, it doesn't even almost seen like you need to, that you have an understanding and you'll proceed forward.

But just wanted to understand, do you feel there is a need to re-engage with the agency and just clarify your understanding as you've moved through the dispute resolution? It sounds like you proceed with your endpoints and you file with your endpoints, and the agency will review your endpoints and just label your product as such. But can you help under -- help us understand whether you're going to re-engage the agency or whether you even need to? Thank you.

Ken, we're going to move forward based on our plan, addressing the factors that, at a high level, the FDA has addressed in the guidance -- clinical meaningfulness, paralytic effect and appropriate risk benefit. We think that that information was addressed and provided us a roadmap for Phase 3 from the dispute resolution process.

We will concurrently use the opportunity to comment globally on what is a guidance document for multiple indications of the upper face with both injectable and topical. But as far as our Phase 3 development plan, we feel like we have what we need, between our formal dispute resolution and other information that is in the guidance document, to move forward under the current plan and submit that BLA and MAA accordingly in 2016.

Okay. Thank you very much.

Thank you. And our next question is from David Amsellem with Piper Jaffray. Your line is open.

Thanks. So, just on the guidance, so, can you just remind us or clarify for us that let's suppose that the final guidance document looks very much as it is now? Can you just clarify for us that your dispute resolution process with the office, what is binding, and that there isn't a risk that if this document is finalized as is that there isn't a risk that you'd have to, for lack of a better term, go back to the drawing board? That's my first question.

And then, my second question is can you just talk us through other alternative measures in terms of assessing paralytic effect? I think the agency believes maximum contraction -- the division believes maximum contraction assessment is necessary to demonstrate paralytic effect. Can you talk about what other measures you are going to look at to demonstrate the mechanism? Thanks.

We will move forward based on the formal dispute resolution that addressed clinical meaningfulness through a two-point improvement in the composite of the investigator's global assessment and the patient's severity assessment.

It is clinically meaningful through the formal dispute resolution. It was clear from that correspondence that we are entitled to select an endpoint and to generate a data package to support the clinical meaningful nature of that primary endpoint. We have done that through that process, and that data set will be submitted in the BLA here in the United States.

Now, as part of that process, they guided us to show a paralytic effect, since it is botulinum toxin as part of the overall risk/benefit. That has historically been best captured through maximum contraction.

We will be collecting as an additional endpoint contraction, in this case, for lateral canthal lines at smile, and that will be used to support the paralytic effect, that the efficacy in both the physician and the patient scale is attributed to the overall relaxation of orbicularis oculi from the botulinum toxin. The combination of those two things will be used to support the risk/benefit analysis.

So, whether you're looking at RT001 for lateral canthal lines or for hyperhidrosis for other indications, that product is working mechanistically -- it's mechanism of action is based on botulinum toxin. So, we don't believe that when we submit the package that there will be a requirement for us to go back and start over again, as you described it.

It's very clear in the guidance that it's part of the regulatory and statutory pathway this is just one pathway. And this guidance sort of reflects today's thinking by FDA as a discussion point, but sponsors are entitled to look at other pathways. And at the end of the day, that will be a data-generated decision based on the -- once again, the clinical meaningfulness, showing mechanism and appropriate risk/benefit.

But, to be clear, you would characterize your formal dispute resolution process and outcome as binding? Is binding the right way to term this?

We don't use this as binding because in most cases it's very clear in the guidance that neither the guidance document is binding unto the agency or to the sponsor. So, it is a roadmap, that if we have the appropriate discussions with the agency it gives us the confidence to move forward, that we're addressing the clinical meaningfulness, the paralytic effect and the appropriate risk/benefit.

Thank you.

Thank you. (Operator Instructions).

Our next question is from David Maris with BMO Capital Markets. Your line is open.

Hi. This is [Christeen Hatchett] in for David. Thank you for taking my question. In regards to the Phase 2 active comparator study, could you provide some color on the doses you're planning on taking forward, and maybe a little bit more on the design and length of trial? And second, with respect to RT001, can you give some guidance as to when in the second half we might expect the Phase 3 data? Thank you.

Starting with the RT002 question first, we will be roughly looking at three doses of RT002, comparable to the label dose of the approved product, a dose higher and a dose lower. So, there will be three RT002 doses with a botulinum toxin dose, an active comparator of Botox, and a placebo dose. As I mentioned, there will roughly 250 to 300 subjects, and that trial will start the end of this year and report out in the second half of next year, probably in the later half of the year based on the 7.3 months duration.

As for RT001, we are guiding investors to expect that data in the fourth quarter, towards the end of this year.

Thank you.

Thank you. And I'm not showing any further questions. Please proceed with any further remarks.

I think that concludes our call for today. I want to thank everyone for participating and joining us today. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.