Revance Therapeutics Inc (RVNC) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Revance Therapeutics 2014 Third Quarter Financial Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded today, November 12, 2014.

I would now like to introduce your host for today's conference Ms. Leigh Salvo, Investor Relations. You may begin.

Thank you and thank you for joining us on the call. Joining me today from Revance Therapeutics is President and Chief Executive Officer, 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 September 30, 2014. If you have not received this news release or if you'd like to be added to the company's distribution list, you can do so on the Investor Relations page of the company's website at revance.com.

During the course of this conference call, Revance management will make forward looking statements including but not limited statements related to Revance Therapeutics clinical development of its product candidates, business strategy and goals, plans and prospects, potential benefits of our product candidate and our technologies, regulatory risks and ability to obtain regulatory approval, 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 in the company described 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 expectation.

I'll now turn the call over to Dan Browne. Dan?

Thank you, Leigh. Good afternoon, everyone, and thank you for joining our third quarter 2014 conference call. Our results for the quarter reflect both the progress and challenges of our business. I'll start the call with the clinical program updates on both of our botulinum toxin product candidates, topical RT001, and injectable RT002. Then I'll cover the key points included in our comment letter in response to FDA's draft guidance. Next, Lauren, will review our financial results along with the guidance for the remainder of the year. At that point, I'll provide some closing remarks, and we'll open the call up for questions.

Beginning with the topical RT001. While we have made significant progress, the preliminary results from our ongoing open label study initiated last month suggests we still have some work to do to optimize the transfer of our manufacturing to our commercial facility and increase the probability of success of our upcoming Phase 3 pivotal program. More specifically, as we announced on October 1, we initiated an RT001 open label study to confirm efficacy upon transfer to our commercial manufacturing facility before moving into a Phase 3 pivotal program for the treatment of crow's feet lines.

The preliminary results showed RT001 was well tolerated with no serious adverse events reported. Both physician and patient assessments were measured in the study. The preliminary efficacy analysis from the first 32 of the 43 subjects enrolled in the open label study showed promising and valuable clinical data as measured by the investigator's global assessment or IGA and the patient severity assessment or PSA. The two point response rates, however, were below what we have reported previously in Phase 2. And when taken in aggregate for the composite end point, the results were not yet adequate to move forward with a pivotal Phase 3 program in crow's feet lines at this time.

We continue to believe our neurotoxin has tremendous commercial potential, and we are committed to its success. Our immediate focus will be to finish the ongoing open label study, including compiling and understanding the data so we can act swiftly to address the cost for the lower composite response rates. Using the information learned from the detailed analysis, we plan to manufacture additional RT001 drug product in our commercial facility and conduct an additional study in early 2015 to confirm the successful transfer of our production.

While we sincerely understand and share your disappointment with the delay in starting our Phase 3 pivotal study, we need additional experience with the drug product in more subjects prior to moving ahead with confidence. We plan to provide you with an additional update in the first quarter of 2015.

I'd like to spend a few minutes covering our therapeutic indication. We continue to explore other indications that lend themselves to the mid-dermal delivery of botulinum toxin designed to provide a painless, topical alternative to the injectable products on the market today. We believe hyperhidrosis or excessive sweating in the underarms is a highly underserved market and represents the most significant near-term therapeutic opportunity for our topical product candidate. Plans are still tracking to initiate a Phase 2 study in hyperhidrosis in Q1 of 2015 with the topical drug product, with the dose and procedure selected specifically for this indication.

We are excited by the potential of RT001 for treating hyperhidrosis. We believe the difference in local anatomy of skin rich in both sweat glands and sweat ducts may provide for more effective drug delivery and this could be different from ending the treatment of crow's feet lines. We believe the next development step is to move forward with the Phase 2 study and test RT001 in this therapeutic hyperhidrosis indication, which important consideration given to the anatomy and the end points in treating crow's feet lines in hyperhidrosis are distinctly different. We are currently working on the final design of the hyperhidrosis trial and expect to provide additional detail when we start the trial in early 2015.

Turning to our injectable RT002 programs. We are moving forward as scheduled with our second program, injectable RT002, which is designed to be a longer duration neurotoxin. We believe our injectable product candidate can potentially address numerous therapeutic and aesthetic indications in the current $2.8 billion worldwide injectable toxin market.

We are initially pursuing clinical development of RT002 for glabellar lines, more commonly known as frown lines, and we are also evaluating opportunities for therapeutic indications with the goal of moving one of our therapeutic programs into the clinic next year. We will provide an update on our RT002 development plans for therapeutic indications in early 2015.

Before the end of this year, we plan to initiate a Phase 2 active comparator clinical trial against the market leader Botox Cosmetic. The design of this five-arm dose-ranging trial includes three active arms, a placebo arm, and a comparator arm. The study is planned to include 250 subjects. We expect the multi-center trial will be randomized one-to-one to evaluate the safety, efficacy, and duration of effect. We anticipate the interim duration results from this study in late 2015.

Last week, we hosted a Clinical Advisory Board at the American Society of Dermatologic Surgery Meeting, referred to as the ASDS, with leading key opinion leaders in aesthetic medicine. During the meeting, we reviewed the RT002 data from the previous clinical and preclinical studies and gave them an opportunity to comment on the study designed for upcoming Phase 2 active comparator trial. The reaction from physicians to the studies was overwhelmingly positive. We consistently heard that a product that could show duration of 29.4 weeks or roughly double the label duration of the commercially available neurotoxins would be "game-changing."

We are encouraged by the large number of opportunities. We have to address the limitations of currently available neurotoxins with our novel product candidates. Our goal remains to transform the botulinum toxin treatment market and emerge as a leader in the aesthetic and therapeutic medicine areas

Now, I'd like to cover some of the key points we addressed in our comment letter in response to FDA's draft botulinum toxin guidance for upper facial lines. As I noted on our call last quarter, we agreed with much of FDA's published guidance document which was issued only for the purpose of receiving public comments. After review and input from our advisors, we filed a comment letter on October 30, 2014, which is currently available on our website and as an 8-K filing. We believe our development plans enable us to meet the informational needs described in the draft guidance and the majority of our clinical program has been developed with those guidelines in mind. Our comment letter reiterated our belief that not all facial lines should be treated the same because each facial area has unique contribution to expression. and accordingly maximum contraction is not the appropriate measure of efficacy for all upper facial lines.

The aesthetic community broadly recognizes the importance of balancing smoothing of crow's feet line at rest with maintaining the ability to smile naturally because of the striking social implications of interfering with the formation of a genuine smile. Key opinion leaders, as well as the ASDS, have now publicly responded. As outlined in their comment letters, they believe that each individual facial area has unique function, emotion, and contribution to the facial hole, and no single treatment or assessment approach should be universally applied across all facial areas.

Further, the statements in their comment letters suggest they believe that allowing outcomes to be determined according to the desired aesthetic results in each facial area is critical for meaningful assessment. And most importantly, they are not supported by the premise that the only way to assess wrinkle line efficacy is through maximum contraction or a two-point change.

It is difficult to predict what the FDA will do from here. There have been instances where final draft guidance took years to publish, other instances where there was never an update at all. There have also been examples of draft guidance being withdrawn. Importantly, if and when final guidance is issued it will take in the consideration the public comments and might not maintain the original draft position of today.

Having said that, we are confident that our position is not only consistent with that of leading clinicians in the field, but equally is important with what consumers want. And we will continue to work collaboratively with the FDA to ensure safety, efficacy, and the appropriate risk benefit data are supported in our RT001 Phase 3 program.

With that update on the business, clinical trials and FDA draft guidance, I'll now turn the call over to Lauren to discuss third quarter and year-to-date financials as we look at our financial outlook for the reminder of 2104.

Thank you, Dan, very much and good afternoon. Starting with our cash balance, we ended the third quarter in a strong cash position with $187.5 million. Our cash burn for the third quarter of 2014 was $15.8 million.

Turning to the P&L, SG&A expenses increased for both the third quarter and year-to-date 2014 as compared to the same period last year due to personnel and administrative cost related to operating as a public company. R&D expenses increased for the quarter and year-to-date 2014 as compared to the same period in a year primarily due to increased development activities for our product candidates in 2014 versus 2013. Stock-based compensation for the three and nine months ended September 30, 2014, was $2.3 million and $4.6 million respectively.

Non-GAAP operating expense for the three and nine months ended September 30, 2014, were $11.0 million and $32.3 million respectively. Non-GAAP operating expense excludes depreciation and amortization and stock-based compensation. We are tracking below our guidance primarily due to lower than forecasted R&D expenses.

Net loss for the third quarter was $14.0 million and our September year-to-date net loss including non-cash interest expense was $48.7 million. Our common shares outstanding as of September 30 were $23.7 million. Our fully diluted shares outstanding, including issued warrants and options not on a treasury basis, were $25.8 million at the end of third quarter 2014.

Turning to our guidance. We believe we have about two years of cash on hand. Based on our results year-to-date and our expectations for the remainder of 2014, we currently expect our 2014 cash burn to be in the range of $65 million to $75 million. This is $10 million lower than our previous guidance of $75 million to $85 million offered in August due to lower than anticipated operating expenses.

Cash burn in 2014 includes $7.1 million paid under the settlement agreement with Medicis, $4.6 million of capitalized financing cost, and debt service of $9 million to $10 million. For the full year 2014, we now anticipate our non-GAAP operating expense, will be in the range of $45 million to $50 million, reflecting lower spending than previously guided on our clinical programs. Our prior guidance of $55 million to $60 million was provided in August of 2014.

For the purpose of modeling shares and EPS, our weighted average shares outstanding for the third quarter were $23.3 million for the balance of 2014 assuming no material issuances of equity. We anticipate that our fiscal year 2014 weighted average shares outstanding will be approximately $18 million to $19 million for your models. This excludes $0.3 million of unvested restricted stock awards.

And with that, I'd like to thank you and turn it back to Dan.

Thank you, Lauren. Revance has developed a unique and patented technology, and a compelling product candidate's across the broad spectrum of aesthetic and therapeutic categories. We expect this injectable botulinum toxin market to exceed $4 billion in the next three years. With RT001, we are taking the necessary steps to ensure successful transfer to commercial manufacturing and ultimately a successful commercial product. While this is leading to near-term delays in starting our Phase 3 pivotal crow's feet lines studies, it does not impact our RT002 or hyperhidrosis programs.

We remain confident in our neurotoxin platform. We have multiple clinical programs and development are under way consisting of topical, injectable, aesthetic, and therapeutic product candidates, and we are committed to their execution. We are laying the ground work to build a premier specialty pharmaceutical company targeting the growing botulinum toxin market. We look forward to updating you on our progress on future calls.

In addition, we plan to be on the road extensively over the next month. Tomorrow, we plan to meet with investors at the Credit Suisse Healthcare Conference in Phoenix followed by a week of marketing in the Midwest, New York, Boston. In December, we'll be attending the Piper Jaffray Healthcare Conference in New York, and participating in West Coast Pharmaceutical bus tour that will be here in the Bay Area. I look forward to seeing some of you during those events.

With that, thank you all for joining us today. And we'll now open it up for questions. Operator?

Thank You. (Operator Instructions)

Our first question comes from Ken Cacciatore with Cowen and Company. Your line is open.

Great. Thanks, guys. I have a couple questions so I'll go one at a time, if I could. First, Dan, could you just give us a sense of what you think could be the issue? Is there anything that you're analyzing chemically different as you try to scale up that you're seeing in this formulation, that you did not see in the previous formulation? And have you thought the consultation of outside experts, who is helping you try to figure out what this issue could be? And then I have a whole bunch of other follow-ups.

Sure. Thank you, Ken. Look, a number of questions, we'll go after those one by one. As far as the specific analysis, I think we don't want to put the cart before the horse quite frankly. As you can tell, we haven't even finished getting all the follow-up on all the patients of the 43. So the most important first step is not guess, right. You want to get the data. As we mentioned, on the -- based on the data that we've got, we're getting very good one-point movement. In some of the areas, the two-point movement as we mentioned are below that we saw in Phase 2 trials. So you want to look at that holistically, you want to look at the drug product, you want to look up the comparisons between where you were in Phase 2 to the commercial to be marketed product, you want to look at the clinical study execution scale, we'll look at all of those things.

And the bottom-line is we wanted to get in front of this with investors, tell people that we had some additional work to do, that we are working to get there to start this quarter. But we believe we had a product. We do see good signal across both the patients and investigators. It's just not a product that we want to move forward with the pivotal trial now.

Okay.

And as far as your comments on experts, we've got a whole group of internal and external experts working on all of facets of those things I just mentioned. And hopefully, we can get back to you as quickly as we can with the additional, more detailed responses.

Okay. This is more of a comment than a question. Hopefully, you will show us that data when it's all and it would be good for all of us to be able to see, I would think. And then, this is more of a -- this is a question. The commentary that you had about the different anatomy of crow's feet versus underarm makes me believe that maybe you're becoming a little bit less sure about the permeability of the product, or how should we -- what should we infer on that commentary that you laid out about the differences between seemingly different areas of the skin? And then, what product would you be moving forward into hyperhidrosis? Is it this product that you just re-formulated? Or is it there is previous batch product that you're going to be using? And then I have another follow-up.

Sure. No, it's the existing RT001 product. We are in no way saying that we're moving to another indication because we can't get delivery in the crow's feet lines. It's actually quite the opposite. The question is, as we look at this 2B marketed formulation at this composite endpoint, which we've talked about the clinical endpoints and the regulatory endpoints, we still believe there are other indications. And so, we wanted to be clear with the community that because we're trying to address this composite endpoint and getting those into alignment, it does not mean that the existing formulation can't be used in hyperhidrosis. It's anatomically different, as we have mentioned, because you've got sweat glands and sweat ducts, but its not because we think it is more permeable or more forgiving. It's just a matter of going forward in a dermatologic application in a therapeutic area. And as we said throughout, we think hyperhidrosis is an excellent indication for a topical route of administration.

Ken Cacciatore: I guess I am trying to understand with what product, with this scalable product. And I guess also, if there continues to be a scale of issue, could you not go back to the original manufacturer in that original way of manufacturing? Is there a limitation with that manufacturer to get back to that original formulation?

That original manufacturer is not setup to be a steady-state manufacturer. They really are making small batches for small clinical trials, Phase 1, Phase 2. They've never had the intent of being a steady-state commercial manufacturer. So that's been the whole basis of transferring that technology to a commercial scale facility, and that's what we're doing and have done. And we will continue to use product made out of this facility going forward.

Because hyperhidrosis and RT002 are earlier stage programs, you have a little more flexibility. But since this is our 2B marketed formulation in a pivotal trial where the process is the product, we want to make absolutely sure in Phase 3 that that's the product we want to carry forward, so.

Yes. But for the hyperhidrosis study, you will be using this newly validated, hopefully newly validated product or you have other product, old product that you are using for hyperhidrosis?

No, this will be the product made out of this facility that's product that were coming off the facility our existing crow's feet line program.

Okay. Thanks. I'll go back in the queue.

Okay.

Thanks, Ken.

Thank you. Our next question comes from David Amsellem with Piper Jaffray. Your line is open.

Thanks. Just a couple. So, I guess maybe I'll try to ask this differently is how could you be sure that this is an optimization of transfer issue? So I guess I'll ask that, number one. Number two, you know, at what point do you say, do you move on from lateral canthal lines and focus on solely the hyperhidrosis indication as your lead indication for RT001? And then, lastly, have you given thought to potentially accelerating development of the long-acting injectable in other indications, therapeutic indications in parallel to working through these issues with 001 given the delay? Thanks.

Hi, David. Look, I think first and foremost, we have to get all the data and look at the totality of the data. We still believe we have a product in RT001 for crow's feet lines. We are encouraged that with the signal, the signal is just at this point not as a magnitude that we want to move into pivotal trial based on the data that we've generated. We will certainly -- as I shared, we can get back to you on that. And I think that we'll have to be revisit that issue once we have the final data as far as hyperhidrosis.

Your comment on RT002, since we've generated the duration data and it is compelling at 29 weeks, we are looking at every opportunity to move that forward as aggressively as we can and to look at it both on the aesthetic side, as well as therapeutic side. Coming out of that clinical advisory board meeting, we're getting lots of feedback from both, doctors on the aesthetic side, as well as on the neurology CNS therapeutic side of where a botulinum toxin with longer duration or a more targeting could play a role.

So we are going to that process aggressively of looking at both of those indications. We're clearly moving forward directly compared to Botox here this quarter and expect to move into a therapeutic indication next year. But as far as reprioritizing RT001, I think we basically need the data, some additional data to make that decision. But at this point, we still feel like RT001 for facial aesthetics on the crow's feet lines is a viable opportunity for this product.

Thank you.

Thank you. (Operator Instructions).

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

Hi. This is Katie Brennan in for David Maris. Thanks for taking my question. So, in regards to RT001, how many weeks along into this ongoing study are you? And what's your expectation for how much longer until it's completed? And I know you said originally you expected to enroll up to 60 patients. Is that still what you expect? Or are you closing it at the 43 that are currently enrolled? And then, how do you anticipate the subsequent study that you plan on doing early next year? Should it defer or will it be kind of similar to the trial that you're running now? Thank you.

Yes. Well, at this point, we will not be adding any additional patients. We'll stop it at 43. The next study will have a comparable size to what we've mentioned before. So, as we said, we said we come back to investor early in the New Year with the final data set as we look at it. We're completing the follow-ups here in that remaining population, and we would expect to get started.

Once we've had a chance -- on the next study, once we've had a chance to fully analyze, look at different cuts of the data as I mentioned go through both the drug product, as well as the clinical study scale with utilization all those things and it would be very comparable to what we would use in the next cohort.

Thank you.

Thank you. And I am showing no further questions at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect.