Revance Therapeutics Inc (RVNC) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen.

Welcome to the Revance Therapeutics 2015 first quarter financial results.

(Operator Instructions).

As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Jeanie Herbert, Senior Director of Investor Relations.

Please go ahead.

Thank you, Jonathan.

Joining us on the call 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 March 31, 2015.

If you have not received this news release or if you would like to be added to the company's distribution list, you can do so on the Investor Relations page of the company's Web site at www.revance.com.

During the course of this conference call, Revance management will make forward-looking statements including but not limited to statements related to Revance Therapeutics' clinical development of our product candidates; business strategy and goals; plans and prospects; the markets in which we compete; potential product candidates and benefits of our current and future product candidates 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 the 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 our annual report on Form 10-K for the year ended December 31, 2014 as filed with the SEC on March 04, 2015.

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?

Thanks Jeanie.

Good afternoon everyone and thank you for joining our first quarter conference call.

On today's call, I'll cover our recent business highlights, Lauren will review our financials and 2015 guidance, and I'll wrap up with details on our clinical milestones.

Then we'll open up the call for your questions.

Two thousand and fifteen is off to an encouraging start, and we're on track with our clinical programs for both RT001 and RT002.

Revance is in a unique position with patented technology and exclusive drug candidates with the potential to substantially penetrate and expand the $3 billion botulinum toxin market.

Topical 01 and injectable 02 have the prospects to treat a wide variety of aesthetic and therapeutic indications and in 2015, we are pursuing four initial development programs.

We recently completed enrollment in our BELMONT Phase 2 active comparator trial to treat glabellar or frown lines.

This trial was structured to evaluate the safety, efficacy and duration of effect of an injectable 02 product, and it has enrolled more than 250 subjects.

This five-arm study, includes three doses of 02, the labeled dose of the current market leader Botox Cosmetic and a placebo control.

We expect to share interim results by year end, showing efficacy measurements at the six-month time interval.

We'll follow up with full duration effect data in early 2016.

We would remind you too that the final cohort in our injectable 02 Phase 1/2 study showed a median duration of seven months for the treatment of frown lines, which is roughly double the label duration of the market leader.

This past month, we commissioned a survey of 80 U.S. dermatologists and plastic surgeons, who are significant users of both botulinum toxin.

We asked them the following question.

Of the patients you've treated in the past month with botulinum toxin injection for glabellar lines, how many of you would switch to a product with six-month duration of effect?

On average, the 80 respondents indicated they would convert more than half of their existing current botulinum toxin treated glabellar line patients to a product like RT002.

These results are extremely encouraging as the sentiment echoes that of several thought leaders and their enthusiasm for an injectable toxin product with the longer duration of effect.

In addition to believing that the majority of their current patients would switch to a longer lasting solution, they believe it could bring new patients into the injectable toxin market.

The market research supports this with physicians in the survey indicating that assuming the longer-lasting product is available, it would lead to market expansion through new patients in the aesthetic botulinum toxin market, truly revolutionary differentiation with the real market growth opportunity.

Moving on to the use of 02 in the treatment of muscle movement disorders, I'm pleased to announce that we are planning to pursue cervical dystonia with RT002.

A driving factor of this is the established regulatory path and clear clinical protocols for future clinical studies.

Cervical dystonia is characterized by excessive point of the muscles in the neck and shoulder often with muscle hypertrophy and tremors.

This debilitating and often painful condition can have significant negative impact on patients' quality of life.

With current toxin treatments, one potential adverse event is the dysphagia, or trouble swallowing, which can be caused by diffusion of the drug.

We believe the prospects of an improved safety profile due to less diffusion combined with the longer lasting treatment make cervical dystonia a natural choice for development for RT002.

In meetings with clinicians at the American Academy of Neurology last month, it was clear there is a tremendous opportunity in several muscle movement disorders.

Physicians voiced a desire to extend their patients' functionality, which can result in significant improvement in their quality of life.

While currently approved injectables are making inroads, a longer lasting treatment would be a superior option.

We estimate that the market for treating muscle movement disorders with neurotoxins represents a $900 million opportunity in 2014, and we have the potential to expand that market meaningfully with the longer duration alternative.

With that I'd like to turn the call over to Lauren to discuss the first quarter financials and the 2015 financial outlook.

Thank you, Dan.

Starting with our cash balance, we ended the quarter with $153.7 million.

Our cash burn was approximately $17.3 million for the quarter.

That cash burn included $2.6 million of cash used to fully pay off our Hercules Notes Payable.

Also note, in April 2015, we closed the sale and leaseback of our commercial fill and finish line equipment with Essex Capital and received $9.8 million in cash.

We anticipate this transaction will add about $7 million of net cash to our balance sheet at year-end.

And with that we believe our cash on hand will last through 2016 and potentially into early 2017.

Turning to the P&L, G&A expenses increased for the first quarter as compared to the prior period in 2014, primarily due to personnel and administrative costs related to operating as a public company.

R&D expenses increased for the first quarter as compared to the same period last year, primarily due to increases in development activities for our two drug product candidates, including our RT002 active comparator study in glabellar line, which was enrolling actively during the quarter.

Stock-based compensation for the three months ended March 31, 2015 was $2.3 million, consisting of $0.8 million for R&D and $1.5 million for G&A.

Non-GAAP operating expenses for the three months were $12.4 million.

Non-GAAP operating expenses exclude depreciation and stock-based compensation.

Net loss for the quarter was $15.4 million.

Our outstanding common shares as of March 31, 2015 were 23.9 million.

Our fully diluted shares outstanding, not on a treasury basis, were 26.4 million at the end of the quarter.

Fully diluted shares include 0.2 million issued warrants and 2.3 million issued options.

Turning to our guidance for 2015, we are reiterating the guidance we provided earlier this year.

We expect to have higher R&D expenses in the second half of 2015 as we plan to have multiple clinical trials ongoing for RT001 and RT002.

We continue to expect cash burn for 2015 to be in the range of $72 million to $80 million excluding depreciation of $2 million to $3 million and stock-based compensation of $10 million to $12 million.

We anticipate 2015 non-GAAP R&D expense to be in the range of $52 million to $60 million excluding depreciation of $2 million to $3 million and estimated stock-based comp of $5 million to $7 million.

For modeling purposes and assuming no material issuance of equity, we expect our 2015 weighted average shares outstanding excluding restricted stock will be approximately 23.5 million to 24.5 million shares.

And with that, I'll turn the call back to Dan.

Thanks, Lauren.

We had a productive start to 2015 and are excited to begin sharing data from these initial milestones in the second half of this year.

We have four Phase 2 or Phase 3 programs reading out either efficacy or interim data before year-end and we look forward to these catalysts demonstrating the power of our patented TransMTS peptide technology in delivering a differentiated experience with botulinum toxin.

Here is a brief summary on the status of our clinical programs, starting with topical RT001 for the treatment of crow's feet lines.

We expect to announce the outcome of the recent open label multi-center study for topical 01 this quarter.

Through our additional work, we are confident that we have optimized the program, invested appropriately in manufacturing and CMC activities and created additional analytic tools to fully characterize our drug product.

Also, we are very encouraged by our progress in advancing our clinical methods development with the use of ultrasound and EMG.

These techniques are intended to allow us to directly measure and assess the paralytic effect of RT001.

These methods put us in better position to provide both quantitative and visual data that show definitively that the RT001 topical product is crossing skin and having the desired paralytic effects on the underlying muscle being treated.

Pending the positive outcome, we plan to initiate our U.S. Phase III pivotal study this summer and report efficacy results in the second half of 2015.

This study will evaluate the safety and efficacy of a single topical application of 01 in adults with moderate to severe crow's feet lines.

Independently, we plan to move forward with topical 01 for the treatment of hyperhidrosis or excessive sweating.

The hyperhidrosis market has significant unmet needs.

A recent quantitative study commissioned by the International Hyperhidrosis Society with more than 1,800 hyperhidrosis sufferers revealed that this is a severely debilitating disease with early onset of primary hyperhidrosis in the majority of patients prior to age 18.

A topical painless long lasting treatment for excessive sweating could dramatically impact patient's quality of life for this challenging disease.

Our treatment allows for targeted delivery without daily application or systemic side effects it seen in another approaches.

This could improve patient and physician satisfaction leading to significant market expansion for hyperhidrosis beyond that of toxin injections, which today is estimated at 75 million in global sales.

As of now, the trial was planned to be Phase 2 randomize dose ranging placebo controlled study, will be conducted at multiple sites throughout the United States to evaluate the safety and efficacy of a single application of RT001.

This placebo controlled trial will enroll adults with moderate to severe axillary hyperhidrosis, two doses of 01 topical gel will be tested.

We anticipate starting the trial mid-2015 and reporting efficacy results later this year.

Moving on to our injectable RT002 and the aesthetic indication for frown lines, with our BELMONT active comparator trial fully enrolled, we are on track to report interim duration results in late 2015.

In terms of our therapeutic indication for injectable 02, we plan to start the Phase 2 trial for cervical dystonia in the second half and report clinical results before year-end.

The trail design is being finalized now and we'll give you more details once the first patient is dosed.

In closing, we continue to be confident that Revance has the potential to fundamentally transform today's botulinum toxin market with a broad range of aesthetic and therapeutic applications.

We look forward to updating you throughout the year on our progress.

In June, Lauren and I plan to meet with investors at the Jefferies Healthcare conference in New York.

Lauren will attend the William Blair Growth Conference in Chicago and I will participate in a fireside chat at the BMO Specialty Pharma Day in New York.

We will also be getting out on the road this summer.

We hope to have the opportunity to meet with many of you during one of those events.

With that, thank you all for joining us today.

I will now open it up for questions.

Operator?

(Operator Instructions).

Our first question comes from the line of Ken Cacciatore from Cowen and Company.

Your question please?

Thanks guys, clearly a lot going on.

Just had a couple specific questions, just first on the cervical dystonia study, just trying to understand or get a sense of how many patients, and how you could enroll and theoretically have data that fast when we're going for duration.

So just trying to understand that trial design.

It was probably straight forward, but maybe could just articulate it a little bit more.

And then, it's great that you're doing that measurement for the crow's feet for the topical, but just wondering if there has been actually any interaction with the FDA in advance to talk about any progress about at rest versus smile or even using this new way of looking at things and not looking at jump to gun that would maybe get the agency to see about setting the protocols up in a way that makes most sense for the way your product is going to be used.

Thank you.

As far as the CD clinical study protocol, we'll be approaching this much like what we did with the glabellar line program.

We will enroll those patients, we'll be capturing the safety and efficacy data.

To the extent that we have any interim duration findings, we'll report that at the end of this year.

We don't know what the duration will be on cervical dystonia.

So that will be a part that will come later.

If it's consistent with the glabellar line trails that duration will be longer than what's been reported with other injectable products.

But the first step in the development is show safety and efficacy in a therapeutic indication where you're using larger doses than what you're using for glabellar trials.

As far as the FDA process, we continue to have discussions, so we continue make filings as part of our regular routine process on conducting clinical trials in the U.S and outside the U.S. What we really wanted to reinforce in this call is this issue of paralytic effect.

From a topical routed administration, there are multiple modalities that have shown the ability to capture that paralytic effect.

At contraction is one.

But there are also other modalities.

And we're really focused on developing a quantitative method and a visual method as part of our method's development program in the clinic to show that when the RT001 product is applied topically, you get the comparable paralytic effect to when the drug is injected.

So, this is going to be as part of our methods development, a key attribute in showing that, not only to the regulatory agencies but the clinical community that 01 is behaving like toxin when it's injected.

Thank you.

Our next question comes from the line of David Amsellem from Piper Jaffray.

Your question please?

This is Michael on for David.

I was just -- you cited the survey data with the six-month duration of effect.

And I was just wondering if you could remind us what you think is meaningful and commercially viable difference in duration for RT002 versus Botox.

In other words, what duration of effect do you guys need to see to move forward?

Thanks.

I think that our target has been to double the duration.

We've been very audacious in setting that development goal.

We think that that based on our conversations with the clinical community is transformative.

Duration has been evasive throughout the industry since the early start of the injectable toxins.

So in the use of glabellar, we think six months or greater is highly differentiated, and that's what was tested in that independent blinded survey with plastic surgeons and dermatologists.

As you recall, we were able to achieve approximately seven months in that initial Phase 1, Phase 2 study.

So I think that we're shooting for the target product profile.

I think once you get incrementally longer, then I think then it becomes more of a market differentiation and how much longer it is over the up to four months it's on the existing labels.

But right now, our goal is to be six months or longer, and hopefully it's close to that initial seven months as we've reported previously.

Thank you.

(Operator Instructions).

Our next question comes from the line of David Maris from BMO Capital Markets.

Your question please?

Is there anything that you learned?

You were already on top of the Anterios' stuff, but was there anything that you learned from their filing that you didn't know before?

Thanks, and then I have a follow-up?

David, we're obviously aware of the regulatory filings and what was conducted as part of that process.

Really there is not much data reported in the clinical literature, so there wasn't much really for us to respond on that process.

And we've been very focused on the topical and longer lasting toxins.

And I think what the Anterios experience really highlights us is there is a lot of opportunity to differentiate neurotoxins, either through [rapid] administration or through longer duration.

And that's where we're squarely focused from an R&D perspective.

David Maris: Then separately in the market research that you've done, when you think about the pricing of the long acting, what is your thinking?

I mean, if it lasts twice as long, you can price it twice as high or what -- and what are the implications on the margin side for that as well?

We were very excited when we did the research with the physicians last month.

We did not do research around price but our thought process is definitely in line with where you are, is that physicians and patients will pay for the difference.

We have a lot to do over the next couple of years during the development program as we have the target product profile and the data come in.

But we believe higher will be better.

Most of our initial modeling on this as you know, has been at parity but we do believe from some of our early research, we will be able to price higher, yes.

Particularly on the therapeutic, where longer duration and potentially addressing some of the adverse events really are critical parameters into pricing of those particular products.

So to Lauren's point, David, is I really believe this product is intended to be a premium price product.

Thank you.

Our next question comes from the line of Tim Lugo from William Blair.

Your question please?

For cervical dystonia, are you going to be enrolling patients who had had prior toxin injections?

And if so, is it going to be in a rich patient population that has responded or will be more of a patients who had partial responses and maybe more willing to switch therapy?

Tim, we're looking at both of those patients groups as part of these initial Phase 2 studies.

We're not prepared to give a public comment on that, but suffice it to say that they will be a homogeneous population.

They'll either be Botox users who are in treatment and are truly responders or they'll be all naive.

I think the most likely is to go with all Botox responders, but we're going to refrain from commenting on that at this point.

Maybe could you give us some idea about why you chose cervical dystonia versus some of the other movement disorders?

I think from our analysis, both in the clinical as well as the marketing, it was one of the larger individual users of a toxin and had a very clear regulatory development path and had very consistent homogenous clinical study parameters, and it had end points that we could compare our product versus other injectable products.

So, it's really mitigating risk and it was speed to getting a therapeutic approval as part of our 02 on the therapeutic side.

And maybe one last question, if you could, thanks for sharing some market data with us earlier.

Have you done any follow-ups with the people who wouldn't switch to a long duration therapy?

It sounds like -- I mean, 50% is obviously a great market share, but it seems like it could be even higher.

Tim, there has been several key opinion leaders that have expressed a much higher switch rate than the 50% that we tested.

We wanted to present the data in the most critical independent fashion.

They are only reacting to a blinded assessment of duration.

We're not giving them the full product profile which has all the safety and efficacy parameters.

It very well may be like the key opinion leaders who had expressed a much higher replacement rate than what is articulated in that existing 80-physician data set.

I think - this is Lauren.

I think that's right, Dan.

You have to look at the KOLs -- I think David Maris and a few others have spoken with on calls, have shown numbers like 80% to 90% or higher.

We went out and intentionally surveyed community dermatologists and community plastic surgeons.

And we were stunned by the 50% number because this is a new concept for some of them.

They are not on the KOL side.

And at this stage with no market preparation, I don't think anybody who did the research for us had ever seen numbers like this for a new product concept.

We were stunned to see that 60% of the respondents felt that longer duration was an unmet need.

And these same community dermatologists had a satisfaction rate with their existing products of 6.3 out of 7. So that's pretty stunning that those two went together.

In addition, 75% were likely or very likely to try the product 02.

And overall, at this early stage we expected the total market for toxins to grow by 16% with our introduction.

So when we added it all together, we were stunned.

It exceeded our expectations for our first round of community research.

That's great to hear.

Thank you.

This does conclude the question-and-answer session of today's program, as well as the content.

Thank you, ladies and gentlemen, for your participation in today's conference.

This does conclude the program.

You may now disconnect.