Revance Therapeutics Inc (RVNC) 2015 Q3 法說會逐字稿

Welcome to Revance Therapeutics' Third Quarter 2015 Financial Results Conference Call.

(Operator Instructions)

As a reminder, this conference call is being recorded today, Monday, November 9, 2015.

I would now like to turn the conference call over to Jeanie Herbert, Senior Director of Investor Relations for Revance. Please go ahead.

Thank you, John. 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 September 30, 2015. If you have not received this release or you would like to be added to the Company's distribution list, you can do so on our 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 relating 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 in 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 our annual report on Form 10-K for the year ended December 31, 2014 as filed with the SEC on March 4, 2015 and subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and our recent prospectus supplement.

Revance cautions you not to place any 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 and thank you for joining our third quarter conference call. It's been an extremely exciting and productive period for Revance since our last call. We announced very positive results for our BELMONT Active Comparator Trial achieving six month duration for RT002 injectable for glabellar lines. We also initiated three clinical trials spanning aesthetic and therapeutic indications for both of our investigational drug product candidates, and we raised more than $134 million of capital to fund our ongoing clinical programs and growing operations.

I am so proud of the progress we have made in building a solid foundation both clinically and operationally. We are well-positioned to complete our development work and enter the $3 billion neurotoxin market with compelling products based on an exciting technology platform. We continue to generate meaningful clinical data for both our topical and injectable toxins, build commercial capabilities to support market entry and strengthen our balance sheet.

I'll start the call with an update on our four clinical programs. Lauren will then review third quarter financials, our recent Company financing activities and updates to 2015 guidance. We will then open up the call for your questions.

Let's start with BELMONT, our RT002 injectable double-blinded active placebo-controlled trial, the 24-week results were extremely encouraging. The safety study for glabellar or frown lines confirms our uniquely differentiated benefit profile with RT002 to deliver significantly longer duration to BOTOX Cosmetic. At week 24, both 40 and 60 unit doses of RT002 continued to show superior efficacy to BOTOX Cosmetic and the 40 unit dose reached six month of duration. We are thrilled with this outcome.

The six months duration seen in RT002 is a substantial improvement over commercially available botulinum toxin treatments with labelled durations of up to four months. Based on our market research, we are confident that this difference is meaningful to physicians and patients alike. As we noted last quarter, quantitative market research conducted with over 80 physicians, a mix of plastic surgeons and dermatologists, show that respondents regard duration of six month as a significant improvement over marketed toxins. Subject responses from BELMONT further reinforce the importance of duration.

We expect that this extended duration will be a profound competitive advantage for both aesthetic and therapeutic indications. I think Dr. Jean Carruthers, a lead investigator for the RT002 BELMONT Trial and one of the world's foremost leaders in aesthetic botulinum toxin, said it best, 'six month duration makes this a likely game changer in aesthetic practices'. With RT002, the patients could get their botulinum toxin treatment on a biannual basis which conveniently coincides with a large percentage of patients who receive fillers and other treatments.

In BELMONT, at the critical four week measurement of efficacy, RT002 had 100% responder rate of 1 point or greater improvement in glabellar lines. This 100% response rate continued through eight weeks. Compared to placebo, this is highly statistically significant and superior to BOTOX.

There are other key takeaways from this study. Efficacy results were supported by both investigator and patient assessments. The results were not simply a dose response as our 20 unit outperformed BOTOX 20 unit, particularly on the measurement most important to patients, no to mild wrinkles. And whether you're using Per Protocol or Intent to Treat, based on 1 point or greater movement assessment by the investigators at 24 weeks, the 40 unit dose of RT002 achieved statistically significant longer duration than BOTOX. RT002 was superior to BOTOX on virtually every measurement in the study, 1 point or better, 2 point or better, none to mild wrinkles at each of the three dose levels.

As a reminder, there are two outcomes that matter to the marketplace.

First, the regulatory outcome which is a 2 point move or change back to baseline when you need treatment. Here RT002 had a higher percentage of subject responders than BOTOX. Second, there is a clinically meaningful outcome when there are no or almost no wrinkles. From a market standpoint, the clinically meaningful endpoint may be the most critical as it is the presence of wrinkles that motivates the patient to get treatment.

At nearly every time point, RT002 40 units is statistically significant versus BOTOX in this key no to mild wrinkle measurement. And at six months, about a third of patients treated with RT002 40 units had no to mild wrinkles. This compares to the same result at only four months for BOTOX indicating a two-month longer duration of effect. We are eager to move forward with the intent to seek an FDA label with six months duration. This isn't about weeks, it's about months of improvement over the three to four month label duration for all the marketed neurotoxins.

Moving on to safety, an added benefit for RT002 was the safety profile. As with other toxins, RT002 appears to have an excellent safety profile with no serious adverse events. We are pleased that the 20 and the 40 unit doses exhibited no ptosis. This may be an added benefit to our extended duration. We are very pleased that a dose response was observed in BELMONT and we plan to take 40 unit dose forward. We are well-positioned for the end of Phase 2 meeting with the FDA which allows us to move quickly into Phase 3.

Concurrently, our plan is to submit a manuscript for peer review and to complete the BELMONT Trial and schedule an end of Phase 2 meeting with the FDA in the first half of 2016. We expect to start Phase 3 pivotal trials in the U.S. in the second half of 2016.

While the BELMONT Trial focused on the treatment of frown lines, RT002 superior duration of effect could have a substantial positive impact on medical interventions in multiple aesthetic and therapeutic indications, including muscle movement disorders and pain management. We are excited by the positive interim safety and efficacy results and by the potential opportunity that RT002 provides for broadening our prospects in the neurotoxin market.

Moving on to RT001, a second major milestone was recently achieved with the initiation of the Phase 3 pivotal study of RT001 topical for lateral canthal lines or crow's feet. This trial, called REALISE 1, is enrolling approximately 450 subjects at multiple sites in the U.S. It will evaluate the safety and efficacy of a single administration of RT001 Topical Gel compared to placebo in patients with moderate to severe crow's feet lines.

We believe topical application could make it easier for medical professionals to administer botulinum toxin and allow patients to avoid the pain, bruising and downtime associated with needles. Success in treating crow's feet would set the stage for other RT001 topical trials to treat aesthetic and therapeutic indications across other areas of the face and body. We are on track to release interim results from the REALISE 1 Phase 3 study in the first half of 2016.

Our second trial for RT001 topical is for the therapeutic indication of hyperhidrosis. Early in September we initiated Phase 2 trial for axillary hyperhidrosis or excessive underarm sweating. The Phase 2 trial is randomized double-blinded placebo-controlled dose ranging study designed to evaluate the safety and efficacy of a single bilateral application of RT001. This trial is using two doses of RT001 Topical Gel plus the placebo. As of mid-October, the trial was fully enrolled with more than 60 patients in multiple sites across the United States.

We believe RT001 could dramatically expand the $75 million toxin market for the treatment of excessive sweating and bring new patients into the physician's office. We plan to release interim data from this study in December. At that time, we'll share the 28 day efficacies for two doses of RT001 versus placebo along with the initial safety data.

Returning to RT002 injectable, in late September we initiated a Phase 2 trial to evaluate the safety, preliminary efficacy and duration of effect of RT002 in patients with moderate to severe isolated cervical dystonia or involuntary muscle contraction of the neck. This is our first therapeutic indication for RT002 and it takes us into the neurology market.

This is an open-label sequential dose escalating study of approximately 36 subjects conducted in the United States. We are using three doses of RT002. This type of therapeutic trial can take longer to enroll patients than aesthetic trials. However, we expect to see the interim results of this Phase 2 study in 2016. The results of the BELMONT Trial on safety, efficacy and duration bode well for outcomes with cervical dystonia.

So, that's the clinical update. I'm confident that this key trial positions us well for BLA filing and eventual commercialization. Once approved, we anticipate launching five indications over five years beginning with RT001 topical for crow's feet in 2019, followed by RT002 injectable for glabellar lines in 2020. At the beginning of the year, I said execution was going to be our focus, and we are delivering.

Let me turn the call over to Lauren to discuss third quarter financials, recent fund raising initiatives and the 2015 financial outlook.

Lauren?

Thank you, Dan. Starting with cash, we are running favorable to our prior cash burn guidance. We ended the quarter with cash and investments of $144 million. In the quarter we utilized $16 million in cash to finance operating activities, capital purchases, investments and financing obligations.

Net loss for the third quarter was $19.2 million compared to $14 million for the prior year quarter, driven by higher R&D expenses relating to ongoing clinical trials and increased personnel, legal and other operational costs. Our common shares outstanding as of today are 28 million. Our fully diluted shares outstanding, not on a treasury basis, are 30.6 million. Fully diluted shares include 0.2 million issued warrants and 2.4 million issued options.

Turning to guidance, we are updating our expense and cash expectations for 2015. Today we closed on a follow-on offering with gross proceeds of $134 million. Thus we now expect to end 2015 with cash and investments in excess of $245 million. Due to our recent offering, we are well-funded and expect our cash on hand will fund our operations until late 2017.

We expect 2015 non-GAAP operating expense to be in the range of $58 million to $66 million, excluding depreciation of $2 million to $3 million and estimated stock-based compensation of $10 million to $12 million. We continue to anticipate R&D expense will be higher in Q4 2015 as compared to other quarters as we have multiple ongoing clinical trials. We expect 2015 non-GAAP R&D expense to be in the range of $40 million to $47 million, excluding depreciation of $2 million to $3 million and estimated stock-based compensation of $4 million to $5 million.

Perhaps most importantly, we want to thank all of our supporters and participants in our financing activities over the last several years. You've provided the capital to get us where we are today, with two drug candidates, four indications in clinical program and a wide array of potential aesthetic and therapeutic targets in the future. We continue to be fiscally and operationally prudent in the utilization of our funds and feel we are now in a solid position to move RT001 and RT002 through Phase 3 clinical trials and towards regulatory approval.

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

Thank you, Lauren. Obviously we're very excited about our interim BELMONT results for RT002 and the potential for a targeted long-acting injectable drug candidate to enter the $3 billion neurotoxin market. BELMONT is a rich data set with findings that you only get in a well-controlled head to head comparison. We have multiple shots on goal for both injectable and topical solutions with all four clinical studies reading now in the next nine months. We have positioned the Company to both penetrate the current botulinum toxin market and to also expand it with products that can bring in new patients for a wide range of aesthetic and therapeutic treatments.

In closing, I would like to thank our terrific team here at Revance who enabled us to achieve our goals and successfully drive our initiatives forward. With that, thank you all for joining us today. I'll now open it up for questions.

Operator?

(Operator Instructions)Our first question comes from the line of David Amsellem from Piper Jaffray. Your question please?

So, on RT002 in therapeutic settings, have you given more thought to how you're thinking about next steps in terms of what other therapeutic areas you'd like to pursue? And then related to that, how much does this cervical dystonia study, how much are you going to lean on that to inform you as to what additional therapeutic indications if any you're going to pursue, and maybe give us a little bit of color on your thought process there?

Sure. So, David, I think with the totality of the BELMONT data, it allows us to really look at the therapeutic indications. We started cervical dystonia because we think, as the muscle movement disorder, that is the ideal transition point for us to sort of look at complementary assets in dermatology and neurology. And we're going to continue to wrap up our investigation into the final data set. I think there's a lot of rich learning and data there, as I mentioned in my closing remarks, and we'll sort of take a look at that and what else would play a role outside of the muscle movement disorders.

But at this point, I think the results indicate mechanistically that with the glabellar and with the cervical dystonia, you can lean on those data sets to really sort of highlight where this drug will play a role, and it obviously can be leveraged across multiple indications. So we'll have to get back to you at a later date with other areas of priority, but we think this drug will play a role in multiple therapeutic indications outside of muscle movement.

(Operator Instructions)Our next question comes from the line of Tim Lugo from William Blair. Your question please?

Congratulations on all the progress. I just wanted to know that now that you've had the glabellar lines data for a bit, have you updated us on when you will be presenting the data and can you just briefly talk about the 60 unit week 24 data and perhaps what you saw between the 40 unit data so why you're taking it it sounds like you're taking that forward into a Phase 3?

So, Tim, our focus obviously is to complete the last three months of the study which would take us out that nine months follow-up interval. And so we will finish that investigative work, and then our goal is to do two things. One is to turn it into a manuscript for peer review. We've been approached by multiple journals to take that under consideration. And then obviously we need to put together the data set to request and hold an end of Phase 2 meeting with the FDA.

So, I think that first of all I think it's most important to just get the data in and get it looked at, at this point. But we think everything is holding together quite nicely through the analyses that have been completed to date. That work will be ongoing. And I think we would like to get that into podium presentations with one of the major medical meetings in the first half of the year and we'll just see where the investigators see those priorities, whether they'd be plastic surgery, dermatology or both.

We expect that the data will be a very strong contribution to the published literature on neuromodulators and I think we're going to get a lot of traction in the medical community to have that data presented as soon as possible in those major meetings.

Sounds good, sounds like something to look forward to. Can you maybe update us on manufacturing for 002? I know there's obviously been a bit of history there with 001. Does anything need to occur on the manufacturing side before you begin U.S. based studies?

So, right now, as we've mentioned on prior calls, that all that manufacturing has been done here at our facility. We had the benefit of a lot of work that went into the preceding API and the finished drug product on topical. So we'll continue to manufacture that product for Phase 3 trials and we'll look at ways to expand our commercial fill/finish on the injectable. With that, I'm going to turn it over to Lauren for her comments.

Thanks Dan. So we actually with the success of the trial just a week or so ago are beginning to work to expand on the finish/fill side, because it is an aseptic process. As Dan said, we make toxin today at scale. We make enough toxin to supply us for many, many years on the drug testing side. So what we need to do now is really make a few investments in scaling up the filling of the cartridges, which will happen over the next 12 to 18 months. We included in next year's burn rate. We'll give some guidance at the beginning of the year on that capital cost.

OK, that's great to hear. And actually switching over to hyperhidrosis, is it safe to say that the dosing may be similar to 002 where you're using an analogous dose label for BOTOX and then step it up maybe 1.5 times or 2 times?

Tim, I think this is one that I don't want to sort of preclude the data. We'll look at the two doses relative to placebo and hopefully that data set will be enough to take this into the next stage of development, but I don't want to sort of guess on what the outcome may be. But right now I think that it's important just to get that trial done by the end of the year.

I think it's interesting on the 40 versus 60, I want to come back to that question, because both performed really, really well. And as we looked at the dose response, we felt that when you look at the totality of the data, when you look at the safety that was demonstrated, the efficacy and the duration, that 40 was the best set for us to move forward into Phase 3 trials.

We saw no ptosis. The adverse events that we did see were those that you would expect with a needle rather the administration. Most of them were pain, edema, a little bit of erythema, but the efficacy of the 40 was so strong and I think relative to the active comparator in the BELMONT Trial, that this is the dose that we think is the best product positioned to give us that six month duration.

As Dr. Carruthers mentioned, this has really been evasive for neuromodulators and we think that getting this into a label as part of our Phase 3 development plan really provides us a compelling and differentiated product from the current injectables that are out there.

Understood. And maybe one last question, as you're planning for the CD trial, is there a similar is there a ptosis in CD that you'll be looking for as kind of adverse event that will signal some sort of differentiation versus BOTOX? I mean is there, when you're planning dose and duration in that trial, what are the kind of side effects you're looking for or is it just maybe more is better in CD versus glabellar lines?

Our development of the CD is very analogous to our development of the glabellar lines where we started with an open label, we learned about the behavior of the drug. So we'll be looking at increasing doses in cervical dystonia, we'll be looking for efficacy on these twister scales, but the adverse events that we'll also be trying to look at is muscle weakness and dysphagia, this difficulty in swallowing. So these are usually inherent from the diffusion of a drug away from the site of injection.

So, we'll not only be carrying the efficacy analysis but we really want to look at potential opportunities to address the spread of toxin. Now it's relatively small trial, but we think that much like the earlier predicated Phase 1, Phase 2 trial that was done in Mexico, that this could be very informative for the next trial on CD which will be in a larger patient population.

And I think, I'd just like to jump in too, Tim, when you look at these patients and talk to the physicians, the need is so high in this muscle movement disorder community. A lot of these patients need treatment, re-treatment at 10 weeks, and they are labelled at 12, and they just lose a lot of function in that time period. So they were very interested to see what our duration might be in addition to the safety profile.

OK. Correct me if I'm wrong, but seems like the pain benefit from BOTOX looked relatively minor last time I looked at the label. Is that something you're going to be looking for, and pain is obviously difficult to measure in clinical trials regardless, but is that somewhere where you could show maybe a differential benefit?

I think at this point, pain is just part of the category of adverse events associated predominantly with the needle given, what's known about at neuromodulators. I think that we'll look obviously at the next design in how we look at capturing that data set. Pain would be a difficult one without a much larger sample population.

Understood. Thanks for taking all the questions, and congratulations.

Thank you. This does conclude the question-and-answer session as well as today's program. We thank you, ladies and gentlemen, for your participation. You may now disconnect.