Revance Therapeutics Inc (RVNC) 2016 Q2 法說會逐字稿

Welcome to the Revance Second Quarter 2016 Financial Results Conference Call.

At this time, all participants are in a listen only mode. Following management's prepared remarks, we will hold a question and answer session.

(Operator Instructions)

As a reminder, this conference is being recorded today, August 4, 2016.

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

Joining us on the call today from Revance is president and chief executive officer Dan Browne and chief financial officer and chief business officer, Lauren Silvernail.

Earlier today, Revance released financial results for the quarter ended June 30, 2016. 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's 2016 financial guidance, clinical development of our product candidates, business strategies and goals, plans and prospects, the markets in which we compete, potential product candidates and benefits of our current and future product candidates and 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, are inherently involved 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 statements include factors the Company describes in the section entitled, "risk factors," in our quarterly report on form 10-Q for the period ended March 31, 2016, as filed with the FCC on May 10, 2016.

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.

The last few months have been pivotal for Revance as we focused our efforts on DaxibotulinumtoxinA for injection. RT002 injectable goes right at the heart of the growing $3.4 billion toxin market with active trials for the treatment of glabellar lines in cervical dystonia. Our cash position is strong and we have fully focused on moving this drug candidate through regulatory approvals to market.

On our call today, I'll cover our clinical development outlook and business highlights followed by Lauren with our financial and updated 2016 guidance, then we'll open up to the call to your questions. As to our clinical development progress, in early June, results from our realized Phase III trial of RT001 topical to treat crow's feet led us to move RT001 back into pre-clinical development.

With the tremendous opportunity for our injectable drug candidates in both aesthetic and therapeutic medicine, we are focusing where we expect the highest returns, expediting RT00 injectable to market for multiple indications. In June, we had our pre-Phase III meeting with FDA regarding RT002 injectable for glabellar lines. As we announced in July, it was a very informative and productive interaction. Based on that meeting, and the minutes received, we are moving forward with the IND submission and initiation of the Phase III program for RT002 in frown lines.

We expect to initiate the Phase III clinical trials later this year. The program will include two placebo controlled pivotal studies conducted at multiple sites in the United States and Canada enrolling 300 to 400 patients in each along with the long-term open labeled safety study enrolling up to 1,500 patients. The primary end-point of these pivotal studies will be a composite of the proportion of subjects who achieve a score of none to mild and a two point improvement from baseline in glabellar line severity on both the investigator and patient assessment scales at maximum frown at week four.

Duration will be assessed as a secondary end-point based on the reduction of severity of frown lines. As you'll recall from our Phase II Belmont, which was an active placebo controlled study, last October, all dose levels of RT002 achieved highly statistically significant investigator reported efficacy compared with placebo at week four. Plus and most importantly, six month duration effect was statistically significant compared with Botox Cosmetic.

As for our first therapeutic indication for RT002 injectable, cervical dystonia, which are severe neck spasms, I'm pleased to announce that we have completed enrollment in the second cohort of 12 patients in the Phase II dose escalating study. Our goal is to show safety and efficacy and potential duration of effects of RT002 in this important muscle movement indication.

We anticipate we will fully enroll the third cohort this year once we get clearance from the DSNB after they review the six week safety data for the second cohort. We plan to share the interim results from the first two cohorts later in 2016.

As to a second therapeutic indication for RT002 injectable, we plan to initiate a new U.S. Phase II trial later this year. We'll be providing more detail on this exciting, novel indication along with the study design as soon as we initiate patient dosing.

In terms of recent business highlights, in May we acquired an intellectual property portfolio of patents and patent application from Botulinum Toxin Research Associates. We gained access to new intellectual property in therapeutic neurotoxin areas and are very excited about its potential use for pain, inflammation and mood disorders such as depression.

Therapeutic indications for Botulinum toxin represent significantly untapped opportunities with tremendous growth potential. As you think about assets such as these for BTRX, the industry has barely scratched the surface of this opportunity. Today, only 11 to 12 indications have been approved but more than 100 are used clinically today and are covered in the U.S. by insurers for reimbursement and there are many other potential indications in research around the world.

At the beginning of July, we announced we had added Julian Gangolli to our board of directors. Julian is currently President, North America of GW Pharmaceuticals. Prior to GW, Julian was a key member of the executive management team that transformed Allergan into one of the leading, global specialty pharmaceutical companies. I believe Julian will be an invaluable contributor and leader to our board due to his strong operating and strategic background.

That covers the recent highlights. We have a busy second half of this year with a number of Phase II and Phase III trials for RT002 planned and to be underway.

Let me now turn the call over to Lauren to cover second quarter financials and the updated financial outlook for the year.

Starting with our cash and investments balance, we ended the second quarter with $217 million. Our cash burn for second quarter was just under $20 million and was $37 million for the first six months of this year. As a result, we expect our cash will last into the second quarter of 2018.

Turning to the P&L, non-GAAP operating expenses for Q2 2016 were $20.6 million. Non-GAAP operating expenses exclude depreciation and stock-based compensation. G&A expenses for Q2 increased to $7 million from $6.4 million in 2015, primarily due to increased personnel, legal and other administrative costs.

Also during the quarter, Revance reported $1.9 million in non-cash impairment expenses relating to RT001 topical manufacturing equipment. R&D expenses for Q2 2016 increased to $15.2 million as compared to $10.3 in 2015 primarily due to increased clinical activity and a $2 million up-front payment to acquire patents and patent applications from BTRX.

Stock-based compensation for the three months ended June 30, 2016 with $3.3 million, consisting of $1.8 million for R&D and $1.5 million for SG&A. Net loss for the second quarter was $24.6 million Our common shares outstanding as of June 30, 2016 were $28.5 million, our fully diluted shares outstanding not on a treasury basis at the end of June, with $31.4 million shares including $2.9 million granted options in warrants.

As for our guidance, we are updating our guidance on this call for fiscal year 2016 based our refocusing on to our RT002 injectable asset. Cash burn for 2016 is now estimated to be in the rage of $90 million to $100 million, a reduction overall of about $15 million from our previous guidance.

We now expect 2016 non-GAAP operating expense to be in the range of $80 million to $90 million, excluding depreciation of $2 million to $3 million at estimated stock-based compensation of $13 million to $15 million. With several RT002 clinical trials in the plan, we anticipate 2016 non-GAAP R&D expense to be in the range of $57 million to $63 million, excluding depreciation of $2 million to $3 million and estimated stock-based comp of $7 million to $8 million.

For modeling purposes, and assuming no material issuances of equity, we expect out 2016 weighted average shares outstanding, excluding unvested restricted stock will be approximately 28 to 29 million shares.

In closing, we are fully focused on getting RT002, our long-lasting neuromodulator, to market for a number of both aesthetic and therapeutic indications. We believe RT002 has the potential to be highly competitive in currently approved indications, plus expand into excited new ones where there are large markets and significant unmet medical needs.

Lauren and I look forward to updating you on our progress on future calls. In terms of travel in September, we'll be in Boston to participate in the Wells Fargo healthcare conference, followed by the Credit Suisse Small and Mid-cap Conference in New York. Please let us know if you'd like to meet when we're in your city.

With that, thank you all for joining us today. I will now open it up for questions. Operator?

(Operator Instructions)

Louise Chen, Guggenheim Securities. Your line is open.

So, first question is how should we think about the breakup in R&D expense in the Q3 versus Q4? And then another question I have, I just wanted to confirm that you had said that the additional indication that you have not disclosed yet, that would disclose that by the end of the year when you start working on it? And then third question here is on RT002 -- just curious how we should think about why your product would last longer than what's currently on the market?

With regard to R&D expense, it will build over the year as we continue to start and enroll patients in the various trials. So it'll be heavier towards the end of the year, but it will grow throughout.

As far when we'll disclose the new therapeutic indication, it will be in the second half of this year. We're really excited about it. We're getting closer. And what we would like to do is come back with a wholesome update with the actual study design, how we're approaching this indication, size of the market. And we'll certainly get that out as quickly as we can.

But it'll definitely be this year. And as far as how RT002 contributes to longer duration, it's the ability to use this peptide as an excipient with the botulinum toxin. So the toxin is the active drug that is creating the therapeutic benefit. But when you combine the toxin and the peptide, it allows you to stabilize the drug at the site of injection - what we believe is to get a higher concentration of denervation. You take down more neuromuscular junctions at the site of injection, and it takes longer to begin to reinnervate that soft tissue segment.

We'll continue to look at this mechanistically over time, but right now we think it's the combination of using the toxin as the active drug and the peptide to stabilize it and anchor that drug at the site of injection.

Our next question comes from the line of David Amsellem with Piper Jaffray. Your line is open.

This is [Samir] on for David. Just two quick ones here. On RT002, can you walk us through the manufacturing scale-up for the upcoming pivotal studies? And is there any reason to be concerned that you could have issues with manufacturing along the lines of what we saw with RT001? And how can we get comfort around that?

Also, can you remind us what you think constitutes a commercially relevant improvement in the duration of effects over Botox? And are you contemplating running an active comparative ARM in addition to placebo ARM in Phase III studies?

Let me just take them in the order that you provided them. On the manufacturing, the drug will be manufactured out of this facility. All the trials today, both pre-clinically and clinically have been manufactured out of this facility. So we have the scale both on drug substance and API to launce the drug -- get through the BLA process. We feel very good with the launch quantities.

And as we add to that, we'll certainly be able to add capacity, but there's no read-through in RT001 that we believe that would be problematic as part of RT002. All the assays have been in place for all the industry for a long period of time. And so we feel very confident with our capabilities. As far as the work with the commercially available toxins, we will not do an active comparator trial.

We'll follow the draft guidance based on our discussions at the pre-Phase III meeting. We believe that our drug versus a placebo is the appropriate study design. It's what the predicate sponsors have done. It'll allow us to achieve our primary endpoint if the data breaks that way and also be able to show duration using that as a secondary endpoint in looking at their reduction in severity. So we feel very confident in the study designs going forward.

Thank you. (Operator Instructions)

Our next question comes from the line of Difei Yang, Brean Capital. Your line is open.

The $15 million reduction of R&D expenses for 2016 - is that just exclusively related to RT001 [development]?

With regard to that, it is predominantly driven by the RT001 discontinuation of clinical work. But we also have made other adjustments across the business, but the bulk of it is RT001.

So then the next question is on the cervical dystonia [indication]. So it sounded like you have completed the interim analysis on the first cohort of 12 patients and I haven't seen announcements with that result. Can you share some of the findings? Is it comparable to the standard of care now? Or is it better, worse?

We haven't done any analysis other than what we mentioned on the last call through the DSMB, looking at safety. So we don't have any analysis to present at this time. Those patients continued to be followed out until they return back to their baseline severity; we're looking at 16 weeks, or thereabouts.

So we don't have an analysis. We are announcing here that we've completed the second cohort; those subjects are under follow-up. Once the DSMB completes their safety review, then we'll start enrolling patients in the third cohort, so we expect to be coming back here in the second half of this year with an interim topline analysis on safety, efficacy, and duration for cohorts 1 and 2. Cohort 3 will not be completed this year, but we would be completed in the first half of next year.

So just to clarify, the safety analysis on the first cohort was completed, so can we reasonably assume there is nothing abnormal or causing concerns have been observed? So basically we can assume this safety profile is comparable to competitor's products?

Yes, Difei, I think we've commented on it; there was nothing in the first round of cohort 1 and the DSMB that it was problematic that prevented us from moving forward from a safety or risk benefit perspective. The drug is working as a botulinum toxin drug works.

Our next question comes from the line of Tim Lugo with William Blair. Your line is open.

I guess regarding the novel indication for 002, is that a novel indication where it's not currently on the label of any neurotoxins currently being marketed?

There are so many potential uses of toxin in the literature; it's almost hard to find one where it hasn't been used for something. This is not on a label for any of the existing sponsored products. But there is clinical literature. There's work that's been done in this. And some of the sponsors have looked at this.

We believe this is a real diamond in the rough. That it is a big market with a significant unmet need, and most importantly, there's a very high probability of success, there's a scale, there's a defined endpoint, there's a group of investigators who've done work in this area.

And so for us, we can't afford to look at seven failed trials that had been done in the past to try to get it right on migraine. And certainly that sponsor deserves a lot of credit for getting that work done, because ultimately it got there.

For us, is we want to make sure that we use our capital very wisely, try to take an indication where there is a demonstration of proof of concept, where there is a path to approvability and where this drug, RT002, with its safety, efficacy and duration benefits can have a meaningful basis for helping those patients, which today don't have a lot of good alternatives.

And is this indication covered through the [BTRX parent] portfolio and maybe expanding on the BTRX patent portfolio? And maybe expanding on the BTRX patent portfolio, do you think any of the current neurotoxins are infringing on any of those patents you purchased?

I think that we have a lot of IP that's in and out of BTRX and our own IP, that RT002 is unique, this botulinum toxin with this peptide excipient. We've tried to develop picket fences around a number of indications and we think we have a very strong IP portfolio that's both offensive and defensive.

When we saw the Belmont data at AAD this year, it seemed like there was maybe a tale of potentially longer responding patients. Have you been able to dig into that more now that we're something like four months since that presentation? And I guess will you discuss this in your upcoming publication?

So we've really been focused on getting that dataset off into the manuscript and have the investigators get it submitted to a peer reviewed journal. That's really been the focus. We've tried to get out as much information as we could at the time of the AAD and I think if it works its way through the peer review process, they will certainly look at that in a very holistic and broad way.

Some of the things will be things you've seen before, but it doesn't change the fact that we think that RT002 in that active placebo control trial outperformed the market leader in virtually every which way you looked at that. And hopefully that works its way through the peer reviewed process. It will be a nice contribution to the published literature on neuromodulators.

Thank you and that does conclude today's Q&A portion of the call.

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