Revance Therapeutics Inc (RVNC) 2016 Q3 法說會逐字稿

Welcome to the Revance third quarter 2016 financial results conference call. (Operator Instructions) As a reminder, this conference is being recorded today, November 3, 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.

Thank you, Stephanie. Joining us on the call today from Revance Therapeutics is President and Chief Executive Officer, Dan Browne; and Chief Financial Officer and Chief Business Officer, Lauren Silvernail.

Earlier today, Revance Therapeutics released financial results for the quarter ended September 30, 2016. If you have not received this news 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 website 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 2016 financial guidance; 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 financial performance. These forward-looking statements are based on the company's current expectations and inherently involve significant risks and uncertainties. The actual results and the timing of these events could differ materially from the 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 quarterly report on Form 10-Q for the period ended June 30, 2016, as filed with the SEC on August 5, 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. Dan?

Thank you, Jeanie. Good afternoon and thank you for joining our third quarter conference call. Revance is intensely focused on the advancement of science to improve the way botulinum toxin and other drugs perform today and in the future. Our lead candidate, DaxibotulinumtoxinA for Injection, commonly known as RT002 injectable, is highly differentiated, and its performance is not simply based on units administered. As we believe our current clinical trials will prove, our unique peptide complex, combined with our highly purified botulinum toxin type A, has the potential to be the first long-lasting injectable formulation of botulinum toxin and, thus, the first truly new neurotoxin product in nearly 30 years. Reducing the frequency of injection improve safety, efficacy, and the risk/benefits associated with the use of highly potent neurotoxin drug products.

In recent months, we've advanced programs in glabellar lines, cervical dystonia, and a new indication for plantar fasciitis. As of today, we have three active and synergistic clinical programs for RT002 injectable. Here are the details.

First, our Phase III program for RT002 injectable for glabellar lines. We have filed and successfully opened the IND with the U.S. FDA and the CTA with the Canadian regulatory authorities, and are moving forward with the Phase III clinical trials to treat frown lines. We have simultaneously initiated activities for both the Phase III pivotal trials and the long-term open-label safety study.

The Phase III program will be conducted at more than 50 sites in the United States and Canada. We are now training investigators, who are on track to start enrolling and dosing patients this quarter. We anticipate enrollment will proceed very quickly. We expect to enroll up to 400 patients in each pivotal trial and about 1,500 patients in the long-term safety study. You can expect top line results for both pivotal trials in the fourth quarter of 2017. We estimate the worldwide glabellar line market is nearly $1 billion, and the botulinum toxin market continues to grow in double digits. A long-lasting, highly differentiated toxin could capture significant share while also helping to fuel continued growth in the category.

Moving on to RT002 injectable for cervical dystonia. Cervical dystonia is a debilitating condition characterized by involuntary muscle contractions in the neck. There are several strategic reasons why we chose to pursue cervical dystonia. First and foremost, those patients are seeking a longer duration effect than the eight to 10 weeks that is commonly seen at any dose of the commercially available botulinum toxin products. These products are labeled to be dosed to no more frequently than every 12 weeks and can begin to wear off at eight weeks to 10 weeks; so patients go weeks without much-needed relief.

Second, just as glabellar line treatment is the ideal indication in which to evaluate and compare safety, efficacy, and duration of botulinum toxin for aesthetic indications. Cervical dystonia is the ideal indication in which they demonstrate safety, efficacy, and duration at higher doses for therapeutic indications. This is due to cervical dystonia having a clear primary and secondary endpoints, plus a well-validated, quantitative scale, which enables assessment and improvement as well as the future related adverse events, such as dysphagia and muscle weakness.

Third, there's an established global regulatory path to approval. And fourth, we believe demonstrating longer duration of RT002 in both glabellar lines and cervical dystonia, along with delivering a strong safety profile, has the potential to clearly demonstrate the value proposition for RT002, and that Revance's technology does not deliver just another old-generation, short-acting botulinum toxin type A to the market. Our cervical dystonia dose-escalating open-label trials started last year with cohort 1 dosing up to 200 units.

Today, the Phase II continues according to plan. We're pleased to report the Data and Safety Monitoring Board reviewed the data from cohort 2 at up to 300 units and approved moving ahead with cohort 3 at up to 450 units. In fact, enrollment in cohort 3 is nearly complete. Before the end of December, we expect to release the interim results from cohort 1 and cohort 2, including safety, efficacy, and duration.

Finally, I'm excited to talk about our latest indication, plantar fasciitis. As we announced this morning, we've initiated a Phase II trial for plantar fasciitis, this new indication for neurotoxin. Revance set the opportunity to be first to market with an approved neurotoxin therapy to treat this painful foot condition afflicting an estimated 10% of the American population during their lives. More than 2 million adults undergo treatment for plantar fasciitis in the United States annually.

The plantar fasciitis is a broad ligament that connects the heel bone to the base of the toes. It acts like the shock absorber of the foot. Once injured, weakness, swelling, irritation, or inflammation sets in, causing pain and stiffness in the heel and the bottom of the foot. Based on my own personal experience as an aging athlete, I can tell you plantar fasciitis causes excruciating, chronic pain, making the exercise and just ordinary walking very difficult. Published literature indicates botulinum toxin administered to the plantar structures decreases tension and blocks pain within the fascia, allowing healing to take place.

Today, the U.S. market to evaluate and treat plantar fasciitis exceeds 250 million. This estimate includes generic, low-priced corticosteroids that do not adequately treat the condition on a timely basis for all patients. A new, targeted approach that provides patients with sustained release from chronic heel pain could significantly grow the market.

Our Phase II placebo-controlled trial will evaluate the safety and efficacy of a single administration of RT002 injectable in reducing the sign and symptoms of plantar fasciitis. We plan to enroll 60 subjects in the United States. The primary efficacy endpoint is the improvement in the American Orthopedic Foot and Ankle Score. Subjects will be evaluated for 16 weeks after single treatment, and we plan to report results next year in 2017.

Strategically, we picked plantar fasciitis for a number of reasons. First, there is a significant unmet clinical need. Second, it's a large market, and it's complementary to cervical dystonia and other muscle movement conditions. Third, there is an established clinical experience with botulinum toxin, which increases the probability of technical success. Fourth, the primary endpoint is well characterized using the American Orthopedic Foot and Ankle Score. And finally, the scale is the most widely used instrument for clinical studies of the foot and ankle. This trial allows us to target our first pain indication and generate proof of concept in Phase II without the time and expense and variability that comes with certain other pain trials, such as migraine.

It is important to note that success with this plantar fasciitis indication could support our exploration of RT002 to treat other pain and inflammation indications; some of which are covered by our newly acquired patents from BTRX. As I've indicated, we are fully focused on RT002 injectable and moving our lead candidate forward on a number of fronts.

With that update, let me turn our call over to Lauren to cover the financials.

Thank you, Dan. Starting with our cash and investments balance, we ended the third quarter with $201 million. Our cash burn for the third quarter was $16 million and $53 million for the first nine months of 2016. Net loss for the third quarter was $18 million compared to $19.2 million for the prior year quarter, driven primarily by lower R&D expenses for RT001 topical, offset by an increase in clinical trial and manufacturing CMC expenses for RT002 injectable.

Our common shares outstanding as of today are 28.5 million. Our fully diluted shares outstanding, not on a treasury basis, at the end of September were 31.4 million shares, including 2.9 million granted options and warrants.

Turning to our guidance. We are updating our expense and cash expectations for 2016. We currently expect to end 2016 with cash and investments in excess of $165 million, which is an $11 million increase in cash and investments from our previous guidance. Tight expense management has resulted in lower-than-planned expenses. With three trials now underway, we expect our cash on hand will fund our operations into the second quarter of 2018. We will provide a more fulsome update on 2017 cash burn expectations early next year.

For 2016 non-GAAP operating expense, we now expect to be in the range of $70 million to $80 million, excluding depreciation of $2 million to $3 million and estimated stock-based compensation of $12 million to $13 million. With three RT002 injectable clinical trials underway in the fourth quarter, we now anticipate 2016 non-GAAP R&D expense to be in the range of $47 million to $53 million, excluding $2 million to $3 million of depreciation and estimated stock-based compensation of $6 million to $7 million. For modeling purposes and assuming no material issuances of equity, we expect our 2016 weighted average shares outstanding, excluding unvested restricted stock, will be approximately 28 million to 29 million shares.

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

Thank you, Lauren. We have busy fourth quarter with initiation of the Phase III program for glabellar lines, enrollment and dosing in the new Phase II study for plantar fasciitis, and a key milestone of reporting interim results of the Phase II trial for cervical dystonia, which we look forward to achieving before the end of this year. As we head into 2017, we continue to be excited by the prospects of RT002 injectable to be a game changer in the field of neurotoxins. Our unwavering goal is to become a global neurotoxin leader in both aesthetics medicine and underserved therapeutic specialties.

In terms of travel. During November, we'll in the U.K. at the Jefferies London Healthcare Conference and in New York for the 28th Annual Piper Jaffray Healthcare Conference. In December, we'll be in Boston to attend the fourth Annual Guggenheim Healthcare Conference. 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'll now open it up for questions. Operator?

(Operator Instructions) Our first question comes from Louise Chen with Guggenheim Securities.

Hi, it's Brandon Folkes on for Louise. I've just got a few here. Can you provide more color on the cost of the upcoming plantar fasciitis trial? And then secondly, if your injectable toxin is approved for both cosmetic and medical indications, how do you think about pricing between the two major categories? And can you charge different prices for cosmetic versus medical products? And then, yes, I know you touched on it, but -- you touched on sort of the access, but any publications or data presentations at medical conferences planned in the foreseeable future?

Great. Hi and thanks for joining the call. This is Lauren Silvernail. Let me take the cost part of the question first, and I'll turn it back to Dan. On the cost side, because this is a 60-patient trial, we expect the full clinical cost will be in the range of USD1 million to USD2 million and really at the lower end of that range. So it's a great value for us to explore this indication for a whole host of reasons.

So as we've chatted about before, the synergistic nature of this molecule allows us to do both cosmetic medicine and therapeutic. And we believe the best approach for us is to look at both. And we'll move forward looking at establishing the value proposition in actually addressing these conditions, both in the aesthetic side and the therapeutic side.

We don't have to make that choice on pricing today, but we think the performance is such that it'll allow us to drive a premium price for both the therapeutic and the aesthetic indications. And we'll let the data sort of play itself out at the time of approval but making sure that we maximize the value to those patients, to those physicians and those payers.

Our next question comes from Ken Cacciatore with Cowen and Company.

Just a couple of quick questions. First, ahead of the cervical dystonia data, I wonder if you want to help set some parameters of what we should be thinking in terms of what's a good hurdle to overcome. So I know you don't have the data. But can you maybe frame vis-a-vis BOTOX what would -- what we should be considering as we go into it as good data?

And then on plantar fasciitis, just wondering, why would we go to an indication that there's no kind of formal BOTOX studies? It seems that we want to try to -- the way that it kind of create maximum value here would be to do things that would compare, like stroke or spasticities, where we kind of know what BOTOX does, and we can show that 002 is really differentiated from BOTOX. So wondering why go outside. I know that there is kind of lose studies done on BOTOX, but nothing is definitive as an approved indication. So why wouldn't we be going after an approved indication and really keep on pushing that differentiation?

Sure. Ken, I think we'll start with the cervical dystonia data. We've based our discussions with physicians and patients and payers based on the labeled indication for the neurotoxins. So if you've got -- go seen up to no more frequently than every 12 weeks, we've got patients who really are often anywhere from eight to 12 weeks, depending on what data set and the severity of the underlying dystonia.

Most likely in the glabellar line, we want to extend that in a clinically meaningful way beyond those data sets. The longer that is, as long as we don't change the safety profile and we're continuing to add the therapeutic benefit, allows us to have a much more differentiated product than the commercially available toxins, which are effectively performing at least by label pretty similarly. For us is we want to extend that duration and still have that very strong safety profile. So the longer that is, the better that it is. And we'll have that data in the first two cohorts that allows us to come back and benchmark to that less than 12 weeks duration.

As far as the indication for what's next, we really like the pain indication as our next. We felt that cervical dystonia, at the doses that we're looking at, at 200, 300, and 450, could carry over and be very informative to what you would see in the upper-limb spasticity that has been done with the current products. They're all behaving about the same.

For us is we really wanted to carve out a new opportunity but yet not going into it blindly. There is clinical data that looks at the performance of botulinum toxin because the center of that was very active in the early days of cerebral palsy and spasticity and helps sort of build that initial use of toxins in those areas. We wanted to take that initial thinking and move into a migraine that we could move very cost effectively.

Lauren highlighted the cost is relatively inexpensive. We'll use cervical dystonia to address the muscle movement, CD, and upper-limb spasticity. We use plantar fasciitis as an entry point in the pain. If the data in the plantar fasciitis addresses some of the pain mechanisms, it allows us to go ahead and reprioritize around other pain indications which we think are also equally attractive.

So it was high probability to success, generating the data and do it in a very cost-effective way. It's not that we won't get the upper-limb spasticity and lower-limb spasticity. I expect that we will. It's about really using the platform to show that the science across indications from low dose to high dose is not just another older-generation toxin. This is meaningfully different, whether it's pain, whether it's muscle movement, or whether it's aesthetic lines. And that's the basis of our strategy moving forward.

Great. Ken, this is Lauren. On that, on the commercial side, from a portfolio standpoint, as we grow this business, it makes sense for us to have indications where there is lower competitive intensity across. And so with the absolute lack of competition today in plantar fasciitis combined with the strong published data, we felt it was a great place for us to go commercially.

Our next question comes from David Amsellem with Piper Jaffray.

This is [Sameer] on for David. Just two quick ones here. I know you've touched on this a bit, but can you talk more about potential expansion opportunities for RT002, maybe in migraine or overactive bladder? Also, are there other market opportunities beyond what you discussed today that aren't in the BOTOX label that you are considering exploring? And the extent that you are, maybe could you provide more color on that? Thanks.

Our challenge is to balance being laser focused in getting the product approved, which is what you see with the glabellar line. We are attacking this simultaneously with two pivotal trials in the open label to try to do whatever we can to accelerate the filing in and ultimate approvability. Conversely is we want to go after the muscle movement that we just talked about. Those are the two largest areas, particularly around the dystonia, and this is the overall muscle movement, wherever it presents anatomically.

Our challenge is to also, without losing focus, look at other areas. We announced the plantar fasciitis. But there is virtually an unlimited opportunity of using a very unique, highly differentiated, either to follow the existing path that is a part of the 11, 12 approved indications or for us to sort of move where the toxin is being used clinically, where there is clinical data, there is manuscripts, there is evidence of some early encouraging findings and to carve out our own domain.

So that's really what we're conveying here in this strategy, in this call. And I think it's an exciting time to at least sort of respond to the clinical community, whether it's in the dermatology, the neurology communities, or whether what we're starting to see in the foot and ankle, whether it be surgical or whether it's podiatry. They see the value of a new, differentiated toxin.

Our next question comes from John Boris with SunTrust.

First one, I'm not sure if you mentioned this earlier. Got on the call a little late. But on cohort 1 and 2, where will you present the data from cohort 1 and cohort 2 in cervical dystonia? And then on the plantar fasciitis opportunity, have there been any competitive trials that have been done with a botulinum toxin in plantar fasciitis? If so, what have you learned from that? What type of dose and duration will you use? And any thoughts on what KOLs have indicated about the potential advantages of using the toxin versus over that of steroids or non-steroidal that are used there?

Yes, good questions, John. Let me take the where will we present the data. What we will do at the end of this year, most likely start with press release. And then we'll look at opportunities at one of the closest neurology meetings, whether it's the AAN or some other venue to actually have the data presented. We still have cohort 3 outstanding, so we want to make sure that we don't run any conflicts with that particular cohort. But we obviously want to get the data out. We think the safety, particularly at high doses, given the rate of dysphasia and muscle weakness, if we can sort of present even at the higher doses a very strong safety profile but start to look at the duration from -- starting that two up to 200 to 300, we think those two cohorts, if clinically meaningful this year, allow us really to start looking at a dose that we're going to move forward with for the pivotal trials.

So we'll get it out there as soon as we can. As far as the plantar fasciitis, there is a fair amount of published literature that the doses range from very low, the 40 or 50, to up to a couple of hundred units. What matters is where the drug is injected, the dose is injected, the amount of diffusion. You don't want a highly diffused. You want a very targeted approach.

And so we went to a site that's been very active in use of toxins all the way back to the very first days, the cerebral palsy, who's been - who's an orthopedist by training. And we felt that institutional knowledge allowed us to sort of take what had been done with neurotoxins with plantar fasciitis to a whole another level. And it's part of our proprietary platform as we look at this indication, whether it'd be the compositions in RT002 or how we dose or where we inject, to really make this a sustainable treatment alternative, that what you see with boots, which are problematic, expensive, patients don't comply; and the corticosteroids, which are relative short acting, but then days or weeks, and limited in their ability to use chronically because you -- what you don't want to do is administer those corticosteroids more than 2 or 3 times a year because you start to run the risk of changing the fat pad under the foot and actually amplifying the condition, and that's associated with the underlying fasciitis. So we think toxin visibility to address the underlying tension and inflammatory process gives us a very unique opportunity to treat this pain condition.

If we're successful here, as we said, we think that, that will open up opportunities in other pain indications, whether it'd be migraine or some of the other things, where you'll not only be looking at the underlying pain mechanisms, but you'd be looking at duration as well.

Our next question comes from Tim Lugo with William Blair.

The plantar fasciitis indication is obviously pretty interesting. Can you maybe talk about the placebo arm in the trial? And are you going to allow pain medication, any rescue medication? Also beyond the tool you are using, are you going to be collecting daily pain scores or any sort of diaries?

So we've randomized 10 patients one-to-one between placebo and the RT002 group. We'll follow the same regimen as far as stretching, and then we'll be following those patients out to 16 weeks. So we'll be capturing those as part of that foot and ankle score, which is a clinical score that looks at both the pain as well as the alignment and function of the overall foot.

So we'll be capturing those scores. It is a very widely used scale. We think it was the best starting point for us that will be used as part of our development of our PRO, where a lot of those things that you're getting to -- because this is such a unique treatment, where you're sort of taking this to another level, it is either based on the corticosteroids or the boots. So we'll be putting that package together once we get the data from this Phase II trial. It should be very highly informative relative to placebo, and we think it's a controlled data set that will hopefully take us to the next stage of development.

Okay. And will there be dosing? And then the next assessments using the score, will be -- that will be at 16 weeks, or will it be maybe some interims in between? I am just thinking about how many data points you'll be collecting in the trial.

Well, we think the 16 weeks is really the critical because that is really the sustained durability of this over a corticosteroid, which is obviously much, much shorter. So that is the efficacy end point and we think that it's most important. We'll be looking at earlier parameters around safety. And so we'll be getting those at earlier time points and collecting data along the way. But I want to come back and reinforce, it's -- when you're addressing both the pain and the inflammation, you really need time for that tissue to remodel following an injection. So it's important to look at the sustainability of the treatment, not just what you see in the first couple of weeks.

Understood. And I think in back pain, there is a protocol where there is multiple injections along the affected vertebra. Is this -- will there any sort of multi-dose portion of this? Maybe -- I think you said there's only one injection.

Well, it's -- there's multiple injections, one treatment setting. So where we're injecting, we're not commenting on today. We'd like to keep that proprietary for now. But as we look at that, it will be addressing the underlying fascia as well as some other anatomic structures in the foot and ankle that goes to address as underlying inflammation and pain of the fascia.

Okay. And maybe just one last question on the CD trial. It sounds like you're tired of hearing about the dose differences between 002 and BOTOX. When we see the first two cohorts of data, do you think that there is going to be enough data to kind of definitively compare the two in terms of dosing differences, that's not just a double X dose of BOTOX, but it's truly differentiated?

Well, look, I think that whether you look at the preclinical work, whether you look at BELMONT, which is probably the best data set so far, this is not just doses. This is not just the number of units. I mean I think that 30 years is plenty long. If you could simply add more units to extend duration, it would have happened by now. And I think if you look at approved drugs, I think we can find very few examples. Once there is a labeled indication, that if you just add more of it, pick your drug of anything that the efficacy gets much better.

So I don't see that unit argument holding true preclinically. It certainly hasn't trailed, held true clinically. And for us is we picked a dose that gave us the best triangulation of safety, efficacy, and duration. And like I said, this is a new generation of neuromodulation, using the toxin and the peptide in a unique way. This is not just another type A toxin. And we feel that, that's the best way for us to compete and do it in a way where you don't have to change the reconstitution, you don't have to change the dosing. You give physicians who are using neurotoxins a seamless way to move from the older generation to a new generation of toxins that, hopefully, if the data holds true, gives us the same safety profile, the same efficacy but fundamentally longer duration.

Thank you, ladies and gentlemen. That concludes the Q&A session and today's conference. You may all disconnect.