Revance Therapeutics Inc (RVNC) 2016 Q4 法說會逐字稿

Welcome to the Revance Fourth Quarter and Full-Year 2016 Financial Results Conference Call.

(Operator Instructions)

As a reminder, this conference is being recorded today, February 27, 2017.

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

Thank you, Bruce. 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 and full year ended December 31, 2016. If you've not received the news release or if you would like to be added to the 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 2017 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 our technologies, regulatory risks and abilities to obtain regulatory approval, and uncertainties and future performance.

These forward-looking statements are based on the Company's current expectations, are 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, 2015, as filed with the SEC on March 4, 2016 and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K.

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 fourth quarter and year-end 2016 conference call. I am pleased to report that Revance finished 2016 strong with five active clinical trials underway using DaxibotulinumtoxinA also known as RT002 injectable. These trials include two Phase 3 pivotal studies and a long-term safety study for glabellar lines, a Phase 2 trial for cervical dystonia and a Phase 2 trial for plantar fasciitis.

As noted in January Time Magazine cover article, DaxibotulinumtoxinA has been dubbed the drug that's treating everything, with hundreds of potential applications. Available short acting Neurotoxin sales continue to experience annual growth rates in the teens, and we plan to enter the market with a long-lasting differentiated product.

The first neuromodulator market segments we've targeted facial aesthetics, muscle movement and muscular skeletal, represent more than $2 billion global market opportunity. Given extended duration and market potential of DaxibotulinumtoxinA, we believe the market can grow at even higher growth rates as we commercialize our pipeline.

So, what's different about RT002 from currently commercially available neurotoxins? RT002's innovation is rooted in its optimized formulation of a purified botulinum toxinA, combined and stabilized with a novel peptide excipient. This formulation appears to improve deliveries of botulinum toxin to the neuromuscular junction. Clinical trials to-date show our DaxibotulinumtoxinA for injection has led to longer duration and increased response rates without compromising safety.

Based on the BELMONT glabellar line results in the interims cervical dystonia data analysis, we have not seen any evidence that increased duration of efficacy leads to longer duration of adverse events. It is also important to note we believe the effect is not simply due to dosing of additional units. Our unique peptide married with our highly purified DaxibotulinumtoxinA appears to achieve more efficient toxin delivery and produce clinically desired outcomes. We believe RT002 will lead to more satisfied patients.

On our call today, I will first cover our recent business highlights, Lauren will review the financials and 2017 guidance, and then I'll close with our clinical updates before opening up the call for questions.

In the fourth quarter, we initiated additional clinical programs for RT002; the first was SAKURA Phase 3 program for glabellar lines, including both pivotal trials, along with long-term safety studies. The second was a Phase 2 trial in an exciting new underserved muscular skeletal indication, plantar fasciitis. In addition, we closed out 2016 with compelling interim results, safety efficacy in 24-week duration from our RT002 injectable Phase 2 trial for cervical dystonia, one of several muscle movement conditions.

While the initial cervical dystonia study protocol ended at 24 weeks, because of the enduring duration results observing cohort 1, we're now extending the follow-up period for the third cohort. Subjects who continue to show clinical benefit at 24 weeks will now be followed up to 36 weeks. Extending the study allows us to generate valuable efficacy and duration data.

As we announced in January, the interim cervical dystonia data was presented at the TOXINS 2017 Meeting in Madrid, as well as the 24 week data for the BELMONT trial. The cervical dystonia oral presentation of the abstract was awarded top honors at the TOXINS 2017, and our two presentations created significant scientific and clinical audience awareness.

The following week, the 24 week BELMONT results were presented in Paris at the 19th Annual International Master Course on Aging Skin World Congress, referred to as IMCAS.

The benefit of longer duration toxin with increased response rates resonated with the attendees at both meetings. And based on the feedback we received after the cervical dystonia presentation, reporting a medium duration of effect of 24 weeks was very well received by the neurology community since the currently marketed products are approved with eight to 12 weeks duration.

It is truly remarkable to see how after 30 years without a differentiated product, everyone is now starting to talk about duration, and why it is clinically and economically meaningful in determining which product to select to treat a particular condition.

We enter 2017 with excitement and a commitment to advance our scientific, clinical and pre-commercial activities through RT002, to improve quality of life for patients across a broad spectrum of needs. Revance plans to have an active scientific presence this year with data at the upcoming AAD Meeting in March and the AAN Meeting in April.

Now, let me turn the call over to Lauren to overview our fourth quarter and year-end results, as well as our financial out for 2017. Lauren?

Thank you, Dan, and good afternoon. Starting with our cash investments balance, we ended 2016 in a strong position with $185.5 million. Our cash burn in the fourth quarter of 2016 was $15.1 million and $67.6 million for fiscal year 2016, which was favorable to our 2016 guidance due to the timing of the initiation of our Phase 3 clinical trial and manufacturing activities.

The earnings release we issued today details our financial results, so I won't go through them on this call. The bottom line is that our net loss was $26.8 million for the fourth quarter and $89.3 million for the full year, consistent with our guidance for the year.

I would like to share a couple of financial details unique to 2016 and the first quarter of 2017.

First, during 2016, we decided not to continue clinical development of our RT001 topical for lateral canthal lines and hyperhidrosis. As a result, in 2016, we booked $9.1 million in impairment expenses related to RT001 topical manufacturing equipment, and $7.1 million of that was in the fourth quarter of 2016. I mentioned the impairment to call out that this expense, while included in our operating expenses, was an asset write-off and was not a cash expense in the quarter for the year.

We continue to be very strategic in our approach to fund-raising and cash management. Over the past few weeks through our previously filed ATM or at-the-market vehicle, we have raised $10.1 million in gross proceeds at an average selling price of $21.52. With these proceeds, we now expect our cash and investments to fund our operations into the fourth quarter of 2018, a quarter longer than we guided in January.

Turning to 2017, we are reiterating our guidance issued last month. Excluding financing activities, we expect cash burn for 2017 to be in the range of $102 million to $112 million. We expect 2017 GAAP operating expenses to be in the range of $108 million to $119 million - - which, when excluding the depreciation of $1 million to $2 million and estimated stock-based compensation of $13 million to $15 million - - results in projected 2017 non-GAAP operating expense of $94 to $102 million.

With five active clinical trials underway, Revance anticipates 2017 GAAP research and development expense to be in the range of $75 to $83 million, which when excluding depreciation of $1 million to $2 million and estimated stock base compensation of $5 to $6 million, results in projected 2017 non-GAAP R&D expense of $69 to $75 million. And with that, I'll turn the call back to Dan.

Thank you, Lauren. Looking ahead at the rest of 2017, as we outlined in the January clinical milestone guidance, we have a [news rich] year, reading out top line results for both Phase 3 pivotal trials in glabellar lines, 24 week and final results for cervical dystonia, and top line results to plantar fasciitis.

Let me give you an update on our clinical progress let's start with the aesthetic indication. In terms of RT002 for glabellar lines, enrollment in Phase 3 trials is nearly complete and we'll announce full enrollment once achieved. We are actively enrolling 300 patients in each pivotal trial and about 1,500 patients in the long-term safety study in more than 60 sites in the United States and Canada.

Top line results from two pivotal studies are expected in Q4 2017. Glabellar lines will be our first commercial launch. Even though treatment of frown lines with neurotoxins is nearly $1 billion market, the U.S. market penetration is low at below 10%. RT002 has the potential to expand that market by reaching consumers who avoid treatment due to the burden of frequent treatments.

On the therapeutic side, we continue to see subjects in the third cohorts in Phase 2 dose escalating clinical trial of RT002 for cervical dystonia. We expect to report the 24 week data for all three cohorts in the second quarter of 2017, potentially at a spring medical conference, and show additional duration data from the extension of the third cohort beyond 24 weeks in the second half of the year.

As to our new therapeutic program for RT002 in plantar fasciitis, we continue to enroll patients in our Phase 2 trial and are targeting 60 subjects in the United States. We expect to have results in the second half of 2017. Plantar fasciitis represents our first venture into pain and inflammation, and could lead the way for additional indications in the future.

Going into 2017, we have an active podium and publication program underway. We plan to present data at a number of medical conferences and in peer-review publications, including the recent data presentations at TOXINS 2017 and IMCAS and in Europe. Those presentations serve to build awareness and consensus on the clinical evidence, RT002's ability to increase subject response rates and extend duration of effect.

In both aesthetic and therapeutic medicine, RT002 could translate into fewer office visits and higher patient satisfaction as carried over a longer period of time. Specifically, in therapeutic indications, RT002 may provide patients with a significant quality of life benefit.

As we continue to deliver clinical data showing longer lasting response and increased response rates, we believe our toxin can capture first line therapy status and therapeutic indications we choose to pursue. We are determined as ever to bring our next generation neuromodulator to market and are busy with pre-commercial activities. Lauren and I look forward to updating you on our progress on future calls.

In terms of travel schedule, later this week we'll be in Orlando to speak at the Dermatology Summit and present poster abstracts on the BELMONT study at the American Academy of Dermatology Meeting. On March 7th, we'll be in Boston, at the Cowen Healthcare Conference, followed by a day in New York.

On March 14th, we'll be in Miami at the Barclays Healthcare Conference, and the week of April 3rd, we plan to be in both New York and Boston to meet with investors. Please let us know if you'd like to catch up when we're in your city.

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

Thank you. (Operator Instructions). And our first question comes from Ken Cacciatore from Cowen and Company. Your line is now open.

Just a question as we continue to wait for the cervical dystonia data, I know you talked about the label, the BOTOX label duration. Can you give us the anecdotal comparison that we should be thinking in clinical practice as we use that thought as the baseline, as we look at the duration from your study. Can you help nuance that, so we have the right comparison as we go into that disclosure?

I think that from our perspective in designing the trial, it has been to get well beyond that eight to 12 weeks of duration for the current short-acting n-toxins. I think we were very pleased on the initial cohorts that reported on the cervical dystonia.

These are not just a few weeks - - it's actually a few months, getting beyond six months - - and I think as we went back to the investigators when we got the feedback from the neurology community, that's really what guided us to extend the follow-up beyond 24 weeks out to 36 weeks. It really highlights this part of this label that we want just to be such a compelling obvious reason for patients to seek another treatment alternative with a longer lasting toxin because of the safety, efficacy and pharmaco-economic benefits that comes with that, and really have that reinforced in a label.

And that's what we've done as part of this dose-escalating trial - - it's what we expect to do to have it confirmed and in the Phase 3 study that will follow.

And although premature, clearly we have to wait for the glabellar study results, but it sounds like in cervical dystonia, it sounds like we could be getting even much longer duration. Is there any explanation as to why that could be?

Is it because the dosing is higher, or the type of area in which you are treating? It sounds like we - should get more and more build up about the CV and the therapeutic use and duration. Is there any explanation behind that?

Yes, I think it's, from our perspective, it's the muscles that you're injecting, it's the number of injections, and obviously it's larger dose. So, what we've tried do with the glabellar lines and the cervical dystonia data is really validate the platform of why this Daxibotulinumtoxin formulated with the peptide gives you more efficient delivery of a toxin to those neuromuscular junctions.

Regardless of whether you're looking at low doses in the case of glabellar lines, or in the larger doses with the cervical dystonia, you're seeing significantly longer duration. Now, we took from the three to four months in the case of glabellar lines now out to six months, we'll have that confirmed and it's part of Phase 3, whether we're at six maybe something longer.

But it was very much a finite number of injections in glabellar lines, five injections with the six aliquot in each one. In the case of cervical dystonia, you're looking at a number of muscles where investigators were allowed to treat up to 200, up to 300, up to 450. What we're finding at those doses that it is really exciting to see those patients who've got debilitating disease - - in this case cervical dystonia - - but our expectation is that will hold true in other muscle movement, really into that profoundly longer duration.

Now, whether it's proportionately longer relative to glabellar, I think that will require additional confirmation in Phase 3. But I think we're just really encouraged that, regardless of low or high dose, whether you're looking at something finite in the case of glabellar lines or sort of more defuse disease and more injections in cervical dystonia, we're still seeing comparably longer durations.

Thank you. And our next question comes from David Amsellem from Piper Jaffray. Your line is now open.

Hey guys, this is Sameer on for David. So, in a hypothetical scenario where you don't get the differentiated duration effect on 002 in the Phase 3 that you're looking for, would you look to pivot quickly to a therapeutic indication that is not another neuromodulator labels, or would you continue to pursue 002 in the aesthetic setting? And then I have another follow up after that.

Sameer, I'll take the first one. I think based on what we've seen, non-clinically but we saw in the clinical study, the BELMONT, what we saw at BELMONT that we still expect to see the same type of duration that we've seen before I think it would be very unexpected to see something less. But obviously we need the data that confirm that.

And because we mentioned we've almost completed enrollment in the glabellar line and we'll certainly make that announcement, we'll come back this year and have an answer to that question that you just presented. But I think at this point, our challenge is much like what was stated on the cover of Time Magazine.

This is a drug that has tremendous versatility. We think RT002 in the case of facial aesthetic changes the treatment paradigm. It allows patients who don't want to be injected who maybe haven't jumped into treatment yet, have a different treatment algorithm. And for those who are in treatment, nobody looks forward to being injected, that this will be longer duration and quantitatively how much longer it will be determined.

In the case of cervical dystonia, what makes the cervical dystonia data so encouraging to neurologists is that it's a well-defined, well-accepted scale, the number of injections, the ability to access those cervical muscles and have a definitive endpoint to show longer duration is something that's really exciting.

And I think once we get plantar fasciitis later in the year, it allow us to triangulate facial aesthetics, muscle movement more generally and then the pain and inflammation. And now you bracket around those hundreds of indications that the Time magazine article referred to, with this particular molecule and its versatility.

So with that, I think we've got plenty in our clinical pipeline for this year. We think the probability of success is high given what is known with botulinum toxin and we just need to confirm what we've seen before.

And then just a quick follow-up on that, if you do see favorable data in plantar fasciitis, and where to advance 002 there, what other therapeutic adjacencies would you consider pursuing in the broader orthopedic or sports medicine space?

I think we think in clusters, when we look at those indications that are in the pipeline this year. And I think to your question, we see a number of opportunities in muscular skeletal, whether it's indicates - -- in the case of plantar fasciitis, which really is a pain and inflammation phenomena - - there'll be others in rotator cuff and in a number of sports medicine or consumer type applications.

But it also can steer you back into the more therapeutic indications for pain, as well.

Our challenge is not so much to articulate the five things we're working on this year, but where are we going to guide this platform. And I think strategically this was an important couple of years for us to really validate the platform, and now we can make really good choices based on the data.

And like I said, at those low doses and the high doses, to determine what is the right priority or the ranking. And quite frankly, that will be our challenges. How many indications can we work on while we're concurrently trying to get RT002 approved? Our focus is to move less away from development and more to a commercial product but also begin to build a strong pipeline behind it. It's an exciting time for the company and I think that's what's reflected in our current development at this point.

Thank you. And our next question comes from Tim Lugo from William Blair. Your line is now open.

It sounds like you've been busy presenting your data in Europe. Can you give us a flavor of what was presented over there for those of us who couldn't make it to the presentations? I believe we were waiting for some two point improvement data in glabellar lines, and I think you've only provided one point data improvement in the past. And, geographically was it received any differently from how US physicians have been receiving the duration data, so far?

Yes, Tim, I think it's part of that that data set is really been to continue to look at data and put ourselves in position for the peer reviewed manuscript, which we hope will be later this year. That's beyond our control, but I think what we're seeing is that enthusiasm is starting to resonate in the marketplace, and we presented most of the prime efficacy base on that one point change.

Whether we're looking at it none to mild or two point, this drug continues to perform exceedingly well. And as that data becomes published through the year, you'll start to see more of that. In Europe, there was some comment by the investigators that they'd look at two point movement as being better than the active comparator, and that'll get out there in due course.

And for glabellar lines, is there any thought into going out to 36 weeks, given what we're seeing in CD? Or is it just, as you mentioned, the difference in doses, and we're seeing just greater durations in CD regardless?

I think that we'll - - at this point Tim, once you unblind it, we're at that 24 week later in the year, that it would be hard extend it beyond that. We may elect to follow those longer, but it won't change the data. Where it would maybe change is up subsequent studies that we might do but look at longer duration, it could be Phase 4 or could be other studies that we may do outside the US, or in the US.

So, I think at this point we feel like the 24 weeks or longer, you will get cross section of patients, you'll have all of them out 24 weeks, and you some that go beyond that to give you some inference on what the medium duration could look like as you look at indications at that dosing.

And one last question for Lauren, it sounds like you've been opportunistic with the ATM. Are you going to continue to be opportunistic or if Q4 2018 a timeframe you're just more comfortable with, given your data flow this year?

As we look at the opportunities set for our toxin, we wanted to make sure that we did have the capital in hand to fund. If you look to our goals and things - - all the goals and the things that we do - -- we're also very glad that cash runway out. Overtime, we will continue to be opportunistic and finance the business, but we've been very careful and judicious, as you can see, and not putting a lot of stock out there.

And our next question comes from Louise Chen from Guggenheim. Your line is now open.

This is [Lana Hassanam] for Louise Chen. Congrats on the updates this quarter. What's your timing on deciding on additional indications for RT002? And on the manufacturing side, how should we think about scaling up for potential commercial launches?

Dan Browne: From my perspective, from a management's perspective, we think focus is our friend. And we really want to focus this year on execution of the pivotal trials, which will put us in position to look at completing the safety study next year, so we can file in building the pipeline behind it.

I think for us, just generate the data and we'll make a thoughtful decision on what's going to move forward in the Phase 3 trials in cervical dystonia and plantar fasciitis and what else we may add to that. So, we don't have a defined timeline to make that decision.

And on the manufacturing side?

On the manufacturing side, we're going to launch out of this facility. We feel very comfortable what our capacity on both API and finished drug product. As we add-on indications, we look at our capacity, what we may do by ourselves, what we may do in partnership. We may look to expand beyond that.

But right now, we're in position to launch out of this facility. And I think our expectations for the number of unit and for number of vials is pretty high. If we need to drop on additional aesthetic fill - finish capabilities, we will do that. But we are at full commercial unlimited capacity on API. We're very comfortable with where we're at.

And our next question comes from John Boris from SunTrust. Your line is now open.

Just on the glabellar lines trials, and especially the long-term trial with 1,500 patients. Just any qualitative guidance you can give on how that's going? One would assume that that's possibly a rate-limiting step?

Second question, as you think about therapeutic and/or cosmetic mechanism of action - - and especially since the FDA is probably going to want that delineated, one would think - - what kind of progress have you made on mechanism of action?

And, last question just has to do with CMC. It's an area where a lot of your peers have faltered on that section, leading to regulatory delays. Can you provide an update on any progress you've made on the CMC section?

John thanks for the question. I'll take the enrollment rate on this one. As we mentioned in the introduction, we'll provide clarity when we fully enroll the pivotal trials. We expect to complete enrollment in all three of those trials this year and we feel good with the enrollment.

With the type of centers, the number of patients have presented, enrollment has not been an issue, and we're really pleased that it's not only the number, but high quality patients to make sure that you get the information you need. And we feel good about that.

Any comment on dropout within the trial so far?

No, I think our enrollment, our retention, is very strong.

OK, great.

As far as mechanism, based on the data that we've seen so far, we haven't changed the mechanism of Daxibotulinumtoxin Type A. It's a formulation science using the peptide to stabilize and create greater efficiency of targeting those neuromuscular junctions. We haven't changed the mechanism. It's an excipient, and got an active (inaudible), and that's been our strategy as part of both non-clinical, clinical and CMC, which is your final question.

On a CMC basis, we've elected to do the right thing and make the investments over a long period of time - - that's both capital into the assets, the infrastructure, and that's into the processes and into people. And we've made significant investments. We feel very good as where we're at, from CMC perspective.

Having that experience, having that repeated history of batches with API and finished drug product, has strengthened the manufacturing CMC operations over last several years. We feel very good with where we're at. We obviously got some work to do to consolidate that data into a BLA package.

But we're feeling very confident, from a CMC perspective, that we can identify not only the toxin but the peptide and the combination of the two, as far as the finished drug product.

Thank you. Our next question is from Difei Yang from Aegis. Your line is now open.

Good afternoon, thanks for taking my questions. Just a couple. The first one is on plantar fasciitis - - I was wondering if you could remind us the dosing that's been tested in the Phase 2 study, and where is the study been conducted?

So, from a dosing - - it's below 200 units usually 160 or below. So, we're below what we saw in the lowest dose of the CD trial. So we don't comment exactly where we inject or how many injections, it's a single setting. But we're well below the threshold we were in the lowest dose of cervical dystonia.

The work is done out of the US. We mentioned one of the centers was in North Carolina, and that's all the comments that we're making at this point on the study design. And I would steer you to clinicaltrials.gov if you'd like more information on [giant defect].

Another question is relative to - - we know that BOTOX, over a period of time, it develops neutralizing antibodies. So given RT002 is a long duration formulation, do you think it will potentially be helpful, or - - I'm just trying to get your thoughts on where you think whether it will be helpful, or less helpful in terms of developing neutralizing antibodies?

So, as you know, Difei, the amount of toxin is very, very low - - you're on a nanogram scale. And what we've done as part a more contemporary manufacturing process is have a more purified dose form. We've removed all those accessory proteins from the - - that are in a botulinum toxin complex.

What we have done as part of our innovative platform is to stabilize that molecule with the peptide, and that gives us a more purified dose form. So, the combination of the purity and the very low quantities, we haven't seen any evidence of antibody formation of that. We obviously will collect that data as part of the long-term safety study where you've repeat administration. But at this point, we're encouraged with the non-clinical and clinical data that we've seen that is not showing any evidence of antibody formation.

At this time, I am showing no further questions. I would like to thank everyone for joining today. This does conclude the program. You may now disconnect. Everyone, have a great day.