Revance Therapeutics Inc (RVNC) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Revance Third Quarter 2017 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded today, November 2, 2017.

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, Sandra. 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 September 30, 2017. If you've not received the news release or 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's 2017 financial guidance, clinical developments 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 ability to obtain regulatory approval and uncertainties and future performance.

These forward-looking statements are based on the company's current expectations and inherently involve significant risks and uncertainties. Our actual results and the timing of 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 quarterly report on Form 10-Q for the quarter ended June 30, 2017, as filed with the SEC on August 4, 2017. 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?

Thank you, Jeanie. Good afternoon, and thank you for joining our third quarter conference call. We had an extremely productive year at Revance and had consistently delivered on our clinical milestones and financial guidance. We're very excited about the prospects of our distinctly unparalleled next-generation neuromodulator, DaxibotulinumtoxinA for Injection or RT002.

We have set our sights on entering the market with the first long-acting neuromodulator for facial wrinkles then follows an expansion into a broad range of neurologic, muscular and pain conditions. We chose our initial indications to validate the performance of our neuromodulator platform and show success in low doses and in high doses and in both small and large muscles.

Before I go into recent clinical highlights, let me just recap 2 additional -- 2 additions we made to our management board in the third quarter. In September, we welcomed our new Chief Commercial Officer, Todd Zavodnick. Todd has more than 20 years of leadership experience at ZELTIQ, Galderma and Alcon, and knows the medical aesthetics and specialty therapeutics markets intimately. He has hit the ground running working on the Revance product launch velocity plan.

We also welcomed in September our new board member, Mark Foley. Mark has more than 25 years of operational and investment experience in health care arena. Most recently, Mark was Chairman, President and CEO of ZELTIQ Aesthetics, overseeing its tremendous growth through its acquisition by Allergan. We are thrilled to add Mark's broad and balanced perspective to our board.

Since we ended the third quarter, I'm pleased to announce that we have completed enrollment of more than 2,100 patients in the SAKURA 3 open-label long-term safety study. This is the final study of the SAKURA program yielding one of the largest safety databases for neuromodulator. We plan to complete the study in the second half of 2018. Enrollment of this safety trial, along with the excellent progress on our manufacturing readiness, puts us on track to file our BLA in late 2018 or early 2019.

In October, we announced complete enrollment in our Phase II trial for plantar fasciitis. We have a total 5 active sites and expect the 8-week top line results for the plantar fasciitis trial at year-end. We believe success in plantar fasciitis may be a gateway for a number of other pain indications to pursue for RT002 injectable.

Before I cover the clinical update, let me turn the call over to Lauren to cover the third quarter financials and outlook for 2017. Lauren?

Thank you, Dan. The earnings release issued today details our financial results, so I won't go through all the details on the call.

Non-GAAP operating expense during the third quarter was $27.3 million. Our operating cash burn for the quarter was $22.9 million, and our quarter end cash and investments balance was $153 million. Assuming our burn rate remains the same next year, we expect to have sufficient cash to fund our operations into the first quarter of 2019.

Both R&D and operating expenses in the third quarter were higher over the prior year, primarily due to the ongoing SAKURA Phase III glabellar lines program and our planned -- our Phase II plantar fasciitis trial. Today, we are reiterating our 2017 financial guidance originally given in January. Specifically, we continue to expect cash burn for 2017 to be in the range of $102 million to $112 million. And with that, I'll turn the call back to Dan.

Thank you, Lauren. Looking ahead, we have 2 significant RT002 clinical milestones before year-end. First, the reporting of results for our SAKURA 1 and SAKURA 2 pivotal trials for glabellar lines. We planned to release the Phase III pivotal trials safety data before we composite primary endpoints for each trial and the key secondary endpoints around reduction in severity and duration. Second, following SAKURA, at year-end, we expect to report top line 8-week results for our Phase II trial in plantar fasciitis. This will include safety data, the primary endpoint used in the visual analog scale measuring the reduction of pain in the foot and the secondary endpoint based on the American Orthopedic Foot and Ankle Score. This is the proof-of-concept trial, not a duration trial, so 8 weeks should provide meaningful clinical feedback on the drug's performance.

Earlier this year, our Phase II results in cervical dystonia show that RT002 has the potential to manage this debilitating disease with at most 2 treatments per year. We plan to meet with regulatory authorities before year-end to gain clarity on the next set of trials for cervical dystonia, which we expect to initiate in 2018.

On the whole, our completed Phase II clinical trials have shown high rates of efficacy and extended duration. The buzz is building, and physicians at medical conferences throughout the year had voiced their excitement about a distinctly new neuromodulator that provides profoundly different patient experience.

As we look ahead, we are now about 2 years from potentially launching our first approved product. The Revance product launch velocity plan will focus on entering the marketplace with a very thoughtful and targeted approach, showing our total preparation to deliver our new technology, both aesthetically and therapeutically.

Our current physician and consumer research clearly indicates there is an unmet need within the aesthetics space. In fact, the #1 request from both physicians and consumers is for more durable, long-lasting neuromodulator that better fits physician practices and the overall lifestyle of the consumer.

Assume -- assuming success in the SAKURA 1 and SAKURA 2 trials, we plan to emerge as a very serious market challenger, offering a new next-generation neuromodulator consumers will ask for by name. We plan to start by challenging the older-generation toxin products in the aesthetics space, then penetrating the untapped market of 27 million potential users, who may want to experience the aesthetic treatment based on a long-acting product.

We also expect to expand the overall market with new indications in therapeutics such as cervical dystonia and plantar fasciitis. We plan to be in New York City during the week of November 13. After that, with the holidays ahead and reporting results from 2 clinical trials before year-end, we won't be attending conferences until early 2018. Please let us know if you would like to see us in New York or you plan to be in San Francisco during the JP Morgan Conference in January. With that, thank you, all, for joining us today. I will now open it up for questions. Operator?

(Operator Instructions) Our first question comes from the line of Tyler Van Buren with Cowen & Company.

I guess, the first one would be on SAKURA 1 and 2, really looking forward to the results clearly, and I guess the fact that we've gotten into November is always a good thing on a trial with the duration endpoint. Can you guys confirm if the database has been locked yet? And if so, kind of what the process is like to analyze the data and how long that might take just given the fact that it is somewhat of a unique trial relative to some, I guess, trials for other companies that people might be used to looking at?

Tyler, good afternoon. Look, we can't comment on the -- on an ongoing trial. What we have reported is we completed enrollment in March of this year and that we were following patients to 36 weeks, 9 months or to their return back to their starting baseline severity. So what we do know that it will be reported this quarter, but beyond the mechanisms of locking or unlocking a trial, we're not going to comment on that at this time.

Okay. That makes sense. And on 2 years from launching, clearly, the safety study results is one gating item. Is there anything else that you guys need to complete on the manufacturing or CMC side that could be gating for that time line? Or is it really just waiting for the safety results?

No, I think getting those 1,500 subjects in the open-label safety was key. And I think we are very pleased with an executive team that were on track. We completed that enrollment here as of this month. And that was the critical path, and we'll complete that in the second half of next year. We are on track on our CMC and manufacturing readiness. It's something that we take very seriously, and we undertook this early in the process. So this will not be an issue at our time of filing and really was the getting those patients enrolled, which is now complete.

It was good to see the management hires clearly great experience. Can you just speak a little bit more towards the commercial preparations that are going on now and especially, assuming the results look good at the end of the year, how that might accelerate over the course of 2018?

Yes. I wanted to comment very briefly on the Revance product loss -- excuse me, the product velocity plan. This is an important sort of transition from us from R&D to commercial. It is really, I would consider, a hyperfocus internally around marketing and consumer operations in that precommercial phase and as we get ready to think about the launch activities. As we've looked at predicted launches in -- with other toxin products, they have not been overly strong. And we have the time now with the next 2 years to get that plan in place internally, focus branded and really sort of work with physicians and consumers that we launch. We have the highest velocity in that launch strategy that can be put together.

I would just say one other thing, Tyler, as we think about launching a new next-generation, I think it's important to sort of look at the older toxins and how they positioned themselves. And as we sort of look at addressing this #1 clinical need, it's really all around longer duration. What that means to physicians in their practices, what it means for consumers and really for us is how do we get consumers to come in and ask for the Revance RT002 product, and that's really part of this product velocity plan that we're putting together at Revance.

And our next question comes from the line of Louise Chen with Cantor Fitzgerald.

So first question I have here is, how you see your product fitting into a space where you will be a new product to the market and potentially, there may be another less expensive toxin, and then within the context of the shorter-duration toxins that are in the market, just curious how you think about your positioning? And then second question I had was, why do you think large pharma companies have historically not been that interested in injectable toxins? And do you think this is changing and why or why not?

So Louise, if I take the first question relative to positioning a new longer-duration neuromodulator versus the old neurotoxin formulations, it's all about addressing unmet needs. The #1 reason, as we've done all of our market research with physicians and patients, is around duration. And we will be the first to have a truly, highly differentiated product in the aesthetics space follow, but we hope will be in the therapeutic applications. I think that differentiation relative to the older botulinum toxins is critically important if you think about new entrants coming into the market that are good companies and good products. They all work comparably about the same. For us, it's really sort of amplify and focus our duration on something fundamentally different. So it's not only longer duration, but I would like to draw you to the outcome and the experience that those patients have with a product that has a longer-acting formulation to it. So for us, it's all about differentiation. And as we sort of think about that as part of our Revance plan, how do we address that #1 need around duration and outcome? We think it's really important and position it against low-cost entrants. Price so far today, as you look at these products here in the United States, hasn't been overly effective at changing market share dynamics. The current market leader has held that position regardless of some of the discounting that's been by the other approved products(inaudible). So we don't think that the marketplace is necessarily looking for price. They're looking for value, they're looking performance, they're looking for outcomes, that is the #1 need. I think as we think about partnerships of our platform, what we've done now with glabellar lines, hopefully with cervical dystonia and plantar fasciitis this year, as I said, this validates the platform. It validates the platform as an opportunity with a first long-duration product in aesthetic, the first product with long duration in therapeutic. We think that therapeutic opportunity is rich. It's more than half the market. And as we sort of expand our pipeline with RT002, it will have a number of therapeutic opportunities in neurology, musculoskeletal, others. We're excited about that. We think there are things that we can do ourselves. We think that there are opportunities to partner with others, whether they big pharma or big spec pharma here in the U.S. or geographically, the therapeutic opportunity for RT002 is profound.

And what about the large-cap pharma and their interest in that market and how that's changed over time, if at all?

Well, I think that big pharmas stay focused on their core specialty areas. And I think as we move into areas of overlap, there will be opportunities to have those discussions. But for us, it's about looking at opportunities for neuromodulation, but also not following where others have been, but creating our own new treatment paradigms. Plantar fasciitis is just one of several opportunities that we see around this particular pain indication. But if the drug shows performance in pain, there will be other pain indications that will allow us to move others that -- will obviously be important to us. They may or may not be important to big pharma. We think that this is an opportunity we could do ourselves. And certainly, if you look at the 3 indications, that's a very big market opportunity for us to commercialize in the U.S., and we're really excited about that opportunity.

Okay. And maybe I could just ask you one more question. One of the existing botulinum toxin companies has publically stated that they felt that the therapeutic usage of a long-acting toxin has a place in the market. And I'm curious if you could comment why that might be the case and where it's particularly compelling? I know you mentioned indication already before, but what about the therapeutic side of it, a long-acting toxin makes it very interesting?

Well, I think when you look at aesthetics, Louise, that the #1 request that we're hearing from physicians and consumers is in the durable long-lasting, which is a consumer preference. We're trying to address the outcome that's associated with neuromodulators and in many ways, it changes the way the fillers have sort of positioned themselves for very short duration. Now, it's a longer duration fillers. We see that same demand, that same need applying in aesthetics. If you look at the therapeutic applications, you're looking at true patient-reported outcome instruments, you're looking at the pharmacoeconomics. If you are a patient, a woman, who has got a debilitating cervical dystonia, who has their drug effect sort of washout in 10, 12, 14 weeks and there has to be repeat treatment 3, 4x a year or more per year, coming in with a 2x per year potentially, if we end up with the duration data that shows that, it allows us to manage those patients in a very cost-effective way, and the outcome associated that is really significant. So part of our challenge in Phase III will be to capture those outcomes, those patient-reported outcomes and really try to highlight the advantage of this technology versus the older toxin technologies.

And our next question comes from the line of Tim Lugo with William Blair.

This is Ashiq Mubarack on for Tim. Just first on, we heard some comments earlier this week during earning cycle about potentially an element of stickiness with existing botulinum toxins. And we were just wondering if you had any thoughts on that? How do you think about the -- how do you think about taking a piece of existing market share with patients that are already on or have previously used an existing BOTOX given varying response rates? And then how should we kind of think about the long-term market curve, do you have any updated thoughts there? And then just one quick modeling question. I think I heard something about operating expense assumptions for next year being roughly the same as full year 2017. Any thoughts on what that curve might look like given the timing of the completion of your SAKURA studies?

Sure. We think -- I think that relative to stickiness, we think it's all based around these outcomes in need for a longer-acting product. That is the differentiation. That's been an unmet need for literally decades since the introduction of neuromodulators. And so we think the best way for Revance to get sticky in this is to we put together the data that would be supported in an approved label that shows that differentiation relative to other products. And so that is our target. And that's what the Phase III SAKURA program is intended to capture. And hopefully, we'll have some guidance on that by the end of this year to sort of inform that. We have really tried to address the current underpenetration. You've got roughly 3 million consumers being treated out of a potential pool of 27 million. And so for us, we think that there is initially way to go after the existing users of neuromodulators. Our clinical trials look at de novo. They look at existing patients who have been treated with other neuromodulators. We're agnostic on that. We're trying to have the broadest possible inclusion criteria in those study designs. So we'll go after those initial patients at the time of launch, but this is really a technology that we believe will enhance this issue around underpenetration and grow the market for neuromodulators in this space. There are large number of consumers who are in the dermatologist and plastic surgeon's office who are not getting the neuromodulator today or maybe they dropped out because they don't want to be interrupted 3 or 4x per year. So we think this is an opportunity to come in with a differentiated product to grow that market in a way, but we think that will apply across both the existing users, but more importantly, grow the market as well.

(inaudible) it's Lauren Silvernail. On the budget, we haven't completed our budgeting exercise for 2018 yet. We will provide that guidance right after the first of the year typically. As we look at it though, if we make a simplifying assumption that next year is like this year, we have cash into the first quarter of 2019.

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

(inaudible) you want to move on and then, David, you'll need to get back in line.

And our next question comes from the line of Donald Ellis with JMP Securities.

Two questions. First question is regarding SAKURA 1 and 2. And were you guys able to implement any programs to try to minimize potential protocol violations before the trial started?

So Don, thanks for the question. As we captured when we were presenting the BELMONT data, it was -- we learned a lot in that trial. And I think one of the challenges of sponsor is how do you get patients back with us longer time intervals 6, 7, 8, 9 months. We work very closely with the sites, our CRO, our internal clinical development and operations team to make sure that the protocol was executed appropriately, that we minimize any risk of losing patients, that we have a strong and intent to treat population as (inaudible) population. And so as much as we really valued presenting the BELMONT data, getting that work published, it's really one of the seminal contributions relative to longer duration. What was more helpful is allowed us to design the Phase III SAKURA program in a way that we would be better executing the trial to address those limitations we found in BELMONT. It's appropriately powered. And we really look at opportunities to put together datasets to show reduction in severity and longer duration. And we'll have that data by year-end. So to your point is, BELMONT was very helpful in informing us what we needed to do in SAKURA.

Great. And my last question is regarding, obviously, we had conversations with physicians about what it would take to unbundle BOTOX from the other suite of products that Allergan is selling. What are your thoughts on what you might have to do? Or is it going to be duration alone that might be enough to help unbundle BOTOX from the fillers and the breast implants?

Well, I think, really, as part of this Revance product velocity plan is, we really take a look first and foremost at performance. We'll have the data here. We'll start putting together the data sets that will allow us to inform what a label would look like, but it all starts with performance and highly differentiated product. I think we have one of the previous questions about better low cost older generation entrants that are coming into the market. So for us is, how do we sort of address this #1 request for longer duration in the meaningfulness stat, both statistically and the clinical meaningfulness for that. We'll have 2 years here as we start putting together the teams and the activities, but we think that if you got a differentiated product, that -- it will -- we can launch with that product. And then as we build our business, we'll have to decide what we want to bolt-on to it. But we feel very confident that with differentiation, that we can both penetrate the market and grow the market with something that's never been developed and commercialized today.

And our next question comes from the line of David Amsellem with Piper Jaffray.

Most of my questions have been answered. Just wanted to pick your brain though on an indication or potential indication for 002 that you haven't talked about, which is migraine. And I wanted to get your thoughts on -- just general thoughts on what you think about pursuit of that indication? And with all of the changes coming down the pike in the migraine space with the CDR piece coming to market, do you think that it still it would make sense for you to pursue an opportunity here?

David, thanks for the question. I think for us, plantar fasciitis was really an important surrogate for us as we think it's a significant unmet need from a pained indication. We like the dynamics in this market space. And if we're successful with the data breaks our way at the end of this year, then it will obviously play another pain indications. We look at chronic migraine, but there are others, both within the pain indication as well as in the other spasticity indications. And I think from the executive team's perspective, we want to stay laser focused on getting an aesthetic and therapeutic drug approved as soon as we can do that, do what we can, and then we will expand the pipeline into other indications. So plus, we're going to get that data. We will have it by the end of the year both on the SAKURA and plantar, and we can make better-informed decisions next year and come back with you what we decide as future indications. There are no shortage of therapeutic indications. We really think the properties of RT002 are going to play both where there are existing neuromodulators as you suggested in chronic migraine headache, but there are others that are as attractive, if not more so that they don't have the intense competition around different molecules, but are really sort of been showing some really interesting proof-of-concept studies around the world. So that's our challenge. Stay focused, but expand the platform as we can.

Thank you. And our final question is a follow-up from the line of Tyler Van Buren with Cowen & Company.

I forgot just one question, which was, perhaps, the most important of them all, but as we think about the SAKURA 1 and 2 readouts and duration, clearly, a lot of people are going to be comparing the results side-to-side to the BOTOX label. And I guess, potentially the IGA would be curious to think, get your thoughts on how we should compare the 2, whether IGA or patient or both matters. And you mentioned that your multiple duration endpoints may be what's 1 or 2 others that we should be paying attention to that could also allow for a duration claim in the label. And what you think is a minimum threshold for differentiation as we go into the data would just be helpful to set all that up?

Sure. As I think we showed in the both the release of the top line results for BELMONT as well as CD, we tried to take a wholesome and release as many of those endpoints as we can. And as we think about the duration and the reduction in severity, I think, first is you want to look at other predicate labels that have already been approved, you want to see what the agency got comfortable with. And so we presented some of that as part of either BELMONT, but you can see that in other labels. This is an active comparative trial, but you'll be able to get the data, both safety, primary efficacy as well as the reduction in severity and duration data that will allow, I think, you and others to go back and look at the performance of this drug, some of the best injectors in North America with a very well validated and strong scale and be able to go back, toggle back and forth and look at the meaningfulness of variety of endpoints. We haven't commented on one specific ones, but we have that discussion with the agency. We put those in hierarchy. And we think that when we come back to report this data, it will be able to provide you the opportunity to compare the dataset with what the other toxins have generated even their label in the literature before us.

Thank you. And this does conclude today's Q&A session. Ladies and gentlemen, thank you for participating in today's call. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.