Revance Therapeutics Inc (RVNC) 2023 Q3 法說會逐字稿

Welcome to the Revance Therapeutics Third Quarter 2023 Financial Results and Corporate Update Conference Call. (Operator Instructions) As a reminder, this call is being recorded today, Wednesday, November 8, 2023.

I would now like to turn the conference call over to Jessica Serra, Head of Investor Relations, Communications and ESG for Revance. Please go ahead.

Thank you, operator. Joining us on the call today from Revance are Chief Executive Officer, Mark Foley; President, Dustin Sjuts; and Chief Financial Officer, Toby Schilke.

During this conference call, management will make forward-looking statements, including statements related to guidance, related to guidance, positive adjusted EBITDA, adjusted gross margin, operating leverage, blockbuster potential. The financial impact of OPUL exit, the impact of our pricing strategy on adoption, our competitive market position, our potential value creation, additional therapeutics approval, plans related to the timing launch and payer coverage of DAXXIFY for cervical dystonia, international expansion, relationships with providers, our commercial success, injector, consumer and patient preferences and behavior, the efficacy duration and safety of DAXXIFY, the benefits of our products and strategy, our strategic partnership shifts and strategy, timeline goals and planned operations.

Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of risks and uncertainties. Factors that could cause results to be different from these statements can be found in our risk factors sections of our recent SEC filings. Revance undertakes no duty or obligation to update any forward-looking statements as a result of new information, future events, or changes in its expectations.

Also on today's call, we will present both GAAP and non-GAAP financial measures. Reconciliation of non-GAAP to GAAP measures is included in our earnings release to the extent accessible.

With that, I will turn the call over to Mark Foley, Chief Executive Officer of Revance. Mark?

Thank you, Jessica. Good afternoon, everyone. And thank you for joining our third quarter, 2023 financial results conference call. Before I cover our results for the quarter, I'm pleased to announce the appointment of Erica Jordan to the position of Chief Commercial Officer, Aesthetics. In this role, Erica will lead our commercial efforts in aesthetics and will be focused on driving growth and synergy across both DAXXIFY and the RHA collection, developing and executing our loyalty and engagement programs, and helping drive our international expansion strategy.

Erica's appointment comes at a critical time as we focus our efforts on DAXXIFY's launch, and I look forward to working closely with her across our different strategic initiatives. Erica is an accomplished healthcare executive, and her strong leadership skills, combined with her extensive commercial experience, will be a welcome addition to the executive team.

Now, turning to our results. Q3 was a pivotal quarter for Revance as we saw the positive impact of our new pricing strategy on DAXXIFY's launch continue to drive growth in the RHA collection and made great progress with our DAXXIFY Preview program for cervical dystonia, which was launched in September following FDA approval.

Also important was our $50 million drawdown of debt from Athyrium Capital at a fixed rate of 8.5%, which further bolstered our cash position to $300 million as of the end of Q3. Product revenue for the third quarter more than doubled to $54.1 million from the same period last year, primarily due to the launch of DAXXIFY, and continued growth of the RHA collection.

As outlined at our recent Investor Day, we believe our progress across aesthetics and therapeutics, focus on capital allocation, and path to positive adjusted EBITDA in 2025 all position us for long-term value creation for our stakeholders.

Let's begin with aesthetics. We delivered $22 million in Q3 DAXXIFY sales and $71 million in total DAXXIFY sales during the first year following FDA approval, surpassing the total first year sales of all BOTOX Cosmetic competitors combined. This is a tremendous accomplishment, particularly considering that DAXXIFY has only been on the market for 2 full quarters and was launched under a measured strategy which initially focused on our existing RHA accounts.

Our early progress underscores the innovation and differentiated performance profile of DAXXIFY and the market's strong interest in a novel long-acting neuromodulator. We knew that the early stages of launch would be an important learning opportunity and as such, designed a preview program to leverage real-world clinical insights to inform our market positioning and enhance our launch efforts. Through preview, customer outreach and engagement and recent independent survey results from 225 injectors, we gained several key validations and learning's.

First, DAXXIFY's differentiated performance profile is clear, including its fast onset, long duration and the appearance of improved skin quality. In fact, of the attributes surveyed these were the top 3 reasons injector cited for switching to DAXXIFY from their first choice short-acting toxin.

Second, injectors are using DAXXIFY broadly across the face with high satisfaction rates. Based on the independent survey, more than 80% of injectors and patients were satisfied or very satisfied with their aesthetic results from DAXXIFY. And lastly, based on provider feedback, there is a significant opportunity to achieve broader product adoption by reducing DAXXIFY's price premium.

As we have learned, there is a strong linkage between price and product expectations. DAXXIFY's higher acquisition cost and accordingly higher price to the consumer has led to elevated consumer expectations, price sensitivity, and a more involved switch discussion.

In surveying our customers, we also heard that they believe DAXXIFY is a better product, but that at a premium price, challenges to deeper adoption exist. However, many practitioners also indicated that if DAXXIFY's price was more competitive with other toxins, they would be able to convert a larger percentage of their customers. Based on the consistency of this feedback, we made a strategic decision to adjust DAXXIFY's price.

Now with DAXXIFY's differentiated performance profile, attractive price point, and strong economic opportunity for the provider, we believe the product is positioned to provide meaningful value to both injectors and consumers.

Further, long-term, we continue to expect to realize an attractive U.S. DAXXIFY adjusted gross margin rate of over 80% as our business scales and as our supply chain matures. Since the rollout of our new pricing strategy on September 1st, the team has been focused on re-engaging with existing accounts in order to help them realize the full value of DAXXIFY and gain more experience with the product.

So far, we've been encouraged by the feedback we've received from our customers on the price, and with the positive trends in purchase volumes and account reorders. Notably, the third the number of DAXXIFY vials sold in Q3 increased by 10% from the prior quarter, with Q3 revenue of $22 million offset by a lower average selling price.

Revenue from reordering accounts and vials sold to reordering accounts were also up 25% and 43% respectively over the prior quarter, with the majority of the increase coming from September.

Further, revenue from reordering accounts represented approximately 2/3 of DAXXIFY revenue for the third quarter, the majority of which came from September. We are still in the early stages of implementing our new pricing strategy, but are very encouraged by the momentum we are seeing.

At the core, we believe that our peptide-formulated toxin provides meaningful differentiation that both customers' injections and vials with more experience. Currently, over 2,500 accounts have ordered DAXXIFY, leaving us with significant headroom for growth.

Turning to the RHA collection, Q3 revenues totaled $32.1 million, up 23% year-over-year, despite softness in the broader filler market, where market research indicated that filler patient spend was down in the low teens year-over-year due to inflationary pressures on consumer spending. Our strong relative to performance continues to be supported by new account growth, the introduction of DAXXIFY, and a robust and deep engagement with customers.

In Q3, we hosted several live RHA training sessions at our Nashville Experience Center with a focus on injection technique and Salesforce training. Collectively, our strong efforts have allowed the RHA collection to gain the most market share in the HA filler market through Q3 of 2023, while most other brands have remained flat, or have declined.

Overall, we're very pleased with our innovative and leading product portfolio, opportunity for growth, and position in the market, where we ended the quarter with over 6,500 accounts.

Moving to our Services offerings, as we covered at Investor Day, we've made the strategic decision to exit our OPUL payments business in order to prioritize our capital allocation. In preparing for OPUL's wind-down by the end of Q1 2024, we have ceased R&D and reduced SG&A related spend. As a result, we expect to free up approximately $20 million per year, which provide us with the flexibility for reinvestment or OpEx reduction.

In summary, we are encouraged by the progress we've made, and the steps we've taken to maximize our opportunity in aesthetics across our portfolio. For DAXXIFY, we've listened to our customers, and made the necessary changes to our pricing strategy to position the product for meaningful share gain over time.

For the RHA collection, we continue to drive partnership and engagement with providers, gaining share in a crowded filler market. And while we've made the decision to exit the OPUL Payments business, we remain committed to growing our loyalty and partnership capabilities in support of realizing Revance's blockbuster potential in the U.S. aesthetics market.

For the balance of the year, we remain confident in our ability to continue to drive growth as we implement our new DAXXIFY pricing program, deliver deeper and broader adoption of the RHA collection, and ensure robust engagement with our growing customer base.

I'll now turn the call over to Dustin for an update on our therapeutics business and strategic partnerships. Dustin?

Thank you, Mark. We're pleased to have received the highly anticipated FDA approval of DAXXIFY for cervical dystonia in Q3, marking our first approval in the therapeutics market and the official start of our therapeutics franchise. With approval, we have the unique potential to disrupt a well-established $2.5 billion U.S. therapeutic toxin market and to address a large patient population with significant unmet needs.

Revance has an opportunity to address the unmet need of the 3 primary stakeholders in the CD market, patients, providers and payers. Most patients experienced symptom reemergence as early as 8 to 10 weeks with conventional neuromodulators that cannot be treated until 12 weeks due to label and reimbursement restrictions. Providers are also known to be conservative in treating this complex condition as there are potential side effects associated with botulinum toxin treatments.

For these reasons, physicians cautiously optimize toxin dosing over 2 to 4 cycles to minimize side effects. From a payers' perspective, botulinum toxins are the 12th most costly medical benefit drug category and managing spend is top of mind. Our ongoing engagement with payers indicates that DAXXIFY's differentiated clinical profile and price point is especially compelling. Given these market dynamics, we believe that DAXXIFY's strong efficacy, long duration, favorable safety profile, particularly in key areas such as dysphagia and muscle weakness and attractive pricing all work together to offer a strong value proposition for stakeholders.

For condition, it has no cure, providers can safely enhance treatment outcomes for their patients with a novel formulation. Payers gain the opportunity for category cost management with a treatment that can result in lower drug costs, fewer treatments and lower procedural costs compared to other treatment options. And most importantly, patients can benefit from more days of symptom relief and potentially fewer treatments per year at a lower out-of-pocket costs.

For all of these reasons, we are excited to see this product into the therapeutics market, which has not seen a new neuromodulator in over 12 years. We are pleased with our approved label, which will be key to supporting optimal treatment plans for patients.

As a reminder, our ASPEN clinical program studied 2 dose groups, the 125-unit and 250-unit doses, which demonstrated a median duration of 24 weeks and 20.3 weeks, respectively. In treating cervical dystonia, it's important to note that physicians often titrate doses to optimize outcomes for patients. That's why we're pleased to see that our proved label contains data from our ASPEN open-label study, which includes individualized dose adjustments for patients with up to 4 treatment cycles over a 52-week period at doses higher than the initial Phase III study.

With the inclusion of this data, we believe our label gives physicians flexibility to optimize individualized treatment plans for their patients. Following FDA approval, we launched our PrevU program, which will include 30 practices with the objective to treat and observe patients through 2 or 3 injection cycles in order to understand optimal dosing and treatment intervals and to optimize the integration of the product into their treatment routine.

We've made great progress with the program so far. Approximately 20 practices have treated more than 150 patients, and interest has been strong on the product's potential. So far, we've seen injectors switch patients to DAXXIFY from all approved neuromodulators, allowing us to collect the wide range of patient and provider experience we are looking for.

Initial doses have ranged from 100 to 500 units, with the majority at 200 units or above. Injectors continue to share important real-world clinical insights on achieving optimal treatment plans for CD patients with DAXXIFY, which will help inform our training and education and commercial efforts at full launch.

As we continue to make great progress with PrevU, the team is also working in parallel to engage in robust discussions with the top 50 commercial payers about the clinical and economic benefits of DAXXIFY. We have already secured coverage and reimbursement for approximately 70 million commercial lives, which includes the largest U.S. payer along with undifferentiated coverage from a top 10 payer with no dosing limitation, giving us confidence in DAXXIFY's potential to disrupt the category.

Expanded discussions have also taken place with the Medicare MACs and federal VA and Department of Defense channels, as we seek to maximize market access for DAXXIFY. We are making great progress on securing coverage across all payer channels, and our permanent J-code will be granted by the time we launch mid-year 2024.

As we move into Q4, we've begun solidifying our therapeutics commercial infrastructure. We have planned to have the first wave of hiring completed by the end of the year, and the balance during the first half of 2024. The infrastructure build-out includes our field reimbursement, medical affairs, and sales leadership teams. In total, we plan to start with about 40 people within our therapeutics organization. We will be ready to launch DAXXIFY for cervical dystonia in mid-year 2024.

Finally, we are pleased to see continued progress in our strategic partnerships. In July, Fosun Pharma received their BLA acceptance for DAXXIFY for cervical dystonia, which followed the BLA acceptance of DAXXIFY for the bovine in April. Fosun anticipates approvals for both indications in China in 2024.

With that, I'll turn the call over to Toby to cover our third quarter financials.

Thank you, Dustin. Total revenue for the third quarter 2023 was $56.8 million, representing a 95.7% increase from the same period last year, driven by the launch of DAXXIFY and increased sales of the RHA Collection. Revenue for the third quarter included $54.1 million of product revenue and $2.7 million of service revenue.

Turning to OpEx, in connection with our planned exit of the OPUL Payments business by the end of Q1 2024, we recorded restructuring charges of $95.2 million as of September 30, 2023, and expect to record an additional $3 million in charges through the three months ending March 31, 2024. GAAP OpEx for the third quarter was $196.1 million, compared to $106.5 million for the same period in 2022.

Excluding costs of revenue, depreciation, amortization, stock-based compensation, restructuring and impairment charges, non-GAAP operating expenses were $69 million for the third quarter, compared to $72.3 million for the same period last year. For the 9 months ended September 30, 2023, non-GAAP operating expenses were up 15% compared to the same period last year, while total product revenue more than doubled during the same period, demonstrating continued operating leverage within our business.

As noted at Investor Day, the restructuring and impairment charges, related to the exit of the payments business, resulted in a revised 2023 GAAP operating expense guidance of $545 million to $585 million, and non-GAAP operating expense guidance of $315 million to $335 million. Further, we expect our 2023 non-GAAP R&D expense guidance to be between $75 million and $85 million. As a reminder, our 2023 non-GAAP OpEx guidance primarily reflects increased investments in our aesthetics commercial infrastructure.

We ended Q3 with over $300 million dollars in cash, cash equivalents and short-term investments, which reflects the proceeds from the $50 million in notes issued to Athyrium Capital. As Mark mentioned, we are pleased to be executing from a position of financial strength, and with our top-line growth and disciplined capital allocation, we are focused on delivering positive adjusted EBITDA in 2025.

Also, as outlined at our Investor Day, we expect to provide product revenue guidance in the first half of 2024. Finally, Revance's shares of common stock outstanding as of October 31, 2023 were approximately $87.8 million, with $95 million fully diluted shares, excluding the impact of convertible debt.

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

Thank you, Toby. With the launch of DAXXIFY as our top priority, we've leveraged customer feedback and learnings from our early launch to remove a key barrier to broad-based adoption, thereby unlocking the product's full value proposition and long-term market potential. And the early signs from our efforts have been encouraging.

We continue to be focused on executing on our launch, while driving growth and synergies across our aesthetics portfolio. As we look to the balance of the year and out into 2024, we believe that there's tremendous opportunity for Revance. In addition to the launch optimizations that are underway in our aesthetics business, we're also making headway in our first therapeutics opportunity, as well as our strategic partnerships. Together with our disciplined capital allocation and strong financial position, we believe we have the fundamentals in place to deliver growth and long-term value for all of our stakeholders.

With that, I will now open the call up for questions. Operator?

(Operator Instructions) First question comes from Seamus Fernandez with Guggenheim Partners.

So, I was just hoping you guys could help frame the fourth quarter for us to some degree. And we're about halfway -- we're halfway through the quarter at this point, but we've also got holidays kind of coming in. That being said, this also tends to be the strongest quarter of the year along with the second quarter.

So, just trying to get a little bit of a color on, should we think about that $22 million as having been sort of operational with the price change for the full quarter, basically that you sort of adjusted the price for folks who had already purchased DAXI. And so, we're actually seeing a full quarter at the revised price in the third quarter. And so, we can actually anticipate that the price change which should have a positive impact will actually result in growth quarter-over-quarter in the fourth quarter for DAXI specifically. That's my first question.

So, yes, I mean, listen, we expect Q4 to be a seasonally up quarter as it has historically been, and we would continue -- we would expect to continue to see growth in our products, including DAXXIFY Q3 to Q4.

As we previously said, we're implementing these changes, and in implementing these pricing changes, we're circling back up with those accounts that have been trained, in some cases that have product on-the-shelf, and that we sort of need to re-engage sort of under the new strategy. And we think that's the right formula to create long-term stickiness and a good foundation to build on.

We're encouraged by what we're seeing. We obviously laid out some of the metrics that we're looking at with regards to the increase in the number of aisles that we saw on a quarter-over-quarter basis, the percentage of revenue that was made up of reordering accounts in the quarter, and we continue to see that carrying through into Q4.

So, we would expect that Q4 is going to be up Q3 over Q4, particularly for DAXXIFY. We would expect that we'll see the seasonality in this business where Q4 is a stronger quarter, and we're going to continue our focus where we're engaging those accounts that we have a relationship with that have already been trained and continue to work our way through that as we build what we believe is the right foundation going forward.

And can you guys -- can you provide us a little bit of color just in terms of where you have the sense that your market share is at this point in the overall market? AbbVie makes statements on their conference call that they're not seeing much impact, but it's a little bit hard to triangulate some of the comments from competitors. So, it would just be helpful to understand what you guys are seeing from a market share perspective in the toxin market.

Yes. So, on the toxin side of it, again, we see data sources that we get, proprietary data sources that represent a much smaller sample size. You know, that data would show that we're kind of in the 2% to 3% range, but again, it's going to represent a smaller portion of that. Obviously, you've got to look at sort of how you annualize that.

And as we said, we're actually really pleased with how well we've performed our first year of launch, $71 million in the first full 12 months. Only 2 of those was really full quarters of launch, which outpaced all other BOTOX competitor launches the first year combined. So I think it's less about where we are today and more about where we are going, but we did see that we did increase our share, as we've moved into Q3 based on the number of vials that we're placing.

And maybe just one final question. As we think about the RHA filler franchise, we also kind of captured in our own surveys, similar dynamics to what you were commenting on in your prepared remarks, just trying to get a better understanding of the sort of filler dynamics. You're maintaining your actual sales, clearly growing share with the RHA fillers. Again, just how should we think about fourth quarter? Should we think about that as strongly sequentially up or kind of tempered by the economic impacts that we're seeing already?

I mean, it's hard to know for sure. Seamus, I mean, we are hearing, as you said, it's interesting, toxins are proving to be pretty resilient, as we've seen in prior economic downturns. Fillers are a little bit more impacted, because they're a little bit bigger ticket items and a little bit more on the considered side.

Again, we would see -- we would expect to see Q4 as a seasonally up quarter. Hard to know for sure exactly what impact the consumer will have, but as we pointed out before,

we had healthy growth year-over-year, 23%.

A lot of the competitors in this space saw little to no growth were actually declined, and so we had the leading market share growth on a year-over-year basis. So, importantly, we feel like we're still early, and we estimate we're probably in the 9% to 10% market penetration. And so, given that we're still only in roughly 6,500 accounts, we have plenty of room and opportunity for growth. And we continue to see that the RHA collection is being broadly appreciated for the value that it delivered. So we do think that we'll continue to see some consumer impact with the current economic environment. But again, we would expect to see Q4 to be up on a seasonal basis.

We now turn to Chris Shibutani with Goldman Sachs.

This is Roger on for Chris. 2 quick questions from our end. One on the therapeutic side. Can you comment on whether patients in the real-world setting are also seeing longer-lasting duration coupled with lower rates of side effects, such as dysphagia and muscle weakness?

And then for our second question, I was wondering if you'd comment a little bit about your go-to-market strategy in light of the pricing update. So, I think, recall, like previously you've mentioned that you'll target the base of accounts you've accumulated through the RHA filler line. This quarter, you've grown by another 500 accounts. Is this level of growth expected to be more measured going forward? Or how do you think about your go-to-market strategy and accelerating that level of growth?

I'll have Dustin hit the first one on the therapeutic side.

Yes, it's really early, Roger, for us to say on the duration side. As you know, we're not through that 12 to 16 weeks kind of time frame or 12 to 20-week time frame on the therapeutic side. So, we'll be able to get more information as we kind of get through PrevU, but so far the excitement's been good.

There has been some anecdotal stuff around onset of action, which we've seen that in the aesthetic side as well, too. On the kind of safety side, we haven't seen anything that's concerning, but I can't say that that's comparative at this point. The majority of the patients, interestingly, that have been put on the product have switched because they had breakthrough pain or breakthrough symptoms with their other neuromodulators. And so, it will be a unique opportunity for us to understand how DAXXIFY helps them in those cases. I'll turn it back to Mark.

Yes. And on the go-to-market strategy with the pricing change, I mean, it's more of the same. We're focused on those accounts that have obviously already been trained on DAXXIFY, have some experience because they have an appreciation for what it takes to embrace the product, bring it into the practice. But now with this new pricing strategy, they can get a lot more experience with it without having price be a barrier to adoption.

And so, we'll continue to focus on those accounts that have already been trained, work with them to pull through product, and then there'll be a combination of continuing to go out to those RHA customers and opening some new accounts. Given the onboarding process where we want them to get trained, sampled, experienced with the product, it will naturally be a little bit more measured. And again, this is all about laying the right foundation for future growth over time, similar to what we've done with the RHA filler line.

Our next question comes from Balaji Prasad with Barclays.

This is Mikaela on for Balaji. Just one quick one. One follow-up. Could you provide any specific color around the feedback you're hearing around this new pricing strategy that was revealed in September? Just really looking to understand what people are, like, some of the comments are saying?

Sure. I mean, I think we're getting a lot of head nodding and support for it. I was actually just recently at the ASDS meeting, which is a big dermatology conference in Chicago. And had an opportunity to engage with a number of different derms, some that are customers and some that are not customers, and walked them through the logic and the feedback and everything that we've had. And everybody completely agrees.

And I think when we continue, your universe, people are saying, listen, I believe it's a better product. I really like the fast onset skin quality and duration is definitely something that the patients are looking for. But some of them that had experience were just saying they struggled a little bit with how to position it with patients, how much of a premium to charge and acknowledge that higher the premium on the price, the higher the expectation on the patient side, to the point where it could be disconnected from the data that we've seen in the clinical trial and what's been replicated out there in the market.

And so I think people are saying this is the right strategy. It's going to allow me to engage with the product to really understand how best to use it without having to take an economic hit. And then going forward, I can then figure out where it fits in my practice, whether or not to take a premium. Many of them acknowledge that their patients come in 2x a year or less. And so giving them maximum value is something that they're also focused on.

We now turn to David Amsellem with Piper Sandler.

So just got a couple. So first, regarding the new pricing strategy, can you talk to what that's done for you regarding new accounts? In other words, accounts that have yet to use DAXXIFY, what's been the receptivity and what's been the level of growth in new accounts since you have implemented the pricing, the new pricing structure for DAXXIFY? So that's number one.

And then on the therapeutic side for DAXXIFY, I think in the past, Mark, you alluded to payer coverage, not by indication, but more by category. And I guess where I'm going with this is how does that play out as it relates to potential off-label use of DAXXIFY beyond cervical dystonia?

Yes. I'll hit the first one and then let Dustin hit the second one. So in terms of the new pricing strategy and new accounts, I mean, when we went into the market, if anything, we received a little backlash in the community, because we weren't onboarding all the accounts that wanted to experience DAXXIFY. And so we had a backlog of accounts that really wanted to try DAXXIFY, but the reps were focused on initially targeting the RHA customers, selling RHA and doing those things.

And so in Q2 or at Investor Day, we talked about the fact that we had less than 2,000 ordering DAXXIFY accounts and now we're over 2,500. So we're clearly onboarding new accounts. If anything, I think this streamlines the onboarding process and the messaging for new accounts that don't have an experience, because we can share with them the journey, hey, here was the clinical trial data, here was the market research, here's sort of the initial pricing and how accounts roll that out to patients, and here was some of the feedback.

And so our suggestion to them is you now have an opportunity to price this on par with your other toxins, get real-world experience, give your patients more value for the same price, and then you can decide over time, again, whether to take premium, whether to bring them back at the same frequency as the existing neuromodulators and give them sort of more good days or fewer wrinkle days, or for those patients that come in 2x a year or less, which is a majority, you can give them a better outcome.

And so I think it's going to really crisp the onboarding message for new accounts, and they'll benefit from the learnings of the others. And then I want to hand it over to Dustin for the therapeutics.

Thanks, David. So as we kind of mentioned earlier, a lot of the majority of the payers in this space do cover bots across all indications, once they approved kind of coverage. And we've seen some of that in our early conversations, as we saw with one of our top 10 payers, which gave an unencumbered kind of access to DAXXIFY across all indications.

So I think the, the payer landscape for DAXXIFY will allow for off-label use as appropriate as the provider sees deem fit. And I think in terms of kind of the quantification of that, I think, it's early to tell. I think, to leverage the ASPEN data that we have. They'll leverage of the other data on ULS to determine what's the right thing to do, but there has been significant inbound interest from providers across all indications kind of in the neuromodulator space.

So we look forward to continuing to provide the data that we can. And we'll see what that entails in terms of their confidence to utilize it in other areas.

Our next question comes from Stacy Ku with TD Cowen.

So, first, just to clarify something from your prepared remarks. Seems like some practices need to work through their already existing DAXXIFY supply. So is that the right way to think about it as you're kind of going back to accounts and talking about repricing, as we think about kind of the impact to sales? That's the first question. Just a clarification.

The second is more of a longer-term question, so some of our KOLs that have really already adopted DAXXIFY. They mentioned the consumer awareness is still really low. So how can you balance kind of this expansion of other accounts trying to expand DAXXIFY adoption, but then kind of the KOLs that have already adopted it? How can you expand usage there, so kind of curious your thoughts there on how to balance maybe a larger scale DTC to patients and when that might be appropriate?

And then finally, just curious your thoughts on potential neurotoxin market entrance, so both longer-acting and shorter-acting. Do you expect any impact?

So on the DAXI supply, so yes, that is true that for some of the accounts that we are circling back up with that already have products on-the-shelf where they paid higher prices or partnered with those accounts to figure out how we can work through that inventory, get them to price it to the patients in line with their conventional toxins to get more experience, and to make that an easier switch discussion. And so that is taking some time.

And as you can imagine, if they have product on-the-shelf, then kind of figuring out what that engagement plan is? What the strategy is to pull it through and how to do that? And that's why we said previously, that that's a target and a focus is to go back to these accounts, because they do have experience. Their staff's been onboarded. They've been -- they've gone through the messaging side of it. And so that is an ongoing focus of the reps in addition to onboarding new accounts and for those that have already worked through product to make sure that they've implemented the new messaging.

In terms of the KOLs and the consumer awareness, hey, listen, we've been supporting the brand kind of more on the digital side of it. But our view is that in this early phase of launch and having such a small number of DAXXIFY accounts, we want to be thoughtful about the spend that has good ROI. So if we do nothing, but activate consumers and they go into practices that don't have DAXI and haven't been trained on DAXI, then it's not a good use of our resources and our time.

So a lot of our focus and effort are focused on kind of in-office practice conversion materials. And increasingly, we're looking at ways that we can better support those accounts that have DAXXIFY, so that we can amplify their voice and drive more consumers into practices that have DAXXIFY on board. And that will be a continued area of focus. But I think you should expect in the near term, it's going to be more targeted and linked to those accounts that we have a relationship with versus just broad-based DTC.

And then lastly, your question on the overall competitive market. To your point, there's a couple of new entrants out there. You've got another sort of Korean toxin that's looking to come into the market, depending on what happens with their PDUFA date. We believe that they’ll compete effectively in the short-acting category. And so I would say that that probably has less of an impact on us and perhaps more of an impact on others.

And then there's QM-1114 that's out there that's got a long-acting liquid formulation. We think actually having more awareness in the market about the importance of duration and long-acting makes sense and will be helpful.

They've received a CRL, so it's a TBD in terms of kind of what their next steps are, what their path is. But we continue to see a very robust market that continues to grow. And based on where we are in our launch evolution and journey, we continue to feel that we've got plenty of room to run.

Our next question comes from Annabel Samimy with Stifel.

Just following on your communication strategy with injectors about the pricing strategy. It doesn't seem like all are aware of it. So do you have a sense how many accounts you've been able to double back on and how many you have left? What percent of your former accounts have you doubled back on? And again, how many -- how has it changed adoption of the new accounts?

And then secondly, at the R&D day, you had several early adopting injectors that sort of adapted to the DAXXIFY profile and started getting more optimal responses? Where do you feel you are in that process with other injectors and adopters and have newer adopters been having different experiences than the original adopters, just with word of mouth and, I guess, maybe peer-to-peer? So maybe you can just comment on that as well.

Yes. So I think, Annabel, it's hard to really know how -- what percent of those that we've onboarded and that have tried DAXI, that we've successfully introduced a new pricing program and that have re-engaged. I think it's going to vary by territory and probably by rep on that side of it.

I would like to hope that most of them are aware and that if they aren't that it will be a near-time priority for it for the field force. So it's hard to know, but that is a priority and that's obviously where we think the greatest return is going to be in the near term.

In terms of kind of where we are in onboarding new accounts, that didn't have a -- that don't DAXXIFY experience, so far, and it's early, I think that that onboarding process is more streamlined because that messaging is very crisp. It's easy to understand. I think it's easier for when we talk about practice integration, how do the people in the staff talk about it?

It's a very different switch discussion if you're saying, hey, listen, I've got a product that has these attributes and features, but I'm going to offer to it a price that's in line with what you're used to paying. I think that that is a again, much easier. And we've heard that from the practices that that talk track makes a ton of sense. And so, again, while it's early, we like what we're seeing. We talked about in our prepared remarks, the percentage of revenue made up from reordering accounts and the increase in the number of vials that we saw in a quarter-over-quarter basis.

So, again, we continue to have high confidence based on the ongoing discussions that we're having with existing and potential new customers about this change and the excitement about, really trying and experiencing it.

Okay. And if I could just have a follow-up on the therapeutic side. I mean, I guess, how should we think about the adoption curve? I know initially you were doing this selective training of physicians, but, you know, barring reimbursement delays, which I don't think you should have any with the J-Code, which is, the schedules are pretty established. Do you think that there could be less hesitation for physicians to use this, given that it's not so much of an aesthetics or an art on someone's face, as opposed to a real clinical outcome that patients can feel? So, how do you think that adoption curve would sort of compare to what you see in aesthetics adoption?

Annabel, this is Dustin. I think we thought a lot about that in terms of adoption curves. And you see so many different things that go into it on the aesthetic side. I think you do see some of those things in the therapeutic side, but a little bit less as it relates to kind of different toggles in that journey. So, I think it'll determine how quickly our reps can get into those offices, how they can work them through, as you know, getting the prior authorization, all bonds need prior authorization regardless of coverage.

And so, I think it'll just be how quickly does that uptake? The early providers in our preview program have been excited to use it. They're using it on a variety of different patients. So, we anticipate when we get our Field Force hired and others will be able to drive that. But typically, the adoption curves are slower here. Slower here in cervical dystonia than what you would see in aesthetics. But now in aesthetics, you've got so many different variables. So we will continue to kind of analyze that and look forward to getting this data back from preview to then be able to provide what we think will be the right kind of adoption metrics on the therapeutic side.

Our next question comes from Tim Lugo with William Blair.

Hey, this is [Walko], thanks for taking the questions. I guess first, just Toby, it looks like you're sort of being pretty disciplined on the expense side, but you've obviously got the restructuring and then you're ramping up with the CD launch. So should we be thinking about the Q3 numbers as reasonable run rate for the next few quarters or are there more changes to expect there?

And then on the therapeutic side, I think you said you had about 150 patients. I know, you mentioned you're targeting 30 practices. Did you have a target patient? And are you sort of generating revenue from these patients through insurance during the preview program?

This is Toby. I'll take your first question and then turn it over to Mark or Dustin. So on the expense side of things and the guidance, we provided annual guidance of $315 million to $335 million from a non-GAAP perspective for the course of 2023. And, obviously, then that is the extent of our guidance right now. However, as Mark and I have said on our prepared remarks, the exit from the OPUL business provides us some optionality with the $20 million that we're annually investing in the OPUL business. So more to come on that one.

This is Dustin. On your second point, we've treated more than 150 now. You mentioned revenue from these patients. I want to be clear that, these are patients that have been sampled. The goal of this program is not to generate revenue potentially through this channel in the early phases. Now, will some of these providers begin to start testing when we have that permanent J-Code and others utilization kind of in a non-sample setting? We do think that'll happen in the first part of next year. But ultimately, that'll be relatively slow because it is those 30 providers. I think as we start unlocking larger channels like federal and others. We'll be able to provide some more kind of input as it relates to kind of what that adoption looks like.

But from an overall preview perspective, we'd anticipate anywhere between 200 and 250 or so patients that are going to be utilized through this program. And remember, it's not just to push patients to the first start, but it's really in cervical distilling to get them to experience a couple of different treatments because of that titration that typically happens. A lot of these patients that are actually being put on to DAXXIFY have already been titrated significantly higher doses than their starting dose of other neuromodulators, and so they're coming back in now with DAXXIFY with a dose that potentially is different than what they're on now today with some of the neuromodulators, and so it'll be understanding that trajectory over a couple cycles, not just first starts like we saw on the aesthetic side.

We now turn to Uy Ear with Mizuho.

Can you talk a bit about on the patient's level whether the new pricing strategy is being passed on to the patients, and at what level? I just wanted to get a better sense. That's my first question. And I guess, and, in this quarter, it seems that you've increased about 500 accounts, and just wondering if that's driven primarily by RHA more or by DAXXIFY?

Yes, Uy, so first on the pricing program and whether or not that that's being passed on to the patients, I mean, that's our expectation, and that's the positioning that we're taking, and the whole justification and rationale for the price change that we took based on feedback, which was, hey, I like the product. As I start attaching a premium, it makes for a longer and more involved switch discussion, and then sometimes expectations. And so, when we onboard new accounts, or we go back to existing accounts, we let them know that, we've really adjusted this price so that you can price it to patients at the same level as your current toxins, and get familiarity and experience, and get more comfort with it.

So, that is the hope. I'm sure not all accounts follow that. Some perhaps take maybe a modest premium or whatever, but that's the whole reason that we made the change. And I would say, I think that's a good thing. You know, a majority of them are doing that, and we think that that's the right way to get a lot more familiarity and experience with the product, because there are going to be subtleties with all these products that they need to, sort of really optimally work our way through. And then the second question.

I just wanted to know the account increase in the quarter, whether that was driven more by RHA.

Yes. Yes, we said, last quarter, we said we were at around 6,000 accounts. Now we're at 6,500 accounts. That's total. And then we said on an earnings Investor Day that, we had less than 2,000 DAXXIFY ordering accounts. And then this quarter, we're, you know, 2,500. So, I think you're seeing, good growth in the DAXXIFY accounts. So, that's going to probably represent, a lot of the growth in the quarter.

We now turn to Serge Belanger with Needham & Company.

First one, can you talk about how the third quarter was trending in terms of vial volumes ahead of the price change? And then secondly, when you launched this product, you launched it with a catchy DTC, advertisement, advertising of breaking up with BOTOX. I think emphasizing the switch opportunity for DAXXI. Just curious now with the lower price, whether you think you're better positioned to catch the new patients coming into the aesthetic market.

Yes, Serge. Maybe I'll take the second one first. In terms of kind of how we're positioned in the marketplace with this price change and what does that mean for adoption and the DTC program that we did, as I mentioned earlier, we believe that the best way to switch a patient is at the practice level. If the practice is bought into, I like this product, I believe it's something that I want to offer my patients because I think there's value that I can provide to them that they're not currently getting out of their conventional neurotoxin.

We believe that the credibility that the injector has far and away is more valuable than a consumer coming in and asking about something that is new. So we spent a lot of our time and effort arming sort of the entire staff with materials about this new product. And then the value for the injector is they see that, hey, I can give my patients something that they don't have today. Most of them are trying to figure out how do I give them the best value for the dollar. And then over time, it will give them another option in terms of something they can either charge a premium for once they have experience and feedback from patients or, you know, give them more value, knowing that most of them come in, you know, less than 2x a year.

So, we're going to continue to lean in at the practice level to make sure that they have the right tools on the switch. And we think that the pricing lever was a biggie in terms of facilitating that switch. And so it's less about trying to capture new, and more about, allowing them or giving them the right tools to switch the patients over.

In terms of third quarter volumes and where we're tracking, I mean, most quarters are going to be back and loaded to the third month of the quarter anyways. That's just the way that this business is. Obviously, we talked about the fact that, September made up the majority of the -- the reorder revenue both in terms of the vials and the dollars on that side of it and reordering accounts made up roughly 2/3 of the revenue. So, we saw what we believe are really good early signs, particularly when we compared it to June, which was the third month in Q2. And so we like what we saw in terms of the impact of that. And so, we believe based on the feedback that we received that this was the right move and we made the right move what we believe was the right time based on having enough information to influence that, but again we like what we're seeing out there.

Okay. Maybe I'll sneak in one more fourth quarter is a big quarter for aesthetics and there's a few uh neurotoxin players that that have um prominent product days during the quarter just curious, if there's a -- if you're planning to have a DAXXI day during the quarter?

Yes. These sort of these days that competitors use to try and incentivize sort of patient couponing and bulk purchasing from accounts have been around for a while and obviously we've weathered out on the RHA filler side over the last several years and that's not been a cornerstone of our strategy we've tended to lean in with product differentiation in training and education and we continue to feel that that's the right way to go. So I wouldn't expect anything from us in Q4 in terms of a DAXXI day. We're going to continue to really focus on getting accounts on-boarded with this new pricing strategy, allowing them to give their patients the experience that we think they're going to love once they get more familiarity with the product. And so that's really what we're focused on in Q4.

Our next question comes Douglas Tsao from with H.C. Wainwright.

Mark, I think you said it, but I just want to make sure it's clear. In terms of what you saw in September after the price change, so from a total revenue basis, did you see sufficient or sort of increase in units to offset the lower price that you were getting?

Yes. I think as we showed in our press release too, we saw units increase 10% on a quarter-over-quarter basis. And revenue came in at $22 million versus $22.6 million. So we saw a nice healthy uptick of an increase of 10% units, but that was offset by the price adjustment that we made.

Well, I guess I'm trying to understand what you saw in September. So in September, I mean, so when you came out with your business and it --

Go ahead.

What were you going to say, Mark? I was just going to say, so specific to September, did you see that increase in units to make it sort of a better month from an absolute revenue standpoint, or was it ultimately, and was it materially higher than what you saw for the most part?

Yes, well, I mean, as I mentioned, September tends to be a busier month, so it's really hard to know in a vacuum exactly what it would be since we weren't in the market September of last year. We did look at June as a proxy for September to say that's the third month of another quarter. And again, we liked the trends that we saw. Most of our reorder revenue and our reorder vials sold did come in September. And so, we're attributing that to the price adjustment and the -- how customers embrace that change.

Okay. And maybe I'm parsing words a little bit, but I'm an equity research analyst, so that's what we do. In terms of your commentary about needing to re-engage or re-engaging with customers, I'm just curious, were you having trouble having, or was the dialogue somewhat cut off after people had some experience or perhaps were having some frustrations with DAXXIFY in the early going?

Yes, I mean, I think we definitely had some accounts where we had some that leaned in heavily where DAXXIFY is majority share wallet they figured out the product they love the look that they get their patients love it, even the premiums working and they're really happy with it. So we've got you know a number of those accounts where that's working, but we definitely have some accounts that trial the product treated sort of a select number of patients, had some come back, that expressed, hey, I'm not sure that the performance profile is worth it for the cost and then for practices, if they didn't dose them right, if they didn't set the right expectations, if they didn't take before pictures. So that they could compare the baseline, that hit a point where they just said, this is hard, and now I've got to spend extra time kind of educating the patients or taking them up.

And so as we've gone back into those accounts, sort of hit this point of, I like it, I think it's a better product, but the practice integration piece of it is more challenging. This is where we got the feedback and it really resonated with them, where that re-engagement is okay. If I can price it in line with the other toxins and you're priced to me as such where I'm not having to eat margin, then I'm willing to lean in and get experience so that I can figure out where this fits.

And so that's that re-engagement piece. And in some of these accounts that it sort of stalled a little bit or reserved it for specific subsets of patients, our goal is obviously to get broader adoption. And that's that re-engagement piece. And if they had some product on the shelf, then they would work through, okay, let's talk about how we pull that through. Let's talk about how many patients we treat. Let's talk about making sure that you've got message consistency, all those things.

We now turn to Terence Flynn with Morgan Stanley.

I guess, too, probably for Toby, is just, any more clarity on timing of how you're thinking about the revenue guidance for 2024 is that early January event is it in conjunction with fourth quarter results or is it later in the year and then how should we think about the DAXXIFY gross margin progression as we head into '24?

Good quesotins, Terrence so we haven't been specific on the timing of our guidance right now except for the first half of 2024. And right now, we think that that's the appropriate guidance to give on that particular timing. Regarding sort of the gross margin profile, if you were to look at sort of our GAAP gross margin profile that was sort of reported in Q1, Q2, Q3, Revance's GAAP gross margin has been pretty consistent, about 73%, 68%, and 70%-ish over the past several quarters. And again, that's largely been, the Q3, obviously, the mix between Q2 and Q3 of RHA and DAXXIFY was relatively the same Q2 versus Q3.

And so we had lower prices for DAXXIFY starting in September, but we were able to offset that with efficiencies that we were found through the supply chain to maintain that gross margin profile. One of the things that as we start to utilize the prior approved product, the product that was expensed versus capitalized we expect there will be some flux upwards on sort of the cost of goods sold for DAXXIFY. However, that will be partially offset by going into AGI and other manufacturers that are that are actually much cheaper on a unit economic perspective so we expect some fluctuation around the margin but generally trying to offset those and the larger thing is making sure stabilizing prices.

Our last question comes from Navann Ty with BNP Paribas.

And thanks for the -- so far on the price change. Just some additional ones from me, do you have an estimate on how long it will take for the Salesforce to re-engage on pricing with the existing accounts that have been trained and have experience? Or what percentage of existing accounts have been re-engaged versus your target?

Navann Ty, I don't necessarily have a great number. Again, if you look at through the end of Q2, we said we were in less than 2,000 accounts. So I'm hoping that, a number of these accounts have been contacted by the reps to inform them of the new price change to re-engage. And then, as we said before, that re-engagement process in a given territory can take a little while as they work through each of their different accounts.

And listen, I'm sure there's some that may not be in a position to re-engage. They might say, hey, come back in a little bit. But I would say most of the accounts that we've on-boarded have been contacted. And then the question is, where are they at in that re-engagement process and I just don't know.

Ladies and gentlemen, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.