Carpe Diem, Daxxify: Revance Therapeutic Preps For An Exciting Year (NASDAQ:RVNC)

On January 9th, Revance Therapeutics, Inc. (NASDAQ:RVNC) disclosed higher-than-expected 4Q revenues from its RHA collection as well as its new cosmetic injection product, DAXXIFY (daxibotulinumtoxinA-lanm) (“Daxxify”). Its stock spiked 45%. Though DAXXIFY’s official commercial launch doesn’t happen until later this spring, the disclosure forced the market to again focus on just how impressive this new product is and to quickly recapture the upright enthusiasm it experienced last fall.

On September 8, the U.S. Food and Drug Administration approved Revance’s DAXXIFY for injection for the temporary improvement of moderate to severe frown lines in adults. It was a series of firsts: it was RVNC’s first product to be cleared by the FDA; and it was the first time in over 30 years that a truly innovative neurotoxin has been brought to the aesthetics market.

What makes Daxxify unique? It can reduce the severity of frown lines for about six months. That is impressive. Six months is nearly double that of Botox, the reigning product, which is effective for 13 weeks. An injection of a purified form of botulinum toxin that paralyzes muscles, Botox revolutionized aesthetic medicine in 2002. In perpetual quest to look younger, it became a hit with celebrities and later the aging affluent. Wrinkle-smoothing botulinum toxin type A injections are now the most common non-invasive aesthetic procedure in the U.S. (And while –like “xerox”–they are all informally called “Botox,” the original BoNT-A injectables product has had three competitors FDA-approved for cosmetic use – Dysport, Jeuveau, and Xeomi.)

Revance now has a material advantage. It has a genuine brand distinction. It offers either a pricing advantage or (more likely) a scheduling advantage –i.e., less time in the doctor’s office. Now clients can choose to have the procedure discreetly once during the summer and once during winter holidays. Tucked deeply into extended vacation periods will help erase the anxiety of the procedure being too obvious –a major issue for on-the-fence prospective users (especially men). Away from the office for a full week or two, any new youthfulness will be less scrutinized and can be chalked up to more exercise and relaxation.

At the time of the approval, Goldman came out with the following note:

“We believe the imminent launch of Daxxify into the $1.7bn US cosmetic neuromodulator market has the potential to be disruptive, garnering share and potentially also helping to grow what remains a still relatively underpenetrated market.. . . We see potential for an even greater level of receptivity to Daxxify’s extended duration of efficacy within therapeutic market indications given the potential to effectively reduce the frequency of treatments versus currently approval botulinum toxin injections, by ~50% annually, with the consequent advantages to patients from a quality-of-life standpoint.”

The Opportunity

The approval has gifted RVNC with an amazing opportunity. The global total addressable market (“TAM”) for aesthetic injection is projected to grow significantly over the next decade. One analyst sees the global Botulinum Toxin market reaching $9.09 billion by 2029, exhibiting a CAGR of 4.9% during the forecast period. In the first half of 2022 alone, sales of Botox, just for U.S. cosmetic use, came in at $862 million.

Wall Street analysts were quick to recognize the “better mousetrap” potential. Ken Cacciatore, a Cowen and Co analyst, has stated — based on his fieldwork — that physicians are expecting Daxxify to reach half the size of Botox in three years, and that it would easily exceed $1 billion in sales. Goldman is less sanguine; it sees Daxxify garnering 21% of the U.S. cosmetic neuromodulator market by 2025 and 35% by 2030. Mizuho is even more conservative – modeling U.S. cosmetics sales for Daxxify to reach about $506M in 2030, assuming a 15% U.S. market share.

Personally, I find myself more optimistic than Mizuho, with revenues of $820 million by 2030. Though this is a company that will lose money for another two years, I see massive profitability by 2025 and an EPS of around 10.35 by 2030:

One opportunity that has not been discussed is China, an unexpected place of big cosmetic demand. Like Brazil, it is becoming a major market.

The coastal cities slosh with disposable income obviously, but I was surprised to learn that cosmetic injection use among Chinese women starts much earlier than in the U.S., often in their late 20s. The market size of botulinum toxin in China was $487 million in 2018 and is expected to reach $2.07 billion by 2025 (with the compound annual growth rate from 2015 to 2018 being 30.8%). Things are accelerating. In 2019, botulinum toxin occupied 32.67% of the aesthetic medicine market in China, nearly doubling from its 2018 share. The Post-pandemic reopening will certainly help matters.

The four currently approved botulinum toxin products on the mainland: Botox, CBTX-A (China), Dysport (U.K.), and Letybo (South Korea). Botox and CBTX-A are the heavy hitters and split the market –occupying 46% and 53% respectively. Dysport and Letybo were newly approved in 2020 and currently have negligible market share.

The Chinese market is rife with illegal imports and the process of any injection application is slow. But the exceptional growth in the market, however, is suggestive of real “greenfield” opportunities for all players in the long term. I don’t expect Daxxify would make it into the Chinese market officially until 2025-2026, but I imagine it will prolong growth.

In addition, Revance expects further label expansion and investment in its aesthetics and therapeutic programs. The company submitted a sBLA in cervical dystonia for Daxxify in 4Q22 and looks to move the product into a Phase 3 in upper limb spasticity this year. Another avenue for growth: chronic migraine, an ~$800M+ US toxin opportunity.

I would argue that Daxxify’s longer-lasting 6 month profile will help it get a leg up in this therapeutic swath of treatment.

The PrevU

Mimicking its RHA filler rollout, Revance wanted its commercial launch of Daxxify to be gradual with a two quarter preview –its so-called PrevU.

In this “University schooling” period, the company has tapped a select group of key operatives (mostly physicians from their existing 5000 accounts) to gain hands-on experience at the company’s central facility under the guidance of its medical affairs team. These trained operatives will then become corporate liaisons and educators implementing the full launch, which is expected to roll out later this Spring (2Q).

The good news: the PrevU program has had a robust start with around 400 select practice partners and thousands of patients treated, generating positive feedback, and revenue of between $10.5 million and $11.5 million. This is very auspicious for the full commercial launch, which doesn’t happen until later this Spring (2Q 2023).

The market certainly responded –up 45% on the news. With that Daxxify revenue of $10.5 to $11.5 million and the unaudited Q4 RHA Collection revenue of between $34.0 million and $35.0 million, RVNC’s 4Q revenues broke above present analyst estimates of $42.4 million for the quarter.

Conclusion

Even if the U.S. falls into a recession in the coming months, I would argue Revance is poised to outperform. The older affluent that use Botox in the U.S. are less exposed to pricing issues or job cuts. As Goldman noted:

“[N]euromodulator products in particular are more resilient in the face of less favorable/challenging macroeconomic environments, than other elective cosmetic products.”

The deeper recession might even help Daxxify, as it might pressure users to reduce the number of costly elective doctor visits each year. I estimate the product will have a 25% premium to Botox, as it lasts longer and frees up time.

Final verdict: expect an exciting second half for Revance. In 2019, AbbVie purchased Allergan for $63 billion in a takeover of Botox that shocked the industry. Since then, Botox has been a goldmine for AbbVie. In 2021, “global Botox therapeutic net revenues” were $2.451 billion and “global Botox cosmetic net revenues” were $2.232 Billion.

With only a $2.31 billion market cap, Revance Therapeutics, Inc. looks cheap given its long-term global opportunities over the coming decade.