Revance Therapeutics - Q2 2024

Executive Summary

• Q2 revenue grew 20% year over year to $65.4M; product revenue was $65.3M (RHA $36.6M, DAXXIFY $28.7M), and net loss per share narrowed to $0.36 from $0.80 in Q2’23.
• DAXXIFY aesthetics momentum accelerated: units +65% YoY and +15% QoQ; reorders drove >75% of DAXXIFY revenue, and accounts ordering surpassed 4,200 per CFO’s correction, indicating deeper penetration and improving stickiness.
• Guidance: 2024 total net product revenue maintained at ≥$280M; GAAP Opex was lowered to $430–$460M (CFO signaled $430–$450M), non-GAAP Opex expected at the lower end of $290–$310M, SG&A unchanged at $240–$255M; management reaffirmed target for positive Adjusted EBITDA in 2025.
• Gross margin tracking ~73% and guided to improve with DAXXIFY mix shift and U.S. manufacturing scale-up; filler market remains soft but RHA outperformed with +15% YoY revenue aided by the RHA 3 lip launch.
• Potential stock catalyst: Crown Laboratories announced a tender to acquire Revance for $6.66 per share cash (89% premium to Aug 9 close) on Aug 12, 2024, a significant strategic and valuation event post-quarter.

What Went Well and What Went Wrong

• What Went Well

  • Strong aesthetics momentum: “DAXXIFY units sold were up 65% year-on-year and 15% QoQ… without the benefit of couponing,” with positive patient preference driving injector adoption.
  • RHA resilience: “RHA Collection… net product revenue of $36.6 million; a YoY increase of 15%” despite a soft filler market; RHA 3 lip indication helped engagement and growth.
  • Expense discipline: GAAP Opex guidance reduced to $430–$460M (CFO: $430–$450M), driven primarily by lower stock-based comp; non-GAAP Opex expected to the low end of $290–$310M.

• What Went Wrong

  • Therapeutics contribution modest near term: Despite 84% commercial coverage and payer wins (VA/DoD formulary), management reiterated 2024 CD revenue would be “modest” given buy-and-bill conservatism and ramp time.
  • Filler market softness persisted industry-wide; management cited consumer spending and preference concerns, though RHA’s “natural” profile helped mitigate pressure.
  • Data discrepancy in press release: CFO corrected Q2 aesthetics account metrics to “over 8,000 aesthetic accounts and over 4,200 DAXXIFY accounts,” higher than the press release’s “over 7,500” and “over 3,700,” highlighting the need to rely on call clarification.

Transcript

Operator (participant)

Welcome to the Revance Therapeutics Second Quarter 2024 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ensure that we have ample time to address everyone's question, we will ask each person to limit themselves to one question and one follow-up. As a reminder, this call is being recorded today, Thursday, August 8th, 2024. I will now hand the call over to your host, Laurence Watts, with Revance Therapeutics. Please proceed.

Laurence Watts (External Investor Relations Counsel/Advisor)

Thank you, operator. Joining us on the call today from Revance are President and Chief Executive Officer, Mark Foley, and Chief Financial Officer, Toby Schilke. During this call, management will make forward-looking statements, including statements related to expectations related to product adoption and reorders, consumer needs, preferences, and behavior, the benefits and value to us, practices and consumers of our products, including the efficacy, duration, skin quality, and safety of our products, future therapeutics expansion, 2024 guidance, positive adjusted EBITDA, future capital expenditures, and anticipated revenue, our strategic priorities, our anticipated success, our ability to grow and take share, our market opportunity and expectations, and our strategy, planned operations, and commercialization plans, and timing of those plans. 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 these results to be different from these statements include factors the company describes in our annual report on Form 10-K and our quarterly report on Form 10-Q. 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. Reconciliations of GAAP to non-GAAP measures are included in our earnings release. With that, I will turn the call over to Mark Foley, President and Chief Executive Officer of Revance. Mark?

Mark Foley (President and CEO)

Thank you, Laurence. Good afternoon, everyone, and thank you for joining our second quarter 2024 financial results conference call. The second quarter of 2024 was another period of continued progress for Revance, led by our Aesthetics division and the implementation of our strategy to bring DAXXIFY to a broad audience based on strong product attributes and competitive pricing. DAXXIFY continued to show strong growth in the second quarter, with aesthetic units sold up 65% year-over-year, and net product revenue $28.7 million, which was up 27% year-over-year. Importantly, feedback from the field continues to be positive and reveals that not only are existing practices reengaging with DAXXIFY, but that new account adds are accelerating due to DAXXIFY's price comparability and appealing product attributes, namely increased duration, fast onset, and improved skin quality.

Importantly, now that consumers have been through several treatment cycles, we are starting to see patient preference drive both injector utilization and new account interest. In the second quarter, we were encouraged by strong reordering activity, as existing aesthetic accounts represented more than three-quarters of DAXXIFY revenue in the quarter, end consumer pricing coming in line with competitor prices, and a meaningful uptick in unit sales on both an annual and quarterly basis without the benefit of couponing. Turning to our filler offerings, the RHA Collection also experienced healthy growth compared to last year, despite overall filler market softness. Starting in April, we launched RHA 3 for lip augmentation and fullness, the number one filler procedure performed in the U.S. To support the launch of the lip indication, we activated consumer and beauty editor experiences, conducted HCP training events, and introduced RHA- RHA 3 promotions.

Along with these activities, we rolled out a campaign around Lips Worth Framing, as well as Beauty of Savings promotional activities. We continue to believe that the quality and differentiated performance profile of the RHA portfolio, combined with our commercial team's ability to execute, provides a stable foundation for our ongoing growth initiatives. RHA Collection net product revenue was $36.6 million in the second quarter of 2024, representing a 15% year-over-year increase. Lastly, at the end of the second quarter, accounts across Revance's Aesthetics portfolio totaled over 7,500. The company also ended the quarter with over 3,700 accounts that have ordered DAXXIFY, which leaves us with significant runway to further expand our number of accounts and ordering base going forward.

Further in the quarter, we were pleased to launch our first portfolio initiative, the Beauty of Savings program, which was designed to provide additional incentives to accounts that purchase both RHA and DAXXIFY. This program has been well-received, and we look forward to continuing to not only grow our account base, but use programs like these to deepen our penetration in existing accounts. Now, let me turn to our therapeutics franchise. In May, we announced the commercial launch of DAXXIFY for the treatment of cervical dystonia, marking our entry into the $2.7 billion U.S. therapeutic neurotoxin market. As such, DAXXIFY for cervical dystonia provides a significant opportunity for Revance and marks the culmination of our decades-long mission to bring our unique innovation to the therapeutics market. Although toxins remain the standard of care for cervical dystonia, patients struggle to achieve sustained symptom relief in between treatments.

This is due to the fact that toxin treatment can only occur every 12 weeks based on product labeling and reimbursement guidelines, even though the therapeutic benefit of current toxins typically wears off eight to 10 weeks after injection. As a result, this frequently leaves patients with unmanaged symptoms that can lead to significant pain, social stigma, and the inability to drive or work. DAXXIFY is the first and only peptide-formulated, long-lasting neurotoxin that offers the potential to improve the duration of symptom control with a favorable safety profile, providing patients and physicians with a compelling new treatment option for a painful and disabling chronic condition. Following our CD approval in August 2023, we launched a PrevU early experience program with the objective of optimizing treatment outcomes and ensuring smooth practice integration. In May, we announced our full U.S. commercial launch.

The initial market response has been encouraging and supportive of our hypothesis that there is an unmet need for a long-lasting neurotoxin to address the large percentage of patients with symptom breakthrough on current toxin regimens. Furthermore, PrevU practices continue to treat patients, and importantly, continue to report compelling clinical results with DAXXIFY. To that end, physicians report that patients in their second and third treatment cycles are experiencing long duration and a safety profile consistent with our phase III ASPEN program. In PrevU, DAXXIFY was shown to deliver 12+ weeks of sustained symptom control for patients that previously had experienced early symptom breakthrough with conventional toxins, and up to 16 weeks or more for many other patients. The majority of these early PrevU accounts are also now purchasing DAXXIFY.

In the second quarter, we also added a greater number of new accounts to our existing PrevU injectors, and of the total number of accounts that have ordered to date, over 40% have already reordered DAXXIFY a second time. On the payer and reimbursement front, access to DAXXIFY continues to increase, reaching more than 240 million lives covered, with commercial coverage increased to 84% of total lives. Additionally, DAXXIFY has been placed on the national formulary for the Department of Veterans Affairs and Department of Defense. DAXXIFY for cervical dystonia is also covered by each of the 12 Medicare Administrative Contractors with greater than 30 million Medicaid lives now covered.

While we continue to make major strides in our mission to bring DAXXIFY to underserved U.S. cervical dystonia patients, we continue to anticipate that initial revenues will be modest, given the conservative nature of treating physicians, reimbursement dynamics, and CD market size. Longer term, we remain bullish on DAXXIFY's potential in the cervical dystonia market and in subsequent therapeutic indications. Now, let me hand the call over to Toby to cover our second quarter financials.

Toby Schilke (CFO)

Thank you, Mark. Our press release and our Form 10-Q detail our financial results in full, so I will only go over the highlights on this call. Total net revenue for the second quarter ended June 30, 2024, was $65.4 million, compared to $54.4 million for the same period in 2023, representing an increase of 20% due to an increase of DAXXIFY and RHA Collection volumes, despite a soft filler market. Net revenue for the second quarter ended June 30th, 2024, included $36.6 million of RHA Collection revenue, $28.7 million of DAXXIFY revenue. Additionally, we had $0.1 million of collaboration revenue amortized from our deferred revenue balance related to our Viatris collaboration.

Total net revenue for the six months ended June 30th, 2024, was $117.3 million, compared to $100.2 million for the same period in 2023. Total GAAP operating expenses for the three and six months ended June 30th, 2024, were $99.9 million and $198.7 million, respectively. Excluding the cost of product revenue, stock-based compensation, depreciation and amortization, non-GAAP operating expenses for the three and six months ended June 30th, 2024, were $74.8 million and $148.5 million, respectively. Revance continues to expect 2024 total net product revenue, which includes sales of DAXXIFY and RHA Collection, to be at least $280 million.

Revance now expects 2024 GAAP operating expenses from its continuing operations to be between $430 million and $460 million, down from $460 million to $490 million. This updated outlook is primarily driven by lower actual and projected stock-based compensation. Revance expects our non-GAAP operating expenses from continuing operations to be in the lower end of a range of $290 million-$310 million. Revance continues to expect non-GAAP SG&A expenses from continuing operations to be between $240 million-$255 million.

On the balance sheet side, our current cash position, $232.2 million of cash, cash equivalents, and short-term investments as of June 30th, 2024, in combination with our operating plan, provides us with multiple levers to achieve positive adjusted EBITDA in 2025. Finally, Revance's shares of common stock outstanding as of July 31st, 2024, were approximately 104.8 million, with approximately 113.8 million fully diluted shares, excluding the impact of convertible debt. And with that, I'll turn the call back over to Mark.

Mark Foley (President and CEO)

Thank you, Toby. In the second half of 2024, we remain focused on delivering net product revenue of at least $280 million, while managing spend to reach positive adjusted EBITDA in 2025. We are encouraged by the unit and sales gains across both DAXXIFY and the RHA Collection, and by the early response we are seeing to our cervical dystonia launch in therapeutics. In short, we are focused on execution and on delivering on our stated goals. With that, I will now open the call up for questions. Operator?

Operator (participant)

We'll now begin the Q&A session. If you would like to ask a question, please press star followed by one on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question comes from the line of Seamus Fernandez with Guggenheim. Please proceed.

Seamus Fernandez (Senior Managing Director)

Thanks for the question. So, just wanted to get a sense for how you see us advancing towards the at least $280 million guidance number. You know, third quarter historically has been a challenging quarter for Aesthetics, but we're a good way through the third quarter. So just trying to get a sense of how you think the third quarter, you know, how we should be thinking about that, you know, kind of a flat quarter-over-quarter with the second quarter, or should we anticipate that it could be down somewhat, which certainly would imply a robust, you know, step up in the fourth quarter to make that $280 million revenue number, on the basis of the regular way business?

So just trying to get a better sense of what proportion of that or how we should be thinking about that sequentially. And then, you know, separately, can you just help us understand a little bit better how we're likely to see with the additional coverage, the VA coverage. Do you see that as an opportunity to accelerate the therapeutic opportunity into 2024? Or should we still be thinking about 2024 as a very modest contribution? Thanks.

Mark Foley (President and CEO)

Great. Thanks, Seamus. So on your first question, in terms of, you know, how to think about the $280 and sort of how to model that, as you know, we don't give quarterly guidance, but, you know, as we sit here today through the end of Q2, we've delivered, you know, kind of roughly 40% of that number, and so we're looking to deliver 60% in the back half. You know, I would break it into two components. The RHA is a little bit more mature product line for us, and so that's gonna move a little bit more consistently with the normal seasonality of the business, plus some growth in it.

Whereas obviously, where we are with DAXXIFY and the new pricing and the messaging that we have, and given that we're in a smaller number of accounts, we would expect to see, you know, sequential growth quarter on quarter with, you know, Q4, you know, seasonally being the largest quarter of the year. And so we, you know, we like where we're positioned. We're very pleased with the Q2 that we delivered, and so that's kind of how we think about moving through the balance of the year. Also, we've got CD, which is starting to come online, which gets to your second question, but that will obviously start to contribute more as we move to the back half of the year, and that's something that we didn't have in the first half of the year.

In terms of additional, you know, coverage, and you talked about sort of the VA and, and, Department of Defense, I mean, all this is gonna help, but yeah, we, we would expect, you know, the, the revenue to be modest, for therapeutic this year. Just even though we've made great strides on the reimbursement side, you know, the priming of the pump, and pulling that through on the back end just takes time, and it's a-- it's a conservative user group that tends to treat a few patients, watch, make sure that they can get paid because it's buy and bill. And so again, we really like what we're seeing clinically, but we think the, the commercial impact from a revenue standpoint will be modest. But obviously, as we move through the balance of the year, we'll, we'll start to step up.

Seamus Fernandez (Senior Managing Director)

Great. And if I can just add one additional question. We're you know, Galderma is talking about bringing competition into the international markets, international marketplace, and we have an approval in Australia. Trying to get a sense of how you see the competitive landscape evolving with longer-acting botulinum toxins in the next couple of years. And you know, do you see a path towards potentially monetizing your asset in international markets as the right approach? I know historically, we've talked about you know, keeping this as a global brand as you know, for potential sale should an outside acquirer be interested. But just wondering if non-dilutive efforts are under consideration at this point. Thanks.

Mark Foley (President and CEO)

Yeah. So why don't I start with the second one first, in terms of kind of how we think about, you know, growth opportunities outside of the U.S. Listen, we're gonna continue to be pragmatic and make what we think are good business decisions. We think that, you know, there's certainly huge opportunity outside of the U.S. We've, you know, filed for approval in Australia, and, you know, we've demonstrated that with, for example, our Fosun partnership, that, you know, having the right partnership might make sense. And so we will continue to actively evaluate options on that side of it. And, you know, if it turns out that going down that path, we think makes more sense for the business, then that's an option for us, certainly on that side of it.

And again, we-- you know, as we kind of get a little bit more mature in the U.S. market, it's-- we think it's also gonna enhance sort of the value and the opportunity internationally. In terms of competition on the long-acting side, listen, we think that right now, anything that raises visibility to the opportunity to have a longer-lasting product is gonna sort of lift all boats on that side of it, so we would welcome that dialogue and discussion. The great thing about DAXXIFY is it's more than it-- there's a lot more about the product than just duration. Given the peptide formulation, what we're seeing is not just, you know, fast onset, but really the skin quality effect that we think is unique.

As we've described before, we're able to get the extended duration with the same amount of core toxin. And why is that important? Well, it's important because as you start to increase the amount of toxin that you deliver in order to get extended duration, you have the ability to potentially lose control over where it goes and sort of the look that you're going for. And so, the nice thing with DAXXIFY is, of those that are working on longer acting, we've not heard anything fundamentally different about the actual formulation itself. And so again, we think it's gonna help grow that overall category, and given our novel peptide formulation, we think we're gonna be really well positioned.

So, yes, international provides a good opportunity for us in terms of the different ways that we think about it, and we actually think that more people talking about long duration is going to be a good tailwind for us.

Seamus Fernandez (Senior Managing Director)

Great. Thanks, guys.

Mark Foley (President and CEO)

Thanks you.

Operator (participant)

Thank you. The next question comes from the line of Chris Shibutani with Goldman Sachs. Please proceed.

Chris Shibutani (Senior Analyst and Managing Director of Biotechnology Equity Research)

Great. Thank you very much. A couple of questions in terms of your margins and spending. On the margin front, can you just give us a sense? It looks as if you're trying to be very mindful of operating expenses, because I think going to that EBIT break-even line, maybe help us understand how gross margins are, you know, progressing and what factors perhaps might be in there as you're increasing, I would presume, some of your volumes in anticipation of therapeutics launch. And then secondly, on the marketing effort and spend, your commentary included the launch of what seems to be sort of more of a bundling type approach. Can you help us understand whether that is influencing the shape of spending as we think about, you know, the next several quarters going forward?

Obviously, there would theoretically be a good return on that as a strategy familiar to the marketplace. But help us understand some of the push-pulls across that, achieving the EBITDA break even at a gross margin level and then the spending on marketing. Thank you.

Mark Foley (President and CEO)

Great. Thanks, Chris. Toby, why don't I turn it over to you to talk about the margin and spend gross margin, a little bit on the marketing, and then I can build on that on the marketing in terms of the programs and what we're seeing.

Toby Schilke (CFO)

Perfect. Thanks. Great question, Chris. So, you know, we reported about 73% gross margin, and about 72% for the first half of 2024. When you take into account the zero cost inventory associated with DAXXIFY, that was expensed prior to approval, gross margin profile is within sort of around 70% combined for RHA and DAXXIFY. And as you think about the levers to improve that margin, which we've long term guided to over 80%, it's twofold. One is the volume shift towards DAXXIFY, which is a higher margin product than RHA. RHA, we partner with Teoxane SA, and so that is, that is generally at a fixed gross margin because that's how they get their economics for the innovation that they have brought in the RHA Collection of fillers.

So as the mix shifts and DAXXIFY continues to grow in terms of volume, you will see that margin increase that way. Secondly, drilling down into DAXXIFY, we've taken steps and invested over the last several years to move DAXXIFY to more efficient production methods. So as we scale our production in Aji in the U.S., our contract manufacturer, and then also further on as we get approved in LSNE PCI facility in New Hampshire, we'll be able to further improve our gross margins with DAXXIFY, with the size and scale from those facilities that they're able to produce versus our facility in New York.

Mark Foley (President and CEO)

Yeah, and then on the marketing side, Chris, I mean, we sort of have a steady state spend right now on the marketing, and I, and I think programs like we ran in Q1 around the coupon and what you're seeing now with the Beauty of Savings around portfolio designed to create more leverage in accounts where we already have a relationship, we think is, you know, gonna help us drive deeper and create more stickiness in the brand. And so, you know, we obviously can flex that. We're using some of these programs to better inform where we want to lean in more, but we, we like what we're seeing, and we've got a variety of things that we're doing independent of that around social digital.

Because one of the things that we're also starting to see with DAXXIFY is, you know, in the beginning it was really incumbent around the injector to kind of do a lot of the promotional work. But now as consumers are getting more experiencing or getting more experience, seeing the benefits of the product, they're asking for it by name. And so, you know, from a KPI standpoint, we're seeing good, healthy growth and awareness. We're seeing good, healthy growth in terms of media share of voice, and so we're seeing a lot of the desired results. And so we've got amount of sort of steady state marketing built into it that we think is sufficient to drive the revenue growth targets that we have, and we'll continue to optimize that as we move out through the balance of the year.

Chris Shibutani (Senior Analyst and Managing Director of Biotechnology Equity Research)

Thank you. That's helpful.

Operator (participant)

Thank you. The next question comes from the line of Stacy Ku with TD Cowen. Please proceed.

Stacy Ku (Director of Health Care and Biotechnology Research Analyst)

Hey, thanks so much for taking our questions. We have a few. So first, can you characterize those 3,700+ accounts that you added for DAXXIFY? That's up from what we believe, around 3,500 in Q1. So as you're broadening the accounts, are you just focused on getting lower accounts that are more high quality, or is it just the sales force was launching both the new filler option and DAXXIFY as well? So just help us understand the accounts added for Q2. And then, a follow-up on that, as you're broadening the DAXXIFY launch, you talked last quarter about the expectations and targets for new accounts. How do you feel about kind of the expectations you've set? Where are you there? Obviously, can't disclose.

I'm guessing you're not gonna disclose your own KPIs, but just help us understand how the broadening of the DAXXIFY launch is going in your view. And then last, for RHA, is the Q2 performance mainly ascribed to the lip launch? And is that why you might expect some growth into Q3 and Q4? Just help us understand the cadence of RHA launch for the rest of the year. Thank you.

Mark Foley (President and CEO)

Sure. So, let me just make notes here. So really, in terms of new account adds, we actually, I believe, and Toby, keep me honest on this, I think we're around 3,000 DAXI at the end of Q1. And so-

Toby Schilke (CFO)

That's correct, Mark.

Mark Foley (President and CEO)

We're saying now that we've got 3,700. So actually, you know, we, we've seen good, nice acceleration in new accounts on DAXXIFY, and we think it speaks to the change in strategy. So we're encouraged with what we're seeing, and that is a part of our strategy to drive the necessary revenue through the balance of the year. Again, it's a combination of going deeper as people experiment and get comfortable with where DAXI fits in their practice, to go deeper and then and drive some of these new ones. And so actually, we were very encouraged with sort of the new account adds that we saw. In terms of the target for new accounts, obviously, with you know, kind of the growth initiatives that we have in place, it will be an important part of our strategy.

But, you know, where we said we're roughly 7,500 aesthetic accounts is the end of Q2, 3,700 accounts in DAXXIFY, we still have a long ways to go in terms of market penetration. And so we think that, you know, the nice thing is we've got, again, a long runway. And so right now we're tracking where we wanna be in terms of that mix of new accounts. But we also saw good, strong volume in reordering accounts. We said that, you know, roughly three-quarters, over three-quarters of our revenue came from reordering accounts. So that's how we think about the phasing, and the target for new accounts.

In terms of RHA and the lip launch and the impact that that had, I think that, you know, part of it is, Stacy, as you're aware, that, you know, when we made the change in the DAXI strategy, we indicated that we were spending more time doubling back with accounts to go deeper. And so now that we've sort of moved beyond that phase, you know, we've been able to, you know, focus more now on the lip launch and RHA 3 and, you know, the portfolio. So we think that we've got a very good foundation of RHA. We're doing a lot more on the clinical training. And actually, there's, you know, some noise out there in the market around, you know, people not wanting to look artificial.

One of the great things about the RHA portfolio is that it's the, you know, it's the least modified of the different hyaluronic acid fillers out there. It's designed to leave a very natural look. And so, you know, we think that that's feeding into this as well. So I think it's just we've hit our stride with DAXXIFY in terms of the messaging and the messaging. The messaging and the pricing. Certainly lips helped, and now that we think that we can start to leverage the synergies between the two, that's how we think about the back part of the year.

Stacy Ku (Director of Health Care and Biotechnology Research Analyst)

Okay. That's incredibly helpful. If I could ask just a quick follow-up then, based on your responses. Just for that relaunch, I think many investors are looking for a signal that there is a recovery, that things are kind of going the right way now that you've kind of changed your pricing strategy. So do you think that Q3, you'll still see some kind of signal of the recovery, or is it really gonna be a Q4 event where it's seasonally strongest? Thanks so much.

Mark Foley (President and CEO)

Thanks, Stacy. No, I mean, I think we, you know, commented earlier that, we would expect RHA product line to follow more seasonality with some growth, whereas with DAXXIFY, given where we are, that, you know, we'll see sequential growth through the balance of the year. You know, we saw pretty meaningful growth on a year-over-year basis, 65%, even though Q2 last year was a launch quarter for us. And, you know, as we look at coming into Q3 and Q4, we're now gonna be, you know, starting to look at an ASP level too, that's gonna be comparable. And so I think that will even show stronger performance on a year-over-year basis. So we would expect, again, you know, sequential, quarterly sequential growth with DAXXIFY.

But, you know, as we saw that the quarter-over-quarter and the year-on-year growth, both in, you know, units and in revenue, we're encouraged with the trend that we're seeing.

Stacy Ku (Director of Health Care and Biotechnology Research Analyst)

Okay. Thanks so much for your follow-up. Thanks.

Mark Foley (President and CEO)

Thanks, Stacy.

Operator (participant)

Thank you. The next question comes from the line of Balaji Prasad with Barclays. Please proceed.

Speaker 13

Good afternoon. This is Shaun for Balaji. Thanks for taking our questions. First of all, could you give us a timeline for the upcoming Fosun approvals in China and the expected milestone payments associated with approvals, and what's your follow-on commercialization plans? Thank you. And in addition to that, could you also talk about the, you know, pricing dynamics for DAXXIFY between the aesthetic end and the therapeutic pricing? Because on the therapeutic end, you have to do the pricing, and that price goes to that negotiation with the payers. And on the aesthetic end, you will give the discounts, like, you know, to the, you know, a cash discount. So how would you balance the aesthetic pricing and therapeutic pricing? Thank you so much.

Mark Foley (President and CEO)

Thanks. Toby, do you want to take the Fosun and the milestones?

Toby Schilke (CFO)

Yes, Mark, sorry about that. I was just... So the, on the Fosun, you know, we, we submitted our, well, Fosun, excuse me, submitted the GL indication for the Chinese regulatory authorities in April of 2023, and cervical dystonia indication in July of 2023. Fosun has guided the markets to say that they expect a 12 or 14-16-month approval time frame for both of those indications. So, you know, we, we expect that that will, that will be happening, and we're working hard with Fosun to support them for approvals of both indications in this calendar year. In terms of upfront payments, since the history, we signed the contract in December 2018, we've received a total of $38 million, subject to Chinese withholding tax of 10%.

You know, and we have additional $222 million of contingent milestone payments. So, you know, we would expect that there would be some milestones. We haven't given the exact figures, per company policy of what we would expect for approval in China for both the glabellar lines and the cervical dystonia approval.

Speaker 13

Thank you.

Mark Foley (President and CEO)

Then for your question regarding the pricing linkage between therapeutics and aesthetics, yeah, I mean, given that it's the same BLA, the pricing will be the same. What's, you know, different for us is we launched in aesthetics first, and so the ASP that we're driving in aesthetics is gonna form the basis for what we charge in therapeutics. And so we've already taken that into account, and we've set up, you know, our different reimbursement contracts and everything around that. And so that will continue to be linkage between the two.

Speaker 13

Thank you.

Operator (participant)

Thank you. The next question goes to the line of David Amsellem with Piper Sandler. Please proceed.

David Amsellem (Managing Director and Senior Research Analyst)

A couple of quick ones from me. First, can you talk about the competitive landscape in the filler space, particularly with another entrant coming in, and just how you see things evolving over time? Do you think that the market ultimately is going to be able to accommodate a more crowded, competitive landscape? So that's number one on the fillers. Then turning over to DAXXIFY in therapeutics, this is going back a, you know, a few years where you had, I think, cast more of a wide net in terms of different development programs in the therapeutic setting. Obviously, you're looking to balance that out with, you know, control and spend.

But I'm wondering over time, particularly as you get to profitability, how you're thinking about other indications for DAXXIFY in therapeutic settings and how much of a priority that is? Thanks.

Mark Foley (President and CEO)

Sure. Thanks, David. So on the competitive intense side, particularly on fillers, you know, I think this is where the product profile really matters, the breadth of indications, and again, the breadth of the product itself. And so, you know, we'll continue to see competition there, but I think there's a reason that, you know, some products stand out more than others in terms of the performance. And as we talked earlier, given the way that the RHA products are constructed and more natural, we think it fits really well and for what people are looking. And there's some, you know, differences in the product line, particularly with, like RHA Redensity and others that, you know, we're hearing a strong brand preference for.

So we think that, you know, not only having the filler line, but having a toxin to partner with it, are also gonna be really helpful in terms of going into accounts and providing a compelling bundle that works for them. And so, you know, we feel very good, and again, we're still early innings in terms of penetration. In terms of DAXXIFY and therapeutics, you know, you're right, we're trying to be thoughtful about how we invest in the therapeutic category, what's the right timing to launch additional indications, given that it takes a while from start to finish. So we think really CD is a great entryway into that to lay the foundation for further growth.

And you know, in the muscle movement category, which is upper and lower limb spasticity and cervical dystonia, that's collectively a billion-dollar market opportunity in the U.S. And so we, we believe we're gonna learn a lot in the cervical dystonia launch, and we'll be able to partner with these clinicians in terms of next steps. We have completed, as we talked about before, phase II program for upper limb spasticity. We had our end of phase II meeting, so we know what the program would look like to activate the phase III. And so it's just a function of, you know, when do we think it's the right time to lean in on that? And t`hen we've done also an IIT in migraine to, you know, generate some of the early data there to inform that strategy.

So, you know, we think long term, there's a very healthy opportunity. It's just a matter of, you know, to your point earlier, what's the right timing, and we're continuing to evaluate that.

David Amsellem (Managing Director and Senior Research Analyst)

Very helpful. Thank you.

Mark Foley (President and CEO)

Thank you.

Operator (participant)

Thank you. The next question comes from the line of Annabel Samimy with Stifel. Please proceed.

Annabel Samimy (Managing Director)

... Hi, thanks for taking my questions. So I just want to confirm, have you washed out all of the accounts that have purchased under the prior price change? Is there still any impact lingering, I guess, from the sort of, so-called coupon that you offer them to sort of make them whole on that? So that's the first question. Then the second is, can you talk a little bit about the loyalty program, the Beauty of Savings? Is this volume-based, or is it as soon as they order the products together? How exactly are they incentivized here? And then anything on the consumer side in terms of more comprehensive couponing, for the actual patients? Thanks.

Mark Foley (President and CEO)

Yeah. Thanks, Annabel. So in terms of the, you know, kind of where we are with the coupon that we ran in Q1, that sunsetted at the end of April, and so that's done, and so there's no, you know, lingering effect there because of the timeframe for redemption on that. So that's fully pulled through, and done. And we recognized, you know, primarily the offset of that program in Q1. And, you know, it was effective. You know, people really liked the program. It did what it was intended to do, which is to drive more patient trial and experience and engagement from the injector side of it.

It was obviously less than optimal from a revenue perspective because we had to take the full offset, but we'll take those learnings forward in terms of, you know, how we think about subsequent programs. The Beauty of Savings was kind of a halo program that, you know, cut across RHA promotions, DAXXIFY promotions, and bundling promotions. And a lot of what we're doing right now is we are linking sort of purchases to training events, since we've found that a lot of the injectors, particularly given the unique performance profile of our products, really appreciate and find a lot of value in training and education, particularly when we can bring in sort of leaders in the industry that they can spend time with. And so that's been a big part of the Beauty of Savings.

Then certainly on the bundling side, there are some additional economic advantages to folks that lean in at certain levels across the portfolio, and we like what we're seeing, and we're seeing, you know, additional share in those accounts where, you know, we've been able to roll that out. In terms of the, you know, kind of how we think about go forward couponing and what we're going to do, you know, we're continuing to evaluate sort of what the return is. We don't have anything right now that's planned to be rolled out, but we're continuing to evaluate, you know, other ways that we might want to incentivize consumer engagement and programs, and that's sort of, you know, stay tuned on that.

Annabel Samimy (Managing Director)

Okay. If I could just squeeze one more in on the therapeutic side. I mean, you have stated a number of very positive statistics. You have your 84% commercial coverage. You're working with Medicare plans or Medicaid plans. You have the Department of Defense, Veterans, and then you have even stated a reorder rate. I guess I'm curious if there was any residual revenues for therapeutics in the DAXXIFY number. I'm just a little surprised that you have all this progress, and you're not reporting any revenues at all.

Mark Foley (President and CEO)

Yeah, well, I think, you know, if you... First off, when you look at the metrics we gave around the aesthetic side, so, you know, we saw 65% year-over-year unit growth, so, you know, almost all of the DAXXIFY revenue is being driven by aesthetics. You know, we, we didn't launch until May, and so, you know, there was a limited amount of time. And again, the way that these practices buy, given that CD is still a pretty small market, it's $340 million in the U.S., these practices don't buy in volume. They buy to treat patients on the buy and bill. And again, even though you've got reimbursement in place, they want to make sure that when they run it through their own system, that they're getting paid.

So they'll tend to treat, you know, one, two, three patients and then wait the full reimbursement cycle before they, you know, see if they're gonna get, they're gonna get paid. And so while we like what we're seeing clinically, we like the progress that we're making on the reimbursement side, it's a conservative group, and a lot of these practices, you know, only see a certain number of these. And so we, again, we just think it's gonna take us time. I think we're pointing, we're pointing to sort of the, the clinical utility and value that DAXXIFY brings, but it's just gonna take a little while to unlock some of the revenue that's gonna be associated with it.

Annabel Samimy (Managing Director)

Okay, great. Thank you.

Mark Foley (President and CEO)

Thanks, Annabel.

Operator (participant)

Thank you. The next question goes to the line of Tim Lugo with William Blair. Please proceed.

Lachlan Brown (Biotech Equity Research Analyst)

Hey, hey, guys. This is Lachlan on for Tim. Thanks for taking the questions. So Mark, I was wondering, can you talk about any changes in how DAXXIFY is being used by the existing accounts since the price change? I mean, have they, you know, beyond just using it more, have they changed the way they use it, use it more off label or different doses or anything? And second, Toby mentioned the soft filler market, and I think we've seen that sort of some softness across aesthetics with competitor reports as well. So just wanted to get your latest thoughts on sort of the state of, of the market for both toxins and fillers and, you know, if there's anything in particular either driving the weakness or that you think could, you know, bring an end to it? Thanks.

Mark Foley (President and CEO)

Sure. Thanks, Lachlan. So in terms of, you know, DAXI and how it's being used, I think with all these products, the more familiar they get with it, the more comfortable they get, and that's, you know, toxins and fillers across. And so certainly, the more people use it, the more comfortable. And while we are, you know, on label for a certain reconstitution, for example, we know that some practices really like to adjust sort of how they reconstitute and how they administer, and they do that with all the other toxins. And so I think we're finding that within any given practice, they are adapting what they believe is the best way to deliver to get the outcome that they want.

Yeah, we run phase II trials in upper facial lines and, you know, what we hear in the marketplace is that injectors are comfortable using DAXI in a similar fashion to the other neurotoxins. And so I don't know that we're necessarily seeing much of a change in terms of where they use the product. I think they're comfortable with where they use it, but I think it's more in the function of, like, how do they reconstitute? How do they dose? We've definitely seen some learning with the forehead, for example. You know, we've heard that, you know, DAXXIFY appears to be more precise, so where you deliver it, it stays, you see less diffusion.

So for the forehead, which is a broader area, we hear that some accounts, for example, are doing more injection points, but just smaller delivery to make sure that they get the desired outcome. And I think the forehead is one of those areas that people, you know, need to take a little bit more time to figure out. But, and then we'll see a range. You know, some are, you know, solely the full dose. Some have moderated their dose a little bit, some adjust their dose. It may be a little different in glabellar lines versus forehead. And so, the good news is I think that, you know, with any new product, there's gonna be its own unique personality, and particularly with a product like ours that has a very different formulation with the peptide.

But I think universally, what we're hearing for those accounts that are, you know, seeing the positive impact and the reinforcement, is that they're saying it, it's different. What I'm seeing in terms of the onset skin quality, it's different, that I can't get with the others, and that's kind of where we see the real stickiness. And so we'll, you know, continue to try and, you know, make sure that we do everything we can to support these accounts and get them the proper training. In terms of the overall market dynamics, in terms of the soft filler market, yeah, I think it's a combination of just some of the market dynamics out there and some of the, you know, the spend challenges that some consumers are having.

And then certainly on the filler market, we've heard a little bit about, you know, the concern about looking artificial and not natural. And as I said previously, we think that that fits really well with the RHA product line because, again, it's the most natural. It's got an indication around dynamic wrinkles and folds, meaning it's designed to move naturally with facial expression and make sure it looks very natural. And, you know, we're still in a small number of accounts, so we have the benefit of being in growth mode. The toxin market seems to be pretty steady, and I think we've seen that in past times with, you know, even an economic downturn in 2008.

And I think it's a lower cost treatment procedure, and I think once people get used to the outcome, it's a little bit like hair color, where they feel now they need my wrinkles to pack and go. So the toxin market feels more stable and steady. The filler market's been a little more soft, but obviously, with the print that we put up in Q2, we feel like, you know, we've got the product line and the strategy and the execution to continue to drive good growth.

Operator (participant)

Thank you.

Lachlan Brown (Biotech Equity Research Analyst)

Great. Thanks a lot.

Operator (participant)

The next question comes from Uy Ear here with Mizuho. Please proceed.

Uy Ear (VP and and Senior Equity Analyst)

Hey, guys. Thanks for taking our questions. So, I guess my first question is, would you be able to share with us the market share that you've gained in this quarter, as you did in the previous quarter, for DAXXIFY as well as for RHA? And secondly, what percentage of the 15% year-over-year growth in RHA came from the lips product? And, thirdly, I just wanna make sure, did you guys add any account overall at all? Because, the press release says, you know, over 7,500 accounts, and that was what was reported in the first quarter. Thanks.

Mark Foley (President and CEO)

Yeah. So let me, let me hit that one first. Toby, do you wanna comment just on the account side of things? Because I think that there, there was an error on our side there.

Toby Schilke (CFO)

Yeah, I think... Yeah, and I appreciate the question, Uy and Stacy. You know, before I finish, we would like to draw your attention to a numerical error on the second quarter release. We should have said that we ended the second quarter at over 8,000 aesthetic accounts and over 4,200 accounts that have ordered DAXXIFY. I apologize about that, and those speak to Stacy's confusion earlier and your confusion, Uy. So, again, it should be 8,000 aesthetic and 4,200 DAXXIFY accounts.

Uy Ear (VP and and Senior Equity Analyst)

Thanks.

Mark Foley (President and CEO)

Thanks for clarifying that, Toby. So, Uy, on your question on the market share side of it, you know, we're one of the few companies that reports your-- has reported market share in the past, so I think it's a little harder to necessarily compare it, and there's always the debate about what the source is. But if you look at, you know, the unit growth that we saw with DAXXIFY, the revenue growth that we've seen with DAXXIFY, I mean, I think it's fair to conclude that, you know, we're continuing to see, you know, good, healthy metrics around what that looks like. And then on the RHA side, the same thing, given the market filler softness and growing 15% year-over-year, you know, we continue to take share on that side of it.

And so I think, you know, from our perspective and in discussions with investors, I think what they're most focused on is, you know, independent of sort of what's happening in the market, are you growing and are you seeing good, healthy metrics? And so we feel good about sort of the metrics that we're putting up, and even in a market that is seeing a little bit of softness, the overall growth there. In terms of the 15% year-over-year growth and question about, like, how much of that is attributed to lips, that's really hard to know because, even though we have an indication for RHA 3 for lips, we do know that practices use a variety of different SKUs to treat the lips. They have their own sort of preference on it.

Then secondly, it's hard to know whether or not the product they use, you know, where it's used in the face. We saw good, healthy growth across the portfolio of the RHA product line. We obviously leaned in and did some other promotions and incentives and training around RHA 3. And so, while lips certainly was something that we were able to leverage to create excitement and engagement, you know, we saw that translate into broader usage across the face, too.

Uy Ear (VP and and Senior Equity Analyst)

Okay, thanks.

Mark Foley (President and CEO)

Great. Thank you.

Operator (participant)

Thank you. The next question comes from the line of Serge Belanger with Needham & Company. Please proceed.

Serge Belanger (Managing Director of BioPharma Equity Research)

Hey, good afternoon. I guess first one from Mark.

Mark Foley (President and CEO)

Hi, Serge.

Serge Belanger (Managing Director of BioPharma Equity Research)

We're soon coming up on the one-year anniversary when you changed the pricing and marketing strategy around DAXI. So just curious where the price per vial now stands relative to where we were a year ago, and whether you expect that will change over the second half of the year? And then similarly, again, on pricing, but on the consumer side, now that we're one more quarter since you dropped the restrictions on the advertised pricing, what kind of movements you've seen there from your injector customers? Thanks.

Mark Foley (President and CEO)

Yeah, thanks. So on the pricing on the year-over-year, we feel really good that we've hit sort of the right balance right now in terms of the price that we're charging our actual injectors. And so that's, you know, settled into a nice spot, and, you know, you can see that reported in, reflected in, in the, in the Q2. So we've seen good, you know, steady pricing right now at the new levels. It'll move a little bit because we still have the tiered pricing based on how much they buy. That can influence sort of that range. But we, we like where we're situated from a pricing standpoint to the practice.

You know, the next question is then, how well is that being translated to the consumer, and are they taking sort of that lower price that we're giving to them and passing along to the consumer? And I would say that's taken a little bit more time, but now we do see that our pricing is coming much more in line with competitor pricings from a consumer standpoint, which is ultimately what we wanted to have happen, so that, you know, we're getting out of this whole, "Hey, at a premium price, the product has to have an elevated set of performance expectations above and beyond sort of the attributes that it has," which, you know, are helping drive adoption.

And so we've been encouraged by seeing that, you know, pricing that we're giving to the injector passed along to the consumers, and we'll continue to monitor that, but we like the, we like where that's also situated. And so we're encouraged that as we come up to sort of the annual point where we made the price change, I think that, you know, it will also allow us to show, you know, healthy year-over-year gains on that as well from a revenue standpoint. You know, in terms of the, you know, the, the advertised pricing, no advertised pricing, yeah, I, I think that, you know, if we look at our awareness trends, the promotional trends that we're seeing, you know, I just, I think that our, our injectors appreciate it because they wanna be able to talk about it.

They wanna be able to say, "Hey, I'm, I've got this, you know, next generation toxin. Come ask me about it." And so I think that that's also feeding into some of the increases that, again, we're seeing in, in awareness, and, and some of the growth trends that we're seeing.

Serge Belanger (Managing Director of BioPharma Equity Research)

Thank you.

Mark Foley (President and CEO)

Great. Thanks, Serge.

Operator (participant)

Thank you. The next question comes from the line of Navann Ty with BNP Paribas. Please proceed.

Navann Ty (Lead Analyst for Healthcare)

Hi, thanks for taking my question. First, can you discuss the fillers market recovery in H2, and do you need that market recovery to reach the revenue guidance? And second, a follow-up to a previous question, what is the contribution of RHA 3 for lips to RHA outperforming the fillers market? Thank you.

Mark Foley (President and CEO)

Thanks, Navann. So in terms of the filler market health, again, you know, even in the midst of what I would say was a softer filler market, the first half of the year and certainly in Q2, we drove really healthy revenue. And so, listen, we think that the HA market is gonna continue to be robust and that longer term, the growth dynamics will be there. And so, you know, we're continuing to focus on delivering on the revenue plan independent of the market drop. And so we're hoping that, you know, if interest rates drop a little bit, that will drive a little bit healthier consumer and things like that.

But so far, when we pulse check with the, you know, the field and, and the customers out there, you know, we feel good about where we're situated, where we're situated today. You know, I, I don't know that I have anything incremental to add on the RHA 3 and sort of where it was on lips. I mean, lips being the number one procedure, it certainly helped that we were able to lean in with that. But, you know, injectors were already treating lips with other products, and so it wasn't like we opened up necessarily a new indication that wasn't getting treated. It allowed us to bring a spotlight and to promote lips with the, you know, RHA 3. So it definitely helped with engagement. We had sort of a whole thing about Lips Worth Framing that drove social media and, and digital opportunities and content sharing.

But it's hard for us to sort of really know, given, as I said before, that some people will use other SKUs than RHA3 to treat the lips, and we don't always know exactly where they use it. But it was certainly helpful for sure, and you know, we'll continue to leverage that going forward. It wasn't just a Q3... a Q2 initiative.

Navann Ty (Lead Analyst for Healthcare)

Thank you. That's helpful. Thanks.

Mark Foley (President and CEO)

Thanks, Navann.

Operator (participant)

Thank you. That concludes today's conference call. Thank you. You may now disconnect your line.

Mark Foley (President and CEO)

Great. Thank you.