Evolus(EOLS) - 2020 Q1 - Quarterly Report

Special Note Regarding Forward-Looking Statements The report contains forward-looking statements subject to significant risks and uncertainties that could cause actual results to differ materially - The forward-looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially[9] - Key risk areas highlighted include the ability to successfully commercialize the sole product, Jeuveau®[9] - The potential future impact of the COVID-19 pandemic on sales, operations, and financial condition is a major uncertainty[9][10] - The company's performance depends on third-party suppliers and manufacturers[9] - The results and impact of current and future legal proceedings pose a significant risk[9] PART I - FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed financial statements reflect the company's position and performance during its initial commercialization period Condensed Balance Sheets The balance sheet shows decreased cash and total assets, reflecting the net loss incurred during the quarter Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $34,652 | $109,892 | | Total current assets | $126,142 | $152,197 | | Total assets | $214,151 | $240,442 | | Liabilities & Equity | | | | Total current liabilities | $22,613 | $24,439 | | Total liabilities | $151,545 | $160,985 | | Total stockholders' equity | $62,606 | $79,457 | Condensed Statements of Operations and Comprehensive Loss The company reported its first revenues of $10.5 million but incurred a net loss of $19.7 million due to commercialization costs Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net revenues | $10,496 | $— | | Gross profit | $6,277 | $— | | Loss from operations | $(17,395) | $(25,269) | | Net loss | $(19,735) | $(10,975) | | Net loss per share | $(0.59) | $(0.40) | Condensed Statements of Cash Flows The company used $27.9 million in cash for operating activities, an increase reflecting costs of the commercial launch Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(27,947) | $(19,200) | | Net cash used in investing activities | $(46,188) | $(80,025) | | Net cash (used in) provided by financing activities | $(1,105) | $60,430 | | Change in cash and cash equivalents | $(75,240) | $(38,795) | Notes to Condensed Financial Statements The notes detail the company's single-product focus, liquidity assessment, significant legal proceedings, and COVID-19 responses - The company's business is focused on its first product, Jeuveau®, a 900 kDa purified botulinum toxin type A, launched in the U.S. in May 2019[36] - Management expects operating losses and negative cash flows to continue for at least the next 12 months but believes current capital is sufficient[37][39] - The company is a defendant in a lawsuit and an ITC investigation that could bar the importation and sale of Jeuveau® in the United States[141][144] - In response to COVID-19, the company announced significant expense reductions, including separating approximately 100 employees[167] - The company has a credit facility with Oxford Finance for up to $100 million, with a $75 million tranche funded in March 2019[122] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results, the impact of COVID-19, cost-saving measures, and future liquidity Impact of COVID-19 Outbreak on Our Business The COVID-19 outbreak severely impacted sales, leading to significant cost-reduction measures and operational changes - The COVID-19 outbreak led to a dramatic decline in elective procedures, negatively affecting sales and accounts receivable collections[179][180] - In April 2020, the company implemented cost-saving measures, including reducing headcount by over 100 employees and delaying the European launch[181] Results of Operations The analysis compares Q1 2020 to Q1 2019, highlighting initial revenues and increased SG&A from commercialization Comparison of Results of Operations (in millions) | Metric | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $10.5 | $— | $10.5 | | Gross Profit | $6.3 | $— | $6.3 | | Selling, general and administrative | $31.3 | $17.5 | $13.8 | | Research and development | $0.5 | $2.4 | $(1.9) | | Net loss | $(19.7) | $(11.0) | $(8.7) | - The increase in SG&A expenses was primarily due to higher personnel-related costs from hiring a U.S. sales force and building out commercial infrastructure[194] Liquidity and Capital Resources The company has sufficient capital for the next twelve months despite expecting continued losses and missing a credit milestone - As of March 31, 2020, the company had cash and cash equivalents of $34.7 million and short-term investments of $65.0 million[203] - The company does not expect to meet the net sales milestone to draw the second $25.0 million tranche of its credit facility[206] - Management believes current capital resources are sufficient to fund operations for at least the next twelve months[213] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is noted as not applicable for this reporting period - Not applicable[228] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - Based on an evaluation as of March 31, 2020, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[230] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, such controls[232] PART II - OTHER INFORMATION Item 1. Legal Proceedings No material developments in legal proceedings have occurred since the last annual report - There have been no material developments with respect to legal proceedings since the company's 2019 Annual Report on Form 10-K[235] Item 1A. Risk Factors The company faces significant risks from the COVID-19 pandemic, single-product dependency, competition, and legal challenges - The COVID-19 outbreak is a primary risk, having caused a dramatic decline in elective procedures and potentially leading to prolonged negative impacts[239][241] - The company's business depends entirely on the successful commercialization of its only product, Jeuveau®, and it faces significant competition[247][253] - Ongoing litigation with Medytox and Allergan at the ITC poses a critical risk; an adverse ruling could result in an exclusion order barring imports and sales of Jeuveau®[286] - The company relies solely on Daewoong in South Korea for manufacturing, making it vulnerable to production disruptions or regulatory issues[267][320] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None[497] Item 3. Defaults Upon Senior Securities This section is noted as not applicable - Not applicable[499] Item 4. Mine Safety Disclosures This section is noted as not applicable - Not applicable[501] Item 5. Other Information The company reports no other information to disclose for this period - None[503] Item 6. Exhibits This section lists the exhibits filed with the report, including officer certifications and XBRL data files - Filed exhibits include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act[506] - Interactive Data Files (XBRL documents) are also included as exhibits[507] Signatures The report is duly signed and authorized by the company's principal executive and financial officers on May 11, 2020 - The report was signed on May 11, 2020, by David Moatazedi, President and Chief Executive Officer, and Lauren Silvernail, Chief Financial Officer[514][515]