Revance(RVNC) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Unaudited Q2 2023 financials show strong revenue growth, a widened net loss, and increased cash used in operations Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights | Account | June 30, 2023 ($ millions) | December 31, 2022 ($ millions) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $141.2 | $109.0 | | Short-term investments | $178.5 | $231.7 | | Inventories | $34.4 | $18.3 | | Total current assets | $378.9 | $374.7 | | Total Assets | $597.5 | $581.9 | | Liabilities & Equity | | | | Total current liabilities | $74.1 | $75.7 | | Debt, non-current | $380.3 | $379.4 | | Total Liabilities | $570.7 | $569.3 | | Total Stockholders' Equity | $26.8 | $12.6 | - Total assets increased to $597.5 million as of June 30, 2023, from $581.9 million at year-end 2022, while total liabilities remained relatively stable at $570.7 million[30] - Inventories nearly doubled to $34.4 million from $18.3 million, reflecting the commercial launch and production of DAXXIFY[30] Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary ($ millions, except per share data) | Metric | Three Months Ended June 30, 2023 ($ millions) | Three Months Ended June 30, 2022 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2022 ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $58.1 | $28.4 | $107.5 | $53.6 | | Product revenue | $54.4 | $25.5 | $100.1 | $46.3 | | Total operating expenses | $123.6 | $86.2 | $231.0 | $173.7 | | Loss from operations | ($65.5) | ($57.8) | ($123.5) | ($120.1) | | Net loss | ($67.3) | ($61.4) | ($127.1) | ($125.8) | | Net loss per share | ($0.80) | ($0.88) | ($1.54) | ($1.82) | - Total revenue for Q2 2023 more than doubled to $58.1 million compared to $28.4 million in Q2 2022, driven by a 113% increase in product revenue[32] - Despite strong revenue growth, the net loss for Q2 2023 increased to $67.3 million from $61.4 million in Q2 2022, primarily due to a 62% rise in Selling, General and Administrative expenses[32] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Six Months Ended June 30 | Cash Flow Activity | 2023 ($ millions) | 2022 ($ millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($122.9) | ($105.5) | | Net cash provided by (used in) investing activities | $55.8 | ($61.3) | | Net cash provided by financing activities | $100.7 | $126.5 | - Net cash used in operating activities increased to $122.9 million for the first six months of 2023, compared to $105.5 million in the same period of 2022[40] - Financing activities provided $100.7 million in cash, primarily from the At-The-Market (ATM) stock offering which generated $100.2 million in net proceeds[40] Notes to Condensed Consolidated Financial Statements - The company believes its existing capital resources of $319.7 million (cash, cash equivalents, and short-term investments), along with an expected $50.0 million draw from its Note Purchase Agreement, will be sufficient to fund operations for at least the next 12 months[43] Product Revenue Breakdown | Product | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :--- | :--- | :--- | | RHA Collection | $31.8 | $62.0 | | DAXXIFY | $22.6 | $38.0 | | Total | $54.4 | $100.1 | - Under the Viatris Agreement for an onabotulinumtoxinA biosimilar, no collaboration revenue was recognized in the first six months of 2023 due to uncertainties and constraints on variable consideration. The transaction price allocated to unfulfilled performance obligations was $54.5 million as of June 30, 2023[59][60] - The company has two key manufacturing-related finance leases: one with ABPS for a dedicated DAXXIFY fill-and-finish line that commenced in January 2022, and another with PCI that has not yet commenced but has a remaining minimum commitment of $226.2 million from H2 2023 onwards[77][86][87] - As of June 30, 2023, the company had $380.3 million in non-current debt, consisting of $282.6 million from 1.75% Convertible Senior Notes due 2027 and $97.8 million from Notes Payable under a Note Purchase Agreement[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue growth to product launches, notes rising operating expenses, and confirms sufficient liquidity Overview and Recent Developments - The company generated $107.3 million in revenue for the six months ended June 30, 2023, and serves over 6,000 aesthetic accounts across its products and services[147] - On August 8, 2023, the company amended its Note Purchase Agreement, reducing the Second Tranche commitment to $50 million (expected to be drawn by August 31, 2023) and increasing the uncommitted Third Tranche to $150 million[148] - The market introduction of DAXXIFY began in March 2023 after the completion of the PrevU early experience program, generating $38.0 million in revenue in the first half of the year[150] - The FDA has accepted the supplemental BLA for DAXXIFY for the treatment of cervical dystonia, with a PDUFA date of August 19, 2023[150] - The OPUL Fintech Platform processed approximately $173 million in Gross Processing Volume (GPV) for Q2 2023, with a trailing-twelve-month GPV of approximately $697 million[152] Results of Operations Revenue by Type - Six Months Ended June 30 | Revenue Type | 2023 ($ millions) | 2022 ($ millions) | Change ($ millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $100.1 | $46.3 | $53.7 | 116% | | Service revenue | $7.3 | $2.1 | $5.2 | 250% | | Collaboration revenue | $0.1 | $5.2 | ($5.1) | (97)% | | Total revenue | $107.5 | $53.6 | $53.8 | 100% | Operating Expenses - Six Months Ended June 30 | Expense Category | 2023 ($ millions) | 2022 ($ millions) | Change ($ millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of product revenue | $30.1 | $15.4 | $14.6 | 95% | | Cost of service revenue | $7.4 | $2.0 | $5.4 | 275% | | Selling, general and administrative | $143.4 | $92.9 | $50.5 | 54% | | Research and development | $46.0 | $55.6 | ($9.7) | (17)% | | Total operating expenses | $231.0 | $173.7 | $57.3 | 33% | - The 116% increase in product revenue for the first half of 2023 was driven by the launch of DAXXIFY ($38.0 million) and a 34% increase in RHA Collection sales ($62.0 million)[155][156] - The company utilized approximately $8 million of 'Zero-cost Inventory' for DAXXIFY in the first half of 2023, which are manufacturing costs expensed to R&D prior to FDA approval. Cost of product revenue is expected to increase once this inventory is depleted[161][164] - Selling, general and administrative expenses increased by 54% in the first half of 2023, primarily due to a $26.8 million increase in sales and marketing expenses related to infrastructure investment for the DAXXIFY launch[169] - Research and development expenses decreased by 17% in the first half of 2023, mainly because certain DAXXIFY manufacturing-related expenses are now being capitalized as inventory post-FDA approval, whereas they were previously expensed to R&D[172][174] Liquidity and Capital Resources Financial Position | Metric | June 30, 2023 ($ millions) | December 31, 2022 ($ millions) | | :--- | :--- | :--- | | Cash, cash equivalents, and short-term investments | $319.7 | $340.7 | | Working capital | $304.9 | $299.0 | - The company's cash, cash equivalents, and short-term investments decreased by $21.0 million in the first six months of 2023. The primary use of cash was $121.2 million for operations, which was largely offset by $100.0 million in net proceeds from the ATM stock offering[186][187] - The company expects to draw the $50 million Second Tranche of its Note Purchase Agreement by August 31, 2023. An uncommitted Third Tranche of up to $150 million is available until March 31, 2024, contingent on achieving at least $50 million in trailing twelve months revenue for DAXXIFY and lender approval[195] - The company sold 3.2 million shares under its 2022 ATM Agreement in Q2 2023 at a weighted average price of $31.90 per share, raising net proceeds of $100.0 million[208] - Management states that existing capital resources, combined with the ability to draw on the Second Tranche of the Note Purchase Agreement, are sufficient to fund the operating plan for at least the next 12 months[211] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure from interest rate fluctuations remains unchanged in H1 2023 - The company's main market risk exposure stems from fluctuations in interest rates. This exposure has not materially changed in the first half of 2023[218] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal controls this quarter - As of June 30, 2023, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[219] - There were no changes in internal control over financial reporting during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[220] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company faces patent infringement and securities class action lawsuits, which it will vigorously defend - Allergan filed a patent infringement lawsuit in October 2021, claiming Revance's DAXXIFY formulation and its manufacturing process (by partner ABPS) infringe on several Allergan patents. A Markman hearing was held on June 28, 2023, and a court decision on claim construction is pending[223] - A securities class action complaint was filed in December 2021, alleging misleading statements about DAXXIFY's manufacturing and approval timeline between November 2019 and October 2021. A hearing on the company's motion to dismiss is scheduled for August 10, 2023[223] Item 1A. Risk Factors No material changes to previously disclosed risk factors in FY2022 10-K and Q1 2023 10-Q - The company refers investors to the risk factors disclosed in its FY2022 10-K and Q1 2023 10-Q, indicating no material changes in the current period[224] Item 5. Other Information Note Purchase Agreement amended, adjusting Second and Third Tranche commitments for future financing - On August 8, 2023, the company executed the First Amendment to its Note Purchase Agreement. This amendment reduced the Second Tranche commitment to $50.0 million and increased the uncommitted Third Tranche to $150.0 million[229] - The amendment established a new principal repayment schedule for the Second Tranche, with quarterly installments beginning in September 2024 and full repayment by the maturity date of September 18, 2026[230]