Evolus, Inc. (EOLS) Q4 2022 Earnings Report, Transcript and Summary

Greetings, and welcome to the Evolus Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Erickson, Vice President, Investor Relations. Thank you, David. You may begin.

Thank you, operator, and welcome to everyone joining us on today's call. With me today are David Moatazedi, President and Chief Executive Officer; Rui Avelar, Chief Medical Officer, Head of R&D; and Sandra Beaver, Chief Financial Officer. Our prepared remarks today will include forward-looking statements within the meaning of United States Securities Laws, and management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the Company's business, strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the Company faces is contained in its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The Company undertakes no obligation to update or review any estimate, projection or forward-looking statements. Additionally, today's discussion will include non-GAAP financial measures, which should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release, which was furnished with our Form 8-K filed today with the SEC and on our Investor Relations website at evolus.com. Lastly, following the conclusion of today's call, a replay will be available on our website at evolus.com. And with that, I'll turn the call over to David.

Thank you, David. The successful results of the fourth quarter of 2022 clearly demonstrate the significant progress we are making to deliver on our long-term strategy to become a leader in the performance beauty market. In 2022, we achieved many important accomplishments that enhanced our position to continue our growth and expand market share. 2022, we grew total revenue of 49%, reaching the top-end of the guidance we introduced in January of that year. For the second year in a row, Jeuveau was the fastest-growing toxin in the aesthetic market, and in 2022, we crossed into a double-digit share position. During the year, we completed enrollment in our Phase II extra-strength study, leading to the release of very encouraging interim data earlier this year. In 2022, we expanded our international operations beyond Canada and began our expansion into the European region with a successful launch in Great Britain. And importantly, throughout the year, we reduced our use of operating cash as we continue on our path to reaching profitability. All these achievements set the stage for a strong and exciting 2023 where we expect to continue delivering above market growth and generating total net revenue of $180 million to $190 million. This keeps us on track to reach total revenue of $500 million by 2028, a 22% compound annual growth rate. We continue to expect non-GAAP operating expenses to be between $145 million and $150 million, and remain committed to reaching positive non-GAAP operating income by year-end without the need for any additional capital to fund our current operations. We will continue expanding our international presence with the launch of Nuceiva in Germany and Austria. We plan to enter additional European countries in 2023, and we are actively planning for a launch in Australia, where we have recently received marketing approval. In addition, we look forward to completing our Phase II extra-strength study and presenting final results in the second half of the year. Now I'll get into some of the details. Our final results for the fourth quarter and full-year 2022 were unchanged from the preliminary results we shared on January 18. As reported, quarterly revenue grew 26% year-over-year and was up 29% on a quarter-over-quarter or sequential basis. Both metrics are multiples above the estimated industry growth rate and clearly demonstrate that Jeuveau continued to gain market share. We finished the year with strong momentum with total revenue growing 49% to $149 million and our key metrics reaching new highs. For example, in the fourth quarter, we added 700 new accounts for a total of more than 2,500 new customers in 2022. This brings a total number of new accounts purchasing Jeuveau since launched to more than 9,500. Importantly, the reorder rate among our customers remains above 70%. Aided by the Switch Your Tox promotional campaign we kicked off in the third quarter, enrollment in the Evolus Rewards Consumer Loyalty Program grew more than 75% in 2022 to reach more than a half million members. Our Switch Your Tox program has proven to be effective. We estimate the program added a percentage point to our market share in the back half of the year. Switch Your Tox was the single biggest driver of our new patient volume during that period, and resulted in greater commitment from our customers, who dedicated higher volumes to their business to Jeuveau and this momentum continues. Looking at the health of the toxin market, underlying U.S. aesthetic market conditions remain strong, and the demand for neurotoxin continues to grow at a healthy rate. Shifting attitudes about health and beauty, broader acceptance of aesthetics and growing consumer purchasing power are continuing to fuel this market expansion. According to a recent McKinsey study, the younger demographic is twice as likely as the older demographic to adopt injectables, which plays to our strengths as a company uniquely focused on a younger consumer with a brand and digital platform designed to appeal specifically to that audience. In 2023, we expect to grow at least twice as fast the aesthetic neurotoxin market, and we will drive out performance by adding as many as 2,000 new customers, increasing share in the new accounts we added in 2022 and deepening our relationships with our more tenured and established customers. As we approach 10,000 accounts, our penetration is only now approaching one-third of potential U.S. customers. This represents a considerable future opportunity to broaden our reach with our differentiated value-added business model. As customers gain confidence using Jeuveau, they increase their purchasing quantities and unlock greater benefits through our Evolus loyalty program, such as co-branded marketing. These actions aided by our expanding consumer loyalty program and a meaningful contribution from international markets will drive total revenues of $180 million to $190 million in 2023. Our projected growth this year puts us on a trajectory toward achieving $500 million in sales in 2028 through a combination of a fundamentally strong aesthetic neurotoxin market, continued market share gains in the U.S., and meaningful contribution from international markets. Let me break this down for you. We estimate the U.S. aesthetic neurotoxin market totaled approximately $2.2 billion at the end of 2022, and assuming a historical annual growth rate will grow to approximately $4 billion or roughly double by the end of 2028. If we only maintain pace with the market, that would represent one-third of the growth needed to reach our target. The [next third] is to achieve the market share gains, the majority of which is captured in this year's guidance. Lastly, as we continue to grow our international footprint, we believe sales outside the U.S. will represent the remaining third, which will ultimately comprise 15% to 20% of our total revenue. Overall, we believe this $500 million target is both realistic and achievable, and it's important to note that it assumes no label expansion per Jeuveau and Nuceiva nor any acquisition. Now turning to our international business. We are continuing to gain traction with Nuceiva in Great Britain, which was launched in the fourth quarter of last year. Clinician interest continues to build and we are generating broader awareness through educational sessions led by key opinion leaders. Our brand and entire approach to the aesthetic market is helping us establish a distinctive presence in Europe, and we will use the strategy in Germany and Austria, the second biggest toxin market in that region, where we are just now launching. The addition of these two countries means we are now able to offer Nuceiva to approximately 40% of the roughly $500 million European market. In 2023, we plan to continue broadening our European presence as part of a phased expansion. In January, we are pleased to report the receipt of regulatory approval to begin selling Nuceiva in Australia, and we are actively planning for a product launch. Australia is one of the largest market opportunities for aesthetic neurotoxins outside the U.S. and our expansion there as well as in Europe, will be a key driver of our sales growth over the next five years. I would now like to turn the call over to Rui, to discuss our Phase II extra-strength results, including some additional data about the control arms. Rui?

Thank you, David. As recently reported, the Jeuveau extra-strength Phase II study continues to progress and is on track to be completed no later than June of this year. The plan is to then present the topline data at one of the major medical conferences in the second half of 2023. At IMCAS, this past January, the first interim data was released. And at the Dallas Cosmetic, Surgery and Medicine meeting later this week, the data will be presented once again along with the controlled results. As a reminder, the data so far has demonstrated no difference in safety profile between the Jeuveau extra-strength, 20 units of Jeuveau, or 20 units of Botox with 88% of adverse events being rated as mild and no serious adverse events reported. The time required for a patient to return back to their baseline Glabellar Line Scale score and the duration of at least a one point improvement on that same scale is assessed by the investigator are similar at this time in the study with the Jeuveau 40 unit extra-strength arm demonstrating a duration of 26.1 weeks. In the controls, 20 units of Jeuveau lasted 21.6 weeks, 20 units of Botox, 21.1 weeks, which is in line with previous studies. Global aesthetic improvement was also assessed by the investigators to determine the time it took are subject to return back to their baseline appearance. These results paralleled the Glabellar Line Scale findings. The Jeuveau extra-strength arm lasted 26.3 weeks compared to 21.6 weeks in 20 units Jeuveau, and 21 weeks in the 20 unit Botox arm. And with that, I'll turn it back to you, David.

Thank you, Rui. Overall, these interim results are significant step forward in our strategy to provide a longer duration treatment option with a product that offers a unique precision profile and natural looking results. We believe having the ability to offer the flexibility of either option using the same commercially approved Jeuveau vial, positions Evolus very favorably in its underpenetrated and growing market. Before I turn the call over to Sandra, I'd like to briefly discuss the recent legal matter involving Medytox and our partner Daewoong. As reported on February 10, the Central District Court in Korea ruled in favor of Medytox in a long-standing trade secret dispute with Daewoong. The court's ruling has no impact on our operations, despite an inaccurate article suggesting otherwise. In fact, as part of our 2021 settlement with Medytox, we resolved all litigation with them and specifically agreed that any pending or future litigation between Medytox and Daewoong would not affect Daewoong's ability to manufacture and export Jeuveau or Nuceiva to Evolus nor our ability to sell it. And with that, Sandra, over to you.

Thank you, David. I would like to start by reiterating just how pleased David and I are with the performance of the Evolus team and the strong finish to 2022. We successfully grew sales well in excess of the market, and at the same time, we carefully managed operating expenses, which came in at $135.7 million and the low-end of our $135 million to $140 million guidance. This also helped us record a steady decrease in our operating cash usage each quarter, putting us on a clear path to achieving profitability in 2023. As a result, we continue to be confident that we have sufficient cash to achieve profitability, and we do not have any expectations of the need for additional capital. Turning to the numbers. As we reported in our pre-announcement, global net revenues for the fourth quarter were $43.6 million, up 26% compared to net revenue in the fourth quarter of 2021, and up 29% on a sequential quarter-over-quarter basis. Included in sales this quarter with $0.7 million of sales to Canada, which are reflected as service revenues on the P&L. Sales into Great Britain, which are included in product revenue were minimal this quarter. Year-over-year sales were driven primarily by higher volumes and a modestly higher average selling price. The pricing environment for neurotoxin products in the U.S. continues to remain strong. As anticipated in our Q3 results, our fourth quarter performance benefited from participation in the Switch Your Tox program with consumer redemptions driving increased demand and enabling recognition of revenues deferred from Q3. This is reflected in the reduction of our accrued revenue contract liability on the balance sheet as compared to Q3. Our reported gross margin for the fourth quarter was 67.7% and our adjusted gross margin, which excludes the amortization of intangibles, was 69.4%. This sequentially higher margin rate over the third quarter reflects a material decrease in our settlement royalty obligations resulting from the conclusion of the royalty to AbbVie on September 16 and the decrease of the royalty to Medytox to a mid single-digit rate calculated on global net sales. This brings to an end all royalty obligations to AbbVie and lowers our royalty rate to Medytox until it expires in 10 years. In 2023, you should expect our adjusted gross margin rate to be in the range of 68% to 71%. Reported selling, general and administrative expenses for the fourth quarter were $36.7 million compared to $34.8 million in the third quarter. This increase was related primarily to greater commercial activities supporting our revenue growth. This quarter SG&A expenses included $2.4 million of non-cash stock-based compensation. Our GAAP operating expenses for the fourth quarter were $54.3 million compared to $51.8 million in the third quarter. Non-GAAP operating expenses for the fourth quarter were $35.7 million compared to $33.7 million in the prior quarter. For the full-year, non-GAAP operating expenses were $135.7 million. Our non-GAAP loss from operations in the fourth quarter was $5.4 million compared to $13.3 million reported in the third quarter. As a reminder, non-GAAP operating expenses exclude product cost of sale. Both non-GAAP operating expenses and non-GAAP loss from operations exclude stock-based compensation expense, reevaluation of the contingent royalty obligation, depreciation and amortization and IPR&D expense. Turning to the balance sheet. We ended the year with $53.9 million in cash compared to $65.6 million at September 30, 2022 for a difference of $12 million. In the fourth quarter, net cash used for operating activities was $8.8 million, which was nearly 50% lower than the amount used in the third quarter, and a continuation of the favorable trends we've seen this year. As a reminder, our final settlement payment of $5 million was paid during the first quarter of 2023, which satisfies our total settlement milestone obligation. In our pre-announcement in January, we committed to reaching profitability in the fourth quarter of 2023, which we define as a positive non-GAAP operating income. I'd like to take a moment to illustrate the progress we made during 2022 that gives us confidence in achieving that profitability goal. Our GAAP cash flow statement includes several settlement-related activities and other non-operating items that when excluded better represent our cash consumption and clearly indicate a more favorable trend. Our reported use of cash from operations in 2022 was $84.9 million, with 57% of this related to settlement and royalty payments, IPR&D and interest expense. The remaining 43%, which is $36.6 million, demonstrates continued progress towards achieving positive operating cash flows and continued to decrease quarter-over-quarter throughout 2022 from a high of $14.6 million in Q1 to a low of $2.1 million in Q4. We remain confident in our ability to manage our operating expenses during 2023. And as I noted at the beginning of my comment, we continue to expect that our existing cash balance will fund our current operations through cash flow breakeven, eliminating the need for additional capital. As a reminder, we continue to look at corporate development opportunities to expand our portfolio and leverage the strong infrastructure that we have built. To fund development activities, we have the $50 million tranche available under the Pharmakon line of credit. To provide additional flexibility, we intend to file a shelf registration statement and an ATM along with our Form 10-K by tomorrow morning. These filings are intended to ensure we have the financial capacity to pursue business development opportunities expeditiously as they arrive. There is no intention to utilize these funds or working capital or ongoing business operations given we fully expect our existing cash balance is sufficient to fund our current business to breakeven and beyond. Before I turn it back over to David, I would like to summarize our 2023 guidance. Total net revenues to be between $180 million and $190 million, over 90% of which will come from sales in the U.S. and the balances from international markets. Our quarterly revenue assumptions assume a return to historical seasonal revenue patterns and adjusted growth margin to be in the range of 68% to 71%, full-year non-GAAP operating expenses to be between $145 million and $150 million, which consists mainly of continued investments in the growth of Jeuveau in the U.S. plus Nuceiva launch expenses internationally and achieving positive non-GAAP operating income in the fourth quarter. Other modeling assumptions include quarterly interest expense of $2.6 million and a full-year weighted average shares outstanding of approximately 57 million. Back to you, David.

Thank you, Sandra. In closing, we are building a performance beauty company uniquely positioned to enable us to create a modern edgy brand for the younger generation. In just eight quarters since the relaunch, we have made significant strides in building Jeuveau brand awareness to number two in our category among consumers. Through data and training, we've established Jeuveau as the precise neurotoxin among injectors, and we are seeing the benefits of that positioning reflected in our double-digit market share in the category. These achievements give a strong confidence in our ability to outpace underlying market growth by a factor of two in 2023 and to grow our revenues organically to $500 million by 2028. In addition, as we've discussed in the past, we intend to compliment our existing product offering with potential acquisitions to extend and deepen our reach across our core markets, utilizing our unique capabilities and go-to-market strategy. We have built a strong growth platform from which we can launch additional opportunities and we fully expect to leverage that platform over time. Lastly, thanks to the focus and excellent execution of our team, we've delivered on our guidance, provided a clear view of our path to profitability and set achievable long-term financial goals. With that, we are ready to take questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Annabel Samimy with Stifel. Please proceed with your question.

Hi, all. Thanks for taking my question. I had a few. I guess, first on the long-acting toxin – the extra-strength toxin data. Just wondering about the response that you're getting to the data you reported on this extra-strength. Obviously some of this was driven by – injector experiences themselves or experimentation rather, and I'm just wondering the extent to which this data could potentially accelerate off-label use. And is there any different thoughts to the reception of a long duration toxin in the market with some of the feedback you're getting in some of the data that's being generated by the competitors? Thanks.

I'll take the [first shot at] that questions, Annabel. When we first presented the data, I think it surprised the number of the clinicians. We've certainly seen, for instance, a 1 point improvement being marked at about 21 weeks, and this is coming – sorry, at about 24 weeks, 23.5 to 24 weeks. So coming in at 26 weeks certainly is a comparable data set. Where we are in terms of feedback right now is early. What we're seeing is a lot of interest. We're seeing clinicians basically asking how do you reformulate it to kind of reproduce what you did in the study. So we're getting right now kind of the early calls of clinicians who are starting to play with it in their clinics on their patients who are trying to do a side-by-side to other products.

Okay. Great. If I could – sorry, go ahead.

No, go ahead.

No, I was just wondering in terms of like any further thoughts to a long duration market and the demand for long duration products now that you're seeing some of the reception from the clinicians?

I mean, I'll take a first kind of shot of it. It really hasn't changed from our first representation to you. It's being pretty consistent. There's a great deal of interest in having a longer duration product in their portfolio, and that number that keeps coming up is about 86% would like the optionality to have a longer duration. But again, when we ask that second question in terms of tell us how you deploy the original strength versus a longer duration, the majority of the use still goes with the original strength for a variety of reasons. One is just trying to learn their way through it to see what the product does and doesn't do. And then a number of folks don't necessarily want patients coming in only twice a year, they like the cadence of four months so that they can actually utilize other products and other touch points.

Yes. Annabel, the only thing I'd add to Rui’s, of course, as you know, it’s early days. There has been a lot greater interest than what we anticipated around understanding our extra-strength formulation and the data. And of course, we have a medical affairs team that's able to address those questions. But what's encouraging here is, of course, as you know, that we have the optionality of using the current original strength, and then for those that are interested in understanding the extra-strength, that's another option that's available to them in their clinical practice. And so regardless of how the mix plays out over time, I think, generating that data was very insightful for our customers.

Okay. If I just ask one more follow-up related to this. Your $500 million guidance assumed, I think a constant market share after this year in standard market growth, but no contribution from other products or even from this extra-strength. So what do you think the extra-strength might add to this if you sort of assume that in your guidance?

Yes. It's a great question. To your point, our guidance currently assumes the existing 20 unit dose will be the dose both in the U.S. as well as internationally. We do assume some further share gains beyond this year. Although that share gain increase starts to moderate as the product gets into the maturity cycle. And as you pointed out, we don't assume any potential benefits of adding additional assets in the bag or even the extra-strength or the market potentially growing at a faster clip over time. So I think those are parts that we haven't factored in, that of course, we believe that we're in control of the guidance we've provided, so we focused on what we have on label as the key driver of that growth.

Great. Thank you.

Thank you. Our next question is from Marc Goodman with SVB. Please proceed with your question.

Can you help us understand the OUS kind of rollout over the next, let's say, 24 months and just what countries come on and how you expect revenues to kind of ramp? And just give us a sense, Canada historically has been a little choppy, you booked some revenues in a quarter and then you don't. And are we done with that and now Canada is going to be pretty consistent on a quarter-to-quarter basis?

It's a good question, Marc. Look, the international business, as you pointed out, has been a very small part of the story. It's been only Canada up until recently as we started to book UK and now with Germany next, we've captured 40% of the European market. So we're starting to build some sizable amount of business there in the international, and that'll continue to grow. I think, we will provide more color as we have further clarity around our timing for expansion into the next market just so you understand the backdrop behind that. We look at this expansion internationally in phases clearly getting the international business to represent 15% to 20% of our overall revenue by 2028 is a significant idea and getting each of those markets right, finding the right partners as we enter them, as well as executing on a launch strategy with the team that we've deployed in Europe. Those are all important ideas. So we're going to continue to be patient, take our time, enter the biggest markets likely first and then expand into some of the smaller markets. But the advantages you know, that we have is we're the first neurotoxin to be approved through the central body in Europe, which means we have access to every country in that market. So we do have the ability to enter those markets thoughtfully over the next couple of years. But we'll give you more color on what's next after Germany and Austria. After we get that launch off the ground, Rui and I are flying out here tomorrow to Germany for that launch meeting that's going to take place. So it's an exciting time to be entering another big market for us and to have the Australian approval earlier than we had anticipated. So we continue to execute on our plan and we'll give you updates as we make progress.

And then just the comment on Canada?

Yes. Canada is, we do believe will continue to grow and as a result will be more consistent in terms of the revenue that we see. I think you saw the – a big – greater consistency last year in terms of booking Canada revenue than you did the prior year, and you'll continue to see that be the case as we get into this year where we expect more consistency of their ordering each quarter.

Okay. Thanks.

Thank you. Our next question comes from Douglas Tsao with H.C. Wainwright. Please proceed with your question.

Hi. Good afternoon, and thanks for taking the questions. I guess, David, certainly the focus or conversation around business development has sort of picked up steam at least from my perspective. So how are you thinking about that from a timing standpoint and how is the sort of market in terms of opportunities and how close are you to potentially adding another product to the bag? Thank you.

Yes. Thanks for the question, Doug. Look, corporate development is a priority for the company. I think we've proven that we can execute with our flagship product here in the U.S., and this team has the capacity in the field with a strong base of customers to support the next asset. So clearly that's something that we're putting energy into. We remain, of course, dilution sensitive. We have a bias towards commercial stage assets or near commercial stage assets. And it's something we're very active on. Fortunately, we're in a unique position. There's only one neurotoxin in the market today, that has a singularity in focus, and that gives us the opportunity to see a lot of assets that companies would like to see partnered with us. And so we'll continue to be selective. We're not under a timeline in terms of a date we need to execute something, but it is a priority, and it has been in all fairness for some time. So that hasn't changed, but we do think that the market environment is evolving around us, which creates opportunities that may not have been there before.

And David, how much value would that potentially unlock for Jeuveau itself, not just add obviously a new product adds revenue, but – would that help jumpstart Jeuveau from a market share standpoint and potentially take it above your sort of current 2028 guidance?

Yes. Doug, I have a view that each product, especially if you're launching a product, has to stand on its own before the combination of products results in something greater than the individual parts. So I think to answer that question, we'd have to be more specific, which unfortunately, I can't get into that level of detail on this call. But getting a management team that can launch products and execute well with them, high-quality products that are durable, these are assets that you believe five, 10 years from now, consumers will continue to come in and get treated with those products in high growth markets. I think those are the fundamental elements that we look for in an asset that we'd want to bring into the portfolio. And then clearly having a customer base that's approaching 10,000 is meaningful with the relationships we've built and the brand that we currently have in the market.

Okay. Great. Thank you.

Thank you.

Thank you. Our next question is from Louise Chen with Cantor Fitzgerald. Please proceed with your question.

Hi. Thank you for taking my questions. So I had a few for you. First one I wanted to ask you was, did you say that 15% to 20% of that $500 million of sales in 2028 was international? And I also wanted to ask on phasing of revenues for 2023, should it follow sort of the typical aesthetic kind of sales or because you're on a growth trajectory, it'll just sequentially increase every quarter. And then for your guidance for 2023, how much of that is international versus U.S.? Thank you.

Louise, thanks so much for the question. I guess I'll take those in order. As it relates to the $500 million guidance, yes, we did say we anticipate roughly 15% to 20% of that revenue to be generated outside of the U.S. So you did hear that correctly. And that is our expectation. As it relates to 2023 phasing, we see us returning to typical aesthetic market seasonality as opposed to being on a ramp curve associated with our initial launch, which really was mostly in 2021. So that is a higher fourth quarter expectation and likely a higher second quarter with some lower performance in the third quarter is the typical seasonality we see in this market. So that is certainly what we are anticipating coming into 2023 in our guidance. As for your third question, international, in our 2023 guidance, we have not broken out international as it relates to 2023 revenue. So we'll continue to launch across those markets in Europe as well as evaluating Australia. But we expect the majority of our revenue, call it, over 90% to continue to come from the U.S.

Thank you.

Thank you. Our next question is from Navann Ty with BNP Paribas Exane. Please proceed with your question.

Hi. Thanks for taking my questions. I have two, please. So I know its early days that you have updated thoughts on the competitive environment, including DAXXIFY launch late March. And my second question is a follow-up on [bd]. So I believe the Pharmakon loan use of proceeds is also bd. So could we assume potentially higher acquisition size than the $50 million from the ATM filing? Thank you.

Yes. Maybe I'll take the first one and hand it over to Sandra to take the second. Yes, Navann, I think you're right. Its early days. We really don't view it as competition. The fact that DAXXIFY is entering the market, we see it as an opportunity as you know, with the extra-strength data it's raising. DAXXIFY’s entrance is raising a lot of questions around it and that in itself creates an opportunity, an opportunity with accounts that are considering potentially switching neurotoxin options, which opens the door for Jeuveau because 90% of the business is not currently with our brand. And also an opportunity to educate around the relationship between dosing and duration and that of course gets handled to our medical affairs team. So in aggregate, the entry of DAXXIFY, I think creates a lot of interest, creates opportunity and likely leads to further market expansion, which we think is, which is interesting, but it is early days, hard to assess what that could mean over time. But it certainly makes it interesting in this space.

Navann, thanks for the questions. As it relates to the ATM filing, we do still have access to the Pharmakon loan. It's a 50 million times that expires at the end of this year, so December 31, 2023. And we did up until the middle of last year also have a shelf, although without an ATM. So as we look to our 10-K filing for this year, it was the most logical and efficient time for us to consider introducing a new shelf along with which we could evaluate whether or not we wanted to include an ATM. So I wouldn't read anything into that about any potential acquisitions at this time. Really, it's a matter of the efficiency and ensuring we have readily accessible, flexible availability of capital should we need it for the right opportunity. There's not anything else that you should consider in terms of why we filed that.

Thank you.

Thank you. Our next question is from Serge Belanger with Needham & Company. Please proceed with your question.

Hi. Good afternoon. Couple of questions for us. The first one just on overall market trends. It doesn't sound like there was any macro headwinds in the fourth quarter, but curious if you're seeing similar trends in the first two months of the year so far. And second question around the [Yugo] product with Jeuveau. I think it's also up for approval in the coming months, so it could be a second entrance in the U.S. market. Curious how you view that product relative to Jeuveau and if it's presence in Europe has kind of given you a preview of what it could do in the U.S.? Thanks.

Great. Thanks for the question. Yes, you're right. In the fourth quarter of last year, we saw minimal impact from the economy. We did hear a little bit of noise from some customers, but as you said, overall, it's a strong quarter in terms of procedural demand. We've seen that carry forward into the new year. As a matter of fact, in the new year, we really don't hear much of any customers complaining about procedural volumes. So at least qualitatively, you could argue that the markets are as good, if not potentially stronger as we entered the new year than they were when we exited them. So I think we feel good about the overall market trends. As it relates to new competition, of course, competitors have to receive approval and we have to have a look at their data and understand the product before we can opine with the view. But we're fortunate this is a market that's been in existence for over 20 years. Today, there are five competitors in the space, and over time there could be a six. I think it's a very healthy market with plenty of room for new entrants to come in and carve out their own space. We see a highly underpenetrated consumer market opportunity. And in the end, a company needs to enter in this market with their unique value proposition in order to establish a presence here. And so in this case, we do see this product outside the U.S., in UK, we're both entering that market at the same time, I think it's probably too early to say what role we play versus others. But I think we think of it the same way, which is it doesn't change our trajectory or our potential as a company, but it potentially creates an opportunity for another player to come in here and establish a presence.

Thank you.

Thank you. Our next question is from Greg Fraser with Truist Securities. Please proceed with your question.

Good afternoon, folks, and thanks for taking the questions. I'm wondering if you're seeing any differences or notable trends in behavior among the consumers in your loyalty program based on age, such as differences in frequency of injections for the millennials versus older consumers. And then on the outlook, the revenue outlook for 2023, can you be more specific on the amount of growth that you're factoring in for the overall U.S. toxin market? Thanks.

Sure. I'll take the first part. I'll turn it over to Sandra to give you a view on our growth assumptions for the outlook. We do look at our consumer data very closely. As you know, we have half a million consumers now in the program and many more transactions than we have consumers because many of them are coming back two, three and four times now that the program's been existence for several years. So we're fortunate that we have such a large database to reference. We don't see a difference amongst the demographic groups in terms of the retention rates. They stratify similarly across groups. Retention rates are very high across the ranges with Jeuveau. And as a matter of fact, most of the patients that we see in there that are newer to Jeuveau or newer to toxin tend to skew younger. Hence our advertising is having its impact. And then, of course, with programs like Switch Your Tox, where we added a significant number of new consumers. Those are switches from other brands, so we're getting conversions which tend to skew older when they're coming from the market leader and other products like that. So we do have a very diverse pool of consumers in our loyalty program, depending on what their source is, skewing older if they're transitioning from another neurotoxin or younger if they're new to the category. And I think that'll continue to be the case. And the last thing I'd say is, it is interesting how the younger demographic does gravitate to loyalty programs at a higher rate than the older generation. That's not unique to aesthetics, it's across consumer purchasing patterns within this younger group. So having a loyalty program is an important dimension. Having a text-based loyalty program, which is what we have, also creates an ease by which we communicate with these consumers. And then lastly, what we've done that's unique and different in addition to text-based approaches, all of our communications with consumers are in partnership with the practice. And so that drives greater confidence and higher open rates in that. We're a partner with these offices and we communicate as one voice with them. And I think those are all factors that have played an important role in us scaling the program because practices trust in the partnership we've built with them, but it also improves the retention rates because consumers get the messages not just from the manufacturer, but also from the practice. Those are some unique dimensions of our program.

Thanks, David, and thanks, Greg, for the questions. As it relates to our 2023 guidance and our underpinning market assumptions that support that guidance, we have not seen in our recent history of material impact from any economic headwinds in our performance. And we've not seen any indications of a material impact to the market and the growth in the market based on the indicators that we've released in 2022 on patient growth as well as customer growth. In light of those things, as we gave our pre-release early in January, our view is that we expected the 2023 market to be in, call it, the high single low double-digit growth range. And that's what does underpin the guidance that we gave. But also, I think it's worth noting that the market itself is highly underpenetrated, right. We still have a lot of customers entering the market to support these growth projections as well as new consumers entering the market to support these growth projections.

Thank you.

Thank you. Our next question is from Uy Ear with Mizuho. Please proceed with your question.

Hi, guys. Thanks for taking my question. So I guess to follow up on Greg's question a bit. We're just kind of curious, would you be able to opine on why, I guess, Allergan is kind of projecting maybe a decline in the market this year? Is there anything that they're seeing or you think they're seeing that could be different for Botox in the U.S.? And secondly, I think you spoke about gaining most of your share this year in order to reach your $500 million target by 2028. Could you kind of help us understand where you think the share would come from? Thanks.

Sure. Look, on the market itself, it's hard for me to comment on what our competitors have mentioned that I think for us, if you look at our growth last year, the majority of the 49% growth came through share gain and not through actual procedural volume. So I think, we don't always have a clear view on what's happening with overall procedural volume, but we do know, from the research we do and the conversations we have with customers, that we believe the procedural volume in the market is growing and the market is healthy. But I can't bridge the gap for you with what other competitors have set. Second, as far as share gains, since launch, when we look back, it's been over 80% of the Jeuveau share in the market has come from the market leader. And we have not seen that shift. Even programs like Switch Your Tox, they weren't targeting any particular toxin, but they continue to significantly over index against a market leader, likely because the 900 kilodalton molecule is the molecule that's owned by Evolus as well as by the market leader. And so there's a comfort level with that being the gold standard and simplicity to the transition of moving away from the market leader to Jeuveau. And I think that might be the key driver of that difference that the learning curve is probably the closest between these two brands. I don't anticipate that will change going forward.

Okay. Thank you.

Thank you. Our next question is from Balaji Prasad with Barclays. Please proceed with your question.

Hi. This is [Michaela] on for Balaji. Thanks for taking our questions. Just on extra-strength, with the results anticipated in the second half of the year, I guess just what do you think – what do you need to see in these Phase II results really just to convince you of its potential? And just one other follow-up. Going back to business development plans, could you also just provide some additional insights into some of the areas you plan to explore? Thanks.

I'll take the first question. In terms of what do we need to convince ourselves of what we have. I mean, the interim data already is pretty telling. We've seen a very nice safety profile and we're seeing very competitive numbers already from a duration perspective. What we plan to do is wait till we have the final data set, which makes sense, of course, and then we plan to have advisory reports, effectively ask the clinicians and the HCPs who are using the product right now, what would make sense from their perspective for us as a next step. And if you really kind of lends itself to three obvious options, one is just publish the study and we have an extensive medical affairs group who could then answer questions in a compliant way as unsolicited medical responses. The other extreme is to take this all the way through to full registration for a label. That obviously would take some time. But when we look at the competitive labels, there's nothing convincing that to take it to that extreme. And then the thing in the middle is probably of some sort of Phase IV or some sort of head-to-head study to actually see how things compare relative to one another. So effectively we're going to wait till the data comes in, then we're going to have a number of advisory boards to decide on the next steps.

Yes. And on the corporate development side, we've outlined the criteria that we're looking for, which is large, durable markets with differentiated assets that have IP that we think protects the asset over time. And from that standpoint, this is a beauty category and that's how we've positioned Jeuveau. And to the extent you have a product that needs a profile that I outlined, that is something that would be an area of interest to us.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments.

Thank you, operator. If you missed any portion of this call, a replay will be posted to our website later today. Thank you to everyone for joining us. We appreciate your interest in Evolus, and we will be available if you have additional questions.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.