Evolus, Inc. (EOLS) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you again for joining us at the Barclays Healthcare Conference, bringing up the final session of the spec pharma track. Pleased to have the management team from Evolus with us. We have David Moatazedi, President and CEO; and Sandra Beaver, the CFO; and Rui Avelar, the Chief Medical Officer with us. I've been covering Evolus now over the last few years and the launch and commercial success of Jeuveau has been exceptional in terms of market share gain, in terms of the impact the product has had within the general population. But to hear more from this, David, thank you all for joining and thank you for joining with us today. Would you like to provide a brief overview on some of the key highlights from Q4 and also your guidance that you provided recently and then we can pass to questions from there.

Sure. Happy to take that. First of all, thank you for having us. It's a pleasure to be here. And we're a company that's now no longer new to the block. We just celebrated last year, 5 years on the market. And we're really proud of the fact that we've been the fastest-growing brand in our space for 4 consecutive years. And we have a business that's consistently grown over 30%. And last year was no exception. As you know, last year, we delivered on the high end of our updated guidance, which was revised up in the third quarter and delivered 32% growth on the year on a single product in the U.S. And I think there's a lot of potential for this product to continue to perform going forward. And we've guided $700 million by 2028, and we sort of underline this at least $700 million because we see a number of vectors for growth over the coming future, including this year, which is an exciting year for us because we transitioned from a single product to a portfolio with the approval that we received earlier this year for a brand-new injectable HA line called Evolysse. And the introduction of Evolysse gave us the confidence to guide this year for another year of above 30% growth, and we've guided to $345 million to $355 million in top line revenue, adding roughly $90 million incremental top line over the year. And we expect the filler to be a significant contributor. 8% to 10% of the revenue this year will be attributed to the filler line with the launch assumed early in the second quarter and revenue coming in, in the back half of the year.

Thank you for that, David. So it was interesting for me as I looked at the market volatility on Monday and the stock moved down 10%, clearly, all growth names were getting impacted. And especially for fillers, I think there's always the general perception that any time the economic conditions weaken, fillers especially get hit. But you're launching into such an environment. So how would you think about this? And again, we think it's probably a misplaced move in the market, but how do you think about launching into such an economy?

Sure. Well, first off, we're operating in when we enter the existing category, a $1.8 billion market, which is the second largest market in aesthetics, and that's the dermal filler space, and we have 0 share. So as it relates to our performance this year, it's our ability to entrench Evolysse and make it an important part of these clinics. We currently have a sizable group of customers that have been fast growing, as you know. We are in 15,000 clinics in the U.S., and we trade at roughly a 30% market share in those clinics. And those clinics, as we've done quite a bit of market research, have a big appetite for bringing on a new technology. Keep in mind, Evolysse is the first new technology developed in this category in over a decade. And Rui will talk a little bit about the clinical data, but we have robust clinical data that supports the product profile that it's going to be effective for these clinics. And then importantly, one thing that we didn't expect was that we do have a differentiated label also. We're the first in this market to be able to mention weight loss in our patient labeling, and that creates a significant opportunity because as you talk about fillers, you're absolutely right that over the last couple of years, this HA market, in particular, the growth has been lower. And the key catalyst when I meet with clinicians and the data supports it is this influx of GLP patients, weight loss patients looking to enter the space of aesthetics. And then the #1 procedure they would add on are HA fillers. And being in a position where we can proactively talk about this gives us the ability to go to the consumer in a way we did with Jeuveau, where we targeted the millennials with Jeuveau, we'll be able to target the weight loss patients with Evolysse. And I think that just creates an incredible opportunity for us to create value in this market and where other players haven't invested as heavily over time.

Great. I have 2 follow-ups on that, David, one for you, one for Rui. So the conference has been aesthetics because we did go to a skin clinic on Monday when we kick started the conference. And yesterday, we had a panelist again from the West Coast and everyone were unanimous that GLP-1s definitely lead to a significant downstream revenue opportunity for fillers. I want to see how you can quantify this in any way that you can, especially because you have a weight loss indication on your label, which is differentiated. And maybe to Rui, just in terms of the clinical data that you've seen on this and how differentiated is it versus a host of other new fillers likely to come in or recently launched too?

Yes. Let's start with the consumer opportunity, and I'll turn it over to fillers. We know that half of these patients that are in GLP-1s, when they get to their desired weight, they're interested in getting into medical aesthetics and the #1 procedure they'll add on is an injectable filler. So that puts us in a very unique place in that, that is a significant growth catalyst. There is a big question mark around when, and I think that's a tougher one to answer, but I can tell you that you accelerate that when, when you can proactively speak to the consumer. That's what we have the ability to do. So as you can imagine, in our Evolysse materials in the office, we'll be speaking to weight loss, but we also do co-branded media. We do quite a bit of co-branded media in the form of billboards and television spots and digital media. And with the launch of Evolysse, the practices we partner with, can earn co-branded media in the same way they do with Jeuveau. The more Evolysse that they purchase, the more we reinvest back into their practice. And that Evolysse co-branding has the ability to go out into the local community and talk specifically about the role of hyaluronic acid and weight loss patients. And we think that could be a significant catalyst to accelerating that growth rate? And it does certainly differentiate us within these clinics.

In terms of the differentiation, it basically starts with the manufacturing, and this is a new way to do it. No one's ever tried to do this. And basically, the cross-linking steps done at near freezing temperatures. And what that lends itself to is a better job of preserving the hyaluronic acid gel. The next step is, is there -- can you show any show advantages on the bench top? The answer is yes, we show that this can actually take a great deal more stress and strain. Ultimately, the clinical data is most important. And we had an active control. We took 2 products through the PMA process and it went against [ Restylane in order to ] control. And what we found there, both products met the primary endpoint of noninferiority. And in the label, we also have the p-value less than 0.001 and the confidence intervals that also show statistical superiority. The rest of the data, all the patients are followed out for a year. And if you look in the case of form at every single data point, we actually showed statistical significance. And what this seems to suggest is this preservation of that natural HA strand seems to lend itself to a gel that's just more efficient in doing a correction. So those are things that certainly open the door when people think about trying at least a new filler.

Got it. Great. So how does that translate into your commercial messaging when you launched the product? Are there any particular segments where you think you -- this would be better positioned or would be probably the best-in-class and just outbeat competition out there?

Well, I'll start with this group lumps fillers into a big concept. And we understand that there's sometimes a negative connotation. What we also see is people are trying to anchor around the concept of natural, a natural look and natural outcome and natural product. So I think the fact that these gels, the way they're constructed is with the objective of doing a better job of preserving the natural HA structure does well. And then obviously, when you have clinical outcomes that show good results, I think that's a helpful first step. That's from an R&D perspective.

So I do think the R&D team has handed off an incredible clinical package and scientific story to the commercial organization. It's the first new technology in a decade. It's entirely different in the way it's manufactured, as we talked about, with the natural retaining more of the natural HA strand. And the clinical data when we've tested it, with doctors, and we had dinner here Monday night with a group of doctors. The data supports the fact this product is efficacious and it lasts. The reason that's important is because then clinicians feel confident enough when they use it that they know it's going to last. They don't need to see patients out to 1 year before they can adopt it. So as you think about the launch curve, I think that impacts that trajectory. And then lastly, getting the mention of weight loss is differentiating. And I think clinicians rightfully so, when any new product enters the market, the big question they have is, how are you going to do something in my market or for my practice that others don't do or the brands. And I think we have a number of reasons why we're the first in this category to do things. And that collectively adds up to an incredible recipe to be coupled with our commercial strategy, which we're going to deploy here in the coming weeks.

Great. Can't argue with that because both the KOLs [indiscernible] spoke to yesterday and day before clearly mentioned that having the filler, of course, and they would be probably engaging with you guys more and that they would expect to see the broader aesthetic customer accounts also to do the same. So if -- is there any way you can quantify it, what is the synergistic impact of having this filler now in terms of your account penetration? What is the incremental opportunity that it opens up from account penetration also means for Jeuveau?

Sure. Well, first, I think when you look at our business today, the 15,000 clinics that we're in, if you double-click on those, we're tracking at close to 30% market share. Interestingly, when you have conversations with these clinics, they love the way that Jeuveau performs. They really like the way we partner with them to help them build their toxin business by focusing on this younger generation in co-branded media. However, they're hamstruck in their ability to commit more of their share to us because it's so punitive in the competitive portfolio of bundles to give us more share on the toxin side. So the very few cases where you see our share much higher, it's because they've left the bigger companies and they started working with single product filler brands, which is obviously less common. Evolysse changes that entire dialogue. It makes us a partner for these clinicians and potentially unlocks the share of Jeuveau in these clinics. Now none of that is factored into our guidance this year. I think to be fair about it, this year, we assume that it's a brand-new technology. We want to train injectors and make sure they get a great experience with the product, and we'll start to see utilization pick up and drive revenue in the back half of the year. That decision to have a broader relationship with Evolus takes time. And I think we're committed to building that partnership over time, but that unlocks it. And then there's, of course, the 15,000 clinics we're not in. And there, Evolysse opens the door for us. We did a sizable set of research in those 15,000 clinics and half of them said with the product profile we presented with Evolysse, they would be interested in revisiting a partnership with us. So I think we have a number of pathways to drive growth over time. And we think this all sets up really nicely against our long-term objective of getting to $700 million by 2028.

Got it. And maybe a final question on the launch itself. Help us understand the process for your accounts to start using Evolus? And is there where you're prioritizing certain accounts? What's the process there?

Yes. So we haven't disclosed the specifics of our launch plan. What we have said is that we built an Evolus Academy, which is comprised of many derms and plastics that are well-known thought leaders that will be training other injectors in the market in the second quarter. That's an important part of our education platform that we're expanding. The second is we've built a portfolio strategy under our branding called Evolux, that's our portfolio program, where practices can get obviously advantaged pricing as they're more loyal on the Evolysse product. But importantly, they can earn co-branded media on that, and that's an important part of it. We've also said that we'll incorporate Evolysse in our consumer loyalty program as we get into the third quarter. And that's going to enable consumers to benefit not just on Jeuveau, but also on Evolysse. And so those are things that are coming. Now the specifics of the launch plan and the velocity of that launch, some of that's going to be shared in the coming weeks at our national meeting, and we expect to be on the market in the very near future.

Got it. And speaking about your loyalty programs, clearly, again, that seems to be a differentiator in terms of what the feedback that we're getting from the field. And is there any component of you benefiting from AbbVie redesigning its own loyalty program? And so have you benefited from that?

Yes. I think in the fourth quarter, you saw us yet again exceed 30% growth on our revenue. And at the time, I think we had a view that the market was really healthy throughout the year that it maintained that health in the fourth quarter. As the others in the industry have reported, we've come to realize that we actually just took a little bit more share than we thought we did in the fourth quarter. So I will say we have benefited a little bit from some disruption that's been happening at the customer level and the opportunity that we've kind of gotten to take on some of those customers. That left us in a place where we exited 2024 approaching 14% share, right? Our goal was 13%. Our long-term guidance implies 13% and we're currently sitting at 14%. Our 2025 guidance also implies 13%, right? So we've got this opportunity to accelerate our own share adoption rates and really bring that into the long-term value proposition for Jeuveau and also Evolysse.

Got it. And maybe a quick comment on the pricing side of things, especially the last couple of years, consumers are sort of attuned to inflation and so taking the prices were easy but was easy. But as we come to 2025, help us understand the role of pricing within driving the Jeuveau market for you or Jeuveau revenue?

I think the overall aesthetic market is priced right for this consumer, meaning the inflation that we've seen in other areas of the consumer space haven't carried through to the consumer on the aesthetic side. When you look at neurotoxins, they're still very affordable to the consumer. It's $300 to $500 for procedure in the United States. And I think that's a very favorable pricing for the efficacy that the consumer is getting, which is why you see this market continue to perform year after year as it's very effective and incredibly affordable. I think the fillers, you've seen something similar where the average price for an injectable filler ranges from $500 to $700 depending on the filler and what part of the country you're in. It is a slightly higher price point. So to your point earlier, if you have a patient now on a GLP, maybe there's a little bit more of a pocketbook crunch there of being able to afford that filler. But that being said, I think putting aside the GLPs, they're still very affordable. And the average ticket price in these clinics has continued to be roughly $1,000 in these med spas and about $1,500 to $2,000 in derms and plastics. That a consumer is spending each time they sit in the chair. And I think for the quality of the results they're getting, what you're seeing broadly when I speak to other companies in the beauty space is consumers are moving towards products that work. And that's the performance beauty push. And that's why you're seeing an interest from the beauty category in the space in general because these products are effective, they're affordable. And clearly, consumers are seeing that at a younger and younger age, which is why this whole category is benefiting from that trend.

Got it. So one of the things that we are seeing as we enter the clinic was the host of new fillers that the KOL showcased and said these are all the ones, which have come and are coming in the near future. And then you also have newer entries on the toxin side, too, with Letybo coming in, maybe a couple of others on the pipeline, too. So help us understand this competitive dynamics, both on the filler side and the toxin side. Is there any difference where newer entrants come into these markets? And from Evolus perspective, how will your commercial approach change as you see more competitors?

Sure. It's a very good question in terms of competitive landscape. One of the more mature markets is Europe, when you look at dermal fillers, there's over 100 products. So when I compare that to the U.S., it's anemic. But interestingly, in the U.S., as an example, 3 hyaluronic acid fillers represent almost 3 families of fillers represent almost 90% of the market here despite the fact that there's more fillers approved. And I think when you look in Europe, where there's over 100, there's about 4 or 5 families that represent about 80% of the market. So what you tend to see is a focus around high-quality products and companies that invest in heavy education and science and companies that are focused on adding value to the category. There has been a focus on price. I think in the toxin space over the last couple of years, and we've actually gone the other way deliberately. We've continued to see our ASP rise in an environment where you saw some of the newer entrants significantly reduce their price. In the end, sure, pricing does matter as long as the quality is really high and the service is really high, then they're willing to make concessions. I think what makes us unique is we're positioned in a really unique place as a value player. On one hand, the profitability of the procedure is important, but so is the investment back. And that drives to the bottom line, whether it's our investment in advertising, which supplements 10% to 12% of these practices they spend in gross revenue back in advertising, we offset some of that. And you can imagine if things slow, they reduce their advertising spend, making what we do even more important. And then keeping these patients loyal is a very significant part, too. And our loyalty program offers everyday rewards that are significantly higher than what the established players offer. And we do think all of these elements collectively add up into this perception that we're bringing incredibly high-quality products and services in order to help drive growth long term in these practices while keeping an eye on the fact these are small business owners, profitability does matter, but it's not about price and chasing that to the bottom.

Got it. Could we also may revisit your long-term guidance and try to understand the pushes and pulls there. You said at least $700 million, but what are the upside risk to it? And how -- is there a way to quantify that what's not factored into this guidance?

Yes, absolutely. We see a very clear path to at least, and we say at least because we really believe this is a floor for us in 2028. And the reason for that is that the combination of factors that are implied in that guidance include $100 million of revenue coming from the OUS markets, and we're now fully launched in all the markets we need to deliver that $100 million and well on our way, particularly in the U.K., to penetrating those markets with Nuceiva. The other pieces are the U.S. toxin and the U.S. filler. It implies a 13% market share, as I mentioned earlier, on the U.S. toxin, and we've already slightly exceeded that. It also implies a 7% market share on the filler. That's at a material discount to the performance we delivered on the toxin. And so if you were to look at those factors and look at our historical performance, if we match the toxin growth rate, which is 11% share for the filler and we continue to gain 2 percentage points of share a year, which we've done consistently for the last 3 years, we'd be well over $1 billion. right? So there's a tremendous amount of upside opportunity that we could realize as we think about these tailwinds that are coming into this market, as we think about the label that we've been able to get with Evolysse that we just haven't factored in. Like even if you look at 2025, we're assuming a flat filler market. We're assuming a moderately growing toxin market, and we've not put any halo effect into Jeuveau because of the launch of Evolysse. So we see these really significant opportunities to outperform, but we don't see many ways to miss.

Got it. I could at least pick 3 major upside risks from your comments there. Now drilling that down into the operating profit side of things, I mean, that gives me significant operating leverage if there's upside risks play out. So help us understand, a, in terms of your path to profitability and then b, the potential upside risks from having $1 billion in revenues.

Sure. So coupled with that $700 million, we've guided to at least 20% non-GAAP operating profit margins. We actually delivered operating profitability ahead of our own schedule in 2024. We anticipate being full year profitable again in 2025 in a more material way. However, we will have investments in 2025 associated with the launch of the first 2 fillers. So once we lap those investments in 2026, you'll see significant expansion in our operating margin happen in 2026 as we really achieve that leverage of having that second set of products in the bag. We'll also launch another indication of Evolysse with Sculpt in 2026. So we'll have that additional opportunity on the top line as well. We expect to be cash flow positive in 2026 and have the full capacity to pay down our debt facility, which starts to come due in '26 and '27.

Understood. Maybe a quick comment on the OUS market. Again, there's not one particular country that we can pick and discuss. But for your major geographies, which are baked into the guidance, are there potentially other geographies which could be coming into play in the next couple of years?

I'd say there's none required is one of the important things to understand. And so there are certainly opportunities that may be available to us now that we have a portfolio in Europe as we look at the combination of the filler and the toxin. We've always been really thoughtful about our OUS expansion where we're not investing ahead of revenue. We're really guiding that market to profitability on its own. And so we're really thoughtful when we put investment into the OUS market. And we'll continue to apply that kind of discipline with any new markets we consider, but we have the footprint we need to deliver the long-term guide.

Great. And Sandra, as we were discussing just before the -- just before starting this conversation as a CFO, I think with greater export revenues and export operations, your job becomes more complicated. So what are your thoughts around managing the currency risk and FX and operations?

Yes. I mean I think, obviously, we're watching as the economic environment unfolds. We're watching as sort of the tariffs happen as all of us are. The majority of our products are coming from South Korea, which is where our toxin is manufactured, and we think the risk on South Korea is relatively low. There's a lot of products in the rest of the market coming from Europe. And so there's some exposure there that we'll have to consider. And that could actually put us at an advantage as opposed to a disadvantage. But it's something we're all, I think, watching really, really closely. The good news is we have a really high-margin business. We have a lot of capacity to absorb risk and still feel really confident in our guide. So we'll continue to manage it as it unfolds.

Got it. Great. That's a good spot to leave this conversation at. David, Sandra and Rui, thank you so much for joining us and for being here at the conference. I hope you had a great day of meetings, too, and we look forward to more updates from you as things go. Thanks.

Thank you too.