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Evolus Faces Jeuveau Import Ban in Trade Dispute

Evolus Inc. could use a shot of its wrinkle-smoothing aesthetics product right about now.

The Newport Beach-based upstart last month received a somewhat unfavorable ruling in a case involving two South Korean pharmaceutical companies and Irvine-based Allergan Aesthetics, now a unit of AbbVie, from the U.S. International Trade Commission.

The ITC found Evolus’ principal product, Jeuveau, was developed using a propriety manufacturing process; Evolus faces a 21-month import ban in the U.S. as a result.

Still, the decision could have been much worse for Evolus; a lower judge recommended in July a 10-year product ban on Jeuveau, which is seen as a less expensive competitor to Allergan’s Botox.

David Moatazedi, CEO Evolus

The decision isn’t final until a 60-day presidential review period is complete, during which time the company plans to appeal the ruling and fund a bond to allow the continued sale of Jeuveau in the U.S. for at least two months.

“There’s no immediate impact to the availability of Jeuveau in the United States,” Chief Executive David Moatazedi said in a statement. “We remain committed to finding a resolution to this legal matter, including reasonable settlement terms with Allergan’s new owner, AbbVie.”

The ITC also reversed course from the previous ruling and declared there is no trade secret with regard to the bacterial strain—a botulinum toxin strain—that is used in both Jeuveau and Allergan’s Botox.

A Positive Smile

After Evolus on Dec. 16 put out a press release with a positive spin on the ITC ruling, its shares rose 21%. Since then, its shares have generally traded down. At press time last week, the company’s market cap hovered around $130 million, which is about a third of its value a year ago.

Mizuho analyst Vamil Divan called the decision “a major setback” for Evolus, noting other competing products could threaten Evolus’ reentrance to the market following a 21-month ban.

Cantor Fitzgerald analyst Alethia Young described the decision as a “big win” for the company, noting the reduction from a 10-year ban to 21 months. She said there’s still value in Jeuveau and a settlement is “still on the table.”

Evolus had a cash position of $107 million, including a $40 million investment from South Korean partner Daewoong Pharmaceutical secured in July, as of Dec. 31, according to regulatory filings. Evolus revealed on Jan. 4, it paid Oxford Finance LLC $76.4 million to discharge all its outstanding obligations.

Its stock price is about a tenth of its all-time high from two years ago.

Aesthetics Boom

The decision comes as demand for facial injections, fillers and other aesthetics products appear to be recovering at a rapid rate from pandemic lows.

AbbVie, the Chicago-based owner of Allergan, reported in late October that third-quarter revenue from its aesthetics portfolio was $967 million and Botox cosmetic revenue was $393 million.

Both its aesthetics portfolio and Botox cosmetic revenues almost doubled from the second to third quarter of 2020.

Call it the Zoom effect.

“While face masks have brought scrutiny to the forehead and region around the eyes, the traditional areas for Botox injections, dermatologists also attribute the boom to videoconferencing,” and the desire of work-at-home employees to look better during online meetings, according to a Wall Street Journal article in October.

Newcomer Evolus also weathered the pandemic better than many expected. Analysts expect the firm to post annual revenue of $56.4 million in 2020, compared to $34.2 million in 2019.

Following the news of the ITC decision, analysts adjusted projections for Evolus’ annual sales in 2021. Consensus estimates predict about $88 million in 2021 annual sales, down from previous expectations of $115 million.

Close Competitors

Allergan, which was headquartered in Orange County for many years, succeeded in protecting its prized Botox, which according to marketing firm Statista, generated an estimated $3.8 billion of sales in 2019 for both medical and cosmetic uses.

Allergan “supports a marketplace that encourages product development and innovation and we welcome fair and lawful competition,” the company said in a statement provided to the Business Journal.

“We believe competition offers choice to customers and we continue to support the healthy growth of the aesthetics market through our continued investments,” it said.

Evolus and Allergan’s connections run deep. Allergan named Carrie Strom to lead its worldwide aesthetics unit based in Irvine following its acquisition in May.

Strom previously worked for Moatazedi, who spent 13 years at Allergan, rising to senior vice president of U.S. Medical Aesthetics for the company, where he led brands like Botox and Juvéderm and oversaw acquisitions such as LifeCell for $2.9 billion and Zeltiq Aesthetics for $2.5 billion.

In 2018, Moatazedi jumped to Evolus. A year ago, he oversaw the launch of Jeuveau, which rhymes with hello and comes from the French word “nouveau” that means modern or up to date.

“This is not your mother’s Botox,” Moatazedi told the Business Journal last year.

Evolus’ Next Steps

Evolus has funded a bond equal to $441 for each 100-unit vial it intends to sell until its Feb. 15 deadline; a total bond amount or unit order was not disclosed in regulatory filings.

Evolus had one reason to smile.

While the company faces a product ban, as well as a cease-and-desist order that prevents the company from selling imported products after the two-month review, it apparently no longer has to fight over the botulinum toxin strain used in its product because the court ruled there was no trade secret.

This part of the ruling was of particular interest to other neurotoxin companies, physicians and others; more than 70 parties signed letters asking the committee not to remove Jeuveau from the market.

Physicians noted a desire for product choice and applauded Evolus’ transparent pricing, stimulus program, co-branded advertisements, and a consumer loyalty program.

Aeon Biopharma, a Newport Beach-based biotech that was previously Alphaeon Corp., the company that spun off Evolus, also voiced concern over the case.

Aeon is using the same neurotoxin molecule that is used in Jeuveau to develop therapeutic products for neurological disorders such as cervical dystoria. Its financial backers also include Korea’s Daewoong, which in September provided a $25 million investment.

In a letter, the company noted Allergan’s “dominant position” in excess of 70% of the domestic cosmetic market, as well as “stranglehold on the domestic therapeutic neurotoxin market” with an approximately 94% market share.

“With this monopoly position, Allergan has no incentive to drive innovation or improve pricing dynamics in its therapeutic business,” Aeon said.

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