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Friday, Jun 9, 2023

Evolus Flagship Drug Grabs Botox Business

The initial release of Evolus Inc.’s first product appears to have gotten the attention of doctors and patients looking for an alternative to Botox.

The upstart Newport Beach drugmaker (Nasdaq: EOLS) has also gotten the attention of Botox-maker Allergan PLC, based on a trade secret-related lawsuit that looks likely to carry over into the later part of next year.

Evolus last quarter rolled out Jeuveau, a botulinum toxin drug designed to act similarly to Botox but at a lower cost in treating moderate to severe frown lines.

The product received Food and Drug Administration approval for its use in the U.S. in February; saw a presales marketing program called the Jeuveau Experience Treatment, or J.E.T., ramp up in May; and had sales kick off in late June.

The goal of the heavily hyped product launch “was to rapidly build a large base of experience and confidence in the market to maximize our launch trajectory,” Chief Executive David Moatazedi said on a conference call with analysts.

Jeuveau’s debut marks the first time in 10 years a new wrinkle-fighting neurotoxin has been released, and about 30 years since Allergan (NYSE: AGN), then based in Irvine, introduced Botox to the marketplace.

$2.3M in 6 Weeks

Initial response have been strong, Moatazedi and other company officials said in its second-quarter earnings call with analysts last month.

“In a short window of six weeks, we booked $2.3 million of net revenue,” Chief Marketing Officer Michael Jafar said.

What’s more, “we’ve been able to answer one of the key questions on everyone’s mind, which is the difficulties of switching from Botox,” Jafar said. “Early feedback from J.E.T. shows we’ve done just that.”

If consumers switched from other toxins to Jeuveau, “approximately 70% came from Botox,” he said.

The company has been marketing its new product under the hashtag “Newtox,” and believes that within two years it will be the No. 2 product in the neurotoxin market.

Allergan’s Botox holds about a 75% share of the global market in the aesthetic neurotoxin market by revenue last year. Industry reports peg the U.S. market for cosmetic uses of those types of products at around $1.2 billion.

Moatazedi and Jafar know quite well Allergan’s Botox. Moatazedi spent more than a decade at Allergan, leaving as the senior vice president of medical aesthetics; Jafar worked 15 years at Allergan, leaving last year as vice president of medical aesthetics body contouring.

Evolus’ goal was to sign up at least 3,000 doctors and other aesthetic practices in the initial rollout of Jeuveau; that figure was up to 5,000 as of early last month, Moatazedi said.

Evolus’ marketing strategy has been heavy on digital marketing, used in conjunction with a sales force of about 140. That investment resulted in a $37.6 million loss for the quarter.

It hasn’t given specific guidance on sales expectations going forward, but noted that sales for the remainder of the year will likely be back loaded in the fourth quarter.

It’s not expected to be cash flow positive by then, officials cautioned.

The company—valued at about $460 million—has seen big stock swings since its $60 million initial public offering last year. It reached higher than $32 a year ago in June. At press time, it was nearly $17, close to its price prior to its latest earnings report, after its shares fell 20% in a matter of days.

ITC Drama

The company’s legal team is expected to remain busy for the next year or so.

Earlier this year, N.J.-based Allergan filed a complaint with the International Trade Commission that alleges among other things, that Jeuveau is manufactured based on misappropriated trade secrets.

A July ruling rejected the claims; now there’s a dispute over whether Allergan—now in the midst of being sold to Chicago-based AbbVie for $63 billion—needs to turn over details of its Botox manufacturing to Evolus and South Korea-based Daewoong, which is the maker of the Jeuveau neurotoxin.

The final resolution date has been pushed out by the ITC courts to October 2020, according to Moatazedi.

“We remain very confident in our IP [intellectual property], and we’ll let the court system continue to work through the case.”

A Permanent Home in Newport Center

Botox rival maker Evolus Inc. moved its headquarters from Irvine to one of Newport Beach’s most exclusive office towers—the 21-story 520 Newport Center Drive building—around the start of the year.

Its space on the 12th floor was previously occupied by Acacia Research Corp. (Nasdaq: ACTG), which put its office up for sublease late last year as part of a corporate restructuring effort.

Acacia subleased the 17,600-square-foot space to Evolus on a short-term basis for $65,000 per month, or about $3.70 per square foot, according to regulatory filings.

That’s less than half of what some other tenants at the building were paying.

In May, Evolus disclosed it inked a new, direct deal with the tower’s owners, Irvine Co.

The new deal starts in February, and runs until 2025. Monthly rents start at $5.30 per square foot, and will go up to $6.32 per square foot over the term of the lease.

The tower was built in 2014 and sits across the street from Fashion Island. Acacia, one of the initial tenants at the tower, is no longer there. Other prior tenants include bond king Bill Gross, who retired earlier this year, and under-fire attorney Michael Avenatti.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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