Shares of the Newport Beach-based aesthetics maker (Nasdaq: EOLS) rose as much as 79% from around $7.15 to $12.80 on Feb. 19, the day of the settlement, before settling around $11.60 and a $392 million market cap at press time.
It’s the highest the company’s stock has seen in a year. Evolus went public in 2018 at $12 a share.
Evolus and its Korean partner Daewoong Pharmaceutical were facing a 21-month import ban for the U.S. after Irvine-based Allergan Aesthetics and its Korean partner Medytox won a U.S. trade ruling in December.
Jeuveau is a less expensive version of Allergan Aesthetic’s best-known product, Botox. Allergan and Medytox had alleged Jeuveau was developed using their propriety manufacturing process.
Jeuveau starts around $610 per vial. Top-tier customers with the highest-volume orders receive the largest discount for $355 per vial.
Under the terms of the settlement agreement, Evolus and Daewoong agreed to pay Allergan and Medytox upfront payments totaling $35 million in multiple payments over two years. It will also pay the two companies certain confidential royalties on the sale of licensed products sold during the restricted period, according to regulatory filings.
Details Murky
Evolus analysts noted financial details of the settlement are limited at this time; Evolus executives declined to comment to the Business Journal ahead of its full-year 2020 earnings call later this month.
“Evolus may still be indemnified by Daewoong from any additional payments, suggesting Daewoong may ultimately be responsible for the economic impact of the settlement,” Mizuho analyst Vamil Divan noted in a report.
“While we had assumed a settlement would be the ultimate outcome of this situation, we are pleased to see this significant overhang removed. We now shift our focus back to Evolus’ ability to commercialize Jeuveau, as the initial launch was encouraging but the company will now need to compete against additional competitors and with a more streamlined commercial infrastructure,” Divan said.
Q4 Impact
Evolus’ fourth-quarter sales increased 16% to $20.6 million, compared to $17.7 million in the third quarter, according to preliminary results announced last Tuesday.
“We delivered another quarter of strong sales despite the backdrop of litigation and the challenging COVID-19 environment,” Chief Executive David Moatazedi said in a statement last week.
“In the fourth quarter, ordering accounts grew to more than 5,600 since launch, and reorder rates reached an all-time high, both of which are indicators of strong adoption and anticipated future Jeuveau demand.”
Reorder rates reached 71.6% as Evolus continued to sell Jeuveau by funding a bond equal to $441 for each 100-unit vial it intended to sell until its Feb. 15 deadline; a total bond amount or unit order was not disclosed in regulatory filings.
Moatazedi also noted the company increased customer pricing “significantly” due to bond requirements, which resulted in nominal revenue generation between mid-December and mid-February.
Evolus had a cash position of $107 million, including a $40 million investment from Korean partner Daewoong secured in July, as of Dec. 31, according to regulatory filings.
Digital Strategy
Evolus launched Jeuveau with the #Newtox hashtag in May 2019. It was the first new cosmetic toxin to hit the U.S. market in over 10 years.
Despite the challenges of 2020, Evolus still achieved growth.
The company, which announced new consumer loyalty and customer stimulus programs in the first half of 2020, said last Tuesday it expects full-year sales of $56.6 million in 2020, up from $34.9 million in 2019.
Analysts expect sales to jump to $105.2 million in 2021.
The company’s digital focus appears to be gaining traction among consumers and physician customers.
More than 110,000 consumers have enrolled in its loyalty program, which says participants can receive up to $160 in rewards a year so that “you can invest in the things you love—like hobbies, side hustles and adding avocado to everything.”
Evolus also noted 75% of orders originated though its Evolus Practice App for physician partners in 2020.
The app offers a range of membership options with features for order placement, social media management, co-branded marketing and practice consulting to physicians.
Along with its #Newtox, Evolus is now touting an #EvolveWithUs hashtag as it looks to the future.
Competitive Landscape
It’s still unknown how the trade lawsuit might affect Evolus’ position going forward in the tight-knit aesthetics industry, which counts a long history in Orange County.
Along with Evolus and Allergan Aesthetics, other competitors include Nashville-based Revance Therapeutics, which is nearing an expected approval of its forehead and above-the-nose aesthetics product, Daxi.
Revance has about 50 employees in Southern California and a commercial office in Irvine.
Unlike Revance, which is pursuing both cosmetic and therapeutic approvals, Evolus is solely focused on cosmetic applications.
“Botox remains the clear market leader, and we expect Revance’s Daxi to be approved in the coming months, but we believe there remains a clear role for Jeuveau in the growing facial toxin market,” Divan said.
“However, we wonder how the changes Evolus had to make last year to address the COVID-19 pandemic, including reducing their employee base by [more than] 40%, will impact their ability to compete against AbbVie, Revance and others, and how the company may adjust their pricing strategy now that the ITC case is behind them.”
Allergan Aesthetics, which was acquired by Chicago’s AbbVie Inc. last May, reported Botox Cosmetic full-year 2020 sales of $1.1 billion. AbbVie executives noted its aesthetics unit experienced rapid recovery after the onset of the pandemic, and said Botox Cosmetic sales are projected to jump to $1.8 billion in 2021.
Carrie Strom, who declined to comment on the settlement, leads the worldwide aesthetics unit of AbbVie, based in Irvine. Strom previously worked for Moatazedi, who spent 13 years at Allergan before assuming his role with Evolus.
While announcing preliminary 2020 results, Moatazedi said in a statement, “We believe increased competition and options benefit all market participants.”
