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Summary

  • Injectable Botulinum toxin treatments are the most popular cosmetic procedure in the United States and the rest of the world.
  • A topical Botulinum toxin treatment could overcome consumer concerns about injectable Botulinum toxin, representing a potential billion dollar market opportunity.
  • Revance’s TransMTS technology could deliver other molecules across the skin that currently require injections.
  • Since its initial public offering (IPO) on February 6, 2014, Revance Therapeutics has more than doubled.

According to the American Society for Aesthetic Plastic Surgery, US consumers spent over $10 billion on over 10 million physician-administered aesthetic procedures in 2012, and non-surgical procedures account for over 80% of the total number of procedures performed.

Injectable botulinum toxin treatments are the most popular cosmetic procedure in the United States and the rest of the world. The research and advisory firm, GlobalData, forecasts that the injectable Botulinum toxin market will grow at a compounded annual growth rate (OTCPK:CAGR) of 14% from 2011 through 2018.

Statistics such as those are why I decided to invest in Revance Therapeutics (NASDAQ:RVNC), a 600M market cap company that is developing a topical formulation of Botulinum toxin that could offer advantages over currently approved, commercially available Botulinum toxin products that can only be injected.

The company's proprietary TransMTS platform technology enables large macromolecules like Botulinum to be delivered across the skin and restricts the Botulinum toxin molecule to the target site, thus eliminating the need for injections.

RT001

The company's lead investigational product, RT001 Botulinum Toxin Type A Topical Gel, is a topical, single-use, gel formulation of Botulinum toxin type A in a proprietary single-use administration device. Unlike other procedures that require several injections in sensitive areas of the face, RT001 gel is applied by the physician and then wiped off using a cleansing procedure.

RT001 is currently being investigated in Phase 3 clinical trials in the United States for the treatment of lateral canthal lines, the "crow's feet" lines that increasingly surround the eyes as one ages.

Revance plans to begin an additional Phase 3 clinical trial studying RT001 for this indication in Europe by early 2015.

Revance has done extensive development work on RT001 for lateral canthal lines. The company has studied RT001 as a treatment of crow's feet lines in over 1,400 people in 13 clinical trials.

In October 2010, Revance announced the results of two Phase 2b clinical trials studying RT001 for the treatment of lateral canthal lines. Researchers found that RT001 was well tolerated and demonstrated statistically significant efficacy results. Adverse events were unrelated to study treatment as rated by investigators and generally mild or moderate, and transient. There was no evidence of spread or diffusion away from the target muscle observed.

Based on its discussions with the US Food and Drug Administration (FDA), the European Medicines Agency (NYSEMKT:EMA) and other regulatory authorities, Revance believes that three Phase 3 pivotal clinical trials and the current Phase 3 open label safety clinical trial, if successful, will provide the efficacy data necessary for the FDA to approve RT001 for the treatment of crow's feet lines.

Revance expects to receive primary efficacy data from the current Phase 3 RT001 clinical trial in mid-2014 and duration data in the second half of this year. After completing the Phase 3 program for the treatment of crow's feet lines, the company plans to file for regulatory approvals in the United States and Europe in 2016.

Other Indications

Revance is also studying RT001 as a potential treatment for hyperhidrosis (excessive sweating), allergic rhinitis (inflammation of the mucous membrane inside the nose), and migraine.

Botulinum toxin-based agents are currently approved in over 80 countries for over 20 different indications including strabismus (condition where eyes do not line up in the same direction), cervical dystonia (a disorder characterized by involuntary muscle contractions), blepharospasm (abnormal, involuntary blinking or spasm of the eyelids), urinary incontinence due to detrusor muscle overactivity associated with a neurologic condition, such as multiple sclerosis (NYSE:MS) or spinal cord injury (NYSE:SCI), and as a treatment for other disorders. Botulinum toxin-based agents are also used as a preventive treatment of headaches associated with chronic migraine.

In 1989, Botox (onabotulinumtoxinA), marketed by Allergan (NYSE:AGN), became the first Botulinum toxin-based drug to be approved by the FDA. Botox is a purified protein that works by blocking overactive nerve impulses that trigger excessive muscle contractions. Botox's effects are temporary and last for three to ten months, depending on the patient and indication.

Botox has now been used by clinicians for about 25 years. The safety and efficacy of the agent has been confirmed in over 60 clinical trials consisting of approximately 15,000 patients. Worldwide, over 35 million vials of Botox have been utilized over the past 25 years. Although Allergan is clearly the leader, other companies developing Botilinum toxin drugs include the Lanzhou Institute of Biological Products with Prosigne and CBTX-A (Botulinum toxin A), Metabiologics, Inc., Merz Pharma GmbH & Co. with Xeomin (incobotulinumtoxinA), Mentor Corporation/Johnson and Johnson (NYSE:JNJ) with PurTox (Botulinum toxin A) , Medy-Tox Inc. with Neuronox (Botulinum toxin A) , US WorldMeds with Myobloc (rimabotulinumtoxinB), and Valeant Pharmaceuticals (NYSE:VRX) and Ipsen Group (IPN.PA) with Dysport (abobotulinumtoxin A).

Revance successfully completed an initial Phase 2 clinical trial that investigated RT001 as a treatment of primary axillary hyperhidrosis and for the prevention of migraine headache. The company has also completed Phase 1 clinical trials that looked at RT001 as a treatment of neuropathic pain and rhinitis. Revance plans to continue the development of RT001 for these indications.

Revance is hoping that its Botulinum toxin products can overcome the limitations to the use of the currently approved injectable Botulinum toxin products. For example, when injectable Botulinum toxin products are used to treat hyperhidrosis, as many as 30 injections must be given in the underarms, and insurance companies reimburse physicians at a low rate relative to the time required to perform the procedure. When injectable Botulinum toxin products are used to treat chronic migraine, headache, up to 31 injections in different parts of the head and neck are required.

Revance also believes that there is a significant opportunity to develop and seek approval for a Botulinum toxin product to treat allergic rhinitis, where there are currently no approved Botulinum toxin products.

Potential Advantages of RT001

Revance has conducted market research that found a topical Botulinum toxin treatment could overcome several key consumer barriers for injectable Botulinum toxin products such as fear of frozen face, needle aversion and concerns about injecting a poison into the body. Revance also found that a topical treatment, like RT001, could improve the profitability of physicians' practices by increasing the number of procedures per patient since the topical application of RT001 is easier to use, requires less skill and training, and is less time consuming than injectable Botulinum toxin products.

Market Potential

According to the research and advisory firm, GlobalData, the Botulinum toxin market will reach $2.5 billion in 2017. Global Data predicts this growth will be the fastest segment in the facial aesthetics market.

Researchers at the market research firm, Global Industry Analysts (GIA) found the global injectable Botulinum toxin market grew from $1.1 billion in 2004 to over $2.4 billion in 2012. GIA notes that therapeutic indications are the fastest growing segment of Botulinum toxin products since it was approved by the FDA for the treatment of migraine headache and urinary incontinence, in addition to other disorders such as hyperhidrosis, movement disorders, such as cervical dystonia, upper limb spasticity, and blepharospasm (uncontrolled blinking).

RT002

Revance is also developing RT002, a new injectable Botulinum toxin product candidate that is not only longer lasting than currently available injectable Botulinum products, but is also designed to offer more targeted delivery of Botulinum toxin to intended treatment areas while reducing the spread beyond the intended injection site.

RT002 has shown promise in preclinical studies and is currently being evaluated in a Phase 1/Phase 2 clinical trial outside of the United States for improvement of glabellar lines, the vertical lines between the eyebrows and above the nose.

Finances

Revance has posted net losses of $44.9 million for FY2011, $58.3 million for FY2012 and $42.4 million for the nine months ended September 30, 2013. The company has accumulated a deficit of $185.8 million and had a net working capital deficit of $28.6 million as of September 30, 2013. The company will release FY2013 results on March 26, 2014.

Analyst Coverage

Analysts are very positive about Revance's prospects. On March 3, Cowen and Company initiated coverage of Revance with an Outperform rating and a $55 price target. Piper Jaffray gave Revance an Overweight rating and a $44 price target. BMO Capital gave Revance an Outperform rating and $37 price target.

Risks

Potential investors should also note that Revance has a limited operating history and has incurred over $185 million in losses since its inception. The company anticipates that we it will continue to incur significant losses for the foreseeable future. Revance will need additional capital to finance the development of RT-001 and RT-002. As a result, the company may sell additional shares which could result in stockholder dilution. If Revance does not secure the necessary capital when needed on acceptable terms, it could delay or terminate product development, or other programs and operations.

Although the studies conducted to date look promising, there is no guarantee that RT-001 and RT-002 will prove to be safe and effective. In addition, Revance is only developing only two products. Even if RT001 and RT002 receive FDA approval, they may never become successful and make the company profitable

Even if RT-001 and RT-002 receive FDA approval, Revance will face competition from companies with significantly greater technical and financial capabilities. These firms include Allergan (39B market cap), Valeant Pharmaceuticals (48B market cap), and Mentor/Johnson & Johnson (265B market cap).

Management

Revance was founded by L. Daniel Browne and Jacob Waugh, MD. Browne serves as President and Chief Executive Officer and is a member of the company's board of directors. Waugh serves as Chief Scientific Officer and Medical Director.

Browne previously served as President and Chief Executive Officer of Neomend, Inc., a medical technology and biomaterials company, from 2001 to 2003. From 1997 through 2000, he was the President of Prograft Medical Inc., a medical technology company. Browne holds a B.S. from the University of Hawaii in Cell and Molecular Biology and an M.B.A. from Pepperdine University.

Before co-founding Revance, Waugh served on staff at the Stanford University School of Medicine. He has authored over 30 research manuscripts and publications in tissue engineering, molecular and cell biology, and gene therapy. Waugh received his B.S. from Rice University and M.D. from the Baylor College of Medicine.

Conclusion

Botulinum toxin has been called the "miracle poison" because it is one of the most lethal substances known to man that has been found to be extremely effective in treating a wide array of disorders ranging from crow's feet wrinkles to urinary incontinence. Botulinum drugs represent a billion dollar market.

Most investors are excited about Revance because the company has developed a Botulinum toxin that would no longer require needle injection, a painful procedure that has deterred many potential patients from receiving treatment.

Revance has also developed a new injectable Botulinum toxin investigative drug that is designed to offer a more targeted delivery of Botulinum toxin to the desired site.

While currently focused on the Botulinum toxin, Revance's TransMTS technology platform may also prove to be applicable to other agents that were previously thought to be too large to transfer across skin.

Although there is much to be excited about this stock that has more than doubled since its IPO last month, Revance Therapeutics is a high risk, high reward investment opportunity.

The company was incorporated in August 1999 under the name Essentia Biosystems, Inc., and commenced operations in June 2002. In April 2005, the firm's name to Revance Therapeutics, Inc.

Source: Why Have Revance Therapeutics Shares More Than Doubled Since The February IPO?