- Both Kythera Biopharmaceuticals and Revance Therapeutics are developing first in class drug candidates that have significant potential in the $10 billion cosmetic procedure market.
- Both of these California-based companies are developing Phase 3 product candidates that tested extremely well in earlier trials.
- Kythera and Revance anticipate having major catalysts that could substantially increase their stock price within the next nine months.
The American Society for Aesthetic Plastic Surgery (ASAPS) recently released research that found Americans spent over $10 billion on cosmetic procedures in 2012. About $2 billion was spent on injectable procedures and $1.8 billion was on skin rejuvenation.
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.
People will spend a lot of money to look good, and these two companies are developing products that have the potential to be big sellers.
Kythera Biopharmaceuticals Inc. (NASDAQ:KYTH)
Westlake Village, California-based Kythera Biopharmceuticals is developing ATX-101, an investigational injectable drug for the reduction of unwanted submental fat, commonly known as "double chin" or "turkey neck."
ATX-101 has been studied in 12 clinical trials comprising a total of over 1,500 patients.
In a recent study, 95% of patients were satisfied their ATX-101 treatment, and the adverse reactions reported were relatively few and mild.
Kythera expects ATX-101 to generate annual sales of $500 million in the United States alone. Outside the United States, the company forecasts that ATX-101 could earn up to $325 million a year in annual sales. I think these predictions may be conservative when one considers that Allergan's Botox annual sales exceed $1.5 billion, with about 50% of Botox used for aesthetic purposes.
The 808M market cap company has a top notch management team, many of whom played a leadership role in securing FDA approval of blockbuster aesthetic products while at Amgen (NASDAQ:AMGN) and Allergan (NYSE:AGN). In March 2013, Kythera announced the appointment of Frederick Beddingfield, III, MD, PhD, as Chief Medical Officer. He joined the company from Allergan, where he worked in an executive capacity across the entire aesthetics portfolio including Botox Cosmetic, Juvederm and Latisse. Beddingfield most recently held the role of Allergan's Vice President and Therapeutic Area Head, Dermatology and Aesthetics.
Last month, the US Food and Drug Administration (FDA) accepted Kythera's new drug application (NDA) for ATX-101. On August 11, 2014, Health Canada did likewise. The FDA's Prescription Drug User Act (PDUFA) date is set for May 13, 2015. The PDUFA date is the goal date for the FDA to complete its review of an investigational drug.
Kythera expects to end 2014 with a year-end cash balance of between $90 million and $100 million, which should enable the company to fund its operating plan through at least the next 12 months.
It may be a good time to buy Kythera stock since it is currently in the $35 range, about 10% below its 200 day moving average of $38.56. The stock has increased over 50% during the past 52 weeks, and the five analysts covering the company have set price targets ranging from $42 to $62.
Revance Therapeutics (RVNC)
Revance Therapeutics is a 570M 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 Newark, California-based company's lead investigational product, RT001 Botulinum Toxin Type A Topical Gel, is a topical, single-use, gel formulation of Botulinum toxin type A. 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.
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.
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.
In addition to 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.
Earlier this month, Revance announced that the company hired Arthur P. Bertolino, MD, PhD, MBA, as its Chief Medical Officer. Bertolino was previously the Vice President of Dermatology for the Novartis (NYSE:NVS) Institutes of Biomedical Research and a Senior Director, Dermatology for Pfizer (NYSE:PFE). The company's management team is comprised of individuals well versed in the dermatology market sector,
Now may be good time to invest in this promising 590M market cap company as Revance stock is selling in the $25 dollar range, well below its 50 day moving average in the $30 range, and important catalysts are expected in Q4 2014. Revance should report the results of the first Phase 3 study by the end of this year. Its second U.S. Phase 3 study and a European Phase 3 study are also on track to be announced in 2015. Revance plans to file for regulatory approvals in the United States and Europe in 2016.
I recommend Kythera and Revance not only because I feel both companies are run by management has the experience and expertise necessary for success, but also because both ATX-101 and RT001 have shown consistently strong clinical results. In addition, both of these product candidates have significant sales potential because they both address aesthetic needs for potentially large patient populations.
Both Kythera and Revance are high risk/high reward stocks that may be attractive to aggressive investors who are comfortable in the highly volatile biotech sector. These investors know that these stocks may decline 30% or more if a drug candidate does not succeed in a clinical trial or fails to receive FDA approval. On the other hand, there are few market sectors as exciting as biotech, and few opportunities that are as lucrative as investing in a company that produces a breakthrough drug.
Disclosure: The author is long KYTH, RVNC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.