Good day, ladies and gentlemen, and welcome to the Evolus Conference Call. Currently, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, today's conference is being recorded. I'd like to introduce your host for today's conference, Mr.
Ashwin Agarwal, Vice President, Finance, Investor Relations and Treasury. Sir, please go ahead.
Thank you, operator, and welcome to everyone participating in today's call. This call is also being broadcast live over the Internet at www.evolus.com and a replay of the call will be available on the company's website for 30 days. With me on today's call are David Moatazedi, President and Chief Executive Officer Lauren Silvernail, Chief Financial Officer and EVP Corporate Development and Rui Avelar, Head of R and D and Chief Medical Officer. In our remarks today, we will include statements that are considered forward looking statements within the meaning of the United States security laws. In addition, management may make additional forward looking statements in response to your questions.
Forward looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its quarterly report on Form 10 ks for the year ended December 31, 2017, filed with the SEC on March 29, 2018, and subsequent quarterly reports on Form 10 Q and current reports on Form 8 ks. Actual results may differ materially from those expressed in or implied by the forward looking statements. The company undertakes no obligation to update or review any estimate, projection or forward looking statement. Additionally, the discussion today will include non GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
A reconciliation of GAAP to non GAAP results may be found in our earnings release, which was furnished with our Form 8 ks filed today with the SEC and may also be found on our Investor Relations website at investors. Evolus.com. And now let me hand the call over to David Mozzetti.
Good afternoon, and thank you all for joining our Q4 and full year 2018 update call. The FDA approval of our flagship product Jeuveau on February 1 marked a critical inflection point in our company's history. The approval transitioned Evolus from an R and D focused company to a commercial stage organization with our sights now set on transforming the aesthetics market. Last month marks the 1 year anniversary of our IPO and in that short timeframe, we have successfully achieved all major milestones. We received U.
S. FDA approval for Jeuveau and approval in Canada. We submitted our European application and expect a CHMP opinion shortly. We have assembled 1 of the highest quality and most experienced management teams in the aesthetic industry. We have submitted for publication our TRANSPARENCY global clinical program.
This includes results from the largest Phase 3 head to head aesthetic pivotal trial versus BOTOX. We are nearing completion of hiring our 140 person specialized sales force and have attracted top talent from the industry. We announced Project Fuse, which is designed to catapult Chabot to the number 2 market position within 24 months of launch. We closed 2018 with pro form a cash of approximately $168,000,000 which includes proceeds received from the Oxford debt financing announced earlier today. 2019 is a pivotal year for Evolus and we expect the launch of Jeuveau to transform the aesthetic market as we know it today.
In the coming weeks, Jeuveau will enter the largest category in aesthetics. There has not been a formidable competitor to challenge the market leader until now. Our plans are complete. We are well funded and fully prepared to execute on what we believe will be the most exciting launch to engage the aesthetic market. At launch, our 140 person sales team will have the advantage of singularity and focus to deploy our initial launch plan, codenamed Fuze, which will engage a broader market with a high degree of urgency.
And today, we are ready to talk with you about price. In this category, there are 3 dimensions to executing a successful pricing strategy. The first is product list price. The second is a competitive volume based physician pricing program. And the third is consumer loyalty.
In this category, the product list price sets the retail price to the consumer. The volume based physician pricing program incentivizes doctors to purchase higher volumes of product and the discounts associated with those volumes will improve the profitability of the procedure relative to the market leader. Lastly, the intent of the consumer loyalty program is to improve the affordability of the procedure for patients. As a result, Evolus will invest in improving the affordability and access for patients, which then does not require doctors to provide a discount relative to competitive brands. Today, we are announcing a list price of $6.10 for a 100 unit vial of Jeuveau.
This price represents a slight premium to the market leader and is a direct reflection of its premium value as Jeuveau is the 1st neurotoxin to enter the market in nearly a decade. In addition, Jeuveau is supported by a distinct and new manufacturing process branded as Hi Pure. Jeuveau has the only Phase 3 head to head data versus a market leader in the U. S. And the premium branding, which will unfold in the coming weeks.
The launch of Jeuveau is designed to introduce a premium brand experience and redefine customer centricity. For modeling purposes, you should continue to assume the same percentage discount that has been previously reported. As you know, all companies in the space offer discounts based on volume. You can assume that what we will offer volume based physician pricing that we will offer volume based position pricing, but for competitive reasons, we do not plan to report average selling price in the future. With that, I'd now like to turn the call over to Lauren, who will provide a review of our Q4 and full year 2018 financial highlights.
Thank you, David, and good afternoon, everyone. At the end of 2018, we had $93,200,000 in cash. As we announced today, we entered into a non dilutive $100,000,000 senior debt facility with Oxford Finance and drew $75,000,000 upon close. We are very pleased to be partnering with Oxford to build our business. The senior debt facility has been structured to provide the growth capital we need while maintaining our operating flexibility.
The first tranche of $75,000,000 is free from revenue, earnings or minimum cash covenants, a key consideration for all shareholders and for us in maintaining flexibility. Including the $75,000,000 we drew at the close of the debt financing, our pro form a cash balance as of Twelvethirty Oneeighteen was $168,000,000 putting us in a very strong cash position. Please note, this figure does not include any other Q1 2019 cash flows. The senior debt is scheduled to be repaid by 20 24 about 5 years from now. We expect to be cash flow breakeven before this debt is due.
Thinking about onetime cash outlays in 2019, as a reminder, we have $13,800,000 of milestone payments due upon FDA and EU approval of Jeuveau to our partner Daewoong and the Evolus founders. On the cash side, $12,800,000 has already been paid out in Q1 of 2019 with the remaining $1,000,000 to be paid upon EU approval. Please note with regard to accounting treatment, dollars 12,200,000 of the total payments will impact the balance sheet and $1,600,000 will impact the operating expense line of our P and L. Our non GAAP operating expenses for Q4 and full year 2018 were $11,500,000 $28,700,000 respectively. Q4 non GAAP operating expense was slightly below the guidance we provided on our Q3 2018 earnings call of 12 $15,000,000 due to the timing of certain expenses.
As a reminder, we are providing a non GAAP metric to make it easier to track our operating expenses, excluding 2 noncash items, which are stock based compensation and royalty revaluation expense. Stock based compensation was $1,900,000 in Q4 $7,000,000 for full year 2018. Non cash revaluation of contingent royalty obligations reflect income of $900,000 in Q4 and expense of $10,500,000 for full year 2018. For 2019, we have decided not to provide revenue or expense guidance during this launch year. But there are a few items we would like to highlight to help you with your financial models.
Our non GAAP operating expense in Q4 was $11,500,000 representing an annualized run rate just under $50,000,000 as we exited 2018. This $50,000,000 includes G and A, R and D and pre launch expenses. Hiring 140 sales representatives in 2019 increases our non GAAP annualized selling expenses to be between 50 $1,000,000 $55,000,000 for 2019 excuse me, on an annualized basis. Please note, selling expense in the first quarter of 2019 will be lower than this rate. We are not providing further detail on our marketing or commercial expenses at this time as we're getting ready to roll out the launch.
Please note also the numbers just provided do not include stock based compensation or royalty revaluation expense. On the cash side, as we mentioned earlier, we have borrowed $7,500,000 one more time, dollars 75,000,000 at what is currently a 9.5 percent annual interest rate. And most importantly, we expect revenue to be backloaded towards the Q4 of 2019 as we build trial and experience with our customers. And with that, I'll turn the call back over to David.
Thank you, Lauren. The path to a successful launch of Jeuveau in the spring is clear. The book is written and now it's only a matter of time before the chapters of the story are unveiled. A number of upcoming catalysts will further enable our success. In the first half of twenty nineteen, we anticipate the publication of our U.
S. Phase 3 trial results and our EU and Canada head to head Phase III results versus BOTOX, both of which are expected to complement our label and to provide clinically relevant information to our customers. We look forward to presenting the commercial launch plan at our Investor and Analyst Day on May 8. Our team is poised to enter the U. S.
Market with a premium brand, high caliber sales force and an impactful commercial strategy. With that, I'll turn the call over for Q and A. Operator?
Thank you, Our first question comes from Louise Chen from Cantor. Please go ahead.
Hi. Thanks for taking my questions. I had a few questions here. First one I had was, how should we qualitatively think about sales to Evolus for 2019 for Jeuveau? I know you're not giving guidance, but we did see Dave will give some color on their guidance for 2019.
There's the Alcyon network and the percentage of sales that they have relative to their key opinion leaders. And then there's some historical comps as well. So we get a lot of questions. Just curious if you could provide any qualitative color. And then the second question that we've gotten a lot is some concerns regarding the other competitors in this space, counter detailing ahead of your launch.
And just curious how much of this you already anticipated and what's built into your launch plan to think about that? And last question I had here is just on your cash runway. With the financing and the existing cash balance, how far does that take you out to? Thank you.
Great. Thank you for the questions, Luis. Maybe I'll just take a step back and point out that, firstly, we've been deliberate about how we've rolled out information related to our commercial launch. And as you can anticipate, there's an increasing level of interest amongst the customer base in anticipation of the launch of Jeuveau. And at the same time, the competitive set has begun preparing both messaging and different field activities around the customer in order to protect against potential share loss.
And as you would expect, we'd anticipate this not just from the market leader, but from all three manufacturers and we've been actively prepared for that. And that is part of the reason why we've been strategically quiet and deliberate about how we roll out each element of the launch. As it relates to the messaging and counter detailing, it's important to note a couple of things. The first is, we have purposefully kept the head to head full data set in anticipation of our launch date. And so we expect when that is published that our sales force and doctors who've been exposed to this data through advisory board meetings will have full visibility to the quality of product that we have.
Our confidence in pricing Jeuveau as a premium brand in the space is reflective of the quality of data that we've generated. This is a very high quality brand and we've assembled a high quality management team in order to launch it. You can expect that the branding elements will be reflective of the same premium pricing nature that these doctors expect when they take on quality brands into their practice. As you think about the uptake of the product and the details that we'll provide in the upcoming May Investor Day, really this is a company that's designed for the broader market. There has been higher engagement with doctors, whether you look at the American Academy of Dermatology, where we had close to 500 doctors that attended our customer event that evening, or the ongoing advisory board meetings, that we continue to hold and have engaged many doctors over the last 6 months.
And there's an increasing amount of interest in the launch of Jeuveau. In the end, there hasn't been an aesthetic only neurotoxin or a company dedicated solely to this space to operate in this category. The combination of the talent we're bringing on, the quality profile that we're building and the launch plans will come together here in spring and introduce the first product in nearly a decade. And we believe that the broader market will want to be a part of that launch.
Great.
Thanks, David. This is Lauren. With regard to the qualitative guidance, Louise, great question. What we would like to tell folks is when you look at second and third quarter, we do not expect to book a lot of revenue in either of those quarters as we encourage physicians and consumers to try the product. What we do anticipate is that revenue will pick up by the Q4 of this year, putting us on a solid trajectory to be number 2 in the market after 24 months and hope that's helpful.
On cash runway, what we are very pleased with this financing. Going into it, we had enough cash to launch the drug. Now we're in a very comfortable position. We have decided not to provide guidance on our full burn rate for this year, so I'm unable to let you know how long that cash will last, but it puts us in a very solid position for an extended period of time. And thanks for asking.
All right. Thank you.
Thank you. Our next question comes from Annabel Samimy from Stifel. Please go ahead.
Hi. Thanks for taking my question. Now you've probably already you have addressed this to a certain degree already, but maybe a little bit more on the promotional front. Clearly, the competitors are already starting with the couponing, the discounting and messaging and providing coupons to physicians. So I know that you're being a little bit careful about how you talk about this, but you've seen what's out there.
Is there anything that's out of bounds of what you expected? And what are some of the tools that you can avoid if you can use to avoid commoditization of the market? Because at some point, it seems like that might start given what we're already seeing in the marketplace. And then separately, you've now had a chance to talk to a number of physicians at AAD. And it seems to me that it's going to be a little bit of a branding game to a certain degree.
So can you give us a sense of the reception that you're getting from those physicians in terms of the brand and the willingness to use a brand and the recognition or the use of a brand that's not fully recognized by the their consumer population, their own patient population? And then finally on the debt side, that's clearly a nice piece of nice source of financing for you. Can you share with us some of the key covenants that we would have to think about in terms of that financing? Thank you.
Thank you, Annabel for the question. And you raised an excellent point surrounding customer concerns around commoditization of this category. And as you point out, we are seeing an increasing level of couponing and discounting from the competitors in anticipation of our launch. I think today, announcing our pricing as a premium brand signals the leadership position that we're taking in this space and that our focus is on building a brand in this category that is very differentiated, not just in terms of the quality of the data that we're going to In these advisory board meetings, we've shared with doctors our design first mentality, our technology platform and how we plan to build a brand in the aesthetic market. As you can imagine with any new product that's entered this space, the awareness level amongst consumers before the product entered was very low, just as where we are today.
But some of the biggest brands that have been built in this space were built through strong leadership and a focus on building a consumer brand that adds value to the category. And we've taken our first step today by announcing a premium pricing of the premium product and you can expect more of that detail to unfold. And as you pointed out at the AAD, the reactions from doctors that had not been exposed to Evolus who attended our customer events, they had the opportunity to see some of the branding and creativity and design first mentality on display. And the meeting, the venue was very different than what you would traditionally see with other pharmaceutical companies. It was reflective of our positioning as a company of a performance beauty company and not a pharmaceutical one that operates in the aesthetic space.
And we believe as that continues to unfold in the coming months, the doctors will start to see the difference between how Evolus operates in the space relative to others. And then with that, I'll turn it over to Lauren to give you an update on the debt.
You bet. Hi, Annabel. With regard to the senior debt, the $75,000,000 we drew down is not subject to any revenue, earnings or minimum cash covenants. And so when you get a look at the 8 ks we filed, you can see there's the normal things around reporting that we need to do to Oxford. But it's essential it's very close to covenant free.
We're very pleased about it other than the normal operating covenants.
Great. Thank you so much.
You bet.
Thank Our next question comes from Irina Kossler from Mizuho. Please go ahead.
Hi, thanks for taking the question. So just to delve into the pricing a bit more. So it's $610,000,000 for a patient, but you have flexibility to coupon the patient and then it's, you're going to be offering, some discount to the physicians. So the physicians, if I understand correctly, also win because they get a slightly they get the same discount approximately, but off of a higher list price. Is that the correct way to understand the pricing strategy?
Yes, great question. And I'm glad you asked about pricing. So Irina, the list price is for a vial of Jeuveau, which is 100 units and that's $6.10 for that vial. As you know, patients will come in and receive different units depending on what the doctor chooses to use. Our on label indication is for 20 units in the glabellar area.
That pricing that the doctor will charge the patient varies of course in every market depending on the doctor injecting. The key point here is that we've priced Jeuveau at a slight premium to the market leader, And we will roll out the different pricing levels to doctors in terms of the volume based pricing once we get past the launch date. And then towards the end of this year, we'll introduce our consumer loyalty program, which is designed to make this procedure more affordable to patients. In the end, your point is exactly right. We anticipate that the market will price Jeuveau at parity to the market leader or slightly above in some cases as we've heard that patients should not expect to pay less for Jeuveau given the quality of data that we've generated and the premium brand that we're bringing to the market.
Okay, great. And then, with regard to your goal of being the number 2 toxin within 24 months, how do you contemplate the market entry of a long acting toxin sometime maybe towards the end of next year or middle of next year? Does that change the number 2 positioning? And can you stay at number 2 beyond 24 months?
Yes. It's a good question. First, in this category, you generally find that product launches establish themselves in the 1st 18 to 24 months. So as you point out, we have that window of time where we'll compete against the 3 existing neurotoxins that are FDA approved. As it relates to the future outlook of toxins that are currently under FDA review and in various stages of review, we haven't provided a view on how we assume that market will play out.
As you know, products have consistently been delayed in this category in their entry. And so it would be preliminary for us to give you any view there. In the end though, one point of distinction here is that we believe we have a frictionless platform to enter the market. And that is a distinct advantage from the quality of the management team that knows the aesthetic space to the quality of the data set with the largest Phase 3 head to head trials against the market leader and a design first digital platform that's designed to eliminate the friction points of doing business in the space. Collectively, those dimensions in the 1st aesthetic only company we believe will generate a significant amount of value and that's going to be in the coming weeks.
Thank you.
Thank you. Our last question comes from David Maris from Wells Fargo. Please go ahead.
Good afternoon. Revance issued a statement to analysts today that points to your pre DLA meeting minutes for Jeuveau. And it says based on feedback from the FDA in the written document, the stated duration is not based on a 2 point comparison to placebo as Evolus has been claiming, but against a threshold level determined at the design stage. So first, had you been claiming that? So I wasn't familiar with that.
So I was glad they raised that. The second is, do you have a comment about it? And then 3rd, Allergan said that they don't think Revance will get 6 months labeling. And I know Irina had asked earlier about what is your expectation of that. Is there any reason for you to think that they will or won't get 6 month labeling or 24 week labeling?
Thank you.
Yes. First of all, thank you for the question. I what we've stated is just in reference to what the FDA guidance has. And in 2014, the FDA said, it's something along the lines of duration claims should be based effectively on a Kaplan Meier analysis of the primary endpoint. And the primary endpoint is a 2 point composite.
So that's all that we've been claiming. The pre BLA our pre BLA meetings are kind of in the public domain and that's what you're referring to. Revance was looking at that document. But if you read it closely, that's not what we say in that document either. So I think there's a little bit of confusion from Revance in terms of how they're interpreting the question of the response from the FDA.
And I can go into more detail if that doesn't explain to you. From our perspective, we have a long a little while ago, and we just said we don't have a duration claim in our label. What we went through in what we put in our label was try to give physicians and patients visibility in terms of how they should think about retreatment. So in our particular label, what we thought was most helpful for doctors and patients to understand kind of what a retreatment cycle would look like is by looking at our open label Phase 2 study, which is very real world where patients came in when they lost their correction went to a 0 or a 1. And in that open label study over the course of a year, actually 2 studies or 9 22 patients, the typical patient came in 3 times a year.
So that we thought that was more informative. After all, the label is supposed to help clinicians and patients understand what to do. Your last question is really important question, of course, is Revance and what their label may or may not read. And really, I mean, we have no insight into that. So it's a fair question, but we wouldn't be able to answer that responsibly.
And that's a good question for the Revance folks.
Thank you very much.
Thank you. This concludes our Q and A session. At this time, I'd like to turn the call back to Mr. Ashwin Agarwal, Vice President, Finance, Investor Relations and Treasury for closing remarks. Please go ahead.
Great. Thanks everybody for participating in today's call.
Thank you, ladies and gentlemen for attending today's conference. This concludes the program. You may all disconnect. Good day.