Okay, good afternoon, everyone, and thanks for attending our conference today. I'm Susan Anderson, one of Canaccord's analysts in the consumer space, and we're very excited to have with us Evolus, and in particular, to host Sandra Beaver, CFO of the company. Sandra, maybe if you can start off with a quick overview of Evolus and the importance of the brand being a beauty brand and not a pharma company, and maybe just about the products that you guys sell?
Yeah, of course. Thank you so much, and thank you for having us here at the conference. We're really happy to be here. So I'm the Chief Financial Officer for Evolus. Evolus is a performance beauty company. Our flagship product is a neurotoxin called Jeuveau. And so what does performance beauty mean, and what's different about Evolus in the neurotoxin space? Performance beauty is this intersection of healthcare and beauty, right? So medical aesthetics and the category of medical aesthetics live here. However, we're different than any of the other neurotoxin products on the market in that we only focus on cash pay. So we are only in the cosmetic use space. We do not have a therapeutic. That gives us a distinct advantage in the way that we're able to partner with practices and offer value-added solutions for those practices to grow in the medical aesthetic space.
So as I said, our flagship product is a neurotoxin called Jeuveau. However, last year, we licensed a line of hyaluronic acid dermal fillers that actually expanded our total addressable market to $6 billion. So that market for neurotoxin was $3.5 billion. We've expanded that market by 78% by adding the dermal filler line. We submitted our first indications to the FDA for approval here in June, and we expect to commercially go live with that asset next year, leaning in more to our differentiation as performance beauty, adding another product to the bag, and I think enabling us to deliver significant growth and opportunity in this space.
Great, thank you. Maybe if you could just talk about Jeuveau then, and how it's positioned in the marketplace versus its competitors. You know, what's the market share versus its peers, and where you see the opportunity longer term?
Yeah, of course. So Jeuveau is one of 5 neurotoxins available today on the market, so it's a very small group of competitors in this space. It's a pharmaceutical product that is sold directly to healthcare providers, so the barriers to entry are relatively high in the sense that you need to go through the FDA, through a clinical trial process. It can take many years and $tens of millions to get a neurotoxin approved. We are the fourth neurotoxin to come on the market in the U.S. of the 5 that are totally available, and we've been on the market for about 5 years. We are number 3 in the category, and we've achieved that in that 5-year timeframe. We're at about 13% of the market as of the second quarter, 2024.
We've increased our share by 2% per year for the last 3 years in a row.
Oh, that's amazing. Maybe if you could talk about how you're very focused on the millennial consumer. You know, what percent of the business is coming from the millennial consumer? Talk about how you market to them.
Sure. So millennials are the largest growing consumer of these products in this space. Believe it or not, the millennials are actually reaching their early forties. It makes me feel very old, but they are. And so millennials are twice as likely as their predecessor to use a neurotoxin. The normalization and the availability of the procedure has continued to increase over time. The proliferation of med spas has continued to enable the availability of the procedure to grow, and with that likelihood and propensity to choose to opt into the procedure younger and younger and for more usage, they're driving the growth of the category. So the category's grown in the low double digits, call it 10%-15%, over the last five years.
We expect it to continue to grow in this high single-digit, low double-digit range for the next five years, and that is largely fueled by these millennials opting into the procedure, and even younger generations choosing to opt into neurotoxins earlier and earlier. With that, we've positioned ourselves as cash pay focused, and we're appealing to that beauty aspect of this treatment. Our advertising is very much geared towards a beauty treatment as opposed to a medical procedure. The accessibility of the treatment being different enables us to offer a different value proposition to the practice and attract a younger consumer base. So we do tend to over-index on the new additions to the category, and over 50% of our new consumers in our loyalty program are in the millennial cohort.
Our growth is being fueled by the growth of the category, and I think we're taking an outsized share of that growth because of the way that we focus our product.
Great, and maybe if you could just mention really quick, the category growth that you expect over the next several years.
Yeah. So I think, as I mentioned, the neurotoxin category is growing in this high single, low double digits, so we expect it to continue to do so over the next 5 years, fueled by the millennials. The filler category, which we'll be entering next year, is growing at a similar rate. If you follow the space, you will notice this year fillers are relatively flat as compared to toxins. The toxin procedure is less expensive, and it's more sticky. It's a very durable asset. And for anyone who's had a neurotoxin, when your neurotoxin wears off, you know it, and so you typically are wanting to go back. It's a bit like... I liken it to hair color, right? If you've got your hair dyed, you can see your roots coming out. If you've had your toxin done, you can see your wrinkles coming back.
People are very likely to go in repeatedly for the treatment. Once they've started using neurotoxin, they will keep going. A filler is a bit more expensive, and it also wears off a lot more gradually. So if you've got a share of wallet conversation happening, you may see some temporary sort of decline or sort of flattening of that market, but it does typically rebound when it flattens. We do expect over the longer term to continue to see healthy growth in both filler and toxin. You just may see a little more variability in that filler category.
Okay, great. Maybe if you could expand on your cash pay model and how that's beneficial to providers, and then also the customer and, and the loyalty program that you mentioned, and how that works very well, and I think you're one of the few, if not the only, that has a loyalty program.
Yeah. As I mentioned, we are the only cash pay-focused neurotoxin on the market today. So what does that mean, being dedicated to cash pay? Every other neurotoxin available has both therapeutic and cash pay indications. The FDA regulates the pricing when you offer a therapeutic, so you cannot undercut your therapeutic price in your cash pay space. You must have price parity between these things. And so with that, there's a disincentive for them to reduce the price on cosmetic because they would be forced to reduce the price on their therapeutic, and in many cases, that therapeutic revenue is higher than the cosmetic revenue they're getting, and there's the massive TAM for therapeutic outside of cosmetic. And so we have this opportunity as being cosmetic-focused cash pay only, to offer differentiated, not just pricing, but sort of additional value-added services to the practice.
So you mentioned our loyalty program. Our customer loyalty programs, this is your healthcare providers, is called Evolux. Inside of Evolux, you get discounted pricing as you move up the tiers of purchasing, fairly consistent with many other models, and we have a discounted offer, where we are a bit below the market leader in terms of price. We're about 20% below the market leader on price. But we also have additional services that you can get access to as you purchase up into that program, the most notable of which is our co-branded media. So co-branded media enables a practice to offer... We do currently TV campaigns, billboards, digital campaigns, where you see the brand of the practice and the brand of our product put out together on a campaign. It's a campaign that's funded by us.
With our beauty focus, we have our own internal creative that designs a very edgy beauty platform-type campaign that we can put out in the market. We can do it far more efficiently than a practice could do on their own because we can leverage that creative across all of our practices, and we can offer them the ability to run these campaigns without having that expense on their P&L. We are the only neurotoxin provider in this space that offers co-branded media, and we believe that it gives the practice the ability to grow on their most important procedure. The highest entry procedure and highest volume procedure in practice remains the toxin, and so having that opportunity to co-brand with the toxin, have that call to action where they go to the practice, really does provide a differentiated value proposition to the practice.
In addition to that, we also have a training program where we do train all the injectors on-site, at their location, or in various different formats. We offer a lot of training opportunities for them to enable them to get confident with the quality of the product and confident with the outcomes for their patients.
Great, that's very helpful. And then maybe if you could talk about the new filler that you're rolling out next year, I guess, what will that rollout look like? Do you already have agreements in place, and how do you see it complementing, you know, the Jeuveau as well?
Yeah, we're very excited about our hyaluronic acid dermal filler line. It's called Evolysse. Evolysse is the next-generation product developed by a company called Symatese out of France. Symatese has been in the medical aesthetics and aesthetic space for decades. They started in the late 1970s. They develop collagen products for L'Oréal. They developed Restylane, which is the leading market hyaluronic acid filler today, and this is the next generation of that product, which we call Evolysse. What's different about Evolysse is that it is created at cold temperatures. So all other hyaluronic acid fillers, they take the hyaluronic acid chain, which is a naturally occurring substance in your joints. They cross-link that chain with something called BDDE to create a gel, and that gel is what's used to inject into the, the face to put volume back in the face.
They create that cross-linking in heat, so they raise the temperature, what causes the hyaluronic acid chain to fragment. So they try to keep it at heat for as little time as possible, to fragment as little as possible, but still, with the heat, there's fragmentation. What Symatese figured out how to do was to cross-link the hyaluronic acid chain in freezing temperatures, and thereby eliminating or significantly reducing that breakage in the hyaluronic acid chain and eliminating those fragments, so there's much less fragmentation. It really helps the structural integrity of the gel itself, as well as the safety of the gel. And so we think this is gonna be a really exciting introduction into the market to have this line of fillers. As I mentioned, they were in clinical trial when we got into the license agreement with Symatese.
So in June of this year, we filed with the FDA, our PMA, for the first two indications of Evolysse. They're for the nasolabial fold. They're called Lift and Smooth, which we expect to launch in the back half of 2025. One of the great things about a filler being the second product in our portfolio is it's incredibly synergistic. So I mentioned our co-branded media, I mentioned our Evolux program, our sales force, and the infrastructure we've built there to launch the toxin. All of these can be used to launch the filler. They're the same point of sale and practice, the same purchasing decision, often by the customer and the consumer. The filler is the most likely secondary procedure after a toxin for a patient. So it creates this tremendous synergy and this tremendous opportunity to drive incremental revenue with very little investment.
Great. Then I guess beyond the filler, do you see other products or categories to expand into and kind of tack on to the platform down the road?
Yes, sure. I mean, as being the only cash pay dedicated medical aesthetics company in the space, we see an opportunity to build that portfolio. Obviously, our current focus is on the launch of these fillers and the successful launch of these fillers. Like I said, we're very excited about the technology. We believe it's gonna bring something very interesting to the market for customers and consumers, and we wanna make sure we're very thoughtful and focused on making that launch successful. Having said that, we're always managing a pipeline. We're always looking for what's going to be next. We do have aspirations to build a medical aesthetics company above and beyond the products that we have over time, and we do think we can add tremendous value into the market. There's certainly other things, you know, sort of above the neck that are more-...
Complementary to the products that we have. There's biostimulatory fillers, which is not in our current portfolio of fillers. We have hyaluronic acid, skin quality, other areas like that, and we're also always looking at developing our own assets as well. We have a pretty exciting R&D team under Rui Avelar, and I think, you know, making sure that we're constantly having pipeline assets is important to the portfolio.
Great. And then maybe just looking at the financials for a little bit, so I think gross margins range between 68%-71%. You know, a nice range to be in, but do you see opportunity for a gross margin longer term?
Yeah. So the nice thing with the filler is the filler should be at least or better than our existing margins, so we are guiding this year to between 68% and 71%. We do see long-term stability in our long-range guide out to 2028 within those margin ranges, thanks to the filler coming in at, at or above those margin levels. There's tremendous certainty in these things for us as well. We have long-standing partnerships with our manufacturers for the toxin and the filler that give us that confidence around those margins, and so there's nothing but potential, I think, upside there, and as we look at when we launch the filler.
And then, as you go out past our long-range plan horizon, we do have some royalties in that revenue that will drop off in 2032, so you'll see a margin step-up out in 2032, which is a little ways off.
Okay, great. Then just looking at profitability, how are you thinking about that longer term? You know, what's the path that we should think about over the next, call it, three to five years?
Yeah, of course. So we guided this year to be profitable in the fourth quarter, and we guided to also be profitable for the full year, 2025. We actually achieved profitability two quarters early, so we were profitable here in the second quarter of 2024. It's very exciting for us. We beat the consensus in the market as well as our own expectations, on top line and cost, enabling us to deliver that profitability a little bit early. That only furthers our confidence and our ability to be profitable in the fourth quarter and for the full year next year. Next year, we'll be launching for the first time our hyaluronic acid fillers, so with that launch, there's going to be launch expenses. We still believe we can fully fund those expenses and be profitable on a full year basis.
What that means is you could see meaningful margin expansion in 2026 when we've lapped on those operating expense investments to launch the fillers. Then you get this great synergistic opportunity on the operating expense base of now having the revenue for both the portfolio of fillers and the toxin on a really efficient cost base that supports both.
Okay, great. And then I guess that leads into my next question, just about capital needs. Do you feel, Is there any, gonna be any big capital needs as we look out over the next couple of years?
Yeah, I mean, we did a raise this past March, an equity raise, and we are sitting on a cash balance of $94 million. We had very low cash burn. Again, being profitable in the second quarter has been a really great benefit to our cash burn as well. So we're sitting on $93.7 million as of Q2, and then we have a debt facility of $125 million, which becomes payable starting in January of 2026 through the end of 2027. With that expansion of margin happening meaningfully in 2026, and with that guide to profitability in 2025, we are very well funded to support all the way through profitability, as well as the repayment of our debt.
So we don't have any capital raise or cash needs at this time, nor do we anticipate having any for a number of years, absent, you know, some wonderful opportunity to expand our portfolio in a meaningful way from where we are. But for now, we're very focused on execution. We're continuing to deliver at or above our own expectations, and we have a very healthy balance sheet to be well-positioned to pay down our debt.
Okay, great. And I guess just, one question on, you know, geographic expansion. Is there opportunity there, I guess, as we look out over the next 3-5 years to expand geographically?
Yeah. So we launched our international market in Q4 of 2022 with the U.K. Our neurotoxin is branded Nuceiva outside the U.S. So in Q4 2022, we were in the U.K., and then in 2023, we launched in Germany, Austria, and Italy. This year, we have launched in Spain and Australia. We also, after licensing the line of fillers in May last year for the U.S., we licensed the same line of fillers for Europe in December of last year. So as we continue to expand our footprint in Europe with the toxin and continue to gain share with the toxin, we get the benefit of also adding the filler into that portfolio starting next year and launching in the countries in which we've developed that infrastructure to support the toxin revenue.
We believe we'll see about 10%-15% of our long-term revenue coming from these OUS markets. So we've guided to at least $700 million by 2028, and it's, I say at least for a reason, right? We see lots of ways to be higher than $700 million. We don't see very many ways to miss it, and we expect about 10%-15% of that to come from those OUS markets.
Okay, great. And then just when you do gain share, I'm curious, do you typically see consumers switch over to Jeuveau from, say, Botox? Is that where you're gaining the most of your share, or, or is it just really that you're grabbing more of the millennial customer's wallet?
I mean, we're doing both, right? So we're seeing about half of our growth is coming from existing practices that we're in. We're in about 14,000 practices in the U.S. today. There's 30,000 on estimate practices that sell neurotoxin and filler today. So we're about 50% penetrated in the market, and we're continuing to gain share. We do believe we're taking an outsized percentage of the growth in the overall market, so we're taking in more of the naive toxin patients, but you don't gain share at the rate we're gaining share without convincing patients to switch. So certainly, there's an opportunity for us to see more and more patients switching over, particularly as the brand and the brand recognition continues to increase for Jeuveau. I think more and more you're hearing people actually know Jeuveau and not just Botox, right?...
The easiest switch that a patient can make or a practice can make is often from Botox to Jeuveau. They are the only two 900 kilodalton molecule neurotoxins in the market today, so they're the most similar in that regard. The decision to switch, you know, becomes a bit easier for the practice as well as for the patient. This is a very precise product. The manufacturing process is a bit different and unique, and it creates this very unique precision profile. For the practitioner, they have a lot more control over how they create outcomes for their patients with our product, and there's certainly really great feedback we get about how much they like that precision and, and how that works well for their patients, and they can get those consistent outcomes for patients.
Then, as we add more and more value to practice, there's more and more reason for the practitioner to advocate for the consumer to choose Jeuveau. The other thing we have is our Evolus Rewards program. So we mentioned Evolux, which is our customer loyalty program. We have a consumer loyalty program. So we offer every consumer who chooses Jeuveau $40 off every time they come in to get treated from the first time they get treated, which is the highest value coupon offer, the most consistent value coupon offer available in the market today.
So that gives the consumer yet another reason to choose Jeuveau, as their first or their change to neurotoxin, is that quality outcome they can expect from the product, the confidence the injector can have in giving the procedure to the patient, the value they get from Evolus Rewards, and then the value they get from the practitioner, for the actual co-branded media and other offerings. You know, often people ask me, like, "Well, you did really well this quarter. Was it rewards? Was it CBM? Was it this? Was it that?" And I think as you think about how that purchase decision happens and how all of those things work together, there's not one thing that's driving the share gain for us. There's not one thing that's creating that decision switch for a practice or a consumer. It's all of those things working together.
It's the full portfolio of not just the products we have, but the solutions we provide to help practices grow that's really creating that inertia behind our brand and behind our products.
Great. And then I guess just a final question on the consumer and the macro pressures potentially. I mean, like you mentioned, your results have been very strong. It doesn't seem like you're seeing any macro pressure, really, but I guess, do you think there's been any consumer pressures within the aesthetics area? And I guess, you know, do you think that the consumer—what's the health of the consumer now versus last year, and what are you expecting for the back half of this year?
Yeah, I mean, I think there's been certainly a little more noise last year than this year, but always a little bit of noise around share of wallet and consumer decision-making, and what capacity does the consumer have to invest in what people consider discretionary procedures? I wouldn't underestimate the value that the consumer places on beauty and their willingness to prioritize their investments in beauty above other things that they may be investing in when they're having a share-of-wallet decision that they need to make. None of us want to go out of our house looking bad, right? We don't want to have our hair a mess or our nails a mess. We don't skip these type of treatments. Our neurotoxin is not typically any different.
And if you're thinking about the variety of different procedures you can get in a medical aesthetic setting, the neurotoxin is by far the most economical of all of those procedures. So if you see folks stretching out their procedure frequency for something like a filler, which is a little bit more expensive, you don't likely see them stretching out their frequency for the toxin because it is more economical, and if they need to prioritize a beauty procedure, they will tend to prioritize the toxin. So although we watch it very closely, right, we obviously keep good eye on the Consumer Confidence Index and other factors in the market, we continue to see the resilience of beauty as a decision and a point that people make to invest in and the resilience of the procedure of the toxin itself in that same way.
Great. That's very helpful. Well, thank you, Sandra, for joining us and Evolus for attending the conference and everyone in the room. Thank you.
Thank you again, Susan, for having us.