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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
| | |
FORM 10-Q
| | | | | | | | |
(Mark One) |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021
| | | | | | | | |
or |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___ |
Commission File No. 001-36297
| | | | | | | | |
| | |
Revance Therapeutics, Inc. |
| (Exact name of registrant as specified in its charter) | |
| | |
| | | | | | | | | | | |
| Delaware | 77-0551645 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1222 Demonbreun Street, Suite 2000, Nashville, Tennessee, 37203
(Address, including zip code, of principal executive offices)
(615) 724-7755
(Registrant’s telephone number, including area code)
| | | | | | | | |
Securities Registered Pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | RVNC | Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ | Emerging growth company | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial statement accounting standards provide pursuance to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
Number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of July 28, 2021: 71,829,718
Table of Contents
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“Revance Therapeutics,” the Revance logos and other trademarks or service marks of Revance appearing in this quarterly report on Form 10-Q (this “Report”) are the property of Revance. This Report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
Unless expressly indicated or the context requires otherwise, the terms “Revance,” “company,” “we,” “us,” and “our,” in this document refer to Revance Therapeutics, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries.
PART I.FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | |
| June 30, | | December 31, |
| 2021 | | 2020 |
ASSETS |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 167,634 | | | $ | 333,558 | |
Short-term investments | 168,662 | | | 102,947 | |
Accounts receivable, net | 641 | | | 1,829 | |
Inventories | 5,065 | | | 5,876 | |
Prepaid expenses and other current assets | 12,602 | | | 5,793 | |
Total current assets | 354,604 | | | 450,003 | |
Property and equipment, net | 21,092 | | | 17,499 | |
Goodwill | 146,964 | | | 146,964 | |
Intangible assets, net | 63,655 | | | 71,343 | |
Operating lease right of use assets | 46,334 | | | 29,632 | |
Restricted cash | 3,452 | | | 3,445 | |
Other non-current assets | 4,774 | | | 1,334 | |
TOTAL ASSETS | $ | 640,875 | | | $ | 720,220 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
CURRENT LIABILITIES | | | |
Accounts payable | $ | 8,176 | | | $ | 12,657 | |
Accruals and other current liabilities | 31,405 | | | 32,938 | |
Deferred revenue, current | 9,862 | | | 7,851 | |
Operating lease liabilities, current | 5,646 | | | 4,437 | |
Derivative liability | 3,159 | | | 3,081 | |
Total current liabilities | 58,248 | | | 60,964 | |
Convertible senior notes | 280,003 | | | 180,526 | |
Deferred revenue, non-current | 75,113 | | | 77,294 | |
Operating lease liabilities, non-current | 41,276 | | | 27,146 | |
TOTAL LIABILITIES | 454,640 | | | 345,930 | |
Commitments and Contingencies (Note 12) | | | |
STOCKHOLDERS’ EQUITY | | | |
Convertible preferred stock, par value $0.001 per share — 5,000,000 shares authorized, and no shares issued and outstanding as of June 30, 2021 and December 31, 2020 | — | | | — | |
Common stock, par value $0.001 per share — 190,000,000 and 95,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 71,798,624 and 69,178,666 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | 72 | | | 69 | |
Additional paid-in capital | 1,446,643 | | | 1,500,514 | |
Accumulated other comprehensive loss | (2) | | | — | |
Accumulated deficit | (1,260,478) | | | (1,126,293) | |
TOTAL STOCKHOLDERS’ EQUITY | 186,235 | | | 374,290 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 640,875 | | | $ | 720,220 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Revenue | | | | | | | |
Product revenue | $ | 17,039 | | | $ | 49 | | | $ | 28,686 | | | $ | 49 | |
Collaboration revenue | 1,394 | | | 250 | | 2,905 | | | 308 |
Service revenue | 371 | | | — | | | 512 | | | — | |
Total revenue | 18,804 | | | 299 | | 32,103 | | | 357 |
Operating expenses: | | | | | | | |
Cost of product revenue (exclusive of amortization) | 5,409 | | | 21 | | | 9,626 | | | 21 | |
Cost of service revenue (exclusive of amortization) | 17 | | | — | | | 17 | | | — | |
Selling, general and administrative | 50,598 | | | 29,606 | | | 99,603 | | | 50,830 | |
Research and development | 29,441 | | | 27,103 | | | 56,692 | | | 66,897 | |
Amortization | 3,676 | | | 674 | | | 6,514 | | | 674 | |
Total operating expenses | 89,141 | | | 57,404 | | | 172,452 | | | 118,422 | |
Loss from operations | (70,337) | | | (57,105) | | | (140,349) | | | (118,065) | |
Interest income | 85 | | | 964 | | | 182 | | | 2,455 | |
Interest expense | (1,569) | | | (4,256) | | | (3,129) | | | (6,404) | |
Changes in fair value of derivative liability | (19) | | | (59) | | | (78) | | | (149) | |
Other expense, net | (357) | | | (134) | | | (462) | | | (260) | |
Loss before income taxes | (72,197) | | | (60,590) | | | (143,836) | | | (122,423) | |
Income tax provision | — | | | — | | | — | | | (100) | |
Net loss | (72,197) | | | (60,590) | | | (143,836) | | | (122,523) | |
Unrealized gain (loss) and adjustment on securities included in net loss | (2) | | | (407) | | | (2) | | | 114 | |
Comprehensive loss | $ | (72,199) | | | $ | (60,997) | | | $ | (143,838) | | | $ | (122,409) | |
Basic and diluted net loss | $ | (72,197) | | | $ | (60,590) | | | $ | (143,836) | | | $ | (122,523) | |
Basic and diluted net loss per share | $ | (1.07) | | | $ | (1.12) | | | $ | (2.15) | | | $ | (2.27) | |
Basic and diluted weighted-average number of shares used in computing net loss per share | 67,462,413 | | | 54,257,320 | | | 67,051,902 | | | 54,062,678 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
Convertible Preferred Stock | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | |
Common Stock | | | | | | | | | | | | | | | |
Balance — Beginning of period | 71,411,389 | | | 71 | | | 57,026,154 | | | 57 | | | 69,178,666 | | | 69 | | | 52,374,735 | | | 52 | |
Issuance of restricted stock awards and performance stock awards, net of cancellation | 166,670 | | | — | | | 220,799 | | | — | | | 1,036,256 | | | 1 | | | 1,417,853 | | | 1 | |
Issuance of common stock in connection with at-the-market offerings | — | | | — | | | — | | | — | | | 761,526 | | | 1 | | | — | | | — | |
Issuance of common stock upon exercise of stock options and warrants | 150,038 | | | 1 | | | 24,442 | | | — | | | 879,476 | | | 1 | | | 76,794 | | | — | |
Issuance of common stock relating to employee stock purchase plan | 91,562 | | | — | | | 48,661 | | | — | | | 91,562 | | | — | | | 48,661 | | | — | |
Shares withheld related to net settlement of restricted stock awards | (21,035) | | | — | | | (6,500) | | | — | | | (148,862) | | | — | | | (79,487) | | | — | |
Issuance of common stock in connection with the Teoxane Agreement | — | | | — | | | — | | | — | | | — | | | — | | | 2,500,000 | | | 3 | |
Issuance of common stock in connection with offerings | — | | | — | | | — | | | — | | | — | | | — | | | 975,000 | | | 1 | |
Balance — End of period | 71,798,624 | | | 72 | | | 57,313,556 | | | 57 | | | 71,798,624 | | | 72 | | | 57,313,556 | | | 57 | |
Additional Paid-In Capital | | | | | | | | | | | | | | | |
Balance — Beginning of period | — | | | 1,432,457 | | | — | | | 1,213,931 | | | — | | | 1,500,514 | | | — | | | 1,069,639 | |
Cumulative-effect adjustment from adoption of ASU 2020-06 | — | | | — | | | — | | | — | | | — | | | (108,509) | | | — | | | — | |
Issuance of restricted stock awards and performance stock awards, net of cancellation | — | | | — | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
Issuance of common stock in connection with at-the-market offerings, net of issuance costs | — | | | (77) | | | — | | | — | | | — | | | 21,623 | | | — | | | — | |
Issuance of common stock upon exercise of stock options and warrants | — | | | 1,373 | | | — | | | 427 | | | — | | | 12,509 | | | — | | | 999 | |
Issuance of common stock relating to employee stock purchase plan | — | | | 2,206 | | | — | | | 671 | | | — | | | 2,206 | | | — | | | 671 | |
Shares withheld related to net settlement of restricted stock awards | — | | | (605) | | | — | | | (111) | | | — | | | (4,250) | | | — | | | (1,512) | |
Stock-based compensation | — | | | 11,289 | | | — | | | 7,353 | | | — | | | 22,551 | | | — | | | 13,897 | |
Equity component of convertible senior notes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 108,510 | |
Issuance of common stock in connection with the Teoxane Agreement | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 43,397 | |
Issuance of common stock in connection with offerings, net of issuance costs of $44 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 15,536 | |
Capped call transactions related to the issuance of convertible senior notes | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (28,865) | |
Balance — End of period | — | | | $ | 1,446,643 | | | — | | | $ | 1,222,271 | | | — | | | $ | 1,446,643 | | | — | | | $ | 1,222,271 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity—(Continued)
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
Other Accumulated Comprehensive Gain (Loss) | | | | | | | | | | | | | | | |
Balance — Beginning of period | — | | | — | | | — | | | 524 | | | — | | | — | | | — | | | 3 | |
Unrealized gain (loss) and adjustment on securities included in net loss | — | | | (2) | | | — | | | (407) | | | — | | | (2) | | | — | | | 114 | |
Balance — End of period | — | | | (2) | | | — | | | 117 | | | — | | | (2) | | | — | | | 117 | |
Accumulated Deficit | | | | | | | | | | | | | | | |
Balance — Beginning of period | — | | | (1,188,281) | | | — | | | (906,137) | | | — | | | (1,126,293) | | | — | | | (844,204) | |
Cumulative-effect adjustment from adoption of ASU 2020-06 | — | | | — | | | — | | | — | | | — | | | 9,651 | | | — | | | — | |
Net loss | — | | | (72,197) | | | — | | | (60,590) | | | — | | | (143,836) | | | — | | | (122,523) | |
Balance — End of period | — | | | (1,260,478) | | | — | | | (966,727) | | | — | | | (1,260,478) | | | — | | | (966,727) | |
Total Stockholders’ Equity | 71,798,624 | | | $ | 186,235 | | | 57,313,556 | | | $ | 255,718 | | | 71,798,624 | | | $ | 186,235 | | | 57,313,556 | | | $ | 255,718 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net loss | $ | (143,836) | | | $ | (122,523) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Stock-based compensation | 21,975 | | | 13,897 | |
Depreciation and amortization | 9,284 | | | 2,152 | |
Amortization of debt discount and issuance costs | 622 | | | 4,504 | |
Amortization of discount on investments | (105) | | | (1,111) | |
Other non-cash operating activities | 62 | | | 240 | |
Non-cash in-process research and development | — | | | 11,184 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | 1,188 | | | (49) | |
Inventories | 811 | | | (778) | |
Prepaid expenses and other current assets | (3,309) | | | (1,179) | |
Operating lease right of use assets | (16,702) | | | 1,165 | |
Other non-current assets | (3,440) | | | 30 | |
Accounts payable | (4,090) | | | (1,099) | |
Accruals and other liabilities | (1,389) | | | 4,052 | |
Deferred revenue | (170) | | | 30,692 | |
Operating lease liabilities | 15,339 | | | (1,679) | |
Net cash used in operating activities | (123,760) | | | (60,502) | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | |
Purchases of investments | (168,597) | | | (159,412) | |
Purchases of property and equipment | (5,016) | | | (1,113) | |
Proceeds from maturities of investments | 103,000 | | | 132,000 | |
Finance lease prepayments | (3,500) | | | — | |
Purchase of intangible assets | — | | | (118) | |
Proceeds from sale of investments | — | | | 16,969 | |
Net cash used in investing activities | (74,113) | | | (11,674) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Proceeds from issuance of common stock in connection with at-the-market offerings, net of commissions | 21,707 | | | — | |
Proceeds from the exercise of stock options, common stock warrants and employee stock purchase plan | 14,715 | | | 1,670 | |
Taxes paid related to net settlement of restricted stock awards | (4,250) | | | (1,512) | |
Payment of offering costs | (216) | | | (337) | |
Proceeds from issuance of convertible senior notes | — | | | 287,500 | |
Proceeds from issuance of common stock in connection with offerings, net of commissions and discount | — | | | 15,581 | |
Payment of capped call transactions | — | | | (28,865) | |
Payment of convertible senior notes transaction costs | — | | | (9,190) | |
Net cash provided by financing activities | 31,956 | | | 264,847 | |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (165,917) | | | 192,671 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | 337,003 | | | 171,890 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | $ | 171,086 | | | $ | 364,561 | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION: | | | |
Internally developed software capitalized from stock-based compensation | $ | 576 | | | $ | — | |
Property and equipment purchases included in accounts payable and accruals | $ | 501 | | | $ | 159 | |
Accrued offering costs | $ | 55 | | | $ | — | |
Issuance of common stock in connection with the Teoxane Agreement | $ | — | | | $ | 43,400 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Company and Summary of Significant Accounting Policies
The Company
Revance is a biotechnology company focused on innovative aesthetic and therapeutic offerings, including its next-generation neuromodulator product, DaxibotulinumtoxinA for Injection. DaxibotulinumtoxinA for Injection combines a proprietary stabilizing peptide excipient with a highly purified botulinum toxin that does not contain human or animal-based components. We have successfully completed a Phase 3 program for DaxibotulinumtoxinA for Injection in glabellar (frown) lines and are pursuing United States (“U.S.”) regulatory approval. We are also evaluating DaxibotulinumtoxinA for Injection in the full upper face, including glabellar lines, forehead lines and crow’s feet, as well as in two therapeutic indications - cervical dystonia and adult upper limb spasticity. To accompany DaxibotulinumtoxinA for Injection, we own a unique portfolio of premium products and services for U.S. aesthetics practices, including the exclusive U.S. distribution rights to Teoxane SA (“Teoxane”)’s line of Resilient Hyaluronic Acid® (“RHA®”) Collection of dermal fillers, the first and only range of U.S. Food and Drug Administration (the “FDA”)-approved fillers for correction of dynamic facial wrinkles and folds, and the HintMD fintech platform, which includes integrated smart payment, subscription and loyalty digital services. We have also partnered with Viatris (formerly Mylan N.V.) to develop a biosimilar to BOTOX® (“an onabotulinumtoxinA biosimilar”), which would compete in the existing short-acting neuromodulator marketplace.
On July 23, 2020, we completed the acquisition of all of the issued and outstanding shares of Hint, Inc. (d/b/a HintMD) (the “HintMD Acquisition”), and HintMD became a wholly owned subsidiary of Revance. HintMD operates the HintMD Platform, which is a payment solution and practice management tool for medical aesthetic practices. In April 2021, HintMD completed the integration of the payment facilitator (“PayFac”) functionality and launched the next-generation HintMD Platform (the “Next-generation Platform”, and together with the HintMD Platform, the “Fintech Platform”) in beta form to select customers.
Since inception, we have devoted substantial efforts to identifying and developing product candidates for the aesthetic and therapeutic pharmaceutical markets, recruiting personnel, raising capital, conducting preclinical and clinical development of, and manufacturing development for DaxibotulinumtoxinA for Injection, DaxibotulinumtoxinA Topical, the onabotulinumtoxinA biosimilar, and the commercial launch of our products and services. We have incurred losses and negative cash flows from operations. We have not generated substantial revenue to date, and will continue to incur significant research and development, sales and marketing, and other expenses related to our ongoing operations.
For the three and six months ended June 30, 2021, we had a net loss of $72.2 million and $143.8 million. As of June 30, 2021, we had working capital surplus of $296.4 million and an accumulated deficit of $1.3 billion. In recent years, we have funded our operations primarily through the sale of common stock, convertible senior notes, payments received from collaboration arrangements, and sales of the RHA® Collection of dermal fillers. As of June 30, 2021, we had capital resources of $336.3 million consisting of cash, cash equivalents, and short-term investments. We believe that our existing capital resources will fund our operating plan through at least the next 12 months following the issuance of this Report, and we may identify additional capital resources to fund our operations.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements are unaudited, and reflect all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair statement of the results for the interim periods presented.
Our condensed consolidated balance sheet for the year ended December 31, 2020 was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. generally accepted accounting
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
principles (“U.S. GAAP”). The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 2021, or any other future period. Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission (the “SEC”), on February 25, 2021.
Our condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries, and have been prepared in conformity with U.S. GAAP. All intercompany transactions have been eliminated.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include, but are not limited to, the fair value of assets and liabilities assumed in business combinations, incremental borrowing rate used to measure operating lease liabilities, the recoverability of goodwill and long-lived assets, useful lives associated with property and equipment and intangible assets, period of benefit associated with deferred costs, revenue recognition (including the timing of satisfaction of performance obligations, estimating variable consideration, estimating stand-alone selling prices of promised goods and services, and allocation of transaction price to performance obligations), deferred revenue classification, accruals including clinical trial costs, valuation and assumptions underlying stock-based compensation and other equity instruments, fair value of derivative liability, and income taxes.
The ongoing COVID-19 pandemic has caused a global slowdown of economic activity which has negatively impacted consumer spending, including with respect to our current and potential customers, while also disrupting sales channels and marketing activities. In addition, the COVID-19 pandemic has impacted the regulatory approval process for DaxibotulinumtoxinA for Injection. In November 2020, the FDA deferred a decision on the biologics license application (“BLA”) for DaxibotulinumtoxinA for Injection for the treatment of moderate to severe glabellar (frown) lines. The FDA reiterated that an inspection of our manufacturing facility is required as part of the BLA approval process, but the FDA was unable to conduct the required inspection of our manufacturing facility in Northern California, due to the FDA’s travel restrictions associated with the COVID-19 pandemic. The FDA initiated the pre-approval inspection of our manufacturing facility in June 2021. We are unable to predict the future impact of the COVID-19 pandemic on the timing of the regulatory approval process following inspection, the progress of clinical trials, supplies and sales of the RHA® Collection of dermal fillers, demand for our products and other aspects of our operations.
As of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our condensed consolidated financial statements.
Recently Adopted Accounting Pronouncement
In August 2020, the Financial Accounting Standards Board issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 simplifies the accounting for convertible debt instruments by removing certain requirements to separately account for conversion options embedded in debt instruments that are not required to be accounted for as derivative instruments. ASU 2020-06 also updates and improves the consistency of earnings per share calculations for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. On January 1, 2021, we adopted ASU 2020-06 using the modified retrospective method and the adoption did not have any impact for our consolidated balance sheets as of December 31, 2020. As a result of the adoption, on January 1, 2021, we made certain adjustments to our consolidated balance
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
sheets which consisted of an increase of $98.9 million in Convertible Senior Notes (the 2027 Notes as defined in Note 9), a decrease of $108.5 million in Additional Paid-in Capital and a decrease of $9.7 million in Accumulated Deficit. Additionally, from January 1, 2021, we will no longer incur non-cash interest expense for the amortization of debt discount after adoption, therefore the interest expense for the 2027 Notes, which is included in the “interest expense” on the condensed consolidated statements of operations and comprehensive loss, will be lower compared to fiscal year 2020.
2. Revenue
Our revenue is primarily generated from U.S. customers. Our product and collaboration revenue is generated from the Product Segment, and our service revenue is generated from the Service Segment (Note 13). The following tables present our revenues disaggregated by the timing of transfer of goods or services: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 |
(in thousands) | Product Revenue | | Collaboration Revenue | | Service Revenue | | Total | | Product Revenue | | Collaboration Revenue | | Service Revenue | | Total |
Timing of revenue recognition: | | | | | | | | | | | | | | | |
Transferred at a point in time | $ | 17,039 | | | $ | — | | | $ | 213 | | | $ | 17,252 | | | $ | 28,686 | | | $ | — | | | $ | 213 | | | $ | 28,899 | |
Transferred over time | — | | | 1,394 | | | 158 | | | 1,552 | | | — | | | 2,905 | | | 299 | | | 3,204 | |
Total | $ | 17,039 | | | $ | 1,394 | | | $ | 371 | | | $ | 18,804 | | | $ | 28,686 | | | $ | 2,905 | | | $ | 512 | | | $ | 32,103 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 | | Six Months Ended June 30, 2020 |
(in thousands) | Product Revenue | | Collaboration Revenue | | Service Revenue | | Total | | Product Revenue | | Collaboration Revenue | | Service Revenue | | Total |
Timing of revenue recognition: | | | | | | | | | | | | | | | |
Transferred at a point in time | $ | 49 | | | $ | — | | | $ | — | | | $ | 49 | | | $ | 49 | | | $ | — | | | $ | — | | | $ | 49 | |
Transferred over time | — | | | 250 | | | — | | | 250 | | | — | | | 308 | | | — | | | 308 | |
Total | $ | 49 | | | $ | 250 | | | $ | — | | | $ | 299 | | | $ | 49 | | | $ | 308 | | | $ | — | | | $ | 357 | |
Product Revenue
For the three and six months ended June 30, 2021, all product revenue was generated from the sale of the RHA® Collection of dermal fillers.
Receivables and contract liabilities from contracts with our product revenue customers are as follows:
| | | | | | | | | | | |
| June 30, | | December 31, |
(in thousands) | 2021 | | 2020 |
Accounts receivables, net | $ | 542 | | | $ | 1,687 | |
Contract liabilities: | | | |
Deferred revenue, current | $ | (1,537) | | | $ | — | |
Total contract liabilities | $ | (1,537) | | | $ | — | |
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Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Collaboration Revenue
Viatris Collaboration and License Agreement
Agreement Terms
We entered into a collaboration and license agreement with Viatris (the “Viatris Collaboration”) in February 2018, pursuant to which we are collaborating with Viatris exclusively, on a world-wide basis (excluding Japan), to develop, manufacture, and commercialize an onabotulinumtoxinA biosimilar.
Viatris has paid us an aggregate of $60 million in non-refundable fees as of June 30, 2021, and the agreement provides for additional remaining contingent payments of up to $70 million in the aggregate, upon the achievement of certain clinical and regulatory milestones and of specified, tiered sales milestones of up to $225 million. The payments do not represent a financing component for the transfer of goods or services.
Revenue Recognition
We re-evaluate the transaction price at each reporting period. We estimated the transaction price for the Viatris Collaboration using the most likely amount method. In order to determine the transaction price, we evaluated all of the payments to be received during the duration of the contract, which included milestones and consideration payable by Viatris. Other than the upfront payment, all other milestones and consideration we may earn under the Viatris Collaboration are subject to uncertainties related to development achievements, Viatris’ rights to terminate the agreement, and estimated effort for cost-sharing payments. Components of such estimated effort for cost-sharing payments include both internal and external costs. Consequently, the transaction price does not include any milestones and considerations that, if included, could result in a probable significant reversal of revenue when related uncertainties become resolved. Sales-based milestones and royalties are not included in the transaction price until the sales occur because the underlying value relates to the license and the license is the predominant feature in the Viatris Collaboration. As of June 30, 2021, the transaction price allocated to the unfulfilled performance obligations was $101.3 million.
We recognize revenue and estimate deferred revenue based on the cost of development service incurred over the total estimated cost of development service to be provided for the development period. For revenue recognition purposes, the development period is estimated to continue through 2025. It is possible that this period will change and is assessed at each reporting date.
For the three and six months ended June 30, 2021, we recognized revenue related to development services of $1.4 million and $2.9 million, respectively. For the three and six months ended June 30, 2020, we recognized revenue related to development services of less than $0.3 million and $0.3 million, respectively.
Fosun License Agreement
Agreement Terms
In December 2018, we entered into a license agreement (the “Fosun License Agreement”) with Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd., a wholly-owned subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd (“Fosun”), whereby we granted Fosun the exclusive rights to develop and commercialize our proprietary DaxibotulinumtoxinA for Injection in mainland China, Hong Kong and Macau (the “Fosun Territory”) and certain sublicense rights.
Fosun has paid us non-refundable upfront and other payments totaling $31 million before foreign withholding taxes. We are also eligible to receive (i) additional remaining contingent payments of up to $229.5 million upon the achievement of certain milestones based on (a) the approval of BLAs for certain aesthetic and therapeutic indications and (b) first calendar year net sales, and (ii) tiered royalty payments in low double digits to high teen percentages on annual net sales. The royalty percentages are subject to reduction in the event that (i) we do not have any valid and unexpired patent claims that cover the
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
product in the Fosun Territory, (ii) biosimilars of the product are sold in the Fosun Territory or (iii) Fosun needs to pay compensation to third parties to either avoid patent infringement or market the product in the Fosun Territory.
Revenue Recognition
We estimated the transaction price for the Fosun License Agreement using the most likely amount method. We evaluated all of the variable payments to be received during the duration of the contract, which included payments from specified milestones, royalties, and estimated supplies to be delivered. We will re-evaluate the transaction price at each reporting period and upon a change in circumstances. As of June 30, 2021, the transaction price allocated to unfulfilled performance obligation was $31 million.
For the three and six months ended June 30, 2021 and 2020, no revenue was recognized from the Fosun License Agreement.
Contract liabilities from contracts with our collaboration revenue customers are as follows:
| | | | | | | | | | | |
| June 30, | | December 31, |
(in thousands) | 2021 | | 2020 |
Contract liabilities: | | | |
Deferred revenue, current - Viatris | $ | 8,317 | | | $ | 7,851 | |
| | | |
Total contract liabilities, current | $ | 8,317 | | | $ | 7,851 | |
| | | |
Deferred revenue, non-current - Viatris | $ | 44,118 | | | $ | 46,299 | |
Deferred revenue, non-current - Fosun | 30,995 | | | 30,995 | |
Total contract liabilities, non-current | $ | 75,113 | | | $ | 77,294 | |
Changes in our contract liabilities from contracts with our collaboration revenue customers for the six months ended June 30, 2021 are as follows:
| | | | | |
| (in thousands) |
Balance on January 1, 2021 | $ | 85,145 | |
Revenue recognized | (2,905) | |
Billings and adjustments, net | 1,190 | |
Balance on June 30, 2021 | $ | 83,430 | |
Service Revenue
Following the HintMD Acquisition in July 2020, we began to offer customer payment processing and certain value-added services through the HintMD Platform to aesthetic practices. We have also launched the beta testing phase of the Next-generation Platform as PayFac, which has not generated material revenue to date. Generally, revenue related to the payment
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Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
processing service is recognized at a point in time, whereas revenue related to the value-added services is recognized over time.
Receivables and contract assets from contracts with our service revenue customers are as follows:
| | | | | | | | | | | |
| June 30, | | December 31, |
(in thousands) | 2021 | | 2020 |
Accounts receivables, net | $ | 99 | | | $ | 142 | |
Contract assets: | | | |
Contract assets, current | $ | 125 | | | $ | 30 | |
Contract assets, non-current | 324 | | | 85 | |
Total contract assets | $ | 449 | | | $ | 115 | |
3. Cash Equivalents and Short-Term Investments
The following table is a summary our cash equivalents and short-term investments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| | | Unrealized | | | | | | |
in thousands | Cost | | Loss | | Fair Value | | Cost | | Fair Value |
Money market funds | $ | 162,052 | | | $ | — | | | $ | 162,052 | | | $ | 267,130 | | | $ | 267,130 | |
Commercial paper | 146,859 | | | — | | | 146,859 | | | 113,446 | | | 113,446 | |
Corporate bonds | 21,805 | | | (2) | | | 21,803 | | | — | | | — | |
Total cash equivalents and available-for-sale securities | $ | 330,716 | | | $ | (2) | | | $ | 330,714 | | | $ | 380,576 | | | $ | 380,576 | |
| | | | | | | | | |
Classified as: | | | | | | | | | |
Cash equivalents | | | | | $ | 162,052 | | | | | $ | 277,629 | |
Short-term investments | | | | | 168,662 | | | | | 102,947 | |
Total cash equivalents and available-for-sale securities | | | | | $ | 330,714 | | | | | $ | 380,576 | |
As of June 30, 2021 and December 31, 2020, we have no other-than-temporary impairments on our available-for-sale securities and the contractual maturities of the available-for-sale securities are less than one-year.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
4. Intangible Assets, net
The following table sets forth the intangible assets and the remaining useful lives for the intangible assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
(in thousands, except for in years) | | Weighted-Average Remaining Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Remaining Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Distribution rights | | 2.9 | | $ | 32,334 | | | $ | (8,757) | | | $ | 23,577 | | | 3.4 | | $ | 32,334 | | | $ | (4,715) | | | $ | 27,619 | |
Developed technology | | 5.4 | | 35,800 | | | (3,670) | | | 32,130 | | | 5.6 | | 19,600 | | | (1,362) | | | 18,238 | |
In-process research and development (1) | | N/A | | — | | | — | | | — | | | N/A | | 16,200 | | | — | | | 16,200 | |
Customer relationships | | 3.1 | | 10,300 | | | (2,360) | | | 7,940 | | | 3.6 | | 10,300 | | | (1,072) | | | 9,228 | |
Tradename | | 0.1 | | 100 | | | (92) | | | 8 | | | 0.6 | | 100 | | | (42) | | | 58 | |
Total intangible assets | | | | $ | 78,534 | | | $ | (14,879) | | | $ | 63,655 | | | | | $ | 78,534 | | | $ | (7,191) | | | $ | 71,343 | |
(1)In-process research and development relates to the research and development of payment facilitator technology to facilitate the processing of customer payments. During the quarter ended June 30, 2021, the in-process research and development assets were placed into service and reclassified as developed technology.
Aggregate amortization expense for the intangible assets presented in the condensed consolidated statements of operations and comprehensive loss are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | | 2021 | | 2020 | | 2021 | | 2020 |
Amortization (1) | | $ | 3,512 | | | $ | 674 | | | $ | 6,350 | | | $ | 674 | |
Selling, general and administrative | | 669 | | | — | | | 1,337 | | | — | |
Total amortization expense | | $ | 4,181 | | | $ | 674 | | | $ | 7,687 | | | $ | 674 | |
(1)The amortization expense related to Distribution rights and Developed technology was recorded to “amortization” in the condensed consolidated statement of operations and comprehensive loss.
Based on the amount of intangible assets subject to amortization as of June 30, 2021, the estimated amortization expense for each of the next five fiscal years and thereafter was as follows:
| | | | | |
Year Ending December 31, | (in thousands) |
2021 remaining six months | $ | 8,320 | |
2022 | 16,625 | |
2023 | 16,625 | |
2024 | 10,837 | |
2025 | 5,967 | |
2026 and thereafter | 5,281 | |
Total | |