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 March 31, 2023
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
| (Exact name of registrant as specified in its charter) | ||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(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 | ||||||
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.
| ☒ | 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 April 28, 2023: 84,040,352
Table of Contents
| Page | ||||||||
PART I. FINANCIAL INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
PART II. OTHER INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
DEFINED TERMS
Unless expressly indicated or the context requires otherwise, the terms “Revance,” “Company,” “we,” “us,” and “our,” in this Quarterly Report on Form 10-Q (this “Report”) refer to Revance Therapeutics, Inc., a Delaware corporation, and, where appropriate, its wholly-owned subsidiaries. We also have used several other terms in this Report, the consolidated financial statements and accompanying notes included herein, most of which are explained or defined below.
“2014 EIP” means the Company’s 2014 Equity Incentive Plan.
“2014 ESPP” means the Company’s 2014 Employee Stock Purchase Plan.
“2014 IN” means the Company’s 2014 Inducement Plan.
“2020 ATM Agreement” means the Sales Agreement by and between Revance and Cowen, dated November 2020, and terminated on May 10, 2022.
“2022 ATM Agreement” means the Sales Agreement by and between Revance and Cowen, dated May 10, 2022.
“2027 Notes” means Revance’s 1.75% Convertible Senior Notes due 2027.
“ABPS” means Ajinomoto Althaea, Inc., doing business as Ajinomoto Bio-Pharma Services, a contract development and manufacturing organization.
“ABPS Services Agreement” means the Technology Transfer, Validation and Commercial Fill/Finish Services Agreement by and between the Company and ABPS, dated March 14, 2017, as amended on December 18, 2020.
“Adjusted Three-Month LIBOR” has the meaning set forth in the Note Purchase Agreement.
“Allergan” means Allergan, Inc.
“Amortization Trigger” has the meaning set forth in the Note Purchase Agreement.
“ASC” means the Accounting Standards Codification as set forth by the Financial Accounting Standards Board.
“Athyrium” means Athyrium Buffalo LP.
“ATM” means at-the-market offering program.
“BLA” means a biologics license application.
“BofA” means Bank of America, N.A.
“BTRX” means Botulinum Toxin Research Associates, Inc.
“CODM” means the chief operating decision maker.
“Consolidated Teoxane Distribution Net Product Sales” has the meaning set forth in the Note Purchase Agreement.
“consumers” means the patients of our aesthetic practice customers.
“Cowen” means Cowen and Company, LLC.
“CROs” means contract research organizations.
“DAXXIFY®” means (DaxibotulinumtoxinA-lanm) for injection.
“DAXXIFY® GL Approval” means the FDA approval in September 2022, of DAXXIFY® in the United States for the temporary improvement of moderate to severe glabellar lines in adults.
“DAXXIFY® GL Approval PSUs” means performance stock units that vested on the 6-month anniversary of the date of DAXXIFY® GL Approval.
i
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Expansion Premises” means the additional 30,591 square feet added to the initial premises pursuant to the Nashville Lease.
“FDA” means the United States Food and Drug Administration.
“Fintech Platform” means OPUL® and the HintMD Platform.
“First Citizens” means First Citizens BancShares Inc., and its assigns.
“First Tranche” means the Notes Payable issued to the Purchasers in an aggregate principal amount of $100.0 million on March 18, 2022.
“Fiserv” means First Data Merchant Services LLC.
“Fosun” means Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd., a wholly-owned subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd.
“Fosun License Agreement” means the License Agreement by and between Revance and Fosun, dated December 4, 2018, as amended on February 15, 2020.
“Fosun Territory” means mainland China, Hong Kong and Macau.
“FY2022 10-K” means our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 28, 2023.
“GPV” means gross-processing volume of the Fintech Platform or the total dollar amount of all transactions processed in the period through the Fintech Platform, net of refunds.
“HintMD” means Hint, Inc., our wholly owned subsidiary.
“HintMD Acquisition” means Revance’s acquisition of HintMD, completed on June 23, 2020.
“HintMD Plan” means the Hint, Inc. 2017 Equity Incentive Plan.
“HintMD Platform” means the legacy HintMD fintech platform.
“JPM” means JPMorgan Chase & Co., and its assigns.
“Indenture” means the indenture, by and between Revance and U.S. Bank National Association, as trustee, dated February 14, 2020.
“injector” means a professional licensed to inject our Products, including physicians.
“Maturity Date” means September 18, 2026, the maturity date of the Notes Payable set forth in the Note Purchase Agreement.
“Nashville Lease” means the office lease by and between Revance and 1222 Demonbreun, LP, dated November 19, 2020, as amended on January 4, 2021, July 1, 2021 and January 13, 2023.
“neuromodulator” means injectable botulinum toxins and neurotoxins.
“Note Purchase Agreement” means the note purchase agreement by and between Revance; Athyrium, as administrative agent; the Purchasers, including Athyrium; and HintMD, as a guarantor, dated March 18, 2022.
“Notes Payable” means notes payable by Revance pursuant to the Note Purchase Agreement.
“NPA Effective Date” means the effective date of the Note Purchase Agreement, March 18, 2022.
“onabotulinumtoxinA biosimilar” means a biosimilar to the branded biologic product (onabotulinumtoxinA) marketed as BOTOX®.
ii
“option counterparties” means capped call transactions with a purchasers and another financial institution.
“OPUL®” means the OPUL® Relational Commerce Platform.
“PAS” means prior approval supplement.
“PayFac” means payment facilitator.
“Payment Facilitator Agreement” means the payment solutions agreement by and among Revance, Fiserv and Pathward, N.A., dated March 4, 2019, as amended on October 31, 2022.
“PCI” means PCI Pharma Services, formerly known as Lyophilization Services of New England, Inc., which was acquired by PCI in December 2021.
“PCI Supply Agreement” means the Commercial Supply Agreement by and between Revance and PCI, dated April 6, 2021.
“PDUFA” means Prescription Drug User Fee Act.
“POS” means point of sale.
“PrevU” means the early experience program for DAXXIFY®.
“Products” means DAXXIFY® and the RHA Collection® of dermal fillers.
“Product Segment” means the business that includes the research, development and commercialization of our Products and product candidates.
“PSA” means a performance stock award.
“PSU” means a performance stock unit.
“Purchasers” means Athyrium and its successors and assigns.
“RHA® Collection of dermal fillers” means RHA® 2, RHA® 3 and RHA® 4, which have been approved by the FDA for the correction of moderate to severe dynamic facial wrinkles and folds; and RHA® Redensity.
“RHA® Pipeline Products” means future hyaluronic acid filler advancements and products by Teoxane.
“RHA® Redensity” means a dermal filler, which has been approved by the FDA for the treatment of moderate to severe dynamic perioral rhytids (lip lines).
“RSAs” means restricted stock awards.
“RSUs” means restricted stock units.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Second Expansion Premises” means the additional 17,248 square feet added to the current premises pursuant to the Nashville Lease.
“Second Tranche” means $100.0 million in Notes Payable that remains available to Revance until September 18, 2023, subject to the satisfaction of certain conditions set forth in the Note Purchase Agreement.
“Services” means the Fintech Platform business.
“Service Segment” means the business that includes the development and commercialization of the Fintech Platform.
“SVB” means Silicon Valley Bank, N.A.
iii
“Third Tranche” means the uncommitted tranche of additional Notes Payable in an aggregate amount of up to $100.0 million, available until March 31, 2024, subject to the satisfaction of certain conditions set forth in the Note Purchase Agreement.
“Teoxane” means Teoxane SA.
“Teoxane Agreement” means the exclusive distribution agreement by and between Revance and Teoxane, dated January 10, 2020, as amended on September 30, 2020, December 22, 2020 and December 22, 2022.
“U.S. GAAP” means U.S. generally accepted accounting principles.
“Viatris” means Viatris Inc., formerly known as Mylan Ireland Ltd.
“Viatris Agreement” means the Collaboration and License Agreement by Revance and Viatris, dated February 28, 2018, as amended on August 22, 2019.
“Viatris Territory” means world-wide (excluding Japan).
“Zero-cost Inventory” means DAXXIFY® inventory produced prior to the DAXXIFY® GL Approval in early September 2022, for which the related manufacturing costs were incurred and expensed to research and development expense prior to the FDA approval.
Revance®, the Revance logos, DAXXIFY®, OPUL® and other trademarks or service marks of Revance appearing in 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.
iv
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
1
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
| March 31, | December 31, | ||||||||||
| 2023 | 2022 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash, current | |||||||||||
| Short-term investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Finance lease right-of-use asset | |||||||||||
| Restricted cash, non-current | |||||||||||
| Finance lease prepaid expense | |||||||||||
| Other non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accruals and other current liabilities | |||||||||||
| Deferred revenue, current | |||||||||||
| Finance lease liability, current | |||||||||||
| Operating lease liabilities, current | |||||||||||
| Total current liabilities | |||||||||||
| Debt, non-current | |||||||||||
| Deferred revenue, non-current | |||||||||||
| Operating lease liabilities, non-current | |||||||||||
| Other non-current liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||
Preferred stock, par value $ | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenue: | |||||||||||
| Product revenue | $ | $ | |||||||||
| Service revenue | |||||||||||
| Collaboration revenue | |||||||||||
| Total revenue | |||||||||||
| Operating expenses: | |||||||||||
| Cost of product revenue (exclusive of depreciation and amortization) | |||||||||||
| Cost of service revenue (exclusive of amortization) | |||||||||||
| Selling, general and administrative | |||||||||||
| Research and development | |||||||||||
| Depreciation and amortization | |||||||||||
| Total operating expenses | |||||||||||
| Loss from operations | ( | ( | |||||||||
| Interest income | |||||||||||
| Interest expense | ( | ( | |||||||||
| Other expense, net | ( | ( | |||||||||
| Net loss | ( | ( | |||||||||
| Unrealized gain (loss) | ( | ||||||||||
| Comprehensive loss | $ | ( | $ | ( | |||||||
| Basic and diluted net loss | $ | ( | $ | ( | |||||||
| Basic and diluted net loss per share | $ | ( | $ | ( | |||||||
| Basic and diluted weighted-average number of shares used in computing net loss per share | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except share and per share amounts)
(In thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||
| Preferred Stock | $ | $ | |||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Balance — Beginning of period | |||||||||||||||||||||||
| Issuance of common stock related to RSUs and PSUs | — | — | |||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | ||||||||||||||||||||||
| Shares withheld related to net settlement of RSAs | ( | — | ( | — | |||||||||||||||||||
| Cancellation of RSAs, net of issuance | ( | — | ( | — | |||||||||||||||||||
| Issuance of common stock in connection with at-the-market offerings | — | — | |||||||||||||||||||||
| Balance — End of period | |||||||||||||||||||||||
| Additional Paid-In Capital | |||||||||||||||||||||||
| Balance — Beginning of period | — | — | |||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | |||||||||||||||||||||
| Shares withheld related to net settlement of RSAs | — | ( | — | ( | |||||||||||||||||||
| Issuance of common stock related to RSUs and PSUs | — | ( | — | — | |||||||||||||||||||
| Stock-based compensation | — | — | |||||||||||||||||||||
| Issuance of common stock in connection with at-the-market offerings, net of issuance costs | — | — | — | ||||||||||||||||||||
| Other | — | — | |||||||||||||||||||||
| Balance — End of period | — | — | |||||||||||||||||||||
| Other Accumulated Comprehensive Loss | |||||||||||||||||||||||
| Balance — Beginning of period | — | ( | — | ( | |||||||||||||||||||
| Unrealized gain (loss) | — | — | ( | ||||||||||||||||||||
| Balance — End of period | — | ( | — | ( | |||||||||||||||||||
| Accumulated Deficit | |||||||||||||||||||||||
| Balance — Beginning of period | — | ( | — | ( | |||||||||||||||||||
| Net loss | — | ( | — | ( | |||||||||||||||||||
| Balance — End of period | — | ( | — | ( | |||||||||||||||||||
| Total Stockholders’ Equity (Deficit) | $ | ( | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
REVANCE THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Stock-based compensation | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt discount and debt issuance costs | |||||||||||
| Amortization of premium (discount) on investments | ( | ||||||||||
| Other non-cash operating activities | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Lease right-of-use assets | ( | ( | |||||||||
| Other non-current assets | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Accruals and other liabilities | ( | ( | |||||||||
| Deferred revenue | ( | ||||||||||
| Lease liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Proceeds from maturities of investments | |||||||||||
| Purchases of investments | ( | ( | |||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Finance lease prepayments | ( | ||||||||||
| Net cash provided by investing activities | |||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Proceeds from the exercise of stock options | |||||||||||
| Taxes paid related to net settlement of stock awards | ( | ( | |||||||||
| Principal payments on finance lease obligations | ( | ||||||||||
| Other financing activities | |||||||||||
| Proceeds from issuance of notes payable, net of debt discount | |||||||||||
| Proceeds from issuance of common stock in connection with at-the-market offerings, net of commissions | |||||||||||
| Net cash provided by financing activities | |||||||||||
| NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION: | |||||||||||
| Capitalized stock-based compensation | $ | $ | |||||||||
| Accrued debt issuance costs and offering costs | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Company and Summary of Significant Accounting Policies
Overview
Revance is a biotechnology company focused on developing and commercializing innovative aesthetic and therapeutic offerings. Revance’s aesthetics portfolio includes DAXXIFY® (DaxibotulinumtoxinA-lanm) for injection, the RHA® Collection of dermal fillers from Teoxane and OPUL®, a relational commerce platform for aesthetic practices. Revance has also partnered with Viatris to develop an onabotulinumtoxinA biosimilar, which would compete in the existing short-acting neuromodulator marketplace. Revance’s therapeutics pipeline is currently focused on muscle movement disorders, including evaluating DAXXIFY® in two debilitating conditions, cervical dystonia and upper limb spasticity.
Liquidity and Financial Condition
Since our inception, most of our resources have been dedicated to the research, development, manufacturing development, regulatory approval and/or commercialization of our Products and Services. We only began generating revenue from commercial sales in July 2020 when we acquired the HintMD Platform and in August 2020 when we launched the RHA® Collection of dermal fillers. Although we received DAXXIFY® GL Approval, we expect to continue to incur losses for the foreseeable future. For the three months ended March 31, 2023, we had a net loss of $59.8 million. As of March 31, 2023, we had a working capital surplus of $245.0 million and an accumulated deficit of $1.8 billion. In recent years, we have funded our operations primarily through the sale of common stock, convertible senior notes, sales of Products, proceeds from notes issued pursuant to the Note Purchase Agreement, and payments received from collaboration arrangements. As of March 31, 2023, we had capital resources of $273.9 million consisting of cash, cash equivalents, and short-term investments. Since the DAXXIFY® GL Approval, we are eligible to draw on the Second Tranche of $100.0 million in full under the Note Purchase Agreement provided certain conditions are met. We may also sell up to $150.0 million of our common stock under the 2022 ATM Agreement. We believe that our existing capital resources along with our ability to draw on the Second Tranche will be sufficient to fund the operating plan through at least the next 12 months following the issuance of the condensed consolidated financial statements.
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, 2022 was derived from audited consolidated financial statements, but does not include all disclosures required by 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, 2022, or any other future period. Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements contained in our FY2022 10-K.
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.
6
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Use of Estimates & Risks and Uncertainties
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 in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, the incremental borrowing rate used to measure operating lease and finance lease liabilities, the recoverability of goodwill and long-lived assets, useful lives associated with property and equipment and intangible assets, the 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 for clinical trial costs, valuation and assumptions underlying stock-based compensation and other equity instruments, and income taxes.
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.
Significant Accounting Policies
There have been no material changes to our significant accounting policies from our FY2022 10-K.
Recent Accounting Pronouncements
The recent accounting pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our present or future financial statements.
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 12). The following table presents our revenue disaggregated by timing of transfer of goods or service:
| Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||
| Transferred | Transferred | ||||||||||||||||||||||||||||||||||
| (in thousands) | at a point in time | over time | Total | at a point in time | over time | Total | |||||||||||||||||||||||||||||
| Product revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Service revenue | |||||||||||||||||||||||||||||||||||
| Collaboration revenue | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
7
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Product Revenue
Our product revenue breakdown is summarized below:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Product: | |||||||||||
RHA® Collection of dermal fillers | $ | $ | |||||||||
DAXXIFY® | |||||||||||
| Total product revenue | $ | $ | |||||||||
Receivables and contract liabilities from contracts with our product customers are as follows:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Receivables: | |||||||||||
| Accounts receivable, net | $ | $ | |||||||||
| Total accounts receivable, net | $ | $ | |||||||||
| Contract liabilities: | |||||||||||
| Deferred revenue, current | $ | $ | |||||||||
| Total contract liabilities | $ | $ | |||||||||
Service Revenue
We offer customer payment processing and certain value-added services to aesthetic practices through the Fintech Platform. Generally, revenue related to the HintMD Platform payment processing service is recognized at a point in time and revenue related to the OPUL® payment processing service is recognized over time. For the Fintech Platform, revenue related to the value-added services component is recognized over time.
Accounts receivable and contract liabilities from contracts with our service customers are as follows:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Accounts receivable: | |||||||||||
| Accounts receivable, net | $ | $ | |||||||||
| Total accounts receivable, net | $ | $ | |||||||||
Collaboration Revenue
Viatris Agreement
Agreement Terms
We entered into the Viatris Agreement in February 2018, pursuant to which we are collaborating with Viatris exclusively in the Viatris Territory, to develop, manufacture, and commercialize an onabotulinumtoxinA biosimilar.
Viatris has paid us an aggregate of $60 million in non-refundable upfront and milestone fees as of March 31, 2023, and the agreement provides for additional remaining contingent payments of up to $70 million in the aggregate, upon the
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REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
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. In addition, Viatris is required to pay us low to mid-double digit royalties on any sales of the biosimilar in the U.S., mid-double digit royalties on any sales in Europe, and high single digit royalties on any sales in other ex-U.S. Viatris territories. However, we have agreed to waive royalties for U.S. sales, up to a maximum of $50 million in annual sales, during the first approximately four years after commercialization to defray launch costs.
Revenue Recognition
We estimated the transaction price for the Viatris Agreement using the most likely amount method within the scope of ASC 606. 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 Agreement 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. At the end of each reporting period, we re-evaluate the probability of achievement of each such milestone and any related constraint, and if necessary, adjusts our estimates of the overall transaction price. 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 Agreement. As of March 31, 2023, the transaction price allocated to the unfulfilled performance obligations was $53.3 million.
We recognize revenue and estimate deferred revenue based on the cost of development service incurred over the total estimated cost of development services to be provided for the development period. For revenue recognition purposes, the development period is estimated to be completed in 2026. It is possible that this period will change and is assessed at each reporting date. ASC Topic 606, Revenue from Contracts with Customers (ASC 606) requires that an entity include a constraint on the amount of variable consideration included in the transaction price. Variable consideration is considered “constrained” if there is a potential for significant reversal of cumulative revenue recognized. As part of the constraint evaluation, we considered numerous factors, including a potential shift in certain responsibilities between the two parties which would result in changes to the net cost sharing payments, for which outcomes are difficult to predict as of the date of this Report. As a result, no collaboration revenue is recognized from the biosimilar program for the three months ended March 31, 2023. We will continue to evaluate the variable transaction price and related revenue recognition in each reporting period and as the above uncertainties are resolved or other changes in circumstances occur. For the three months ended March 31, 2022, we recognized $3.6 million of revenue related to development services.
Fosun License Agreement
Agreement Terms
In December 2018, we entered into the Fosun License Agreement with Fosun, whereby we granted Fosun the exclusive rights to develop and commercialize DaxibotulinumtoxinA for Injection in the Fosun Territory and certain sublicense rights.
As of March 31, 2023, Fosun has paid us non-refundable upfront and other payments totaling $38.0 million before foreign withholding taxes. We are also eligible to receive (i) additional remaining contingent payments of up to $222.5 million upon the achievement of certain milestones 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 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.
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REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
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 March 31, 2023, the transaction price allocated to unfulfilled performance obligation is $38.0 million.
For the three months ended March 31, 2023, we recognized revenue of $0.1 million related to the Fosun License Agreement. For the three months ended March 31, 2022, no revenue was recognized from the Fosun License Agreement.
Receivables and contract liabilities from contracts with our collaboration customers are as follows:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Receivables: | |||||||||||
| Accounts receivable, net — Fosun | $ | $ | |||||||||
| Total accounts receivable, net | $ | $ | |||||||||
| Contract liabilities: | |||||||||||
| Deferred revenue, current — Viatris | $ | $ | |||||||||
| Total contract liabilities, current | $ | $ | |||||||||
| Deferred revenue, non-current — Viatris | $ | $ | |||||||||
| Deferred revenue, non-current — Fosun | |||||||||||
| Total contract liabilities, non-current | $ | $ | |||||||||
Changes in our contract liabilities from contracts with our collaboration revenue customers for the three months ended March 31, 2023 are as follows:
| (in thousands) | |||||
| Balance on December 31, 2022 | $ | ||||
| Revenue recognized | ( | ||||
| Billings and adjustments, net | |||||
| Balance on March 31, 2023 | $ | ||||
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REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
3. Cash Equivalents and Short-Term Investments
The following table is a summary of our cash equivalents and short-term investments:
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| in thousands | Cost | Losses | Fair Value | Cost | Losses | Fair Value | |||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||
| U.S. treasury securities | ( | ( | |||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | |||||||||||||||||||||||||||||||||
| U.S. government agency obligations | |||||||||||||||||||||||||||||||||||
| Total cash equivalents and available-for-sale securities | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Classified as: | |||||||||||||||||||||||||||||||||||
| Cash equivalents | $ | $ | |||||||||||||||||||||||||||||||||
| Short-term investments | |||||||||||||||||||||||||||||||||||
| Total cash equivalents and available-for-sale securities | $ | $ | |||||||||||||||||||||||||||||||||
As of March 31, 2023 and December 31, 2022, 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.
4. Intangible Assets, net
The following table sets forth the major categories of intangible assets and the weighted-average remaining useful lives for those assets that are not already fully amortized:
| March 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except for in years) | Weighted Average Remaining Useful Lives (in years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Remaining Useful Lives (in years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||||||||||||||
| Distribution rights | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Acquired developed technology | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Internally developed technology | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other software | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Development in progress | N/A | — | N/A | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
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REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Based on the amount of intangible assets as of March 31, 2023, the expected amortization expense for each of the next five fiscal years was as follows:
| Year Ending December 31, | (in thousands) | ||||
| 2023 remaining nine months | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 and thereafter | |||||
| Total | $ | ||||
5. Inventories
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
6. Balance Sheet Components
Accruals and other current liabilities
Accruals and other current liabilities consists of the following:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Accruals related to: | |||||||||||
| Compensation | $ | $ | |||||||||
| Selling, general and administrative | |||||||||||
| Research and development | |||||||||||
| Inventories | |||||||||||
| Clinical trials | |||||||||||
| Interest expense | |||||||||||
| Other current liabilities | |||||||||||
| Total accruals and other current liabilities | $ | $ | |||||||||
12
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Property and equipment, net
Property and equipment, net consists of the following:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Manufacturing and other equipment | $ | $ | |||||||||
| Leasehold improvements | |||||||||||
| Computer equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Construction in progress | |||||||||||
| Total property and equipment, gross | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
7. Leases
Operating Leases
Our operating leases primarily consist of non-cancellable facilities leases for research, manufacturing, and administrative functions. Our non-cancellable facilities operating leases have original lease periods expiring between 2027 and 2034, and include one or more options to renew for seven years to fourteen years . The monthly payments for our operating leases escalate over the remaining lease term. Our lease contracts do not contain termination options, residual value guarantees or restrictive covenants.
Finance Lease
Our finance lease represents a dedicated fill-and-finish line for the manufacturing of DAXXIFY®. In March 2017, we entered into the ABPS Services Agreement. The ABPS Services Agreement contains a lease, which commenced in January 2022, related to a dedicated fill-and-finish line for the manufacturing of DAXXIFY® because it has an identified asset that is physically distinct for which we have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease provides us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity of the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line through our purchase orders to ABPS. Each party has the right to terminate the ABPS Services Agreement without cause, with an 18-month written notice to the other party. The lease is classified as a finance lease in the condensed consolidated balance sheets.
Under the ABPS Services Agreement, until May 2022, we were subject to minimum purchase obligations of up to $30.0 30.0
In January 2023, we entered into a second amendment to the above mentioned statement of work under the ABPS Services Agreement. The second amendment established a minimum purchase obligation for the year ending December 31, 2023 of $23.9 million. The minimum purchase obligation for the year ending December 31, 2023 was determined to be fixed lease payments and such payments will increase the present value calculation in arriving at the remaining finance lease liabilities with a corresponding adjustment to the related finance lease right-of-use asset.
13
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
The operating and finance lease costs are summarized as follows:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Finance lease: | |||||||||||
| Amortization of finance lease right-of-use asset | $ | $ | |||||||||
| Interest on finance lease liability | |||||||||||
Variable lease cost (1) | |||||||||||
| Total finance lease costs | |||||||||||
| Operating leases: | |||||||||||
| Operating lease cost | |||||||||||
Variable lease cost (2) | |||||||||||
| Total operating lease costs | |||||||||||
| Total lease cost | $ | $ | |||||||||
(1)Variable finance lease cost includes validation, qualification, materials, and other related services which are not included in the lease liabilities and are expensed as incurred.
(2)Variable operating lease cost includes management fees, common area maintenance, property taxes, insurance and parking fees, which are not included in the lease liabilities and are expensed as incurred.
As of March 31, 2023, maturities of our lease liabilities are as follows:
| (in thousands) | Finance Lease | Operating Leases | Total | ||||||||||||||
| Year Ending December 31, | |||||||||||||||||
| 2023 remaining nine months | $ | $ | $ | ||||||||||||||
| 2024 | |||||||||||||||||
| 2025 | |||||||||||||||||
| 2026 | |||||||||||||||||
| 2027 | |||||||||||||||||
| 2028 and thereafter | |||||||||||||||||
| Total lease payments | |||||||||||||||||
| Less imputed interest | ( | ( | ( | ||||||||||||||
| Present value of lease payments | $ | $ | $ | ||||||||||||||
Our lease contracts do not provide readily determinable implicit rates, as such, we used the estimated incremental borrowing rate based on the information available at the adoption, commencement, or remeasurement date. As of March 31, 2023, remaining lease terms and discount rates are as follows:
| Finance Leases | Operating Leases | ||||||||||
| Weighted-average remaining lease term (years) | |||||||||||
| Weighted-average discount rate | % | % | |||||||||
14
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Supplemental cash flow information related to the leases was as follows:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from finance lease | $ | $ | |||||||||
| Financing cash flows from finance lease | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for lease liabilities | |||||||||||
| Finance lease | $ | $ | |||||||||
| Principal payments in accounts payable from finance lease | $ | $ | |||||||||
Leases Not Yet Commenced
PCI Supply Agreement
In April 2021, we entered into the PCI Supply Agreement pursuant to which PCI would serve as a non-exclusive manufacturer and supplier of DAXXIFY®. The initial term of the PCI Supply Agreement is dependent upon the date of regulatory submission for the manufacturing of DAXXIFY® and may be terminated by either party in accordance with the terms of the PCI Supply Agreement. The term of the PCI Supply Agreement may also be extended for one additional three-year term upon mutual agreement of the parties.
The PCI Supply Agreement contains a lease related to a dedicated fill-and-finish line and closely related assets for the manufacturing of DAXXIFY® because it has identified assets that are physically distinct for which we will have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease will provide us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity implied from the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line.
The embedded lease had not yet commenced as of March 31, 2023. The accounting commencement and recognition of the right-of-use lease assets and lease liabilities related to the embedded lease will take place when we have substantively obtained the right of control. The embedded lease is preliminarily classified as a finance lease.
Pursuant to the PCI Supply Agreement, we are responsible for certain costs associated with the design, equipment procurement and validation, and facilities-related costs, monthly payments and minimum purchase obligations throughout the initial term of the PCI Supply Agreement. As of March 31, 2023, we have made prepayments of $27.5 million to PCI which is recorded within “Finance lease prepaid expense” in the condensed consolidated balance sheets. Based on our best estimate as of March 31, 2023, our remaining minimum commitment under the PCI Supply Agreement will be $10.8 million for 2023, $14.4 million for 2024, $18.3 million for 2025, $25.3 million for 2026, $29.5 million for 2027, and $134.5 million for 2028 and thereafter in aggregate.
Nashville Lease Expansion Premises
In November 2020, we entered into the Nashville Lease, a non-cancelable operating lease for an office space in Nashville, Tennessee. The lease commenced and was recognized on the condensed consolidated balance sheets in June 2021. In July 2021, we entered into the Second Amendment to the Nashville Lease, which provided for the expansion of the initial premises to include the Expansion Premises, an additional 30,591 square feet with an expected term to 2034. The lease accounting commencement date of the Expansion Premises has not occurred and is expected to take place when the office space is made available to us after the completion of certain improvement work, which is currently expected in late 2023 at the earliest. The monthly base rent payments for the lease escalate over the term. The total undiscounted basic rent payments currently determinable for the Expansion Premises are $16 million with an expected term to 2034.
15
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
8. Debt
The following table provides information regarding our debt:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
2027 Notes | $ | $ | |||||||||
| Less: Unamortized debt issuance costs | ( | ( | |||||||||
| Carrying amount of the 2027 Notes | |||||||||||
| Notes Payable | |||||||||||
| Less: Unamortized debt discount | ( | ( | |||||||||
| Less: Unamortized debt issuance costs | ( | ( | |||||||||
| Carrying amount of notes payable | |||||||||||
| Debt, non-current | $ | $ | |||||||||
Interest expense relating to our debt in the condensed consolidated statements of operations and comprehensive loss are summarized as follows:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2023 | 2022 | |||||||||
| Contractual interest expense | $ | $ | |||||||||
| Amortization of debt issuance costs | |||||||||||
| Amortization of debt discount | |||||||||||
| Total interest expense | $ | $ | |||||||||
Convertible Senior Notes
In February 2020, we issued the 2027 Notes, in the aggregate principal amount of $287.5 million pursuant to the Indenture. The 2027 Notes are senior unsecured obligations and bear interest at a rate of 1.75 % per year, payable semiannually in arrears on February 15 and August 15 of each year, began on August 15, 2020. The 2027 Notes will mature on February 15, 2027, unless earlier converted, redeemed or repurchased. In connection with issuing the 2027 Notes, we received $278.3