Revance Therapeutics Inc (NASDAQ:RVNC) is on the cusp launching a real revenue-generator: a Botox competitor. RT002 (DaxibotulinumtoxinA) — which will first be approved to treat frown lines — may very well shake up the industry, propelling revenues higher for Revance. Revance calls RT022 “the first major innovation to hit the neuromodulator market in 30 years.”
And botulinum toxin (commonly known as botox) isn’t just used for wrinkles. There are currently more than 100 therapeutic uses reimbursed by healthcare providers, representing a $3.4 billion market globally.
The market clearly has high expectations for the company — it is up 65% from yearly lows. Even though shares have pulled back slightly in 2018, investors should pay attention to the product launch.
RVNC Prepares to Launch a Botox Competitor
RT002 has a key advantage over the alternatives already out on the market: each treatment works for six months.
After launch, if demand starts off strong and the company has no problem fulfilling orders, Revance will reward patient investors. The initial launch and the market’s response is critical for achieving early success, however.
Revance needs to establish its premium branding and resonate with the cosmetic and physician community. The neuromodulator market is big — worth $4 billion for the year and $7 billion by 2024. Yet if the initial uptake falls short, Allergan plc (NYSE:AGN) could re-organize its advertising and operational efforts to weaken Revance. But Allergan has its own competitors — none of which share RT002’s advantages.
Furthermore, Revance is not making the mistake that other biotech pharmaceuticals fell for. Rather than trying to develop too many products for its size on its own, it is working with Mylan N.V. (NASDAQ:MYL) to develop and manufacture a more affordable biosimilar to Botox. Revance gets $25 million upfront, followed by $100 million maximum if it meets milestones in clinical and regulatory tasks.
This allows Revance to focus its own resourcs on the distribution of the long-acting RT002.
Other Uses
Botulinim toxin can treat a wide range of disorders, including cervical dystonia, migraines, hyperhidrosis and number of neurological disorders.
Revance is currently studying the efficacy of RT002 for treating cervical dystonia. It will undergo safety testing in a Phase 3 trial in the U.S. in 2018.
In the first quarter of 2018, the company completed a Phase 2A trial studying RT002 for the treatment of pain in patients suffering from plantar fasciitis.
The company is investigating other apathetic indications for RT002, but that research is still in preclinical stages.
RVNC Has Strong Balance Sheet
Revance ended the fourth quarter with $283 million in cash. In that same period, it burned through $30 million. When the financing is considered, the company should have enough cash to avoid a capital raise in 2018.
At an upcoming investor day meeting on April 19, the company may give more details on its healthy balance sheet and operating expense forecasts for 2018.
Revance’s Strong Outlook
The lack of innovation for Botox should give Revance’s formulation a positive tailwind. And since the market has not yet seen a version of Botox that lasts as long as Revance’s version, chances are very good that the company will take market share away from its competitors.
This, coupled with Mylan’s expertise in the field will help Revance meet, if not exceed, revenue expectations for 2018.
Even without the other market opportunities the company is testings the stock does not look expensive. Right now, analysts expect a loss per share of $3.56 in 2018 and $4.05 in 2019. The negative numbers are due to the high R&D costs RVNC faces in the near-term along with conservative sales expectations for RT002. As I said, I expect sales will far exceed these expectations.
The Bottom Line for RVNC Stock
Analysts have a price targets ranging from $30+ all the way up to $60, set by Goldman Sachs on March 5. On average, analysts have a $49 price target on the stock.
A doubling of RVNC is unlikely in the near term — especially as markets overall underperform. Still, Revance is well-positioned to impress investors with its initial sales. If that happens, then $60 a share becomes very possible.
[Editor’s Note: This article originally stated that Mylan and Revance had partnered to develop and distribute RT002. The companies have partnered on a fast-acting, similar drug not yet named.]
As of this writing, Chris Lau held no position in the aforementioned securities.
