Revance History:
founded 1999
Friends and family and VC funding from 1999 to 2014: $250M (My estimate based on SEC filings prior to 2014)
First S1 in early 2014: $80M raise followed by 2nd in 2014 to develop transdermal NT for topical botox competitor.
Stock hit $40 per share soon after 2014 IPO then transdermal drug candidate failed and Revance moved quickly to develop injectable drug candidate that they felt had significantly longer duration because of proprietary peptide technology. Allergan kicked tires but passed on investment around this time.
Continued trials of Daxi until first aesthetic indication approval in Sept 2022 after Covid delays and CRL in fall 2021. Followed by first therapeutic approval in CD August 2023.
Long time CEO, Browne, was pushed out for HR issues and board member Mark Foley took over CEO role in 2019. Mark Foley's big claim to fame was taking Zeltiq, the maker of Coolsculpting, from the brink of BK and a valuation below $150M to a sale to Allergan in 4 years time for $2.5B = 1600% gain.
Multiple rounds of share sales over the past 9 years to raise over $1B since it was founded in 1999. Banks have made a fortune from Revance's capital raises over the last 9 years: Cowen, GS, Piper, Sun Trust, William Blair, Barclay, Cantor, Guggenheim.
Financial Metrics:
Market cap today at $5.80/share price: $510M
Cash end of Q3: $300M
Cash burn Q3: $70M
Estimated Cash year end 2023: $238M (my estimate)
Total Debt: $438M
1) 2027 Convertible Notes: $287.5M (1.75%). Revance purchased capped Call for $29M on this debt to hedge against dilution up to $49 per share.
2) Note Purchase Agreements: $150M drawn so far at 8.5% interest: Athyrium. $150M still available by March 31st, 2024. All covenants appear to be ok.
Quarterly Opex with R&D: $100M
GMs: 65%, but will gradually rise toward 75 to 80% next 24 months as Daxi production ramps toward PCI manuf facility in NY by 2025. Daxi margin goal at full ramp by 2027 is mid to high 80s.
Therefore: needs to get to $150M in quarterly revenue to get to break even at 65% GMs. RHA: $32M, Daxi Aesthetic: $22M this past quarter. My target by Q2 2024: RHA: $40M, Daxi Cosmetic: $45M, Daxi therapeutic: $10M = $95M revenue and cash burn of $38M and cash remaining of $140M assuming they don't tap remaining $150M of Athyrium credit facility.
Current annual Revenue run rate: $225M. Goldman 2024 revenue estimate recently cut from $380M to $335M. My target is $370M.
Stock has topped near $40s several times over the last 9 years and bottomed around $12 several times. Share price has never dropped below $10 prior to its recent drop. May 2023 share price topped at $37.70.
In summary: 24 years of human work/effort to develop a novel drug, with lots of R&D, and over $1B invested and spent to get here and just now ramping up manuf/fill/finish capacity, 150 person sales force hired and trained by May 2023. Full Teoxane license with $140M annual sales of RHA past 12 months at 65 to 70% GMs. No safety issues and sales of Daxi just started in Q2 2023 and now starting to ramp as pricing model solidified, messaging getting optimized, injection technique getting optimized, and as word of mouth starts to take hold and as docs like me see client after client coming back super happy after their first Daxi treatment and not wanting to go back to Botox.
No approval risk. Sufficient cash and credit facility remaining to get us to cash flow break even by 2025. Interest expense on debt reasonable.
And with an Enterprise Value of $648M, you are now buying shares at 50% below invested capital on a real basis while saving 10 years of time/human capital, and while fully de risked and we now know the product works and is superior.
Stated otherwise: for a new competitor to come along to compete against Revance, they will have to spend over $1.5B in drug development costs and need 8 to 10 years to get to where Revance is today and you can simply buy Revance today at less than half that price fully de risked.
Damn!!
Bullish
AI
