Evolus Inc

Previous wording

We are a global performance beauty company with a customer-centric approach to delivering breakthrough products in the cash-pay aesthetic market. Our first product, Jeuveau® (prabotulinumtoxinA-xvfs), is currently sold in the United States, Canada and certain European countries. We have commercial launch plans in additional countries where we have regulatory approval that we expect to implement in the next few years. We are also actively pursuing regulatory approval of Evolysse™, a line of hyaluronic acid dermal fillers, and anticipate obtaining regulatory approval of the Evolysse™ line of products in Europe in the second half of 2024 and in the United States beginning in 2025. Regulatory approval has already been received for the Evolysse™ nasolabial fold product in Europe.

Current wording

We are a global performance beauty company with a customer-centric approach to delivering breakthrough products in the cash-pay aesthetic market. Our first product, Jeuveau® (prabotulinumtoxinA-xvfs), is currently sold in the United States, Canada and certain European countries. We have commercial launch plans in additional countries where we have obtained regulatory approval, which we expect to implement in the next few years. We are also actively pursuing regulatory approval of Evolysse™, a line of hyaluronic acid dermal fillers that includes mid face, nasolabial folds, lips and eyes. Regulatory approval has already been received for the Evolysse™ nasolabial fold product in Europe, and we anticipate obtaining regulatory approvals for the remaining three Evolysse™ line of products in Europe in late 2024 and in the United States beginning in 2025. In June 2024, we submitted a premarket approval (“PMA”) application to the U.S. Food and Drug Administration (the “FDA”) for the Evolysse™ Lift and Evolysse™ Smooth dermal filler products for the nasolabial fold.

Previous wording

In March 2024, we completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. We received net proceeds of $46.8 million from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock at the purchase price, which the underwriters exercised in April 2024 with respect to 318,100 of the allotted option shares. The net proceeds to the Company from the sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4.2 million.

Current wording

In March 2024, we completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. We received net proceeds of $46.8 million from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock at the purchase price, which the underwriters exercised in April 2024 with respect to 318,100 of the allotted option shares. The net proceeds to us from the sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4.2 million.

Previous wording

The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruptions, including uncertainty regarding the stability of certain financial institutions, increases in inflation rates, rising interest rates, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. We expect elevated levels of cost inflation to continue, potentially impacting consumer discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation. We cannot reasonably estimate the financial impact of increased inflation on our financial condition, results of operations or cash flows in the future.

Current wording

The global economy, including the financial and credit markets, has recently experienced volatility and disruptions, including increases in inflation rates, rising interest rates, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability. We expect elevated levels of cost inflation to continue, potentially impacting consumer discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation. We cannot reasonably estimate the financial impact of increased inflation on our financial condition, results of operations or cash flows in the future.

Previous wording

Net revenues of Jeuveau® sales increased by $17.6 million, or 42.2%, to $59.3 million for the three months ended March 31, 2024 from $41.7 million for the three months ended March 31, 2023, primarily due to higher sales volumes. Net revenues during the three months ended March 31, 2024 and 2023 consisted of $0.4 million and $0.7 million, respectively, of service revenue from the sale of Jeuveau®through a distribution partner in Canada. We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive medical aesthetic market as well as on regulatory approval for the Evolysse™ dermal filler product line in the United States and Europe.

Current wording

Net revenues of Jeuveau® sales increased by $17.6 million, or 35.7%, to $66.9 million for the three months ended June 30, 2024 from $49.3 million for the three months ended June 30, 2023, primarily due to higher sales volumes. Net revenues during each of the three months ended June 30, 2024 and 2023 consisted of $0.7 million of service revenue from the sale of Jeuveau®through a distribution partner in Canada. We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive medical aesthetic market as well as on regulatory approval for the Evolysse™ dermal filler product line in the United States and Europe by Symatese and subsequent commercial launch of these products.

Previous wording

Product cost of sales, excluding amortization of intangible assets, increased by $6.0 million, or 49.6%, to $18.1 million for the three months ended March 31, 2024 from $12.1 million for the three months ended March 31, 2023, primarily due to higher sales volume. We anticipate that our product cost of sales will fluctuate in line with changes in revenues.

Current wording

Product cost of sales, excluding amortization of intangible assets, increased by $4.4 million, or 29.9%, to $19.1 million for the three months ended June 30, 2024 from $14.7 million for the three months ended June 30, 2023, primarily due to higher sales volume. We anticipate that our product cost of sales will fluctuate in line with changes in revenues.

Previous wording

Our gross profit margin was 68.3% and 69.1% for the three months ended March 31, 2024 and 2023, respectively. Our gross profit margin has been and will continue to be negatively impacted from September 2022 to September 2032 as we pay royalty obligations related to our litigation settlement agreement. See “—Liquidity and Capital Resources—Litigation Settlement” for further information. We also anticipate our gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau® and as we continue to expand internationally.

Current wording

Our gross profit margin was 70.3% and 68.7% for the three months ended June 30, 2024 and 2023, respectively. Our gross profit margin has been and will continue to be negatively impacted from September 2022 to September 2032 as we pay royalty obligations related to our litigation settlement agreement. See “—Liquidity and Capital Resources—Litigation Settlement” for further information. We also anticipate our gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau® and as we continue to expand internationally.

Previous wording

Selling, general and administrative expenses increased by $7.7 million, or 20.6%, to $45.1 million for the three months ended March 31, 2024 from $37.4 million for the three months ended March 31, 2023, primarily resulting from increasing personnel costs related to our commercial activities. Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches.

Current wording

Selling, general and administrative expenses increased by $9.0 million, or 21.8%, to $50.2 million for the three months ended June 30, 2024 from $41.2 million for the three months ended June 30, 2023, primarily resulting from increasing personnel costs related to our commercial activities. Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches.

Previous wording

Research and development expenses increased by $0.7 million to $2.1 million for the three months ended March 31, 2024 from $1.4 million for the three months ended March 31, 2023. The increase was primarily attributable to increasing our clinical operations and research and development expenses related to increased clinical operations and research. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions for our current products.

Current wording

Research and development expenses increased by $1.2 million to $2.4 million for the three months ended June 30, 2024 from $1.2 million for the three months ended June 30, 2023. The increase was primarily attributable to increasing our clinical operations and research and development expenses related to increased clinical operations and research. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions for our current products.

Previous wording

The change in the fair value of the contingent royalty obligation payable to Evolus Founders is recorded in operating expenses in each reporting period. During the three months ended March 31, 2024 and 2023, the revaluation charges of $1.6 million and $1.6 million, respectively, were primarily driven by changes in management assumptions relating to revenue forecasts, the discount rate used and the timing of cash flows.

Current wording

The change in the fair value of the contingent royalty obligation payable to Evolus Founders is recorded in operating expenses in each reporting period. During the three months ended June 30, 2024 and 2023, the revaluation charges of $1.6 million and $1.7 million, respectively, were primarily driven by changes in management assumptions relating to revenue forecasts, the discount rate used and the timing of cash flows.

Previous wording

Non-operating expense, net, increased by $1.5 million, or 55.6%, to $4.2 million for the three months ended March 31, 2024 from $2.7 million for the three months ended March 31, 2023, primarily due to the advancement of the $50.0 million of term loans in 2023 and higher interest expense for our term loans. Interest on our term loans is based on a variable interest rate, which we expect will continue to fluctuate with the market. See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for further information.

Current wording

Non-operating expense, net, increased by $0.7 million, or 23.3%, to $3.7 million for the three months ended June 30, 2024 from $3.0 million for the three months ended June 30, 2023, primarily due to the advancement of the $50.0 million of term loans in 2023 and higher interest expense for our term loans. Interest on our term loans is based on a variable interest rate, which we expect will continue to fluctuate with the market. See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for further information.

Previous wording

As of March 31, 2024 we had cash and cash equivalents of $97.0 million, positive working capital of $103.5 million and stockholders’ equity of $18.4 million.

Current wording

As of June 30, 2024 we had cash and cash equivalents of $93.7 million, positive working capital of $104.0 million and stockholders’ equity of $19.3 million.

Previous wording

We began selling Jeuveau® in May 2019 and have a relatively limited history of generating revenues. Since inception, we have incurred recurring net operating losses and have an accumulated deficit of $572.1 million as of March 31, 2024 as a result of ongoing efforts to develop and commercialize Jeuveau®, including providing selling, general and administrative support for our operations. We had net loss of $13.1 million and $14.8 million for the three months ended March 31, 2024 and 2023, respectively. We had net loss from operations of $8.9 million and $12.0 million for the three months ended March 31, 2024 and 2023, respectively. We used net cash of $10.6 million and $20.6 million in operating activities for the three months ended March 31, 2024 and 2023, respectively. We expect to continue to incur significant expenses for the foreseeable future as we increase marketing efforts for Jeuveau® in the U.S., Europe, and Australia, pursue regulatory approvals in other jurisdictions and ready for commercial launch of the Evolysse™ Lift, Smooth, and Sculpt dermal filler product line.

Current wording

We began selling Jeuveau® in May 2019 and have a relatively limited history of generating revenues. Since inception, we have incurred recurring net operating losses and have an accumulated deficit of $583.4 million as of June 30, 2024 as a result of ongoing efforts to develop and commercialize Jeuveau®, including providing selling, general and administrative support for our operations. We had net loss of $24.5 million and $32.9 million for the six months ended June 30, 2024 and 2023, respectively. We had loss from operations of $16.6 million and $27.2 million for the six months ended June 30, 2024 and 2023, respectively. We used net cash of $17.1 million and $33.9 million in operating activities for the six months ended June 30, 2024 and 2023, respectively. We expect to continue to incur significant expenses for the foreseeable future as we increase marketing efforts for Jeuveau® in the U.S., Europe, and Canada, prepare to commercially launch Jeuveau® in other jurisdictions where we have obtained regulatory approval, including Australia, pursue regulatory approvals in other jurisdictions and prepare to commercially launch Evolysse™ Lift, Smooth, and Sculpt dermal filler product line.

Previous wording

In March 2024, we completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. We received net proceeds of $46.8 million from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock (the “option shares”) at the purchase price, which the underwriters exercised in April 2024 with respect to 318,100 of the allotted option shares. The net proceeds to the Company sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4.2 million.

Current wording

In March 2024, we completed a follow-on offering and issued 3,554,000 shares of its common stock, at a price to the public of $14.07 per share. We received net proceeds of $46.8 million from the offering, after deducting underwriting discounts and commissions and other offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 533,100 additional shares of common stock (the “option shares”) at the purchase price, which the underwriters exercised in April 2024 with respect to 318,100 of the allotted option shares. The net proceeds to us from the sale of the option shares, after deducting the underwriters’ discounts and commissions, was $4.2 million.

Previous wording

As of March 31, 2024, we recorded an aggregate balance of $44.8 million on our balance sheet for the future royalty payment obligation to Evolus Founders.

Current wording

As of June 30, 2024, we recorded an aggregate balance of $44.6 million on our balance sheet for the future royalty payment obligation to Evolus Founders.

Previous wording

In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc. (“Medytox”) in the U.S. International Trade Commission related to Jeuveau® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox which we refer to as the Medytox Settlement Agreement. We refer to the U.S. Settlement Agreement and the ROW Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements. In the first quarter of 2023 we made a final milestone payment of $5.0 million. Going forward, from September 17, 2022 to September 16, 2032, we will pay to Medytox a quarterly, mid-single digit royalty on net sales of Jeuveau®sold in other Evolus territories.

Current wording

In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc. (“Medytox”) in the U.S. International Trade Commission related to Jeuveau® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox which we refer to as the Medytox Settlement Agreement. We refer to the U.S. Settlement Agreement and the ROW Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements. In the first quarter of 2023, we made a final milestone payment of $5.0 million. Going forward, from September 17, 2022 to September 16, 2032, we will pay to Medytox a quarterly, mid-single digit royalty on net sales of Jeuveau®sold in other Evolus territories pursuant to the Medytox Settlement Agreement.

Previous wording

In 2023, we entered into two agreements with Symatese S.A.S. and its affiliates, or Symatese, which granted us exclusive rights to commercialize and distribute the Evolysse™ line of dermal fillers in the United States and 50 countries in Europe for aesthetic and dermatological uses. We refer to the agreement conveying rights in the United States as the “Symatese U.S. Agreement” and the agreement conveying rights in Europe as the “Symatese Europe Agreement.” In the United States, we obtained the rights to the Evolysse™ products referred to as (i) Lift; (ii) Smooth; (iii) Sculpt; (iv) Lips; and (v) Eye and in Europe we obtained the rights to (i) Lift; (ii) Smooth; (iii) Sculpt; and (iv) Lips.

Current wording

In 2023, we entered into two agreements with Symatese S.A.S. and its affiliates (“Symatese”), which granted us exclusive rights to commercialize and distribute the Evolysse™ line of dermal fillers in the United States and 50 countries in Europe for aesthetic and dermatological uses. We refer to the agreement conveying rights in the United States as the “Symatese U.S. Agreement” and the agreement conveying rights in Europe as the “Symatese Europe Agreement.” In the United States, we obtained the rights to the Evolysse™ products referred to as (i) Lift; (ii) Smooth; (iii) Sculpt; (iv) Lips; and (v) Eye and in Europe we obtained the rights to (i) Lift; (ii) Smooth; (iii) Sculpt; and (iv) Lips.

Previous wording

For the three months ended March 31, 2024, operating activities used $10.6 million of cash, which primarily resulted from our net loss of $13.1 million. Net operating assets and liabilities changed by $6.2 million, primarily driven by improved collections from customers, payments to vendors and the timing of inventory purchases from our supplier. Operating activities also includes adjustments for certain non-cash charges including $5.1 million of stock-based compensation expense, $1.6 million in revaluation of our contingent royalty obligation, $0.2 million of provision of allowance for doubtful accounts and $1.4 million of depreciation and amortization.

Current wording

For the six months ended June 30, 2024, operating activities used $17.1 million of cash, which primarily resulted from our net loss of $24.5 million. Net operating assets and liabilities changed by $11.1 million, primarily driven by improved collections from customers, payments to vendors and the timing of inventory purchases from our supplier. Operating activities also includes adjustments for certain non-cash charges including $10.9 million of stock-based compensation expense, $3.2 million in revaluation of our contingent royalty obligation, $0.8 million of provision of allowance for doubtful accounts and $2.8 million of depreciation and amortization.

Previous wording

For the three months ended March 31, 2023, operating activities used $20.6 million of cash, which primarily resulted from our net loss of $14.8 million. Net operating assets and liabilities changed by $12.7 million, primarily driven by timing of receipts from customers and payments to vendors and the final cash litigation settlement payment of $5.0 million to Medytox and Allergan. Operating activities also includes adjustments for certain non-cash charges including $3.3 million of stock-based compensation expense, $1.6 million in revaluation of our contingent royalty obligation, $0.3 million of provision of allowance for doubtful accounts and $1.2 million of depreciation and amortization.

Current wording

For the six months ended June 30, 2023, operating activities used $33.9 million of cash, which primarily resulted from our net loss of $32.9 million. Net operating assets and liabilities changed by $15.6 million, primarily driven by timing of receipts from customers and payments to vendors and the final cash litigation settlement payment of $5.0 million to Medytox and Allergan. Operating activities also includes adjustments for certain non-cash charges including $7.5 million of stock-based compensation expense, $3.3 million in revaluation of our contingent royalty obligation, $0.3 million of provision of allowance for doubtful accounts and $2.4 million of depreciation and amortization.

Previous wording

Cash used in investing activities was $0.8 million for the three months ended March 31, 2024 compared to $0.5 million for the three months ended March 31, 2023.

Current wording

Cash used in investing activities was $2.1 million for the six months ended June 30, 2024 compared to $0.7 million for the six months ended June 30, 2023.

Previous wording

Cash provided by financing activities was $45.7 million for the three months ended March 31, 2024, compared to $1.3 million of cash used in financing activities for the three months ended March 31, 2023. For the three months ended March 31, 2024, cash provided by financing activities resulted from $47.0 million from a follow-on equity offering as described above.

Current wording

Cash provided by financing activities was $50.1 million for the six months ended June 30, 2024, compared to $22.5 million of cash provided by financing activities for the six months ended June 30, 2023. For the six months ended June 30, 2024, cash provided by financing activities resulted from $51.2 million from a follow-on equity offering as described above. For the six months ended June 30, 2023, cash provided by financing activities resulted from $25.0 million net proceeds from drawing on the second tranche of the Pharmakon Term Loans as described above.

Previous wording

Our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, primarily consist of (i) principal and interest payments related to our Pharmakon Term Loans (future interest payments on our outstanding Pharmakon Term Loans total approximately $56.2 million, with $17.7 million due within twelve months), (ii) quarterly royalty payments to the Evolus Founders of a low single digit percentage of net sales of Jeuveau® (these obligations terminate in the quarter after the 10-year anniversary of the first commercial sale of Jeuveau® in the United States), (iii) quarterly royalty payments to Medytox of a low-double digit royalty on net sales of Jeuveau®sold in the United States and other Evolus territories (during the period from September 17, 2022 to September 16, 2032), (iv) minimum purchase obligations under the Daewoong Agreement, (v) €12.1 milestone payments under the Symatese U.S. Agreement consisting of €1.6 million in June 2025, €4.1 million in June 2026, €3.2 million in June 2027, and €3.2 million in June 2028, in each case subject to three of the dermal filler products gaining approval prior to that date, (vi) €3.1 million of milestone payments under the Symatese Europe Agreement consisting of : €1.2 million on the second anniversary of certain regulatory approvals and €1.9 million on the earlier of the third anniversary of certain regulatory approvals or following a year in which we achieves €25 million in revenue in Europe for the dermal filler products, and (vii) obligations under operating leases related to our office space which are described in more detail in Note 7. Operating Leasesin the Notes to the Condensed Consolidated Financial Statements in Part I, Item of this quarterly report. During the three months ended March 31, 2024, there were no material changes to these obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, primarily consist of (i) principal and interest payments related to our Pharmakon Term Loans (future interest payments on our outstanding Pharmakon Term Loans total approximately $51.6 million, with $17.7 million due within twelve months), (ii) quarterly royalty payments to the Evolus Founders of a low single digit percentage of net sales of Jeuveau® (these obligations terminate in the quarter after the 10-year anniversary of the first commercial sale of Jeuveau® in the United States), (iii) quarterly royalty payments to Medytox of a low-double digit royalty on net sales of Jeuveau®sold in the United States and other Evolus territories (during the period from September 17, 2022 to September 16, 2032), (iv) minimum purchase obligations under the Daewoong Agreement, (v) €12.1 milestone payments under the Symatese U.S. Agreement consisting of €1.6 million in June 2025, €4.1 million in June 2026, €3.2 million in June 2027, and €3.2 million in June 2028, in each case subject to three of the dermal filler products gaining approval prior to that date, (vi) €3.1 million of milestone payments under the Symatese Europe Agreement consisting of : €1.2 million on the second anniversary of certain regulatory approvals and €1.9 million on the earlier of the third anniversary of certain regulatory approvals or following a year in which we achieves €25 million in revenue in Europe for the dermal filler products, and (vii) obligations under operating leases related to our office space which are described in more detail in Note 7. Operating Leasesin the Notes to the Condensed Consolidated Financial Statements in Part I, Item of this quarterly report. During the six months ended June 30, 2024, there were no material changes to these obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2023.