Shares in already beleaguered Allergan plc (NYSE: AGN) were dealt a body blow Tuesday after Revance Therapeutics Inc (NASDAQ: RVNC) announced favourable results from a pair of phase 3 clinical trials evaluating its RT002 treatment for glabellar lines (a.k.a frown lines) between the eyebrows. RT002 is a next-generation neuromodulator Daxibotulinumtoxin A for injection.
Jokingly christened the “Better Botox,” RT002 is a potential rival to Allergan’s blockbuster Botox treatment. The Revance trials covered over 600 patients in the U.S. divided into two groups, one of which received a placebo. According to the company the trials showed that use of RT002 led to statistically significant reduction in severity of frown lines compared to the placebo, and that RT002 appeared generally safe and well-tolerated in both studies. What’s more, the patients who received the drug showed a vast improvement compared to those receiving the placebo, at every measured time point in the trials.
Significantly, the wrinkles returned only after about 27 weeks. “These results demonstrate it is scientifically and clinically possible to create a significantly longer-acting neuromodulator with a duration of six months, compared to three to four months observed with currently available products,” said Revance CEO Dan Browne in a statement.
Huge Opportunity For Revance Therapeutics Inc (NASDAQ: RVNC)?
There’s still work ahead for Revance, but it is staring at a huge market currently dominated by Allergan’s Botox Cosmetic and Galderma’s Dysport.
For perspective, Allergan’s Botox earned revenue of $729.2 million in 2016 in the capacity of a facial aesthetic product, and taken with its applications as a therapeutic for conditions such as hyperhidrosis and migraines, it grossed $1.98 billion in that year.
In fact, being the first new neuromodulator product developed in over 20 years, RT002 could ultimately be looking at an opportunity worth about $3.6 billion in the aesthetics or therapeutics market. About a third of that is accounted for by glabellar lines – so Revance can hope for some serious payback in the future.
Note that the active ingredient in RT002 – botulinum toxin Type A is the same as that used by Revance’s competitors, but what’s different is that RT002 uses the Revance’s proprietary peptide technology.
Revance is already in the midst of a long-term safety trial expected to culminate in the second half of 2018. If the trial proves successful, the company will apply for approval to the FDA in the first half of 2019 and hopefully launch the product in the U.S. in 2020.
Revance Therapeutics Inc (NASDAQ: RVNC) Claims Received Sceptically
Allergan has brushed aside the trial results. “Based on the profile demonstrated in this data, Allergan does not view this toxin as being differentiated from Botox,” spokesman Mark Marmur wrote in an emailed statement to Bloomberg.
“The clinical profile and market leadership of Botox and Botox Cosmetic are well established,” he went on to say, describing the data as “underwhelming.”
He added: “Allergan does not expect Revance’s toxin to enter the market until mid-2020 and we do not believe this data will support a longer duration claim as the only composite data (2-point improvement, none or mild, and both investigator and patient) is at 30 days not at six months.”
It may be recalled that on November 29, Morgan Stanley analyst David Risinger too cast doubts on Revance’s claim that RT002 was longer-lasting. “We also think that mechanistically it would be difficult to create a significantly longer-lasting Botox because botulinum toxin gradually loses efficacy over four months due to neuronal regeneration,” he said.
The results of the long-term safety trial will prove the veracity, or otherwise, of these comments.
Revance Therapeutics Inc (NASDAQ: RVNC) Beefs Up Finances
As at 30th September, 2017, the company held cash and investments worth $153 million, which it said was sufficient to fund its activities into the first quarter of 2019. Its cash burn during the third quarter was nearly $23 million. For 2017, it expects the cash burn to be in the range $102 million – $112 million.
Upon the announcement of the successful trials, Revance shares leaped 34% to close Tuesday at $34.75.
In a well-timed move, the company simultaneously announced a proposed underwritten public offering in which it will sell approximately $175 million of shares of its common stock. In addition, certain stockholders of the Company would be offering 600,000 shares for sale to the public.
With the issue proceeds Revance will substantially boost its liquidity and be able to comfortably conduct the development of its drug pipeline.
Could Revance Therapeutics Inc (NASDAQ: RVNC) Be an Acquisition Target?
A larger competitor such as Allergan may want to protect its lucrative Botox turf and decide to acquire Revance, which is, after all, a small cap biotech company. Alternatively, Allergan may only want to buy out RT002. Either way, Revance investors could benefit from an acquisition premium.
According to one analysis by Guggenheim’s Rohit Vanjani, the fair value of a Revance share is $42, calculated by the DCF method based on estimated profits from RT002 botulinum toxin product through 2028, discounted at 15%.
Even by that measure, Revance shares have an appreciation potential of about 23% from the currently traded price of $34.25, and investors may consider a long-term investment in the company.
Feature image: Flickr
In-body image: Revance