Ashwin Agarwal - Vice President Finance, Investor Relations and Treasury David Moatazedi - President and Chief Executive Officer Lauren Silvernail - Chief Financial Officer and EVP Corporate Development.

Louise Chen - Cantor Irina Koffler - Mizuho John Boris - SunTrust Donald Ellis - JMP Securities.

Good day ladies and gentlemen and welcome to the Third Quarter 2018 Evolus Earnings Conference Call. At this time all participants in a listen-only mode. Later we will conduct a question-answer-session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference call is being recorded.

I would now like to introduce your host for today's call Mr. Ashwin Agarwal, Vice President Finance, Investor Relations and Treasury. Sir, you may begin..

Thank you, operator, and welcome to everyone participating in today's call. This call is also being broadcast live over the Internet at www.evolus.com and a replay of the call will be available on the company's Web site for 30 days.

With me on today's call are David Moatazedi, President and Chief Executive Officer and Lauren Silvernail, Chief Financial Officer and EVP Corporate Development. In our remarks today, we will include statements that are considered forward-looking statements within the meaning of the United States securities laws.

In addition management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends which may affect the company's business, strategy, operations or financial performance.

A detailed discussion of the risks and uncertainties that the company faces is contained in its quarterly report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 29, 2018 and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K.

Actual results may differ materially from those expressed in or implied by forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statement. Additionally the discussion today will include non-GAAP financial measures.

These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliation of GAAP to non-GAAP results may be found in our earnings release which was furnished with our 8-K filed today with the SEC and may also be found on our Investor Relations Web site at investors.evolus.com.

Let me hand the call over to David Moatazedi..

Good afternoon and thank you all for joining our third quarter update call. In Q3, we continued to make excellent progress against our key milestones. We are within 90 days of our February 2, 2019, PDUFA action date for DWP-450 with launch anticipated in spring 2019.

We completed the hiring of our corporate leadership team which includes our Vice President of Sales and other top sales positions. We also received approval of DWP-450 from Health Canada with launch anticipated in the first half of 2019.

In Europe, we anticipate an opinion from CHMP in the first half of 2019 pending a favorable opinion; we expect approval prior to mid-year. We ended Q3 with a strong cash position of approximately $105 million.

As a reminder pending approval DWP-450 will carry a unique value proposition as the first aesthetic only neurotoxin product to be launched in the U.S. We remain pleased with the ground full of physician support and excitement around DWP-450's clinical profile presented at recent medical conferences.

In our Phase 3 clinical trials, DWP-450 met all primary and secondary endpoints. In total the DWP-450 program included more than 2100 patients across multiple clinical trials with no serious adverse events related to the product. In the coming months, we will complete the transition from an R&D to a commercial stage company.

We plan to focus on four key initiatives that are expected to drive the successful launch of DWP-450. First, we will debut our corporate identity and reveal the DWP-450 brand name. Second, we will continue to expand the sales management team and plan to hire sales reps upon U.S. approval.

Third, we remain customer-centric with purposeful presence at key medical meetings and scientific advisory boards. Lastly, we intend to submit multiple publications from the U.S., European and Canadian Studies including head-to-head data versus the market leader.

With that, I'd now like to turn the call over to Lauren who will provide a review of our Q3 financial highlights..

Thank you, David, and good afternoon everyone. At the end of Q3, we had $105 million in cash which included $68 million of net proceeds before expenses from our July offering. It is worth noting we used only $6 million of cash in each of the first three quarters of 2018.

Our non-GAAP operating expenses in Q3 were $7.7 million excluding stock-based compensation of $1.5 million and non-cash royalty reevaluation expense of $2.3 million. This was in line with our guidance.

As a reminder we began providing a non-GAAP metric upon our last call to make it easier to track our operating expenses including two non-cash items, stock-based compensation and royalty reevaluation expense.

Looking forward, we plan to increase Q4 operating expenses as we invest in our key pre-commercial initiatives as described a few minutes ago by David. As such we expect our Q4 non-GAAP operating expenses to be in the range of $12 million to $15 million. And with that I'll turn the call back to David..

Thank you, Lauren. I'm pleased by our strong execution during the quarter and how we are strategically positioned moving forward. We will continue to stay focused on our key pre-launch initiatives and establishing Evolus as a premier aesthetic company.

I would like to thank each and every employee for their daily commitment and passion in partnership with the physician community; we are dedicated to evolving the business of aesthetics. Thank you for your time. And we look forward to seeing you at our upcoming fall investor conferences. With that, I'll turn the call over for Q&A.

Operator?.

Thank you. [Operator Instructions] Our first question comes from Louise Chen of Cantor. Your line is open..

Hi. Thanks for taking my questions. I had a few here. So first question I had was what additional data do you have coming in 2019 and what are you expecting or where should we be looking at in terms of the kind of report that you're going to give there.

And then, secondly is what is the real share of competitors to Botox now what's their market share? And where do you think you can get to in the next 12 to 18 months post launch and why? And then, in terms of the ALPHAEON physician network how much sales do they represent for Botox right now? Thank you..

Great. Louise thanks for joining the call and couple of great questions there. First, with regards to data, we expect to publish not just our U.S. pivotal trials versus placebo in the first part of next year, but we also expect to publish head to head trials versus the market leader that were conducted in the Phase 3 trials in Europe and Canada.

That is precisely what makes DWP-450 unique as a new market entrant into this category. We'll be the first neurotoxin that will enter the market with Phase 3 head-to-head data. And once that information is made public we believe that that helps build the story around the frictionless alternative to the market leader.

Now as it relates to market shares, there are multiple sources that track market share and most of them triangulate to the market leader at a roughly 70% unit share and the remaining two competitors occupy the remaining 30% in market share.

As far as the future share that we estimate, look we're investing into building out our commercial stage company today and the investment that we're making is commensurate with what we believe the opportunity is here, which is that with the technology we have and that the data that we will launch with this product has the potential to occupy the number two market share position within two years.

And part of that has to do with the early investors in the company. You'd asked about what share potential they have. We believe it is roughly anywhere from 3% to 5% of the neurotoxin market today sits within that early investor group.

We recently completed a survey with a large number of those investors and we're surprised to learn that they occupy some of the top positions in terms of the pricing tiers for all three major competitors and we know that they remain highly motivated and interested in DWP-450 and we look forward to making the product available to them..

Thank you..

Thank you. Our next question comes from Irina Koffler of Mizuho. Your line is open..

Hi. Thanks for taking the questions. I'm just wondering if you had any takeaways from the Allergan Medical Aesthetic Day in September. Was anything surprising to you and also as you hold your ad boards to various key opinion leaders. Can you share some of the feedback and advice that you're getting about your product and pending launch. Thank you..

Great. Thank you. Thank you for the two questions. I'd start with the Aesthetics Day, overall was a positive I think for the entire category. Allergan is the market leader and it was great to see the commitment that Allergan has to not only continuing to invest, but to increase their investment into the aesthetic market.

We also believe that the penetration rate amongst consumers is very low.

It's single digits today in the category and there's a potential to drive higher penetration rates as a result of driving consumer awareness and creating more affinity to these brands that can happen through market leaders like Allergan investing in DTC, it also happens through new companies like Evolus entering the market with a new product with an entirely new value proposition that could target a segment of consumers that might not otherwise go into the office.

And so we believe that the combination of Allergan's investment and Evolus entering as a new player in the category will enable us to continue to accelerate what we believe to be a high growth market for the foreseeable future.

The second part of your question was around the advisory boards, we've been really overwhelmed by the positive feedback we've been getting from the physician community not just in the advisory boards, but even outside of them.

And what we hear back consistently is the following, which is number one there hasn't been a new company in the injectable aesthetic space in a number of years. And the fact that we remain customer-centric, our leadership team has a depth of experience in this space.

There's a high degree of trust in working with this leadership team as we build out the company. As they see the data both the U.S. pivotal trials and the head-to-head studies versus a market leader.

There's a degree of confidence that's formed in that room between the leadership that existed and the product that gets formed as a result of the comprehensive data set that results in a high degree of enthusiasm around the prospect of Evolus entering the market in 2019.

We continue to remain focused on building out our commercial infrastructure as we prepare for that approval date..

Thank you..

Thank you. Our next question comes from John Boris of SunTrust. Your line is open..

Thanks for taking the questions. First question just has to do with the regulatory review by the FDA.

Have you received any questions on either the CMC or clinical sections of the FDA, have they signed-off on your trademark yet? And when would you anticipate entering into labeling discussions?.

Yes. We've been in constant dialogue with the FDA when we received our PDUFA date, the FDA was quick to begin dialogue and we continue to progress as planned. And we believe we are on track and tracking towards the February 2, PDUFA date.

We have received pre-clearance for our brand name which we will launch that in the coming months and as we do we'll certainly make you all aware of that. And, of course, we anticipate that we're going to enter labeling discussions prior to the approval date that's always tough to predict in advance John as you know.

They could -- those discussions could take place just a week or two prior to approval or that could take place in advance of that. And so we believe worked we're on track with where we expect to be in the filing..

And then just a commercial question, on product concept testing especially as you're getting ready to put your publication strategy together, obviously a goal here to have a frictionless launch, what are the key findings that you're possibly getting from the physicians that you're talking to on the key concepts that they're very interested in on DWP-450?.

So you mentioned frictionless. We hear that back consistently in our advisory board meetings. Of course, these are scientific advisory board, so the majority of the time is spent reviewing the finds and the clinical data. And what we hear back from doctors is that it's a frictionless alternative. The data is comprehensive.

There's not a degree of skepticism in the room and the multiple advisory boards that we've been in. If anything it's more confidence. And what they're quick to point out is that there hasn't been a new neurotoxin entering the market with is comprehensive of a data set as we plan to enter with and that that is what primarily drives the confidence.

Beyond that doctors are quick to point out that there is the market leader and there is an opportunity for another player to be more competitive in this space.

And we believe that Evolus and DWP-450 represent the opportunity to occupy that spot in the market that has evolved over a number of years through a combination of consolidation in the industry, uncertainty as it relates to the competitive environment and of course having the depth of experience in the aesthetic space gives them a degree of confidence that we can be successful..

Just a last question. You obviously have some experience having watched facial filler took a significant part of share within that market. You had a really good set of publications to be able to do that with.

Is there anything you can take away from that launch that you think helps with your approach to the launch on DWP-450 since you want to be the second share leader within 24 months?.

Yes. We know that these doctors want to do business with not just the company but the people within the company that that they know and they get to know very well. And we've maintained that as our focus from inception since I joined the company and the leadership team does the same. We are very much customer-focused first.

At the same time, the data itself -- the doctors the confidence that we have the frictionless alternative product, and then, lastly putting the combination of our high touch management team together with a high-quality product into one launch package that we believe will enable us to establish ourselves in this market will give us a significant head-start as we enter this space.

And we're working through the commercialization plans now. Internally they're final, of course, we haven't disclosed them. We continue to remain strategically quiet until we get to the approval date, but we'll always be science first in how we think about any data we present to customers. But most importantly the data that we have is clean.

We share every data point with our customers so they have full visibility to the quality of work that that's been done here. And we feel pretty good about our position going in..

Thanks for taking the questions..

Our next question comes from Donald Ellis of JMP Securities. Your line is open..

Thank you. Just have one question that has been answered.

David can you describe some of the sales and marketing activities that are available to Evolus that are not available to companies receiving reimbursement for both therapeutic anesthetics indications in the toxin market?.

Yes. It's a great question Don. First, of course, the thing that most of the times gets pointed out is, we are an anesthetic-only company which means from a pricing standpoint we're not limited in terms of how we think about pricing around each customer.

It's unique versus the other three existing toxins because they have a therapeutic form of their product. However, it's not unique compared to other aesthetic products out there when you think about categories like fillers or implants.

Those are markets where the companies and the manufacturers are able to customize your pricing and not be restricted by government reimbursement when they think about what the optimal prices to maximize the opportunity in the market. We will be the first entrant that has the latitude to price ourselves to maximize the opportunity that's number one.

The second is because we don't have a therapeutic link to our product. We don't believe that the rules like Sunshine laws apply to Evolus. And so that means that the representatives and the sales managers can be very closely involved in high touch and customer-centric and engage with these practices outside of their traditional business hours.

And that becomes especially important for a newer company like Evolus because for the customer getting them out of the office and being able to spend time with them to talk about the product and the company outside of their day-to-day busy schedules is important in establishing ourselves.

And of course, we can spend time on activities such as practice, development and keep that physician engagement high in a way that other companies are challenged due to the some of the regulations that are out there..

Okay. Thank you very much..

Thank you. I'm showing no further questions at this time. I'd like to turn the conference back over to Mr. Moatazedi for any closing remarks..

Great. Well, thank you all for joining the call today. As mentioned earlier, we have a clear line of sight towards approval of DWP-450 in February of 2019 and we're expecting to launch commercially in the spring. We believe we're launching with a new chapter in aesthetics.

The first new injectable company in over a decade in this space with the first known 900 [kDA] [ph] molecules since the market leader was first introduced. We feel great about the progress we've made and we look forward to keeping you updated as we prepare for commercialization. Thanks for your time..

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect..