Good day ladies and gentlemen and welcome to the Evolus Conference Call. Currently, all participants are 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 is being recorded.

I would now like to introduce your host for today's conference, Mr. Ashwin Agarwal, Vice President Finance, Investor Relations and Treasury. Sir, please go ahead. ..

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 website for 30 days.

With me on today's call are David Moatazedi, President and Chief Executive Officer; Lauren Silvernail, Chief Financial Officer and EVP Corporate Development and Rui Avelar, Head of R&D and Chief Medical Officer.

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 the 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. A reconciliation of GAAP to non-GAAP results may be found in our earnings release which was furnished with our Form 8-K filed today with the SEC and may also be found on our Investor Relations website at investors.evolus.com.

And now, let me hand the call over to David Moatazedi..

Good afternoon and thank you all for joining our fourth quarter and full year 2018 update call. The FDA approval of our flagship product Jeuveau on February 1st marked a critical inflection point in our company’s history.

The approval transitioned Evolus from an R&D-focused company to a commercial-stage organization with our sites now set on transforming the aesthetic market. Last month marks the one-year anniversary of our IPO and in that short timeframe, we have successfully achieved all major milestones. We received U.S.

FDA approval for Jeuveau and approval in Canada. We submitted our European application and expect a CHMP opinion shortly. We have assembled one of the highest quality and most experienced management teams in the aesthetic industry. We have submitted for publication our TRANSPARENCY global clinical program.

This includes results from the largest Phase III head-to-head aesthetic pivotal trial versus Botox. We are nearing completion of hiring our 140 person, specialized sales force and have attracted top talent from the industry.

We announced Project FUSE, which is designed to catapult Jeuveau to the number two market position within twenty-four months of launch. We closed 2018 with pro forma cash of approximately $168 million, which includes proceeds received from the authored debt financing announced earlier today.

2019 is a pivotal year for Evolus and we expect the launch of Jeuveau to transform the aesthetic market as we know it today. In the coming weeks, Jeuveau will enter the largest category in aesthetics. There has not been a formidable competitor to challenge the market leader until now. Our plans are complete.

We are well funded and fully prepared to execute on what we believe will be the most exciting launch to engage the aesthetic market. At launch, our 140 person sales team will have the advantage of singularity and focus to deploy our initial launch plan code named FUSE, which will engage a broader market with a high degree of urgency.

And today, we are ready to talk with you about price. In this category, there are three dimensions executing a successful pricing strategy. The first is product list price. The second is a competitive volume-based physician pricing program and the third is consumer loyalty. In this category, the product list price sets the retail price to the consumer.

The volume-based physician pricing program incentivizes doctors to purchase higher volumes of products and the discounts associated with those volumes will improve the profitability of the procedure relative to the market leader. Lastly, the intent of the consumer loyalty program is to improve the affordability of the procedure for patients.

As a result, Evolus will invest in improving the affordability and access for patients which then does not require doctors to provide a discount relative to competitive brands. Today, we are now seeing a list price of $610 for a 100 unit vial of Jeuveau.

This price represents a slight premium to the market leader and is a direct reflection of its premium value as Jeuveau is the first neurotoxin to enter the market in nearly a decade. In addition, Jeuveau is supported by a distinct and new manufacturing process branded as Hi-Pure.

Jeuveau has the only Phase III head-to-head data versus the market leader in the U.S. and the premium branding which will unfold in the coming weeks. The launch of Jeuveau is designed to introduce a premium brand experience and redefine customer centricity.

For modeling purposes, you should continue to assume the same percentage discount that has been previously reported. As you know, all companies in the space offer discounts based on volume.

You can assume that what we will offer, volume-based physician pricing - that we will offer volume-based physician pricing but for competitive reasons, we do not plan to report average selling price in the future. With that, I’d now like to turn the call over to Lauren who will provide a review of our Q4 and full year 2018 financial highlights..

Thank you, David and good afternoon everyone. At the end of 2018, we had $93.2 million in cash. As we announced today, we entered into a non-dilutive, $100 million senior debt facility with Oxford Finance and drew $75 million upon close. We are very pleased to be partnered with Oxford to build our business.

The senior debt facility is has been structured to provide the growth capital we need while maintaining our operating flexibility. The first tranche of $75 million is free from revenue, earnings or minimum cash covenant, a key consideration for all shareholders and for us in maintaining flexibility.

Including the $75 million we drew at the close of the debt financing, our pro forma cash balance as of 12/31/2018 was $168 million, putting us in a very strong cash position. Please note this figure does not include any other first quarter 2019 cash flows. The senior debt is scheduled to be repaid by 2024 about five years from now.

We expect to be cash flow breakeven before this debt is due. Thinking about one-time cash outlays in 2019, as a reminder, we have $13.8 million of milestone payments due upon FDA and EU approval of Jeuveau to our partner Daewoong and the Evolus founders.

On the cash side, $12.8 million has already been paid out I Q1 of 2019 with the remaining $1 million to be paid upon EU approval. Please note with regard to accounting treatments, $12.2 million of the total payments will impact the balance sheet and $1.6 million will impact the operating expense line of our P&L.

Our non-GAAP operating expenses for Q4 and full year 2018 were $11.5 million and $28.7 million respectively. Q4 non-GAAP operating expense was slightly below the guidance we provided on our Q3 2018 earnings call of $12 million to $15 million due to the timing of certain expenses.

As a reminder, we are providing a non-GAAP metric to make it easier to track our operating expenses excluding two non-cash items which are stock-based compensation and royalty revaluation expense. Stock-based compensation was $1.9 million in Q4 and $7.0 million for full year 2018.

Non-cash revaluation of contingent royalty obligation reflects income of $0.9 million in Q4 and expense of $10.5 million for full year 2018. For 2019, we have decided not to provide revenue or expense guidance during the launch year. But there are a few items we would like to highlight to help you with your financial models.

Our non-GAAP operating expense in Q4 was $11.5 million representing an annualized runrate just under $50 million as we exited 2018. This $50 million includes G&A, R&D and pre-launch expenses.

Hiring 140 sales representatives in 2019 increases our non-GAAP annualized selling expenses to be between $50 million and $55 million for 2019 – excuse me, on an annualized basis. Please note, selling expense in the first quarter of 2019 will be lower than this rate.

We are not providing further detail on our marketing or commercial expenses at this time as we are getting ready to roll out the launch. Please note also the numbers just provided do not include stock-based compensation or loyalty revaluation expense.

On the cash side, as we mentioned earlier, we have borrowed 7.5 – one more time, $75 million at what is currently a 9.5% annual interest rate. And most importantly, we expect revenue to be back loaded towards the fourth quarter of 2018 as we build trial and experience with our customers. And with that, I’ll turn the call back over to David. .

Thank you, Lauren. The path through successful launch of Jeuveau in this spring is clear. The book is written and now it’s only a matter of time before the chapters of the story are unveiled. A number of upcoming catalysts will further enable our success. In the first half of 2019, we anticipate the publication of our U.S.

Phase III trial results and our EU and Canada head-to-head Phase III results versus BOTOX both of which are expected to complement our label and to provide clinically relevant information to our customers. We look forward to presenting the commercial launch plan at our Investor and Analyst Day on May 8th. Our team is poised to enter the U.S.

markets with a premium brand and high caliber sales force and an impactful commercial strategy. With that, I’ll turn the call over for Q&A.

Operator?.

[Operator Instructions] Our first question comes from Louise Chen from Cantor. Please go ahead. .

Hi, thanks for taking my questions. I had a few questions here. First one I had was, how should we qualitatively think about sales to Evolus for 2019 for Jeuveau? I know you are not giving guidance, but we did see Dave will give some color on their guidance for 2019.

There is the LCI network and the percentage of sales that they have relative to their key opinion leaders and then there is some historical comps as well.

As we get a lot of questions, just curious if you could provide any qualitative color? And then the second question we’ve gotten a lot is, some concerns regarding the other competitors in the space counter-detailing ahead of your launch and just curious how much of this you already anticipated and what’s built into your launch plan to think about that? And last question I had here is just on your cash runway, with the financing and the existing cash balance, how far does that you out to? Thank you.

.

Great. Thank you for the question Louise.

Maybe a I’ll just take a step back and point out that, firstly, we’ve been deliberate about how we’ve rolled out information related to our commercial launch and if you can anticipate there is an increasing level of interest amongst the customer base in anticipation of the launch of Jeuveau and at the same time, the competitive set has begun preparing both messaging and different field activities around the customer in order to protect against potential share loss.

And as you would expect, we’d anticipate this not just from the market leader but from all there manufacturers and we’ve been actively prepared for that and that is part of the reason why we’ve been strategically quiet and deliberate about how we roll out each element of the launch.

As it relates to the messaging and counter-detailing, it is important to note a couple things.

The first is, we have purposefully kept the head-to-head full dataset in anticipation of our launch date and so, we expect when that is published, that our sales force and doctors who’ve been exposed to this data through advisory board meetings will have full visibility to the quality of products that we have.

Our confidence in pricing Jeuveau as a premium brand in the space is reflective of the quality of data that we’ve generated. This is a very high quality brand and we’ve assembled a high quality management team in order to launch it.

You can expect that the branding elements will be reflective of the same premium pricing nature that these doctors expect when they take on quality brands into their practice.

As you think about the uptake of the product and the details that we’ll provide in the upcoming May Investor Day, really this is a company that’s designed for the broader market.

There has been higher engagement with doctors where they look at the American Academy of Dermatology where we had close to 500 doctors that attended our customer event that evening or the ongoing advisory board meeting that we continue to hold and have engaged many doctors over the last six months and there is an increasing amount of interest in the launch of Jeuveau.

In the end, there hasn’t been an aesthetical neurotoxin or a company dedicated solely to this space to operate in this category.

The combination of the talent we are bringing on, the quality profile that we are building and the launch plans will come together here in spring and introduce the first product in nearly a decade and we believe that the broader market will want to be a part of that launch. .

Thanks, David, and this is Lauren. With regard to the qualitative guidance release, great question.

What we would like to tell folks is when you look at second and third quarter, we do not expect to book a lot of revenue in either of those quarters as we encourage our physicians and consumers to try the product, What we do anticipate is that revenue will pick up by the fourth quarter of this year putting us on a solid trajectory to be number two in the market after 24 months.

And hope that’s helpful. On cash runway, we are very pleased with this financing. Going into it, we had enough cash to launch the drug. Now we are in a very comfortable position. We have decided not to provide guidance on our full burn rate for this year.

So I am unable to let you know how long that cash will last, but it puts us in a very solid position for an extended period of time and thanks for asking. .

All right. Thank you..

Thank you. Our next question comes from Annabel Samimy from Stifel. Please go ahead..

Hi, thanks for taking my question. Now, you’ve probably already you had addressed this to a certain degree already, but maybe a little bit more on the commercial front clearly the competitors are already starting with the couponing, the discounting and the messaging and providing coupons to physicians.

So, I know that you are being a little bit careful about how you talk about this.

But, you are seeing what’s out there, is there anything that’s out of bound that what you’ve expected and what are some of that you can avoid – if you can use and avoid commoditization of the market? Because at some point, it seems like that might start to go we are already seeing in the marketplace.

And then, separately, you’ve now had a chance to talk to among many physicians at AAD and it seems to me that it’s going to be a little bit of a branding game to a certain degree.

So, can you give us a sense of the reception that you are getting from those physicians and from the brand and the willingness to use a brand and the recognition or the use of a brand that’s not fully recognized by their consumer population, their own patient population? And then, finally on the debt side, that’s clearly a nice source of financing for you.

Can you share with us some of the key covenants that we would have to think about in terms of that financing? Thank you. .

Thank you, Annabel for the question and you rose an excellent point surrounding customer concerns around commoditization of this category and as you point out, we are seeing an increasing level of couponing and discounting from the competitors in anticipation of our launch.

I think today, announcing our pricing as a premium brand signals the leadership position that we are taking in this space and that our focus is on building a brand in this category that is very differentiated not just in terms of the quality of the data that we are going to introduce, but differentiated in the branding and the way that we go to market.

In these advisory board meetings, we shared with doctors our design-first mentality, our technology platform and how we plan to build a brand in the aesthetic market. As you can imagine with any new product that’s entered this space, the awareness level amongst consumers before the product to enter was very low, just as where we are today.

But some of the biggest brands that have been built in this space were built through strong leadership and a focus on building a consumer brand that adds value to the category and we’ve taken our first step today by announcing a premium pricing of the premium product and you can expect more of that detail to unfold.

And as you pointed out, at the AAD, the reactions from doctors that had not been exposed to Evolus who attended at our customer events, they have the opportunity to see some of the branding and creativity and design first mentality on display and the venue was very different than what you would traditionally see with other pharmaceutical companies and was reflective of our positioning as a company of a performance beauty company and not a pharmaceutical one that operates in the aesthetic space.

And we believe as that continues to unfold in the coming months, the doctors will start to see the difference between how Evolus operates in this space relative to others. And then, with that, I’ll turn it over to Lauren to give you an update on the debt. .

You bet. Hi, Annabel. With regard to the senior debt, the $75 million we drew down is not subject to any revenue earnings or minimum cash covenants. And so, when you got to look at the 8-K we filed, you can see there is the normal things around reporting that we need to do to Oxford. But it’s very close to covenant free.

We are very pleased about it other than the normal operating covenants..

Great. Thank you so much. .

You bet..

Thank you. [Operator Instructions] Our next question comes from Irina Koffler from Mizuho. Please go ahead..

Hi, thanks for taking the question. So, just to delve into the pricing a bit more. So it’s $610 for a patient, but you have flexibility to coupon the patient and then it’s – you are going to be offering some discount to the physicians.

So the physicians, if I understand correctly, also win, because they get a slightly – they get the same discount approximately but off of a higher list price.

Is that a correct way to understand the pricing strategy?.

Yes, great question and I am glad you asked about the pricing. So, Irina, the list price is for a vial of Jeuveau which is 100 units. And that’s $610 for that vial. As you know, patients will come in and receive different units depending on what the doctor chooses to use our on-label indication is for 20 units in the Glabellar area.

That pricing that the doctor will charge the patient varies of course in every market depending on the doctor injecting.

The key point here is that, we price Jeuveau at a slight premium to the market leader and we will roll out the different pricing levels to doctors in terms of the volume-based pricing once we get past the launch date and then towards the end of this year, we will introduce our consumer loyalty program which is designed to make this procedure more affordable to patient.

In the end, your point is exactly right. We anticipate that the market will price Jeuveau at parity to the market leader or slightly above in some cases as we’ve heard that patients should not expect to pay less for Jeuveau given the quality of data that we’ve generated and the premium brand that we are bringing to the market. .

Okay, great.

And then, with regard to your goal of being the number two toxin within 24 months, how do you contemplate the market entry of the long-acting toxin sometime maybe towards the end of next year or middle of next year? Does that change the number two positioning and can you stay at number two beyond 24 months?.

Yes, it’s a good question. First, in this category, you generally find that product launches establish themselves in the first 18 to 24 months. So, as you point out, we have that window of time where we will compete against the three existing neurotoxins that are FDA approved.

As it relates to the future outlook of toxins that are currently under FDA review and in various stages of review, we haven’t provided a view on how we assume that market will play out. As you know, products have consistently been delayed in this category in their entry and so it will be preliminary for us to give you any view there.

In the end though, one point of distinction here is that, we believe we have a frictionless platform to enter the market.

And that is a distinct advantage from the quality of the management team that knows the aesthetics space to the quality of the dataset with the largest Phase III head-to-head trials against the market leader and a design first digital platform that’s designed to eliminate the friction points of doing business in the space.

Collectively, those dimensions in the first aesthetic-only company we believe will generate a significant amount of value and that’s going to be in the coming weeks. .

Thank you..

Thank you. .

Our last question comes from David Maris from Wells Fargo. Please go ahead..

Good afternoon. Revance issued a statement to analysts today that points to your pre-BLA meeting minutes for Jeuveau and it says based on feedback from the FDA in the written document, the stated duration is not based on a two point comparison to placebo as Evolus has been claiming, but against a threshold level determined at the design stage.

So, first, had you been claiming that? So I wasn’t familiar with that. So I was glad that you’ve raised that. The second is give a comment about it. And then third, Allergan say that they don’t think Revance will get six months labeling and I know Irina had asked earlier about what is your expectation of that.

Is there any reason for you to think that they will or won’t get six month labeling or a 24 week labeling? Thank you. .

Yes, first of all, thank you for the question. What we’ve stated is just in reference to what the FDA guidance has. And in 2014, the FDA said, it’s something along the lines of duration, claims should be based effectively on a Kaplan–Meier of the primary endpoint. And the primary endpoint is a two point composite. So that’s all that we’ve been claiming.

The pre-BLA or pre-BLA meetings are kind of in the public domain and that’s what you are referring to, Revance. I was looking at that document. But if you heat it closely, that’s not what we see in that document either.

So I think there is a little bit of confusion from Revance in terms of how they are interpreting the question and the response from the FDA. And I can go into more detail if that doesn’t explain to you. From our perspective, we have a long call, a conference call little while ago and we just said we don’t have a duration claim in our label.

What we went through in – what we put in our label was try to give physicians and patients visibility in terms of how they should think about retreatment.

So in our particular label, what we thought was most helpful for doctors and patients to understand kind of what a retreatment cycle would look like is by looking at our open-label Phase II study which is very real world where patients came in when they lost their correction and went to a zero or a one.

And in that open-label study, over the course of the year, and actually two studies there were 922 patients. The typical patient came in three times a year. So that we thought that was more informed after all the label is supposed to help clinicians and patients understand what they do.

Your last question is really important question of course is, Revance and what their label may or may not read and really I mean we have no insight into that. So it’s a fair question, but we wouldn’t be able to answer that responsibly and that’s a good question for the Revance folks. .

Thank you very much. .

Thank you. This concludes our Q&A session. At this time, I’d like to turn the call back to Mr. Ashwin Agarwal, Vice President, Finance, Investor Relations and Treasury for closing remarks. Please go ahead. .

Great. Thanks everybody for participating in today’s call. .

Thank you. Ladies and gentlemen for attending today’s conference. This concludes the program. You may all disconnect. Good day..