Good day ladies and gentlemen and welcome to the Evolus conference call. At this time all participants are in a listen-only mode. Following the management's prepared remarks, we will host a question-and-answer session and our instructions will be given 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 call 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; Rui Avelar, Chief Medical Officer and Head of R&D; and Mike Jafar, Chief Marketing Officer.

In our remarks today, we will include statements that are considered Forward-Looking Statements within the meaning of the United States security 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, 2018 filed with the SEC on March 20, 2019. 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 first quarter 2019 update call. During the first quarter of 2019, we executed against all of our critical milestones to enable the launch of the Company and Jeuveau.

On today's call, I will briefly cover these accomplishments and discuss key upcoming milestones before Lauren, covers our first quarter financial performance. This quarter we announced the publication of the largest aesthetic head-to-head pivotal trial which compared Jeuveau and BOTOX, in the Aesthetic Surgery Journal.

The publication of the study is critical to our launch success. We are the first new neurotoxin in the United States to have head-to-head data at launch and we believe the results speak for themselves. The medical community feedback on these results has been outstanding. Specifically the secondary endpoints and 30 new published exploratory data points.

The head-to-head data was also critical to support our European filing. Last Friday we announced a positive opinion from the CHMP for new Nuceiva in the European Union. We anticipate approval within 90 days and continue to evaluate commercial partnership opportunities in Europe.

During the quarter, we also announced the publication of our Phase III US pivotal trial in dermatologic surgery which further validated the safety and efficacy of Jeuveau versus placebo. We have now fully hired our U.S. sales force. We screened over 6,000 candidates and following an extensive interview process we deployed a 140-person sales force.

We are pleased with the composition of our sales team. 80% have aesthetic experience. It is clear we have one of the most experienced and now following our national sales meeting, one of the most energized sales teams in the field. With our singularity and focus the sales team is now fully prepared to execute our launch in the coming days.

We are within days of introducing the first 900 kilodalton neurotoxin in the United States in nearly 30 years. The path to achieving our goal of the number two market share position within 24 months of launch is clear. We will provide more specifics around our go to market strategy for Jeuveau at our Investor and Analyst Day on May 8th.

With that I would now like to turn the call over to Lauren who will provide a review of our Q1 2019 financial highlights..

Thank you David, and good afternoon everyone. At the end of the first quarter we had $133.7 million in cash, cash equivalents and short-term investments compared to $93.2 million as of December 31, 2018.

During the first quarter of 2019, the Company received proceeds of $71.7 million net of discounts and issuance costs after drawing down upon the first $75 million tranche of the senior debt facility with Oxford Finance.

During the quarter we use $31.2 million of cash including $18.4 million for operating activities less capitalized software and $12.8 million of milestone payments paid under various arrangements upon receiving the FDA approval of Jeuveau.

As it relates to the accounting treatment for these $12.8 million in milestones $1.6 million impact the R&D expense line of our P&L. The remaining $11.2 million of milestone payments were recorded to the balance sheet impacting contingent royalty obligation and intangible assets.

As a reminder an additional $1 million is due to our partner Daewoong following anticipated EU approval. Net loss for the first quarter ended March 31, 2019 was $11 million compared with a net loss of $6.2 million for the first quarter of 2018. Net loss in the first quarter 2019 includes an income tax benefit of $14.5 million.

This income tax benefit resulted from a partial release of the valuation allowance for deferred tax assets as Jeuveau was approved by the FDA in the first quarter of this year. Our non-GAAP operating expenses for Q1 were $17.9 million.

As a reminder we are providing a non-GAAP metric to make it easier to track our operating expenses including three non-cash items, stock-based compensation of $2 million, reevaluation of the contingent royalty obligation expense of $4.9 million and depreciation and amortization of $0.5 million.

As I stated on our 2018 year-end earnings call, we have decided not to provide revenue or expense guidance during this launch here. However, there are a few items we would like to highlight to help you with your financial models.

Based upon our Q4 2018 non-GAAP operating expense the annualized run rate for G&A, R&D and pre-launch expenses is approximately $50 million. We have hired our 140%-person sales team which increases our non-GAAP annualized selling expenses to between $40 million to $50 million.

Please note selling expenses in the first quarter were lower and primarily consisted of our sales leadership team. Please note the numbers just provided do not include any GAAP to non-GAAP adjustments as previously described.

And most importantly, we expect revenue to be back loaded toward the fourth quarter of 2019 as we build trials and experience with our customers. And with that I will turn the call back over David..

Thank you, Lauren. Before turning the call over for Q&A, I would like to take a moment to thank our entire team for their hard work leading up to this pivotal moment as we prepare to launch Jeuveau. Over the last 90 days the team has successfully gained U.S. FDA approval, a positive CHMP opinion and published our U.S.

and EU trial data from our TRANSPARENCY clinical program. On the commercial side we built out a 140% sales team and prepared the U.S. market for the launch of Jeuveau in the coming days. We look forward to unveiling our go to market commercial strategy at our Investor and Analyst Day on May 8th.

We plan to attend a number of investor meetings, including SunTrust and Bank of America in May and Jefferies JMP and BMO in June. We plan to have a significant presence at the American Society for Aesthetic and Plastic Surgery meeting beginning May 17th. We hope to see at one of these meetings. With that I will turn the call over for Q&A. Operator..

Thank you, sir. [Operator Instructions] And our first question will come from the line of Louise Chen from Cantor Fitzgerald. Your line is now open..

Hi. Thanks for taking my questions. I had two that you specified.

So, in the early days of the launch as you go through the trial phase with customers what are the best metrics for us to look at to track and measure your launch performance? And then the second question I had was do you have any early feedback from physicians who have seen the full head-to-head data for Jeuveau versus its competitors? Thank you..

Great. And thanks for the call and for sitting on the call Louise. I will start by addressing just the early feedback because we have quite a bit of feedback now that the data has been published and it's out in the public domain.

And what we have heard back from doctors when they look at the data set, specifically around the 30 exploratory endpoints, is that the feedback we hear there is a consistency in how Jeuveau performs over time.

And having that view relative to the market leader is helpful and it credentials the brand and the Company to have such comprehensive data set.

And it further also validates the importance of releasing this data closer to commercialization because it enabled not only for the doctors to be able to experience the data right before the launch but also enabled our sales representatives to be present and able to answer any questions that doctors have.

Now as it relates to measures in the early days, I will save the answer to that for our upcoming Analyst Day. You will get a lot more color around our go to market strategy and some of the key leading indicators of success surrounding that. And of course those are going to be important to look for and we will provide more color on that day..

Thank you..

Thank you. And our next question will come from the line of Gregg Gilbert with SunTrust. Your line is now open..

Thanks. Good afternoon. I have a bunch of strategy questions but I think I will punt on those for now. Maybe in terms of market background you can share with us from a cosmetic toxin procedure standpoint, how many of those in the U.S.

in a given year are sort of existing toxin patients versus new starts because I'm pretty sure your ability to penetrate might be easier in one bucket than another? And then secondly longer term David and team how important is it to eventually have a bundle of your own? I know your simple one product approach and your singular focus on that is an advantage short-term, but longer term I'm sure you have given a lot of thought to how the Company will evolve.

So maybe you can give us some broad strokes on that recognizing that your focus is what it is for now? Thanks..

Great. Thanks for the questions, Gregg. First off on the market side there is just over two million patients that get a neurotoxin treatment in the U.S.

There is a couple of sources you can reference, the ASPS survey as well as the ASAPS survey are just a few of them, but we have done our own market sizing and they further validate that it's north of about two million.

In conversations with customers and based on what we hear, it appears that in the market there is an influx of new patients, especially with this emerging millennial population. And so we hear quite a bit about market growth accelerating. As you know this market we believe is growing high single low double digits.

So that alone gets you about 10% growth and we know there is some turnover within the category. So what we estimate is anywhere from 20% to 30% of patients on an annual basis are new to the category and the remainder are existing patients coming back.

And I think when you compare that to other categories what you'd find is that this is a very sticky space that consumers when they get treated continue in some habit. Obviously, for all manufacturers not with the frequency we'd like to see.

I think everyone likes to see patients coming back three times a year but on average this category performs very well because of the high patient satisfaction with the procedures.

As it relates to your second question with regards to our focus, one of the key things that stood out at our national meeting with our sales force is that as we stand up a new company and a new product. There is a tremendous amount of energy around Evolus and how we are doing things differently.

And we think our singularity and focus enables us to really create a great deal of excitement and focus both for the customer and our sales force around that idea.

Now as you point out once we get past the first couple of years of launch and establish ourselves as we have committed to the number two player in the first 24 months, at that point there is a lot of value we could create with additional products “in the bag.” And so that is an area that we are actively considering and we are assessing the category and of course as we have more information we will share that with you..

Thank you. Our next question will come from the line of Irina Koffler with Mizuho. Your line is now open..

Hi. Thanks for taking the question. So we are seeing on social media that some sites have already started to stock your product on some physician offices. And just wondering if you have any information as to what they are pulling from or what they are using less of in order to start stocking.

And maybe when you first stock a site, is that just free sample or are they actually buying and maybe you can comment a little bit on the quantity?.

Great. Thanks, Irina. And you are right, we are seeing the same thing in terms of social media posts that accounts are either gearing up for Jeuveau but we have heard rumblings of something that access to the product. I would start with we have not shipped the product. So nobody in the US has access to Jeuveau.

That being said, as you notice this market is very competitive and there is increasing levels of interest in Jeuveau and accounts are starting to get in front of that demand.

And so you are seeing that in their social media posts and we are also seeing that in accounts advertising to their patients, in addition to sending out mailers to their existing patient base.

And I think that all reflects positively toward the steady buildup that we have had starting with last year where we focused heavily initially on advisory boards to refine our messaging around the science and the clinical data and then the build out of our commercialization plans.

And There has been a significant amount of customer engagement as we help formulate the vision and how we plan to launch Jeuveau here in the coming days. And those doctors that were involved in some of those meetings along with their peers that they speak to on a regular basis have started to really increase the chatter around our launch.

And then of course we had our national meeting just several weeks ago and now that we have 140 men deployment in the field the noise level has really hit an all-time high for us. And so this is the right time for us as we prepare to enter the market..

Thank you. And our next question will come from line of Annabel Samimy with Stifel. Your line is now open..

Hi. Thanks for taking my question. So we have talked a lot about counter-detailing that you might expect from Allergan and the strategies that they use to lock maybe some of their best customers like long-term contracts.

What we haven't really talked about is what you are seeing from Galderma and Merz, just before its parting -- had a pretty good quarter with 10% growth.

But do you have any specific install with whether that is market growth or is there some serious step-up on their part to penetrate ahead of you as a new entrant because part of your strategy clearly is to get to number two position and it's going to have to come at their expense to a certain degree.

And then just if you can give us any other incremental qualitative response to the head-to-head data? You mentioned that the physicians are struck by the 30 other export endpoints. One of the push backs that we heard was why there was no measure on the patient to maintain zero or one across all the time points.

Just various things like why is 60 days missing. So any commentary around that would be very helpful. Thank you..

Okay. great. I will start out with counter-detailing. We really haven't seen anything different over the last 30 days than we were hearing prior. So the counter messaging has been relatively light and there isn't a consistent theme that we are hearing from anyone of the competition.

And as you know we purposefully stayed strategically quiet around both the data and our go to market strategy leaving ourselves in a position where we could control the dialogue in the market and we feel that largely we are fortunate enough to be in that position where our reps are the first ones to deliver the data to these customers if they hadn't participated in a meeting with us prior.

That in addition to the fact that what the data does from a qualitative standpoint more than anything else it brings simplicity to the conversation.

As you can imagine without this data doctors would be drawing their own conclusions of how this compares and they may even be drawing some conclusions based on prior talks and launches and likely that would form skepticism around this product. What we are finding is that the competitive data accomplishes its objective.

It delivers high confidence in the quality of the product and in the end they leave saying I want to try this brand and that is why we remain optimistic in getting this product out and getting it in their hands. Now as it relates to the specific data points, I have got Rui sitting across to me. I will turn it over to Rui to address those..

Sure. So I will take the second counterpoint first why there no day 60. Well one of the things that we really wanted to make sure was that there was high compliance at the sites, so the more visits you add the more compromised you are potentially from a compliance.

And if we look at our, I believe, our Phase III studies we modeled in about 10% drop-out. And I think we had 97% - 98% completion. So that kind of speaks to the strategy of having a good strong robust data set with high compliance. And at day 60 traditionally toxins don't seem to drop out very much.

So that is why we thought day 90, 120, 150 be more meaningful and that is why we have that there. With regards to zero or one that is always an interesting question. And we understand we have been counter-details on that. I would suggest that zero and one has really been manipulated in an inappropriate way.

So what I mean by that is when you talk about zero or one as a metric, you have to look very carefully at the baseline demographics of a study. What I mean by that is, how many severe patients did you have and how many moderate patients did you have.

Because to be a responder using that definition if most of your patients are easy moderate you only need a one-point improvement to become a responder using that definition. If most of your subjects are severe then you need a two-point improvement to be a responder.

So one cannot compare against another dataset unless you understand specifically what the baseline demographics are. Otherwise just like saying how fast you run, well, here’s my time for 100 meters and your time is for 200 meters and you are trying to compare that is completely inappropriate. Most of our studies were severe.

If you look at our 002 study it's like mid 80% of the patients were severe. So when you look at our data set and you look at zero, one it's like comparing a two-point improvement as compared to if you want to compare a study where most of their patients are only moderate. In other words they only had to improve one point, we had to improve two points.

So that is basically an explanation that says when you want to use zero or one as a comparison you must also put out the baseline demographic so you can understand that, number one. Number two, if you want to make a comparison it should be a head-to-head study because there is lots of things that are different within a study.

So you can't compare across studies. So with that people have asked are we planning to release the zero or one from a head-to-head. The answer is yes. Importantly our primary endpoint in our head-to-head study was a zero or a one.

Now if you are wondering what it looks like throughout the rest of the study day 2, day 14, day 30, day 120, day 150, 190 we also plan to release that. That is probably coming out at a day steps. So there is no hiding, it's all coming up..

Thank you. [Operator Instructions] And our next question will come from the line of Douglas Tsao with H.C. Wainwright. Your line is now open..

Hi, good afternoon. Thanks for taking the questions. Just in the fourth quarter earnings call you sort of announced your pricing strategy.

I was just curious David if you could provide some feedback from the channel in terms of what you discussed? And then my second question is just obviously you were - imminently you are going to get the European approval.

Just how long is sort of your urgency to potentially find a commercial partner to monetize that? And also do you have enough manufacturing or enough supply to serve both markets? Thank you..

Great. Thank you Doug for the questions. I will start with feedback on the pricing strategy. I know that as a leadership team we have been on the road quite a bit hosting dinners with doctors in local markets. As an example I was in Houston last week.

I know Mike who is sitting across the table from me was in a couple of cities in Denver and the feedback is consistent which is they are very pleased with the fact that we have introduced a premium brand to the category.

The last thing doctors want to see in this market is commoditization and so pricing ourselves at a list price premium as a market leader establishes the quality of product that we have. At the same time they had questions around how we plan to execute our pricing program back to the doctors.

And we, of course, haven't disclosed specifics around the different pricing tiers for our customers. You will hear more about that at our Investor Day. But in the end as we have communicated in the past you can model out the 20% to 25% discount relative to the market leader.

And so naturally as you assume 20% to 25% that does improve the profitability profile of this procedure. And so customers have been very receptive to that message.

And they also can relate to the history of price increases that have taken their price from a vial of the market leader from 400 all the way up to 600 and then on the resulting side the margin erosion that is occurred on the other end of it. And so in the end those are the two dimensions that we have focused on.

And then lastly we talk about what will come in the back half of the year which is we want to invest in her. In the end this category it's not just about the list price or the discounts back to the customer, all manufacturers have those. It's about growing the space.

And so we plan to invest in her to increase the affordability of this treatment through our loyalty program the will be introduced in the back half of the year. And there is tremendous amount of interest in what that looks like. And like everything else we will stage that out.

Shortly after launch we plan to provide a little bit more color around that piece. Now as it relates to your second question for potential partners in Europe, that is an area that we have been very diligent around.

We had as we have provided input before, we assess the European market in terms of capabilities and different manufacturers that have a footprint that cover Europe. Of course we are looking for a partner that can reflect the quality of company that Evolus is in the United States and one that our partner is with Clarion in Canada.

And so we have a high bar for what we are looking for and that is something that we will update you on. Likely as we get closer to the approval stage around midyear we will provide more color around where we are in those discussions. The last question I will turn it over to Lauren. Yeah..

One comment on modeling as well. Doug this is Lauren Silvernail. As you are looking at modeling it's important to understand that our arrangements when we partner in Europe involve us and Daewoong in a partner. So from a modeling standpoint we ask everyone to make sure you are very modest on including OUS or outside the U.S.

because it is a three-way split. So the impact on our P&L at this point of international arrangements outside of Canada is pretty modest.

And would you remind us of your third question?.

Just in terms of your ability to supply both markets over the next few years..

I think when we look at our ability to supply we are not constrained at all. Our partner Daewoong constructed a custom plant for this product which obviously was approved and had plenty of capacity supply US, Europe and Canada..

Okay, great. Thank you..

Thank you. And our next question will come from the line of David Maris with Wells Fargo. Your line is now open..

Good afternoon. A couple of questions. Do you think the gender or age differences in the EU/CA Phase III trial had any impact on the efficacy data? That is one of the things that a couple of clients and one of your competitors have brought up and just want to see what your response is to that? Thank you..

Sure. This is Rui. Please feel free to elaborate in terms of the - so that I interpret your question right. The majority of the patients were female. Of course we know that males have a lower responder rate and we know that the majority of patients were under 65. In other words patients over 65 tend to have a lower responder rate.

Specifically the number of patients who were over 65 was balanced between the two arms between the onabotulinum in our product. I think there was one-patient different off the top of my head and in the males, it was pretty similar, also pretty small numbers.

So if you look at how small those numbers are to the overall weighting, it probably doesn't change things. The thing that was most significant was the Jeuveau arm actually had more severe than the BOTOX arm.

So if we look from an end perspective and if we were to point to something that may have affected the result that is probably the one that I point to just because there is more of them and of course that is to our disadvantage to have more severe as compared to BOTOX..

Yeah. You addressed the part that I was getting at which is that having more males may skew that a little bit because they may be slightly harder to treat.

And you are right, there is very few patients and but the average age was a little bit older, I think about a year older but it sounds as though what you have said answers the question which is you don't think you have had any impact or is it [multiple speakers] marginal?.

Exactly and especially if you look at the over age 65 which is where things start to tilt and over the age 65 we are actually asked to do a sensitivity analysis and the ends between those two are pretty similar. We actually still showed statistical superiority placebo, the competitive arm did not..

Great. Thank you very much..

Thank you. This concludes our question-and-answer session for today. Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program and we may all disconnect. Everybody have a wonderful day..