Ladies and gentlemen, good morning, and welcome to the Q4 and Full Year 2019 Evolus Conference Call. As a reminder, today’s conference is being recorded. I would like to introduce your host for today’s conference, Mr. Ashwin Agarwal, Vice President Finance, Invest Relations and Treasury. Sir, please go ahead..

Thank you, operator, and welcome to everyone participating on today’s call. This call is also being broadcast live over the internet at evolus.com, and a replay of the call will be available on the Company’s website for 30 days.

This morning we posted an accompanying slide deck we’ll refer to on today’s call, which could be accessed from the Events & Presentations page in the Investors section of our website.

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

In our remarks today, we will include statements that are considered forward-looking statements within the meaning of 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 annual report on Form 10-K, 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 statements. 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 off to David..

First, we launched our national digital campaign in January; Second, we introduced Evolux to the market, which is the first co-branded digital advertising program for neurotoxin customers, based on their loyalty status; And lastly, in the second quarter, we will unveil our consumer loyalty program, which is designed to make the treatment more affordable for patients.

Collectively, we expect these programs will further enhance the Jeuveau value proposition and create long-term loyalty with practices and consumers. Now, I’d like to pass the call to Mike for more context around these important initiatives..

First millennial consumers influence the generations above them, giving us broader reach to the market; Second, they buy authentic and approachable brands that speak to their lifestyle; And lastly, the numbers are simply staggering.

We believe the treated millennial population will double for each of the next two years, growing from 900,000 in 2019 to over 4 million patients by 2021. As we have previously reported, we are pleased to see that Jeuveau is over-indexing against the millennial segment. As observed in our J.E.T. survey,, 39% of patients were millennials.

The psychology of this consumer is also in our favor. 51% are bothered by facial lines, and nearly 64% worry about getting or worsening facial lines. More importantly, 70% of them are willing to spend money on improving or maintaining their facial appearance. These are favorable data points as we introduce our DTM strategy. Moving to slide six.

The combination of a highly motivated consumer base and Evolux, the first of its kind practice loyalty programs will allow us to fully optimize our Direct to Millennial strategy. Allow me to spend a minute highlighting the features of Evolux.

What the market has come to expect in a loyalty program is a set of tiers based on the number of vials purchased, resulting in a set discount. On the other hand, as everyday consumer of leading loyalty programs such as Bonvoy, Amex, or Starbucks, we tend to enjoy perks beyond price.

Evolux is the perfect combination of a traditional and modern loyalty program. Evolux is designed with perks to bring value to our customers well beyond price. The greatest benefit of Evolux is the first co-branded digital advertising program to have the aesthetic neurotoxin space.

To give you context on how this looks like, on slide seven, you’ll see our smart media approach. We will put Jeuveau alongside our injectors in an ad designed to optimize consumer reach. Evolus benefits from consistent branding and our practice benefits from personalized media impression.

We recently launched a national campaign called “Is Your Tox Modern Made?”. On the left is an example of this national ad currently running; on the right is the co-branded version of that same ad, which we will deploy on a customer’s behalf, beginning in the second quarter. That deployment will be in a fixed radius around our customers.

Turning to slide eight. Evolux in combination with our consumer loyalty program, powered by our technology platform, will be the first end-to-end solution offered by a company in our space. We believe this will further enhance the Jeuveau value preposition.

Leveraging our Evolus Practice app, we were able to instantly launch Evolux in the first quarter of 2020. Every account was able to see their status, price, benefits and what’s needed to unlock future value in a matter of seconds. Account status will then dictate the customer’s ranking on our website. Most brand website features products.

Through our Direct to Millennial lens, we chose to humanize the search experience and feature our customers instead of our products. We bring customer to life as personalities. We credential them and ultimately give consumers a delightful search experience. This reduces the number of steps for consumers to take action.

We also see consumers out by geo targeting each of our purchasing practices and serve up co-branded ads, like the one you see on slide eight.

Lastly, as we launch our consumer loyalty, an account will be able to see the leads generated from our co-branded media effort, conversion and retention rates, all on one platform, the Evolus Practice app, again creating the first end to end solution to hit our market. Moving to slide nine.

I look forward to providing you the details of our consumer loyalty program on our next earnings call. So, let me close by giving you a snapshot of our progress to date.

As stated, we recently launched a new campaign, “Is Your Tox Modern Made?”, generating 11.5 million impressions with an average target consumer seeing the ad nearly two times in the past 45 days.

Our website traffic is up 68% month-over-month, and 33% of consumers looking for a Jeuveau provider are naïve to this category, validating our DTM strategy and consumer approach. From a customer perspective, we’re pleased with the 3,500 practices purchasing Jeuveau, and our growing customer base of high quality and diverse set of injectors.

We’re also pleased with the way our technology is performing. One of the KPIs we look at is the net promoter score, also known as NPS. For context, an NPS can be as low as negative 100, meaning every respondent is a detractor, or as high as positive 100, meaning every respondent is a promoter.

A positive NPS, one that is higher than zero is generally deemed good. An NPS of 50 is excellent and anything over 70 is simply exceptional. Since we launched our app, our NPS score has ranged from the mid-60s to the high-80s with an average of 70.

This is a credit for the caliber of individuals we have, driving our design orientation, product and engineering teams. To close, I’m very pleased with the receptivity of our branding, our technology, and our loyalty strategy. We’re intently focused on building a consumer brand and continuing to fuel growth into the aesthetic neurotoxin category.

Let me pass the call over to Lauren to comment on our financial performance..

Thank you, Mike, and good morning, everyone. I would like to highlight the financial progress we’ve made since the U.S. launch of Jeuveau last year. For those of you who have downloaded our slide deck, I’m on slide 10. During the fourth quarter, net revenue was $19.5 million, which was a 48% increase over Q3 2019.

Q4 net revenue consisted of $18.8 million of Jeuveau product sales in the U.S. and $700,000 of revenue from sales to our Canadian partner. Our full year net revenue was $34.9 million. As David discussed, we are pleased by the quality of the revenue and the growth trajectory in 2019.

In the fourth quarter, gross margin increased to 81% compared to 72% in Q3 of 2019. Gross margin in Q4 increased due to one-time launch pricing from our manufacturing partner. Moving to slide 11. Non-GAAP operating expenses for Q4 2019 were $28.2 million, which is your point $0.9 million lower than the third quarter of 2019.

Full year non-GAAP operating expenses were $108 million. Non-GAAP operating expenses for the fourth quarter excluded these non-cash items, $2.5 million for stock-based compensation, $1.5 million of depreciation and amortization, and a benefit of $3.8 million related to the revaluation of the contingent royalty obligation.

Net loss for Q4 was $14.5 million, down from $37.6 million in Q2 2019, a reduction of 61%, driven primarily by increased Jeuveau sales. At the end of 2019, we were well-funded and had approximately $130 million in cash, cash equivalents and short-term investments, compared to $74 million at September 30, 2019.

During Q4, we received net proceeds of $73 million from an equity offering. In 2019, we showed continued improvement in quarterly cash burn. Specifically, Q4 2019 cash burn was $17.2 million, improved from $25.9 in Q3 and $33.8 in Q2 of 2019.

In addition, we have $25 million remaining available to draw from our Oxford credit facility upon achievement of certain sales milestones. Going forward, we will continue to focus on prudent cash management. Although we are not providing financial guidance for 2020, I can add some color to help with your financial modeling. The size of the U.S.

aesthetic neurotoxin market was $1.4 billion in 2019. This market has historically been subject to seasonality with the first and third quarters being the lower sales quarters. We expect limited revenue from outside the U.S. in 2020 and do not expect any international revenue in the first half of 2020.

We are targeting Q1 2020 gross margin to be above 70%. We expect variability in gross margin between quarters due to the implementation of various marketing programs. As a reminder, our Q2 to Q4 2019 non-GAAP operating expenses range between $28 million and $33 million.

For 2020, we expect non-GAAP operating expense to vary between quarters and be in a similar range as 2019. Overall, I’m very pleased by our accomplishments in 2019, both financially and operationally. I would like to thank the Evolus team for their strong contribution and dedication. Now, I’ll turn the call back over to David..

Thank you, Lauren. We believe Evolus is well-positioned for long-term success. We have a singularity in focus with one product in a large $1.4 billion aesthetic market. Our investments are hyper-targeted on the female millennial segment, which is over-indexing on growth versus the broader market.

And our proprietary digital platform enables account personalization at scale. This year, we’re also preparing for geographical expansion into Europe and pursuing business development opportunity to build our pipeline. We remain committed to building a pipeline of differentiated aesthetic products.

Lastly, I’d like to provide an update on the International Trade Commission or ITC case. As you may know, the ITC hearings took place February 4th through the 7th in Washington D.C. In June, the judge will reach an initial determination, followed by a final decision by the ITC targeted for October 2020.

In the interim, it’s customary for various redacted versions of motions, briefs and transcripts to become public. However, I would caution you not to draw any definite conclusions from individual documents, as the initial determination will be decided based on the totality of the merits as assessed by the judge in June and the ITC in October.

We look forward to resolving the case before year end and remain confident in the strength of our IP. We can’t speak further to this matter on today’s call, but recognize it is something important to all of our employees and to our shareholders.

In closing, I would like to thank the thousands of customers who have partnered with us to introduce Jeuveau and create a new experience for their patients. I’d like to recognize the strong performance of our customer-centric sales organization and also thank each and every employee for their outsized impact.

With that, I’ll turn the call over for Q&A.

Operator?.

[Operator Instructions] Your first question comes from Marc Goodman from SVB Leerink. Please go ahead. .

Hi. Thanks for taking my question. This is Rudy on the line for Marc. Congrats on the solid results. I have two quick questions.

So, first, can you talk about the feedback you’ve got so far from doctors and customers regarding Jeuveau’s efficacy profile? And second, what is the biggest pushback you get so far from the doctors?.

Great. Thanks for the question, Marc. As you could imagine, just looking -- if you’re looking at slide number 10, I could tell you that when we were launching Jeuveau in the U.S. in May, the perfect picture would have been what we’re displaying here on that slide, which is we’ve had an incredible response from the customer base around the U.S.

to launch Jeuveau with over 3,500 customers placing an order last year, following a significant J.E.T. program that we launched in the market. We’re very pleased with the customer response. And probably, most important health metric here is that those customers continue to purchase throughout the year.

And we saw over 56% of accounts placing a reorder in 2019. That number in particular is important because as you think about the J.E.T. program, we had up to three shipments from May through the end of the third quarter in these accounts. And then, on top of that, we saw not only a revenue order, but an additional reorder during that window as well.

So, some of these accounts received up to five shipments in the seven months that we’re in the market, in 2019. So, overwhelmingly positive. And I’m going to turn over to Mike. I know he spent some time in the field recently to share some of his comments..

Yes. I appreciate the question. Thanks, David. And the excitement in the market is still there, three quarters into this thing. If you look at what customers are saying, I just spent a few days with our elite customers. These are some of the top, 1% of Evolus practices.

They’re averaging anywhere between 600 to thousands of patients out there on this product, almost nine months into this thing. And they’ll be the first to tell you patients love it. They love the product, the results are as expected. We saw it in our clinical Phase 3 program, we saw it in our J.E.T. survey, and we’re seeing it anecdotally day to day.

So, the product is obviously performing as expected. In terms of some of the resistance or the pushback, as you stated, in terms of customers, starting with -- you don’t have another product, and I don’t know how to understand the economics of this product relative to the portfolio. That was the first set of kind of friction that we faced.

We since simplified the pricing model and we showed them what the economics can look like and we walked them through this. Any account that’s willing to give our representative a few minutes to understand the economics quickly gets over this friction of, or notion that there isn’t a filler in the back.

So, that’s kind of the first one that we’ve been very successful in competing against three companies out there with a portfolio and establishing the numbers that you are now seeing, says that we’re able to compete against the bundle quite easily.

The second one is help me market, and I don’t understand how to market this product because to me it’s a me-too product. And that’s how customers see it. Consumers see it quite differently. They don’t look at this product as a me-too. And frankly, we’re carving out an interesting niche here with a millennial consumer.

And so, now you have customers come with us, asking for help to further their marketing skillset. Evolus is the beginning stage of that. And when we unlock our consumer loyalty program, it will be the next one.

And so, the top two hurdles that we’ve had to overcome have been rather simple, as we’ve garnered the attention of the market and spent some time launching this thing. So, I’ll turn it back to the call..

The next question comes from Gregg Gilbert with SunTrust..

Good morning. Thanks for the questions. I’ll ask my quick three-parter upfront here. First, I was hoping you could estimate what portion of the overall market is represented by millennials you shared for your business.

Secondly, David, how far along are you and the Board in considering fillers or other products that can leverage what you’ve built? And maybe you could share the lens that you’re looking through in terms of the types of things you would do versus those you would not do as a company.

And lastly, Lauren, just a clarification on your modeling color, which was helpful. On revenues, I think, your comments were focused on the market, but not necessarily Jeuveau.

Could you clarify that as it relates to sequential revenues that clearly for the market tend to be down in Q1, that you’re in launch phase? So can you bridge those comments, please? Thanks..

Sure. Gregg, thanks for the questions. I’ll handle the business development question. I’ll turn it over to Mike to talk a little bit about the millennial segment and how we’re performing there, relative to what the overall market is.

And as you heard today, we’re increasing our investment there because we believe not only we’re gaining traction, but that’s a long-term sustainable advantage that we have. And then, lastly, turn it over to Lauren for your last question. Look, on the business development side, this is an area we’ve been very active. We know the space well.

We’re actively scouring the market for differentiated assets that we believe will generate long-term value for this Company. A portfolio is an important idea, but so a singularity in focus. And for now, we’re very committed to building out this brand. This is a $1.4 billion market in the U.S. with single digit penetration.

We believe that our singularity in focus, and launching programs like Evolux and a consumer loyalty program that will increase affordability of this procedure to the patient, will help expand this market overall.

The millennial segment in particular is one that we believe not only we see an influx of new consumers entering the market over the next several years, but the growth is astounding as Mike spoke to earlier. You see less than 1 million patients in the market growing to over 4 million just in the next 24 months. That’s a meaningful driver of growth.

And we believe that by focusing there, we can drive a lot of value. And of course, we’re seeing early results that look good in that segment. I’ll have Mike speak to that. .

Yes. If I were to look at the portions market, comparing the millennials to call it the Gen Xs here, there’s almost a 50-50 split of the existing patient basis getting treated. The beauty of the millennial market though is that it’s growing leaps and bounds over the rest of the market. If you were to step back, the entire market’s growing.

And so, we’re in a good spot. We just happen to focus on the segment that’s outpacing this growth and in their priority. This consumer tends to spend more on this category and on other assets of beauty than other generations. They prioritize this over anything else. So, the psychology and the sizing of this consumer base is in our favor.

I’ll turn it now over to Lauren..

Thanks, Mike. Good morning, Gregg. Thanks for the color on sequential quarters. If you look at the market leader in the aesthetics, the overall market has historically been subject to seasonality.

I mean, if we look at U.S sales reported by the market leader over the last two years, Q1 sales for the mature companies have decreased 11% to 14% as compared to Q4 of the prior year.

We’re in a growth phase, but our point with the qualitative comment was to emphasize we don’t expect to see the same growth going into Q1 that we saw going from Q3 to Q4. So, it does tend to flatten out the first quarter a bit compared to prior quarters where we’ve shown tremendous growth.

But, I think it’s important to understand that we expect to have great year-over-year growth. .

Your next question comes from Annabel Samimy from Stifel..

I just wanted to focus on Evolux for a minute. So, I understand that physicians are looking for help in marketing their practices. Do you get a sense that there will be any -- I mean, on the other side, there’s possibly some sensitivity of physicians feeling that they’re too close to one company and pushing a product if they’re too entrenched in it.

So, can you just help us understand the receptivity of the physician base and with this co-branding effort. And just quickly, just want to ensure that the promotional product is now washed out of all inventories.

And then, finally, I know that you can’t comment on the ITC complaint, but maybe you can help us understand potential realistic scenarios that could emerge from this ITC case from the worst case to the best case, so we can sort of start framing it in our head. Thanks..

Sure. Thanks for the question. So, why don’t I take each of them and then I’ll -- I’m going to ask Mike to expand on the Evolux comment as well. So, let me start with the ITC. Clearly top of mind for investors as we mentioned earlier, the hearing took place earlier in February. And with the ITC, the majority of those hearings are confidential.

It’s not like a public trial where most of the information is available to you. So unfortunately, Annabel, I’m not able to provide any more color than what I provided earlier. That being said, nothing changed through the case.

We feel confident in the strength of our IP and we expect that this case will be resolved before the end of the year and this will be behind us.

Moving onto your second question, I’d say that first, if you step back, before we launched the Company, we spent a significant amount of time working through the design of how we could add value to this category.

To give a lot of credit to the competitors, I think they’ve done a really nice job of building brands and helping grow these aesthetic practices. The next wave of growth is going to come from a differentiated approach to this market, not just in the product, but in the way that we communicate to the consumers.

By wiring our companies through a single digital platform, it enabled us to bring personalization to this market. What that means is that every customer, when they downloaded the Evolus app in May of last year to participate in the J.E.T. program, they began to engage with this company in a very different way from how other companies operate.

Not only did we curate their images on the Evolus, find a doctor, so that they would be more approachable to the consumer, but we also introduced price transparency to the customers. So, they had full visibility to their pricing, and also how they could move up to our higher tiers and obtain better pricing over time.

But in all fairness, in 2019, it was all just about trial and gaining experience with the app. In 2020, it’s really about building this category and establishing this brand.

We believe that through our digital platform and Evolux, we can now advertise with the customer and eliminate a step that the consumer would have to go through when they’re thinking about getting treated with a neurotoxin in the market today, because we’re combining that doctor directly with our brand.

And by partnering the two together, we now create one less step in the consideration process for the consumer to take action. We know that millennial segment is very active on the digital side and we know customers are looking to increase the number of millennial patients in their practice.

When you couple our digital platform with the market opportunity on the consumer front, what you get is a unique opportunity through Evolux. That’s very appealing to all practices. We’re hearing that consistently. We’ve only been out in the market with the Evolux program for less than a month, and the response we’re getting is overwhelmingly positive.

They never had in this toxin market a co-investment between the company and the customer, where as they purchase, we invest behind them. As you can imagine, not only is that beneficial driving patients in, but from a manufacturer standpoint, we have full visibility to the ROI associated with that investment from the account.

And that ability for us to scale up that investment over time, becomes a lot more transparent, and will be a lot more visible in terms of the return that we can share with you. And so, we’re very pleased with how this is all rolled out. And I give a lot of credit to Mike and the rest of the marketing team for really being forward thinking.

And that’s really been the premise of the Company in the launch of this product is how do we add more value to a market where the competitive set has done a really nice job of building out this category. And this is where we add value here. It’s a very differentiated approach. I’ll have Mike add some color there as well..

I’ll start by saying this is retail medicine at its best. Right? So, if you look at it from that context, these doctors, these accounts, these injectors, these med spas, they don’t have marketing departments.

They’re trying to inject, they’re trying to manage their payroll, their trying to manage their social media handle, they’re trying to market within their local market. And so they look for partnership and they look for help from industry. Since our entrance, I’ll tell you, the intensity and the content around this category has only increased.

You now have everybody providing great quality content against this category. And so, this is what’s needed to fuel growth. Customers are very receptive to Evolux, because they realize, they are the artists in this equation. And putting them at the forefront allows consumers to see who’s delivering these products.

And we’re not doing it in a way that the brand is overpowering it. We’re doing it in a way where the injectors are spotlight and highlight of this thing.

Lastly, having been around this industry for about 10 years now, 10 to 11 years, there’s been a consistent theme all along that stated that we want -- we as injectors want access to what you as a company have done on a national -- or are doing on a national level. We want to localize your national efforts, so we could piggyback off of that.

There’s no better way to do that than to take that onto Evolux where we combine our national efforts to our local effort. The receptivity has been overwhelmingly positive, now that we’re close to a month out in the field with Evolux and so far things look pretty good..

Thanks, Mike. And then lastly, I think Annabel, you’d asked about promotional products in the market. We expect that that J.E.T. product was all consumed through the end of the fourth quarter. And then as we started the new year, we’re operating from a position where most of the product is now product that we’re selling into the market..

Your next question comes from Louise Chen from Cantor..

Hi. Thanks for taking my questions here. I had a few.

So, for Jeuveau, are there any supply issues, or do you anticipate any supply issues due to coronavirus because it’s manufactured in South Korea? And then, secondly, how close -- or is there any way you can provide any metrics as to how close you are to the number two share in the U.S.? And then, last question is, I know you gave a lot of color on 2020, and thank you for that, but any way to think about the sales growth for Jeuveau in 2020? Thank you..

Hi, Louise. Good morning. I wanted to talk to the inventory question you asked. At year-end and you’ll see when we file our 10-K later today, we had about $6.4 million of inventory at 12/31/19. In the first quarter, we continued to receive shipments on a regular basis. Our plant is in full operation.

And between our manufacturing partner and us, we have much more than six months of finished goods inventory. So, we’re in a solid position on inventory and have no concerns..

On the share side, the back half of last year, as you know, Louise, we achieved the number three market share position, and that puts us roughly trading in the 6 to 10 share range here as we entered the New Year.

Our next clip up in terms of market share we believe will come on the backs of the Evolux launch, which we’re hearing great feedback against, as well consumer loyalty.

That next wave of customers, whether you think about our growth coming from going wider from 3,500 customers up, which we expect to do in 2020 or deeper in terms of the utilization per customer will come off of the backs of both the Evolux and the consumer loyalty program. And we believe that will result in our continued share uptake to the year.

And I think that gets to your last question around sales growth. Clearly, we expect revenue will continue to grow. You saw a very nice clip up from the third quarter up to the fourth. We’re going to continue seeing new accounts added throughout the year, and we’re also seeing accounts committing a greater portion of their toxin business to us.

And so, naturally, that will continue we expect throughout the year. Keep in mind, we’ve only been on the market for about seven months by the end of the calendar year in 2019. So, it’s still very early in our launch. And as you point out, there’s three quarters of the time left until the two-year mark where we get to the number two period.

So, we feel very good about how quickly we’ve gotten out of the gates, and also the plans that will get us to the number two position within 24 months of launch..

Your next question comes from Douglas Tsao from H.C. Wainwright..

Just a couple for me. First, given your focus on the millennial customer segment, does that affect the types of products and opportunities that you might be looking at in terms of business development versus companies that might be focused a little bit more on the Gen X.

And then second, just in terms of Jeuveau and the ongoing launch dynamics, just curious if you have a sense of whether your -- whether the sales force is really focused today on expanding the customer base or deepening penetration within existing account base.

And obviously, they’re trying to do both, but I was just curious if you had a sense at this point whether feedback from reps was that they were going -- they’re getting more success doing one or the other..

All great questions. I’ll handle first, in terms of the sales force focus. It is on both. And in that degree around going wider versus deeper varies obviously by pockets around the country. They have the tools to do both.

In the end, when you think about getting to the number two market share position, we feel like we have a strong base of users with 3,500 and we have the opportunity within that user base to continue to drive our share higher, and Evolux is designed specifically to do that and will continue to, we believe, to over index in our share against the millennial population as a result of that investment that we have on the digital side with Evolux program.

But, going wider is also an important initiative in markets throughout the country. As we have expanded our injector base, you can imagine that in any pocket of the market, you enter, there’s a number of customers that are in some stage of consideration of bringing on Jeuveau to their practice.

And obviously our reps are capitalizing on that opportunity as well. And with the consumer loyalty program, we believe that becomes another catalyst that drives more customers in, given that there is an existing pool of roughly 4 million toxin users that many of which are part of some loyalty program.

And although we’ve had great episodic promotional programs with our consumer rebates, many customers are looking for our loyalty program.

And so, we believe that once we get to the middle of 2020, and our value propositions rolled out, that’s where we’ll start to see continued expansion and meaningful contribution from these accounts because they’ll have full visibility to a very differentiated value proposition in the market..

Okay.

And then, in terms of the business?.

Yes. So, on the business development side, look, there’s existing markets, which were -- which are established markets that of course we spend considerable amount of time thinking about. And we also look at how the consumer psychology of that younger demographic, as you point out.

There are many unmet needs, some of them are of higher importance to that younger demographic than others. And to the extent that we can contribute to this market with not just differentiated assets within the existing space but also to create markets that don’t exist, we’re very open to that idea.

As you can see, with our marketing strategy, we’re about unlocking potential that otherwise we believe would not have been achieved without the approach that we’re taking. And to the extent that we believe there’s an asset out there that can help do that that is something we would pursue..

Your next question comes from Balaji Prasad from Barclays..

Firstly, pleased to see the launch of a Evolux. Will you be sharing any quantitative metrics on this program on a regular basis? And how should we track or factor the impact of this program better? Also, on the same lines, I wanted to understand the smart media approach.

How is it different from your digital campaign last year?.

I’ll provide some initial comments and I’ll ask Mike to provide some more color here. On the Evolux program, just like every other metric, as we get further into Evolux, well provide you some more color around the performance of the program.

That being said, keep in mind, the accounts in the first quarter are buying up to our top three tiers in order to get the benefit of the digital advertising, which starts in the second quarter.

So, as you think about some of the metrics we might report on, as it relates to consumer engagement from the digital platform, that’s a back half idea that we’ll provide some more color around. It’s not something you should expect in the second quarter.

Any additional color you want to add? Mike?.

I’ll address smart media. I’ll start with the consumer, which is obviously the end user, and then, I’ll touch upon our kind of buying strategy and then I’ll give you the metrics here. This consumer, called the millennial consumer, needs content that’s personalized. They seek companies that understand them.

And so, that approach is all about personalizing our context. And combining our national and our local strategy is key to unlocking that potential. From a media buying strategy, we have a very involved media agency that’s in our office every day.

And we deploy a very programmatic approach on how we buy media on a very-localized level around customers that are purchasing our brand. The last thing we want to do is take our spend and deploy it in a market that we don’t have a great saturation of customer base. And so, we’re mindful of where that goes on a local level.

And I’ll tell you, the combination of our programmatic approach and our personalization is already proving in the content through this year’s strategy rather than last year. As you know, we reported our J.E.T. -- through our J.E.T. survey the percentage of patients that are naïve to this category.

And then, last year, based on our last year’s media strategy, was about 25% of patients coming into our brand, being naïve to this category. This year, we just reported that it’s about 33% of patients that are naïve to this category.

So, making these programmatic changes and aligning them with personalization and context is proven to continue to grow this category on a very local level..

Okay. Thank you. A secondly, I appreciate the update on the litigation. I just had a procedural question here.

When can we expect to see the redacted versions of these hearings? And lastly, on a Nuceiva, how will the launch ramp across the different countries? And did I understand right that you’ll have no material revenues in H1 from Europe? Thank you..

I’ll let Lauren take the second part of your question. As it relates to the ITC case and what materials may become public. As you know, the filings were all private thus far, but it’s up to all three parties to agree on what documents are made public. And so that will be coming over the number of weeks moving forward.

At this point, it’s not entirely clear. So, I’m not a in a position to speak to what may become available to the public..

On the European question, if I caught all of it, Balaji, what I heard was to put some color around the European and the Canadian revenues. We do not expect international revenues in the first half of 2020. Canada is soft, and Europe launches in the second half. Let me know if I’ve addressed your question..

Yes. Thank you. That’s helpful. Yes. Thanks, Lauren..

Thank you..

Your next question comes from Vamil Divan from Mizuho..

Hi. Great. Thanks for taking the questions. So, I just have a couple here. One, again, I know you can’t say much around the ITC. But, one question we received a lot from investors is around some of these potential outcomes and I know a settlement is one of them.

And I guess, the question we’ve been getting is that there’s some sort of settlement where there’s some additional royalty payments that are decided upon by the parties.

Is Evolus -- are you guys indemnified from paying any of those further royalties? So, I’m not sure if you can comment on that point, but if could, it’d be helpful, because we’ve been getting questions on that. And then my second question, you showed the results of your survey on the millennial population on slide five.

And obviously, a fairly large percentage of millennials are worried about lines and wrinkles and willing to spend to manage it.

Did you have any specific questions around their willingness to undergo a facial toxin procedure specifically, as opposed to spending in other ways to try and manage it?.

I’ll start up with ITC questions and then turn it over to Mike around the consumer research that he shared. On the ITC case, unfortunately, we’re not going to be able to provide any more color than what I’ve provided earlier.

But to answer the other part of your question there, we are indemnified by our partner Daewoong in this case, but we can’t speak to what may transpire over the course of the number of months. We look forward to obviously closure of this case in October. And it’s something that’s important to both employees of the Company as well as our shareholders.

We recognize that. In the interim, we’re very focused on delivering on the businesses and having just resolved by the end of the year.

Mike?.

Yes. I appreciate the question on their willingness to take this. To understand that, you have to step back and look at how -- the upbringing of this consumer. This consumer has been around this category for many years watching her mom partake in this.

Right? And that’s a psychological shift that wasn’t there decades prior to where this whole procedure was rather taboo. So, that upbringing is making this product a lot more kind of acceptable for that consumer base. You also have a shift on the customer where that customer is migrated from medical setting to front retail store.

And they’re trying to make their procedures a lot more accessible. Then, you have the advent of social media. And 90 plus percent of the content out there against this category is driven by customers on their localized market. So, now, as a consumer, as a millennial consumer, you’ve seen your mom partake in this and you grew up in this.

You’ve seen the advent of social media and the frequency and where this is spoken about. And you’re seeing customers move their offices into a retail setting where if you walk by a strip mall, you can walk in right into it. And that’s fine in any given part of the country. The openness against this category is becoming increasingly more important.

You also have a consumer base that’s willing to spend on this, as they do with other aspects of their of their personal lives. They grew up in ridesharing world. They’re putting off buying a second car. They grew up in the Airbnbs of the world. They’re putting off buying second homes. And they’re putting off having children to a later age.

So, they’re interest in maintaining their active lifestyle and intensity and personal care is only increasing, which is a favorable economic backdrop to us. So, the openness behind this category is continuing to increase. And that’s the reason why we actually will focus on this, and the consumer segment..

Okay. If I can squeeze in one more, just another one just to get a sense of the market dynamics. I was wondering about -- obviously some of your competitors are going through pretty major organizational changes and acquisitions and the like.

Have you noticed any change in sort of the behavior of your competitors over the last few months, as a result of some of these transactions?.

Look, I think, we brought to the market a different approach. Right? We’re an aesthetic-only company with the neurotoxin, and it’s not tied to reimbursement. That idea is an important one. And with that we were able to bring to the market transparency in pricing and were able to roll out some the programs we spoke to you today.

We’ve seen, since the competitors across the board have transitioned from businesses that were integrated into the pharmaceutical business to separate global business structures. That certainly makes a lot of sense to us in terms of how you can support the customer with that business model.

But, at the same time, nothing really changes in terms of what we’re doing or the way that we’ve launched the product in the market. We continue to march our way down the field, so to speak, in the sense that we have a lot of work to do, to build out a brand and to make this a household name. And we’re committed to doing that.

We’re pleased with the uptake of the product. We like the way that we’re structured and focused against this market. And then, lastly, we talked about this early on. Customer centricity is incredibly important.

The fact that any doctor can reach out to the senior levels of this organization and provide their input and feedback and we can act quickly around the market need is an advantage that we have as a small company that we’ll continue to deliver against..

There are no further questions at this time. Ladies and gentlemen, this does conclude today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect..