RVNC - Revance Therapeutics: Impressive Sales Growth/Concerning Cash Burn

2023-09-15 17:51:50 ET

Summary

• Revance Therapeutics, Inc. stock has fallen by half in the past six months, despite impressive sales growth, prompting speculation on whether it is now a good buy.
• The recent DAXXIFY launch seems to be proceeding well, but quarterly cash burn remains an issue as Revance challenges Botox in this space.
• Analysts have mixed opinions on the stock, with some reiterating buy ratings and others issuing neutral ratings.
• An investment analysis follows in the paragraphs below.

Curiosity is only vanity. We usually only want to know something so that we can talk about it ."? Blaise Pascal.

It has been nearly six months since we looked in on Revance Therapeutics, Inc. ( RVNC ) . In that article , we concluded that the stock's recent rally was overdue for a pause and the shares should be avoided. That turned out to be the right call, outside advocating for a short position, as the stock has tumbled by half since that piece ran here on Seeking Alpha. Have the shares fallen enough to now be in the " buy zone" ? An updated analysis follows below.

Company Overview:

Nashville, TN headquartered Revance Therapeutics is focused on the development, manufacture, and commercialization of neuromodulators for various aesthetic and therapeutic indications. The stock currently trades at $17.00 a share and sports an approximate market capitalization of $1.5 billion.

Second Quarter Results:

The company reported its second quarter numbers on August 8th. Revance Therapeutics had a GAAP loss of 80 cents a share, a penny worse than expectations. Revenues rose nearly 105% on a year-to-year basis to just over $58 million. Sales from the RHA Collection came in at $31.8 million, up nearly 25% from 2Q2022. The Collection consists of four injectable gels (RH2, RH3, RH4, and RHA Redensity) to soften lines and restore volume.

DAXXIFY revenue was $22.6 million, which was up some 47% sequentially from the first quarter of this year. The product also had service revenue of $3.7 million. DAXXIFY was approved in September of last year to treat glabellar lines. The product's approval timeline got pushed back some two years thanks to the pandemic's impact on the FDA. The product's key customer segment is female users between the age of 25 and 55.

DAXXIFY is positioned to challenge the large Botox franchise and is the first true innovation in neuromodulator formulation in over 30 years. Shareholders got some good news in mid-August when DAXXIFY was also garnered a label expansion to now treat adult patients with the neck disorder cervical dystonia. A recent Seeking Alpha article pegged this potential market at just under $350 million. The company hopes to be approved in China for both indications through its partner Fosun Pharma in the coming quarters. Both marketing applications have been accepted awaiting potential approval in China.

During the quarter, the company increased its aesthetic sales force by 50% to 150 personnel. One key reason that SG&A expenses jumped to $77.4 million for the quarters to $47.8 million in the same period a year ago.

Analyst Commentary & Balance Sheet:

The analyst firm community has been largely bullish on Revance Therapeutics since the company posted its second quarter earnings report. Six analyst firms including Mizuho Securities and Barclays have reiterated Buy/Outperform ratings. Price targets range from $35 to $50 a share. Both Exane BNP Paribas ($20 price target) and Morgan Stanley ($25 price target) have issued Neutral ratings on the stock.

Just under 20% of the outstanding float is currently held short. Numerous insiders have been frequent and significant sellers of the stock throughout 2023. So far in the third quarter they have disposed of approximately $3.2 million worth of equity collectively.

The company ended the first half of 2023 with approximately $320 million in cash and marketable securities on its balance sheet after posting a net loss of $67.2 million during the second quarter. This was higher than the $61.4 net loss in 2Q2022. During the quarter, Revance the company issued 3.2 million shares of common stock via its existing At-the-market ((ATM)) program which raised approximately $100 million worth of proceeds via dilution. Revance has approximately $180 million in long-term debt.

Verdict:

Revance Therapeutics lost $4.90 a share in FY2022 on just over $132 million of revenue. The current analyst firm consensus has revenues soaring to nearly $250 million in FY2023 and losses being cut to just under three bucks a share. Revenue growth of just over 65% is projected in FY2024 as losses get chopped by two-thirds to just under a buck a share.

No one can question that Revance is delivering impressive sales growth. The key challenge for the company remains the same as from our article earlier this year. This is its cash burn rate, which is not improving yet despite sales gains as the company builds out its sales structure to ramp up sales of DAXXIFY. Further dilution is almost certainly on the horizon and profitability happens in the earliest in FY2025, and more likely FY2026. Probably key reasons there is such a high short percentage in the stock right now.

Therefore, until Revance Therapeutics, Inc. can make substantial progress in reducing its cash bleed, I will remain on the sidelines on this name.

Or, rather, let us be more simple and less vain ."? Rousseau Jean-Jacques.

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