RVNC - Revance Therapeutics: Rally Seems Due For A Pause

2023-04-03 19:57:20 ET

Summary

• Today, we take a deeper look at Revance Therapeutics, Inc., a developer of aesthetic products that is seeing rapid revenue growth.
• The company has potential catalysts on the horizon but is bumping up against analyst price targets and has a high cash burn rate.
• The shares are up 80% so far in 2023. Will the stock's winning ways continue? An investment analysis follows in the paragraphs below.

Vanity plays lurid tricks with our memory, and the truth of every passion wants some pretense to make it live .”? Joseph Conrad

Today, we put Revance Therapeutics, Inc. ( RVNC ) in the spotlight. This developer of neuromodulators is targeting several indications within the aesthetic arena. The company is experiencing rapid sales growth from its current product portfolio and its primary asset DAXXIFY (daxibotulinumtoxinA-lanm) is now competing against the blockbuster BOTOX. Daxxify is the first true innovation in neuromodulator formulation in over 30 years. The shares have risen by more than 75% so far in 2023 on initial sales. Can the rally continue or is profit taking on the horizon? An analysis follows below.

Company Overview:

Revance Therapeutics is focused on the development and commercialization of neuromodulators for various aesthetic and therapeutic indications and is based in Nashville, TN. The stock currently trades around $33.00 a share and sports an approximate market capitalization of $2.7 billion.

The company's business consists of several component starting with The RHA® Collection, which is a collection of four injectable gels (RH2, RH3, RH4, and RHA Redensity) to soften lines and restore volume.

In September of last year, Revance announced that Daxxify had garnered FDA approval for this injection for the temporary improvement of moderate to severe frown lines. This product will now compete directly against Botox from Abbvie Inc. ( ABBV ) in what Cowen & Co. estimate at the time of approval to be an approximate $2 billion market in the United States. Daxxify's six month median duration is superior to Botox, whose injections are typically scheduled every three to four months. Revance almost immediately raised $200 million via a secondary offering after the FDA decision to raise proceeds to support the initial rollout of Daxxify.

In October of last year, Revance submitted a supplemental Biologics License Application or sBLA to the FDA for Daxxify to approve an indication for cervical dystonia . Management has stated that the U.S. market for muscle movement disorders is is approximately $1 billion annually, with Cervical Dystonia making up some $345 million of that projection. The scheduled action date for this application is August 19th. A full commercial launch if approved for this indication would begin in 2024.

Fourth Quarter Results:

On the last day of February, the company posted its fourth quarter numbers . Revance lost $1.82 a share on a GAAP basis, 78 cents a share worse than the consensus. It should be noted that Revance took a one-time impairment loss to their services segment of $69.8 million as well as one-time accelerated amortization expense of $11.7 million for their legacy HintMD developed technology asset. This was part of the plan migration over to the company's OPUL platform that serves its clients. Revenues did rise over 90% on a year-over-year basis to $49.9 million, nearly $5 million above expectations.

Revance's revenues from its RHA® Collection came in at $34.8 which was up 46% from the same period a year ago. For the year, this product portfolio booked $107.2 million in sales, up 51% from FY2021. Daxxify 'PrevU' revenue was $11 million and Daxxify began its full scale commercial launch last month.

The company also had $2.9 million of service revenue ((OPUL)), and $1.2 million of collaboration revenue.

Analyst Commentary & Balance Sheet :

Since fourth quarter results posted, a half dozen analyst firms including Piper Sandler and Needham have reissued Buy/Outperform ratings on RVNC stock. Price targets proffered range from $33 to $42 a share. Wells Fargo maintained its Hold rating but did bump up its price target to $30 on the stock from $22 previously.

Approximately one out of every outstanding six shares are currently held short. Several insiders sold just over $4 million worth of shares collectively in the first quarter of this year. The company ended FY2022 with approximately $340 million in cash and marketable securities on its balance sheet after posting a net loss of $146 million in the fourth quarter. For the 2022 fiscal year Revance had a net loss of $356.4 million. The company has long-term debt of just under $380 million.

Revance does have a note purchase agreement in place to fund its operations until it reaches management's projected cash flow breakeven status.

Verdict:

Currently the analyst firm consensus has the company losing $2.71 a share in FY2023 even as revenues soared just over 80% to $240 million. They see sales growth slowing to 70% in FY2024 and losses being more than cut in half to $1.28 a share. Both revenue and earnings projections are in a wide range it should be noted.

The company is aiming at significant market opportunities and has substantial sales growth ahead of it. The longer lasting effects of Daxxify compared to Botox could lead to rapid growth in market share. That said, profitability is some time off in the future. Add in the stock hitting up against analyst firm price targets after its big run in 2023 and some recent insider selling, my bet is that Revance Therapeutics, Inc. stock's big rally is overdue for at least a " pause" if not a pullback at current trading levels. If the shares came back to the mid $20s, I probably would start to build an initial stake in RVNC as the company seems well positioned over the long term. I just believe the stock has gotten a bit ahead of itself after its big rise this year.

Besides, nothing makes one so vain as being told that one is a sinner. Conscience makes egotists of us all .”? Oscar Wilde.

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