Wrinkles received some bad news this week: A new, longer-acting competitor to Botox Cosmetic received its first FDA approval. Revance Therapeutics (RVNC) finally overcame manufacturing deficiencies to snag regulatory approval for Daxxify in a specific aesthetic condition.
A pivotal clinical trial demonstrated many patients maintained responses for six months, whereas the benefits of Botox generally last three to four months. The potential to need only two treatments per year is expected to become a significant selling point. Daxxify is also the only product on the market to exclude animal-derived components, which could provide a marginal boost in certain demographics.
Investors are rightfully excited about the possibilities to compete in the aesthetics market with Botox, but the company has greater ambitions for Daxxify that will require additional approvals over the next few years.
What's the Market Opportunity?
Daxxify earned FDA approval specifically for treating glabellar lines, or vertical wrinkles between the eyebrows and on the forehead. It may seem silly to draw such a distinction, but it's important for investors to understand the nuances involved in the approval and overall market for the product.
Drugs such as Botox and Daxxify are called neuromodulators. They're derived from toxins produced by the soil bacterium Clostridium botulinum, which is responsible for botulism. The rare but serious illness is characterized by paralysis in vital body systems caused by the bacterial toxins. However, when the toxins are purified and used in infinitesimally small amounts measured in nanograms, they can locally reduce activity in the nervous system. Neuromodulators have treatment applications in wrinkles, migraines, muscle spasms, and other conditions spanning both aesthetics and therapeutics.
Revance Therapeutics will need to earn separate FDA approvals for each new indication. The first approval will compete with Botox Cosmetic in the aesthetics market, which is generally what most people associate with the world's most famous neuromodulator. AbbVie (ABBV) generated full-year 2021 revenue of $1.4 billion from Botox Cosmetic. It generated $862 million in domestic sales in the first half of 2022, suggesting it's on pace to grow over 20% this year.
That provides a significant opportunity for Revance Therapeutics, but success will take time. Daxxify will need to compete against four different neuromodulators in aesthetics including Botox Cosmetic, Dysport, Xeomin, and Jeuveau. The longer-acting formulation is expected to provide a significant advantage within the competitive landscape.
Wall Street is generally optimistic about the company's ability to achieve success. Revance Therapeutics has built commercial infrastructure for its dermal filler products that can be leveraged to launch and ramp Daxxify. Existing relationships with dermatologists could accelerate market share gain, especially considering the value proposition for doctors.
The long-acting formulation is a key selling point for patients who desire fewer injections. It's also a selling point for dermatologist offices, which can charge more for Daxxify and generate more revenue per patient visit.
Going Beyond Aesthetics
Why stop with aesthetics? Revance Therapeutics has conducted and is conducting multiple studies evaluating Daxxify in therapeutic indications. A supplemental biologics license application (sBLA) in cervical dystonia (painful contractions in neck muscles) is expected to be submitted before the end of 2022. A phase 3 clinical trial in upper limb spasticity (muscle spasms and stiffness in the arms) is currently underway.
AbbVie generated full-year 2021 revenue of $2 billion domestically from therapeutic applications of Botox. Revance Therapeutics estimates cervical dystonia and spasticity indications represent 16% and 28% of the market opportunity, respectively. Treatments for migraine (36%) and overactive bladder (6%) represent additional notable opportunities.
The challenger is pursuing an interesting development strategy to accelerate its arrival. In addition to studying Daxxify in specific therapeutics indications, Revance Therapeutics has partnered with Viatris (VTRS) to develop a biosimilar of Botox. That would potentially allow the companies to compete in all 115 approved indications for Botox with a single approval.
Manufacturing deficiencies from Revance Therapeutics have delayed the Botox biosimilar to at least 2026, but it remains the only such biosimilar in development as of this writing.
A Solid Strategy in a Competitive Market
Revance Therapeutics has set out on an ambitious and daunting mission to compete with Botox, which is one of the most recognizable global brands. It has focused its efforts on the right areas so far.
Daxxify addresses a core drawback of Botox Cosmetic by offering more durable responses. The RHA collection of dermal fillers provides an opportunity to generate significant additional revenue, but more importantly, monetized the creation of much-needed commercial infrastructure. The company's marketing materials also ooze with class and luxury, which will be needed to capture the attention of Botox customers.
Perhaps the single-biggest risk is the company's history of manufacturing deficiencies. When a drug developer submits a BLA requesting regulatory approval, over half of the application contains manufacturing data, not clinical data. The FDA has been highly critical of Revance Therapeutics with respect to manufacturing operations, which have delayed multiple products including Daxxify and the Botox biosimilar candidate.
Although approval means the company has addressed manufacturing concerns relating to Daxxify for now, investors need to acknowledge the potential for future negative surprises. The risk is heightened considering the focus on aesthetic markets. Dermatologists and patients could quickly abandon the brand if manufacturing obstacles ever jeopardize product quality or availability.
Simply put, the company is on the right path and appears generally well positioned for success. Investors should nonetheless remain realistic about the daunting challenge ahead. It will take time to ramp sales of Daxxify and earn additional approvals, while I wouldn't be so quick to assume manufacturing problems are behind the company.
