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What changed in Evolus, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Evolus, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+459 added−429 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-08)

Top changes in Evolus, Inc.'s 2023 10-K

459 paragraphs added · 429 removed · 312 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+73 added−34 removed47 unchanged
Biggest changeWe believe the growth in the medical aesthetics market is driven by a number of factors, including: 3 Table of Contents • increased use by millennials who are increasingly seeking medical aesthetic treatments and utilizing neurotoxins as an entry point for aesthetic procedures due to their minimally invasive nature; • an aging population together with an increasing life expectancy, which is resulting in more consumers with a desire for improved appearance and well-being over a longer period of time; • rising disposable income, with the U.S.
Biggest changeWe believe that the medical aesthetics market and the facial injectables market are poised for consistent growth driven by a number of factors, including: • increased use by millennials and younger demographics who are increasingly seeking medical aesthetic treatments and utilizing neurotoxins as an entry point for aesthetic procedures due to their minimally invasive nature; • an aging population together with an increasing life expectancy, which is resulting in more consumers with a desire for improved appearance and well-being over a longer period of time; • rising disposable income, with the United States Bureau of Economic Analysis reporting that real disposable income in the United States increased approximately 30% from December 2013 to December 2023; • growing awareness, including through social media, utilization and acceptance of elective or minimally invasive aesthetic procedures; and • continued innovation and improved accessibility to these treatments due to an increase in the number of aesthetic practitioners who perform these procedures.
Biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Adverse event reporting and submission of periodic reports is required following FDA approval of a BLA.
Biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Adverse event reporting and submission of periodic reports is required following the FDA approval of a BLA.
These laws that may affect our ability to operate include, but are not limited to: • The Anti-Kickback Statute, which prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program; • The Federal False Claims Act which imposes civil and criminal liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government; • The Federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier; • The Foreign Corrupt Practices Act (“FCPA”), which prohibits certain payments made to foreign government officials; • The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device a material fact or making 10 Table of Contents any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services relating to healthcare matters; • The Federal Physician Payments Sunshine Act, and its implementing regulations, which require that certain manufacturers of drugs, medical devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report to the CMS information related to certain payments or other transfers of value made or distributed to physicians, which is defined broadly to include other healthcare providers, teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; and • State and foreign law equivalents of the foregoing and state laws regarding pharmaceutical company marketing compliance, reporting and disclosure obligations.
These laws that may affect our ability to operate include, but are not limited to: • The Anti-Kickback Statute, which prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual, or furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program; • The Federal False Claims Act which imposes civil and criminal liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government; • The Federal Civil Monetary Penalties Law, which prohibits, among other things, offering or transferring remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order or receive items or services reimbursable by the government from a particular provider or supplier; • The Foreign Corrupt Practices Act (“FCPA”), which prohibits certain payments made to foreign government officials; • The Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services relating to healthcare matters; • The Federal Physician Payments Sunshine Act, and its implementing regulations, which require that certain manufacturers of drugs, medical devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report to the CMS information related to certain payments or other transfers of value made or distributed to physicians, which is defined broadly to include other healthcare providers, teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; and • State and foreign law equivalents of the foregoing and state laws regarding pharmaceutical company marketing compliance, reporting and disclosure obligations.
FDA Marketing Approval The process required by the FDA before a biological product may be marketed in the United States generally involves the following: • completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLPs, and applicable requirements for the humane use of laboratory animals or other applicable regulations; • submission to the FDA of an investigative new drug application, or IND, which must become effective before human clinical trials may begin; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed biological product for its intended use, according to the FDA’s regulations, commonly referred to as good clinical practices, or GCPs, and any additional requirements including those for the protection of human research subjects and their health and other personal information; 9 Table of Contents • submission to the FDA of a BLA for marketing approval that includes substantive evidence of safety; • purity and potency from results of nonclinical testing and clinical trials; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity and, if applicable, the FDA’s current good tissue practices for the use of human cellular and tissue products; • potential FDA audits of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and • FDA review and approval of the BLA .
FDA Marketing Approval of Biologics The process required by the FDA before a biological product may be marketed in the United States generally involves the following: • completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLPs, and applicable requirements for the humane use of laboratory animals or other applicable regulations; • submission to the FDA of an investigative new drug application, or IND, which must become effective before human clinical trials may begin; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed biological product for its intended use, according to the FDA’s regulations, commonly referred to as good clinical practices, or GCPs, and any additional requirements including those for the protection of human research subjects and their health and other personal information; • submission to the FDA of a BLA for marketing approval that includes substantive evidence of safety; • purity and potency from results of nonclinical testing and clinical trials; 11 Table of Contents • satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity and, if applicable, the FDA’s current good tissue practices for the use of human cellular and tissue products; • potential FDA audits of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and • FDA review and approval of the BLA .
These completed obligations consisted of (i) cash payments of $35.0 million in multiple payments to Allergan and Medytox, of which we paid $15.0 million in the third quarter of 2021, $15.0 million in the first quarter of 2022, and $5.0 million in the first quarter of 2023, (ii) royalty payments to Allergan and Medytox on the sale of Jeuveau ® , based on a certain dollar amount per vial sold of Licensed Products by or on our behalf in the United States, from December 16, 2020 through September 16, 2022, (iii) royalty payments to Medytox, from December 16, 2020 to September 16, 2022, of a low-double digit percentage of net sales of Jeuveau ® sold by us or on our behalf in territories we have licensed outside the United States, and (iv) the issuance of 6,762,652 shares of our common stock to Medytox.
These completed obligations consisted of (i) cash payments totaling $35.0 million to Allergan and Medytox, of which we paid $15.0 million in the third quarter of 2021, $15.0 million in the first quarter of 2022, and $5.0 million in the first quarter of 2023, (ii) royalty payments to Allergan and Medytox on the sale of Jeuveau ® , based on a certain dollar amount per vial sold of Licensed Products by or on our behalf in the United States, from December 16, 2020 through September 16, 2022, (iii) royalty payments to Medytox, from December 16, 2020 to September 16, 2022, of a low-double digit percentage of net sales of Jeuveau ® sold by us or on our behalf in territories we have licensed outside the United States, and (iv) the issuance of 6,762,652 shares of our common stock to Medytox.
The percentages of responders in the intent to treat population were: • EV-001: 1.2% placebo, 67.5% Jeuveau ® , with an absolute difference between the groups of 66.3%, 95% CI (59.0, 72.4) 5 Table of Contents • EV-002: 1.3% placebo, 70.4% Jeuveau ® , with an absolute difference between the groups of 69.1%, 95% CI (61.5, 75.1) EU Phase III Clinical Trials – Head-to-Head Comparison of Jeuveau ® , Botox and Placebo The EVB-003 study was the third Phase III safety and efficacy study in the TRANSPARENCY Program and compared the efficacy of Jeuveau ® , Botox and Placebo.
The percentages of responders in the intent to treat population were: • EV-001: 1.2% placebo, 67.5% Jeuveau ® , with an absolute difference between the groups of 66.3%, 95% CI (59.0, 72.4) • EV-002: 1.3% placebo, 70.4% Jeuveau ® , with an absolute difference between the groups of 69.1%, 95% CI (61.5, 75.1) EU Phase III Clinical Trials – Head-to-Head Comparison of Jeuveau ® , Botox and Placebo The EVB-003 study was the third Phase III safety and efficacy study in the TRANSPARENCY Program and compared the efficacy of Jeuveau ® , Botox and Placebo.
Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered. U.S.
We do not incorporate the information on or accessible through these websites into this Annual Report on Form 10-K, and you should not consider any information on, or that can be accessed through, these websites a part of this Annual Report on Form 10-K or any other filing we make with the SEC. 13 Table of Contents
We do not incorporate the information on or accessible through these websites into this Annual Report on Form 10-K, and you should not consider any information on, or that can be accessed through, these websites a part of this Annual Report on Form 10-K or any other filing we make with the SEC. 18 Table of Contents
Other Regulation of the Healthcare Industry While we do not currently have plans for our neurotoxin product to be covered by insurance or government reimbursement programs, if we were to offer reimbursable products, we could be subject to federal laws and regulations covering reimbursable products, such as the Anti-Kickback Statute, Stark Law and Physician Payment Sunshine Act.
Other Regulation of the Healthcare Industry While we do not currently have plans for our neurotoxin product or our dermal filler product candidate to be covered by insurance or government reimbursement programs, if we were to offer reimbursable products, we could be subject to federal laws and regulations covering reimbursable products, such as the Anti-Kickback Statute, Stark Law and Physician Payment Sunshine Act.
Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending license or marketing applications, warning letters and other enforcement actions, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending license or marketing applications, warning letters and other enforcement actions, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
International Trade Commission related to Jeuveau ® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox, which we refer to as the Medytox Settlement Agreement. We refer to the U.S.
(“Medytox”) in the U.S. International Trade Commission related to Jeuveau ® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox, which we refer to as the Medytox Settlement Agreement.
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” those independent contractors or agents of covered entities that 11 Table of Contents create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity.
Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity.
Post-Approval Requirements Once a BLA is approved, a product is subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.
Post-Approval Requirements for Biologics in the United States Once a BLA is approved, a product is subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.
This empowers employees to take ownership over their career 12 Table of Contents and development trajectory. Long-term incentives in the form of equity (Stock Options and RSUs) provide a sense of ownership in the company’s long-term success and help retain talent that can make a difference.
This empowers employees to take ownership over their career and development trajectory. Long-term incentives in the form of equity (Stock Options and RSUs) provide a sense of ownership in the company’s long-term success and help retain talent that can make a difference.
We believe we have good relations with our employees. Attracting and Developing Talent We believe that our employees are our greatest asset, and our future success largely depends upon our continued ability to attract and retain high caliber talent. Talent management is critical to our ability to execute our long-term growth strategy.
We believe we have good relations with our employees. Attracting and Developing Talent 16 Table of Contents We believe that our employees are our greatest asset, and our future success largely depends upon our continued ability to attract and retain high caliber talent. Talent management is critical to our ability to execute our long-term growth strategy.
Daewoong License and Supply Agreement In 2013, we entered into the Daewoong Agreement, which has been amended from time to time, pursuant to which Daewoong agreed to manufacture and supply Jeuveau ® and grant us an exclusive license to import, distribute, promote, market, develop, offer for sale and otherwise commercialize and exploit Jeuveau ® for aesthetic indications in the United States, EU, United Kingdom, members of the European Economic Area, Switzerland, Canada, Australia, certain members of the Commonwealth of Independent States, or CIS, and South Africa, as well as co-exclusive distribution rights with Daewoong in Japan.
Daewoong License and Supply Agreement In 2013, we entered into the Daewoong Agreement, which has been amended from time to time, pursuant to which Daewoong agreed to manufacture and supply Jeuveau ® and grant us an exclusive license to import, distribute, promote, market, develop, offer for sale and otherwise commercialize and exploit Jeuveau ® for aesthetic indications in the United States, EU, United Kingdom, members of the European Economic Area, Switzerland, Canada, Australia, New Zealand, and South Africa, as well as co-exclusive distribution rights with Daewoong in Japan.
The initial term of the Daewoong Agreement expires September 30, 2023, and automatically renews for unlimited additional three-year terms if we meet certain performance requirements. We expect to meet these performance requirements.
The initial term of the Daewoong Agreement expired September 30, 2023, and automatically renewed for an additional three-year term. The Daewoong Agreement automatically renews for unlimited additional three-year terms if we meet certain performance requirements. We expect to meet these performance requirements.
Settlement Agreement and the Medytox Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements. We have completed all obligations to Allergan and the majority of our obligations to Medytox under the Medytox/Allergan Settlement Agreements.
We refer to the U.S. Settlement Agreement and the Medytox Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements. We have completed all obligations to Allergan and the majority of our obligations to Medytox under the Medytox/Allergan Settlement Agreements.
All such reports are also available free of charge via EDGAR through the SEC website at www.sec.gov.
All such reports are also available free of charge via EDGAR 17 Table of Contents through the SEC website at www.sec.gov.
In 2019, we formed an employee-led Culture & Belonging Council. This council has a vision to create and foster a culture that reflects diversity and inclusion so that each of our employees has a sense of belonging as their authentic, unique selves.
Inclusion and Belonging We promote an inclusive culture that values equity, opportunity, and respect. In 2019, we formed an employee-led Culture & Belonging Council. This council has a vision to create and foster a culture that reflects diversity and inclusion so that each of our employees has a sense of belonging as their authentic, unique selves.
There are only five approved injectable botulinum toxin type A neurotoxins in the United States, including Jeuveau ® . There are also other injectable botulinum toxin type A products being developed for the U.S. market.
Competition Aesthetic Neurotoxins There are only six approved injectable botulinum toxin type A neurotoxins in the United States for aesthetic indications, including Jeuveau ® . There are also other injectable botulinum toxin type A products being developed for the U.S. market.
Our business has been, and will continue to be, subject to a variety of laws including the Federal Food Drug and Cosmetic Act, or FFDCA, and the Public Health Service Act, or the PHS Act, among others. Biologics and medical devices are subject to regulation under the FFDCA and PHS Act.
Our business has been, and will continue to be, subject to a variety of laws including the Federal Food Drug and Cosmetic Act, or FFDCA, and the Public Health Service Act, or the PHS Act, among others.
Human Capital Resources As of December 31, 2022, we had 215 employees, all of whom were full-time in the United States and United Kingdom, and 70% of our full-time employees were women. None of our employees are represented by labor unions or covered by collective bargaining agreements, and we have never experienced any work stoppage.
Human Capital Resources As of December 31, 2023, we had 273 employees, all of whom were full-time in the United States, Canada and Europe, and 63% of our full-time employees were women. None of our employees are represented by labor unions or covered by collective bargaining agreements, and we have never experienced any work stoppage.
We provide our employees with access to a variety of health and wellness programs, including programs that support physical and mental health and well-being by providing tools, resources, and coaching to help them improve or maintain a healthy lifestyle.
We provide our employees with access to a variety of health and wellness programs, including programs that support physical and mental health and well-being by providing tools, resources, and coaching to help them improve or maintain a healthy lifestyle. We maintain a healthy workplace by encouraging employees to work remotely if feeling ill and offering a hybrid work schedule.
Our first commercial product is Jeuveau ® , which is a proprietary 900 kilodalton, or kDa, purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults.
Jeuveau ® is our commercially available proprietary 900 kilodalton, or kDa, purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults. Jeuveau ® offers a 900kDa botulinum toxin alternative to BOTOX (onabotulinumtoxinA).
Most of our primary competitors are also approved to sell injectable botulinum toxin type A neurotoxins in Europe and other markets that we may enter.
Most of our primary competitors are also approved to sell injectable botulinum toxin type A neurotoxins in Europe and other markets that we may enter. Dermal Fillers There are a number of dermal fillers currently offered in the United States.
Within the multiple age groups that receive aesthetic neurotoxin treatments, we strategically focus our marketing efforts on the millennial segment which is the largest cohort in the U.S. population. In 2019 there were estimated to be approximately 73 million millennials, defined as individuals born between 1981 and 1996.
Within the multiple age groups that receive aesthetic neurotoxin treatments, we strategically focus our marketing efforts on the millennial segment which is the largest cohort in the United States population. Millennials are defined as individuals born between 1981 and 1996.
Going forward, our remaining obligation will be to pay Medytox a mid-single digit royalty percentage on net sales of Jeuveau ® in the United States and all territories we have licensed outside the United States through September 16, 2032. Competition Our primary competitors are companies offering injectable dose forms of botulinum toxin.
Our remaining obligation is to pay Medytox a mid-single digit royalty percentage on net sales of Jeuveau ® in the United States and all territories we have licensed outside the United States through September 16, 2032.
The primary efficacy endpoint was defined as the proportion of subjects classified as responders on Day 30. A subject was considered a responder only if both the investigator and the subject independently agreed that there was a 2 point improvement or greater on the GLS from Day 0 to Day 30 at maximum frown.
A subject was considered a responder only if both the investigator and the subject independently agreed that there was a 2 point improvement or greater on the GLS from Day 0 to Day 30 at maximum frown. This type of endpoint where both the investigator and subject must agree is known as a composite endpoint. Both of the U.S.
The safety results included 33 adverse events, 88% of which rated as mild and 12% of which rated at moderate. There were no severe or serious adverse events observed in the safety results. The trial is expected to be completed in the first half of 2023, and final results will be presented in the second half of 2023.
The safety results included 33 adverse events, 88% of which rated as mild and 12% of which rated at moderate. There were no severe or serious adverse events observed in the safety results.
We value the impact of ongoing volunteer opportunities with community partners Orangewood Foundation, Samueli Academy and the Jesse Rees Foundation. Corporate Information Our principal executive offices are located at 520 Newport Center Drive, Suite 1200, Newport Beach, California 92660, and our telephone number is (949) 284-4555. Our website address is www.evolus.com.
Corporate Information Our principal executive offices are located at 520 Newport Center Drive, Suite 1200, Newport Beach, California 92660, and our telephone number is (949) 284-4555. Our website address is www.evolus.com.
Additionally, Hugel Inc., has submitted a BLA to the FDA for an injectable botulinum toxin type A neurotoxin. If the Hugel BLA is approved, we expect the competition in the U.S. injectable botulinum toxin market to further increase.
Additionally, Medytox, Inc. and Galderma S.A. have each submitted a BLA to the FDA for injectable botulinum toxin type A neurotoxins. If any one of these BLAs is approved, we expect the competition in the U.S. injectable botulinum toxin market to further increase.
The TRANSPARENCY program, which was developed in consultation with the FDA, Canadian, and European regulatory bodies, included three multicenter, randomized, double-blinded, controlled, single dose Phase III studies titled EV-001, EV-002 and EVB-003. Treatment of the Glabellar lines was based on a 4-point photonumeric Glabellar Line Scale, or GLS, where 0=no lines, 1=mild lines, 2=moderate lines and 3=severe lines. U.S.
The TRANSPARENCY program included three Phase III studies titled EV-001, EV-002 and EVB-003. Treatment of the Glabellar lines was based on a 4-point photonumeric Glabellar Line Scale, or GLS, where 0=no lines, 1=mild lines, 2=moderate lines and 3=severe lines. U.S. Phase III Clinical Trials – Composite End Point Versus Placebo The two identical U.S.
Phase III Clinical Trials – Composite End Point Versus Placebo The two identical U.S. Phase III studies, EV-001 and EV-002 (the “U.S. Phase III Studies”), enrolled a combined 654 adults who had moderate to severe glabellar lines at maximum frown. Subjects were randomly assigned in a 3:1 ratio to receive a single treatment of either Jeuveau ® or placebo.
Phase III studies, EV-001 and EV-002, enrolled a combined 654 adults who had moderate to severe glabellar lines at maximum frown. Subjects were randomly assigned in a 3:1 ratio to receive a single treatment of either Jeuveau ® or placebo. The primary efficacy endpoint was defined as the proportion of subjects classified as responders on Day 30.
Regulation Outside of the United States and Europe In addition to regulations in the United States and EU, we may be subject to a variety of regulations in other jurisdictions governing manufacturing, clinical trials, commercial sales and distribution of our future products.
The rules for placing medical devices on the market in Northern Ireland, which is part of the United Kingdom, differ from those in the rest of the United Kingdom. 15 Table of Contents Regulation Outside of the United States and Europe In addition to regulations in the United States and EU, we may be subject to a variety of regulations in other jurisdictions governing manufacturing, clinical trials, commercial sales and distribution of our future products.
EU Phase III Primary Endpoint - Responder Rates at Maximum Frown on Day 30 (GLS = 0 or 1) by Investigator Assessment EU Phase III Primary Endpoint - Non-Inferiority, at Maximum Frown on Day 30 by Investigator Assessment 6 Table of Contents EU and Canadian Phase III Trial - Adverse Event Rate Summary EU and Canadian Phase III Trial - Select Secondary Endpoints *P-Value Placebo vs Jeuveau ® TRANSPARENCY Safety Evaluations Safety was studied across all five studies that made up the TRANSPARENCY Clinical Program.
The absolute differences between the treatment groups were: • 83.1% between Jeuveau ® and placebo groups, 95% CI (70.3, 89.4), (p ® was superior to placebo; and • 4.4% between Jeuveau ® and BOTOX groups, 95% CI (-1.9, 10.8), with non‑inferiority of Jeuveau ® versus BOTOX concluded based on the lower bound of the 95% CI for the absolute difference exceeding -10.0%. 6 Table of Contents EU Phase III Primary Endpoint - Responder Rates at Maximum Frown on Day 30 (GLS = 0 or 1) by Investigator Assessment EU Phase III Primary Endpoint - Non-Inferiority, at Maximum Frown on Day 30 by Investigator Assessment EU Phase III Trial - Select Secondary Endpoints *P-Value Placebo vs Jeuveau ® TRANSPARENCY Safety Evaluations Safety was studied across all five studies that made up the TRANSPARENCY Clinical Program.
In addition to the companies commercializing and developing neurotoxins, there are other products and treatments that may indirectly compete with Jeuveau ® , such as dermal fillers, laser treatments, brow lifts, chemical peels, fat injections and removal and cold therapy. We compete with various companies that have products in these medical aesthetic categories.
Other Medical Aesthetics Products In addition to the companies commercializing and developing neurotoxins and dermal fillers, there are other products and treatments that may indirectly compete with our products and product candidates, including but not limited to laser treatments, brow lifts, chemical peels, medical grade and mass-market skin care products, fat injections and removal and cold therapy.
Manufacturing Daewoong Pharmaceuticals Co. Ltd., or Daewoong, manufactures and supplies Jeuveau ® to us. Daewoong has over 70 years of experience manufacturing pharmaceutical products and is one of the largest pharmaceutical companies in South Korea. Daewoong constructed a facility in South Korea where Jeuveau ® is produced.
Daewoong has over 70 years of experience manufacturing pharmaceutical products and is one of the largest pharmaceutical companies in South Korea. Daewoong constructed a facility in South Korea where Jeuveau ® is produced. We believe this facility will be sufficient to meet demand for Jeuveau ® for the foreseeable future.
There are two types of MAs: • The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA and which is valid throughout the entire territory of the EEA.
Government Regulation in Europe EU Regulation of Biologics In the European Economic Area, or EEA (which is composed of the 27 Member States of the EU plus Norway, Iceland and Liechtenstein), medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. 14 Table of Contents There are two types of MAs: • The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA and which is valid throughout the entire territory of the EEA.
We believe the comprehensive TRANSPARENCY clinical data set, including a head-to-head Phase III study comparing Jeuveau ® and BOTOX, provides physicians with confidence in recommending Jeuveau ® to their patients. • Our management team has significant experience and expertise in medical aesthetics .
We believe the comprehensive TRANSPARENCY clinical data set, including a head-to-head Phase III study comparing Jeuveau ® and BOTOX, provides physicians with confidence in recommending Jeuveau ® to their patients. Jeuveau ® is currently available in the United States, Canada and certain European markets and we plan to make the product available in Australia and additional European markets.
However, we are aware that historically the aesthetic neurotoxin market generally experiences higher revenue in the second and fourth calendar quarters as compared to the first and third calendar quarters. Government Regulation in the United States We operate in a highly regulated industry that is subject to significant federal, state, local and foreign regulation.
Government Regulation in the United States We operate in a highly regulated industry that is subject to significant federal, state, local and foreign regulation.
We believe the primary competing products in this market include BOTOX, Dysport, Xeomin and Daxxify: • BOTOX, marketed by Allergan, received FDA approval in 2002 for glabellar lines.
We believe the primary competing products in this market include BOTOX, Dysport, Xeomin, Daxxify and Letybo: • BOTOX, marketed by AbbVie, received FDA approval in 2002 for glabellar lines. • Dysport, marketed by Galderma S.A., or Galderma, received FDA approval in 2009 for glabellar lines. • Xeomin, marketed by Merz Pharma GmbH & Co., or Merz, received FDA approval in 2011 for glabellar lines. • Daxxify, marketed by Revance Therapeutics, Inc., or Revance, received FDA approval in late 2022 for glabellar lines. • Letybo, marketed by Hugel, Inc., or Hugel, received FDA approval in February 2024 for glabellar lines.
Impact of Settlement Agreements In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc. (“Medytox”) in the U.S.
Under both agreements, Symatese will be responsible for and the sole owner of any marketing authorization and clinical trial results for the dermal filler products. Impact of Settlement Agreements 9 Table of Contents In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc.
We believe pursuing an aesthetic-only non-reimbursed product strategy creates meaningful strategic advantages in the United States, including pricing and marketing flexibility. We utilize this flexibility to drive market adoption through programs such as promotional events, co-branded marketing programs and pricing strategies. • We offer a unique technology platform.
By avoiding the regulatory burdens that accompany reimbursed products and pursuing an aesthetic-only non-reimbursed product strategy, we believe that we create flexibility to deliver a unique value proposition to our customers. We utilize this flexibility to drive customer adoption efforts through programs such as our consumer loyalty program, co-branded marketing programs, promotional events and pricing strategies.
In the United States, cosmetics, dietary supplements, biopharmaceutical products and medical devices are subject to extensive regulation by the FDA.
Biologics, such as our neurotoxin product, and medical devices, such as our dermal filler product candidates, are subject to regulation under the FFDCA and PHS Act. In the United States, biopharmaceutical products and medical devices are subject to extensive regulation by the FDA.
Pipeline Phase II “Extra-Strength” Clinical Trial In November 2021, we announced the initiation of a Phase II clinical trial designed to investigate a higher strength dose of Jeuveau ® in the glabellar lines. This planned glabellar line study is a controlled, randomized, prospective, double blind, three-arm trial following patients out to a maximum of 12 months.
This planned glabellar line study is a controlled, randomized, prospective, double blind, three-arm trial following patients out to a maximum of 12 months. Three-arms will be enrolled: the currently approved 20 units of BOTOX and 20 units of Jeuveau ® compared to 40 units of “extra-strength” Jeuveau ® .
We have elected to specifically target the self-pay aesthetic market. With a reduced regulatory burden compared to third-party payor reimbursed therapeutic products, there is a number of benefits that market participants in reimbursed markets are unable to achieve, such as an enhanced level of interaction with our physician-customers. Jeuveau ® is the only U.S. neurotoxin without a therapeutic indication.
With a reduced regulatory burden compared to third-party payor reimbursed therapeutic products, there are a number of benefits that market participants in reimbursed markets are unable to achieve.
Item 1. Business. Overview We are a performance beauty company with a customer-centric approach to delivering breakthrough products in the self-pay aesthetic market.
Item 1. Business. Overview We are a global performance beauty company with a customer-centric approach to delivering breakthrough products. Our primary market is the cash-pay aesthetic market, which consists of medical products that consumers pay for directly out of pocket. Our customers are aesthetic practitioners who are properly licensed to deliver our products.
The key components of our strategy are: • Pursue an aesthetic-only strategy to enhance marketing and pricing flexibility along with improving transparency for our customers. • Launch directly or partner outside of the United States to reach and serve physicians and consumers in those territories. • Leverage our differentiated digital platform to efficiently open new accounts, personalize the purchasing process and efficiently deploy marketing programs at scale, including co-branded media. • Establish a leading medical aesthetics company with a diversified product offering by in-licensing technology, developing partnerships and potentially acquiring products.
Jeuveau ® is currently the only U.S. commercialized neurotoxin without a therapeutic indication. • Launch directly or partner outside of the United States to reach and serve aesthetic practitioners and consumers in those territories. • Leverage our differentiated digital platform to efficiently open new customer accounts, personalize the purchasing process and efficiently deploy marketing programs at scale, including co-branded media.
We believe the combination of a highly specialized sales force and our technology platform is an effective and competitive model. • Results from our TRANSPARENCY global clinical program in more than 2,100 patients provides robust data to physicians evaluating the purchase of Jeuveau ® .
We believe aesthetic practitioners generally prefer the performance characteristics of the complete 900 kDa neurotoxin complex and are accustomed to injecting this formulation. Jeuveau ® is bolstered by the results from our TRANSPARENCY global clinical program which included more than 2,100 patients and provides robust data to physicians evaluating the purchase of Jeuveau ® .
Three-arms will be enrolled: the currently approved 20 units of BOTOX and 20 units of Jeuveau ® compared to 40 units of “extra-strength” Jeuveau ® . In January 2023, we announced positive interim results from the Phase II clinical trial.
In January 2023, we announced positive interim results from the Phase II clinical trial.
Among these companies are Allergan (now AbbVie), Sanofi, Revance, Sun Pharma, Valeant Pharmaceuticals International, Inc., or Valeant, Mentor Worldwide LLC, a division of Johnson & Johnson, Merz, Galderma, and Skinceuticals, a division of L’Oreal SA.
We compete with various companies that have products in these medical aesthetic categories. Among these companies are AbbVie, Sanofi, Revance, Sun Pharma, Bausch Health Companies, Mentor Worldwide LLC, a division of Johnson & Johnson, Merz, Galderma, and Skinceuticals, a division of L’Oreal SA. Seasonality We have not observed significant seasonality in our net revenues in recent years.
In November 2021, we announced the initiation of a Phase II clinical trial designed to investigate a higher strength dose of Jeuveau ® in the glabellar lines. We completed our patient enrollment in the clinical study evaluating the “extra-strength” dose in the second quarter of 2022 and the trial is expected to be completed in the first half of 2023.
In the European Union we are seeking a CE mark for the Evolysse TM line of dermal fillers. 7 Table of Contents Other Clinical Evaluations Phase II “Extra-Strength” Jeuveau ® Clinical Trial In November 2021, we announced the initiation of a Phase II clinical trial designed to investigate a higher strength dose of Jeuveau ® in the glabellar lines.
This type of endpoint where both the investigator and subject must agree is known as a composite endpoint. Both of the U.S. Phase III studies met the primary endpoint of superiority over placebo.
Phase III studies met the primary endpoint of superiority over placebo.
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Our primary market is the self-pay aesthetic market, which includes medical products purchased by physicians and other customers that are then sold to consumers or used in procedures for aesthetic indications that are not reimbursed by any third-party payor, such as Medicaid, Medicare or commercial insurance.
Added
Our Products and Product Candidates Our currently commercially available product and our product candidates represent two of the largest product categories within medical aesthetics, injectable neurotoxins and injectable dermal fillers, respectively.
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We believe we offer customers and consumers a compelling value proposition with Jeuveau ® . Currently, BOTOX (onabotulinumtoxinA) is the neurotoxin market leader, and prior to the approval of Jeuveau ® , was the only known 900 kDa botulinum toxin type A complex approved in the United States.
Added
Evolysse TM is a line of hyaluronic acid dermal fillers which utilizes first-generation cold technology currently in regulatory development. The line includes a variety of products including mid face, nasolabial folds, lips and eyes in the United States and Europe.
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We believe aesthetic physicians generally prefer the performance characteristics of the complete 900 kDa neurotoxin complex and are accustomed to injecting this formulation. United States In February 2019, we received the approval of our first product Jeuveau ® (prabotulinumtoxinA-xvfs) from the U.S. Food and Drug Administration, or FDA. In May 2019, we commercially launched Jeuveau ® in the United States.
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Regulatory approval has been received for the Evolysse TM nasolabial fold product in Europe and the remaining three products are anticipated to be approved in late 2024. We anticipate a Premarket Approval, or PMA, applications for the first two Evolysse™ dermal filler products will be submitted to the U.S. Food and Drug Administration by mid-year 2024.
Removed
If this indication is approved by the FDA after our completion of all necessary clinical trials and regulatory submissions (including a Phase III clinical trial), we will have the opportunity to offer an extra-strength dosage option, which may make Jeuveau ® the first multi-strength neurotoxin and give customers and consumers increased treatment options.
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The United States regulatory approval and commercial launch is expected in 2025 for the first two products with subsequent regulatory approval and product launches for the three remaining products in 2026 and 2027.
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International In August 2018, we received approval from Health Canada for the temporary improvement in the appearance of moderate to severe glabellar lines in adult patients under 65 years of age. We began marketing Jeuveau ® in Canada in October 2019 through our distribution partner, Clarion Medical Technologies, Inc., or Clarion.
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The following chart details certain important features of our primary product lines: Product Line Status Description Treatment Approvals Estimated Market Size in 2027 Jeuveau ® Commercial Injectable botulinum toxin type A Temporary improvement in the appearance of frown lines in adults.
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In September 2019, we received approval from the European Commission, to market Jeuveau ® in all 27 European Union, or EU, member states plus the United Kingdom, Iceland, Norway and Liechtenstein. In January 2021, we received a positive decision from the European Commission to add the 50 unit product to the existing approval obtained in September 2019.
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United States - 2019 Canada - 2018 European Union/United Kingdom/European Economic Area - 2019 Australia - 2023 Switzerland - 2023 United States* - $3.9 billion Europe** - $0.7 billion Evolysse TM Product Candidate in Regulatory Development Portfolio of injectable hyaluronic-acid based dermal fillers.
Removed
We commercially launched Jeuveau ® in Great Britain in September 2022, in Germany and Austria in February 2023, and we are finalizing plans for entering additional countries in Europe as part of a phased rollout. In January 2023, we received approval from the Australian Therapeutics Good Administration, or TGA, for regulatory approval of our neurotoxin in Australia.
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Improvement of moderate to severe nasolabial folds facial wrinkles, mid face volume, lip fullness and infraorbital hollow correction.
Removed
Our Market Our primary market is self-pay aesthetic healthcare, which includes medical products purchased by physicians that are then sold to consumers or used in procedures for aesthetic indications that are not reimbursed by any third-party payor, such as Medicaid, Medicare or commercial insurance.
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Europe - Anticipated Late 2024 United States - Anticipated 2025 United States* - $2.2 billion Europe** - $1.6 billion 4 Table of Contents *Source: Medical Insight’s The Global Aesthetic Market Study ** Source: Clarivate Aesthetic Injectables Market Insights The Medical Aesthetics Market Opportunity According to Medical Insights, in 2023, total sales of professional medical aesthetic products were estimated to be $19.7 billion globally.
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By focusing on the self-pay medical aesthetics market, we believe we are not exposed to reimbursement risk associated with a reliance on payments from such third-party payors, and we are subject to fewer regulations that place limits on the types of marketing and other interactions we have with physicians.
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Through 2027, the total sales of professional medical aesthetic products is expected to expand by 7.5% per year to $26.8 billion. Within this market, the facial injectables market, consisting of neurotoxins and dermal fillers, is estimated to be $9.5 billion in 2023 and is expected to grow to $13.3 billion in 2027.
Removed
According to Medical Insight’s The Global Aesthetic Market Study, within the self-pay aesthetic market, the global aesthetic neurotoxin market is estimated to grow to approximately $6.4 billion in 2026 and the U.S. aesthetic neurotoxin market is expected to grow to approximately $3.7 billion in 2026.
Added
We believe millennials view aesthetic treatments as integral to personal health and self-care, heavily influenced by social media and the internet. Our Strategic Differentiation The key components of our strategy are to: • Focus on the largest segments of the medical aesthetic market.
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According to Clarivate Aesthetic Injectables Market Insights, the European aesthetic neurotoxin market is expected to grow to approximately $662 million in 2026.
Added
Aesthetic neurotoxins and dermal fillers are the largest and two of the fastest growing segments in the rapidly expanding global aesthetics market. With their high regulatory barriers to entry, these economically resilient product segments are poised for continued growth and adoption. • Pursue an aesthetic-only strategy to enhance marketing and pricing flexibility along with improving transparency for our customers.
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Bureau of Economic Analysis reporting that real disposable income in the United States increased approximately 19% from December 2012 to December 2022; • growing awareness, utilization and acceptance of elective or minimally invasive aesthetic procedures; and • continued innovation and improved accessibility to these treatments due to an increase in the number of physicians who perform these procedures.
Added
We have built and continue to improve our platform with the goal of limiting friction and enhancing the overall experience for aesthetic practitioners and ultimately consumers. • Establish a leading medical aesthetics company with a diversified product offering by in-licensing technology, developing partnerships and potentially acquiring products. 5 Table of Contents Clinical Evidence/Regulatory Development Jeuveau ® - TRANSPARENCY: Evolus Clinical Development for Glabellar Lines Our TRANSPARENCY clinical program was a comprehensive five-study clinical development program for Jeuveau ® and was used to meet international regulatory requirements.
Removed
We believe that approximately 1.7 million females between the age of 30 and 39, which includes many individuals we define as millennials, are considering neurotoxins in the next twelve months. Our Competitive Strengths We offer physicians and consumers a compelling value proposition because: • Jeuveau ® offers the market the first known 900 kDa neurotoxin alternative to BOTOX.
Added
Evolysse TM Dermal Filler Pipeline The graphic below provides a summary of the current status of development of the Evolysse TM line of dermal fillers in the United States and European Union and anticipated key milestones. In the United States we are seeking a PMA with the FDA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe market price for our common stock may be influenced by many factors, some of which are beyond our control, including: • changes in financial estimates or guidance, including our ability to meet our future revenue and operating profit or loss estimates or guidance; • the public’s reaction to our earnings releases, other public announcements and filings with the SEC or those of companies that are perceived to be similar to us; • variations in our financial results or those of companies that are perceived to be similar to us; • any termination or loss of rights under the Daewoong Agreement; • the FDA or other U.S. or foreign regulatory or legal actions or changes affecting us or our industry; • adverse developments concerning our manufacturer or any future strategic partnerships; • adverse developments affecting our compliance with the Medytox Settlement Agreement; • adverse developments concerning litigation pending against us; • introductions and announcements of new technologies and products by us, any commercialization partners or our competitors, and the timing of these introductions and announcements; • success or failure of competitive products or medical aesthetic products generally; 36 Table of Contents • announcements of results of clinical trials or regulatory approval or disapproval of product candidates; • unanticipated safety concerns related to the use of Jeuveau ® or any of our future products; • changes in the structure of healthcare payment systems; • announcements by us or our competitors of significant acquisitions, licenses, strategic partnerships, new product approvals and introductions, joint ventures or capital commitments; • overall financial market conditions for the pharmaceutical and biopharmaceutical sectors and issuance of securities analysts’ reports or recommendations; • rumors and market speculation involving us or other companies in our industry; • short selling of our common stock or the publication of opinions regarding our business prospects in a manner that is designed to create negative market momentum; • sales of substantial amounts of our stock by Medytox, Alphaeon 1, LLC, Daewoong or other significant stockholders or our insiders, or the expectation that such sales might occur; • news reports relating to trends, concerns and other issues in medical aesthetics market or the pharmaceutical or biopharmaceutical industry; • operating and stock performance of other companies that investors deem comparable to us and overall performance of the equity markets; • additions or departures of key personnel, including our Chief Executive Officer, Chief Financial Officer, and Chief Medical Officer; • intellectual property, product liability or other litigation against us, our manufacturer or other parties on which we rely or litigation against our general industry; • changes in our capital structure, such as future issuances of securities and the incurrence of additional debt; • changes in accounting standards, policies, guidelines, interpretations or principles; • economic conditions in the markets in which we operate, including those related to COVID-19 and the Russian-Ukrainian conflict; and • other factors described in this “Risk Factors” section.
Biggest changeAgreement or the Symatese Europe Agreement; • adverse developments in the regulatory approval process for Evolysse™; • the FDA or other U.S. or foreign regulatory or legal actions or changes affecting us or our industry; • adverse developments concerning our manufacturer or any future strategic partnerships; • adverse developments affecting our compliance with the Medytox Settlement Agreement; • adverse developments concerning litigation pending against us; • introductions and announcements of new technologies and products by us, any commercialization partners or our competitors, and the timing of these introductions and announcements; • success or failure of competitive products or medical aesthetic products generally; • announcements of results of clinical trials or regulatory approval or disapproval of product candidates; • unanticipated safety concerns related to the use of Jeuveau ® or any of our future products; • changes in the structure of healthcare payment systems; • announcements by us or our competitors of significant acquisitions, licenses, strategic partnerships, new product approvals and introductions, joint ventures or capital commitments; • overall financial market conditions for the pharmaceutical and biopharmaceutical sectors and issuance of securities analysts’ reports or recommendations; • rumors and market speculation involving us or other companies in our industry; • short selling of our common stock or the publication of opinions regarding our business prospects in a manner that is designed to create negative market momentum; • sales of substantial amounts of our stock by Medytox and Daewoong or other significant stockholders or our insiders, or the expectation that such sales might occur; • news reports relating to trends, concerns and other issues in medical aesthetics market or the pharmaceutical or biopharmaceutical industry; • operating and stock performance of other companies that investors deem comparable to us and overall performance of the equity markets; • additions or departures of key personnel, including our Chief Executive Officer, Chief Financial Officer, Chief Medical Officer and Chief Marketing Officer; • intellectual property, product liability or other litigation against us, our manufacturer or other parties on which we rely or litigation against our general industry; • changes in our capital structure, such as future issuances of securities and the incurrence of additional debt; • changes in accounting standards, policies, guidelines, interpretations or principles; • economic conditions in the markets in which we operate, including those related to COVID-19 and ongoing geopolitical conflicts; and • other factors described in this “Risk Factors” section.
If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to FDA prohibitions or other restrictions on the sale or marketing of our products and other operations or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry.
If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to the FDA prohibitions or other restrictions on the sale or marketing of our products and other operations or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, which could continue.
Although the length and impact of the ongoing military conflict in Ukraine is highly unpredictable, the conflict has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, which could continue.
Additionally, if we raise additional capital through debt financing, we will have increased fixed payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures to meet specified financial ratios, and other operational restrictions, any of which could restrict our ability to market and sell Jeuveau ® or any future product candidates or operate as a business and may result in liens being placed on our assets.
Additionally, if we raise additional capital through debt financing, we will have increased fixed or variable payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures to meet specified financial ratios, and other operational restrictions, any of which could restrict our ability to market and sell Jeuveau ® or any future product candidates or operate as a business and may result in liens being placed on our assets.
Many of our potential competitors, including Allergan, and now AbbVie Inc., which acquired Allergan, who first launched BOTOX for cosmetic uses in 2002 and has since maintained the highest market share position in the aesthetic neurotoxin market with its BOTOX product, are large, experienced companies that enjoy significant competitive advantages, such as substantially greater financial resources enabling them to, among other things, market and discount aggressively.
Many of our potential competitors, including AbbVie Inc., which acquired Allergan, who first launched BOTOX for cosmetic uses in 2002 and has since maintained the highest market share position in the aesthetic neurotoxin market with its BOTOX product, are large, experienced companies that enjoy significant competitive advantages, such as substantially greater financial resources enabling them to, among other things, market and discount aggressively.
These include the following provisions: • permit our board of directors to issue shares of preferred stock, with any rights, preferences and privileges as they may designate, without stockholder approval, which could be used to dilute the ownership of a hostile bidder significantly; • provide that the authorized number of directors may be changed only by resolution of our board of directors and that a director may only be removed for cause by the affirmative vote of the holders of at least 66 2/3% of our voting stock; • provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • divide our board of directors into three classes, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent; • provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; • prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; and • provide that special meetings of our stockholders may be called only by the chairman of the board, our Chief Executive Officer or by our board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors, which may delay the ability of our stockholders to force consideration by our company of a take-over proposal or to take certain corporate actions, including the removal of directors.
These include the following provisions: • permit our Board of Directors to issue shares of preferred stock, with any rights, preferences and privileges as they may designate, without stockholder approval, which could be used to dilute the ownership of a hostile bidder significantly; • provide that the authorized number of directors may be changed only by resolution of our Board of Directors and that a director may only be removed for cause by the affirmative vote of the holders of at least 66 2/3% of our voting stock; • provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; • divide our Board of Directors into three classes, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors; • require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent; • provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice, which may discourage or deter a potential 43 Table of Contents acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; • prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; and • provide that special meetings of our stockholders may be called only by the chairman of the Board of Directors, our Chief Executive Officer or by our Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors, which may delay the ability of our stockholders to force consideration by our company of a take-over proposal or to take certain corporate actions, including the removal of directors.
The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, government files or penalties and other harm to our business and our competitive position.
The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, government files or penalties and other harm to our business and our competitive position.
Even a successful defense would require significant financial and management resources and result in decreased demand for Jeuveau ® or any future product candidates or products we may develop, termination of clinical trial sites or entire trial programs, injury to our reputation and significant negative media attention, withdrawal of clinical trial participants or cancellation of clinical trials and significant costs and diversion management’s time to defend the related litigation.
Even a successful defense would require significant financial and management resources and result in decreased demand for Jeuveau ® , Evolysse™, or any future product candidates or products we may develop, termination of clinical trial sites or entire trial programs, injury to our reputation and significant negative media attention, withdrawal of clinical trial participants or cancellation of clinical trials and significant costs and diversion management’s time to defend the related litigation.
If we underestimate requirements for Jeuveau ® , we may have inadequate inventory, which could interrupt, delay or prevent delivery of our products to our customers. Any of these occurrences would negatively affect our financial performance. Risks Related to Intellectual Property Third-party claims of intellectual property infringement may prevent or delay our commercialization efforts and interrupt our supply of products.
If we underestimate requirements for our products, we may have inadequate inventory, which could interrupt, delay or prevent delivery of our products to our customers. Any of these occurrences would negatively affect our financial performance. Risks Related to Intellectual Property Third-party claims of intellectual property infringement may prevent or delay our commercialization efforts and interrupt our supply of products.
Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of Jeuveau ® or any future products that we develop. We currently carry product liability insurance covering our clinical trials.
Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of Jeuveau ® , Evolysse™, or any future products that we develop. We currently carry product liability insurance covering our clinical trials.
We have a limited operating history and have incurred significant losses since our inception and anticipate that we may incur losses in the future. We have only one product and limited commercial sales, which, together with our limited operating history, makes it difficult to assess our future viability. We are a performance beauty company with a limited operating history.
We have a limited operating history and have incurred significant losses since our inception and anticipate that we may incur losses in the future. We have only one product and limited commercial sales, which, together with our limited operating history, makes it difficult to assess our future viability. We are a global performance beauty company with a limited operating history.
The demand for Jeuveau ® could also be negatively impacted by any adverse effects of a competitor’s product or treatment. Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products would impair our ability to grow our business.
The demand for our products could also be negatively impacted by any adverse effects of a competitor’s product or treatment. Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products would impair our ability to grow our business.
The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in product liability claims. Any of these occurrences may harm our business, financial condition, operating results and prospects.
The drug or device-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in product liability claims. Any of these occurrences may harm our business, financial condition, operating results and prospects.
If we fail to attract and keep senior management and key scientific personnel, we may be unable to market and sell Jeuveau ® successfully, or any future products we develop. Our success depends in part on our continued ability to attract, retain and motivate highly qualified management.
If we fail to attract and keep senior management and key personnel, we may be unable to market and sell Jeuveau ® successfully, or any future products we develop. Our success depends in part on our continued ability to attract, retain and motivate highly qualified management.
The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of Jeuveau ® or any future products we develop. In addition, we could experience difficulties attracting and retaining qualified employees in the future.
The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of Jeuveau ® , Evolysse™, or any future products we develop. In addition, we could experience difficulties attracting and retaining qualified employees in the future.
It is possible that the volatility of and uncertainty around SOFR as a LIBOR replacement rate and the applicable credit adjustment would result in higher borrowing costs for us, and would adversely affect our liquidity, financial condition, and earnings.
It is possible that the volatility of and uncertainty around SOFR as a LIBOR replacement rate and the applicable credit adjustment would result in higher borrowing costs for us, and could adversely affect our liquidity, financial condition, and earnings.
Following regulatory approval, we, and our direct and indirect suppliers, including Daewoong, remain subject to the periodic inspection of our plants and facilities, review of production processes, and testing of our products to confirm that we are in compliance with all applicable regulations.
Following regulatory approval, we, and our direct and indirect suppliers, including Daewoong and Symatese, remain subject to the periodic inspection of our plants and facilities, review of production processes, and testing of our products to confirm that we are in compliance with all applicable regulations.
We may become involved in lawsuits to protect or enforce our intellectual property or the patents and other intellectual property of our licensors, which could be expensive and time-consuming. Competitors may infringe our intellectual property, including any future patents we may acquire, or the patents and other intellectual property of our licensors, including Daewoong.
We may become involved in lawsuits to protect or enforce our intellectual property or the patents and other intellectual property of our licensors, which could be expensive and time-consuming. Competitors may infringe our intellectual property, including any future patents we may acquire, or the patents and other intellectual property of our licensors, including Daewoong or Symatese.
Even if we are successful, domestic or foreign litigation or USPTO or foreign patent office proceedings may result in substantial costs and distraction to our management or the management of any of our current or future licensors, including Daewoong.
Even if we are successful, domestic or foreign litigation or USPTO or foreign patent office proceedings may result in substantial costs and distraction to our management or the management of any of our current or future licensors, including Daewoong or Symatese.
Regulatory approval of a BLA or BLA supplement, marketing authorization application, or MAA, or other product approval is not guaranteed, and the approval process is expensive and may take several years. The FDA, the EMA and other regulatory authorities have substantial discretion in the approval process.
Regulatory approval of a BLA or BLA supplement, PMA, marketing authorization application, or MAA, or other product approval is not guaranteed, and the approval process is expensive and may take several years. The FDA, the EMA and other regulatory authorities have substantial discretion in the approval process.
You should carefully consider the risks and uncertainties described below, together with all the other information in this Annual Report on Form 10-K, including Item 7“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included in Item 8 “Financial Statements and Supplementary Data.” If any of the following risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed.
You should carefully consider the risks and uncertainties described below, together with all the other information in this Annual Report on Form 10-K, including Item 7“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included in Item 8 “Consolidated Financial Statements and Supplementary Data.” If any of the following risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed.
We expect that we will continue to expend substantial resources for the foreseeable future in order to continue to market and sell Jeuveau ® and for the clinical development of any additional product candidates we may choose to pursue.
We expect that we will continue to expend substantial resources for the foreseeable future in order to continue to market and sell Jeuveau ® and for the clinical development of Evolysse ™ and any additional product candidates we may choose to pursue.
Our failure to comply with all applicable regulatory requirements, or Daewoong’s failure to comply with applicable regulatory requirements, including those promulgated under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, and the Controlled Substances Act, may subject us to operating restrictions and criminal prosecution, monetary penalties and other enforcement or administrative actions, including, sanctions, warnings, product seizures, recalls, fines, injunctions, suspension, revocation of approvals, or exclusion from future participation in the Medicare and Medicaid programs.
Our failure to comply with all applicable regulatory requirements, or our partner’s failure to comply with applicable regulatory requirements, including those promulgated under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, and the Controlled Substances Act, may subject us to operating restrictions and criminal prosecution, monetary penalties and other enforcement or administrative actions, including, sanctions, warnings, product seizures, recalls, fines, injunctions, suspension, revocation of approvals, or exclusion from future participation in the Medicare and Medicaid programs.
The systems underlying our digital technology may not be adequately designed or may not operate with the reliability and redundancy necessary to avoid performance delays or outages that could be harmful to our business.
The information systems underlying our digital technology may not be adequately designed or may not operate with the reliability and redundancy necessary to avoid performance delays or outages that could be harmful to our business.
If our digital technology is unavailable when customers attempt to access them, or if they do not load as quickly as expected, users may not use our technology as often in the future, or at all, and our ability to sell Jeuveau ® through a more limited sales force may be disrupted and we may not realize the efficiencies of leveraging our digital technology, any of which could adversely affect our business and financial performance.
If our digital technology is unavailable when customers attempt to access them, or if they do not load as quickly as expected, users may not use our technology as often in the future, or at all, and our ability to sell our products through a more limited sales force may be disrupted and we may not realize the efficiencies of leveraging our digital technology, any of which could adversely affect our business and financial performance.
Financial and operational impacts that we experienced in connection with the COVID-19 pandemic, and may experience as a result of future COVID-19 outbreaks or other public health crises, include: • a decline in the rates of elective procedures; • difficulties in enrolling patients in clinical programs; • changes in the availability of our key personnel; 16 Table of Contents • temporary closures of our facilities or the facilities of our business partners, customers, third party service providers or other vendors; • interruptions to our supply chain and distribution channels; and • downstream economic effects, including disruptions capital or financial markets, increased inflation and rising interest rates.
Financial and operational impacts that we experienced in connection with the COVID-19 pandemic, and may experience as a result of future COVID-19 outbreaks or other public health crises, include: • a decline in the rates of elective procedures; • difficulties in enrolling patients in clinical programs; • changes in the availability of our key personnel; • temporary closures of our facilities or the facilities of our business partners, customers, third party service providers or other vendors; • interruptions to our supply chain and distribution channels; and • downstream economic effects, including disruptions capital or financial markets, increased inflation and rising interest rates.
Our competitors also may obtain FDA or other regulatory approval for these products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market, which may create additional barriers to successfully commercializing Jeuveau ® and any future product candidates and attracting physician and consumer demand.
Our competitors also may obtain FDA or other regulatory approval for these products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market, which may create additional barriers to successfully commercializing Jeuveau ® and any future product candidates and attracting practitioner and consumer demand.
Furthermore, the use of Jeuveau ® or any future product candidates for indications other than those cleared by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and consumers. Any of these events could harm our business and results of operations and cause our stock price to decline.
Furthermore, the use of Jeuveau ® or any future product candidates for indications other than those cleared by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among customers and consumers. Any of these events could harm our business and results of operations and cause our stock price to decline.
If the safety of Jeuveau ® is compromised due to a failure to adhere to applicable laws or for other reasons, we may not be able to successfully commercialize our product and we may be held liable for injuries sustained as a result. In addition, the manufacturing facilities of certain of our suppliers are located outside of the United States.
If the safety of our products is compromised due to a failure to adhere to applicable laws or for other reasons, we may not be able to successfully commercialize our product and we may be held liable for injuries sustained as a result. In addition, the manufacturing facilities of certain of our suppliers are located outside of the United States.
If we, our products or the manufacturing facilities for our products fail to comply with applicable regulatory requirements, a regulatory agency may: • impose restrictions on the marketing or manufacturing of the product, suspend or withdraw product approvals or revoke necessary licenses; • issue warning letters, show cause notices or untitled letters describing alleged violations, which may be publicly available; • mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners; • require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance; • commence criminal investigations and prosecutions; • impose injunctions; 32 Table of Contents • impose other civil or criminal penalties; • suspend any ongoing clinical trials; • delay or refuse to approve pending applications or supplements to approved applications filed by us; • refuse to permit drugs or active ingredients to be imported or exported; • suspend or impose restrictions on operations, including costly new manufacturing requirements; or • seize or detain products or require us to initiate a product recall.
If we, our products or the manufacturing facilities for our products fail to comply with applicable regulatory requirements, a regulatory agency may: • impose restrictions on the marketing or manufacturing of the product, suspend or withdraw product approvals or revoke necessary licenses; • issue warning letters, show cause notices or untitled letters describing alleged violations, which may be publicly available; • mandate modifications to promotional materials or require us to provide corrective information to aesthetic practitioners; • require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance; • commence criminal investigations and prosecutions; • impose injunctions; • impose other civil or criminal penalties; • suspend any ongoing clinical trials; • delay or refuse to approve pending applications or supplements to approved applications filed by us; • refuse to permit drugs or active ingredients to be imported or exported; • suspend or impose restrictions on operations, including costly new manufacturing requirements; or • seize or detain products or require us to initiate a product recall.
Inflation in the markets we serve could similarly impact our revenues, as consumer spending power could decline. Any of the foregoing could harm our business. In addition, our business strategy was developed based on a number of important assumptions about the self-pay healthcare market. For example, we believe that the number of self-pay healthcare procedures will increase in the future.
Inflation in the markets we serve could similarly impact our revenues, as consumer spending power could decline. Any of the foregoing could harm our business. In addition, our business strategy was developed based on a number of important assumptions about the cash-pay healthcare market. For example, we believe that the number of cash-pay healthcare procedures will increase in the future.
In the event that regulations applicable to reimbursed products are changed to apply to self-pay healthcare products, we would no longer have this flexibility and we may not be able to compete as effectively with our competitors which may have a material effect on our business, financial condition and results of operations.
In the event that regulations applicable to reimbursed products are changed to apply to cash-pay healthcare products, we would no longer have this flexibility and we may not be able to compete as effectively with our competitors which may have a material effect on our business, financial condition and results of operations.
Additionally, the shares of common stock held by Medytox are subject to contractual restrictions on transfer that, subject to certain limited exceptions such as transfers to affiliates prohibit Medytox from transferring more than 25% of the shares it holds prior to September 16, 2023, more than 50% of the shares it holds prior to September 16, 2024 and more than 75% of the shares it holds prior to September 16, 2025, with such contractual restrictions terminating on September 16, 2025.
Additionally, the shares of common stock held by Medytox are subject to contractual restrictions on transfer that, subject to certain limited exceptions such as transfers to affiliates prohibit Medytox from transferring more than 50% of the shares it holds prior to September 16, 2024 and more than 75% of the shares it holds prior to September 16, 2025, with such contractual restrictions terminating on September 16, 2025.
If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected. 41 Table of Contents
If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected. 46 Table of Contents
Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research, manufacture clinical trial supplies or allow commercialization of Jeuveau ® or any future product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all.
Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research, manufacture clinical trial supplies or allow commercialization of our products or any future product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all.
In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business 38 Table of Contents combinations with an interested stockholder who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
The decision by a consumer to undergo treatment with Jeuveau ® for the treatment of glabellar lines or other aesthetic indications that we may pursue may be influenced by a number of factors, including the cost, efficacy, safety, perception, marketing programs for, and physician recommendations of Jeuveau ® versus competitive products or procedures.
The decision by a consumer to undergo treatment with Jeuveau ® for the treatment of glabellar lines or other aesthetic indications that we may pursue may be influenced by a number of factors, including the cost, efficacy, safety, perception, marketing programs for, and aesthetic practitioner recommendations of Jeuveau ® versus competitive products or procedures.
Our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related security incidents. Jeuveau ® or any other product candidate for which we seek approval as a biologic may face competition sooner than anticipated.
Our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cybersecurity incidents and other related security incidents. Jeuveau ® or any other product candidate for which we seek approval as a biologic may face competition sooner than anticipated.
If we or any of our current or future licensors are unable to prevent material disclosure of the non-patented intellectual property related to Jeuveau ® to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could adversely affect our business.
If we or any of our current or future licensors are unable to prevent material disclosure of the non-patented intellectual property related to our products to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could adversely affect our business.
Our strategy of competing in the aesthetic neurotoxin market is dependent on the marketing and pricing flexibility that we believe is afforded to a company with a portfolio limited to self-pay healthcare, comprised of products and procedures that are not reimbursed by third-party payors.
Our strategy of competing in the aesthetic neurotoxin market is dependent on the marketing and pricing flexibility that we believe is afforded to a company with a portfolio limited to cash-pay healthcare, comprised of products and procedures that are not reimbursed by third-party payors.
Delaware law provides that we may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interest and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful. • We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. • We will be required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification. 39 Table of Contents • The rights conferred in our bylaws will not be exclusive.
Delaware law provides that we may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interest and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful. • We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. • We will be required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification. • The rights conferred in our bylaws will not be exclusive.
Additional factors necessary for the successful commercialization of Jeuveau ® include the availability, perceived advantages, relative cost, relative safety of Jeuveau ® and relative efficacy of competing products, the timing of new product introductions by us or our competitors, and the sales and marketing tactics of our competitors, including bundling of multiple products, in response to our launch of Jeuveau ® .
Additional factors necessary for the successful commercialization of Jeuveau ® include the availability, perceived advantages, relative cost, relative safety of Jeuveau ® and relative efficacy of competing products, the timing of new product introductions by our competitors, and the sales and marketing tactics of our competitors, including bundling of multiple products, in response to our launch of Jeuveau ® .
For example, we are aware that one of our competitors, Allergan (now AbbVie), has obtained and plans to obtain additional indications for its neurotoxin product within medical aesthetics and, therefore, is able to market its product across a greater number of indications than Jeuveau ® .
For example, we are aware that one of our competitors, AbbVie, has obtained and plans to obtain additional indications for its neurotoxin product within medical aesthetics and, therefore, is able to market its product across a greater number of indications than Jeuveau ® .
If we are successful in commercializing Jeuveau ® or any other product candidate, the FDA and other regulatory agency regulations require that we report certain information about adverse medical events if those products may have caused or contributed to those adverse events.
If we are successful in commercializing Jeuveau ® or any other product candidate, including Evolysse™, the FDA and other regulatory agency regulations require that we report certain information about adverse medical events if those products may have caused or contributed to those adverse events.
A number of our larger competitors also have access to a significant number of studies and publications that they could use to compete with us. In the long term, we expect to expand our focus to the broader self-pay healthcare market.
A number of our larger competitors also have access to a significant number of studies and publications that they could use to compete with us. In the long term, we expect to expand our focus to the broader cash-pay healthcare market.
We face risks in building and managing a sales organization whether internally or by utilizing third parties, including our ability to retain and incentivize qualified individuals, provide adequate training to sales and marketing personnel, generate sufficient sales leads, effectively manage a geographically dispersed sales and marketing team, adequately provide complementary products to be offered by sales personnel, which may otherwise put us at a competitive disadvantage relative to companies with more extensive product lines, and handle any unforeseen costs and expenses.
We face risks in building and managing a sales organization whether internally or by utilizing third parties, including our 28 Table of Contents ability to retain and incentivize qualified individuals, provide adequate training to sales and marketing personnel, generate sufficient sales leads, effectively manage a geographically dispersed sales and marketing team, adequately provide complementary products to be offered by sales personnel, which may otherwise put us at a competitive disadvantage relative to companies with more extensive product lines, and handle any unforeseen costs and expenses.
Risks Related to Our Business and Strategy We currently depend entirely on the successful commercialization of our only product, Jeuveau ® . If we are unable to successfully market and sell Jeuveau ® , we may not generate sufficient revenue to continue our business.
Risks Related to Our Business and Strategy We currently depend entirely on the successful commercialization of our only commercially available product, Jeuveau ® . If we are unable to successfully market and sell Jeuveau ® , we may not generate sufficient revenue to continue our business.
Physicians could use Jeuveau ® on their patients in a manner that is inconsistent with the approved label of the treatment of moderate to severe glabellar lines, potentially including for the treatment of other aesthetic or therapeutic indications.
Customers could use Jeuveau ® on their patients in a manner that is inconsistent with the approved label of the treatment of moderate to severe glabellar lines, potentially including for the treatment of other aesthetic or therapeutic indications.
Our research and development and manufacturing activities in the future may, and Daewoong’s manufacturing and supplying activities presently do, involve the controlled storage, use and disposal of hazardous materials, including botulinum toxin type A, a key component of Jeuveau ® , and other hazardous compounds.
Our research and development and manufacturing activities in the future may, and our licensors’ manufacturing and supplying activities presently do, involve the controlled storage, use and disposal of hazardous materials, including botulinum toxin type A, a key component of Jeuveau ® , and other hazardous compounds.
While we do not expect that Jeuveau ® will subject us to the various U.S. federal and most state laws intended to prevent health care fraud and abuse, we may in the future become subject to such laws.
While we do not expect that Jeuveau ® or Evolysse™ will subject us to the various U.S. federal and most state laws intended to prevent health care fraud and abuse, we may in the future become subject to such laws.
We and our current licensor, Daewoong, currently rely upon a combination of trademarks, trade secret protection, confidentiality agreements and proprietary know-how. Botulinum toxin cannot be patented, as it is produced by Clostridium botulinum , a gram-positive, rod-shaped, anaerobic, spore-forming, motile bacterium with the ability to produce the neurotoxin botulinum.
We and our current licensors, Daewoong and Symatese, currently rely upon a combination of trademarks, trade secret protection, confidentiality agreements and proprietary know-how. Botulinum toxin cannot be patented, as it is produced by Clostridium botulinum , a gram-positive, rod-shaped, anaerobic, spore-forming, motile bacterium with the ability to produce the neurotoxin botulinum.
These companies may also seek to compete based on their longer operating history. Larger companies may be better capitalized than us and, accordingly, are able to offer greater customer loyalty benefits to encourage repeat use of their products and finance a sustained global advertising campaign to compete with our 17 Table of Contents commercialization efforts at launch.
These companies may also seek to compete based on their longer operating history. Larger companies may be better capitalized than us and, accordingly, are able to offer greater customer loyalty benefits to encourage repeat use of their products and finance a sustained global advertising campaign to compete with our commercialization efforts at launch.
We have filed a registration statement with the SEC covering shares of our common stock available for future issuance under our 2017 Omnibus Incentive Plan and may file future registration statements covering shares of our common stock for future issuance under any future plans.
We have filed a registration statement with the SEC covering shares of our common stock available for future issuance under our 2017 Omnibus Incentive Plan and 2023 Inducement Incentive Plan and may file future registration statements covering shares of our common stock for future issuance under any future plans.
For example, to maintain our business model, we have chosen not to offer products or services available in the broader healthcare market that are reimbursed by third-party payors such as Medicare, Medicaid or commercial insurance. This eliminates our ability to offer a substantial number of products and indications for Jeuveau ® .
For example, to maintain our business model, we have chosen not to offer products or services available in the broader healthcare market that are reimbursed by third-party payors such as Medicare, Medicaid or commercial insurance. This eliminates our ability to offer a substantial number of products and indications for Jeuveau ® or any future products, such as Evolysse™.
As the technology, medical device and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Third parties may assert that we or any of our current or future licensors, including Daewoong, are employing their proprietary technology without authorization.
As the technology, medical device and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. 33 Table of Contents Third parties may assert that we or any of our current or future licensors, including Daewoong, are employing their proprietary technology without authorization.
Our failure, or the failure of Daewoong, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of Jeuveau ® .
Our failure, or the failure of our partners, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.
We may incur substantial expenses as a result of our or Daewoong’s lack of disaster recovery and business continuity plans, or the adequacy thereof, which could have a material adverse effect on our business.
We may incur substantial expenses as a result of our or our licensors’ lack of disaster recovery and business continuity plans, or the adequacy thereof, which could have a material adverse effect on our business.
Only the manufacturing process for botulinum toxin can be patented, for which Daewoong has obtained a U.S. patent. Our trade secrets and other confidential proprietary information and those of our licensors could be disclosed or competitors could otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Only the manufacturing process for botulinum toxin can be patented, for which Daewoong has obtained a U.S. patent. Our trade secrets and other confidential proprietary information and those of our licensors could be disclosed or competitors could otherwise gain access to our trade secrets or independently develop substantially equivalent 34 Table of Contents information and techniques.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it 30 Table of Contents difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
Defense of such a claim would require dedicated time and resources, which time and resources 28 Table of Contents could otherwise be used by us toward the maintenance of our own intellectual property and the development and commercialization of Jeuveau ® and any of our future product candidates or by any of our current or future licensors for operational upkeep and manufacturing of our products.
Defense of such a claim would require dedicated time and resources, which time and resources could otherwise be used by us toward the maintenance of our own intellectual property and the development and commercialization of Jeuveau ® and any of our future product candidates or by any of our current or future licensors for operational upkeep and manufacturing of our products.
In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, or in-license needed technology or other product candidates. There could also be public announcements of the results of the hearing, motions, or other interim proceedings or developments.
In addition, the uncertainties associated with litigation could compromise our ability to raise the funds necessary to continue our clinical trials, continue 35 Table of Contents our internal research programs, or in-license needed technology or other product candidates. There could also be public announcements of the results of the hearing, motions, or other interim proceedings or developments.
We have received regulatory approval for Jeuveau ® in the United States for the treatment of moderate to severe glabellar lines. The terms of that approval restrict our ability to market or advertise Jeuveau ® for other indications, which could limit physician and consumer adoption. Under the U.S.
We have received regulatory approval for Jeuveau ® in the United States for the treatment of moderate to severe glabellar lines. The terms of that approval restrict our ability to market or advertise Jeuveau ® for other indications, which could limit aesthetic practitioner and consumer adoption. Under the U.S.
The FDA, the EMA and other regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including the following: • a product candidate may not be deemed safe, effective, pure or potent; • the data from preclinical studies and clinical trials may not be deemed sufficient; • the FDA or other regulatory authorities might not approve our third-party manufacturers’ processes or facilities; • deficiencies in the formulation, quality control, labeling, or specifications of a product candidate or in response to citizen petitions or similar documents filed in connection with the product candidate; • general requirements intended to address risks associated with a class of drugs, such as a new REMS requirement for neurotoxins; • the enactment of new laws or promulgation of new regulations that change the approval requirements; or • the FDA or other regulatory authorities may change their approval policies or adopt new regulations.
The FDA, the EMA and other regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including the following: • a product candidate may not be deemed safe, effective, pure or potent; 38 Table of Contents • the data from preclinical studies and clinical trials may not be deemed sufficient; • the FDA or other regulatory authorities might not approve our third-party manufacturers’ processes or facilities; • deficiencies in the formulation, quality control, labeling, or specifications of a product candidate or in response to citizen petitions or similar documents filed in connection with the product candidate; • general requirements intended to address risks associated with a class of drugs, such as a new REMS requirement for neurotoxins, dermal fillers or other aesthetic products; • the enactment of new laws or promulgation of new regulations that change the approval requirements; or • the FDA or other regulatory authorities may change their approval policies or adopt new regulations.
In addition, actions such as those described above could cause 40 Table of Contents significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
In addition, actions such as those described above could cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
If we raise additional capital through public or private equity offerings or offerings of securities convertible into our equity, the ownership interest of our existing stockholders will be diluted and the terms of any such securities may have a preference over our common stock.
If we raise additional capital through public or private equity offerings or offerings of securities convertible into our 20 Table of Contents equity, the ownership interest of our existing stockholders will be diluted and the terms of any such securities may have a preference over our common stock.
The Anti-Kickback Statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that 34 Table of Contents would be paid for in whole or part by Medicare, Medicaid or other federal health care programs.
The Anti-Kickback Statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs.
Fluctuations in currency exchange rates may negatively affect our financial condition and results of operation s. 23 Table of Contents Exchange rate fluctuations may affect the costs that we incur in our operations. The main currencies to which we are exposed to such fluctuations are the British pound and the EU euro.
Fluctuations in currency exchange rates may negatively affect our financial condition and results of operation s. Exchange rate fluctuations may affect the costs that we incur in our operations. The main currencies to which we are exposed to such fluctuations are the British pound and the EU euro.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired. We may not obtain regulatory approval for the commercialization of any future product candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial 37 Table of Contents prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired. We may not obtain regulatory approval for the commercialization of any future product candidates.
In the long term, our expenditures will include costs associated with the continued commercialization of Jeuveau ® , research and development, approval and commercialization of products and any of our future product candidates, including our proposed higher strength dose of Jeuveau ® , such as research and development, conducting preclinical studies and clinical trials and manufacturing and supplying as well as marketing and selling any products approved for sale.
In the long term, our expenditures will include costs associated with the continued commercialization of Jeuveau ® , research and development, approval and commercialization of products and any of our future product candidates, including our proposed higher strength dose of Jeuveau ® and the Evolysse™ line of dermal fillers, such as research and development, conducting preclinical studies and clinical trials and manufacturing and supplying as well as marketing and selling any products approved for sale.
Our strategy of focusing exclusively on the self-pay healthcare market may limit our ability to increase sales or achieve profitability. Our strategy is to focus exclusively on the self-pay healthcare market. This focus may limit our ability to increase sales or achieve profitability.
Our strategy of focusing exclusively on the cash-pay healthcare market may limit our ability to increase sales or achieve profitability. Our strategy is to focus exclusively on the cash-pay healthcare market. This focus may limit our ability to increase sales or achieve profitability.
Although we believe that the safety procedures utilized by Daewoong for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, this may not eliminate the risk of accidental contamination or injury from these materials.
Although we believe that the safety procedures utilized by our licensors for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, this may not eliminate the risk of accidental contamination or injury from these materials.
If we are unable to obtain approval for indications in addition to our approval for glabellar lines, our marketing efforts for Jeuveau ® will be severely limited. As a result, we may not generate physician and consumer demand or approval of Jeuveau ® .
If we are unable to obtain approval for indications in addition to our approval for glabellar lines, our marketing efforts for Jeuveau ® will be severely limited. As a result, we may not generate aesthetic practitioner and consumer demand or approval of Jeuveau ® .
We may not be able to file for regulatory approvals or to do so on a timely basis, and even if we do file, we may not receive necessary approvals to commercialize our products in markets outside of the United States.
We may not be able to file for regulatory approvals or to do so on a timely basis, and even if we do file, we may not receive necessary 39 Table of Contents approvals to commercialize our products in markets outside of the United States.
To compete successfully in the aesthetic market, we will have to demonstrate that Jeuveau ® is at least as safe and effective as current products sold by our competitors. Competition in the aesthetic market could result in price-cutting and reduced profit margins, any of which would harm our business, financial condition and results of operations.
To compete successfully in the medical aesthetic market, we will have to demonstrate that our products are at least as safe and effective as current products sold by our competitors. Competition in the medical aesthetic market could result in price-cutting and reduced profit margins, any of which would harm our business, financial condition and results of operations.
Our need to effectively execute our growth strategy requires that we identify, recruit, retain, incentivize and integrate any additional employees to effectively manage any future clinical trials, manage our internal development efforts effectively while carrying out our contractual 22 Table of Contents obligations to third parties, and continue to improve our operational, financial and management controls, reporting systems and procedures.
Our need to effectively execute our growth strategy requires that we identify, recruit, retain, incentivize and integrate any additional employees to effectively manage any future clinical trials, manage our internal development efforts effectively while carrying out our contractual obligations to third parties, and continue to improve our operational, financial and management controls, reporting systems and procedures.
Moreover, a computer security incident that affects our systems or results in the unauthorized access to financial information, personally identifiable information (PII), customer information or data, including credit card transaction data or other sensitive information, could materially damage our reputation.
Moreover, a cybersecurity incident that affects our information systems or results in the unauthorized access to financial information, personally identifiable information (PII), customer information or data, including credit card transaction data or other sensitive information, could materially damage our reputation.
A depreciation of these currencies against the U.S. dollar will decrease the U.S. dollar equivalent of the amounts derived from foreign operations reported in our consolidated financial statements, and an appreciation of these currencies will result in a corresponding increase in such amounts.
A depreciation of these currencies 29 Table of Contents against the U.S. dollar will decrease the U.S. dollar equivalent of the amounts derived from foreign operations reported in our consolidated financial statements, and an appreciation of these currencies will result in a corresponding increase in such amounts.
In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for Jeuveau ® and any other future product candidates will be subject to extensive and ongoing regulatory requirements.
In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for Jeuveau ® and any other future product candidates, such as Evolysse™, will be subject to extensive and ongoing regulatory requirements.
Larger competitors could seek to prevent or delay our commercialization efforts via costly litigation which can be lengthy and expensive and serve to distract our management team’s attention. We could face competition from other sources as well, including academic institutions, governmental agencies and public and private research institutions.
Larger competitors could seek to prevent or delay our commercialization efforts via costly litigation which can be lengthy and expensive and serve to distract our management team’s attention. We could face competition from other sources as well, including academic 23 Table of Contents institutions, governmental agencies and public and private research institutions.
Additionally, our competitors have greater existing market share in the aesthetic neurotoxin product market and long-standing customer loyalty programs and sales contracts with large customers which creates established business and financial relationships with customers, aesthetic societies and universities.
Additionally, our competitors have greater existing market share in the medical aesthetic market and long-standing customer loyalty programs and sales contracts with large customers which creates established business and financial relationships with customers, aesthetic societies and universities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our corporate headquarters is located at 520 Newport Center Drive, Suite 1200, Newport Beach, CA 92660, in a facility that we lease, encompassing approximately 17,758 square feet of space. The lease for this facility expires on January 31, 2025. We believe our facilities are sufficient for our current needs.
Biggest changeItem 2. Properties. Our corporate headquarters is located at 520 Newport Center Drive, Suite 1200, Newport Beach, CA 92660, in a facility that we lease, encompassing approximately 17,758 square feet of space.
When our lease expires, we may exercise our renewal option or look for additional or alternate space for our operations, and we believe that suitable additional or alternative space will be available in the future on commercially reasonable terms.
With the additional office space, we believe our facilities are sufficient for our current needs. When our lease expires, we may exercise our renewal option or look for additional or alternate space for our operations, and we believe that suitable additional or alternative space will be available in the future on commercially reasonable terms.
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On July 27, 2023, we entered into an amendment to the existing lease agreement for our corporate headquarters for additional office space of approximately 8,333 square feet of space. The lease term for the additional office space is expected to commence in the second half of 2024. The lease agreement expires on January 31, 2030.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBased on information available to us at present, management cannot reasonably estimate a range of loss with respect to this matter. 42 Table of Contents Other Legal Matters In addition to the legal proceedings set forth above, from time to time, we may be subject to other legal proceedings and claims in the ordinary course of business.
Biggest changeOther Legal Matters In addition to the legal proceedings set forth above, from time to time, we may be subject to other legal proceedings and claims in the ordinary course of business.
Item 3. Legal Proceedings. Securities Class Action Lawsuit On October 16 and 28, 2020, two putative securities class action complaints were filed in the U.S. District Court for the Southern District of New York by Evolus shareholders Armin Malakouti and Clinton Cox, respectively, naming us and certain of our officers as defendants.
Item 3. Legal Proceedings. 47 Table of Contents Securities Class Action Lawsuit On October 16 and 28, 2020, two putative securities class action complaints were filed in the U.S. District Court for the Southern District of New York by Evolus shareholders Armin Malakouti and Clinton Cox, respectively, naming us and certain of our officers as defendants.
We responded to the demand in December 2021. The outcome of this matter is uncertain at this point.
We responded to the demand in December 2021. The outcome of this matter is uncertain at this point. Based on information available to us at present, management cannot reasonably estimate a range of loss with respect to this matter.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe payment of dividends is also restricted under our credit facility. 43 Table of Contents
Biggest changeThe payment of dividends is also restricted under our credit facility.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has been listed and traded on the Nasdaq under the symbol “EOLS” since February 12, 2018. Holders of Record As of March 3, 2023, we had approximately 53 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock has been listed and traded on the Nasdaq under the symbol “EOLS” since February 12, 2018. Holders of Record As of March 1, 2024, we had approximately 36 holders of record of our common stock.
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Performance Graph This performance graph shall not be deemed “soliciting material” or “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any of our filings under the Securities Act or Exchange Act, except as shall be expressly set forth by specific reference in such filing. 49 Table of Contents This graph shows a comparison of the cumulative total return on our common stock, The Nasdaq Composite Index, and The Nasdaq Biotechnology Index for the five years ended December 31, 2023.
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The graph assumes that $100 was invested at the market close on the last trading day for the year ended December 31, 2018 in each investment and assumes the reinvestment of any dividends. The stock price performance on the graph is not necessarily indicative of future stock price performance.
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Company/Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Evolus $ 100.00 $ 102.27 $ 28.24 $ 54.71 $ 63.11 $ 88.49 Nasdaq Composite Index $ 100.00 $ 135.23 $ 194.24 $ 235.78 $ 157.74 $ 226.24 Nasdaq Biotechnology Index $ 100.00 $ 124.41 $ 156.36 $ 155.37 $ 138.42 $ 143.60 Unregistered Sales of Equity Securities As consideration for the rights granted under the Symatese Europe Agreement as described in Note 2.
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Basis of Presentation and Summary of Significant Accounting Policies , on December 20, 2023 we issued to Symatese 610,000 shares of our common stock, par value $0.00001 per share.
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Such shares were offered and sold in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), set forth under Section 4(a)(2) of the Securities Act relating to sales by an issuer not involving any public offering.
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Symatese has represented to us that it is an accredited investor and that it acquired such shares of common stock for investment purposes only and not with a view to any resale, distribution or other disposition of securities in violation of the Securities Act. 50 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following are reconciliations of adjusted gross profit to gross profit, the most directly comparable to GAAP measure, and adjusted gross profit margin to gross profit margin, the most directly comparable GAAP measure: Year Ended December 31, (in millions) 2022 2021 Total net revenues $ 148.6 $ 99.7 Cost of sales: Product cost of sales (excludes amortization of intangible assets) 55.9 43.5 Settlement payment from Daewoong — (25.5) Amortization of distribution right intangible asset 3.0 2.9 Total cost of sales 58.9 20.9 Gross profit 89.8 78.7 Gross profit margin 60.4 % 79.0 % Add: Settlement payment from Daewoong — (25.5) Add: Amortization of distribution right intangible asset 3.0 2.9 Adjusted gross profit $ 92.7 $ 56.1 Adjusted gross profit margin 62.4 % 56.3 % 47 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the periods indicated: Year Ended December 31, (in millions) 2022 2021 Revenue: Product revenue, net $ 146.6 $ 99.0 Service revenue 2.0 0.7 Total net revenues 148.6 99.7 Operating expenses: Product cost of sales (excludes amortization of intangible assets) 55.9 43.5 Settlement payment from Daewoong — (25.5) Selling, general and administrative 141.8 112.1 Research and development 4.7 2.1 In-process research and development 2.0 — Revaluation of contingent royalty obligation payable to Evolus Founders 5.8 6.3 Depreciation and amortization 3.7 5.6 Total operating expenses 213.9 144.1 Loss from operations (65.3) (44.4) Non-operating expense, net (9.0) (1.4) Loss from extinguishment of debts, net — (1.0) Loss before income taxes: (74.3) (46.8) Income tax expense 0.1 0.0 Net loss $ (74.4) $ (46.8) Unrealized loss, net of tax (0.3) — Comprehensive loss $ (74.7) $ (46.8) Net Revenues We currently operate in one reportable segment, and all of our net revenues are derived from sales of Jeuveau ® .
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the periods indicated: Year Ended December 31, (in millions) 2023 2022 Revenue: Product revenue, net $ 199.7 $ 146.6 Service revenue 2.4 2.0 Total net revenues 202.1 148.6 Operating expenses: Product cost of sales (excludes amortization of intangible assets) 61.6 55.9 Selling, general and administrative 164.9 141.8 Research and development 6.6 4.7 In-process research and development 8.9 2.0 Revaluation of contingent royalty obligation payable to Evolus Founders 4.3 5.8 Depreciation and amortization 5.1 3.7 Total operating expenses 251.3 213.9 Loss from operations (49.2) (65.3) Non-operating expense, net (12.3) (9.0) Loss before income taxes: (61.5) (74.3) Income tax expense 0.2 0.1 Net loss $ (61.7) $ (74.4) Unrealized loss, net of tax (0.1) (0.3) Comprehensive loss $ (61.8) $ (74.7) The following table summarizes our gross profit margin for the periods indicated: Year Ended December 31, (in millions) 2023 2022 Total net revenues $ 202.1 $ 148.6 Cost of sales: Product cost of sales (excludes amortization of intangible assets) 61.6 55.9 Amortization of distribution right intangible asset 3.0 3.0 Total cost of sales 64.5 58.9 Gross profit $ 137.6 $ 89.8 Gross profit margin 68.1 % 60.4 % Net Revenues We currently operate in one reportable segment, and all of our net revenues are derived from sales of Jeuveau ® .
The following discussion contains management’s discussion and analysis of our financial condition and consolidated results of operations and should be read together with the historical consolidated financial statements and the notes thereto included in Item 8 “Consolidated Financial Statements and Supplementary Data” and included elsewhere in this Annual Report on Form 10-K.
The following discussion contains management’s discussion and analysis of our financial condition and consolidated results of operations and should be read together with the consolidated financial statements and the notes thereto included in Item 8 “Consolidated Financial Statements and Supplementary Data” and included elsewhere in this Annual Report on Form 10-K.
The increase was primarily attributable to increasing our clinical operations and research and development expenses related to the Phase II “extra-strength” clinical trial. We expect our research and development expenses to continue to increase if and when we seek to develop further product candidates and as we pursue regulatory approvals in other jurisdictions.
The increase was primarily attributable to increasing our clinical operations and research and development expenses related to the Phase II “extra-strength” clinical trial. We expect our research and development expenses to continue to increase if and when we develop further product candidates and as we pursue regulatory approvals in other jurisdictions.
Settlement Agreement. License and Supply Agreement The Daewoong Agreement includes certain minimum annual purchases we are required to make in order to maintain the exclusivity of the license. We may, however, meet these minimum purchase obligations by achieving certain market share in our licensed territories.
License and Supply Agreement The Daewoong Agreement includes certain minimum annual purchases we are required to make in order to maintain the exclusivity of the license. We may, however, meet these minimum purchase obligations by achieving certain market share in our licensed territories.
As a result of the royalty payments that we are required to pay under the Medytox Settlement Agreements, our cost of sales and gross profit margin have been negatively impacted and will continue to be negatively impacted to a marginal extent from September 2022 to September 2032.
As a result of the royalty payments that we are required to pay under the Medytox Settlement Agreements, our cost of sales and gross profit margin have been negatively impacted and will continue to be negatively impacted to a lesser extent from September 2022 to September 2032.
International Trade Commission related to Jeuveau ® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox which we refer to as the Medytox Settlement Agreement. We refer to the U.S.
(“Medytox”) in the U.S. International Trade Commission related to Jeuveau ® (the “ITC Action”) and certain related matters by entering into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S. Settlement Agreement, and another Settlement and License Agreement with Medytox which we refer to as the Medytox Settlement Agreement.
In addition, during the period from December 16, 2020 through September 16, 2022, we agreed to pay to Allergan and Medytox royalties on the sale of Jeuveau ® , based on a certain dollar amount per vial sold in the United States, and a low-double digit royalty on net sales of Jeuveau ® sold in other Evolus territories.
In addition, during the period from December 16, 2020 through September 16, 2022, we agreed to pay to Allergan and Medytox royalties on the sal e of Jeuveau ® , based on a certain dollar amount per vial sold in the United States, and a low-double digit royalty on net sales of Jeuveau ® sold in other Evolus territories.
These completed obligations consisted of (i) cash payments of $35.0 million in multiple payments to Allergan and Medytox, of which we paid each of the first payment of $15.0 million in the third quarter of 2021, the second payment of $15.0 million in the first quarter of 2022, and the final payment of $5.0 million in the first quarter of 2023, (ii) payment to Allergan and Medytox of certain royalties on the sale of Jeuveau ® , based on a certain dollar amount per vial sold 45 Table of Contents of Licensed Products by or on our behalf in the United States, from December 16, 2020 through September 16, 2022, (iii) payment to Medytox, from December 16, 2020 to September 16, 2022, of a low-double digit royalty on net sales of Jeuveau ® sold by us or on our behalf in territories we have licensed outside the United States, and (iv) the issuance of 6,762,652 shares of our common stock to Medytox.
The completed obligations consisted of (i) cash payments of $35.0 million , of which we paid the first payment of $15.0 million in the third quarter of 2021, the second payment of $15.0 million in the first quarter of 2022, and the final payment of $5.0 million in the first quarter of 2023, (ii) payment to Allergan and Medytox of certain royalties on the sale of Jeuveau ® , based on a certain dollar amount per vial sold of Licensed Products by or on our behalf in the United States, from December 16, 2020 through September 16, 2022, (iii) payment to Medytox, from December 16, 2020 to September 16, 2022, of a low-double digit royalty on net sales of Jeuveau ® sold by us or on our behalf in territories we have licensed outside the United States, and (iv) the issuance of 6,762,652 shares of our common stock to Medytox.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue recognition. We generate product revenue from the sale of Jeuveau ® in the United States and Great Britain and service revenue from the sale of Jeuveau ® through a distribution partner in Canada.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. We generate product revenue from the sale of Jeuveau ® in the United States and Europe and service revenue from the sale of Jeuveau ® through a distribution partner in Canada.
Litigation Settlement As described in “—Overview— Impact of Settlement Agreements ,” on February 18, 2021, upon entering into the Medytox/Allergan Settlement Agreements, we agreed to pay to Allergan and Medytox $35.0 million in multiple payments over two years, of which we paid $15.0 million in the third quarter of 2021 and $15.0 million during the first quarter of 2022, with final payment of $5.0 million paid in the first quarter of 2023.
Litigation Settlement As described in “—Overview— Impact of Settlement Agreements ,” on February 18, 2021, upon entering into the Medytox/Allergan Settlement Agreements, we agreed to pay to Allergan and Medytox $35.0 million in multiple payments over two years, of which we paid the first payment of $15.0 million in the third quarter of 2021, the second payment of $15.0 million in the first quarter of 2022, and the final pay ment of $5.0 million in the first quarter of 2023.
However, there can be no assurance such financing or other alternatives will be available to us on acceptable terms, or at all. The global economy, including the financial and credit markets, has recently experienced significant volatility 51 Table of Contents and disruptions, including severely diminished liquidity and credit availability and rising interest rates.
However, there can be no assurance such financing or other alternatives will be available to us on acceptable terms, or at all. The global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including severely diminished liquidity and credit availability and rising interest rates.
The portion of invoice price allocated to the Reward is initially recorded as deferred revenue, and when customers 54 Table of Contents redeem the Reward and the related product is delivered, the deferred revenue is reversed and included in net revenues.
The portion of invoice price allocated to the Reward is initially recorded as deferred revenue, and when customers redeem the Reward and the related product is delivered, the deferred revenue is reversed and included in net revenues.
These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and our future market share in various jurisdictions. Operating Leases Our corporate headquarters in Newport Beach, California is under a five-year non-cancelable operating lease, which expires on January 31, 2025 with an option to extend the term for an additional 60 months.
These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and our future market share. Operating Leases Our corporate headquarters in Newport Beach, California is under a non-cancelable operating lease, which expires on January 31, 2030 with an option to extend the term for an additional 60 months.
We received net proceeds of approximately $68.7 million from Pharmakon, after issuance costs and debt discounts. On December 5, 2022, we entered into a Second Amendment to the loan agreement to extend our option to draw down the second tranche of $50.0 million until December 31, 2023.
The first tranche of $75.0 million was funded on December 29, 2021. We received net proceeds of approximately $68.7 million from Pharmakon, after issuance costs and debt discounts. On December 5, 2022, we entered into a Second Amendment to the loan agreement to extend our option to draw down the second tranche of $50.0 million until December 31, 2023.
Settlement Agreement and the ROW Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements. We have completed all obligations to Allergan and the majority of our obligations to Medytox under the Medytox/Allergan Settlement Agreements.
We refer to the U.S. Settlement Agreement and the ROW Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements. We have completed all obligations to Allergan and the majority of our obligations to Medytox under the Medytox/Allergan Settlement Agreements.
We also anticipate our gross profit margin and adjusted gross profit margin will fluctuate as we implement various marketing programs that may affect the average selling price for Jeuveau ® and as we expand internationally.
We also anticipate our gross profit margin will fluctuate as we implement various marketing p rograms that may affect the average selling price for Jeuveau ® and as we expand internationally.
At the time Jeuveau ® product is sold to customers, the invoice price is allocated between the product sold and the estimated material right reward, or Reward, that the customer might redeem in the future.
At the time 60 Table of Contents Jeuveau ® product is sold to customers, the invoice price is allocated between the product sold and the estimated material right reward, or Reward, that the customer might redeem in the future.
We have based our projections of capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources, which consist of cash and cash equivalents, cash generated from operations, and cash available under the Pharmakon Term Loans, sooner than we expect.
We have based our projections of capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources, which consist of cash and cash equivalents and cash generated from operations, sooner than we expect.
Current and Future Capital Requirements We believe that our current capital resources, which consist of cash and cash equivalents, future cash generated from operations, and cash available under the Pharmakon Term Loans, will be sufficient to satisfy our cash requirements for at least the next twelve months for working capital to support our daily operations and meet commitments under our contractual obligations with third parties, although we may need to access the debt and equity markets or other sources of financing to satisfy our long-term cash requirements as further discussed below.
Current and Future Capital Requirements 57 Table of Contents We believe that our current capital resources, which consist of cash and cash equivalents, future cash generated from operations and sales under the ATM Sales Agreement will be sufficient to satisfy our cash requirements for at least the next twelve months for working capital to support our daily operations and meet commitments under our contractual obligations with third parties, although we may wish to access the debt and equity markets or other sources of financing to satisfy our long-term cash requirements as further discussed below.
Market Trends and Uncertainties The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruptions, including the COVID-19 pandemic, increases in inflation rates, rising interest rates, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability.
Market Trends and Uncertainties The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruptions, including uncertainty regarding the stability of certain financial institutions, increases in inflation rates, rising interest rates, severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, and uncertainty about economic stability.
Our cash requirements depend on numerous factors, including but not limited to the impact of any potential disruptions to our supply chain, inflation or other economic conditions, and other long-term commitments and contingencies.
Our cash requirements depend on numerous factors, including but not limited to, the impact of any potential disruptions to our supply chain, inflation or other economic conditions, uncertainty regarding the stability of certain financial institutions, and other long-term commitments and contingencies.
For product revenue, we recognize revenue when control of Jeuveau ® is transferred to a customer upon receipt. For service revenue, we are determined to be the agent in the distribution of Jeuveau ® in Canada and record the sale as service revenue on a net basis.
For product revenue, we recognize revenue when control of Jeuveau ® is transferred to a customer upon receipt. For service revenue, we are determined to be the agent in the distribution of Jeuveau ® in Canada and record the sale as service revenue on a net basis. Product revenues are recorded net of sales-related adjustments, wherever applicable.
Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.
Consolidated Financial Statements and Supplementary Data - Note 7. Operating Leases. Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.
Financing Activities Cash used in financing activities was $4.1 million for the year ended December 31, 2022, compared to $73.1 million of cash provided by financing activities for the year ended December 31, 2021.
Financing Activities Cash provided by financing activities was $44.6 million for the year ended December 31, 2023, compared to $4.1 million of cash used in financing activities for the year ended December 31, 2022.
We completed our patient enrollment in the clinical study evaluating the “extra-strength” dose in the second quarter of 2022. This program provides us with the opportunity to offer the first multi-strength neurotoxin, giving customers and consumers increased treatment options. In January 2023, we announced positive interim results from the Phase II clinical trial.
We completed our patient enrollment in the clinical study evaluating the “extra-strength” dose in the second quarter of 2022. This program provides us with the opportunity to offer the first multi-strength neurotoxin, giving customers and consumers increased treatment options.
During the years ended December 31, 2022 and 2021, the revaluation charge of $5.8 million and $6.3 million, respectively, were primarily driven by changes in management assumptions relating to revenue forecasts, the discount rate used and the t iming of cash flows.
During the years ended December 31, 2023 and 2022, the revaluation charges of $4.3 million and $5.8 million, respectively, were primarily driven by changes in management assumptions relating to revenue forecasts, the discount rate used and the timing of cash flows.
Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and future launches internationally. Research and Development Research and development expenses increased by $2.7 million, or 129.7%, to $4.7 million for the year ended December 31, 2022 from $2.1 million for the year ended December 31, 2021.
Selling, general and administrative expenses may fluctuate in the future primarily due to potential changes in marketing strategies and international launches. Research and Development Research and development expenses increased by $1.8 million, or 38.3%, to $6.6 million for the year ended December 31, 2023 from $4.7 million for the year ended December 31, 2022.
The proceeds of the Pharmakon Term Loans are used to fund our general corporate and working capital requirements. Contingent Royalties and Promissory Note Payable to the Evolus Founders We are obligated to make quarterly royalty payments of a low single digit percentage of net sales of Jeuveau ® to the Evolus Founders.
The proceeds of the Pharmakon Term Loans are used to fund our general corporate and working capital requirements. Contingent Royalties to Evolus Founders We are obligated to make quarterly royalty payments of a low single digit percentage of net sales of Jeuveau ® to the Evolus Founders. These obligations terminate at the end of the second quarter of 2029.
Our gross profit margin and adjusted gross profit margin will continue to be negatively impacted to a lesser extent from September 2022 to September 2032 as we pay royalty obligations to Medytox at a mid-single digit percentage of net revenue.
Our gross profit margin was impacted negatively and materially through September 2022, by our payments under the Medytox/Allergan Settlement Agreements. Our gross profit margin has been and will continue to be negatively impacted to a lesser extent from September 2022 to September 2032 as we pay royalty obligations to Medytox at a mid-single digit percentage of net revenue.
Impact of Inflation The markets in which we operate are currently experiencing increased inflation. While we do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented, a prolonged inflationary environment could increase our cash required for operations and impact our liquidity position.
While we do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented, a prolonged inflationary environment could impact consumer discretionary spending for aesthetic medical procedures, increase our cash required for operations and impact our liquidity position.
On a recurring basis, we estimate the amounts of receivables considered uncollectible to reflect an allowance for doubtful accounts. Contingent Royalty Obligation to the Evolus Founders We determine the fair value of the contingent royalty obligation payable to the Evolus Founders under the Amended Purchase Agreement based on significant unobservable inputs using a discounted cash flows method.
Contingent Royalty Obligation to the Evolus Founders We determine the fair value of the contingent royalty obligation payable to the Evolus Founders under the Amended Purchase Agreement based on significant unobservable inputs using a discounted cash flows method.
The interim data showed that the “extra-strength” formulation of Jeuveau ® appeared to be generally safe and well-tolerated and demonstrated a median duration of at least 26 weeks based on the time for patients to return to baseline after treatment.
The clinical trial data showed that the “extra-strength” formulation of Jeuveau ® had a similar safety profile to the controls and demonstrated a median duration of at least 26 weeks based on the time for patients to return to baseline after treatment.
Selling, General and Administrative Selling, general and administrative expenses increased by $29.8 million, or 26.6%, to $141.8 million for the year ended December 31, 2022 from $112.1 million for the year ended December 31, 2021, primarily resulting from increased personnel costs and increased commercial activities.
Selling, General and Administrative Selling, general and administrative expenses increased by $23.1 million, or 16.3%, to $164.9 million for the year ended December 31, 2023 from $141.8 million for the year ended December 31, 2022, primarily resulting from increasing personnel costs and related to our commercial activities.
Indebtedness See “ —Liquidity and Capital Resources ” for a description of our Pharmakon Term Loans. 53 Table of Contents Material Cash Requirements Our material cash requirements from known contractual and other obligations primarily consist of (i) principal and interest payments related to our Pharmakon Term Loans (future interest payments on our outstanding Pharmakon Term Loans total approximately $33.8 million, with $9.3 million due within twelve months), (ii) a final payment of $5.0 million related to the Medytox/Allergan Settlement Agreements, which was paid in February 2023, (iii) quarterly royalty payments to the Evolus Founders of a low single digit percentage of net sales of Jeuveau ® (these obligations terminate in the quarter after the 10-year anniversary of the first commercial sale of Jeuveau ® in the United States), (iv) quarterly royalty payments to Medytox of a low-double digit royalty on net sales of Jeuveau ® sold in the United States and other Evolus territories (during the period from September 17, 2022 to September 16, 2032) and (v) obligations under operating leases related to our office spaces.
Material Cash Requirements Our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, primarily consist of (i) principal and interest payments related to our Pharmakon Term Loans (future interest payments on our outstanding Pharmakon Term Loans total approximately $60.9 million, with $17.9 million due within twelve months), (ii) quarterly royalty payments to the Evolus Founders of a low single digit percentage of net sales of Jeuveau ® (these obligations terminate in the quarter after the 10-year anniversary of the first commercial sale of Jeuveau ® in the United States), (iii) quarterly royalty payments to Medytox of a low-double digit royalty on net sales of Jeuveau ® sold in the United States and other Evolus territories (during the period from September 17, 2022 to September 16, 2032), (iv) minimum purchase obligations under the Daewoong Agreement, (v) €12.1 milestone payments under the Symatese U.S.
Our royalty obligations to Allergan concluded on 48 Table of Contents September 16, 2022, and beginning on September 17, 2022, our royalty obligations to Medytox were reduced to a mid-single digit percentage of net revenue for ten years thereafter.
Our royalty obligations to Allergan concluded on September 16, 2022, and beginning on September 17, 2022, our royalty obligations to Medytox were reduced to a mid-single digit percentage of net revenue through the expiration of our Medytox royalty obligation in September 2032.
Our future funding requirements will depend on many factors, including, but not limited to: • the rate of revenue growth for Jeuveau ® in the United States and success of planned international launches; • our ability to forecast demand for our products, scale our supply to meet that demand and manage working capital effectively; • corporate development activities including the purchase, license, or other acquisition of products and services to add to our product or service offerings • the number, characteristics, and development stage of any future product candidates we may develop or acquire; • the timing and costs of any ongoing or future clinical programs we may conduct; • the cost of manufacturing our product or any future product candidates and any products we successfully commercialize, including costs associated with our supply chain; • the timing and amounts of the royalty and other payments payable in connection with the Medytox Settlement Agreement; • the amounts of the royalty payable to the Evolus Founders; • the cost of commercialization activities for Jeuveau ® or any future product candidates are approved or cleared for sale, including marketing, sales and distribution costs; • the cost of maintaining a sales force, the productivity of that sales force, the market acceptance of our products and the actions and product introductions of our competitors; • our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of any such agreements that we may enter into; • any product liability or other lawsuits related to our products; • the cost of any current litigation, including our ongoing securities class action lawsuit and shareholder derivative lawsuit; • the expenses needed to attract and retain skilled personnel; • the costs associated with being a public company; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property and any other future intellectual litigation we may be involved in; and • the timing, receipt and amount of sales of any future approved or cleared products, if any. 52 Table of Contents Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 (in millions) Net cash (used in) provided by: Operating activities $ (84.9) $ (33.4) Investing activities (2.9) 4.0 Financing activities (4.1) 73.1 Effect of exchange rates on cash (0.3) — Change in cash and cash equivalents (92.3) 43.7 Cash and cash equivalents, beginning of period 146.3 102.6 Cash and cash equivalents, end of period $ 53.9 $ 146.3 Operating Activities For the year ended December 31, 2022, operating activities used $84.9 million of cash, which primarily resulted from our net loss of $74.4 million, as adjusted for certain non-cash charges including $10.8 million of stock-based compensation expense, $1.6 million of provision of allowance for doubtful accounts, $1.1 million of amortization of debt discount and issuance costs, $3.7 million of depreciation and amortization and $5.8 million in revaluation of our contingent royalty obligation.
Our future funding requirements will depend on many factors, including, but not limited to: • the rate of revenue growth for Jeuveau ® in the United States and success of planned international launches; • the timing of regulatory approval for the Evolysse™ dermal filler product line in the United States and Europe by Symatese and our ability to successfully commercialize these products; • development costs and milestone payments related to the Evolysse™ products; • our ability to forecast demand for our products, scale our supply to meet that demand and manage working capital effectively; • corporate development activities including the purchase, license, or other acquisition of products and services to add to our product or service offerings; • the number, characteristics, and development stage of any future product candidates we may develop or acquire; • the timing and costs of any ongoing or future clinical programs we may conduct; • the cost of manufacturing our product or any future product candidates and any products we successfully commercialize, including costs associated with our supply chain; • the timing and amounts of the royalty and other payments payable in connection with the Medytox Settlement Agreement; • the amounts of the royalty payable to the Evolus Founders; • the cost of commercialization activities for Jeuveau ® , the Evolysse™ dermal filler product line or any future product candidates that are approved or cleared for sale, including marketing, sales and distribution costs; • the cost of maintaining a sales force, the productivity of that sales force, the market acceptance of our products and the actions and product introductions of our competitors; • our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of any such agreements that we may enter into; • any product liability or other lawsuits related to our products; • the cost of any current litigation, including our ongoing securities class action lawsuit and shareholder derivative lawsuit; 58 Table of Contents • the expenses needed to attract and retain skilled personnel; • the costs associated with being a public company; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing intellectual property and any other future intellectual litigation we may be involved in; and • the timing, receipt and amount of sales of any future approved or cleared products, if any.
Depreciation and Amortization Depreciation and amortization decreased by $1.9 million, or 33.8%, to $3.7 million for the year ended December 31, 2022 from $5.6 million for the year ended December 31, 2021 due to the decrease in amortization of the internal-use software.
Depreciation and Amortization Depreciation and amortization increased by $1.4 million, or 37.9%, to $5.1 million for the year ended December 31, 2023 from $3.7 million for the year ended December 31, 2022, primarily due to an increase in amortization of internal-use software and leasehold improvements.
The Pharmakon Term Loans will mature on the sixth year anniversary of the closing date of the first tranche. The term loan bears an annual interest rate equal to the U.S. Dollar LIBOR rate (subject to a LIBOR rate floor of 1.0%) plus 8.5%, and matures in December 2027.
The Pharmakon Term Loans will mature on the sixth year anniversary of the closing date of the first tranche. The term loan bears an annual interest rate equal to the 3-month secured overnight financing rate (“SOFR”) (subject to a SOFR rate floor of 1.0%) plus 8.5% per annum.
You should carefully read “Special Note Regarding Forward-Looking Statements” and Item 1A “Risk Factors.” Overview We are a performance beauty company with a customer-centric approach to delivering breakthrough products in the self-pay aesthetic market. In February 2019, we received the approval of our first product Jeuveau ® (prabotulinumtoxinA-xvfs) from the U.S. Food and Drug Administration, or FDA.
You should carefully read “Special Note Regarding Forward-Looking Statements” and Item 1A “Risk Factors.” Overview We are a global performance beauty company with a customer-centric approach to delivering breakthrough products in the cash-pay aesthetic market. Our first product, Jeuveau ® (prabotulinumtoxinA-xvfs), is currently sold in the United States, Canada and certain European countries.
The standalone selling price of the Reward is measured based on historical sales data, estimated average selling price of Jeuveau ® at the time of redemption, expected customer and consumer participation rates in the loyalty program, and estimated number of qualifying treatments to be performed by customers.
The standalone selling price of the Reward is measured based on estimated average selling price of Jeuveau ® at the time of redemption and the expected redemption rate by customers based on historical sales data.
In addition, net operating assets and liabilities changed by $11.5 million primarily driven by $15.0 million of accrued litigation settlement expenses and various timing of inventory purchases and payments, collections from customers and payments to vendors.
Net operating assets and liabilities changed by $5.9 million, primarily driven by improved collections from customers, payments to vendors, the timing of inventory purchases from our supplier, and the final cash litigation settlement payment of $5.0 million to Medytox and Allergan.
For the year ended December 31, 2021, operating activities used $33.4 million of cash, which primarily resulted from our net loss of $46.8 million as adjusted for certain non-cash charges including $9.6 million of stock-based compensation expense, $0.6 million of provision of allowance for doubtful accounts, $0.9 million of amortization of debt discount and issuance costs, $5.6 million of depreciation and amortization and $6.3 million in revaluation of our contingent royalty obligation.
Operating activities also includes adjustments for certain non-cash charges including $10.8 million of stock-based compensation expense, $5.8 million in revaluation of our contingent royalty obligation, $1.6 million of provision of allowance for doubtful accounts, $1.1 million of amortization of debt discount and issuance costs and $3.7 million of depreciation and amortization.
In-process Research and Development In the second quarter of 2022, we recorded an upfront payment of $2.0 million in connection with the License and Research Collaboration Agreement (the “Collaboration Agreement”) we entered into in June 2022 with a 3D printing company with biomaterial capabilities. See Note 2 . Basis of Presentation and Summary of Significant Accounting Policies for additional information.
In 2022, we recorded an upfront payment of $2.0 million in connection with the License and Research Collaboration Agreement (the “Collaboration Agreement”) we entered into with a 3D printing company with biomaterial capabilities. In 2023, we recorded the upfront payment of $4.4 million and the issuance of shares of $4.4 million in connection with the Symatese U.S.
Revenues are recognized when the control of the promised goods is transferred to the customer in an amount that reflects the consideration allocated to the related performance obligations and to which we expect to be entitled in exchange for those products or services.
Revenues are recognized when the control of the promised goods is transferred to the customer in an amount that reflects the consideration allocated to the related performance obligations and to which we expect to be entitled in exchange for those products or services. 54 Table of Contents Net revenues of Jeuveau ® sales increased by $53.5 million, or 36.0%, to $202.1 million for the year ended December 31, 2023 from $148.6 million for the year ended December 31, 2022, primarily due to higher sales volumes.
Non-Operating Expense, Net 49 Table of Contents Non-operating expenses, net, increased by $7.6 million, or 544.2%, to $9.0 million for the year ended December 31, 2022 from $1.4 million for the year ended December 31, 2021, primarily due to higher interest expense for the Pharmakon Term Loans.
Non-Operating Expense, Net Non-operating expense, net, increased by $3.3 million, or 36.6%, to $12.3 million for the year ended December 31, 2023 from $9.0 million for the year ended December 31, 2022, primarily due the advancement of the $50.0 million second tranche of the Pharmakon Term Loans in 2023.
In May 2019, we commercially launched Jeuveau ® in the United States. Jeuveau ® is a proprietary 900 kDa purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults.
Jeuveau ® is a proprietary 900 kDa purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults. Evolysse™, a line of dermal fillers, is a first-generation cold technology hyaluronic acid line for products including mid face, nasolabial folds, lips and eyes.
See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for further information. Contingent Royalties and Notes Payable to Evolus Founders We are obligated to make quarterly future payments to the founders of Evolus, which we refer to as the Evolus Founders, of a low single digit percentage of net sales of Jeuveau ® .
Contingent Royalties to Evolus Founders We are obligated to make quarterly future payments to the founders of Evolus, which we refer to as the Evolus Founders, of a low single digit percentage of net sales of Jeuveau ® . These obligations will terminate at the end of the second quarter of 2029.
Revaluation of Contingent Royalty Obligation Payable to Evolus Founders The change in the fair value of the contingent royalty obligation payable to Evolus Founders is recorded in operating expenses in each reporting period.
Agreement and Symatese Europe Agreement, respectively. See Note 2 . Basis of Presentation and Summary of Significant Accounting Policies for additional information. Revaluation of Contingent Royalty Obligation Payable to Evolus Founders 55 Table of Contents The change in the fair value of the contingent royalty obligation payable to Evolus Founders is recorded in operating expenses in each reporting period.
The Pharmakon Term Loans On December 14, 2021, we entered into a loan agreement with Pharmakon. Pursuant to the terms of the agreement, Pharmakon agreed to make term loans to us in two tranches. The first tranche of $75.0 million was funded on December 29, 2021.
We have not sold any shares under the ATM Sales Agreement. See Note 9. Stockholders’ Equity for additional information. The Pharmakon Term Loans On December 14, 2021, we entered into a loan agreement with Pharmakon. Pursuant to the terms of the agreement, Pharmakon agreed to make term loans to us in two tranches.
Product cost of sales, excluding amortization of intangible assets, increased by $12.4 million, or 28.4%, to $55.9 million for the year ended December 31, 2022 from $43.5 million from the year ended December 31, 2021 primarily due to higher sales volume. We anticipate that our product cost of sales will fluctuate in line with changes in revenues.
Product cost of sales, excluding amortization of intangible assets, increased by $5.7 million, or 10.1%, to $61.6 million for the year ended December 31, 2023 from $55.9 million from the year ended December 31, 2022 primarily due to higher sales volume, offset by reduced royalty obligations to Medytox.
We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive medical aesthetic market. Cost of Sales Product Cost of Sales Product cost of sales, excluding amortization of intangible assets, primarily consisted of the cost of inventory purchased from Daewoong.
We anticipate our continued sales growth will depend on our ability to grow our customer base and increase purchases by our current customers in the competitive aesthetic market as well as on regulatory approval for the Evolysse TM dermal filler product line in the United States and Europe by Symatese.
We anticipate that the fiscal 2023 will continue to reflect a dynamic macroeconomic environment. We expect elevated levels of cost inflation to continue, potentially impacting consumer discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation.
We expect elevated levels of cost inflation to continue, potentially impacting consumer 53 Table of Contents discretionary spending for aesthetic medical procedures. Markets experiencing uncertainty could have substantial high rates of inflation. We cannot reasonably estimate the financial impact of increased inflation on our financial condition, results of operations or cash flows in the future.
These obligations terminate at the end of the second quarter of 2029. The fair value of the obligations are valued quarterly and are referred to in our consolidated financial statements as the contingent royalty obligation. In November 2021, we also paid $20.0 million to satisfy in full a promissory note that matured in November 2021.
The fair value of the obligations are valued quarterly and are referred to in our consolidated financial statements as the contingent royalty obligation.
Investing Activities Cash used in investing activities was $2.9 million for the year ended December 31, 2022 compared to cash provided by investing activities of $4.0 million for the year ended December 31, 2021. The change in cash used in investing activities was attributable to maturities of short-term investments with no new purchases during the year ended December 31, 2021.
Investing Activities Cash used in investing activities was $1.6 million for the year ended December 31, 2023, compared to $2.9 million for the year ended December 31, 2022.
The interest on the Pharmakon Term Loans is based on a variable interest rate, which we expect will continue to result in higher interest expense in the current interest rate environment.
Interest on the Pharmakon Term Loans is based on a variable interest rate, which we expect will continue to fluctuate with the market. Income Taxes Expense There was minimal income tax expense for the years ended December 31, 2023 and 2022.
The trial is expected to be completed in the first half of 2023, and final results will be presented in the second half of 2023. Impact of Settlement Agreements In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc. (“Medytox”) in the U.S.
The Pharmakon Term Loans matures on the six-year anniversary of the closing date of the first tranche. See “—Liquidity and Capital Resources—The Pharmakon Term Loans” for further information. Impact of Settlement Agreements In February 2021, we settled litigation claims related to a complaint against us filed by Allergan, Inc. and Allergan Limited (together, “Allergan”) and Medytox, Inc.
Recently Issued and Adopted Accounting Pronouncements We describe the recently issued accounting pronouncements that apply to us in Item 8. Consolidated Financial Statements and Supplementary Data - Note 2. Basis of Presentation and Summary of Significant Accounting Policies-Recent Accounting Pronouncements. 56 Table of Contents
Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement, which could materially impact the fair value reported on the consolidated balance sheet. Recently Issued and Adopted Accounting Pronouncements We describe the recently issued accounting pronouncements that apply to us in Item 8. Consolidated Financial Statements and Supplementary Data - Note 2.
We used net cash of $84.9 million and $33.4 million in operating activities for the twelve months ended December 31, 2022 and 2021, respectively. We expect to continue to incur significant expenses for the foreseeable future as we increase marketing efforts for Jeuveau ® in the U.S., Europe, and Australia and maintain our regulatory approvals.
We used net cash of $34.0 million and $84.9 million in operating activities for the twelve months ended December 31, 2023 and 2022, respectively.
In addition, net operating assets and liabilities changed by $34.3 million primarily driven by $15.0 million of accrued litigation settlement expenses and various timing of inventory purchases and payments, collections from customers and payments to vendors.
For the year ended December 31, 2022, operating activities used $84.9 million of cash, which primarily resulted from our net loss of $74.4 million. Net operating assets and liabilities changed by $34.3 million, primarily driven by timing of receipts from customers and payments to vendors and the second cash litigation settlement payment of $15.0 million to Medytox and Allergan.
In January 2023, we received approval from the Australian Therapeutics Good Administration, or TGA, for regulatory approval of our neurotoxin in Australia. In November 2021, we announced the initiation of a Phase II clinical trial designed to investigate a higher strength dose of Jeuveau ® in the frown lines.
In addition, we will sub-license its distribution rights for the Evolysse™ fillers line to a Symatese subsidiary for distribution in France. “Extra-Strength” Clinical Trial 52 Table of Contents In November 2021, we announced the initiation of a Phase II clinical trial designed to investigate a higher strength dose of Jeuveau ® in the frown lines.
These obligations terminate at the end of the second quarter of 2029. The fair value of the obligations is valued quarterly and is referred to in our consolidated financial statements as the contingent royalty obligation. In November 2021, we also paid $20.0 million to satisfy in full a promissory note that matured in November 2021.
The fair value of the obligations is valued quarterly and is referred to in our consolidated financial statements as the contingent royalty obligation. As of December 31, 2023 and 2022, we recorded an aggregate balance of $45.0 million and $46.3 million, respectively, on our consolidated balance sheet for the future royalty payment obligation to Evolus Founders.
We have a limited history of generating revenues and began shipping Jeuveau ® in May 2019. Since inception, we have incurred recurring net operating losses and as of December 31, 2022, we had an accumulated deficit of $497.3 million. We incurred net losses of $74.4 million and $46.8 million in the years ended December 31, 2022 and 2021, respectively.
Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $62.8 million, positive working capital of $64.1 million and stockholders’ deficit of $20.7 million. We began selling Jeuveau ® in May 2019 and have a relatively limited history of generating revenues.
Net revenues of Jeuveau ® sales increased by $48.9 million, or 49.1%, to $148.6 million for the year ended December 31, 2022 from $99.7 million for the year ended December 31, 2021, primarily due to higher sales volumes.
In-process Research and Development In-process research and development increased by $6.9 million, or 343.5%, to $8.9 million for the year ended December 31, 2023 from $2.0 million for the year ended December 31, 2022.
Removed
Our primary market is the self-pay aesthetic market, which includes medical products purchased by physicians and other customers that are then sold to consumers or used in procedures for aesthetic indications that are not reimbursed by any third-party payor, such as Medicaid, Medicare or commercial insurance.
Added
We have commercial launch plans in additional countries where we have regulatory approval that we expect to implement in the next few years.
Removed
We believe we offer customers and consumers a compelling value proposition with Jeuveau ® . Currently, onabotulinumtoxinA (BOTOX) is the neurotoxin market leader, and prior to the approval of Jeuveau ® , was the only known 900 kDa botulinum toxin type A complex approved in the United States.
Added
We are also actively pursuing regulatory approval of Evolysse™, a line of hyaluronic acid dermal fillers, and anticipate obtaining regulatory approval of the Evolysse™ line of products in Europe in the second half of 2024 and in the United States beginning in 2025. Regulatory approval has already been received for the Evolysse™ nasolabial fold product in Europe.
Removed
We believe aesthetic physicians generally prefer the performance characteristics of the complete 900 kDa neurotoxin complex and are accustomed to injecting this formulation. In August 2018, we received approval from Health Canada for the temporary improvement in the appearance of moderate to severe glabellar lines in adult patients under 65 years of age.
Added
Our primary market is the cash-pay aesthetic market, which consists of medical products that consumers pay for directly out of pocket. Our customers are aesthetic practitioners who are properly licensed to deliver our products.
Removed
We began marketing Jeuveau ® in Canada in October 2019 through our distribution partner Clarion Medical Technologies, Inc., or Clarion. In September 2019, we also received approval from the European Commission, to market the product in all 27 European Union, or EU, member states plus the United Kingdom, Iceland, Norway and Liechtenstein.
Added
By avoiding the regulatory burdens that accompany reimbursed products and pursuing an aesthetic-only non-reimbursed product strategy, we create flexibility to deliver a unique value proposition to our customers. We utilize this flexibility to drive customer adoption through programs such as our consumer loyalty program, co-branded marketing programs, promotional events and pricing strategies.
Removed
In January 2021, we received a positive decision from the European Commission to add the 50 unit product to the approval obtained in September 2019. We launched Jeuveau ® in Great Britain in September 2022, in Germany and Austria in February 2023, and we are finalizing plans for entering additional countries in Europe as part of a phase rollout.
Added
Recent Developments Symatese Agreements On May 9, 2023, we entered into a License, Supply and Distribution Agreement, or the Symatese U.S.
Removed
In addition, in March 2021, we entered into a Confidential Settlement and Release Agreement and certain related agreements with Daewoong Pharmaceutical Co. Ltd.
Added
Agreement, with Symatese S.A.S (“Symatese”), pursuant to which Symatese granted to us an exclusive right to commercialize and distribute five dermal filler product candidates which we collectively refer to as Evolysse™, including the products we refer to as: (i) Lift; (ii) Smooth; (iii) Sculpt; (iv) Lips; and (v) Eye in the United States for aesthetic and dermatological uses.
Removed
(“Daewoong”), which we refer to as the Daewoong Settlement Agreement, under which Daewoong paid us $25.5 million in April 2021, cancelled all remaining milestone payments up to $10.5 million in aggregate under the Daewoong Settlement Agreement and reimbursed us certain amounts (calculated on a dollar amount per vials sold basis in the United States) for sales of certain products with respect to which we are required to pay Medytox and Allergan royalties pursuant to the U.S.
Added
We also have the right of first negotiation to obtain a license from Symatese for any new products developed using the same technology as the Evolysse™ line of dermal fillers. Evolysse™ Lift, Smooth, and Sculpt are currently in advanced stages of clinical trials pursuant to an investigational device exemption, or IDE, from the U.S. Food and Drug Administration, or FDA.
Removed
Settlement Agreement. See Note 11. Medytox/Allergan Settlement Agreements and Daewoong Arrangement for additional details on the litigation settlement agreements.
Added
We have agreed to a cost-sharing arrangement with Symatese to gain FDA approval of the Evolysse™ Lips and Eye products. Subject to FDA approval, we expect Evolysse™ Lift and Smooth to commercially launch in the first half of 2025, Evolysse™ Sculpt to launch in 2026 and Evolysse™ Lips and Eye to launch in 2027.
Removed
The second tranche of $50.0 million may be drawn at our election no later than December 31, 2023, subject to the terms and conditions of the Pharmakon Term Loans. As of March 8, 2023, we have not drawn the second tranche. The Pharmakon Term Loans will mature on the six-year anniversary of the closing date of the first tranche.

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