Evolus, Inc. (NASDAQ:EOLS) is a global performance beauty company that has established itself as a leading player in the cash-pay aesthetic market. The company's flagship product, Jeuveau®, has been driving impressive growth, while its upcoming dermal filler line, Evolysse™, promises to further strengthen its position in the industry.

Business Overview

Evolus was founded in 2012 with the goal of developing and commercializing innovative aesthetic products. The company's strategy is focused on the cash-pay aesthetic market, which allows for greater pricing and marketing flexibility compared to the reimbursed healthcare market. Jeuveau®, the company's first and currently only commercially available product, 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® was approved by the FDA in February 2019 and the company commercially launched the product in the United States in May 2019. The product was also approved in Canada, Europe, Australia, and Switzerland, and the company has been actively expanding its international footprint. In 2023, Evolus entered into an agreement to be the exclusive distributor of Evolysse™, a line of dermal fillers, in the United States and Europe.

Financials

Evolus has demonstrated impressive financial performance, particularly in recent quarters. For the full year 2023, the company reported net revenues of $202.1 million, a significant increase from the $174.4 million reported in 2022. However, the company continued to incur net losses, reporting a net loss of $61.7 million in 2023 compared to a net loss of $74.4 million in 2022.

The company's operating cash flow for the full year 2023 was -$34.0 million, while its free cash flow was -$35.6 million. These negative cash flow figures reflect the company's ongoing investments in the commercialization of Jeuveau® and the development of Evolysse™.

Q1 2024 Results

In the first quarter of 2024, Evolus reported strong financial results, with net revenues of $59.3 million, representing a 42.2% increase compared to the same period in the prior year. This growth was primarily driven by higher sales volumes of Jeuveau® in the United States, which accounted for over 95% of the company's total revenues.

The company's gross profit margin for the quarter was 68.3%, and its adjusted gross profit margin, which excludes the amortization of intangible assets, was 69.5%. Evolus reported a GAAP operating loss of $8.9 million and a non-GAAP operating loss of $0.9 million for the quarter, representing a significant improvement compared to the prior-year period.

As of March 31, 2024, Evolus had $97.0 million in cash and cash equivalents, which included $47.0 million in net proceeds from a follow-on offering completed in the quarter. The company's strong liquidity position is expected to fully fund its operations through profitability in the fourth quarter of 2024 and beyond.

Jeuveau® Performance

Jeuveau® has been the primary driver of Evolus' growth, with the product demonstrating strong performance in both the United States and international markets. In the first quarter of 2024, the company added over 700 new purchasing accounts in the U.S., bringing the total number of customers to over 13,000, which represents approximately 40% penetration of the roughly 30,000 customers in the U.S. that inject cosmetic neurotoxin.

The company's consumer loyalty program, which offers a $40 discount on Jeuveau® treatments, has also been a key factor in the product's success. In the first quarter of 2024, the program achieved an all-time high number of redemptions, with approximately 180,000 consumers receiving treatment, of which 60% were repeat customers.

Evolus' international expansion of Jeuveau®, marketed as Nuceiva® in certain markets, has also been a focus for the company. The company continues to expand its footprint in the U.K., Germany, and Italy, while also preparing to launch the product in Australia and Spain later this year.

Evolysse™ Pipeline

In addition to the success of Jeuveau®, Evolus is also preparing for the launch of its Evolysse™ line of dermal fillers. The company entered into agreements with Symatese in 2023 to obtain exclusive rights to commercialize and distribute the Evolysse™ products in the United States and Europe.

Regulatory approval has already been received for the Evolysse™ nasolabial fold product in Europe, and Evolus plans to file the first two Evolysse™ products with the FDA within the next 90 days. The company expects to present the top-line results of the pivotal trial for these products at the SCALE meeting in Nashville on May 17, 2024.

The Evolysse™ line of dermal fillers is expected to complement Jeuveau® and provide Evolus with a more comprehensive offering for its customers, who often utilize both neurotoxins and fillers in their aesthetic practices. The company believes the addition of Evolysse™ will further strengthen its position in the cash-pay aesthetic market.

Competitive Landscape

The medical aesthetic market is highly competitive, with Evolus facing competition from larger players such as AbbVie Inc. (which acquired Allergan) and its BOTOX product, as well as emerging competitors like Revance Therapeutics, Inc. and Hugel, Inc. that have recently obtained FDA approval for their own neurotoxin products.

Evolus has positioned itself as a differentiated player in the market, focusing on the cash-pay aesthetic segment and offering unique programs like its consumer loyalty program. The company believes its brand recognition, clinical performance, and high satisfaction profile of Jeuveau® will continue to drive demand, particularly from the younger generation of consumers.

Additionally, the company's strategy of building a comprehensive portfolio of aesthetic products, including Evolysse™, is expected to further strengthen its competitive position and allow it to better serve its customer base.

Outlook

For the full year 2024, Evolus is guiding for total net revenues between $255 million and $265 million, with over 95% of the revenue coming from the United States. The company expects its quarterly revenue to follow typical industry seasonality, with first-half growth rates exceeding second-half growth rates.

Evolus is also targeting an adjusted gross margin between 68% and 71% for 2024 and non-GAAP operating expenses between $185 million and $190 million. The company expects to achieve positive non-GAAP operating income on a consolidated basis for the fourth quarter of 2024 and the full year 2025, though profitability may not be sustained every quarter in 2025 due to the Evolysse™ launch.

Looking further ahead, the company projects its total net revenue can reach at least $700 million by 2028, driven by continued growth in its neurotoxin business in the U.S. and international markets, as well as the growing contribution from the Evolysse™ line of fillers.

Risks and Challenges

Evolus faces several risks and challenges, including the highly competitive nature of the medical aesthetic market, the potential for regulatory changes that could impact its business model, and the successful commercialization of both Jeuveau® and Evolysse™. The company is also dependent on its relationships with key partners, such as Daewoong for the manufacturing of Jeuveau® and Symatese for the development and supply of Evolysse™.

Additionally, the company's financial performance has been impacted by ongoing legal disputes and settlement agreements, which have resulted in significant royalty payments and legal expenses. Evolus will need to continue to manage these legal and regulatory challenges while executing on its growth strategy.

Conclusion

Evolus has established itself as a leading player in the cash-pay aesthetic market, driven by the strong performance of its flagship product, Jeuveau®. The company's upcoming launch of the Evolysse™ line of dermal fillers, combined with its focus on the younger generation of consumers and unique customer programs, positions it well to continue capturing market share and driving long-term growth.

Despite the competitive landscape and legal challenges, Evolus' financial performance, liquidity position, and guidance for the future suggest that the company is well on its way to achieving its goal of $700 million in total net revenue by 2028. As the company continues to execute on its strategy, it remains an intriguing investment opportunity in the dynamic and growing medical aesthetic market.