Q4 2019 Earnings Call
Ladies and gentlemen.
Good morning, and welcome to the Q4 and full year 2019 Evelyn Conference call.
As a reminder, today's conference is being recorded.
I would like to introduce your host for today's conference Mr., Ashwin, Oracle, Vice President Finance Investor Relations and Treasury. Sir. Please go ahead.
Thank you operator, and welcome everyone participating on today's call.
Call is also being broadcast live over the Internet Abbott with Dot Com and a replay of the call will be available on the company's website for 30 days.
This morning, we posted an accompanying slide deck, we were hurt you on today's call, which can be accessed from the it eventually presentation page in the Investor section of our website with me today, our baby maternity President and Chief Executive Officer, Lauren Silvernail, Chief Financial Officer, and he VP corporate development like your part Chief Marketing Officer.
Sure and really Abelardo, Chief Medical officer, and head of R&D and our remarks. Today. We will include statements that are considered forward looking statements within the meaning of United States Security laws. In addition management may make additional forward looking statements in response to your questions forward looking statements are based on management's current assumptions embedded.
Patients or future events and trends, which may affect the company's business strategy operations or financial performance.
Detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on form 10-K quarterly reports on form 10-Q, and current reports on form eight k. actual results may differ materially from those expressed in or implied by the forward looking statements. The company undertakes no obligation to update or have you any.
Estimate projection or forward looking statement.
Additionally, the discussion today will include non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or an isolation from our GAAP results.
Reconciliation of GAAP to non-GAAP results, maybe found in our earnings release, which was furnished with our form 8-K filed today with the FCC. It may also be found on our Investor Relations website at investors Dot Evolent Dotcom and let's now let me hand, the call off the David.
Good morning.
We're pleased to share with you our strong 2019 result, and provide further color on the next chapter of Archibald watch.
Before I do you may recall, we were deliberate in how we designed the company to compete directly with the three established players in the market. We started with a highly experienced management team and position the evolution as a performance beauty company with the first aesthetic only neurotoxin in the United States.
We are well positioned for long term success, we have a singularity a focus one product targeted against the largest market anesthetics, we have a targeted investment against the fast growing millennial segment and its activity at all underpinned by our proprietary digital platform, enabling account personalization at scale.
2019 was a very successful year for Avalon Mark by the rapid uptake as you both in the U.S.
During the year, we achieved the number three unit share position.
We increased our purchasing account base from approximately 350 in the second quarter to 2000 in the third quarter and finished the year with over 3500 purchasing a cow.
Lastly, we drove net revenue from 13.2 million in the third quarter to 19.5 million import.
In 2019, all key performance indicators trended up into the right. We established a strong account base, which grew at a steady rate.
Reorder rates continue to ride and we're pleased to report patient satisfaction out today 150 exceeded 75% based on our jet survey.
In 2020, we transition to the second phase bar launch, which is focused on buildings you go into a consumer brand.
Over the next few quarters, we're introducing our direct the millennial or de T. M strategy focused on the fast growing millennial segment.
Our GTM investment had three component.
First we launched our national digital campaign in January.
Second we introduced Avelox to the market, which is the first cobranded digital advertising program for neurotoxin customers based on their loyalties data.
And lastly, the second quarter, we will unveil our consumer loyalty program, which is designed to make the treatment more affordable for patients.
Collectively we expect these programs will further enhances your value proposition and create long term loyalty with practices and consumers now I'd like to pass the call to my more context around these important initially.
Thank you David and good morning.
Drawing your attention to slide four I'll start by saying, we built a unique company with a differentiated purpose, we introduced a new ways to communicate a neurotoxin took consumer we launched the entire brand by way of a hashtag asked I can you talk.
We lost a digital platform, which scaled the organization and introduce pricing transparency to the market.
The next and most exciting chapter is the consumer chapter.
The place where the uniqueness of our marketing strategy comes to life.
As a backdrop to our consumer strategy I'll start by commenting on our purpose.
Just to make her beauty experience delightful and achievable.
We look at the consumer Len.
Through the each and every day.
We don't just market clinical features and benefits, we strive to create an emotional connection between your vote.
And her by design for every touch point.
Starting with the names of bolt.
For the creative.
Branding and the approachable content.
A collection of these activities differentiate tablets as a performance beauty company.
Today consumers, yes differently. They don't think of us as a pharma company. They yes is it beauty oriented company, that's useful and fresh.
Moving to slide five.
So when it came time to deploy our consumer effort, we didn't choose the traditional BTC model.
We did a thoughtfully and intentionally we call it DPM direct the millennial.
We made a deliberate choice to build our brand around the millennial consumer.
The following drove our decision.
First.
Millennial consumer influenced the generations of bumped them, giving us broader reach to the market.
Good they buy authentic and approachable brand that's speak to their lifestyle.
And lastly, the numbers are simply staggering, we believe the treated millennial population will double for each of the next two years growing from 900000 in 2019 over 4 million patients by 2021.
As we previously reported we're pleased to see that your vote over indexing against the millennial segment.
As observed in our Jets survey, 39% of patients were millennials.
It's like College you have this consumer is also in our favor.
51% of bothered by fish a line.
Nearly 64% worry about getting a worsening face wine.
Importantly, 70% of them are willing to spend money on improving or maintaining their facial parents.
These are favorable data points as we introduce our DCF strategy.
Moving to slide six.
The combination of a highly motivated consumer base and Avelox. The first of its kind practice loyalty program will allow us to fully optimized our direct millennial strategy.
Allow me to spend a minute highlighting the features about Alex.
Well the market has come to expect in a loyalty program.
It's a set a few years.
Based on the number of vials purchase resulting in a set discount.
On the other had.
Everyday consumers of leading loyalty programs, such as Bon voyage Amex for Starbucks.
We tend to enjoy perks beyond price.
I have a luck is the perfect combination of the traditional and modern loyalty program.
Well, that's the design with perks to bring value to our customers well beyond price.
The greatest benefit above luck is the first cobranded digital advertising program. They had these static neurotoxin space.
To give you call effect on how this looks like on slide seven you'll see our smart media approach.
We will put you have all alongside our injectors in an AD designed to optimize consumer reach.
Avalere benefits from consistent branding and our practice benefit from personalized media impressions.
We recently launched a national campaign called is your talks modern made.
On the left as an example of this national AD currently running.
On the right. It's a co branded version of that same AD, which we will deploy on a customer's behalf beginning of second quarter.
That deployment will be in a fixed radius around our customers.
Turning to slide eight.
Hi, Good luck in combination with our consumer loyalty program.
Powered by our technology platform will be the first end to end solution offered by company in our space.
We believe this will further enhances your value proposition.
Leveraging our Apple is practice out we were able to instantly launch ever Lux and the first quarter of 2020.
Every account was able to see their status price benefit and what's needed to unlock future value in a matter of seconds.
Accounts status will then dictate a customer's ranking on our website.
Most brand website features product.
Through our direct millennial nine we chose to Humanitas search experience and feature our customers instead of our product.
We bring customers the life, that's personalities, we credential them and ultimately give consumers a delightful search experience.
This reduces the number of steps for consumers to take action.
We also see consumers out by Geo targeting each of our purchasing practices and serve up co branded AD like the one you see on slide eight.
Lastly, as we lost her consumer loyalty.
And account will be able to see the leads generated from our co branded media effort conversion and retention rates. All on one platform you have all this practice out.
Again, creating the first end to end solution to hit our market.
Moving to slide nine.
I look forward to providing you the details of our consumer loyalty program on our next earnings call, but let me close by giving you a snapshot of our progress to date I.
As stated we recently launched a new campaign is your talks modern made generating 11.5 million impressions with an average target consumer seemed the add nearly two times in the past 45 days.
Our website traffic is up 68% month over month and 33% of consumers looking for is your vote provider are not used to this category.
Validating our DPM strategy and consumer approach.
From a customer perspective.
Pleased with a 3500 practices purchase things you're though.
And our growing customer base of high quality and diverse set of injectors.
We're also pleased with the way our technology is performing.
One of the Cape <unk>, we look at as they net promoter score also known as and P. S. Four contacts and MPS can be as low as negative 100, meaning every respond to this is a tractor.
Or as high as positive 100, meaning every responded to the promoter.
A positive npis, one that is higher than zero is generally deemed good.
And then P.S.. So 50 is excellent and anything over 70 is simply exceptional.
Since we launched our App our NPS score has ranged from the mid Sixtys to the high Eightys with an average of 70.
This is a credit for the caliber of individuals we have driving our design orientation product and engineering teams.
The close I'm very pleased with the receptivity of our branding our technology and our loyalty strategy.
We're intently focused on building, a consumer brand and continuing to fuel growth into the stack neurotoxin category.
Let me pass the call over to Lawrence to comment on our financial performance.
Thank you, Mike and good morning, everyone I would like to highlight the financial progress. We've made sense U.S. launch of Jumbo last year for those of you have downloaded our slide deck I'm on slide 10.
During the fourth quarter net revenue was 19.5 million, which was a 48% increase over Q3 2019 Q4 net revenue consisted of 18.8 million of jumbo product sales in the U.S. and 700000 of revenue from sales to our Canadian partner.
Our full year net revenue was 34.9 million as David discussed we are pleased by the quality of the revenue and the growth trajectory in 2019.
In the fourth quarter gross margin increased to 81% compared to 72% in Q3 of 2019 gross margin in Q4 increased due to onetime launch pricing from our manufacturing partner.
Moving to slide 11, non-GAAP operating expenses for Q4, 2019 or 28.2 million.
Did you 0.9 million lower than the third quarter of 2019 full year non-GAAP operating expenses were 108 million.
Non-GAAP operating expenses for the fourth quarter. Excluding these non cash items 2.5 million for stock based compensation 1.5 million of depreciation and amortization and a benefit of $3.8 million related to the revaluation of the contingent loyalty obligor.
Nation.
Net loss for Q4 was 14.5 million down from 37.6 million in Q2, 2019, a reduction of 61% driven primarily by increased jumbo sale.
At the end of 2019, we were well funded and had approximately 130 million in cash cash equivalents and short term investments compared to 74 million at September 30, 2019. During Q4, we received net proceeds of 73 million from an equity offering.
In 29 team. We showed continued improvement in quarterly cash burn specifically Q4 2019 cash burn was 17.2 million improved from 25.9 in Q3 and 33.8 in Q2 2019. In addition, we have 25 million.
Remaining available to draw from our Oxford credit facility upon achievement of certain sales milestones.
Going forward, we will continue to focus on prudent cash management.
Although we are not providing financial guidance for 2020, I can add some color to health with your financial modeling.
The size of the new episodic neurotoxin market was 1.4 billion in 2019. This market has historically been subject to seasonality with the first and third quarters being the lowest sales quarters.
We expect limited revenue from outside less than 2020, and do not expect any international revenue in the first half of 2020.
We are targeting Q1, 2020 gross margin to be above 70%.
We expect variability in gross margin between quarters due to the implementation of various marketing programs.
As a reminder, our Q2 two Q4 29 to non-GAAP operating expenses ranged between 28 million and 33 million for 2020, we expect non-GAAP operating stats to vary between quarters and be in a similar range as 29 team overall I'm very.
We used by our accomplishments in 2019, both financially and operationally I would like to thank you have always team for their strong contributions and dedication now I'll turn the call back over to David.
Thank you Lauren.
We believe outlets is well positioned for long term success, we have a singularity and focus with one product in a large 1.4 billion dollar static market. Our investments are hyper targeted on the female millennials segment, which is over indexing on growth versus the broader market.
And our proprietary digital platform enables account personalization and scale.
This year, we're also preparing for geographical expansion into Europe, and pursuing business development opportunities to build our pipeline. We remain committed to building a pipeline of differentiated static products.
Lastly, I'd like to provide an update on the international Trade Commission or ITC case as you May know the ITC hearings took place February 4th due to seven in Washington D.C.
In June the judge will reach an initial determination followed by a final decision by the ITC targeted for October 2020.
Any interim its customary for various redacted version emotions briefs and transcripts to become public.
However, I'm caution you not to draw any definitive conclusions from individual documents as the initial determination will be decided based on the totality of the merits as assessed by the judge in June and the ITC in October.
We look forward to resolving this case before year end and remain confident in the strength of our IP.
We can't speak further to this matter on today's call, but recognize it is something important to all of our employees and to our shareholders.
In closing I would like to think the thousands of customers, who partnered with us to introduce umo and create a new experience for their patients.
I'd like to recognize the strong performance of our customer centric sales organization and also think each and every employee for their outsized impact with that I'll turn the call over for QNX operator.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one.
Key on your touched on telephone if your question has been answered all you wish to remove yourself from the Q. Please press the pound key.
Your first question comes from Mark Steadman from STB the link.
Please go ahead.
Hi, Thanks for taking my question is Super duty on the line from Mark.
Congrats on the solid results I have two quick questions. So first can't so well the feedback you've got so far from doctors and customers regarding two wells efficacy profile.
And second what is the biggest pushed back you guess so far found that doctors.
Great. Thanks for the question Mark up as you can imagine just looking if you're looking at slide number 10, a I could tell you that when we were launching chabot in the U.S. and in May the perfect picture would've been what were displayed here on that fly which is we've had incredible response from the.
Customer base around the U.S. launches of all with over 3500 customers, placing an order last year. Following a significant jet program that we launched in the market. We're very pleased with the customer response, and probably most important health metric years that those customers continued to purchase throughout.
The year and we saw over 56% of account, placing a reorder in 2019 that that number in particular is important because as you think about the jet program, we had up to three shipments.
From may through the end of the third quarter needs a cow and then on top of that we saw not only a revenue order, but an additional reorder during that window as well. So some of these accounts received up to five shipments in the seven months that were in the market in 2019, so overwhelmingly positive and I'm going to turn over to Mike I know he.
That sometime in the field recently to share some of his comment no I. Appreciate the question. Thanks, David and the excitement in the market is still there you know three quarters into this Ah into this thing if you look at how what customers are saying I just spent a few days with our elite customers. These are some of the top 1% of of list practices, they're averaging anywhere between.
600 to thousands of patients out there on this product almost nine months into this thing and and they'll be the first is how you patients love it they love the product. The results are as expected we side in our clinical phase three program. We saw it in our jet survey and we're seeing it anecdotally day to day. So the product is obviously.
Performing as expected in terms of some of the a the the resistance or the pushed back as you stated in terms of customer well. It started with you know you don't have another product and I don't know how to under spot on I didn't send a cat [laughter] I don't know how to understand the economics of of this product relative feel portfolio.
That was the first outside of kind of friction that weve faced a weve been simplifies the pricing model and we showed them what the economics can look like and we walked into the any account thats willing to give our a representative a few minutes I understand the economic quickly gets over the the friction of.
Or notion that there isn't a filler in the back so that's kind of the the first one that we've been very successful in competing against three companies out there with a portfolio in establishing the numbers that you are now seeing says that we're able to compete against the bundle a quite easily. The second one is help meet market and I don't understand how to market this product because.
To me, it's it's a me too products.
And that's how customers see consumers see quite differently. They don't look at this product as a me too and frankly were carving out an interesting niche here with a millennial consumer and so now you up customers coming to us asking for help to further their marketing skill sets up a lot is the beginning a stage of that and when we unlock our consumer loyalty.
Program It will be the next one so the top two hurdles that we've got to overcome had been rather simple as we aren't the attention of the market and spend some time launching this thing so I'll turn it back to the call.
[laughter].
Thanks, that's very helpful.
Congrats again on your fixed.
Your next question comes from Greg Gilbert with Suntrust.
Good morning, Thanks for the questions I'll ask my quick three part or upfront here first I was hoping you could estimate what portion of the overall market.
It's represented by millennials he shared.
For your business Secondly, David how far along are you in the and the board and considering.
Fillers or other products that can leverage what you've built and maybe you could share the lens that you're looking through in terms of the types of things you would do versus those you would not do as a company and lastly learned just a clarification on your modeling color, which was helpful. On revenues I I think your comments were focused on the market, but not necessarily as you have a could you clarify that.
It relates to sequential revenues that clearly for the market tend to be down in Q1, but you're in launch phase. So can you bridge those comments. Please thanks.
Sure.
Great. Thanks for for the questions I'll handle the business on the question now I'll turn it over to Mike just talk a little bit about the millennial segment.
And how we're performing their relative to what the overall market isn't as you heard today, we're we're increasing our investment there because we believe not only were gaining traction, but that's a long term sustainable advantage that we have and then lastly, I'll turn it over to warn for you for your last question look on the business development side. This is an area. We've been very active we know this space while we're on.
Notably scouring the market for differentiated assets that we believe will generate long term value for this company a portfolio is an important idea, but so is similarity and focus and for now out we're very committed to building out. This brand. This is a 1.4 billion dollar market in the U.S. with single digit penetration, we believed that our senior.
Clarity and focus and launching programs like Avelox and a consumer loyalty program to will increase affordability of this procedure to the patient will help expand this market overall the millennial segment. In particular is one that we believe not only we see an influx of new consumers entering the market over the next several years, but the growth is astounding as Mike spoke.
To earlier, you see the less than a million patients in the market date growing to over 4 million just in the next 24 month, that's a meaningful driver of growth and we believe that by focusing there. We can drive a lot of value and of course, we're seeing early results that look good in that segment I'll have Mike speak to that yes, I where to look at the proportions market compelling.
A millennial so call it the genex's here, there's almost a 50 50 split of the existing patient base, that's getting treated the beauty of the millennial market Bill is that it's growing leaps and bounds over the rest of the market. If you were to step back the entire markets growing and so where it wasn't a good spot we just happen to focus on the segment that outpacing in its growth.
And in their priorities this consumer tends to spend more on this category and on other assets of beauty than than other generations. They power tight this over anything else. So the psychology and the sizing of this consumer base because in our favor I'll turn it over to Lauren.
Thanks, Mike and good morning, Greg Thanks for the color on quarter sequential quarters. If you look at the market leader anesthetics. The overall market has historically been subject to seasonality I mean, if we look at U.S. sales reported by the market leader over the last two years Q1 sales for the mature companies have decreased.
Moving to 14% as compared to Q4 of the prior year warranty gross thing, but our point with the qualitative comment was to emphasize we don't expect to see the same growth going into Q1, but we saw going from Q3 Q4. So it does tend to flatten out the first quarter a bit compared to.
Prior quarters, where we've shown tremendous growth, but I think it's important to understand that we expect to have great year over year graph.
Thanks.
Your next question comes from annum Annabel Samimy from Stifel.
Hi, guys. Thanks.
Thanks for taking my question and Ah Congratulations on another great year I, just want to focus on Alex for for a minute. So I understand that physicians are looking for health and marketing their practices.
You get a sense that there'll be any I mean on the other side there is possibly some sensitivity if physicians.
She laying that they're too close to one company and pushing up product. If there are two and tranches. So can you just help us I understand the receptivity of the physician base and what this co branding effort and Ah quickly.
Just wanted to ensure that the promotional product is now wash out of all and worries.
And then finally I know that you can't comment on I T C. A complaint, but maybe to help us understand potential realistic scenarios that could emerge from this ITC case from the worst case, the best case that we can sort of start framing it nor had thanks.
Sure.
Thanks, a question so why don't I.
Take each of them and then I'm going to ask Mike to expand on the other walks comment as well.
So let me start with the ITC clearly top of mind for investors as you as mentioned earlier that the hearings place earlier in February and with the ITC. The majority of those hearing are confidential. It's it's not like a public trial were mostly information is available to you. So unfortunate odd annabel I'm not able to provide anymore.
Color than what I provided earlier that being said, yes, nothing changed to the case, we feel confident the strength of our IP and we expect that this case will be resolved before the end of the year and this will be behind us.
Moving onto your second question.
I'd say that first if you step back before we launched the company. We spent a significant amount of time working through the design of how we could.
Add value to this category to give a lot of credit to the competitors I think they've done a really nice job of of building brands and helping grow. These aesthetic practices. The next wave of growth is going to come from a differentiated approach to this market not just in the product, but in the way that we communicate to the consumers by wiring our company into a single digit.
Little platform it enabled us to bring personalization to this market what that means is that every customer when they downloaded the atlas app in may of last year to participate in a jet program. They began to engage with this company in a very different way from how other companies operate not only did we cure.
Great their images on the ABL assigned a doctor so that they would be more approachable to the consumer but we also introduced price transparency to the customers. So they had full visibility to their pricing and also how they could move up to our higher tiers and obtain better pricing over time, but in all fairness in 2019.
Was all just about trial and gaining experience with the out in 2020, it's really about building this category and establishing this brand we believe that through our digital platform and Avelox. We can now advertised with the customer and eliminate a step that the consumer would have to go through when they're thinking about.
Take a getting treated with the neurotoxin in the market today, because we're combining that dr. directly with our brand.
By partnering the two together, we now create one less step into consideration process for the consumer to take action. We know that millennials segment is very active on the digital side and we know customers are looking to increase the number of millennial patients in their practice when you couple our digital platform with the Mark.
Under the on the consumer front, what you get is a unique opportunity to avelox, that's very appealing to all practices. We're hearing that consistently we've only been out in the market with the other Lux program for less than a month and the response, we're getting is overwhelmingly positive they've never had in this toxin market a co investment between the company.
And the customer, whereas they purchase we invest behind them as you could imagine not only is that beneficial driving patience and but from a manufacturer standpoint, we have full visibility to the ROI associated with that investment from the account and that ability for us to scale up that investment over time becomes a lot more transparent and will be a lot more.
Visible in terms of the return that we can share with you and so we're very pleased with how this is all rolled out and I give a lot of credit to Mike and the rest of the marketing team really being forward thinking and that's really been the premise to the company and the launch of this product is how do we add more value to a market where the competitor that's done a really nice job.
Building out this category and this is where we add value here. It's a very differentiated approach I'll have Mike add some color there as well as extendable for the question.
I'll start by telling you. This is retail medicine at its best right on so if you look at it from that context. These these doctors. These accounts. These injectors. These men spot they don't have marketing departments right. There, they're trying to inject they're trying to manage their payroll, they're trying to manage their social media handle they're trying to market within their local market and so they look for partners.
Ship and they look for help from industry since our entrance I'll say the intent the intensity in the content around this category has only increased you now have everybody providing great quality content against a this category and so this is what's needed to fuel growth customers are very receptive to have a lucky because they realize they are the artus.
And this equation and putting them at the forefront allows consumers to see whose delivering these products and we're not doing it in a way that the branches overpowering. It we're doing in a way where the where the injectors arts are the spotlight and the highlight of this thing lastly, you know having been around the industry forgot about 10 years now.
Oh, it's an 11 years.
There's been a consistent theme all along that that's stated that we want we as injectors want access to what you as a company have done on a national or are doing on a national level, we want to localize your national effort. So we can piggyback off of that there's no better way to do that tend to take that pick that onto avelox, where we combine.
International efforts to our local efforts at the the receptivity has been overwhelmingly positive now that we're close to a month out in the field with evel less and so far things look pretty good.
Thanks, Mike and then lastly, I think Annabel you'd asked about promotional product in the market.
We expected that jet product was all consumed through the end of the fourth quarter and then as we started a new year, we're operating from a position where most of the product is now product that we're selling into the market.
Great. Thank you so much.
Your next question comes from Louise Chen from Cantor.
Hi, Thanks for taking my questions here I had a few so French of all our their supply issues or do you anticipate any supply issues due to corona virus.
Because as manufactured in South Korea, and then secondly, how close are is there anyway, you can provide any metrics at the how close you are to the number to share in the U.S. and.
And then last question is I know you gave a lot of color on 2020, and thank you for that but anyway to think about the sales growth for each of though in 2020. Thank you.
Great Hi believes good morning, wanting to talk to the inventory question you asked at year end and you'll see when we file. Our 10-K later today, we had about $6.4 million U.S. of inventory at 12 31 19 in the first quarter, we continue to be.
See you shipments on a regular basis, our plant is in full operation and between our manufacturing partner and US we have much more than six months of finished goods inventory. So we're in a solid position on inventory and have no concerns.
On the share side.
The back half of last year as you know Luis we achieved the number three market share position.
And that puts us roughly trading in a six to 10 share range here as we entered the new year.
Our next clip off in terms of market share. We believe will come on the back of the Avelox launch, which were hearing great feedback against as well as consumer loyalty that next wave of customers, whether you think about our growth coming from going wider from 3500 customers up which we expect to do in 2000.
20 or deeper in terms of the utilization per customer will come off of the backs of both the avelox in the consumer loyalty program. We believe that will result in our continued share uptake through the year and I think that gets to your your last question around sales growth I clearly, we expect revenue will continue to grow you saw very nice clip up from the third.
Quarter up to the fourth we're going to continue see new account.
Added throughout the year and we're also seeing account committing a greater portion there talking business to us and so naturally that will continue we expect throughout the year keep in mind, we've only been on the market.
For about seven months by the end.
Of the calendar year in 2019, so still very early in our launch and as you point out there's three quarters of the time left until the two year, Mark where we get to the number two period. So we feel very good about how quickly we've gotten out of the gate.
And also the plans that will get us to the number two position within 24 month watch.
Hi, Thank you.
Your next question comes from Douglas Tsao from H.C. Wainwright.
Hi, good morning, Thanks for taking the questions. Just a couple from me first you know given your focus on the millennial customer segment does that affect on the types of products and opportunities that you might be looking at in terms of business development versus companies that might be focus a little bit more.
On the Genex and then second just in terms of Tivo and beyond going launch dynamics. Just curious if you have a sense of whether.
Youre, a cat or where the sales force is really focused today on expanding the customer base or deepening penetration within the existing campaign and obviously they are trying to do Paul but I I was just curious you get a sense at this point whether feedback from wraps was is that they were going to you know, they're getting more success doing one or the other.
Yeah, all great questions I'll I'll handle first in terms of the Salesforce focus is on bolt and that degree around going wider versus deeper varies obviously by pockets around the country. They have the tools to do both in the M. When you think about hitting that the number two market share position.
We feel like we have a strong base of users with 3500, and we have the opportunity within that user base to continue to drive our share higher and Avelox is designed specifically to do that and we'll continue to we believe to over indexing our share against the millennial population as a result of that investment that we have.
On the digital side with Avelox program, well going wide or is also an important initiative in markets throughout the country. As we have expanded our injector base you can imagine that in any pocket of the market you enter there's a number of customers that are in some stage of consideration of bringing onto your vote in their practice and obviously our reps are capitalizing on that opportunity.
As well and with the consumer loyalty program, we believe that becomes another catalyst that drives more customers and.
Given that there is an existing pool of roughly 4 million toxin users that many of which are part of some loyalty program and although we've had great episodic promotional programs with our consumer rebates. Many customers are looking for our loyalty program and so we believe that once we get to the middle of 2020.
And our value propositions rolled out that's what we're supposed to see continued expansion and meaningful contribution from these account because they'll have full visibility to a very differentiated value proposition in the market.
Okay, and then in terms of defense.
Yeah. So on the business development side look there is existing markets, which were which are established markets that of course, we spent a considerable amount of time thinking about and we also look at how the consumer psychology that younger demographic as you point out.
There are many unmet need some of them are higher importance to that younger demographic than others and to the extent that we can contribute to this market would not just differentiated assets within the existing space, but also to create markets that don't exist. We're very open to that ideas you could see with our marketing strategy, where about unlocking potential.
Will that otherwise we believe would not have been achieved without the approach that we're taking the extent that we believe there's an asset out there that can help do that.
Good that is something we would pursue.
Your next question comes from the logic print side from Barclays.
Go ahead Sir.
Hi, good morning, Thanks for taking the questions on congratulations on the on the numbers.
Oh firstly.
I'm pleased to see the launch of Alex will you be sharing any quantity metrics on this program.
On a regular basis and how should we track of factor the impact on this program a better also on the same lines a wanted to understand the smart media approach. How this is different from your digital campaign last year.
Thanks.
Sure.
I'll provide some initial comments not Mike to provide some more color here on the up lots program just like every other metrics as we get further into Avelox. We'll we'll provide you some more color around the performance of the program that being said keep in mind to count in the first quarter are buying up to our top three tiers in order to get the.
Benefit of the digital advertising, which starts in the second corner. So as you think about some of the metrics who might report on as it relates to consumer engagement from the digital platform. That's a back half a idea that will provide some more color around it's not something you should expect and in the second quarter any additional color you want to add Mike.
A lot on the I'll address the Pharmedium I'll start with the consumer which is all obviously the end user and then I'll touch upon our kind of buying strategy and then I'll give you the metrics here.
This consumer called the millennial consumer needs content, that's personalized they seek companies that understands them and so that approach is all about personalizing.
Our content and combining our national and our local strategy.
It's key to unlocking that potential from a media buying strategy. We have a very involved media agency. That's in our office everyday and redeploy a very programmatic approach on how we buy media on a very localized level around customers that are purchasing our brand. The last thing we want to do as take our spend and deployed in a market that we don't have a great saturation of.
Customer base and so we're mindful of where that goes on a local level and I'll tell you. The combination of our programmatic approach and our personalization is already proving and the content.
Through this your strategy rather than last year as you know we reported our jet through our test survey the percentage of patients that are naive for this category and then last year based on our last year's media strategy was about 25% of patients coming into our brand being now uses category. This year, we just reported that it's about 33%.
Patients that are now use this category, so making these programmatic changes and aligning them with personalization and content is proving to continue to grow this category on a very local level.
Thank you.
Secondly.
Skin I appreciate the update on the litigation I just had a procedural question here Oh when can we expect to see that it actually promotions of deals hearings and lastly on anew Siva homeland. The launch a ramp of girls are different countries and good I understand right that you allow no material revenues in etch one.
From Europe. Thank you.
I will say I'll, let lorne take the second part to your question as it relates to the ITC case, and what materials may become public on the.
As you know the filing for all private thus far but it's up to all three parties to agree on what documents are made public.
And so that will be coming over the number of weeks moving forward at this point, it's on entirely clear some of them in a position to speak to what may become available to the public.
Right right on the European question, if I caught all of that volume what I heard was tied to put some color around the European and Canadian revenues, we do not expect international revenues in the first half of 2020, Canada is stock and Europe launches into.
The second half, let me know fines addressed your question.
Yeah. Thanks, that's helpful Yep.
Thanks, a lot of thank you.
Sure next question comes from the.
It's a meal defend from Mizuho.
Hi, great. Thanks for taking my question. So I just have a couple here one again I know you can't say much around the ITC, but one question. We received a lot from investors is around some of these potential outcome I know a settlement as one of them.
And I just a question we've been getting is there's some sort of settlement where there's some initial royalty payments that are.
Decided upon by the parties.
Is simple is are you guys indemnified from any of those further royalties.
True and comments nothing to do you couldn't be helpful.
Question on that.
And then my second question you showed the result of your on serving on the millennial population and that it's like online and obviously fairly large percentage and when you wasn't worried about London wrinkles and willing to spend the management.
Do you have any specific your questions around their willingness to undergo official talks and procedure specifically.
As opposed to the old spending in other ways to try and manage it. Thanks.
Bundle. Thanks for the question I'll start ups ITC questions and then turn it over to Mike on the consumer research that that he shared.
On the ITC case, unfortunately, not to be able to provide any more color than than what I provided earlier, but.
To answer the other part of your question. There we are indemnified by our partner they win in this case.
What we can't speak to what May transpire over over the course of the number of months. We look forward to obviously closure of this case in October.
And it's something that's important to both employees of the company as well as for our shareholders. We recognize that in the interim we're very focused on delivering on the business and have been this resolved by the end of year, Mike Yeah. I. Appreciate the question on their willingness to take this let's set so I understand that you got to step back and look at how the up bringing up this consumer biscuit.
Tumor has been around this category for many years watching.
Her mom part taken us right and that's a psychological shifts that wasn't there decades prior to whereas this whole procedure was rather taboo it.
So that that upbringing is making this product a lot more.
Kind of accessible to that consumer base. You also have a shift on the customer where that customers migrated from medical settings. The front from retail store and they're trying to make their procedures. A lot more accessible then you have the advent of social media and 90 plus percent of the content out there against this category.
I've been by customers on their localize market. So now as a consumer as a millennial consumer you've seen your mom partake in this and you grew up in this you've seen the I've been a social media end to end the frequency and where this is spoken about and you're seeing customers move their offices into our retail setting where if you walk by a strip mall you could walk in.
Right into it and that's fine at any given part of the country. The openness against this category is becoming increasingly more important you also have a consumer base that's willing to spend on this as they do with other aspects of their of their personal life. They they grew up and ride sharing world there, they're putting off buying a second car. They go.
Were up in the air being views of the world, they're putting out buying second homes and they're putting off having children until later eight so their interest in maintaining their active lifestyle and that intensity against personal care is only increasing which has a favorable economic backdrop to us. So the openness behind this category is continuing to increase.
And that's the reason why we're actually will focus on this and the consumer segment.
Okay, and it seems like a squeeze in one more just another one just to get us into the market dynamics.
It was wondering about the some of your competitors are going to pretty major organizational changes and no acquisitions and alike.
Have you noticed any change in sort of the behavior of her editors over the last few months as a result.
Some of these transactions.
Look I think we brought to the market a different approach right were anesthetic only company with the neurotoxin, that's not tied to reimbursement.
That idea is is an important one and with that we were able to bring to the market transparency in pricing and were able to roll out some of the programs. We spoke to today, we've seen since on the competitors across the board had transitioned from businesses that were integrated into the pharmaceutical business to separate global does.
Structures.
It certainly makes a lot of sense to us in terms of how you can support the customer with that business model.
But at the same time, nothing really changes in terms of what we're doing all the way that we've launched the product in the markets. We continue to March our way down in the field so to speak in the sense that we've a lot of work to do to build out of brand and to make this a household name and we're committed to doing that we're pleased with the uptake of the product we like the way that were structured focused against.
As markedly this market and then lastly, we talked about this early on customer Centricity is incredibly important in fact that any doctor can reach out to the senior levels of this organization and and provide their input and feedback and we can act quickly around the market needs is an advantage that we have.
As a small company that will continue to to deliver again.
Okay. Thank you.
There are no further questions at this time.
Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day you may now disconnect.
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