Q4 2020 Evolus Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Q4 and for year 2020, <unk> Conference call.
At this time, all participants on a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press Star then one on your telephone.
As a reminder, today's conference is being recorded.
I would like to introduce your host for today's conference Mr. Ashwin Agarwal, Vice President Finance Investor Relations and Treasurer, Sir. Please go ahead.
Thank you operator, and welcome to everyone participating on today's call. This call is also being broadcast live over the Internet at Evelyn Dot Com and a replay of the call will be available on the company's website for 30 days with me on today's call are David Motors, Eddie President and Chief Executive Officer, and Lauren Silvernail, Chief Financial Officer and E D.
<unk> corporate development.
In 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 on based on management's current assumptions and expectations of future events and trends, which may affect the company's business strategy operations or financial performance.
A detailed discussion of the risks and uncertainties that the company faces.
And its annual report on form 10-K quarterly reports on form 10-Q, and current reports on form 8-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 review any estimate projections or forward looking statements.
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 in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found on our earnings release, which was furnished with our form 8-K filed today with the SEC and May also be found on our.
Investor Relations website at investors thought Evelyn Dotcom and now let me hand, the call over to David.
Good afternoon, and thank you ashwin it.
It is a pleasure to be here with you today and to have both the uncertainty of the ITC case behind us and clarity around the financial support from our partner day work.
As I look back on 2020, I'm very pleased with the overall performance of the company and the underlying strength of the aesthetic neurotoxin market recovery, despite the headwinds of Covid and the ITC case.
As we transition to 2021, we are very bullish on the aesthetic neurotoxin market and expectations for Jabil.
We expect the U S aesthetic neurotoxin market will achieve $1 5 billion in value this year, marking a new high for the category.
We believe this to be the case because of the strong peak shaped recovery observed in the back half of last year were in the third quarter. We saw the market returned to pre COVID-19 levels and by the fourth quarter the market eclipsed all time highs.
Consumer market trends are also favorable with a fast growing millennial segment on track to represent the majority of neurotoxin users within the next several years.
We remain confident that you've always optimally positioned against this demographic due to our brand positioning value of our consumer loyalty program and digital orientation.
We were pleased to see this positioning reflected in the composition of our user base, which over index against millennials, which represented approximately 40 percentage of all users as compared to approximately 30% for the overall market.
In February we pre announced 2020 revenue with Chabot experiencing a faster recovery in the second half of 2020 as compared to the broader aesthetic neurotoxin market. Despite the litigation backdrop and sales impact in the fourth quarter from selling under our bond for two weeks.
We have built a resilient business by laying the foundation of our value proposition beginning with the launch of <unk> rewards our consumer loyalty program.
In the back half of last year, we launched <unk> co branding initiatives made up of digital ads and Billboards, which are earned when customers achieve certain purchase levels and our <unk> pricing program.
This aligns our brand building activities directly with customer interest in expanding their millennial patient base.
As a result ours your boat business experienced strong underlying business trends coming out of the second half of 2020, where we added greater than 2000 accounts during the year with these trends continuing into the fourth quarter with nearly 600 accounts at it.
Our reorder rates continued to rise, reaching a healthy 72% by year end.
Two full quarters on the market, we were able to enroll over 110000 patients and tablets rewards, which speaks to the value of this program to both the doctor and the patient who received $40 off of every treatment.
We believe we have the recipe to unlock the full potential gibeau with our direct to millennial strategy.
Looking forward, we expect the second quarter of this year to Mark the first quarter since commercialization, where the market will benefit from the <unk> value proposition.
As a result, we expect the second quarter of 2021 net revenue will hit an all time high as we drive greater utilization and practices and your boat brand awareness with consumers, Let me turn the call over to Lauren to provide you with a financial update.
Thank you David and good afternoon, everyone at the beginning of 2021, we embarked on a two pronged strategy to strengthen our balance sheet and resolve all legal matters related to the ITC case for.
First we eliminated a total of $127 million of debt and milestone obligations in January we paid off $76 million in senior debt with Oxford Finance.
In March we extinguished $41 million of convertible debt. One day will have agreed to an early conversion into Evelyn common shares and the elimination of $10 5 million of current and potential future milestone payments.
In addition, they wound is providing us with $25 5 million and the cash infusion, which will be called out as a GAAP to non-GAAP adjustments to operating expenses in the first quarter of 2021.
All combined the financial restructuring plan, we successfully completed this quarter has resulted in a stronger balance sheet with a pro forma cash position at December 31, 2020 of $57 million.
Second we resolved all legal matters related to the ITC case with all parties that he talked to Allergan in day one.
This means to us financially is we.
We'll pay $35 million over two years, which is fully offset by the day, one cash payment to us and the elimination of future milestones with regard to royalties. There are two time periods for first time period is the 21 month period from mid December 2020 through mid September.
'twenty two.
This time ever for pay a dollar amount per vial sold in the United States.
During the same 21 month period <unk> will also pay a low double digit royalty on international sales the impact of which is expected to be nominal through September 2022.
The second time period is the 10 year period, beginning September 2022.
This time Evelyn we'll pay a mid single digit royalty on our global net sales, which is expected to be offset by a nominal U S price increase as such for the settlement economics are not expected to materially impact gross margin. After September 'twenty 'twenty, two which is now only about <unk>.
17 months away.
The settlement agreements with all three parties result in an expected 2021 corporate gross margin percentage between 50 and 55%.
Excluding the first quarter, where we have $25 5 million for cash infusion from day, one a which.
Which will be booked into operating expense.
This temporary gross margin profile is expected to have absolutely no ability no impact on.
On our ability to drive continued growth of jumbo, while maintaining our competitive pricing for.
Transitioning to the strong 2020 performance David discussed our fourth quarter 2020, net revenue of $20 6 million was our highest quarterly jumbo net revenue to date for.
Q4, net revenue increased 16% sequentially over Q3 2020.
As a reminder, we had minimal sales in the last two weeks of Q4 as we were selling under our bonds beginning mid December 2020.
Turning to the first quarter of 2021, we recorded minimal net revenue through mid February as we continued to sell under our bonds as <unk>.
Model your first quarter revenue you should assume revenue for only half for the first quarter.
We expect Q2 2021 to be our strongest revenue quarter since launch.
As it relates to our international business, we expect nominal 2021 revenue from Canada.
European sales to begin in 2022.
Moving down the P&L, our fourth quarter 2020 gross margin percentage was 64, 6%.
System with commentary provided on prior calls our gross margin will depend on sales levels promotional activity on other factors.
Our fourth quarter 2020, non-GAAP loss from operations was $12 2 million of note. We improved our 2020 full year non-GAAP loss from operations to $54 million by 33% compared to 2019.
Our pro forma cash at year end 2020 was $57 million representing a.
At December 31, 2020 cash of $107 6 million.
Uh huh.
$5 5 million of cash being provided by day wouk less $76 4 million for the Oxford finance debt pay off earlier this year.
Cash burn during the fourth quarter was only $3 million due to favorable changes in working capital, including high revenue collection on no cash payments for inventory during the quarter we.
We expect our cash burn will be higher in Q1 2020.
Higher in Q1, 2021 and in Q4 2020.
As a result of the recent settlement agreements.
Half 43, 7 million shares of common stock outstanding with that I'll turn the call back to David.
Thank you Lauren as we close the books on 2020, I would like to take a moment to thank our <unk> employees for the incredible resilience. They have shown through what was an extraordinary year filled with challenges.
I'd also like to extend my thanks to our <unk> customers, many of whom wrote letters in support of our costs.
I've always believed that customer Centricity powers. This company, we would not have reached this outcome without their unwavering support.
We have a renewed level of energy and poised as we entered 2021.
We've proven that in aesthetic company positioned against the younger demographic with a focus on technology creates a unique differentiation.
In 2020, we laid the groundwork and now our focus is on execution.
We expect our launch trajectory to continue and we will look to accelerate our market adoption by surrounding the customer with our full value proposition.
Separately, we are actively developing plans for European launch, which we expect will take place early next year as we look forward to entering the second largest market for neurotoxins in the world.
Lastly, we will be pursuing further market expansion by gaining approvals in additional countries in the years following with that I will turn the call over for Q&A operator.
Thank you, ladies and gentlemen, as a reminder to ask a question you will need to press Star then one on your telephone.
To withdraw your question press the pound key.
Again, Thats star one to ask the question.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Marc Goodman with SBB Leerink. Your line is open.
Yes, good afternoon couple of questions first.
You mentioned that you expect the market to be a $1 5 billion. This year can you just give us a sense of what was that number in.
In 2020, and remind us what it was in 2019.
And then second of all.
Lauren just give us a sense of how the company is thinking about spending obviously this past year was an unusual year.
But with things starting to open up a little bit and obviously with the uncertainty going on you know how are you thinking about advertising and promotion dollars to kind of spend and the number of sales reps, you're thinking about just give us a sense of that thank you.
Okay.
Hi, Mark This is David I'll take the first part and then hand it over to Lauren Good question on on the market value I'll give you. The numbers first and then I'll give you my color second so we value the market at about $1 3 billion U S market in 2019, and then the market declined to $125 billion in 2020.
And we expect it to to put back up to $1 5 billion in 2021. So it gives you a sense for the high growth rate, we expect to see even when you compare it against the 2019 period, it's a healthy growth rate, but as you know mark when you look at the one 5 billion in 2020 the decline doesn't tell the whole story, if you did a for.
Non half back half view, what you'd see is the back half of the year in 2020 the market grew overall.
The front half of course, because that Covid period that you see a significant decline so effectively COVID-19 was a two two quarter pause on the market overall and growth, but what you saw was the market rebounded very quickly no different from what we observed during the last recession in the late 2000 period and if I could.
Show now multiple times when it's been tested that it's very resilient.
These consumers come back and they come back quickly as they prioritize this treatment over other out of pocket expenses that they have and it's great to see that strong trajectory to end the year and we feel very good about that carrying into this year.
Right.
Hey, Mark and good afternoon to take the second part of that question on operating expenses.
For the December quarter in 2020, we did $25 5 million of non-GAAP operating expense. If you look at that it's a good.
Good average proxy for this year on a quarterly basis, some will be higher some will be lower.
With regard to investment we.
We are continuing to invest heavily in the business with infrastructure and legal costs largely behind us we're able to really redirect on all of our expense investments directly into things close to the customer on the programs that David talked about.
And as far as number of reps, we're going to continue to invest where it makes sense.
So see us over the course of this year, while managing Africa carefully, making those investments and shifting the mix to make sure we drive sales growth.
How much legal expenses go away can you just give us a sense of how much you spent on debt this past year.
Some of that will be reimbursed as well, but basically if we look at it it's in the low single millions to the mid low to mid single million.
A lot of our.
We're paid by a day one.
Thank you.
Thank you.
Our next question comes from the line of Annabel for me MA with Stifel. Your line is open.
Hi, Thanks for taking my questions and.
Congratulations on resolving all those issues.
Several actually so first on.
The dollar amount that you have to pay.
For violent during that 21 month period.
I know its undisclosed but does it provides you with sufficient flexibility to continue to offer the discounts for the customers and maintain the consumer programs or does this take away your.
Ed.
He said the other competitors. So that's the first question the second.
Now that you have certainty in the revenue line is there any additional investment that you feel like you need to make and build out.
And the operating platform.
Anything on the digital platform, you need to bolster or anything in terms of.
Personal outreach that you can do.
Especially as we're entering a more competitive environment and then finally I know, it's hard to discuss business development, but are you now in a position to.
Consider it with the current cash levels that you have and how do you balance that against the desire to breakeven.
So thanks.
So.
Let me start off on the dollar side on the royalty and make sure I answer your question there Annabel.
When you look at the gross margin profile of the business right. After we take into account all the puts and takes other payments in and out on the settlement. We ended up in a really nice position you know last year. We ended the year on when you look at the ports. When you look at the year overall at 68% in the fourth quarter around $60 65 per cent gross margin.
So for 100 to 150 basis points, we were able to put the whole legal case behind us along with all the other details of course that leaves us in a really strong position to continue the same type of pricing programs, we've had and actually to dial up our promotional spend.
This year at and we're measuring it very carefully versus return on investment because the best way to fund our business is to grow sales.
And the return on investment comes very quickly at the stage, we're at because we've already built out the infrastructure to your second question.
Obviously, we continue to invest in improvements to our digital App on our software platform and we continue to invest in our design team. There are a huge part of our competitive advantage.
But all the big investments have been made there and now we're really continuing to streamline and work on that so not a lot of investment dollars behind the scene.
Thanks for your next question with business development, unless I missed something there yeah. Okay.
Yeah sure. Let me just build on one last question on the first point Annabel around the customer there is no significant impact to pricing to the customer we did take a nominal price increase once.
We did complete the settlement, but that nominal price increase.
It allows customers as they move up our <unk> tiers to effectively maintain the same pricing. So what we've heard now back from customers is number one we continue to maintain our value proposition, which is on average greater than 30% savings relative to the market leader and that was what we wanted to ensure maintained through the.
Unfortunately, we were able to do that thanks to the announcement, we made yesterday related to our partner support as it relates to future investments as you know in about last year. When Covid first struck we reduced our expense base by nearly 40% and we leaned into our digital platform that created a level of efficiency within.
Our operations that frankly changed the way that we look at investment going forward. We continue to build our digital platform and find that customers are transacting on that program as well as our loyalty program has created a very efficient way for them to pass on savings to the patient at this point in time.
It's unclear as we scale up how much we need to add infrastructure in terms of head count relative to continuing to lean into the digital structure and we think we have inefficiency that as we continue to scale. We can reap the value from so you shouldnt expect meaningful increases in terms of our internal hedge.
Count structure going forward, what you should expect that.
Incremental investments that are very thoughtful as Lauren pointed out that we'll have high ROI associated with them.
Great and then last on the balance in business development with cash for.
Kevin.
Sure Yeah. If you look at if you look at the types of business development that we're able to do today.
You can look at it a couple of different ways. If we decide to add something to our pipeline, which is something we could do down the road.
Most of those do not come with a high upfront payment. So we're in a strong position to do those because they tend to be structured as pay as you go.
Anything that's a marketed product is often a larger deal on the stock. These days is actually at a very nice level as the currency that said, we're considering all of our options very very carefully.
As we come out of this COVID-19 period.
And as we continue to grow the business.
Great. Thank you.
Thank you.
Our next question comes from the non of Louis Chen with Cantor.
Line is open.
Hi, congratulations on all the progress you've made and thanks for taking my questions. Here. So you gave some good color on first and second quarter sales just curious if you're thinking third and fourth quarter it'll be sequential quarterly increases over the second quarter second question I had was your market share now how has it improved throughout.
The year and do you still plan to get to the number two player and then last question. Here is just cash runway you noted pro forma number where does that take you who or what kind of milestones will you meet with that cash value in place. Thank you.
Yes.
Yes.
Thanks, Louise I'll take the first two and then I'll I'll turn it over to Lauren to answer your last question.
We believe that this year, we continue to see strong momentum throughout the year recognizing of course that there is a seasonal dynamic in this market.
Third quarter is generally the lowest volume quarter for our customers of the year. So factoring for that we do expect that we'll continue to build momentum as our value proposition continues to build and we track all the lead metrics and those lead metrics are new accounts and we continue to see that number move up into the right.
We track reorder rates and we continue to see those numbers every quarter move up into the right. We also track consumers entering into our loyalty program and of course, that's now just entering its third full quarter of course, that's continuing to perform very well for us as well and all the co branding initiatives would be the last item in all of those lead Matt.
Tricks for US continue to show strength I've spent a significant amount of time now and speaking with customers and what I'm hearing back is this is a very different value proposition than what others do and I think youre familiar with the space Louise it's been about portfolio selling and trying to bundle one brand and reduced the price on another and what we're bringing into the market is very.
Different we introduced our value proposition of pricing gear, one so really isn't about the price any longer it's about how we build their business and what we're introducing with our singularity and focus is an entirely different value proposition when we advertise it as our customer with our brands together in digital or in <unk>.
Billboards and that's something that's very compelling because as they invest more into chabot, we invest back into that customer and that mutual relationship drives a lot of value and growth for them and of course growth for us as a brand. So we feel very good about what that will do over the coming quarters, we expect that to continue to build momentum and that plays into your second.
Question around share in that you know on the back half of last year, we believe our growth outpaced the overall market by a meaningful amount. Despite the fact that we were impacted by the bond period in the fourth quarter and then of course that bond period was a pause on our launch trajectory and its straddle both the fourth quarter and half of the first quarter.
Before we were back in terms of able to perform at the levels. We were before and so we expect now as we reenter into our first full quarter without the bond impact in Q2 that we regained a lot of that momentum and that means share uptake that comes in the form of continued share penetration in the market. So with that I'll turn it over to long answer for that.
Great. Thanks, Louise on the on the cash runway the best way for us to generate cash is of course to sell jumbo.
And that continues to be the case going forward. So as David mentioned in his remarks, we will continue to invest into the growth that you've always our highest.
Is our highest opportunity set with regard to cash our cash runway is less than 12 months.
But that is something when you look at the fourth quarter, we burned about three there we will burn a little more cash this year certainly as we have a few other things left to pay for for example, we have a $15 million milestone due under our settlement agreements this year.
But puts us on a very good position able to price to go where we want investing the business as we're taking.
And as we look out there you know we've never had trouble financing. This business, it's always gone very well for us stocks and a very good place and we're pleased with our progress.
Okay. Thank you very much.
Thank you.
Our next question comes from the line of Gregg Gilbert with Truth Securities. Your line is open.
Thanks, Good afternoon.
Afternoon, David what are the implications of.
Many talks on day, one being significant shareholders on how long are they locked up.
Can you confirm that you have free reign to pursue any strategic opportunities you on the companys see fit.
Hi, Greg Let me, let me talk a little bit about the strategic implications of David when you met he talks and then I'll, let Lauren talked a little bit about their shares and how we see that on.
The first is <unk>.
As you saw on Lauren's coverage of the settlement itself.
David will continues to be a strategic partner for US there are more than a shareholder frankly. This is a relationship that we see over the long term.
We have the licenses now and in two of the largest markets on the wall between the U S and Europe and they want to see this business continue to grow and of course, we represent the large majority of the revenue that they will develop from there neurotoxin business. So that strategic relationship is very strong.
Separately as you know there is ongoing litigation in Korea between the two companies day wound in Medi talks and that is why as we worked through the settlement.
We were pleased to make many talks a shareholder to align our long term interest in the near term those long term interest appear around the opportunity to ensure that this company has no future risks as it relates to litigation, we resolved all outstanding issues, but there's also.
<unk> beyond that that will provide color on as we get into the future as it relates to other potential entrants that may enter the market and those are things, we'll give color on it as we make progress into the year great.
Hello, Greg with regard to the lockup agreements et cetera, and the shares once a day.
<unk> talk they are locked up through 2025.
That those <unk> 25 per cent a year beginning 2022.
And with regard to day wound the shares are unregistered.
Okay, and then a follow up it Lauren any safety tips on just the quarterly lumpiness of SG&A and for David.
Curious how your BD activity levels have evolved.
Based on Covid based on pre settlement now post settlement and maybe more importantly.
Looking ahead.
As you think about broadening out the portfolio over time would you encourage us to think about.
Somewhat.
Let's say typical strategy, we've seen for other Fedex players or more something outside the box net.
That we haven't seen.
Before from a company evolution standpoint thanks.
So on the SG&A question I think it's probably helpful to look at it from a total non-GAAP operating expense basis.
Reported $25 five in the fourth quarter of 2020 for non-GAAP Opex. That's a good proxy for our quarterly average for us for 2021, it'll be a little higher and a little lower depending on the promotional mix. We employ in this specific quarter, we will continue to invest.
And promotion as we have been doing but obviously, we've become more efficient with our rewards program.
And allows us to redirect dollars into ever look billboards and other digital.
David has been talking about we really have a very disciplined approach around looking for return on investment then we're pretty ruthless with making sure we pick those programs and continue to grow those programs that are generating the sales dollars that immediately fund the business.
Thanks Lauren.
And Greg as it relates to business development. Clearly this is a priority area for us in the litigation put a pause on some of our business development activities.
And that being said you made an interesting comment around do you follow the same path or do you consider different approaches as you know this market today, whether it's the market leader or those that followed they've mirrored a similar strategy. It's about building a portfolio of products to leverage one against the other for better price.
And that's ultimately been the point of differentiation has both breadth and the ability to leverage as we look at our business today, we like our singularity and focus I shared with you earlier, that's why we think that singularity and focus is an advantage when all of the other competitors are focused on their portfolio and how they bundled them because we.
Aleve, our pricing delivers the value, but it's about growing the market that ultimately crack the real value of this category on a mark that <unk>.
Separately as we look at assets. There are few criteria that we apply to it it's not just about adding the next asset as you know, it's about having high quality durable assets and those assets that we believe that younger demographic will gravitate to and that is how we create the next category in aesthetics and so.
We will provide more color around our business development strategy you can expect that this year as we begin to spend more time on that but thanks for that question.
Thanks, guys.
Thank you.
Our next question comes from the line of for Mail Diamond with Mizuho. Your line is open.
Hey, guys. This is a way for volume.
A few questions.
First I guess could you talk about your European launch that's expected in 2022 it seems like.
Just in terms of geography and.
It looks like your.
Doing it on your own or are you going with a partner.
And.
The second question is.
Just wondering like.
Before the.
On the pause and 40.
40% reductions in.
Your operations.
Versus.
Now that you're out of the new in the clear lithium the ITC issue just wondering like what is the difference in terms of.
The need for more reps than versus <unk>.
Now going forward you grow your revenue like what what has changed.
Thanks.
Alright, thanks for the question.
Oh God for Europe.
And when you look at what's on over this quarter to unlock value.
With our expanded partnership.
Well, we're really ready.
Moving on Europe and were very pleased with where we landed on that we are in the process right now looking at our strategy with our chip with them. We have the ability now to launch on our own for to use distributors.
And give you more color on that strategy as the year rolls out.
Chief Marketing officer, Crystal Mylan burgers through all those details now because as you know Europe is not a country its a region.
And we're going to put together a very clear strategy to make sure we're highly successful there.
And then <unk>. It's a good question around what has changed I would characterize as three things have changed the first is.
Macro environment changed so that the trend towards Digitization clearly accelerated as a result of COVID-19 and that played well into our hands and then in addition to that we made significant infrastructure changes to reduce our burn out of necessity, frankly, but what that yielded to us was clarity and that as we leaned.
Into our digital platform the market rapidly adopted it and used it which created an efficiency about our business that was much greater than what we had anticipated as I mentioned before the majority of our orders now transact through our digital platform and then lastly, we have the hindsight now of seeing this product now in the market.
For almost two years and as we look forward what we see is every incremental dollar the driving.
More value around the customer versus just the sales force trying to push product into accounts and that's why you're seeing the increased focus around digital co branding and billboards and things of that nature, because what these accounts are hungry for our new patients and what we believe we have is the code that cracks for new patients.
Against that younger millennial demographic and that is the fastest growing segment and we believe this brand is well positioned for it and so to the extent, we can invest to make these practices more productive we believe that that yield the best return for us in both market share penetration as well as long term stickiness.
In this market and so we will look to continue to selectively invest in there will of course youll requirement for some additional resources as it relates to the sales force, but it will we believe that this efficiency carries for this company long term and we feel very good about our ability to do that over time and you see that evidenced in the fourth quarter.
We're a revenue hit an all time high on this lower spend base and we believe that's very sustainable.
Okay. Thanks.
Yeah.
Thank you.
Our next question comes from the line of Douglas Tsao with H C. Wainwright. Your line is open.
Good afternoon, everyone. Our crispy all its on for Doug Tsao.
Once that initial higher on royalty periods through 'twenty two 'twenty 'twenty two is over half the Dol will your promotional strategy change we may be expect more spend maybe an increase in BD activities on our new marketing campaign and my second question is which ex U S geographies other than you are.
Targeting and can you give us a little more color on that strategy. Thank you.
Ladies and gentlemen, please standby.
Yeah.
Yes.
Yes.
Once again, ladies and gentlemen, please standby your conference will resume momentarily.
Yeah.
But unless you make for you may resume.
Oh, Hey.
So Christy I'll come on for dog.
So two quick ones. The first one is.
<unk> 'twenty 'twenty two once that a higher royalty period is done how if at all about your promotional strategy change can we expect any different maybe a more marketing spend maybe more BD activities and second on which ex U S. Geographies are you thinking of expanding to and maybe can you give us a little more color on your plans there.
From Europe of course, thank you.
Hi, Chris This is David Thanks for the question I'll touch on the royalty period after 2022 and that initial royalty is.
<unk> resolved nothing changes the reality of it is even now our plans for this year as well as next year. During this royalty period, we plan to invest we plan to drive.
The revenue to the same levels and ultimately we view this whats remaining of 17 months as a tax period that will we will pay it impacts obviously, our operating profit during this window, but this is about building a company for the long term and so that investment will persist beyond.
Once it goes away of course, it creates a business with a better margin profile, which means potentially the operating profit could be greater.
And gives us the ability to think about how we can use that capital in different ways of course as you pointed out so with that I think I answered the business development question, but I'll turn it over to Lauren as well maybe she can give you some color that youre looking for further information share Bill Let me know if I'm not getting your question right because it broke up a little bit on our side what I heard is what are our plans internationally.
Beyond Europe without the right question.
Yes, just with geographies, maybe what youre thinking over there absolutely.
We have a fantastic product that needs to be launched in all the territories that are in our license.
And so Europe is approved now and we are ready to go with that planning and launch in 'twenty two early 'twenty two.
With all the deals done this quarter and particularly with the restructuring of our license with our strategic partner day wound.
It really opens up some of the terms et cetera, the rest of the world and our license so look for us to provide more color as the year goes on.
But we will be doing filings and at least in one jurisdiction a little bit of clinical work to make sure jumbo and aesthetics, it's actually youll see that the brand outside the U S is launched in our territories over the next few years.
Awesome. Thank you so much.
Thank you.
I'm showing no further questions in the queue.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
[music].
Yeah.
On the.
[music].
Sure.