Q3 2021 Evolus Inc Earnings Call
[music] greetings welcome to the ever list third quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note that this conference is being recorded.
Now I'll turn the conference over to your host David Erickson, Vice President of Investor Relations you may begin.
Thank you operator, and welcome to everyone joining us on today's call.
With me today are David Motors, <unk>, President and Chief Executive Officer, Lauren Silvernail, Chief Financial Officer, and Executive Vice President Corporate development, and really Avalon, Chief Medical Officer, and head of research and development.
Our prepared remarks today will include forward looking statements within the meaning of United States Securities Laws and management May make additional forward looking statements in response to your questions.
Forward looking statements are 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 of detailed.
Discussion of the risks and uncertainties that the company faces is contained in the 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 forward looking statements. The company undertakes no obligation to update or review any estimate projection or forward looking statements.
Additionally, our 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 in our earnings release, which was furnished with our form 8-K filed today with the SEC.
And on our Investor Relations website at <unk> Dot Com lash.
Lastly, following the conclusion of today's call a replay will be available on our website at <unk> dot com and with that I'll turn the call over to David.
Thank you David and good morning.
We are very pleased to share with you our results for the third quarter of 2021, which reflect increasing sales momentum strong oversight of fixed operating expenses and disciplined cash management.
For the quarter, we delivered record revenue of $26 7 million, which represents 58% growth over comparable U S sales in the third quarter of 2020.
Most impressive is our quarter over quarter growth of 5%, reflecting continued market share gains during what is typically a seasonally down quarter.
Overall, the U S synthetic market conditions remain quite favorable and demand for toxin products, among new and existing patients continues to be strong.
Through October 2021, we continue to see strong growth in our <unk> consumer rewards program, where registration currently stands at more than 240000 consumers a doubling since the end of last year.
Our business continues to over index to millennials and younger patients.
Which now represents nearly 40% of our user base and the loyalty program markedly higher than the overall category, where millennials and younger represent less than 30% of toxic news.
The millennial segment is the future growth driver for the aesthetic market as this consumer group is the largest generation today with over 70 million consumers in the U S alone.
This underpenetrated demographic is comprised of savvy consumers, who are beauty conscious with fewer barriers to seeking treatment than prior generations.
Additionally, these consumers are active on social media, which plays directly to our marketing and digital capabilities.
During the third quarter, we added more than 500, new <unk> customers, bringing our total account base to more than 6500.
We're also efficiently servicing these accounts through a combination of field and in house sales professionals, while continuing to derive product reorders of our digital platform, where the majority of our orders continue to be placed.
One of the differentiating features of <unk> business model is a strategy specifically designed to help our customers grow their toxin businesses.
One of the key features of that strategy is our co branded marketing program.
Since we are the first company in the toxin category to offer co branded marketing.
A poll to take a few moments to help bring it to life.
Co branded marketing or Cvs.
And the service, we offer to our higher volume customers that enabled them to create personalized advertising campaign featuring featuring their practice alongside this Evelyn Andrew boat brands.
Customers can select from a range of advertising options, including digital Billboards and now in the fourth quarter, new streaming TV at all of these options provide accounts with a custom advertising offering to target consumers in their local market.
Each media program runs for a specified length of time and the campaign results are measured and provided to each practice.
And of all our customer purchases the more advertising value they receive.
Our Cvs program has grown quite a bit since we first introduced it a little over a year ago to date, we placed over 1000 billboards across the U S, making <unk> one of the largest purchasers of outdoor media across industries.
This volume growth is resulting in greater economies of scale by lowering our per unit advertising costs.
Co branded marketing is working in the third quarter, our Cvs presence increased significantly we ran more than 850 individualized co branded marketing campaigns across the United States, which resulted in more than 395 million media impressions.
Both of these metrics are nearly double our second quarter levels, which positions us well as we build the chabot grant to the millennial consumer.
The benefits of our CBF program or money not only does local advertising helped build account awareness, but it also directly connect to connect consumers with jumbo injectors.
Additionally, co branded marketing services call to action to both the new user considering her first treatment and existing patients as a reminder to scheduled return visits.
This type of promotion also creates awareness among potential accounts incentivizing them to inquire how they can become chabot injectors.
Ultimately this exclusive program helps establish create deep and lasting relationships with our key accounts, while also helping promote our brands.
Lastly earlier today, we announced we are investing in a phase II program to study an extra strength dose for extended duration of your boat give.
Our Fedex only business model <unk> is uniquely positioned to capitalize on this opportunity, which should set us up for continued market share gains.
Now I'd like to turn it over to really Avalon, our Chief Medical officer, and head of R&D to provide further detail about this exciting new program.
Thank you David.
I am pleased to announce that we've initiated an extra strength you both program starting with the phase III studies.
As background all companies with an FDA approved neurotoxin have conducted studies to look at the effect of increasing dose and duration.
And it's now fairly well accepted that indeed, increasing the dose of a given neurotoxin does increase its duration of effect.
It also changes the products performance profile in other ways and this study will help us understand that additional dimension.
Since our commercial launch of <unk>, we've learned a great deal about how it performs clinically in the real world.
The feedback from clinicians is that <unk> is very precise one of the main safety concerns regarding clinical studies with toxins is around the potential for local and distant spread of the drug and we believe that the precise nature of the jumbo makes it well suited for his lapel or line.
Indication at a higher dose.
As a company we've never been shy about taking our competitors.
In our initial entry into the market, we conducted the largest head to head phase III trial in aesthetics against the market leader.
This enabled everyone to easily compare to Paulo to botox across various metrics at every data point from the start of the study to the end at 150 days each.
These results were presented at several medical meetings and published in peer reviewed journals.
We're very excited about our extra strength program.
And we're well on our way having already started the study initiation work.
We haven't opened any in place and expect to enroll our first patient in the first quarter of 2022.
This program is designed to give us the flexibility to pursue our longer duration indication.
On labeling.
In this phase II <unk> study, but there will be three arms of the currently approved 20 units of Botox cosmetic.
The units and Chabot and 40 units of extra strength your vote.
The study will be prospective double blind randomized active control design and will follow patients up to one year.
We will provide additional details about the study in the first quarter.
David.
Thank you Roy as much as we're excited about this phase II program. We believe that current 20 unit doses you Bo will remain a flagship use of our product in the future.
The overall subject satisfaction from the original study using the 20 unit dose was over 90%. While this satisfaction rate is very high we believe an extra strength as <unk> increases options for those consumers, who may desire a different performance profile and longer duration we.
We look forward to providing updates on our progress in future quarters.
Before we get into the financials I want to provide a brief update of our expansion into Europe next year, we are continuing to finalize our launch plans and the introduction of <unk> remains on track for early next year.
Our initial entry will focus on several of the larger more attractive markets, including the UK, Germany and France in these markets, we will build on our customer experience and learnings from our U S launch.
As we gained traction in these initial markets we plan to open additional markets utilizing a combination of direct and distributor sales model as a reminder, the European talk to market represents a 470 million dollar opportunity. We're excited to enter this market, where we will be the newest company to enter more than a decade with.
That I will turn the call over to Lawrence for some additional financial information. Thank.
Thank you David and good morning, everyone I would like to start by echoing David's comments and say how pleased I am with how well this team executed in the third quarter as he mentioned, we reported quarterly net revenues of $26 7 million up 58% compared to U S. Net revenue in the third quarter of <unk>.
2020, and up 5% on a sequential quarter over quarter basis, Despite a negative market growth rate you.
You may recall that the third quarter is typically the lowest quarter, India static toxin industry due to seasonality.
Compared to the third quarter of last year. The majority of our sales growth in the third quarter of this year was driven by higher volumes overall, the pricing environment for neuro Tox products in the U S remains quite stable with two competitors, including the market leader raising price in Q3 by 3%.
Moving down the P&L, our reported gross margin in the third quarter was 54, 2%.
Our adjusted gross margin in the third quarter, excluding the amortization of intangibles was 56, 9% and comparable with both the first and second quarters of this year.
We continue to expect our full year 2021 adjusted gross margin, which includes settlement royalties and excludes one time payments to be in the range of 54% to 57% as a reminder, beginning in mid September of next year. The royalty we pay on net sales drop.
<unk> to a mid single digit rate.
As a result, beginning in the fourth quarter of 2022 we expect our adjusted U S gross margin to exceed 70%.
Selling general and administrative expenses on a GAAP basis for the third quarter of 2021 was $31 7 million up from $21 9 million during the third quarter of 2020. The majority of this increase was driven by co branded marketing such as Billboards digital media and content creation.
To bills that <unk> brand alongside our customers for the third quarter of 2021 SG&A expense on a GAAP basis included $2 4 million of noncash stock based compensation expense.
Our non-GAAP loss from operations in the third quarter of 2021 was $14 3 million as compared to $6 5 million in the third quarter of 2020 the.
The increased loss from operations of $7 8 million in Q3 was driven principally by investments and co branded marketing expenses non-GAAP loss from operations excludes stock based compensation revaluation of the contingent royalty obligation.
Depreciation and amortization.
From a balance sheet standpoint, we ended the quarter with $107 8 million in cash compared to $131 7 million at June 32021, a difference of $23 nine.
9 million cash collections from customers during the quarter were particularly strong with cash collected approximating our reported net sales for the quarter.
During the third quarter, we scheduled a $15 million milestone payment under our settlement agreement. Excluding this payment royalties and cash received from accessing our aftermarket or ATM program. Our operating cash burn was approximately $8 million. This reflects our continued focus on carefully managing overhead expense.
And investing closer to the customer to fuel our sales growth.
Overall, we feel we're in a very solid cash position.
As we look out a couple of quarters I want to remind you of $40 million of previously disclosed cash obligations, including a 20 million dollar payment to be ever lose founders in the fourth quarter of this year, a $15 million settlement payment in Q1 of next year and our final $5 million settlement payments in Q1 two.
23.
We made our first royalty payments under the settlement agreements. During Q3 2021. These royalty payments will continue to be calculated at their current rates until the rate drops in mid September of 2022.
During the third quarter of this year, we sold approximately 725000 common shares under our ATM program for net proceeds of approximately $8 2 million at a weighted average price of $11 67 per share we have not accessed the ATM since August and at this time we have.
No plans to sell additional shares under the ATM.
For the third quarter, our weighted average shares outstanding were $55 1 million and for modeling purposes. We suggest to use approximately 50 million shares for the full year 2021 with that I turn the call back to David.
Thank you Lauren before we move to Q&A I'd like to formally welcome Jessica I know back to the <unk> leadership team Jess.
Jessica has recently come aboard as senior Vice President Human resources and brings extensive experience in organizational development talent development and HR strategy across many different industries. We look forward to her leadership as we continue to execute on our growth plan.
In closing our strong performance this quarter on the heels of a great second quarter positions us for a record finish to 2021 more.
More importantly, these results reinforce that we have the right strategy and are continuing to execute against it.
We believe our differentiated business model centered on the fast growing millennial market and in true partnership with our customers will enable us to continue to outpace the market growth rate and based on our solid financial footing. We believe we are positioned for further growth and value creation as we continue to increase our market share in the U S and expand our global footprint.
Into Europe, and further differentiate our competitive position with our extra strength clinical development program with that we're ready to take questions.
Thank you at this time, we will be conducting a question and answer session. If you will.
Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please where we pull for questions.
Our first question comes from the line of Louise Chen with Cantor you May proceed.
With your question.
Hi, congratulations on the sales this quarter and thanks for taking my questions here. So I had a few questions for you.
Sure.
So what kind of R&D spend are you anticipating for that and when will that fall into place.
Then what is the incremental revenue opportunity you expect from this extra strength and then I have a bigger picture question for you is what is the penetration that I talked about today globally and in the U S and where do you think that that could go over time. Thank you.
Good morning, Luis how are you thinking with regard to the cost of the extra strength study that will be approximately $2 million during 2022.
With regard to additional sales I think it's a little bit early to predict that as we're in in phase two at this point.
Great and then to the second part of your question.
Louise we operate in a highly underpenetrated and fast growing market the consumer penetration rate, we estimate in the U S is approximately 6% and when you look at that younger demographic of millennials they have far fewer barriers to entering this market than their prior demographics had in the past and so.
We believe that's part of what's fueling the faster growth in this market. In addition of course to the zoom boom that we're all seeing accelerating the interest in aesthetic.
Thank you.
Our next question comes from the line of Annabel <unk> with Stifel. You May proceed with your question Hi.
Hi, Thanks for taking my question I had a few actually I guess the first is.
The growth of the overall market can you talk a little bit more about the dynamics. It doesn't seem like there was a tremendous amount of seasonality.
This quarter as we've seen from botox, almost being flat quarter over quarter.
So I just wanted to sort of understand some of the competitive dynamics and how you feel you're advancing as far as market share.
<unk> was a.
See if you can give us a little bit more granular detail about the impact of the co branding and some of the metrics that you might be able to share as far as directing patients <unk> patients to those.
To those practices and the benefits there.
And then finally on the long acting toxin.
Rather the the extra strength toxin.
I guess.
To understand it a little bit better are.
Are you feeling comfortable doubling the dose at this time.
Typically because there is such precision.
And you don't have a concern about spread them.
Because I guess the idea of just doubling the dose.
You know could generate different effects on the face as opposed to just longer duration. So I just want to understand how you're feeling comfortable with that.
Great Annabel. Thanks, Thanks for the question I'll take the first two around the market and then co branded media metrics and then turn it over to Bruce to answer your question around the extra strength program that we have in terms of overall market. Clearly this has been a very strong market. This year you saw the market leader.
Ported late last week and reported as you pointed out just a small decline of minus three three points. Our business sequentially grew five point. So I think there's about an eight point spread there that we feel very good about and that not if you look at our revenue in the second quarter you saw that we got our feedback under us.
The majority of that revenue came from accounts from the back half of last year, placing an initial order and so I give a lot of credit to the team for their focus in Q2 of re engaging customers and now in Q3, you see that we've added another dimension because not only are we continuing to work with existing customers, but we're expanding our footprint.
By adding 500, new accounts and I think youre starting to see the share accelerate in terms of our share gain and we believe this is the early innings of us in the relaunch phase of <unk> and we feel like we're on a strong trajectory, but overall you're right. This market is has a very healthy growth profile and as we've always said.
We could do well in this category and continuing to build our brand you may see the same from others in this space as far as co branded media.
We continue to track all metrics, we've reported several of them you'll see them posted on the on our Investor Relations site a full updated presentation later today, which shows the progress we've made on co branded media.
Since the first quarter of this year, where the number of campaigns has increased from just over 100 to over 800 campaigns now from the first quarter all the way to the end of the third quarter. So we're clearly accelerating.
Our traction in terms of these campaigns in and we're seeing that the impressions were creating during that same window of time has significantly increased as well and there are more metrics and we'll continue to provide more color with time, but as you know Annabel building a brand is not a one or two quarter effort.
Multiyear effort and as we've always said we're building a brand for the millennial demographic and we believe our co branded media strategy.
Not only is it targeted in our local market around the consumer.
And also targeted to the millennial, but it's also targeted around a practice thats using chabot and so that we have confirmation that once that consumers going in and asking for the products are going into an account that has the experience using it. So we're very pleased with the early metrics, we're seeing around co branded media, but that's something we'll continue to provide more color on it.
He goes on ill pass over to really talk about the extra strength sure.
Thank you Annabel for the question and I think you actually summarized it really nicely.
That's basically it.
When you double the dose.
Increasing our.
Our product can be an issue when we think about spreads both local and and distant just as a piece of trivia. If you look at the August 2014 released from the FDA when they printed and gave the guidance on Tox studies and the phase there is a whole page on concerns about adverse events.
So maybe let's 50 potential adverse events, so given the fact that work.
Reception and the feedback from the doctors that are product seems to be very precise. It just seems to fall very well to study it in a higher duration or higher dose type scenario.
The thing that we really do want to understand it's not just the safety profile, but also theres a performance tradeoffs. So we know that from feedback from clinicians and consumers are patients like the feel of chabot, when they're treated with it face to face that it feels less heavy and there is a lot of descriptive language that of <unk>.
They like it.
What we want to understand is when you use a higher dose what does that performance feel like and do they like that feel that tradeoff of giving away potentially that kind of natural light field to potentially some different performance attributes. So this study allows us to be able to understand clinically how patients.
Steel and if they prefer this versus the other again I think David summarized it nicely. The 20 units that we have right now we know works really well and the feedback that we get both from patients and Kols is that they liked this product, but we also know that there are some doctors who are experimenting with higher doses. So we wanted to do this in a more.
Control fashion and it just makes sense of doing the phase two capacity.
Okay.
Thank you.
Our next question comes from the line of Marc Goodman Goodman with SBB Leerink you May proceed with your question.
Yes, good morning, just to continue on with <unk>.
Raul market, David can you just talk a little bit about like how caldor remember something what's going on here behind the scenes who's gaining share.
Who you're taking share from.
It seems like the market like you said, obviously the growth rate was a big year over year, but quarter to quarter. It was probably flattish fourth quarter will be up a little bit. So how are you assuming.
We ended the year for total sales in this market in the U S and maybe you can give us a sense for how.
<unk> gotten off to start in the fourth quarter.
Great. Thanks.
Thanks Mark.
First I think as it relates to the other toxins.
It's tough to speak for those because those are private companies. So we don't have great visibility to their performance, but it's fair to say that.
Since the Covid recovery in the back half of last year. This market has been on an accelerating growth trend and you see that the typical seasonality in the third quarter that you would see where generally you would see potentially a double digit decline sequentially you didn't see that from the market leader and that's a sign of the resilience of this market which continues to.
Strong and we're very optimistic about that trend carrying forward into the close of the year.
And we're also very optimistic about our prospects because not only do we benefit from the overall market growth. We believe that a combination of our co branded media and our effort to go wider is enabling us to deliver faster growth than the market overall procedure. So I think mark you are hearing from us we.
Feel really good about our business I think what we say internally is we feel like we found the right recipe in terms of how we get out and promote our brand and the effort that the team has behind it.
And in many ways, we feel that the wins at our back and we just need to execute at this point and continuing to deliver some strong quarters here.
Can you talk about October at all.
Yeah.
Yes, I think as I was saying before I think the same trends.
Carried through that we've been observing which is very strong demand.
Recently held a customer meeting.
Where we had nearly 100 customers present at an off site and I can tell you that as I walked around that meeting it was consistent.
The dialogue was around either adding additional injectors to absorb the additional demand coming into practices or practices, we're looking to expand and add new facilities for 2022 and that was a consistent theme across the board that.
The demand is picking up for these accounts and they're looking at ways to absorb it and I think those are very obviously, great problems to have in this market right now and that's probably one of the biggest challenges that we see when we're advertising in the co branded media that these consumers want to get into this is a 15 minute quick and office.
Procedure. It is not a typical medical procedure, where they are willing to wait months to get into a practice they want to get in within a matter of a couple of days and so clearly building up the ability to absorb the demand is going to be an important part of how this market evolves over time, but I do believe that we're on the right path that you've got this market. It is strong.
Pace here of growth than we've ever had it we estimate this market. This year will annualize at about a $1 8 billion dollar <unk>.
Revenue range and and what May have an update that guidance as we come out of Q4 based on the strong run rates we're seeing.
Yeah.
Thanks.
Our next question comes from the line of the meal demand with Mizuho Securities. You May proceed with your question.
Great. Thanks, so much for taking my questions I apologize I missed some of it has just been juggling a few different company.
This morning, so one on your extra screen.
Program can you just talk a little bit.
Sort of target profile would be for that.
Initially as doctors had gotten used to you, though and maybe it's because of the precision some at least to US had mentioned that they don't feel last quite as long as botox, where you've done that and this is certainly more in line with botox.
The performance in Q1 from Botox or is it maybe more trying to get even longer duration.
Maybe closer to one.
So as reported with taxing stuff.
Just a little bit more I understand there would be helpful.
Other point was more around the millennial demographic without what you guys are focusing on can you maybe just give us a sense of the share of your sales that are coming from the millennials or any symptoms or market share split in the millennial population versus the non millennial population.
Yes.
Okay.
Great Great questions Valmont, why don't I start with the millennials I'm going to make one quick comment and turn it over to Roy.
Extra strength program that we have.
For millennial is one thing we track is the percent of millennials that are in our consumer loyalty program and we did report that 40% of consumers in our <unk> rewards program, our millennial age or younger and that compares to less than 30% for the overall toxin market. So we feel.
Very good about our advertising and our branding positioning well against that millennial segment, and we hear that consistently when we're out in the field with customers that the.
Consumers respond very well to our advertising they respond well to the brand positioning and we're seeing that of course being pulled through now and co branded media, where with over 800 campaigns that we individualize around the country and nearly 400 million media impressions clearly that's also starting to build the <unk>.
Awareness for as you go and we think all of these collectively as you know Bob will over time really have a building effect and that's how other major brands in this instead of category were created it wasn't overnight. It was overtime and I think we're on the right track to building a new brand in this space that's targeted against this younger demographic and that's really what makes us unique.
As the newest player in the endotoxin category.
Moving over to your questions around the extra strength, maybe I'll just start with a couple of comments around the key learnings that we've had over the last couple of years in the market. The first is there is a segment of injectors in the U S that are playing with dose they have been for a number of years. It's a small segment, but they have been playing with doubling in even more increasing the dose of <unk>.
<unk> approved neurotoxin in the U S and Theyre seeing a direct correlation to increasing the dose and the higher and the longer duration of effect, but theyre also seeing different properties that come with that as well and I'll, let <unk> speak to that the second and third.
Now publications with all toxins, showing a direct correlation between higher doses and duration.
So we feel very confident that there's a direct correlation there based on a very large study conducted with the market leader showing that and as you know we did our own head to head study in the past. So we have a lot of confidence in terms of how our currently approved chabot dose compares against the market leader.
And lastly, there is a bit of confusion in this market.
There has been because.
The focus has been around duration without tradeoffs and we believe that based on the learnings there are tradeoffs in the end and just as there are with pharmaceutical product. If you increase the dose there's likely some benefits, but there's trade offs that come with that and we think doing a study to show that is going to be important but most importantly, I think we're well positioned.
To do that where does static only company, which gives us the latitude to optimize the value of not only our 'twenty unit dose, but a future potential dose at a higher level, enabling a consumer to start with the 20 unit, which we believe will be the flagship but have an option to move to a higher dose is in fact, she is looking for different properties.
And so we do believe this is the right time to do it and based on where the market is today I think will be the company that could provide that clarity around what the tradeoffs are really sure.
And I think David summed it up pretty nicely, but just to hit your question straight on in particular, the first point it is being very well established now how <unk> compares to botox in terms of duration.
The largest head to head study bears that out very nicely. It was 540 patients and if you look at the responder rates over time, you could see that we ended up with higher responders on a relative basis. When you do the actual duration calculation pretty similar actually <unk> is about a week longer than botox in duration. If you look at.
The csrs and host materials and Thats been pretty consistent there have been other phase III studies. There was another glabella lines study before ours that was before it became chabot during our diligence and that pattern has been pretty consistent that you.
Chabot, either less as long if not a little bit longer in those phase III studies in terms of the product profile that we're looking for it's very it's like David said, we're looking to have a look at a product that may have a longer duration and we're trying to understand that trade off between duration and how it feels clinically for the patient.
The other thing Thats quite confusing the marketplace right now is ultimately the definition of duration, we've seen a lot of companies take liberties in terms of how they are defining duration. So we're looking to see how that plays out too in this study helps us understand those attributes.
Okay. Thank you so much.
Our next question comes from the line of Douglas Tsao with H C. Wainwright.
Proceed with your question.
Hi, Good morning, just a couple of questions from me. So first I'm just curious.
What percentage of your overall revenue is now coming from accounts that are participating in the co branded.
Marketing program.
It's a great question follow up Yeah, I'll answer that wanted to ask you Bob.
Not disclosing the details around CDM for competitive purposes.
Obviously, it's a it's a large part of our business. We did say that there is over 500 customers.
That participated and co branded media and it's growing at a fast rate.
And you know that we have a little over 6000 customers now that have purchased <unk> in the U S. So you have some context around the penetration of the program, but in terms of revenue we're not disclosing that just yes next question.
Okay, and then just in terms of just to understand in terms of the extra shrink program. So is the focus to run the phase to see what you learn and then proceed to do a study that you might.
Submit to the FDA for a label change.
Yes, so right now we're just like you said, where we want to see what 40 units looks like we want to understand the duration profile, which we expect to be longer. This as we've all seen that when we double the dose that we get longer duration, but more importantly, we want to understand how patients.
Feel about it what it feels like clinically when you have it.
We know 20 units, we know patients are happy with 20 units we know.
Clinicians are very happy with 20 units and we have seen like I said there are kols. There are physicians, who are experimenting and playing with the higher doses. So we wanted to do it in a more controlled fashion.
And then sorry, you've made one more point at the end there.
So I was just curious if you're intending to then run a.
Our phase III study for a label change that's right. So that's the flexibility in the program. We can understand if it makes sense to continue forward. So we have the flexibility to decide if we want to continue the program and take it all the way through to a label and this data will be submitted to the FDA as a phase II study.
And then just really just how many patients are going to participate in the study.
This right now we're looking at about 120 patients in three arms.
Okay.
Okay.
Our final question comes from the line of Greg Fraser withdrew it Securities. You May proceed with your question.
Good morning folks thanks for taking the questions.
Have you seen any changes in behavior by the market leader in terms of customer programs or initiatives to protect share that might create headwinds for <unk> and the other players.
Question is on SG&A, which was up more than I expected. It sounds like the growth was driven in part by the CPM program should we look at that <unk> level as a new run rate from which you'll grow.
Yes.
Yes, I'll start with the first question just around the competitive activity and then turn it over to Loren to address.
Our spend rates.
Look the market leader continues to deliver revenue at all time highs I think in the second quarter. You saw all time high revenue for them and then in the third quarter for that season also an all time high so you're seeing very strong trends overall you saw them also raised price in the summer.
Both allergan as well as our Gal derma raise price, 3%. So youre seeing all the signs of a very healthy market and of course us over indexing in terms of our performance relative to the overall market rates, which look you'd expect that given the profile product, we have and where we're investing and co branded.
Media to drive a greater acceleration of our business I will turn it over to Loren to speak to the spend associated with the great. Good morning, Greg, Yes, we did spend more in the third quarter.
Investing very close to the customer it really in the CPM programs that we've been talking about and the majority of the increase in SG&A.
And driven by that CPM spend.
And I think your other part of that question was will that continue we do believe it will continue into Q4.
Great. Thank you.
At this time, we have reached the end of the question and answer session and I will now turn the call back over to Mr. Eriksson for any closing comments.
Thank you operator, if you missed any portion of this call a replay will be posted to our website. Later today. Thanks to everyone for joining US. We appreciate your interest in <unk> and will be available. If you have any additional questions.
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[music].
Okay.
Yeah.