Whirly lollipop on orange background.

We were initially pretty excited about Revance (RVNC) based on our work in and around the theme we refer to as “aging population.” The lead product at Revance is a form of botox that can be applied topically rather than injected.Screen Shot 2014-02-12 at 9.23.42 AM

The story is still a good one but when we went through the transcript of the IPO roadshow more carefully a couple of things stuck in our craw. Specifically:

Recently the trials have failed – “We started our initial Phase 3 work in the second half of 2013. This initial Phase 3 study showed no difference between RT001 and placebo group. There was essentially no efficacy between either RT001 or a placebo. This was unlike anything we had ever seen in the prior Phase 2 trials. We investigated and identified causes for the elimination of signal. We looked at the addition of two ingredients to improve the gel diluent stability as possible reasons for the elimination of signal. We actually returned to the Phase 2b diluent formulation based on the completion of real-time aging that showed two-year stability, and there was no longer a need for those inactive ingredients to improve diluent stability.

We initiated confirmatory two-cohort clinical trial CL035 to confirm efficacy. The first cohort had a randomization error. That error was corrected and the data showed efficacy that was statistically significant. A second cohort confirmed efficacy and expanded the total number of subjects in the study. The CL035 study achieved the Phase 3 composite endpoint. That endpoint was statistically significant at rest and at smile. We believe the CL035 study confirms that we restored efficacy and we are ready to re-initiate Phase 3 studies.”

The application is more involved than we envisioned – “To use the device, you simply pull it out of the refrigerator, and [it] can be used immediately or prepared at the start of the day. Simply click the button, insert the plunger and thread into the device. It allows the staff to push the diluent into the toxin. You simply shake, much like you were reconstituting injectable toxins, and then pull it back in the central cylinder where it starts. Now, you just simply twist off the toxin. You can’t get a needle in here to aliquot [the] drug out, and now you can dispense the drug as shown here with the patient sitting up very comfortably.”

The biggest risk short term is that something else unexpected occurs during the current Phase 3 trial which sends the company back to the drawing board and the stock down to single digits. Beyond that the commercialization of the drug may not be as easy peasy as investors expect given the multi-step application process that may be prone to user error in the field.

Conclusion

We still like Revance and it fits well into our “aging population” theme. But after the shares have moved up from the $16 IPO price to $26 it feels more like a “wait and see” name than a must own. Botox is a big market and has a much wider range of potential use than most investors associate with it. If Revance can clear this phase 3 trial with the revised formulation and execute well during the commercialization phase for RT001 then current holders should be safe.

In addition to the transcript (noted above) we also have the slides in the archive: Revance RVNC IPO Roadshow Slides.

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