Evolus: Next Big Thing in the Performance Beauty Industry

04 Aug Evolus: Next Big Thing in the Performance Beauty Industry

Evolus, Inc. (NASDAQ: EOLS) is a performance beauty company with a customer-centric approach focused on delivering breakthrough products in the self-pay aesthetics market. This market includes medical products purchased by physicians and other customers that are then sold to consumers or used in procedures for aesthetic indications not reimbursed by any third-party payor, such as Medicaid, Medicare, or commercial insurance.

Evolus, Inc. (NASDAQ: EOLS)

Market Cap: $572.07M; Current Share Price: $10.05
Data by YCharts

The Company and its Products
Evolus’s first commercial product is Jeuveau®, which is a proprietary 900 kilodalton, or kDa, purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults.

Currently, BOTOX (onabotulinumtoxinA) is the neurotoxin market leader, and before the approval of Jeuveau®, it was the only known 900 kDa botulinum toxin type A complex approved in the United States. Aesthetic physicians generally prefer the performance characteristics of the complete 900 kDa neurotoxin complex and are accustomed to injecting this formulation.

The Company is also preparing to launch a second product line – Evolysse, an innovative technology that complements the Jeuveau brand. Evolysse is a highly competitive filler line – a first-generation cold technology Hyaluronic Acid line with five fillers in late-stage clinical development.

Evolysee is being developed in partnership with Symatese, developer of the latest generation of Restylane® products in the U.S.

Toxins and fillers are the top two medical aesthetic procedures, and with the two product lines Jeuveau and Evolysee, Evolus seems poised to transform the beauty treatment industry.

The following key points elaborate on why Evolus is a must-watch.

1. Growing Presence in Large Underpenetrated Markets

Evolus is rapidly gaining market share in the ~$2.3B U.S. toxin market while expanding internationally. As discussed, the Company is also introducing a broad product portfolio to the $1.8B U.S. dermal filler market. Both these segments are expected to nearly double by 2028.

Specifically, according to Medical Insight’s The Global Aesthetic Market Study, within the self-pay aesthetic market, the global aesthetic neurotoxin market is estimated to grow to approximately $6.4 billion in 2026, and the U.S. aesthetic neurotoxin market is expected to grow to roughly $3.7 billion in 2026. According to Clarivate Aesthetic Injectables Market Insights, the European aesthetic neurotoxin market is expected to grow to approximately $662 million in 2026.

The growth in the medical aesthetics market is driven by several factors, including:

Increased use by millennials who are increasingly seeking medical aesthetic treatments and utilizing neurotoxins as an entry point for aesthetic procedures due to their minimally invasive nature;

an aging population together with an increasing life expectancy, which is resulting in more consumers with a desire for improved appearance and well-being over a more extended period;

rising disposable income, with the U.S. Bureau of Economic Analysis reporting that real disposable income in the United States increased approximately 19% from December 2012 to December 2022;

growing awareness, utilization, and acceptance of elective or minimally invasive aesthetic procedures;

continued innovation and improved accessibility to these treatments due to an increase in the number of physicians who perform these procedures.

Within the multiple age groups receiving aesthetic neurotoxin treatments, the Company focuses its marketing efforts on the millennial segment, the largest cohort in the U.S. population. In 2019 there were estimated to be approximately 73 million millennials, defined as individuals born between 1981 and 1996. About 1.7 million females between the age of 30 and 39, which includes many individuals defined as millennials, are considering neurotoxins in the next twelve months.

In such a situation, the Company is especially likely to see broad adoption of its products as they are highly effective for millennials.

Evolysee is also expected to rake in huge revenues for the Company. In anticipation, Evolus has already raised 2028 revenue guidance by $200M (from $500M to $700M) based on Evolysee product launches in 2025, 2026, and 2027.

2. Comprehensive Business Strategy

The Company launched Jeuveau in the United States with its own specialty sales organization, now consisting of over 100 positions between representatives, management, and other sales employees, and in Canada through its distribution partner, Clarion. Evolus launched its product in Great Britain in September 2022, Germany and Austria in February 2023, and plans to launch in additional European countries and Australia. It plans to expand its product offerings through in-licensing, partnerships, acquisitions, and international launches. The critical components of the Company’s strategy are:

Pursue an aesthetic-only strategy to enhance marketing and pricing flexibility and improve customer transparency.

Launch directly or partner outside the United States to reach and serve physicians and consumers in those territories.

Leverage differentiated digital platforms to open new accounts efficiently, personalize the purchasing process and efficiently deploy marketing programs at scale, including co-branded media.

Establish a leading medical aesthetics company with a diversified product offering by in-licensing technology, developing partnerships, and potentially acquiring products.

Use medical education to establish the precision profile of Jeuveau.

Among business strategy initiatives, the Company’s differentiated cash-pay business model deserves special mention as it offers the following benefits:

Avoid third-party payer reimbursement complications

Greater pricing flexibility without a tie to therapeutics

Enables co-branded marketing

Promotes brand and practices to draw in consumers

Ability to offer customers a compelling value proposition

Strengthens customer loyalty

The success of Evolus’s business strategy is evident from the fact that over the last few years, consumer registration and consumer redemption in the Evolus Rewards Program have continued to grow.

Due to the sound business principles, the Company is expected to grow exponentially in the future as well.

3. Financial Performance

For Q2 FY23, Evolus reported net revenue of $49.3 million, a 33% increase over the corresponding quarter in the prior year, representing a new quarterly record. During the quarter, the company also achieved essential performance indicator records, including an all-time high since the launch year of nearly 800 new customer accounts, the enrollment of 64,000 new patients, and the completion of more than 147,000 patient reward redemptions, having surpassed one million redemptions in its Evolus Rewards™ Patient Loyalty Program earlier this year.

For Q1 FY23, Evolus reported net revenue of $41.7 Million, Up 23% from Q1 FY22. The Gross and adjusted gross margins were 69.1% and 70.9%, respectively.

For FY22, the Company reported net revenue of $148.6 million, up 49% over FY21. For the second year in a row, Jeuveau® was the fastest-growing neurotoxin in the U.S. aesthetic market, crossing into a double-digit unit share position.

For FY22, gross profit margin and adjusted gross profit margin were 60.4% and 62.4%, respectively, impacted by the higher settlement royalty rates in effect until September 2022.

Loss from operations was $65.3 million for FY22 compared to $44.4 million in FY21. Non-GAAP loss from operations in FY22 decreased by 11% to $43.0 million from $48.4 million in FY21, driven by solid sales growth and partially offset by investments to support the company’s international expansion.

During FY23, Evolus expects to grow twice as fast as the U.S. aesthetic neurotoxin market, with net revenue from $185 to $195 million. The Company also expects to achieve positive non-GAAP operating income in 2025. Evolus is fully funded to profitability, including the dermal filler investment, by utilizing the remaining $50 million tranche of its existing credit facility with Pharmakon Advisors.

The above details indicate that Evolus is expanding exponentially in a highly underserved market, mainly due to the increasing popularity of Jeuveau. Moreover, the Company is expected to perform even better once it launches its Evolysse product line in 2025, 2026, and 2027.

All these indications spell a bright future for the Company, and hence Evolus seems worth putting on the watch list.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Reference:

https://investors.evolus.com/press-releases-and-news/news-details/2023/Evolus-Reports-Fourth-Quarter-and-Full-Year-2022-Results-and-Provides-Business-Update/default.aspx

https://investors.evolus.com/press-releases-and-news/news-details/2023/Evolus-Reports-First-Quarter-2023-Results-and-Provides-Business-Update/default.aspx

https://s29.q4cdn.com/603291515/files/doc_news/Evolus-Raises-Full-Year-Revenue-Guidance-on-Record-Second-Quarter-2023-Revenue-2023.pdf

https://s29.q4cdn.com/603291515/files/doc_presentation/2023/07/1-evolus-investor-relations-deck-june-2023.pdf

https://www.sec.gov/ix?doc=/Archives/edgar/data/1570562/000157056223000070/eols-20230331.htm

https://www.sec.gov/ix?doc=/Archives/edgar/data/1570562/000157056223000038/eols-20221231.htm