Evolus, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparable period is FY2020. Evolus is a commercial-stage aesthetic company whose revenue comes almost entirely from Jeuveau, a self-pay botulinum toxin product approved for glabellar lines. The filing reports fourth-quarter 2021 Jeuveau net product revenue of $34.7 million; it does not provide a clear standalone Q4 profit or cash-flow value in the supplied text.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total net revenue | $99.7 million | $56.5 million |
| Net loss | $46.8 million | $163.0 million |
| Loss from operations | $44.4 million | $153.1 million |
| Operating cash flow | Use of $33.4 million | Use of $57.9 million |
| Gross profit / gross margin | $78.8 million / 79.0% | $35.2 million / 62.4% |
| Adjusted gross profit / margin | $56.2 million / 56.3% | $38.2 million / 67.6% |
| Cash and cash equivalents at year-end | $146.3 million | $102.6 million |
Revenue increased 76.3%, mainly from higher sales volume and, to a lesser extent, a higher U.S. average selling price. The reported FY2021 gross margin includes a one-time $25.5 million Daewoong settlement receipt recorded as a reduction of cost of sales; adjusted gross margin excludes that receipt and intangible-asset amortization. Selling, general and administrative expense was $112.1 million, versus $98.2 million; research and development expense was $2.1 million, versus $1.7 million.
At year-end, Evolus reported positive working capital of $121.1 million, total assets of $257.5 million and stockholders’ equity of $81.9 million. Long-term debt under the Pharmakon facility had a net carrying value of $71.2 million, representing a $75 million funded tranche. The facility bears interest at three-month U.S. dollar LIBOR, subject to a 1.0% floor, plus 8.5%; principal payments are scheduled to begin in 2025. A further $50 million tranche was available for election by December 31, 2022, subject to conditions.
Material changes versus FY2020
- Revenue rose by $43.1 million, while net loss narrowed by $116.2 million. FY2020 included $83.4 million of litigation settlement expense and $3.0 million of restructuring costs; these did not recur in FY2021.
- Adjusted gross margin fell to 56.3% from 67.6%, reflecting higher product costs and settlement-related royalties, partly offset by Daewoong reimbursements. Management expected royalty obligations to weigh materially on margins through September 2022 and to a lesser extent through September 2032.
- Operating cash use declined to $33.4 million from $57.9 million. Financing included $92.4 million net proceeds from a follow-on offering, $10.9 million net proceeds from ATM share sales and $72.0 million net proceeds from Pharmakon debt; cash also funded the $76.4 million Oxford loan payoff and $20.0 million founder-note repayment.
- Common shares outstanding increased from 33.7 million to 55.6 million, including shares issued to Medytox in settlement, shares issued on conversion of Daewoong’s note, and shares sold in the public offering and ATM program.
Outlook, risks and unusual items
- Outlook: Management said it expected operating losses and negative operating cash flows to continue for at least the next 12 months. It believed available capital resources were sufficient to fund operations through at least that period, while cautioning that projections could prove incorrect. No numerical revenue or profitability guidance is provided.
- Commercial plans: Evolus planned selective European launches in Q3 2022 and expected an Australian launch in 2023, subject to regulatory approval. A Phase II study of a higher-strength Jeuveau dose was expected to enroll its first patient in Q1 2022, with completion anticipated in the first half of 2023.
- Settlement obligations: The Medytox/Allergan settlement required $35 million in cash payments, of which $30 million had been paid by the filing date, with $5 million due in 2023. It also imposed royalties on sales, including mid-single-digit royalties to Medytox through September 2032. Daewoong paid Evolus $25.5 million and agreed to reimburse certain U.S. royalties during the earlier period.
- Key business risks: Evolus depends on one product and one manufacturer, Daewoong. Failure to meet minimum purchase or other agreement requirements could jeopardize exclusivity. Competition, consumer discretionary spending, COVID-19 effects, product adoption, regulatory compliance, supply continuity and the ability to raise capital are significant uncertainties.
- Legal matters: A securities class action and related derivative litigation remained pending. Management said the claims were without merit, but could not reasonably estimate a loss range and recorded no liability for the actions. Their outcomes remain uncertain.
- Other items: Evolus reported a $422.9 million accumulated deficit and a $44.7 million founder royalty obligation. It also disclosed LIBOR transition risk on its floating-rate debt. Financial statements were audited; management concluded internal control over financial reporting was effective, but the auditor did not attest to that assessment under the company’s emerging-growth-company exemption.
Important facts for investors to verify
- Whether revenue growth and customer purchasing continue, and whether reported growth translates into improving adjusted gross margin and operating performance.
- The remaining settlement payments and royalties, including the timing and amount of Daewoong reimbursements and the margin impact after September 2022.
- Cash burn, financing needs, debt interest expense and the conditions for drawing the additional $50 million Pharmakon tranche.
- Progress of European and Australian launches, regulatory approvals and the higher-strength Jeuveau clinical trial.
- Daewoong’s supply performance and Evolus’s compliance with minimum purchase and exclusivity terms.
- Developments in the securities and derivative litigation, and any resulting potential costs or liabilities.