Evolus, Inc. Q2 FY2022 Earnings Call

Greetings. Welcome to the Evolus Second Quarter 2022 Earnings Call. At this time, our participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I would now like to 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 Moatazedi, President and Chief Executive Officer; and Rui Avelar, Chief Medical Officer and Head of R&D. 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. A detailed discussion of the risks and uncertainties that the company faces is contained in 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, projection, or forward-looking statement. Additionally, today's discussion will include non-GAAP financial measures, which 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 evolus.com. Lastly, following the conclusion of today's call, a replay will be available on our website at evolus.com. And with that, I'll turn the call over to David.

We are pleased to share with you our results for the second quarter of 2022, which reflected above-market growth, increased market share, and disciplined operating expense management. Sales grew to a record $37.2 million, and our lead sales and marketing metrics demonstrated growing brand awareness and continued strong adoption of Jeuveau. During the quarter, we continued to carefully manage our overhead expenses, investing the majority of incremental spending in activities to support sustained growth in the U.S. and establish our presence in Europe. And we remain in a strong cash position funded to beyond profitability. We expect 2022 to be another strong year of growth for Evolus, even in an environment with greater macroeconomic headwinds. Based on our year-to-date performance and our confidence in a resilient and fundamentally strong aesthetic neurotoxin market, we continue to believe we can achieve the upper end of our full-year sales guidance range of $143 million to $150 million. This equates to a year-over-year growth rate approaching 50%. Now, I'll get into some of the details. In the second quarter, we grew total sales 42% year-over-year in an aesthetics market that continues to demonstrate strong demand. Our U.S. sales growth rate was at least double the estimated market growth rate. New account growth during the quarter was again very strong, and we added nearly 590 new customers, bringing our account base to more than 8,100, with a reorder rate that continues to run above 70%. This expanding customer base creates a pipeline for future growth. Because our experience shows that new customers typically start out with small orders, then over time as they gain confidence with the product and our unique co-branded marketing benefits, we see our market share expand steadily. Supporting this observation is Guidepoint Qsight aesthetics data that provides analysis from point-of-sale across more than 800 practices. This data shows that over the last 12 months, Jeuveau has reached the number one or number two toxin share position within practices that have adopted our product. And while our customer base has expanded rapidly to over 8,100 accounts, we are still only selling to less than one-third of the aesthetic neurotoxin customers in the U.S. This combined with a greatly under-penetrated toxin market leaves room for significant opportunity in the coming years. We are continuing to see excitement for our co-branded streaming TV advertising, which is available to our largest customers. Customers earned these ads by committing a large portion of their toxin business to Jeuveau. During the second quarter, we completed production on a large batch of these ads, which have recently begun airing. In the second quarter, we ran a total of 750 digital billboard and streaming TV marketing campaigns that generated more than 250 million media impressions. These ads serve the dual purpose of promoting our customers' businesses while continuing to build the Jeuveau brand. We have now completed eight consecutive quarters of advertising through our co-branded media program, and the cumulative effect of that advertising is driving brand awareness. In fact, among a representative panel of aesthetics consumers, aided awareness of Jeuveau has now reached number two in the market, ahead of both DYSPORT and XEOMIN. And this recognition has occurred in just three short years since we first launched. Jeuveau brand awareness is also continuing to drive patients into practices for treatment. Membership in our Evolus Rewards program, of which the largest demographic is millennials and younger, grew to nearly 390,000 by the end of the quarter, up from 335,000 last quarter. Through the first half of the year, approximately 180,000 rewards have been redeemed compared to 100,000 for the first half of 2021. This puts us on track to nearly double the number of redemptions over last year, illustrating the power of this program to motivate consumers and their loyalty to Jeuveau. Now, we know there's a great deal of interest in how the current economic environment might affect the growth trajectory of the toxin market and the behavior of consumers. So, I'd like to take a moment to discuss some of the trends we are seeing. As you know, we stay very closely connected with our customers because we're not just selling them a product, but we're engaging in long-term relationships designed to help them grow their practices. And we have very good visibility into the engagement of consumers enrolled into our loyalty program. In the second quarter, we did not observe signs of slowing as measured by purchasing patterns across our customer base or consumer engagement in our loyalty program. Third-party data that tracks overall procedural volumes suggested a slight slowdown in growth compared to the first quarter, but still trending in line with historical averages. Since the end of the second quarter, growth trends have remained strong, and we have not seen any meaningful change in customer purchasing patterns. Additionally, our customers are not reporting any material differences in patient volumes or spending habits when it comes to neurotoxin products. We continue to believe the fundamentals of the toxin market are strong and that the low penetration rate we see today will continue to increase over time. We are also encouraged by the overall resilience of the aesthetic neurotoxin market, which has demonstrated positive annual growth over 15 years. Even during the last recessionary period of 2007 through 2009, the only exception to this was in 2020, when practices were closed due to COVID. Neurotoxins are one of the most affordable aesthetic procedures. And if faced with the choice, patients are more likely to stretch out the interval between treatments than to stop getting them altogether. All of this gives us confidence that Evolus can grow at a faster pace than the toxin market and continue to gain share by leveraging our unique business model, focused on the cash-pay aesthetic market and targeting the millennial consumer, using our cost-effective digital platform. Building on our momentum, several weeks ago we launched Switch Your Tox and Love Evolus Forever, our largest promotional campaign to date. The Switch program is a strategic investment designed to sustain our growth and drive further market share gains in 2023 and beyond. Switch is designed to simply increase Jeuveau usage by injectors and their patients. Customers who purchase a minimum amount of Jeuveau by the end of the third quarter will receive 60 reward certificates in the amount of $160 per new Jeuveau consumer to be used over two consecutive treatments. This reward represents a meaningful patient discount over competitors' incentive programs, and we think it will be quite attractive to new consumers. The rollout of this program has just begun, and while early feedback has been quite positive, the results of Switch will unfold over the next several quarters as customers sign up and customers come in for their two treatments. Now turning to Europe. Beginning this quarter, we will begin the launch of Nuceiva initially to customers in Great Britain and Germany, which are the two largest markets in that region and represent nearly 40% of the European market. Our early efforts will focus on introducing our company and our product at local aesthetic meetings. And initial sales are expected to be modest as we build our presence. Longer term, we expect Nuceiva to be an important contributor to our growth as we expand to additional European countries, as well as Australia in 2023. And now, I'll turn the call over to Rui Avelar for a brief update. Rui?

Thank you, David. If you follow Evolus for any length of time, we're acutely focused on millennial consumers. They're digitally savvy, they consider aesthetic medicine to be part of everyday life, and they are willing to spend money to prevent aging. While this demographic is the future growth driver of the aesthetic toxin market, interestingly, there's very little published on millennials in the medical literature. In June, Dermatological Surgery published a new post-hoc analysis on our Phase 3 trials, comparing millennial patients to non-millennials. And we believe this is the first paper on millennials in glabellar lines. This paper was based on pooled data from our three studies, totaling 737 patients. It also included some important subjective metrics, such as global aesthetic improvement and subject satisfaction. As you'd expect, the average age between the two groups was different, 28 versus 58. By comparison, the baseline severity of glabellar lines at maximum frown was similar: 72% severe in the millennials and 76% in the non-millennials. However, there was a difference in the number of patients with severe glabellar lines at rest, only 3% of millennials compared to 23% in the non-millennials. It's this process of aging and permanent wrinkle formation that the millennials are trying to prevent or delay. We already know that Jeuveau works well in non-millennials. And this came out clearly in the studies. When we looked at efficacy in millennials as measured by a one point or greater improvement on the glabellar line scale at maximum frown, we found that by day two, 60% were already responders. And surprisingly by days seven, 14, and 30, the responder rates were 100%. At the end of the study, day 150, over 40% of millennials were responders. A similar pattern emerged when we looked at global aesthetic improvement, with 100% responder rates at days seven, 14, and 30, and at the end of the study, 62% of subjects felt aesthetically that they were still improved or much improved. Finally, looking at subject satisfaction, by day two, 62% of millennials were responders and days seven, 14, and 30, 100% were responders. Even at the end of the study, day 150, or five months, subject satisfaction was still high at 79%. The safety profile did not demonstrate any differences between the two groups, and there were no serious adverse events related to the drug. So, in conclusion, we already knew that Jeuveau worked very well in non-millennials. And now we have data that shows Jeuveau works even better in millennials, our target demographic. Lastly, just a quick update on the Phase 2 extra-strength study. We recently announced the completion of enrollment. Patient follow up is ongoing, and we remain on track to complete the trial by the first half of 2023. Back to you, David.

Thanks, Rui. As you've heard us say, we aspire to become a multi-product aesthetic company. And during the quarter, we took a step in that direction by investing in a future growth opportunity. We have entered into an exclusive licensing agreement with a 3D printing company with unique material capabilities for a $2 million investment. This agreement gives us global rights to develop their technology for aesthetic applications. Evolus will fund and work closely with their team to conduct research, and we will be responsible for predetermined payouts when certain development and commercial milestones are reached. The combination of their technology and biomaterials capabilities and our R&D expertise could lead to novel product concepts that generate new market opportunities. While this is still early stage, we are excited about its potential, and we look forward to providing updates at appropriate intervals. Before we move to the financials, I'd like to provide an update on our CFO search. Prior to Lauren's departure, we hired a very experienced interim CFO to help oversee our strong internal finance and accounting team. Having an interim CFO on board has enabled us to take our time to ensure we find the right person to build a position. Over the past several months, we've met with a number of very strong candidates, and I expect we'll be able to announce our new CFO in the very near future. With that, I'll hand the call over to David Erickson to take you through the financial information.

Thank you, David. We're very pleased to deliver another very strong quarter. And I'd like to call your attention to several noteworthy items, including a 42% increase in net revenues, a growth rate well in excess of the estimated toxin market growth rate, a gross margin profile that will improve dramatically within the next 60 days. And this is the first quarter where we are in a net positive cash position. I'll provide more detail about each of these in the next few minutes. Net revenues for the second quarter this year were $37.2 million compared to $26.1 million a year ago, which was a growth rate of 42%. Looking at just the U.S. sales, which excludes $0.7 million of international sales in the year-ago period, our growth rate was 46%. Year-over-year sales were driven primarily by higher volumes and a slightly higher average selling price. Overall, the pricing environment for neurotoxin products in the U.S. remains strong. Our reported gross margin for the second quarter was 55.4%. And our adjusted gross margin, which excludes the amortization of intangibles, was 57.4%. In mid-September, our settlement royalty obligations to AbbVie will end. At the same time, our settlement royalty obligations to Medytox will decrease significantly to a mid-single digit rate calculated on global net sales. These changes are expected to dramatically lift our fourth quarter adjusted gross margin to the range of 68% to 71%. This fourth quarter step-up will result in a blended full-year adjusted gross margin of 58% to 61%. Reported selling, general, and administrative expenses for the second quarter were $36.9 million compared to $33.4 million in the first quarter. This incremental spending was in line with our expectations and was due to increased personnel costs and increased commercial activities. We are continuing to carefully manage expenses, which gives us the flexibility to direct incremental dollars toward business growth initiatives. This quarter, SG&A expense included $3 million of non-cash stock-based compensation. Our GAAP operating expenses for the second quarter were $58.5 million compared to $49.4 million in the first quarter. Operating expenses this quarter included the $2 million payment related to the licensing agreement David described a few moments ago, which was expensed as in-process research and development. Non-GAAP operating expenses for the second quarter were $35.4 million compared to $31.0 million in the prior quarter. This sequential step up in the second quarter was expected, and we remain on track with our full-year non-GAAP operating expense guidance of $135 million to $140 million. Our non-GAAP loss from operations in the second quarter was $14.1 million compared to $10.3 million reported in the first quarter. As a reminder, both non-GAAP operating expenses and non-GAAP loss from operations exclude stock-based compensation expense, revaluation of the contingent royalty obligation, depreciation and amortization, and the $2 million IPR&D charge. Turning to the balance sheet, we ended the second quarter with $84.5 million in cash compared to $106.7 million at March 31st, 2022, for a difference of $22 million. The major pieces in that $22 million include $14 million of inventory payments to support the growth of the business, a combined $6 million of net royalty payments, $2 million for the licensing agreement, and interest payments of approximately $2 million. The balance was a net positive of $1.3 million as cash collected slightly exceeded cash used to operate the business. This is the first quarter with net positive cash and keeps us on a path to achieving sustainable positive cash flow. As a reminder, we have one final $5 million settlement payment due in the first quarter of 2023, which will satisfy our total settlement milestone obligation. We continue to expect that our existing cash balance will fund our current operations through cash breakeven. As a reminder, the $50 million tranche on our Pharmakon debt facility is available, and we can borrow it at any time during 2022 with no additional restrictions or covenants. This second tranche provides us with financial flexibility as we explore opportunities to expand our product portfolio. Before we turn the call back over to David, I'd like to summarize our 2022 guidance, all of which remains unchanged from last quarter. Full-year sales at the upper end of $143 million to $150 million. This is based on our year-to-date performance and our confidence in a resilient and fundamentally strong aesthetic neurotoxin market. This guidance also assumes a minimal contribution from international markets. Full-year adjusted gross margin between 58% and 61%, with a fourth quarter step up to 68% to 71% concurrent with a decrease in settlement royalty rates. And full-year non-GAAP operating expenses between $135 million and $140 million. This is driven mainly by continued investments in the growth of Jeuveau in the U.S., plus the Nuceiva launch expenses in Europe. Other modeling assumptions include quarterly interest expense of $2.3 million and full-year weighted average shares outstanding of approximately 56 million. Back over to you, David.

Thank you, David. In conclusion, the investments we are making in 2022 to grow our company and build our brand are fueling above-market growth, which puts Evolus on track for another very strong and successful year. We have earned a number one or number two share position in accounts that we support with our unique business model and increasing consumer brand awareness. While we have rapidly grown our U.S. presence since we launched our product three years ago, we have an opportunity to expand our customer base much farther. And we're on the brink of broadening our geographic footprint into two of the largest markets in Europe, followed by additional European countries and Australia in 2023. On the product front, we are building a pipeline with our Phase 2 extra-strength study and an investment in a promising new technology. Overall, we believe we have a tremendous amount of momentum in our position for continued growth and success. We greatly appreciate the support of our customers, employees, and shareholders, and we look forward to sharing our results in the quarters ahead. With that, we're ready to take questions.

At this time, we will be conducting a question-and-answer session. Our first question is from Louise Chen with Cantor. Please proceed with your question.

Hi. Congratulations on all the strong execution this quarter. And thank you for taking my questions here. David, a few for you. I wanted to ask you, what the market opportunity or your latest thinking on the market opportunity for extra-strength Jeuveau, will there be a pricing differential and how much additional sales could this add? And then I also want to ask you how you're preparing for the launch of Nuceiva in Europe. What is the market opportunity here, and how do you expect the ramp to be? I know you gave some color already, but just curious if you could provide a little bit more details there. And then, last question is any additional updates on business development opportunities to expand your product portfolio. Could we see something else this year, and how much capital do you have to deploy towards business development? Thank you.

Great. Well, good morning, Louise. Thanks for joining the call. Why don't I take the first part on the extra-strength? I'll let Rui talk about what you can expect from a clinical profile standpoint going forward. We had outlined on a prior call that, following research we did with our customer base to better understand how they would perceive the role of an extra-strength when they currently use the original strength of Jeuveau with a profile similar to what you've seen with a 40-unit dose, whether you want to look at products under development or products in market, I think you'll find that the efficacy profile, the two are very similar. So, we tested against that profile. And what we learned is one, there's very high interest in an extra-strength dose of Jeuveau. As a matter of fact, 86% of customers that we polled here said that they were interested in it. When you dig a layer further and beyond interest, and you ask them about utility of the product, what we learned is the large majority of their use will continue to be the original strength. They see applications for extra-strength, but that will be the minority of their use. And by being in a position where we have both the original and the extra-strength with our cash pay advantage and the flexibility that provides us, we think that gives us a unique opportunity to capitalize on this market and its potential going forward. I will let Rui provide a little bit more color on what to expect clinically.

Sure. From an expectations perspective, just to kind of base that everyone, where things are right now. If we look at competitive products that have longer duration implications such as Dexcy, we see somewhere between 23.5 to 24 weeks duration. That's looking at a one point glabellar line improvement. When we look at our results with 20 units, we already come in with 21 weeks duration as opposed to 40 units of Dexcy. It's also really important to consider that we did mostly severe patients, and in the Dexcy, it was mostly moderate patients. So, we did a tougher population. So, from an outcomes perspective, we feel pretty confident that if we reach 24 weeks as a minimum, we're in a very good position, especially given what you just shared, David, that most want to have access to a longer duration, but that the majority of utility would actually be the original. So, we'd be in a position to have both.

Thanks, Rui. I want to emphasize a key point Rui made. Ultimately, we're discussing weeks of differences rather than months when looking at the clinical data published so far. We're excited to learn more as we launch our products in the market. Regarding Europe, I'm very enthusiastic about our developments there. I've spent significant time in Europe, and Rui has joined me. We've partnered with a company in Germany that we have trained on our product. Their sales team already manages a range of aesthetics products, and they are now proactively discussing Nuceiva in Germany, which is the largest market in Europe. In addition, we have established our own sales organization in the U.K., so together, these two markets represent almost 40% of the European market. This marks an important beginning for us as we expand. What excites me is that we are the first neurotoxin to enter that market, similar to our entry in the U.S. nearly a decade ago, and there's considerable interest from physicians. An important aspect is that we now have three years of insights from the U.S. that our team in Europe is utilizing by collaborating with some of our successful sales representatives from here. We're already noticing early interest, which is very encouraging. However, we anticipate a modest ramp-up, primarily to manage our expenditures and the product's uptake. Thus, we expect only minimal revenue contribution from Europe in the latter half of this year. Looking at the bigger picture, Europe is the second-largest market worldwide. The market opportunity for neurotoxins exceeds half a billion dollars, and we believe we can establish a significant presence in Europe over time. We're optimistic about the ramp-up and will keep you informed as we progress. I will be spending some time in Europe as we prepare for this increase, but our team has done an excellent job building our capabilities for a meaningful presence in these two markets. On the business development side, as you know, we hired a Head of Corporate Development. Christos Monovoukas has been with us for nearly two quarters and is fully committed to our corporate development efforts, which we have previously outlined. We are focused on commercial-stage assets that align with our existing aesthetics portfolio and are actively exploring assets that we believe could be leveraged under our Evolus platform. We are also assessing pipeline assets that we think could generate significant value in this sector over time. We believe we have a distinctive R&D capability in aesthetics, led by Rui and supported by Ethan, who has developed numerous device and drug technologies in this field. With these resources, we feel that we can unlock some complex development programs. An example is the deal we announced this quarter, which, while in its early stages, offers a substantial opportunity for us. We are pleased with our progress in business development, but I want to stress our focus and dedication. This focus has been key to our achievements so far. We are not in a rush to make any moves, but we are well-capitalized with a $50 million tranche from Pharmakon, which we can utilize if a suitable opportunity arises. We will keep you updated on our advancements.

Thank you.

Our next question is from Annabel Samimy with Stifel. Please proceed with your question.

Hi. Thank you for my questions, and congratulations on your ongoing success. I would like to discuss your growth strategies. At one point, you mentioned focusing on depth rather than breadth. Our research indicates that in the accounts you have penetrated, you rank as either number one or number two, with significant penetration. So, are you planning to grow by expanding the range of accounts you target? Could you elaborate on your growth strategies and how the Evolus program facilitates this? My second question pertains to the consumer side. You've introduced a new consumer loyalty coupon program. Will this change the cost of the program for you, or is it similar to your previous patient or consumer assistance programs? Lastly, I would like to understand where you are getting the most traction with accounts. Is it still skewed toward spas, and are you seeing more couponing happening there compared to dermatologists and plastic surgeons, who appear to be less impacted by this approach? It seems that patients or consumers are still more influenced by recommendations than coupon programs. Could you provide some insight into that? Thank you.

Thanks for the questions, Annabel. I found it interesting that while reviewing data from Guidepoint Qsight, I also had the opportunity to look at your research. It confirmed that our share within existing accounts is approximately four times higher than our general market share in the category, validating our findings. However, your research focused more on dermatology and plastic surgery, while our business performs better in the medi-spa sector. It was encouraging to see another set of data reinforce our belief that Jeuveau is a high-quality product that boosts the confidence of practices that adopt it. Over the past year, our brand has significantly increased its market share in many practices, largely due to improved understanding of our product through medical training and the benefits of co-branded media. We now serve about a third of practices using neurotoxin products and are looking to expand our presence among the remaining two-thirds that haven't yet adopted Jeuveau and are using competitors. To address this, we've been heavily focused on medical education, engaging thousands of injectors from various fields. The positive perception of Jeuveau within the dermatology and plastic surgery communities has been growing, and while we have more work to do, we believe we're on the right track. Additionally, our sales team has grown slightly to meet demand and enhance our outreach efforts. This has contributed to a notable increase in new accounts, with nearly 600 new additions recently, up from about 400 new customers per quarter historically. We're also enthusiastic about our Switch Your Tox program, which aims to boost market share among customers in the early stages of using Jeuveau. This program facilitates the transition of patients using other toxins to our product by providing confidence and financial incentives. Consumers can save $160 on two consecutive treatments, which is significant given the current economic climate. Once engaged with our brand, customers tend to remain loyal, as reflected in our loyalty data. The Switch Your Tox program not only drives immediate patient conversions, enhancing our market share, but also fosters loyalty within practices, allowing for future customer base expansion. We view this as a long-term investment, not just a short-term tactic. While the program does come at a cost affecting gross margins, we have accounted for this in our full-year guidance. The implementation remains straightforward for practices, seamlessly utilizing our existing loyalty program. We expect that the simplicity and ease of execution will lead to strong uptake of the program.

Great. Thanks so much.

Our next question is from Marc Goodman with SVB. Please proceed with your question.

Yeah. Good morning. A couple of questions. First of all, can you give us a sense of how you're thinking about the third quarter versus the second quarter traditionally in the market? Usually, it's a step down just for the market in and of itself on an absolute basis, but obviously, the past couple of years have been a little funky. So, if you can talk about that a little bit. Second of all, in business development, are you considering devices as well? I heard you mention devices, and I wasn't sure whether you were considering that in the past. And then, I guess, the last question is thinking about the growth of the market for the full year today versus how you were thinking about it three months ago. And your thinking about next year, any different than how you were thinking about it three months ago. Thanks.

Great. Thanks for the questions, Marc. On the first, on the seasonality question, as you've mentioned, the prior two years, the third quarter seasonality that we've seen historically in this category just hasn't been present, as consumers weren't traveling in the prior several years. The third quarter was far more resilient than what we've seen in the past. This quarter is a bit different. We know consumers are traveling. You see airlines are at capacity in terms of their ability to support the influx of travel here in the third quarter. And I suspect that the traditional seasonality that we've seen prior to COVID is likely back in play. And that's what we're assuming. That being said, look, we're gaining market share in this category. And so, our business may not follow traditional seasonality, but I suspect you'll see that reflected in the numbers for the third quarter for different aesthetic manufacturers. And, of course, we don't guide on the specific quarter, but you have a sense for what we expect to do on the year. So, clearly, that means we expect the third and the fourth quarter to be meaningful quarters for us in terms of the growth trend that you'll see. On the corporate development side, just to clarify, not all devices plug in the wall like when you think about devices. Facial fillers are medical devices. And so, to clarify, we haven't said exactly what devices we're looking at, but we have not prioritized anything that plugs in the wall. But we do have the capability to develop drugs as well as class two or three devices. This team's developed those types of technologies in the past. And so, we have the latitude to do that over time, but we're going to continue to be selective against products that don't require a combination of capital and consumables, at least in the near term for our corporate goals. For 2023, at this point in time, we have not provided guidance. We're continuing, obviously, like you are to closely watch the market. We're really pleased with what we're seeing in terms of the resilience of the neurotoxin market. As you know, I operated in that space during the last recession, and this category of toxins has been very resilient through macroeconomic headwinds. Here we have another catalyst, which is the millennial generation that's coming in at a faster rate than we had during the last recession. I do believe that that's going to create a tailwind even in that economic environment potentially that we could face coming forward. So, we feel good about the prospects for 2023, but we'll give you an update as we get closer to the end of the year as to how we think about next year.

All right. Thanks.

Our next question is from Greg Fraser with Truist Securities. Please proceed with your question.

Hey, good morning, folks. Thanks for taking the question. I want to follow up on the comments on growing the customer base. Do you have a target for the number of practices that you'd eventually like to have as customers? And do you anticipate having to expand the commercial team over time in a more material way than you've done in the past to help grow and service the customer base? And then on the recent publication of the post-hoc analysis, I'm curious how you plan to leverage that publication to further drive Jeuveau adoption among that key segment of the market. Thank you.

Well, I'll let Rui take the second question and then I'll handle the customer base off.

Sure. So, yes, we do plan to take advantage of the millennial paper. It really was interesting; if you try and Google search, we couldn't find a paper on millennials in glabellar lines. We could find one on forehead, but not on glabellar lines. The nice thing about that paper is that, because it's a Phase 3, it's a very high quality, and because it's on glabellar lines and within the study, it's completely on label. So, we can actually leverage that paper both with the Salesforce and with a very clinically savvy medical affairs group.

Greg, thanks for the question on a customer base. A couple of comments there. The first is, when we think about the customer, we think about it on three dimensions. One is, of course, the traditional field-based support. The second is inside sales, which runs at a fraction of the cost of the field force. And then, of course, the last one is digital and how we can automate the way that we service customers. You see that we've been adding modestly into our field-based; obviously, that's a much higher cost to add a sales rep into an account. And so, we closely scrutinize that expense. And we've been building capabilities that enable us to generate revenue from a digital standpoint that will continue to build. We believe that as this continues to expand our customer base, there's a long tail in aesthetics of roughly 20,000 customers. We believe through digital automation, we can be very efficient in supporting that customer group and building our business, then sending that digital footprint into inside sales to support them as they get larger. And then, modestly continue to increase the field base over time. But we don't anticipate any significant increase in the sales force. We like the model we've built, and we think we can accommodate our growth with this incremental approach to field-based.

Thanks for the color.

Our next question is from Serge Belanger with Needham and Company. Please proceed with your question.

Good morning. I have a couple of questions. David, you mentioned that spending habits remain strong and there haven't been significant changes yet. However, I'm interested to know if the staff shortages we’ve observed in various sectors have impacted operations in the aesthetics and office areas, and if this might influence the seasonality we anticipate in the third quarter. Additionally, regarding the European launch, I'm not sure if you touched on this, but could you discuss the pricing dynamics and if there will be any restrictions on using some of the co-branding marketing tools that have been effective for Jeuveau in the U.S.? Thank you.

Thanks, Serge. Starting out with spending habits and staff shortages, we experienced staff shortages in the first quarter, and you saw these practices are pretty creative about how they work around that. I don't expect the third quarter to be too different. That being said, having spent some time recently in the field, look, these doctors are finally taking vacation a bit, so they are taking some time off. So, the traditional seasonality that I mentioned to Marc, I think, is in play here for the third quarter, but nothing unique as it relates to COVID that should be slowing down the market from what we see at this point in time. As far as European pricing dynamics, certainly Europe is a lower price point than the United States, and I think that's reflected in the market value. Procedural volume might be similar between the U.S. and Europe, yet the market value for toxins in Europe relative to the U.S. is about a quarter of the size. So, as a result of those pricing dynamics, clearly there's a lower ASP, and we've reflected that in terms of our investment and the market potential that that comes from it. But we feel that those are challenges that we went into well aware of. We feel that we can overcome those and build a meaningful business there. But over time, of course, the U.S. will continue to represent a large majority of our revenue, but Europe is going to be a contributor to our growth as we go forward. Lastly, on capabilities in Europe, this is a drug, as you know. Advertising a drug is not allowed in Europe. So, some of the co-branding media that we have in the United States will translate to Europe, but a lot of the messaging around how the product's used, the precision dynamics, the support on that level, as well as some of our digital capabilities, we've been able to carry over to Europe that creates a lot of efficiency for that team.

Thank you.

Our next question is from Douglas Tsao with H.C. Wainwright. Please proceed with your question.

Hi, good afternoon. Good morning. Thanks for taking the questions and congrats on the results. David, I think you mentioned that in most of your accounts you've taken over the first or second position. I'm just curious, how long does it typically take from when you bring an account online to you gaining that level of penetration?

Thank you, Doug, for your questions. What we're observing is that the ramp-up time is decreasing. This is happening due to our capabilities and the efficiency of our representatives in helping accounts gain confidence in the product. While I can't provide a specific number of quarters on average, we are indeed seeing a quicker ramp-up. In fact, our leading indicators are performing better than our revenue, which is a lagging indicator of our progress. This gives me confidence that many of these metrics are improving at a faster rate than our revenue. We see evidence of this in the number of new accounts, repurchasing patterns, and the increasing purchases from existing accounts. Additionally, the number of redemptions in our consumer loyalty program is rising faster than our revenue, indicating greater interest in Jeuveau. In the U.S., more accounts are showing interest, and as they come on board, they are growing more rapidly, reflected in our existing account base buying more than before. We are also witnessing an influx of new customers on both the injector and consumer sides. It’s challenging to pinpoint whether this is due to CBM, the field footprint, or digital efforts, but I believe all these elements are working together to drive growth. Adding more scale in the second half of the year further strengthens our momentum as we approach the year's end.

And maybe as a follow-up. David, when we think about the growth that you've experienced in the first half of this year, I mean, how much is coming from accounts that were added in 2022, or is that still something that we should look ahead to, or you should stand to benefit from in the second half of this year?

Yeah. So, new accounts contribute very little to our growth within a quarter. New accounts are really a longer-term play, and they contribute to our growth over time. So, I think you should think about that new account as part of what drives 2022 as well as 2023 revenue.

We have reached the end of the question-and-answer session. And I will now turn the call over to management for closing remarks.

Thank you, operator. If you missed any portion of this call, a replay will be posted to our website later today. Thank you for joining us. We appreciate your interest in Evolus and will be available if you have additional questions.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.