Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Company and Summary of Significant Accounting Policies
Overview
Revance is a biotechnology company focused on developing and commercializing innovative aesthetic and therapeutic offerings. Revance’s aesthetics portfolio includes DAXXIFY® (DaxibotulinumtoxinA-lanm) for injection, the RHA® Collection of dermal fillers from Teoxane and OPUL®, a relational commerce platform for aesthetic practices. Revance has also partnered with Viatris to develop an onabotulinumtoxinA biosimilar, which would compete in the existing short-acting neuromodulator marketplace. Revance’s therapeutics pipeline is currently focused on muscle movement disorders, including evaluating DAXXIFY® in two debilitating conditions, cervical dystonia and upper limb spasticity.
Liquidity and Financial Condition
Since our inception, most of our resources have been dedicated to the research, development, manufacturing development, regulatory approval and/or commercialization of our Products and Services. We only began generating revenue from commercial sales in July 2020 when we acquired the HintMD Platform and in August 2020 when we launched the RHA® Collection of dermal fillers. Although we received DAXXIFY® GL Approval, we expect to continue to incur losses for the foreseeable future. For the three months ended March 31, 2023, we had a net loss of $59.8 million. As of March 31, 2023, we had a working capital surplus of $245.0 million and an accumulated deficit of $1.8 billion. In recent years, we have funded our operations primarily through the sale of common stock, convertible senior notes, sales of Products, proceeds from notes issued pursuant to the Note Purchase Agreement, and payments received from collaboration arrangements. As of March 31, 2023, we had capital resources of $273.9 million consisting of cash, cash equivalents, and short-term investments. Since the DAXXIFY® GL Approval, we are eligible to draw on the Second Tranche of $100.0 million in full under the Note Purchase Agreement provided certain conditions are met. We may also sell up to $150.0 million of our common stock under the 2022 ATM Agreement. We believe that our existing capital resources along with our ability to draw on the Second Tranche will be sufficient to fund the operating plan through at least the next 12 months following the issuance of the condensed consolidated financial statements.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements are unaudited, and reflect all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair statement of the results for the interim periods presented.
Our condensed consolidated balance sheet for the year ended December 31, 2022 was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 2022, or any other future period. Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements contained in our FY2022 10-K.
Our condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries, and have been prepared in conformity with U.S. GAAP. All intercompany transactions have been eliminated.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Reclassification
At the beginning of 2023, we changed our presentation of internal-use software where approximately $8.3 million has been reclassified from property and equipment, net into intangible assets, net. Refer to Note 4 and Note 6 for further detail as of March 31, 2023 and December 31, 2022. Use of Estimates & Risks and Uncertainties
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. U.S. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, the incremental borrowing rate used to measure operating lease and finance lease liabilities, the recoverability of goodwill and long-lived assets, useful lives associated with property and equipment and intangible assets, the period of benefit associated with deferred costs, revenue recognition (including the timing of satisfaction of performance obligations, estimating variable consideration, estimating stand-alone selling prices of promised goods and services, and allocation of transaction price to performance obligations), deferred revenue classification, accruals for clinical trial costs, valuation and assumptions underlying stock-based compensation and other equity instruments, and income taxes.
As of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our condensed consolidated financial statements.
Significant Accounting Policies
There have been no material changes to our significant accounting policies from our FY2022 10-K.
Recent Accounting Pronouncements
The recent accounting pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our present or future financial statements.
2. Revenue
Our revenue is primarily generated from U.S. customers. Our product and collaboration revenue is generated from the Product Segment, and our service revenue is generated from the Service Segment (Note 12). The following table presents our revenue disaggregated by timing of transfer of goods or service:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
| Transferred | | Transferred |
(in thousands) | at a point in time | | over time | | Total | | at a point in time | | over time | | Total |
Product revenue | $ | 45,658 | | | $ | — | | | $ | 45,658 | | | $ | 20,837 | | | $ | — | | | $ | 20,837 | |
Service revenue | 57 | | | 3,500 | | | 3,557 | | | 91 | | | 765 | | | 856 | |
Collaboration revenue | — | | | 116 | | | 116 | | | — | | | 3,568 | | | 3,568 | |
Total revenue | $ | 45,715 | | | $ | 3,616 | | | $ | 49,331 | | | $ | 20,928 | | | $ | 4,333 | | | $ | 25,261 | |
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Product Revenue
Our product revenue breakdown is summarized below: | | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2023 | | 2022 |
Product: | | | |
RHA® Collection of dermal fillers | $ | 30,280 | | | $ | 20,837 | |
DAXXIFY® | 15,378 | | | — | |
Total product revenue | $ | 45,658 | | | $ | 20,837 | |
Receivables and contract liabilities from contracts with our product customers are as follows:
| | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
Receivables: | | | |
Accounts receivable, net | $ | 15,152 | | | $ | 10,966 | |
Total accounts receivable, net | $ | 15,152 | | | $ | 10,966 | |
| | | |
Contract liabilities: | | | |
Deferred revenue, current | $ | 1,255 | | | $ | 705 | |
Total contract liabilities | $ | 1,255 | | | $ | 705 | |
Service Revenue
We offer customer payment processing and certain value-added services to aesthetic practices through the Fintech Platform. Generally, revenue related to the HintMD Platform payment processing service is recognized at a point in time and revenue related to the OPUL® payment processing service is recognized over time. For the Fintech Platform, revenue related to the value-added services component is recognized over time.
Accounts receivable and contract liabilities from contracts with our service customers are as follows:
| | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
Accounts receivable: | | | |
Accounts receivable, net | $ | 105 | | | $ | 59 | |
| | | |
| | | |
| | | |
| | | |
Total accounts receivable, net | $ | 105 | | | $ | 59 | |
| | | |
| | | |
| | | |
| | | |
Collaboration Revenue
Viatris Agreement
Agreement Terms
We entered into the Viatris Agreement in February 2018, pursuant to which we are collaborating with Viatris exclusively in the Viatris Territory, to develop, manufacture, and commercialize an onabotulinumtoxinA biosimilar.
Viatris has paid us an aggregate of $60 million in non-refundable upfront and milestone fees as of March 31, 2023, and the agreement provides for additional remaining contingent payments of up to $70 million in the aggregate, upon the
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
achievement of certain clinical and regulatory milestones and of specified, tiered sales milestones of up to $225 million. The payments do not represent a financing component for the transfer of goods or services. In addition, Viatris is required to pay us low to mid-double digit royalties on any sales of the biosimilar in the U.S., mid-double digit royalties on any sales in Europe, and high single digit royalties on any sales in other ex-U.S. Viatris territories. However, we have agreed to waive royalties for U.S. sales, up to a maximum of $50 million in annual sales, during the first approximately four years after commercialization to defray launch costs.
Revenue Recognition
We estimated the transaction price for the Viatris Agreement using the most likely amount method within the scope of ASC 606. In order to determine the transaction price, we evaluated all of the payments to be received during the duration of the contract, which included milestones and consideration payable by Viatris. Other than the upfront payment, all other milestones and consideration we may earn under the Viatris Agreement are subject to uncertainties related to development achievements, Viatris’ rights to terminate the agreement, and estimated effort for cost-sharing payments. Components of such estimated effort for cost-sharing payments include both internal and external costs. Consequently, the transaction price does not include any milestones and considerations that, if included, could result in a probable significant reversal of revenue when related uncertainties become resolved. At the end of each reporting period, we re-evaluate the probability of achievement of each such milestone and any related constraint, and if necessary, adjusts our estimates of the overall transaction price. Sales-based milestones and royalties are not included in the transaction price until the sales occur because the underlying value relates to the license, and the license is the predominant feature in the Viatris Agreement. As of March 31, 2023, the transaction price allocated to the unfulfilled performance obligations was $53.3 million.
We recognize revenue and estimate deferred revenue based on the cost of development service incurred over the total estimated cost of development services to be provided for the development period. For revenue recognition purposes, the development period is estimated to be completed in 2026. It is possible that this period will change and is assessed at each reporting date. ASC Topic 606, Revenue from Contracts with Customers (ASC 606) requires that an entity include a constraint on the amount of variable consideration included in the transaction price. Variable consideration is considered “constrained” if there is a potential for significant reversal of cumulative revenue recognized. As part of the constraint evaluation, we considered numerous factors, including a potential shift in certain responsibilities between the two parties which would result in changes to the net cost sharing payments, for which outcomes are difficult to predict as of the date of this Report. As a result, no collaboration revenue is recognized from the biosimilar program for the three months ended March 31, 2023. We will continue to evaluate the variable transaction price and related revenue recognition in each reporting period and as the above uncertainties are resolved or other changes in circumstances occur. For the three months ended March 31, 2022, we recognized $3.6 million of revenue related to development services.
Fosun License Agreement
Agreement Terms
In December 2018, we entered into the Fosun License Agreement with Fosun, whereby we granted Fosun the exclusive rights to develop and commercialize DaxibotulinumtoxinA for Injection in the Fosun Territory and certain sublicense rights.
As of March 31, 2023, Fosun has paid us non-refundable upfront and other payments totaling $38.0 million before foreign withholding taxes. We are also eligible to receive (i) additional remaining contingent payments of up to $222.5 million upon the achievement of certain milestones and (ii) tiered royalty payments in low double digits to high teen percentages on annual net sales. The royalty percentages are subject to reduction in the event that (i) we do not have any valid and unexpired patent claims that cover the product in the Fosun Territory, (ii) biosimilars of the product are sold in the Fosun Territory or (iii) Fosun needs to pay compensation to third parties to either avoid patent infringement or market the product in the Fosun Territory.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Revenue Recognition
We estimated the transaction price for the Fosun License Agreement using the most likely amount method. We evaluated all of the variable payments to be received during the duration of the contract, which included payments from specified milestones, royalties, and estimated supplies to be delivered. We will re-evaluate the transaction price at each reporting period and upon a change in circumstances. As of March 31, 2023, the transaction price allocated to unfulfilled performance obligation is $38.0 million.
For the three months ended March 31, 2023, we recognized revenue of $0.1 million related to the Fosun License Agreement. For the three months ended March 31, 2022, no revenue was recognized from the Fosun License Agreement.
Receivables and contract liabilities from contracts with our collaboration customers are as follows:
| | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
Receivables: | | | |
Accounts receivable, net — Fosun | $ | 116 | | | $ | 315 | |
Total accounts receivable, net | $ | 116 | | | $ | 315 | |
| | | |
Contract liabilities: | | | |
Deferred revenue, current — Viatris | $ | 4,781 | | | $ | 6,162 | |
| | | |
Total contract liabilities, current | $ | 4,781 | | | $ | 6,162 | |
| | | |
Deferred revenue, non-current — Viatris | $ | 43,047 | | | $ | 40,600 | |
Deferred revenue, non-current — Fosun | 37,977 | | | 37,977 | |
Total contract liabilities, non-current | $ | 81,024 | | | $ | 78,577 | |
Changes in our contract liabilities from contracts with our collaboration revenue customers for the three months ended March 31, 2023 are as follows:
| | | | | |
| (in thousands) |
Balance on December 31, 2022 | $ | 84,739 | |
Revenue recognized | (116) | |
Billings and adjustments, net | 1,182 | |
Balance on March 31, 2023 | $ | 85,805 | |
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
3. Cash Equivalents and Short-Term Investments
The following table is a summary of our cash equivalents and short-term investments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
in thousands | Cost | | Losses | | Fair Value | | Cost | | Losses | | Fair Value |
Money market funds | $ | 102,270 | | | $ | — | | | $ | 102,270 | | | $ | 85,206 | | | $ | — | | | $ | 85,206 | |
Commercial paper | 68,104 | | | — | | | 68,104 | | | 80,946 | | | — | | | 80,946 | |
U.S. treasury securities | 54,385 | | | (67) | | | 54,318 | | | 109,984 | | | (228) | | | 109,756 | |
Corporate bonds | 28,774 | | | (58) | | | 28,716 | | | 41,186 | | | (146) | | | 41,040 | |
U.S. government agency obligations | — | | | — | | | — | | | 4,480 | | | — | | | 4,480 | |
Total cash equivalents and available-for-sale securities | $ | 253,533 | | | $ | (125) | | | $ | 253,408 | | | $ | 321,802 | | | $ | (374) | | | $ | 321,428 | |
| | | | | | | | | | | |
Classified as: | | | | | | | | | | | |
Cash equivalents | | | | | $ | 116,137 | | | | | | | $ | 89,686 | |
Short-term investments | | | | | 137,271 | | | | | | | 231,742 | |
Total cash equivalents and available-for-sale securities | | | | | $ | 253,408 | | | | | | | $ | 321,428 | |
As of March 31, 2023 and December 31, 2022, we have no other-than-temporary impairments on our available-for-sale securities, and the contractual maturities of the available-for-sale securities are less than one-year.
4. Intangible Assets, net
The following table sets forth the major categories of intangible assets and the weighted-average remaining useful lives for those assets that are not already fully amortized:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
(in thousands, except for in years) | | Weighted Average Remaining Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Weighted Average Remaining Useful Lives (in years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Distribution rights | | 5.0 | | $ | 32,334 | | | $ | (21,428) | | | $ | 10,906 | | | 1.4 | | $ | 32,334 | | | $ | (20,882) | | | $ | 11,452 | |
Acquired developed technology | | 4.0 | | 35,800 | | | (25,000) | | | 10,800 | | | 4.2 | | 35,800 | | | (24,325) | | | 11,475 | |
Internally developed technology | | 2.2 | | 8,918 | | | (3,055) | | | 5,863 | | | 2.4 | | 8,062 | | | (2,271) | | | 5,791 | |
Customer relationships | | 1.3 | | 10,300 | | | (6,867) | | | 3,433 | | | 1.6 | | 10,300 | | | (6,223) | | | 4,077 | |
Other software | | 1.6 | | 879 | | | (658) | | | 221 | | | 1.8 | | 3,166 | | | (1,592) | | | 1,574 | |
Development in progress | | N/A | | — | | | — | | | — | | | N/A | | 975 | | | — | | | 975 | |
Total intangible assets | | | | $ | 88,231 | | | $ | (57,008) | | | $ | 31,223 | | | | | $ | 90,637 | | | $ | (55,293) | | | $ | 35,344 | |
N/A - Not applicable
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Based on the amount of intangible assets as of March 31, 2023, the expected amortization expense for each of the next five fiscal years was as follows:
| | | | | |
Year Ending December 31, | (in thousands) |
2023 remaining nine months | $ | 7,940 | |
2024 | 8,843 | |
2025 | 6,150 | |
2026 | 4,889 | |
2027 | 2,856 | |
2028 and thereafter | 545 | |
Total | $ | 31,223 | |
5. Inventories
Inventories consist of the following: | | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
Raw materials | $ | 1,059 | | | $ | 505 | |
Work in process | 6,448 | | | 4,933 | |
Finished goods | 20,268 | | | 12,887 | |
Total inventories | $ | 27,775 | | | $ | 18,325 | |
6. Balance Sheet Components
Accruals and other current liabilities
Accruals and other current liabilities consists of the following:
| | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
Accruals related to: | | | |
Compensation | $ | 16,169 | | | $ | 28,014 | |
Selling, general and administrative | 7,267 | | | 9,681 | |
Research and development | 4,663 | | | 9,012 | |
Inventories | 2,489 | | | 2,312 | |
Clinical trials | 1,017 | | | 1,863 | |
Interest expense | 629 | | | 1,912 | |
Other current liabilities | 3,631 | | | 6,563 | |
Total accruals and other current liabilities | $ | 35,865 | | | $ | 59,357 | |
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Property and equipment, net
Property and equipment, net consists of the following:
| | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
Manufacturing and other equipment | $ | 21,920 | | | $ | 21,920 | |
Leasehold improvements | 7,706 | | | 7,706 | |
Computer equipment | 3,506 | | | 3,506 | |
Furniture and fixtures | 1,677 | | | 1,677 | |
Construction in progress | 2,433 | | | 1,606 | |
Total property and equipment, gross | 37,242 | | | 36,415 | |
Less: Accumulated depreciation | (23,289) | | | (22,616) | |
Total property and equipment, net | $ | 13,953 | | | $ | 13,799 | |
7. Leases
Operating Leases
Our operating leases primarily consist of non-cancellable facilities leases for research, manufacturing, and administrative functions. Our non-cancellable facilities operating leases have original lease periods expiring between 2027 and 2034, and include one or more options to renew for seven years to fourteen years. The monthly payments for our operating leases escalate over the remaining lease term. Our lease contracts do not contain termination options, residual value guarantees or restrictive covenants.
Finance Lease
Our finance lease represents a dedicated fill-and-finish line for the manufacturing of DAXXIFY®. In March 2017, we entered into the ABPS Services Agreement. The ABPS Services Agreement contains a lease, which commenced in January 2022, related to a dedicated fill-and-finish line for the manufacturing of DAXXIFY® because it has an identified asset that is physically distinct for which we have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease provides us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity of the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line through our purchase orders to ABPS. Each party has the right to terminate the ABPS Services Agreement without cause, with an 18-month written notice to the other party. The lease is classified as a finance lease in the condensed consolidated balance sheets.
Under the ABPS Services Agreement, until May 2022, we were subject to minimum purchase obligations of up to $30.0 million for each of the years ending December 31, 2022, 2023 and 2024. In May 2022, we amended a statement of work under the ABPS Services Agreement pursuant to which the minimum purchase obligations of $30.0 million per year were eliminated, and instead the minimum purchase obligations would be negotiated prior to the beginning of each year over the term of the agreement. As a result of the amended statement of work, the finance lease was modified. The primary change was that the modification reflects payments in 2023 and 2024 as variable lease payments, contingent on negotiation at the beginning of each period and excludes such payments in the present value calculation in arriving at the remaining finance lease liabilities with a corresponding adjustment to the related right-of-use asset, among other considerations and changes.
In January 2023, we entered into a second amendment to the above mentioned statement of work under the ABPS Services Agreement. The second amendment established a minimum purchase obligation for the year ending December 31, 2023 of $23.9 million. The minimum purchase obligation for the year ending December 31, 2023 was determined to be fixed lease payments and such payments will increase the present value calculation in arriving at the remaining finance lease liabilities with a corresponding adjustment to the related finance lease right-of-use asset.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
The operating and finance lease costs are summarized as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2023 | | 2022 |
Finance lease: | | | |
Amortization of finance lease right-of-use asset | $ | 2,318 | | | $ | — | |
Interest on finance lease liability | 566 | | | 1,508 | |
Variable lease cost (1) | 374 | | | 1,390 | |
Total finance lease costs | 3,258 | | | 2,898 | |
Operating leases: | | | |
Operating lease cost | 2,207 | | | 2,223 | |
Variable lease cost (2) | 507 | | | 434 | |
Total operating lease costs | 2,714 | | | 2,657 | |
Total lease cost | $ | 5,972 | | | $ | 5,555 | |
(1)Variable finance lease cost includes validation, qualification, materials, and other related services which are not included in the lease liabilities and are expensed as incurred.
(2)Variable operating lease cost includes management fees, common area maintenance, property taxes, insurance and parking fees, which are not included in the lease liabilities and are expensed as incurred.
As of March 31, 2023, maturities of our lease liabilities are as follows:
| | | | | | | | | | | | | | | | | |
(in thousands) | Finance Lease | | Operating Leases | | Total |
Year Ending December 31, | | | | | |
2023 remaining nine months | $ | 16,402 | | | $ | 5,515 | | | $ | 21,917 | |
2024 | 3,102 | | | 8,723 | | | 11,825 | |
2025 | — | | | 8,981 | | | 8,981 | |
2026 | — | | | 9,242 | | | 9,242 | |
2027 | — | | | 2,535 | | | 2,535 | |
2028 and thereafter | — | | | 14,612 | | | 14,612 | |
Total lease payments | 19,504 | | | 49,608 | | | 69,112 | |
Less imputed interest | (893) | | | (12,360) | | | (13,253) | |
Present value of lease payments | $ | 18,611 | | | $ | 37,248 | | | $ | 55,859 | |
Our lease contracts do not provide readily determinable implicit rates, as such, we used the estimated incremental borrowing rate based on the information available at the adoption, commencement, or remeasurement date. As of March 31, 2023, remaining lease terms and discount rates are as follows:
| | | | | | | | | | | |
| Finance Leases | | Operating Leases |
Weighted-average remaining lease term (years) | 3.0 | | 7.4 |
Weighted-average discount rate | 10.7 | % | | 9.8 | % |
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Supplemental cash flow information related to the leases was as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2023 | | 2022 |
Cash paid for amounts included in the measurement of lease liabilities | | | |
Operating cash flows from operating leases | $ | 2,084 | | | $ | 2,076 | |
Operating cash flows from finance lease | $ | 566 | | | $ | — | |
Financing cash flows from finance lease | $ | 2,486 | | | $ | — | |
Right-of-use assets obtained in exchange for lease liabilities | | | |
Finance lease | $ | 23,735 | | | $ | 70,280 | |
Principal payments in accounts payable from finance lease | $ | 3,307 | | | $ | — | |
Leases Not Yet Commenced
PCI Supply Agreement
In April 2021, we entered into the PCI Supply Agreement pursuant to which PCI would serve as a non-exclusive manufacturer and supplier of DAXXIFY®. The initial term of the PCI Supply Agreement is dependent upon the date of regulatory submission for the manufacturing of DAXXIFY® and may be terminated by either party in accordance with the terms of the PCI Supply Agreement. The term of the PCI Supply Agreement may also be extended for one additional three-year term upon mutual agreement of the parties.
The PCI Supply Agreement contains a lease related to a dedicated fill-and-finish line and closely related assets for the manufacturing of DAXXIFY® because it has identified assets that are physically distinct for which we will have the right of control as defined under ASC 842. The right of control is conveyed because the embedded lease will provide us with both (i) the right to obtain substantially all of the economic benefit from the fill-and-finish line resulting from the exclusivity implied from the dedicated manufacturing capacity and (ii) the right to direct the use of the fill-and-finish line.
The embedded lease had not yet commenced as of March 31, 2023. The accounting commencement and recognition of the right-of-use lease assets and lease liabilities related to the embedded lease will take place when we have substantively obtained the right of control. The embedded lease is preliminarily classified as a finance lease.
Pursuant to the PCI Supply Agreement, we are responsible for certain costs associated with the design, equipment procurement and validation, and facilities-related costs, monthly payments and minimum purchase obligations throughout the initial term of the PCI Supply Agreement. As of March 31, 2023, we have made prepayments of $27.5 million to PCI which is recorded within “Finance lease prepaid expense” in the condensed consolidated balance sheets. Based on our best estimate as of March 31, 2023, our remaining minimum commitment under the PCI Supply Agreement will be $10.8 million for 2023, $14.4 million for 2024, $18.3 million for 2025, $25.3 million for 2026, $29.5 million for 2027, and $134.5 million for 2028 and thereafter in aggregate.
Nashville Lease Expansion Premises
In November 2020, we entered into the Nashville Lease, a non-cancelable operating lease for an office space in Nashville, Tennessee. The lease commenced and was recognized on the condensed consolidated balance sheets in June 2021. In July 2021, we entered into the Second Amendment to the Nashville Lease, which provided for the expansion of the initial premises to include the Expansion Premises, an additional 30,591 square feet with an expected term to 2034. The lease accounting commencement date of the Expansion Premises has not occurred and is expected to take place when the office space is made available to us after the completion of certain improvement work, which is currently expected in late 2023 at the earliest. The monthly base rent payments for the lease escalate over the term. The total undiscounted basic rent payments currently determinable for the Expansion Premises are $16 million with an expected term to 2034.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
In January 2023, we entered into the Third Amendment to the Nashville Lease, which provides for the expansion of the current premises to include the Second Expansion Premises, an additional 17,248 square feet with an expected term to 2032. The monthly base rent payments for the lease escalate over the term, and the total undiscounted basic rent payments determinable for the Second Expansion Premises are $7 million. The lease accounting commencement date of the Second Expansion Premises has not occurred and is expected to take place when the office space is made available to us after the completion of certain improvement work, which is currently expected in late 2023 or early 2024.
8. Debt
The following table provides information regarding our debt:
| | | | | | | | | | | |
| March 31, | | December 31, |
(in thousands) | 2023 | | 2022 |
2027 Notes | $ | 287,500 | | | $ | 287,500 | |
Less: Unamortized debt issuance costs | (5,263) | | | (5,587) | |
Carrying amount of the 2027 Notes | 282,237 | | | 281,913 | |
| | | |
Notes Payable | 100,000 | | | 100,000 | |
Less: Unamortized debt discount | (1,261) | | | (1,347) | |
Less: Unamortized debt issuance costs | (1,117) | | | (1,192) | |
Carrying amount of notes payable | 97,622 | | | 97,461 | |
Debt, non-current | $ | 379,859 | | | $ | 379,374 | |
Interest expense relating to our debt in the condensed consolidated statements of operations and comprehensive loss are summarized as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2023 | | 2022 |
Contractual interest expense | $ | 3,383 | | | $ | 1,588 | |
Amortization of debt issuance costs | 432 | | | 332 | |
Amortization of debt discount | 85 | | | 11 | |
Total interest expense | $ | 3,900 | | | $ | 1,931 | |
Convertible Senior Notes
In February 2020, we issued the 2027 Notes, in the aggregate principal amount of $287.5 million pursuant to the Indenture. The 2027 Notes are senior unsecured obligations and bear interest at a rate of 1.75% per year, payable semiannually in arrears on February 15 and August 15 of each year, began on August 15, 2020. The 2027 Notes will mature on February 15, 2027, unless earlier converted, redeemed or repurchased. In connection with issuing the 2027 Notes, we received $278.3 million in net proceeds, after deducting the initial purchasers’ discount, commissions, and other issuance costs.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
The 2027 Notes may be converted at any time by the holders prior to the close of business on the business day immediately preceding November 15, 2026 only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2020 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the 2027 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (iii) if we call any or all of the 2027 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events. On or after November 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2027 Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
The conversion rate will initially be 30.8804 shares of our common stock per $1,000 principal amount of the 2027 Notes (equivalent to an initial conversion price of approximately $32.38 per share of our common stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2027 Notes in connection with such a corporate event or notice of redemption, as the case may be.
Contractually, we may not redeem the 2027 Notes prior to February 20, 2024. We may redeem for cash all or any portion of the 2027 Notes, at our option, on or after February 20, 2024 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2027 Notes.
If we undergo a fundamental change (as defined in the Indenture), holders may require us to repurchase for cash all or any portion of their 2027 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2027 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
Note Purchase Agreement
In March 2022, we entered into the Note Purchase Agreement, pursuant to which the Purchasers agreed to purchase from us, and we agreed to issue to such Purchasers the Notes Payable. On March 18, 2022, we issued to the First Tranche of $100.0 million. Since the DAXXIFY® GL Approval, we are eligible to draw on the Second Tranche of $100.0 million in full under the Note Purchase Agreement provided certain conditions are met, until September 18, 2023. In addition, there is an uncommitted Third Tranche in an aggregate amount of up to $100.0 million until March 31, 2024, subject to the satisfaction of certain conditions set forth in the Note Purchase Agreement, including the achievement of greater than or equal to $50 million in trailing twelve months revenue for DAXXIFY® preceding the date of the draw request for the Third Tranche note, and approval by Athyrium.
Our obligations under the Note Purchase Agreement are secured by substantially all of our assets and the assets of our wholly owned domestic subsidiaries, including their respective intellectual property.
Initially, the Notes Payable bear interest at an annual fixed interest rate equal to 8.50%. If the Third Tranche of Notes Payable becomes committed, the Notes Payable will then bear interest at an annual rate equal to the sum of (i) 7.0% and (ii) Adjusted Three-Month LIBOR for such interest period (subject to a floor of 1.50% and a cap of 2.50%). We are required to make quarterly interest payments on the Notes Payable, commencing on the last business day of the calendar month following the funding date thereof, and continuing until the last business day of each March, June, September and
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
December through the Maturity Date. The Maturity Date may be extended to March 18, 2028 if, as of September 18, 2026, less than $90 million principal amount of our existing 2027 Notes remain outstanding and with the consent of the Purchasers. Initially, all principal for each tranche is due and payable on the Maturity Date. Upon the occurrence of an Amortization Trigger, we are required to repay the principal of the Second Tranche and the Third Tranche in equal monthly installments beginning on the last day of the month in which the Amortization Trigger occurred and continuing through the Maturity Date. At our option, we may prepay the outstanding principal balance of all or any portion of the principal amount of the Notes Payable, subject to a prepayment fee equal to (i) a make-whole amount if the prepayment occurs on or prior to the first anniversary of the NPA Effective Date and (ii) 2.0% of the amount prepaid if the prepayment occurs after the first anniversary of the NPA Effective Date but on or prior to the second anniversary of the NPA Effective Date. Upon prepayment or repayment of all or any portion of the principal amount of the Notes Payable (whether on the Maturity Date or otherwise), we are also required to pay an exit fee to the Purchasers.
The Note Purchase Agreement includes affirmative and negative covenants applicable to us, our current subsidiaries and any subsidiaries we create in the future. The affirmative covenants include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial reports, maintain insurance coverage and satisfy certain requirements regarding deposit accounts. We must also (i) maintain at least $30.0 million of unrestricted cash and cash equivalents in accounts subject to a control agreement in favor of Athyrium at all times and (ii) upon the occurrence of certain specified events set forth in the Note Purchase Agreement, achieve at least $70.0 million of Consolidated Teoxane Distribution Net Product Sales on a trailing twelve-months basis. The negative covenants include, among others, restrictions on our transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets and undergoing a change in control, in each case subject to certain exceptions.
If we do not comply with the affirmative and negative covenants, such non-compliance may be an event of default under the Note Purchase Agreement. The Note Purchase Agreement also includes events of default, the occurrence and continuation of which could cause interest to be charged at the rate that is otherwise applicable plus 2.0% and would provide Athyrium, as administrative agent, with the right to exercise remedies against us and the collateral, including foreclosure against our property securing the obligations under the Note Purchase Agreement, including our cash. These events of default include, among other things, our failure to pay principal or interest due under the Note Purchase Agreement, a breach of certain covenants under the Note Purchase Agreement, our insolvency, the occurrence of a circumstance which could have a material adverse effect and the occurrence of any default under certain other indebtedness.
Capped Call Transactions
Concurrently with the 2027 Notes, we entered into capped call transactions with the option counterparties and used $28.9 million of the net proceeds from the 2027 Notes to pay the cost of the capped call transactions. The capped call transactions are expected generally to reduce the potential dilutive effect upon conversion of the 2027 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2027 Notes, as the case may be, with such reduction and/or offset subject to a price cap of $48.88 of our common stock per share, which represents a premium of 100% over the last reported sale price of our common stock on February 10, 2020. The capped calls have an initial strike price of $32.38 per share, subject to certain adjustments, which corresponds to the conversion option strike price in the 2027 Notes. The capped call transactions cover, subject to anti-dilution adjustments, approximately 8.9 million shares of our common stock.
The capped call transactions are separate transactions that we entered into with the option counterparties and are not part of the terms of the 2027 Notes. As the capped call transactions meet certain accounting criteria, the premium paid of $28.9 million was recorded as a reduction in additional paid-in capital in the condensed consolidated balance sheets, and will not be remeasured to fair value as long as the accounting criteria continue to be met. As of March 31, 2023 and December 31, 2022, we had not purchased any shares under the capped call transactions.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
9. Stockholders’ Equity (Deficit) and Stock-Based Compensation
2014 EIP
On January 1, 2023, the number of shares of common stock reserved for issuance under the 2014 EIP increased by 3,295,432 shares. For the three months ended March 31, 2023, 2,058,472 shares of stock awards and 177,472 stock options were granted under the 2014 EIP. As of March 31, 2023, 4,048,394 shares were available for issuance under the 2014 EIP.
2014 IN
For the three months ended March 31, 2023, no stock options or awards were granted under the 2014 IN. As of March 31, 2023, 760,617 shares were available for issuance under the 2014 IN.
HintMD Plan
For the three months ended March 31, 2023, no stock options or awards were granted under the HintMD Plan. As of March 31, 2023, 79,302 shares were available for issuance under the HintMD Plan.
2014 ESPP
On January 1, 2023, the number of shares of common stock reserved for issuance under the 2014 ESPP increased by 300,000 shares. As of March 31, 2023, 1,983,069 shares were available for issuance under the 2014 ESPP.
Net Loss per Share
Our basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. The diluted net loss per share is calculated by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, shares of common stock underlying the 2027 Notes at the initial conversion price, outstanding stock options, unvested stock awards, and shares of common stock expected to be purchased under the 2014 ESPP, are considered common stock equivalents, which were excluded from the computation of diluted net loss per share because including them would have been antidilutive.
Common stock equivalents that were excluded from the computation of diluted net loss per share are presented below:
| | | | | | | | | | | |
| March 31, |
| 2023 | | 2022 |
Convertible senior notes | 8,878,938 | | 8,878,938 |
Unvested RSUs and PSUs | 3,598,879 | | 2,331,448 | |
Unvested RSAs and PSAs | 1,728,551 | | 2,814,890 |
Outstanding stock options | 1,199,574 | | 5,072,328 |
Shares of common stock expected to be purchased on June 30, under the 2014 ESPP | 165,079 | | | 199,217 |
ATM Offering Programs
In November 2020, we entered into the 2020 ATM Agreement with Cowen. Under the 2020 ATM Agreement, we could offer and sell, from time to time, through Cowen, shares of our common stock having an aggregate offering price of up to $125.0 million. We were not obligated to sell any shares under the 2020 ATM Agreement. Subject to the terms and conditions of the 2020 ATM Agreement, Cowen was required to use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the rules of The Nasdaq Global Market, to sell shares from time to time based upon our instructions, including any price, time or size limits specified by us. We paid Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimbursed legal fees and disbursements and provided Cowen with customary indemnification and contribution rights. From January 1, 2022 through May 10, 2022, we sold 1.7 million shares of common stock under the 2020 ATM Agreement at a weighted average
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
price of $18.71 per share resulting in net proceeds of $31.6 million after sales agent commissions and offering costs. The 2020 ATM Agreement was terminated on May 10, 2022.
On May 10, 2022, we entered into the 2022 ATM Agreement with Cowen. Under the 2022 ATM Agreement, we may sell up to $150.0 million of our common stock. We are not obligated to sell any shares under the 2022 ATM Agreement. Subject to the terms and conditions of the 2022 ATM Agreement, Cowen will use commercially reasonable efforts, consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the rules of The Nasdaq Global Market, to sell shares from time to time based upon our instructions, including any price, time or size limits specified by us. We pay Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cowen with customary indemnification and contribution rights.
As of both March 31, 2023 and the filing date of this Report, no shares of common stock had been sold under the 2022 ATM Agreement.
Stock-Based Compensation Expense
Stock-based compensation expense was allocated as follows:
| | | | | | | | | | | |
(in thousands) | Three Months Ended March 31, |
2023 | | 2022 |
Selling, general and administrative | $ | 10,265 | | | $ | 8,164 | |
Research and development | 2,817 | | | 6,199 | |
Total stock-based compensation expense | $ | 13,082 | | | $ | 14,363 | |
10. Fair Value Measurements
The following table summarizes, for assets and liabilities measured at fair value, the respective fair value and the classification by level of input within the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
(in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | |
Money market funds | $ | 102,270 | | | $ | 102,270 | | | $ | — | | | $ | — | |
U.S. treasury securities | 54,318 | | | 54,318 | | | — | | | — | |
Commercial paper | 68,104 | | | — | | | 68,104 | | | — | |
Corporate bonds | 28,716 | | | — | | | 28,716 | | | — | |
Total assets measured at fair value | $ | 253,408 | | | $ | 156,588 | | | $ | 96,820 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
(in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | |
U.S. treasury securities | $ | 109,756 | | | $ | 109,756 | | | $ | — | | | $ | — | |
Money market funds | 85,206 | | | 85,206 | | | — | | | — | |
U.S. government agency obligations | 4,480 | | | 4,480 | | | — | | | — | |
Commercial paper | 80,946 | | | — | | | 80,946 | | | — | |
Corporate bonds | 41,040 | | | — | | | 41,040 | | | — | |
Total assets measured at fair value | $ | 321,428 | | | $ | 199,442 | | | $ | 121,986 | | | $ | — | |
For Level 1 investments, we use quoted prices in active markets for identical assets to determine the fair value. For Level 2 investments, we use quoted prices for similar assets sourced from certain third-party pricing services. The third-party
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
pricing services generally utilize industry standard valuation models for which all significant inputs are observable, either directly or indirectly, to estimate the price or fair value of the securities. The primary input generally includes reported trades of or quotes on the same or similar securities. We do not make additional judgments or assumptions made to the pricing data sourced from the third-party pricing services.
The fair value of the 2027 Notes and the Notes Payable (Note 8) was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. We present the fair value of the 2027 Notes and the Notes payable for disclosure purposes only. As of March 31, 2023, and December 31, 2022, the fair value of the 2027 Notes was $354.3 million and $288.2 million, respectively. As of March 31, 2023 the fair value of the Notes Payable was approximately the same as its unamortized carrying value. 11. Commitments and Contingencies
Teoxane Agreement
In January 2020, we entered into the Teoxane Agreement, pursuant to which Teoxane granted us the exclusive right to import, market, promote, sell and distribute Teoxane’s line of Resilient Hyaluronic Acid® dermal fillers, which include: (i) RHA® Collection of dermal fillers, and (ii) the RHA® Pipeline Products in the U.S. and U.S. territories and possessions, in exchange for 2,500,000 shares of our common stock and certain other commitments by us. The Teoxane Agreement is effective for a term of ten years from product launch in September 2020 and may be extended for a two-year period upon the mutual agreement of the parties. We are required to meet certain minimum purchase obligations during each year of the term. Our minimum purchase obligation for the years ending December 31, 2023 and December 31, 2024 will be $40 million and $52 million, respectively. Minimum purchase obligations after December 31, 2024 may be determined at a later date. We are also required to meet certain minimum expenditure requirements in connection with commercialization efforts. Our minimum expenditures related to the commercialization and promotion of RHA® Collection of dermal fillers and RHA® Pipeline Products for the years ended December 31, 2023 and 2024 will be $34 million and $36 million, respectively. Minimum expenditures related to the commercialization and promotion of RHA® Collection of dermal fillers and RHA® Pipeline Products after December 31, 2024 may be determined at a later date.
Either party may terminate the Teoxane Agreement in the event of the insolvency of, or a material breach by, the other party, including certain specified breaches that include the right for Teoxane to terminate the Teoxane Agreement for our failure to meet the minimum purchase requirements or commercialization expenditure during specified periods, or for our breach of the exclusivity obligations under the Teoxane Agreement.
Other Contingencies
As of March 31, 2023, we are obligated to pay BTRX up to a remaining $15.5 million upon the satisfaction of certain milestones relating to our product revenue, intellectual property, and clinical and regulatory events.
Indemnification
We have standard indemnification agreements in the ordinary course of business. Under these indemnification agreements, we indemnify, hold harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to our technology. The term of these indemnification agreements is generally perpetual after the execution of the agreements. The maximum potential amount of future payments we are obligated to pay under other indemnification agreements is not determinable because it involves claims for indemnification that may be made against us in the future but have not been made. We have not yet incurred material costs to defend lawsuits or settle claims related to indemnification agreements.
We have indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
For the three months ended March 31, 2023 and 2022, no material amounts associated with the indemnification agreements have been recorded.
Litigation
In October 2021, Allergan filed a complaint against us and ABPS, one of our manufacturing sources of DAXXIFY®, in the U.S. District Court for the District of Delaware, alleging infringement of the following patents assigned and/or licensed to Allergan: U.S. Patent Nos. 11,033,625; 7,354,740; 8,409,828; 11,124,786; and 7,332,567. Allergan claims that our formulation for DAXXIFY® and ABPS’s manufacturing process used to produce DAXXIFY® infringes its patents. Allergan also asserted a patent with claims related to a substrate for use in a botulinum toxin detection assay. On November 3, 2021, we filed a motion to dismiss. On November 24, 2021, Allergan filed an amended complaint against us and ABPS, alleging infringement of an additional patent assigned and/or licensed to Allergan: U.S. Patent No. 11,147,878. On December 17, 2021, we filed a second motion to dismiss, and on January 14, 2022, Allergan filed an opposition to that motion. We filed a reply to Allergan’s opposition on January 21, 2022, and on August 19, 2022, the court denied our second motion to dismiss. On September 2, 2022, we filed an answer and counterclaims to Allergan's amended complaint. On December 30, 2022, Allergan filed a second amended complaint against us and ABPS, alleging infringement of three additional patents assigned and/or licensed to Allergan: U.S. Patent Nos. 11,203,748; 11,326,155; and 11,285,216. On January 20, 2023, we filed an answer and counterclaims to Allergan's second amended complaint. On March 3, 2023, we filed invalidity contentions, which challenge Allergan’s asserted patents.
On December 10, 2021, a putative securities class action complaint was filed against the Company and certain of its officers on behalf of a class of stockholders who acquired the Company’s securities from November 25, 2019 to October 11, 2021, in the U.S. District Court for the Northern District of California. The complaint alleges that the Company and certain of its officers violated Sections 10(b) and 20(a) of Exchange Act by making false and misleading statements regarding the manufacturing of DAXXIFY® and the timing and likelihood of regulatory approval and seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including reasonable attorneys’ fees. The court appointed the lead plaintiff and lead counsel on September 7, 2022. The lead plaintiff filed an amended complaint on November 7, 2022. On January 23, 2023, we filed a motion to dismiss. On March 8, 2023, the lead plaintiff filed an opposition to our motion to dismiss. On April 7, 2023, we filed a reply in support of our motion to dismiss. A hearing on our motion to dismiss is scheduled for June 29, 2023, but we cannot be certain of whether that motion to dismiss will be granted.
We dispute the claims in these lawsuits and intend to defend the matters vigorously. These lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The outcome of the lawsuits is necessarily uncertain. We could be forced to expend significant resources in the defense of either lawsuit, and we may not prevail. In addition, we may incur substantial legal fees and costs in connection with each lawsuit.
We record a provision for a liability when we believe that it is both probable that a liability has incurred, and the amount can be reasonably estimated. As of both March 31, 2023 and December 31, 2022, no such provision for liabilities related to the above litigation matters were recorded on the condensed consolidated balance sheets.
12. Segment Information
Reportable Segments
We report segment information based on the management approach. The management approach designates the internal reporting used by the CODM for making decisions and assessing performance as the source of our reportable segments.
We have two reportable segments: the Product Segment and the Service Segment. Each reportable segment represents a component, or an operating segment, for which separate financial information is available that is utilized on a regular basis by our CODM in determining resource allocations and performance evaluation. We also considered whether the identified operating segments should be further aggregated based on factors including economic characteristics, the nature of products and services, production processes, customer base, distribution methods, and regulatory environment; however, no such aggregation was made due to dissimilarity of the operating segments.
REVANCE THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Product Segment
Our Product Segment refers to the business that includes the research, development and commercialization of our approved products and product candidates, including DAXXIFY®, the onabotulinumtoxinA biosimilar and the RHA® Collection of dermal fillers.
Service Segment
Our Service Segment refers to the business that includes the development and commercialization of the Fintech Platform.
Corporate and Other Expenses
Corporate and other expenses include operating expenses related to general and administrative expenses, depreciation and amortization, stock-based compensation, in-process research and development and intersegment elimination that are not used in evaluating the results of, or in allocating resources to, our segments. Intersegment revenue represents the revenue generated between the two segments. For the three months ended March 31, 2023 and 2022, intersegment revenue was $0.6 million and $0.3 million, respectively.
Reconciliation of Segment Revenue to Consolidated Revenue
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2023 | | 2022 |
Revenue: | | | |
Product Segment | $ | 45,774 | | | $ | 24,405 | |
Service Segment | 3,557 | | | 856 | |
Total revenue | $ | 49,331 | | | $ | 25,261 | |
Reconciliation of Segment Loss from Operations to Condensed Consolidated Loss from Operations
| | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2023 | | 2022 |
Loss from operations: | | | |
Product Segment | $ | (12,730) | | | $ | (24,951) | |
Service Segment | (7,087) | | | (3,935) | |
Corporate and other expenses | (38,215) | | | (33,335) | |
Total loss from operations | $ | (58,032) | | | $ | (62,221) | |
We do not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented.