What changed in this filing

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Item 1. Business

2021-03-25 compared with 2020-02-25 · 87 added, 36 removed, 240 unchanged (34% of the section changed)

We are a performance beauty company with a customer-centric approach focused on delivering breakthrough products in the self-pay aesthetic market.

Our first product, Jeuveau ® , is a proprietary 900 kDa purified botulinum toxin type A formulation indicated for the temporary improvement in the appearance of moderate to severe glabellar lines, also known as “frown lines,” in adults.

Our primary market is the self-pay aesthetic market, which includes medical products purchased by physician and other customers that are then sold to consumers or used in procedures for aesthetic indications that are not reimbursed by any third-party payor, such as Medicaid, Medicare or commercial insurance.

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

Our primary market is the self-pay aesthetic market, which includes medical products purchased by physicians and other customers that are then sold to consumers or used in procedures for aesthetic indications that are not reimbursed by any third-party payor, such as Medicaid, Medicare or commercial insurance.

We believe we offer customers and consumers a compelling value proposition with Jeuveau ® .

Currently, onabotulinumtoxinA (BOTOX) is the neurotoxin market leader, and prior to the approval of Jeuveau ® , was the only known 900 kDa botulinum toxin type A complex approved in the United States.

Currently, BOTOX (onabotulinumtoxinA) is the neurotoxin market leader, and prior to the approval of Jeuveau ® , was the only known 900 kDa botulinum toxin type A complex approved in the United States.

We believe aesthetic physicians generally prefer the performance characteristics of the complete 900 kDa neurotoxin complex and are accustomed to injecting this formulation.

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Food and Drug Administration, or FDA.

In May 2019, we commercially launched Jeuveau ® in the United States.

As part of our commercial launch in the United States, we introduced the Jeuveau ® Experience Treatment, or J.E.T., an exclusive program for aesthetic providers and consumers to be the first to experience Jeuveau ® .

offered aesthetic providers the opportunity to receive multiple shipments of Jeuveau ® through August 2019.

The program was made available through our technology platform, “Evolus Practice”, which allows providers to open a new account, order Jeuveau ® , pay invoices and engage with our customer experience team and medical affairs representatives.

We enrolled over 5,000 customer accounts in JET.

In addition to the J.E.T program, in 2019, we launched marketing programs designed to increase the adoption of Jeuveau ® by customer accounts and to drive consumer demand for Jeuveau ® .

The next phase of our U.S.

launch will be the release of our customer loyalty program, branded Evolux™, and our consumer loyalty program in 2020.

In May 2019, we commercially launched Jeuveau ® in the United States, and our net sales totaled $56.5 million for fiscal year 2020 and $20.6 million for the fourth quarter of 2020.

International

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We began marketing Jeuveau ® in Canada in October 2019 through our distribution partner, Clarion Medical Technologies, Inc., or Clarion.

In September 2019, we received approval from the European Commission, to market the product in all 28 EU member states, Iceland, Norway and Liechtenstein.

We plan to launch Jeuveau ® in Europe in 2020.

In September 2019, we received approval from the European Commission, to market Jeuveau ® in all 28 EU member states, Iceland, Norway and Liechtenstein.

In January 2021, we received a positive decision from the European Commission, to add the 50 unit product to the existing approval obtained in September 2019.

We plan to launch Jeuveau ® in Europe in early 2022.

Our primary market is self-pay aesthetic healthcare, which includes medical products purchased by physicians that are then sold to consumers or used in procedures for aesthetic indications that are not reimbursed by any third-party payor, such as Medicaid, Medicare or commercial insurance.

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Within the multiple age groups that receive aesthetic neurotoxin treatments, we strategically focus our marketing efforts on the millennial segment which is the largest cohort in the U.S.

In 2019 there are estimated to be approximately 73 million millennials, defined as individuals born between 1981 and 1996.

In 2019 there were estimated to be approximately 73 million millennials, defined as individuals born between 1981 and 1996.

We believe that approximately 1.7 million females between the age of 30 and 39, which includes many individuals we define as millennials, are considering neurotoxins in the next twelve months.

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• Our management team has significant experience and expertise in medical aesthetics.

Our management team has extensive experience in self-pay healthcare markets, in the development, market launch and commercialization of major medical products, execution and integration of business development transactions, identification of and

partnerships with KOLs, and understanding of the regulatory environment of the healthcare markets.

Key members of our leadership team have also served in relevant senior leadership positions with leading aesthetic companies.

In May 2019, we launched Jeuveau ® in the United States with our own specialty sales organization now consisting of over 150 positions between representatives, management and other sales employees and in Canada through our distribution partner, Clarion.

We plan to expand our product offerings over time through in-licensing, partnerships and acquisitions.

In May 2019, we launched Jeuveau ® in the United States with our own specialty sales organization now consisting of over 70 positions between representatives, management and other sales employees and in Canada through our distribution partner,

We plan to expand our product offerings over time through in-licensing, partnerships and acquisitions and by launching our products internationally.

The key components of our strategy are:

Partner outside of the United States to reach and serve physicians and consumers in those territories.

• Pursue an aesthetic-only strategy to enhance marketing and pricing flexibility along with improving transparency for our customers.

• Leverage our strong KOL relationships to assist in scientific presentations, publications, and other methods to drive success of our commercial launch of Jeuveau ® .

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

• Leverage our differentiated digital platform to efficiently open new accounts, personalize the purchasing process and efficiently deploy marketing programs at scale.

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

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

Final Ruling by the U.S.

International Trade Commission and the Subsequent Settlement Agreements

On January 30, 2019, Allergan, plc (now Allergan Limited) and Allergan, Inc., who we refer to collectively as Allergan, and Medytox, Inc., or Medytox, filed a complaint against us and Daewoong Pharmaceuticals Co., Ltd., or Daewoong in the International Trade Commission, or ITC, alleging that Jeuveau ® is manufactured based on misappropriated trade secrets of Medytox and therefore the importation of Jeuveau ® is an unfair act.

The ITC matter, which we refer to as the ITC Action, is entitled In the Matter of Certain Botulinum Toxin Products.

The ITC instituted an investigation as ITC Inv.

On December 16, 2020, the ITC issued a final determination in the ITC Action and issued (1) a limited exclusion order prohibiting the importation of Jeuveau ® into the United States for a period of 21 months and (2) a cease and desist order preventing the Company from, among other things, selling, marketing, or promoting such imported Jeuveau ® in the United States for a period of 21 months.

We refer to the limited exclusion order and the cease and desist order collectively as the remedial orders.

The Final Determination was subject to a 60-day presidential review period before taking effect.

During the presidential review period, the Company was permitted to continue importation and sales of Jeuveau ® subject to payment of a bond of $441 per vial.

Effective February 18, 2021, we entered into a Settlement and License Agreement with Medytox and Allergan, which we refer to as the U.S.

Settlement Agreement and another Settlement and License Agreement with Medytox, which we refer to as the ROW Settlement Agreement.

We refer to the U.S.

Settlement Agreement and the ROW Settlement Agreement collectively as the Medytox/Allergan Settlement Agreements.

Under the Medytox/Allergan Settlement Agreements, we obtained (i) a license to commercialize, manufacture and to have manufactured for us certain products identified in the Medytox/Allergan Settlement Agreements, including Jeuveau ® (the “Licensed Products”) in the United States and other territories where we license Jeuveau ® , (ii) the dismissal of outstanding litigation against us, including the ITC Action, a rescission of the related remedial orders, and the dismissal of a civil case in the Superior Court of California against us, which we refer to together with any claims (including claims brought in Korean courts) with a common nexus of fact as the Medytox/Allergan Actions, and (iii) releases of claims against us for the Medytox/Allergan Actions.

In exchange, we agreed to (i) make cash payments of $35.0 million in multiple payments over two years to Allergan and Medytox, (ii) pay to Allergan and Medytox certain royalties on the sale of Jeuveau ® , based on a certain dollar amount per vial sold of Licensed Product by or on our behalf in the United States, from December 16, 2020 to September 16, 2022, (iii) from December 16, 2020 to September 16, 2022, pay to Medytox a low-double digit royalty on net sales of Jeuveau ® sold by us or on our behalf in territories we have licensed outside the United States;

(iv) from September 16, 2022 to September 16, 2032, pay to Medytox a mid-single digit royalty percentage on net sales of Jeuveau ® in the United States and all territories we have licensed outside the United States, (v) issue to Medytox of 6,762,652 shares of our common stock, par value $0.00001 per share, which we issued on February 18, 2021, and (vi) enter into a Registration Rights Agreement pursuant to which we granted certain registration rights to Medytox with respect to such shares of common stock

beginning as of March 31, 2022.

In addition, under the Medytox/Allergan Settlement Agreements, we made certain representations and warranties and agreed to positive and negative covenants.

On March 23, 2021, we entered into a Confidential Settlement and Release Agreement with Daewoong Pharmaceuticals Co.

Ltd., or Daewoong, which we refer to as the Daewoong Settlement Agreement, a Convertible Promissory Note Conversion Agreement, which we refer to as the Conversion Agreement and the Third Amendment to the Supply Agreement (which amends the Daewoong Agreement), which we refer to as the Daewoong Agreement Amendment.

We refer to the Daewoong Settlement Agreement, the Conversion Agreement and the Daewoong Agreement Amendment collectively as the 2021 Daewoong Arrangement.

Under the 2021 Daewoong Arrangement, (i) Daewoong agreed to (a) pay us an amount equal to $25.5 million, (b) pay certain reasonable legal fees incurred by our litigation counsel in connection with its defense of the ITC Action (including any appeal of the resulting remedial orders), (c) cancel up to $10.5 million in aggregate milestone payments under our Daewoong Agreement, and (d) reimburse us certain amounts (calculated on a dollar amount per vials sold basis in the United States) for sales of certain products with respect to which we are required to pay Medytox and Allergan royalties pursuant to the U.S.

Settlement Agreement;

and (ii) we agreed to (y) release certain claims we may have against Daewoong or certain of its affiliates and representatives related to the allegations made in or the subject matter of the Medytox/Allergan Actions, or any orders, remedies and losses resulting from the Medytox/Allergan Actions, and (z) coordinate with Daewoong on certain matters related to the Medytox/Allergan Actions.

In the Conversion Agreement, among other things, the parties agreed that (i) the principal balance of the $40.0 million aggregate principal amount convertible promissory note we issued to Daewoong on July 30, 2020, which we refer to as the Daewoong Convertible Note, and accrued and unpaid interest thereon shall be automatically converted, at the conversion price of $13.00 per share, into 3,136,869 shares of our common stock;

and (ii) the Daewoong Convertible Note shall be deemed cancelled and satisfied in full in connection with such conversion.

Under the Daewoong Agreement Amendment, the parties agreed to amend the Daewoong Agreement to:

(i) expand the territory within which we may distribute Jeuveau ® to certain countries in Europe;

(ii) reduce the period of time with respect to which we are required to deliver binding forecasts to Daewoong;

(iii) introduce certain limitations on Daewoong’s ability to convert our exclusive license for certain territories to a non-exclusive license in the event we fail to meet certain minimum purchase requirements for such territory;

(iv) adjust the minimum purchase requirements and reduce the transfer price per vial of Jeuveau ® applicable to various territories;

(v) require that any Jeuveau ® supplied by Daewoong match certain shelf-life thresholds;

and (vi) prohibit us from sharing certain confidential information regarding Daewoong with Medytox or its affiliates or representatives.

For additional information on the final ruling by the ITC and the subsequent Settlement Agreements, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations— Impact on Our Business of Final Ruling by the U.S.

International Trade Commission and the Subsequent Settlement.”

Jeuveau ® Overview

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• 4.4% between Jeuveau ® and BOTOX groups, 95% CI (-1.9, 10.8), with non‑inferiority of Jeuveau ® versus BOTOX concluded based on the lower bound of the 95% CI for the absolute difference exceeding -10.0%.

EU Phase III Primary Endpoint - Responder Rates at Maximum Frown on Day 30 (GLS = 0 or 1) by Investigator Assessment

EU Phase III Primary Endpoint - Non-Inferiority, at Maximum Frown on Day 30 by Investigator Assessment

EU Phase III Primary Endpoint - Responder Rates at Maximum Frown on Day 30 (GLS = 0 or 1) by Investigator Assessment EU Phase III Primary Endpoint - Non-Inferiority, at Maximum Frown on Day 30 by Investigator Assessment

As presented in the table below, within each group, 32.7% of placebo subjects, 41.9% of BOTOX subjects and 37.6% of Jeuveau ® subjects experienced AEs.

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Daewoong License and Supply Agreement

On September 30, 2013, we entered into the Daewoong Agreement with Daewoong, pursuant to which Daewoong agreed to manufacture and supply Jeuveau ® and grant us an exclusive license to import, distribute, promote, market, develop, offer for sale and otherwise commercialize and exploit Jeuveau ® for aesthetic indications in the United States, EU, Great Britain, Canada, Australia, Russia, Commonwealth of Independent States, or CIS, and South Africa, each, a covered territory.

On September 30, 2013, we entered into the Daewoong Agreement with Daewoong, pursuant to which Daewoong agreed to manufacture and supply Jeuveau ® and grant us an exclusive license to import, distribute, promote, market, develop, offer for sale and otherwise commercialize and exploit Jeuveau ® for aesthetic indications in the United States, EU, Great Britain, European Economic Area, Switzerland, Canada, Australia, Russia, Commonwealth of Independent States, or CIS, and South Africa, each, a covered territory.

Provided that if we do not apply for approvals or commence clinical trials in certain covered territories within 12 months of the Daewoong Agreement Amendment, we may no longer have rights to that covered territory.

Daewoong also granted us a non-exclusive license to do the same in Japan.

In connection with our entry into the Daewoong Agreement, we made an upfront payment to Daewoong of $2.5 million and agreed to make milestone payments upon certain confidential development and commercial milestones, including payment to Daewoong upon each of FDA and EMA approval of Jeuveau ® .

Under the Daewoong Agreement, the maximum aggregate amount of milestone payments that could be owed to Daewoong upon the satisfaction of all milestones is $13.5 million.

Under the Daewoong Agreement, the maximum aggregate amount of milestone payments that could have been owed to Daewoong upon the satisfaction of all milestones is $13.5 million.

Upon the FDA approval in February 2019 and EMA approval in September 2019, we paid $2.0 million and $1.0 million milestone payment, respectively.

As of December 31, 2019 , Daewoong is eligible to receive remaining contingent milestone payments of up to $10.5 million .

Under the Daewoong Agreement, Daewoong is responsible for all costs related to the manufacturing of Jeuveau ® , including costs related to the operation and upkeep of its manufacturing facility, and we are responsible for all costs related to obtaining regulatory approval, including clinical expenses, and commercialization of Jeuveau ® .

As of December 31, 2020, Daewoong was eligible to receive remaining contingent milestone payments of up to $10.5 million, all of which were cancelled in March 2021 as part of the Daewoong Settlement Agreement.

Daewoong is responsible for all costs related to the manufacturing of Jeuveau ® , including costs related to the operation and upkeep of its manufacturing facility, and we are responsible for all costs related to obtaining regulatory approval, including clinical expenses, and commercialization of Jeuveau ® .

Under the Daewoong Agreement, Daewoong has agreed to supply us with Jeuveau ® at an agreed-upon, transfer price, and we have agreed to make milestone payments upon completion of certain confidential development and commercial milestones.

Our exclusivity is subject to certain minimum annual purchases upon commercialization and if we fail to meet these targets, Daewoong may, at its option, convert the exclusive license to a non-exclusive license.

Our exclusivity is subject to certain minimum annual purchases for each covered territory upon commercialization and if we fail to meet these targets, Daewoong may, at its option, convert the exclusive license for such covered territory to a non-exclusive license.

These potential minimum purchase obligations are contingent upon the occurrence of future events, including receipt of governmental approvals and our future market share in various jurisdictions.

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We also have the option to negotiate first with Daewoong to secure a distribution license for any product that Daewoong directly or indirectly develops or commercializes that is classified as an injectable botulinum toxin (other than Jeuveau ® ) in a covered territory or Japan.

The initial term of the Daewoong Agreement is from September 30, 2013 to the later of (i) the fifth anniversary of approval from the relevant governmental authority necessary to market and sell Jeuveau ® or (ii) September 30, 2023, and automatically renews for unlimited additional three-year terms if we meet certain performance requirements.

The initial term of the Daewoong Agreement expires September 30, 2023, and automatically renews for unlimited additional three-year terms if we meet certain performance requirements.

The Daewoong Agreement will terminate (A) upon written notice by either us or Daewoong upon a continuing default that remains uncured within 90 days (or 30 days for a payment default) by the other party, or (B) without notice upon the bankruptcy or insolvency of our company.

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has submitted a BLA to the FDA for an injectable botulinum toxin type A neurotoxin and received a target date action date of November 25, 2020 under the Prescription Drug User Fee Act;

If the BLA is approved, we expect the competition in the U.S.

however the FDA has deferred its decision on the BLA and the BLA has not yet been approved.

If Revance’s BLA is approved, we expect the competition in the U.S.

injectable botulinum toxin market to further increase.

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aesthetic neurotoxin market in May 2019.

Given the early stage of our launch of Jeuveau ® , we have not experienced seasonality in our net revenue to date.

Given the early stage of our launch of Jeuveau ® , the impact of the COVID-19 outbreak and the impact of the ITC remedial orders, we have not observed significant seasonality in our net revenue to date.

However, we are aware that historically the aesthetic neurotoxin market experiences higher revenue in the second and fourth calendar quarters as compared to the first and third calendar quarters.

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Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity.

HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

In addition, state and non-U.S.

laws, including the General Data Protection Regulation adopted by the EU, govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns.

We also remain subject to federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.

These laws vary and could impose additional penalties.

For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to alleged privacy and data security violations.

Further, certain states have proposed or enacted legislation that will create new data privacy and security obligations for certain entities, such as the California Consumer Privacy Act, or CCPA, which came into effect January 1, 2020 and was recently amended and expanded by the California Privacy Rights Act, or the CRPA, passed on November 3, 2020.

The CCPA and CPRA, among other things, create new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.

The CCPA also created a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach.

It remains unclear what, if any, additional modifications will be made to the CPRA by the California legislature or how it will be interpreted.

Therefore, the effects of the CCPA and CPRA are significant and will likely require us to modify our data processing practices and may cause us to incur substantial costs and expenses to comply, particularly given our base of operations in California.

Environmental Regulation

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In 2019 Alphaeon changed its name to AEON Biopharma, Inc.

We continue to refer to the renamed AEON Biopharma, Inc.

As of December 31, 2019 , Alphaeon owned 25.8% of our outstanding shares of common stock.

Subsequent to December 31, 2019 , Alphaeon contributed all of the shares it held in us to Alphaeon 1, LLC.

As of December 31, 2019 , we had 235 employees, all of whom constituted full-time employees.

None of our employees are represented by a collective bargaining agreement, and we have never experienced any work stoppage.

and contributed all of the shares it held in the Company to Alphaeon 1, LLC.

The Company continues to refer to the renamed AEON Biopharma, Inc.

as “Alphaeon” and Alphaeon 1, LLC as Alphaeon 1, LLC.

As of December 31, 2020 and March 25, 2021, Alphaeon owned 25.7% and 19.8% of our outstanding shares of common stock, respectively.

Human Capital Resources

As of December 31, 2020, we had 119 employees, all of whom are full-time in the United States, and 63% of our full-time employees were women.

None of our employees are represented by labor unions or covered by collective bargaining agreements, and we have never experienced any work stoppage.

We believe we have good relations with our employees.

We believe that our future success largely depends upon our continued ability to attract and retain highly qualified management and technical personnel.

Talent management is critical to our ability to execute on our long-term growth strategy.

To facilitate talent attraction and retention, we strive to make our company a safe and rewarding workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation and benefits, and by programs that build connections among our employees.

We continue to be committed to an inclusive culture which values equity, opportunity, and respect.

In support of our inclusive culture, we offer competitive compensation and benefits, including stock awards;

provide unconscious bias training to strengthen employee awareness;

and strive to recruit a diverse talent pool across all levels of the organization.

In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.

This included implementing a work-from-home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel.

Corporate Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business