Competition in the US aesthetic botulinum toxin market is set to increase with the launch of Evolus' Jeuveau—the first new botulinum toxin approved by the FDA since Merz Pharma’s XEOMIN in 2010—this spring. In a market dominated by Allergan’s BOTOX, several investors and industry members have questioned how Evolus will enter this already competitive space and how the existing competitors—Allergan, Galderma and Merz Pharma—will defend their current share.
While Evolus has yet to unveil its full commercial strategy (which will be released at its investor day on May 8th), we expect the company to promote the similarities between Jeuveau and Allergan’s BOTOX and to compete using dynamic pricing/marketing strategies and by leveraging its relationship with key opinion leaders.
The Contestant: Evolus
Evolus first became a potential competitor in September 2013, when the company signed an agreement with South Korean manufacturer Daewoong Pharmaceutical, licensing the latter company’s botulinum toxin, Nabota (now known as Jeuveau in the US and Nuceiva in the EU and Canada). The Daewoong Agreement provided Evolus with the exclusive rights to Nabota for aesthetic indications in the US, Canada, EU, Australia, Russia, CIS territories and other select countries. Just a few days later, Evolus was acquired by Strathspey Crown Holdings (SCH) for ALPHAEON, a subsidiary fully owned by SCH. Evolus remained a wholly owned subsidiary of ALPHAEON until going public in February 2018, at which point ALPHAEON became the majority shareholder. While Nabota is currently approved and sold by Daewoong Pharmaceutical in several countries not covered by the Daewoong Agreement, Evolus received FDA approval for Jeuveau for the treatment of moderate to severe glabellar lines in February 2019, and the US will be the first country in which Evolus commercializes the product.
Evolus will promote the similarities between Jeuveau and Allergan’s BOTOX
Jeuveau has many similarities to BOTOX—both toxins have the same molecular weight, providing them with similar handling and performance characteristics, and Evolus demonstrated noninferiority for Jeuveau in a head-to-head trial with BOTOX. Evolus has since promoted Jeuveau as a “frictionless” alternative to BOTOX and is relying on these similarities to entice clinicians to switch to Jeuveau because it offers a seamless transition between products with minimal training required for physicians.
Many initially believed Evolus would encourage clinicians to add Jeuveau to their portfolio of aesthetic offerings with deep discounts and a list price at least 20% below BOTOX. However, the company surprised the industry by announcing a list price of $610 for a 100-unit vial of Jeuveau, a slight premium to BOTOX’s list price of $601. While the initial plan for Evolus was to predominantly compete on price, the company is now using the extensive clinical data obtained through several clinical trials to position Jeuveau as a premium product.
This new strategy, however, is likely multipronged. A high list price publicly creates the perception of a premium product, shedding any negative connotations surrounding the product’s Asian origin; at the same time Evolus can privately lower the price by providing substantial rebates and volume discounts. Still, price alone is likely not a strong enough driving force.
Both Galderma’s Dysport and Merz Pharma’s XEOMIN are already priced at a 20-40% discount relative to BOTOX and, collectively, these two companies have only managed to capture a quarter of the aesthetic botulinum toxin market and less than 5% of the therapeutic market in the US. Moreover, discounts to physicians are not always passed on patients, with the physician often pocketing the difference, decreasing the opportunity for budget-conscious patients to seek out a less expensive alternative. Evolus will therefore need to rely on other methods in addition to competitive pricing to increase product adoption and gain share.
Evolus will compete using dynamic pricing and marketing strategies offered by exclusively pursuing nonreimbursed indications
While botulinum toxins are used for both aesthetic and therapeutic purposes, Evolus is unique from its competitors in that it will exclusively pursue aesthetic indications. Although the therapeutic market is significantly larger, accounting for nearly 60% of the $3 billion US botulinum toxin market, this strategy will provide the company with two key advantages—exclusion from the Physician Payments Sunshine Act and pricing flexibility.
The Sunshine Act requires all manufacturers of medical products reimbursed by the Centers for Medicare & Medicaid Services (CMS) to disclose payments or transfers of value made to physicians. CMS covers the use of botulinum toxin for therapeutic indications such as cervical dystonia and prophylaxis for chronic migraine; however, cosmetic applications such as the treatment of frown lines are not covered. Companies with both covered and noncovered products are required to report all payments, even if they relate to a noncovered indication. By only pursuing nonreimbursed indications, Evolus will not be subject to the disclosure rules of the Sunshine Act and will have greater marketing freedom and more opportunities to engage with physicians on a personal level.
A self-pay, aesthetic-only strategy will also provide Evolus with enhanced flexibility to discount Jeuveau to increase sales. The CMS determines reimbursement rates for botulinum toxins based on the average selling price for all sales of the product, both aesthetic and therapeutic. Therefore, competitors with reimbursed indications are unlikely to provide substantial discounts to aesthetic practitioners as this may reduce the therapeutic reimbursement rate, limiting overall revenues. While the original Daewoong agreement included an option to develop Jeuveau for therapeutic indications, the company does not want to cede the advantages provided by exclusively selling nonreimbursed products. In December 2017, Evolus transferred the therapeutic option to ALPHAEON, eliminating the possibility to develop Jeuveau for therapeutic indications; ALPHAEON later exercised this option in September 2018. While Jeuveau may eventually be approved for therapeutic indications, it most likely won’t be through Evolus.
Beyond pricing and a self-pay strategy, Evolus also plans to raise brand awareness through active social media campaigns and a digital platform to engage directly with patients and physicians. The platform will likely streamline ordering for physicians and entice patients to seek out providers who offer Jeuveau with a loyalty program that provides discounts for repeat customers.
Evolus will leverage its relationship with key opinion leaders and Strathspey Crown Holdings
The final key advantage that Evolus possesses is its relationship with SCH, a physician-owned private equity firm. Approximately 250 physicians, consisting predominantly of key opinion leaders in dermatology, plastic surgery, and ophthalmology have an equity stake in SCH. Through this investment, these physicians have indirectly aligned their financial interests with those of Evolus and may be more likely to recommend Jeuveau to colleagues and to prescribe the product over competing alternatives. While these physicians account for only a small percentage of total botulinum toxin injectors in the US, they can influence a much wider network of physicians through ShoutMD, a social media platform exclusively for physicians, owned by SCH. ShoutMD, which boasts over 11,000 members, rewards activity on the site with discounts on aesthetic products and preferential placement in the ALPHAEON physician locater. The influence of ShoutMD was previously exhibited when a lawsuit against Merz Pharma for the unlawful use of promotional materials wrongly included physicians within its scope. Merz Pharma initially refused to defend the physicians or compensate them their own legal costs; however, after the ShoutMD community united and expressed their mutual discontent, Merz Pharma quickly reversed its decision and supported the physicians.
Although these SCH physician partners will likely aid the launch of Jeuveau by promoting brand awareness, they could also potentially harm Jeuveau’s reputation if the broader physician community becomes aware of the financial relationship with Evolus and perceives a conflict of interest. Before adding a new product to their practice, most physicians will scrutinize the available clinical data to ensure the product demonstrates efficacy and safety. While Jeuveau was extensively studied in several clinical trials, in the two pivotal US trials (EV-001 and EV-002), one of the 20 investigators was a physician partner of SCH and in the two nonpivotal US trials (EV-004 and EV-006), eight of the 29 investigators were physician partners of SCH. Consequently, other physicians may express skepticism when reviewing Jeuveau’s clinical data.
The Market Leaders
Despite the threat of new entrants, Allergan, Galderma, and Merz Pharma have no plans to relinquish their current share. The market leaders will defend their positions though several strategies, including large practitioner training programs, loyalty programs that leverage their diverse product portfolios, analytics capabilities that can be used for marketing efforts, and innovative payment options.
The market leaders will defend their position through large practitioner training programs
Allergan has a very large physician education program, training approximately 60,000 injectors every year. Many physicians received their initial training with Allergan and are most comfortable using the company’s products. Moreover, in the US BOTOX is approved for three aesthetic indications, while all competing products are only approved for one; because manufacturers can only provide training on indications approved by the FDA, Allergan is able to offer a more comprehensive training program. Most new market entrants lack the resources to run extensive training programs and may face an uphill battle trying to penetrate physician offices.
At the time of launch, Jeuveau will be the only product sold by Evolus, whereas Allergan, Galderma, and Merz Pharma all offer a range of aesthetic therapies including botulinum toxins, dermal fillers, and other cosmetic products such as cosmeceuticals, breast implants, and energy-based devices. These diverse product portfolios create opportunities for product bundling and dynamic pricing. For example, through its Partner Privileges physician loyalty program, Allergan offers rebates in the range of 4–18% which are based on overall spend across all Allergan products. Physicians are therefore incentivized to purchase products from a single manufacturer to maximize their savings and are less likely to swap out an individual product. Companies that sell a range of products are also able to bundle their offerings, providing large discounts on products that don’t have therapeutic indications, such as dermal fillers, when they are purchased together with botulinum toxins. These tactics help draw patients and physicians to the market leaders.
Innovative payment options will help the market leaders maintain their share
Allergan’s defense strategy extends beyond competitive pricing. The company has built the BOTOX brand into a household name, and this widespread brand recognition helps drive patients to physician offices carrying Allergan products. Through its Brilliant Distinctions patient loyalty program, Allergan is also able collect and analyze large amounts of consumer data to better target patient subsets and aid marketing efforts. Furthermore, at its Medical Aesthetics Day in September 2018, Allergan announced a partnership with Hints MD, a subscription-based service for aesthetics treatments. The program, which improves access by providing patients with a lower upfront cost of treatment, locks patients into using products from a single manufacturer and encourages repeat purchases, further decreasing opportunities for new market entrants.
While Evolus has several unique and potentially disruptive strategies to bolster its success, we anticipate the company will face intense competition from the market leaders in the coming months.
We anticipate that Evolus will:
- Promote the similarities between Jeuveau and Allergan’s BOTOX
- Compete using dynamic pricing and marketing strategies offered by exclusively pursuing non-reimbursed indications
- Leverage its relationship with key opinion leaders and Strathspey Crown Holdings
The market leaders will defend their positions through:
- Large practitioner training programs
- Loyalty programs that leverage their brand recognition and diverse product portfolios
- Innovative payment options
DRG helps aesthetic teams evaluate market potential, optimize product and portfolio planning, develop positioning, identify commercial targets, and track brand and competitor performance.
Contributor: Robert Cohen, Analyst, Medtech Insights