Revance Therapeutics Inc (NASDAQ:RVNC) just announced it will be discontinuing its phase II trial in its lead development candidate, based on the drug in question missing its predefined primary endpoint. The company is down nearly 25% on the data, and looks set for further decline as the US session kicks off on Tuesday. These sorts of declines aren’t unusual on the back of a discontinuation, especially in a phase III for a development stage company, but there may be opportunity in the pullback. Revance has a pipeline beyond its crow’s feet treatment, and this pipeline might just warrant a valuation beyond its current price.

So, with this said, here’s a look at why.

First, a quick recap on the discontinuation. The drug in question is RT001 – a topical administration formulation of what’s called DaxibotulinumtoxinA. Essentially, it’s a Botox replacement that attempts to use the same active ingredient – botulinum – albeit in a slightly different form, to reduce the appearance of wrinkles. Currently, Botox is only available sub dermally – that is, through an injection – and a topical alternative (even if not quite as effective as the injectable version) had the potential to be a real hit in the cosmetics space. Unfortunately for Revance, this isn’t the candidate to take to market.

So, with the potential for what could easily have amounted to a billion-dollar market (assuming an expansion beyond crow’s feet based on the crow’s feet approval) making up the majority of the market perceived valuation for Revance, and the latest data essentially closing this market off to the company, it’s no surprise that the stock is down to the extent it currently is.

Alongside the announcing of the discontinuation, however, Revance announced that data from a phase II would be reported during the second half of this year, and this data could prove the catalyst behind a bouncing back near term. Why? Well, the data doesn’t apply to a potential market the size of the topical Botox space (at least in the current indication) but if it demonstrates efficacy, there is a decent size population to go at post-phase III, and plenty of potential for expansion once this initial indication gets a commercialization green light.

What’s the drug?

It’s the same active ingredient as the recently failed candidate – DaxibotulinumtoxinA. This time, however, it’s a sub dermal injection administration, and it is targeting a condition called cervical dystonia.

Cervical dystonia is a condition that causes an involuntary spasm and tightening of the neck muscles, and leads to an uncontrollable tilt in the head. Neck muscle botulinum toxin is the current SOC, but it only lasts a short period, so frequent administration is required. With DaxibotulinumtoxinA, Revance is trying to extend the period of efficacy, by way of restricting the drug to the injection site. Current options spread, and thereby reduce site potency. DaxibotulinumtoxinA might be able to reduce this spread. It’s not a massive market, with an incidence in the US of around 9 people per 100,000, but the MOA of the drug is what’s important for expansion purposes going forward. Think of this as a proof of concept trial for a longer lasting Botox.

So what’s the takeaway here? Well, that Revance is a far less attractive stock now its lead candidate is no longer in contention for a topical administration commercialization is a given. The company’s pipeline is far weaker without RT001, and the decline in its market capitalization reflects this fact. This reflection, however, may not be 100% accurate in its magnitude. The phase II RT002 data set for release during the second half of this year has the potential to shift sentiment a bit, and if it comes out as indicative of efficacy, we could see some upside in Revance’s market capitalization before the close of the year. Likely not enough to close the gap on today’s losses, but enough to offer up some level of reward on an entry at current prices, and even more so if the stock (as is looking likely) continues to wane across the remainder of the week. The company’s financial position makes this a risky exposure, but for the risk tolerant biotech investor with space in their portfolio for a small speculative position, it could be well worth a look.