Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lantheus Holdings Inc (LNTH, Financial) reported a strong quarter with consolidated net revenue of $394.1 million, an increase of 22.5% year-over-year.
- PYLARIFY generated net sales of more than $273 million, up nearly 30% from the prior year period, driven by continued PSMA PET diagnostic growth.
- DEFINITY continued its strong momentum with second quarter net sales of approximately $78 million, up almost 11% year-over-year.
- The company executed three strategic transactions to expand its pipeline, including the acquisition of NAV-4694, a late-stage next-generation F18 PET imaging agent candidate targeting beta amyloid in Alzheimer's disease.
- Lantheus Holdings Inc (LNTH) has a strong liquidity position with cash and cash equivalents, net of restricted cash, standing at $757 million and access to a $350 million undrawn bank revolver.
Negative Points
- Gross profit margin for the second quarter was 68.4%, a decrease of 121 basis points from the second quarter of 2023.
- Operating expenses at 25% of net revenue were 202 basis points higher than the prior year rate and ahead of expected spending levels.
- The company reported a decrease in strategic partnerships and other revenue by 31.7% due to the prior year comparable having $7 million of RELISTOR-related royalties not repeated this year.
- The updated guidance for adjusted EPS was lowered to a range of $6.60 to $6.70, down from the previous guidance of $7 to $7.20, due to increased R&D expenses and other investments.
- The company faces competitive pressures in the PSMA PET imaging market, with three other commercial competitors and potential new entrants.
Q & A Highlights
Q: Can you provide insights on the CMS recommendation to unbundle PYLARIFY and its potential impact on pricing?
A: We are pleased that CMS recognizes the value of diagnostic radiopharmaceuticals, including PYLARIFY. If the proposed rule becomes final in November, CMS would maintain separate payment for PYLARIFY for the 20% of patients with traditional Medicare fee-for-service treated in the hospital outpatient setting. The proposed separate payment is based on mean unit cost (MUC) beginning in 2025, potentially transitioning to ASP once manufacturers submit relevant ASPs. We will continue to work with industry stakeholders and CMS to maximize patient access.
Q: What are the reasons behind the revised earnings guidance and the significant step-up in R&D expenses?
A: The revised earnings guidance reflects the investments made to support long-term growth, including advancing MK-6240 for an NDA filing in 2025 and other business development costs. Approximately $0.25 of the anticipated investment for 2024 is within the R&D line. Our investment will vary over time, similar to our approach with PYLARIFY, and we will provide more details as we progress.
Q: What are your expectations for PYLARIFY revenue growth trends transitioning from 2Q to 3Q, and how will strategic contracts impact the second half of the year?
A: We expect Q3 to be lower than Q4 in absolute dollar terms due to seasonal trends, but volumes will continue to grow throughout the year. Strategic partnerships with key customers are a core part of our strategy to sustain PYLARIFY's leadership. Conversations with key customers are progressing well, and we are pleased with our progress.
Q: Can you size the Alzheimer's opportunity for Lantheus and compare it to the market opportunity for PYLARIFY?
A: The Alzheimer's field is poised for significant growth with recent therapeutic approvals. We believe our agents, MK-6240 and NAV-4694, are next-generation or best-in-class. MK-6240 is currently in over 90 trials, and NAV-4694 is potentially the most sensitive and specific beta amyloid marker. We are highly encouraged and expect the Alzheimer's market to be substantial.
Q: How do you plan to differentiate NAV-4694 in the Alzheimer's diagnostic market, which already has existing standards of care?
A: NAV-4694 has higher sensitivity and specificity with less off-target binding in the brain, potentially allowing for clearer images and earlier detection of beta amyloid. This earlier detection may lead to earlier treatment and better outcomes. We expect to bring NAV-4694 through pivotal trials and into commercialization.
Q: What is your ability to leverage your existing commercial footprint for MK-6240 and PNT2002?
A: We have significant infrastructure and relationships in place that we can leverage for both MK-6240 and PNT2002. For Alzheimer's agents, we can utilize our existing PET manufacturing network and commercial relationships. For PNT2002, we already have relationships with therapeutic sites that also perform imaging, allowing us to build from a position of strength.
Q: Can you provide more details on the upcoming SPLASH readout and your expectations for the POINT partnership?
A: We expect additional data from the SPLASH trial this quarter. We are encouraged by the primary endpoint results and plan to move forward based on the upcoming data. We will update the market once we have more information.
Q: How do you view the potential impact of new entrants on PYLARIFY's market share and growth?
A: We believe PYLARIFY has significant and sustainable competitive advantages both commercially and clinically. New competition raises awareness in the marketplace, which can be beneficial. We continue to invest in lifecycle management and product improvements to maintain our leadership position.
Q: What are your current thoughts on share buybacks and dividends?
A: Our first priority is business development, but we continuously evaluate capital allocation, including share buybacks and dividends. We will consider these options as appropriate.
Q: Can you grow PYLARIFY next year, and what are your expectations for its growth rate?
A: We remain positive about PYLARIFY's growth potential. The current market is annualizing at about $1.5 billion, with potential to grow to over $2 billion this year and $3 billion by the end of the decade. We believe PYLARIFY will continue to grow and maintain its leadership position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
