Lantheus Holdings, Inc. (NASDAQ:LNTH) Q1 2024 Earnings Call Transcript

Lantheus Holdings, Inc. (NASDAQ:LNTH) Q1 2024 Earnings Call Transcript May 2, 2024

Lantheus Holdings, Inc. beats earnings expectations. Reported EPS is $1.69, expectations were $1.55. Lantheus Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. Welcome to the Lantheus First Quarter 2024 Conference Call. All lines have been placed on mute. This call is being recorded and a replay will be available in the Investors section of the company’s website approximately two hours after the completion of the call and will be archived for at least 30 days. I will now turn the call over to Mark Kinarney, Vice President of the Investor Relations. Mark?

Mark Kinarney: Thank you. Good morning and welcome to today’s call. With me today are Brian Markison, our CEO; Paul Blanchfield, our President; and Bob Marshall, our Chief Financial Officer. We will begin the call with prepared remarks and then open the call for Q&A. This morning, we issued a press release which was furnished to the Securities and Exchange Commission under Form 8-K reporting our first quarter 2024 results. The release and today’s slide presentation are in the Investors section of our website at lantheus.com. Any comments made during our call could include forward-looking statements. Actual results may differ materially from these statements due to a variety of risks and uncertainties which are detailed in our SEC filings.

Please refer to our SEC filings for a detailed discussion of these risks and uncertainties. Discussions during the call will also include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is also included in the Investors section of our website. It is my pleasure to now turn the call over to our CEO, Brian.

Brian Markison: Thank you, Mark and good morning everyone. This marks my first earnings call as CEO of Lantheus, and I am delighted to be here to lead this incredible team. I began my career as a pharmaceutical sales rep and have more than 40 years of experience. Throughout my career I have successfully led commercial efforts in numerous therapeutic categories, including oncology and immunology across major global markets. Having served most recently as the Chair of the Board and a Member of the Board since 2012, I have a deep understanding of Lantheus and the radiopharmaceutical industry and I’m committed to partnering with our exceptional leadership team to enhance the vision, strategy, and execution necessary to remain the leading radiopharmaceutical focused company.

The outstanding start to 2024 underscores this operational excellence and innovation as we once again delivered strong performance and made strategic investments to advance and expand our pipeline. I’m particularly proud that our products were used to impact the lives of more than 1.6 million patients and their families in the quarter. As we look to the future, Lantheus will continue to be the leading radiopharmaceutical focused company through operational excellence and sustained innovation in diagnostics and therapeutics, enhanced by AI, while delivering better patient outcomes and value to stakeholders. To realize this, we will maximize the value of our existing portfolio, expand our pipeline and expertise through business development and M&A, and sustain an attractive financial profile.

With that, I’ll now turn the call over to Paul to speak about our existing commercial portfolio. I’ll then come back and discuss our pipeline.

Paul Blanchfield: Thank you, Brian. I’m excited to share details on another successful quarter. PYLARIFY generated net sales of $259 million, up over 32% from the prior year. Growth was driven by an expanding PSMA PET imaging market and increasing utilization of PSMA PET with PYLARIFY at existing customer sites. We continue to focus on delivering over $1 billion of net sales for PYLARIFY in 2024, making PYLARIFY the first ever PET imaging agent blockbuster, and ensuring PYLARIFY is available for patients, continues to grow and remains a clear market leader. As the clear market leader, we help to drive growth of the overall PSMA PET imaging market through continued education on the benefits of PSMA PET with PYLARIFY to the prostate cancer community.

We recently launched our new marketing campaign, Let’s Be Clear, which highlights our differentiating clinical and commercial value proposition, as well as our market leadership as the number one utilized PSMA PET imaging agent. Last year, we expanded our PYLARIFY sales force to educate nuclear medicine departments and free-standing imaging centers, as well as referring neurologists and oncologist, and we are beginning to see the impact of these efforts. This new campaign and sales force expansion, combined with our strategic partnerships enables us to continue to grow the overall market and sustain PYLARIFY brand leadership. Behind all of these efforts is our relentless focus on operational excellence, including reliability, scale and out-the-door time flexibility.

PYLARIFY is the only PSMA PET imaging agent that is widely available through a diverse F-18 distributor network ensuring convenient and reliable supply. We serve patients in all 48 contiguous states, as well as Washington DC, and Puerto Rico, and in Europe through our partner carrier [ph] supplying a large and growing market. We continue to expand our network with multiple sites activated in the quarter, while also enabling earlier dose delivery times at existing PMS; both of which improved patient access and support the growing demand for PYLARIFY. We continue to actively implement a multi-faceted strategy to mitigate the impact of the potential expiry of transitional pass-through payment or TPT at the end of 2024. It’s important to note that potential expiration of TPT only affects approximately 20% of our PYLARIFY revenue, and we are committed to mitigating the impact for hospitals.

In addition, TPT is not a PYLARIFY specific issue, but rather a class issue. In fact, the products that currently represent approximately 95% of the prostate cancer PSMA PET imaging market, all face TPT expiry within 9 months of each other. As we mentioned on our last call, we have been entering into long-term strategic partnerships with customers who ensure they continue to have access to PYLARIFY as their PSMA PET agent of choice. We are fiercely committed to ensuring PYLARIFY is available for patients and remains the clear market leader. We also continue to work with the Centers for Medicare and Medicaid Services or CMS to create separate payment for radiopharmaceutical diagnostics while advocating for the FIND Act to ensure health equity for patients seeking access to innovative radiopharmaceutical diagnostics, including PYLARIFY.

To further grow the market and support PYLARIFY’s long-term growth, we are exploring the clinical utility of PYLARIFY in additional patient populations, including favorable intermediate risk patients to inform medical guidelines. We have begun enrolling patients in the mirror study designed to determine whether PSMA PET imaging with PYLARIFY can detect the presence or absence of additional prostate cancer lesions in patients initially staged as favorable intermediate risk, and importantly, how imaging can change their intended management. We also continue to support investigator sponsored research with the potential to expand the clinical utility of PYLARIFY. And as we have previously said, we continue to assess additional options to support the lifecycle of PYLARIFY, including how to maintain patient access and maximize the value of our entire portfolio, and we’ll share more information as appropriate.

In our microbubble business, DEFINITY maintained its strong momentum, with first quarter net sales of approximately $77 million, up 11% year-over-year. DEFINITY’s drivers of success continue to be it’s clinical and commercial value proposition, decades of experience in clinical use supported by our operational excellence and customer education efforts. During the quarter, the FDA approved our supplemental new drug application for DEFINITY’s use in pediatric patients with suboptimal echoes. The expanded indication is a testament to the products proven utility across broad patient populations, now including pediatrics. I will now turn the call back to Brian who will provide some insights into our pipeline.

Brian Markison: Thank you, Paul. Within our existing pipeline, we have a number of opportunities that have the potential to significantly impact the lives of patients and our future growth, including PNT2002, PNT2003 and MK-6240; each of these assets was acquired or licensed based on our in-depth knowledge of the radiopharmaceutical market and our focused business development and M&A efforts. PNT2002 was our investigational PSMA targeted radio-ligand therapy for RLT for the treatment of patients with metastatic castration-resistant prostate cancer. In December 2023, we reported that SPLASH, the phase 3 registrational study, achieved its primary endpoint with a statistically significant 29% reduction in the risk of radiographic progression or death.

As we have previously shared, we are waiting more mature overall survival results as only 46% of protocols specified target events were reached at the first interim analysis. We will analyze the overall survival data when it has matured to 75% of the protocol specified events, which our models indicate should occur in the third quarter of this year. PNT2003, a product candidate for the treatment of neuro-endocrine tumors is currently under FDA review. If approved and pending positive resolution of the Hatch-Waxman litigation, PNT2003 could launch in 2026, making it the first radio-equivalent to lutetium 177 dotatate. This is already a sizeable and growing market, and PNT2003 would be an additional option for patients and their healthcare providers for the treatment of neuro-endocrine tumors.

We continue to progress MK-6240 our F-18 based PET tracer under development for the detection of Tau tangles [ph] which has the potential to be a best-in-class agent for staging and monitoring progression of Alzheimer’s disease, and leverages our expertise in radiopharmaceutical diagnostics, and specifically F-18 based PET products. Clinical evidence accumulated over the past five years has shown the value of Tau as a prognostic marker for cognition, which is recognized and established research guidelines from The National Institute on Aging & Alzheimer’s Association, as well as in their draft clinical guidelines. MK-6240 with high affinity and limited off-target binding insight the brain offers the potential for earlier detection of tau and monitoring for changes the levels of tau, which has led to its adoption within Alzheimer’s disease therapeutic clinical trials.

The success of these trials may help inform future use of MK-6240 and we look forward to sharing more on the regulatory path for this asset later this year. Earlier this year, we announced our partnership with Perspective Therapeutics, which provides us with the ability to further expand our our RLT pipeline with an option to exclusively license VMT-α-NET perspectives lead-based product candidate for the treatment of neuro-endocrine tumors. We see lead 12 [ph] as one of the more promising isotopes for alpha therapy [ph], especially when paired with Perspective’s proprietary key layer. Perspective expects preliminary results from cohorts 1 & 2 of the ongoing dose escalation Phase 1, 2a trial in the third quarter; we also can elect to co-develop certain [indiscernible] based alpha therapies for prostate cancer.

Finally, we took an equity position in the company because we believe in their platform. In summary, we have a market-leading commercial portfolio and a growing development portfolio, and a fully integrated capabilities to develop, manufacture and commercialize multiple product candidates. As we look to the future, we will utilize our balance sheet, strong cash flow, and access to capital to execute a financially attractive business development and M&A opportunities that enhance our pipeline and capabilities in areas that we believe best align with our radiopharmaceuticals expertise. Finally, we have and will continue to sustain and strengthen our financial profile investing in our current business to maximize value while ensuring we have sufficient capacity to invest in long-term growth drivers.

This has been a hallmark of Lantheus and something we plan to continue. Naturally, I’m incredibly proud of the Lantheus has accomplished and even more excited about the future. The radiopharmaceutical field offers significant near and long-term potential, and our existing portfolio, capabilities and financial discipline position us well to continue to be the leading radiopharmaceutical focused company. I will now turn the call over to Bob.

Bob Marshall: Thank you, Brian and good morning, everyone. I will provide highlights of the first quarter 2024 financials focusing on adjusted results with comparisons to the prior year quarter, unless otherwise noted. Turning now to the details; consolidated net revenue for the first quarter was $370 million, an increase of 23%. Radiopharmaceutical oncology contributed $259.3 million of sales in the quarter, up 32.1%, attributable to the continued strength of PYLARIFY with sales of $258.9 million, up 32.4% year-over-year, and in line with seasonal trends we’ve noted over the last year. Precision Diagnostics revenue of $104.2 million was 9% higher. Highlight includes sales of DEFINITY at $76.6 million, 11.2% higher, alongwith TechneLite revenue of $21.7 million, up 3.5%.

Lastly, strategic partnership and other revenue was $6.5 million, down 27.5% due largely to the prior year comparable having $6.2 million of RELISTOR related royalties, not repeated this year. Gross profit margin for the first quarter was 68.8%, an increase of 14 basis points, despite an approximate 70 basis point headwind due to the previously noted RELISTOR royalty sales made last year. The increase is attributable to favorable product mix led by robots volumes of PYLARIFY and DEFINITY, along with the streamlined manufacturing footprint, offset in part by higher contracted material and overhead costs and additional PMF network investments. Operating expenses at 26.8% of net revenue were 538 basis points higher than the prior year rate, but in line with previously guided spending levels.

As noted earlier this year, increases in operating expense reflect investments made to support several growth and efficiency initiatives. Notably, we successfully went live with our new ERP system on January 1, which we supplemented with external help to ensure smooth transition and continuity of our business. Operating profit for the quarter was $155.3 million, or an increase of 9.4%. Other income and expense at $3.9 million of income is a result of net interest — excuse me, net interest income, offset in part by interest expense on our existing debt. Total adjustments in the quarter were $12 million of gain before taxes; of this amount $15.4 million and $9.9 million of expense is associated with non-cash stock and incentive plans and acquired intangible amortization respectively.

$21.7 million of IP, R&D and transactional expenses relate to the prospective transactions during the quarter, along with a $60.7 million unrealized gain tied to that equity investment with the remainder relating to acquisition, integration and other non-recurring expenses. Our effective tax rate was 25.7%. The resulting reported net income from the first quarter was $131.1 million and $118.3 million on an adjusted basis, an increase of 15.8%. GAAP fully diluted earnings per share for the first quarter were $1.87 and $1.69 on an adjusted basis, an increase of 15.2%. Now turning to cash flow. The first quarter operating cash flow totaled $127.2 million, $18.7 million over Q1 last year. Capital expenditures totaled $8.3 million, $900,000 lower than the prior year quarter.

Free cash flow which we defined as operating cash flow less capital expenditures was $119 million, an increase of 19.8%. During the quarter, the company invested $78.3 million in Perspective Therapeutics alongside a net $20 million to obtain certain rights and options, as well as the sale of our Somerset facility. Taken together cash and cash equivalents, net of restricted cash now stands at $718.3 million. We have access to our $350 million undrawn bank revolver, and are comfortable with our strong liquidity position. Turning now to our updated guidance for the full year 2024, as well as a first look at the second quarter. We are increasing our view for PYLARIFY for the full year as we see clear signals of market expansion, brand awareness and market leadership amidst competitive dynamics.

We now forecast PYLARIFY to grow in the mid-20% range over the full year 2023 results. And as was noted on the last call, sequential growth should follow the seasonal pattern seen in 2023. We remain confident in DEFINITY and that it can grow high single digits for the full year on top of last year as mid-teens performance. Other products also remain at our prior expectation levels. Taken together, we estimate full year revenue to be in the range of $1.5 billion to $1.52 billion, up from the prior estimate of $1.41 billion to $1.445 billion, an increase of approximately 18% to 20% over 2023 excluding RELISTOR from the 2023 result. We expect fully diluted adjusted earnings per share to be in the range of $7 and $7.20, up from the prior estimate of $6.50 to $6.70.

For the second quarter, net revenue should be in a range of $380 million to $390 million. Fully diluted adjusted earnings per share it should be in the range of $1.81 to $1.86. With that, let me turn the call back over to Brian.

Brian Markison: Thank you. In summary, our outstanding first quarter performance is a testament to the dedication of the Lantheus employees. We are actively implementing our strategy to drive both, near and long-term growth, prioritizing the advancement expansion of our radiopharmaceutical pipeline, while maintaining robust performance. With ample capital and strategic positioning we’re positioned to keep creating value supported by market leading products, including PYLARIFY, which has the potential to be the first PET imaging agent to reach blockbuster status. Throughout 2024, we will continue to harness our team’s potential to identify, develop and invest in innovative solutions and leverage our proven operational excellence to serve healthcare professionals and patients.

Having been with the company for a number of years before taking over as CEO approximately two months ago, I am more excited than ever about the future of Lantheus. We have a tremendous opportunity to build on our heritage and unrivaled radiopharmaceutical leadership. I want to thank everyone in the Lantheus organization for their ongoing unwavering commitment to our purpose to find, fight and follow disease to deliver better patient outcomes. And with that, we are now ready to take your questions. Operator, please proceed.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Anthony Petrone from Mizuho Financial Group.

Anthony Petrone: Thank you, and congrats on the strong quarter here out of the gate for 2024. And again, Brian, welcome and congratulations on taking the CEO role. Maybe to start with with PYLARIFY, here on [ph] from a 3-month perspective in March, but also the guidance; so well beyond our expectations in 1Q. And Bob, you mentioned here plus 20% on a much higher base here looking out for the remainder of 2024. So just a little bit on the dynamics in the underlying marketplace. Are you seeing more utilization, mostly in the core indications of high risk in metastatic cancer populations? Or you’re actually seeing some usage off label in earlier indications? And then maybe a little bit on utilization as therapy starts to get going. Is that also a driver? And I’ll have a couple of follow-up questions. Thanks.

Brian Markison: Yes. And thanks for the congrats, this is Brian. I’ll kick it off and then turn it over to Paul. But I think the short answer on PYLARIFY is, we are we are seeing the use of the brand expand. And most importantly, it’s within our existing locations and customer accounts. So, I think more referring physicians are getting on the bandwagon. Our commercial team is really expanding the knowledge base that’s out there. And we are also seeing through a lot of clinical trial use that people are beginning to look at much earlier settings for PYLARIFY, much like the mirror study. Paul, you want to add to that?

Paul Blanchfield: Thanks, Brian. And thanks, Anthony. If we look at drivers of PYLARIFY in the first quarter, and then Bob can touch a little bit more on the guidance. I would say it’s driven by three overall factors; the first is the growth in the overall market. The continued expansion of PSMA PET, particularly among existing prescribers has been stronger than we anticipated. And market research suggests an increasing scan utilization for BCR [ph] patients, as well as for patient selection and monitoring, which is really leading to a larger current addressable market than we initially anticipated at the beginning of the year. As Brian alluded to the biggest driver of the PYLARIFY growth is really the increasing utilization at existing customers, where we are seeing existing prescribers continue to support and see the brand preference that we see in PYLARIFY.

We think this really validates the marketing initiatives, including our new campaign, our 2023 sales force expansion, our strategic partnerships with customers, as well as our continued enhancement of our PMF network, which is now upto about 58 sites, including call [ph] times, available days and new sites. And then lastly, we did take a price increase at the beginning of the year. That had a far lesser impact, but we did take a 6% whack in price — whack price increase at the beginning of this year. Would reiterate what Brian mentioned around the label. As we’ve always said, the label for PYLARIFY is incredibly broad. And indeed some of the lifecycle management as noted, the mirror study, is really about addressing guidelines, given the breadth of the label for risk of metastasis prior to definitive therapy or a rising PSA; there really is a broad population for Lantheus to continue to educate physicians on.

And we see those paying rewards from all the investment and hardwork. Maybe on a future looking guidance basis, I’ll let Bob provide some commentary.

Bob Marshall: Good morning, Anthony. Just — I can’t really expand much more on that. I mean, I guess what I would tell you is that each quarter we evaluate or reevaluate to confirm or dismiss our assumptions. And as I said in my prepared remarks, and I think we heard Paul sort of detail that in his as well, is that we see clear signals of market expansion, brand awareness and market leadership. And so from that perspective, we learn from these — this historic data, and we make adjustments to our view of the world. So based on that that we have confidence that we can deliver more than $1 billion in PYLARIFY sales for the year.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Roanna Ruiz from Leerink.

Roanna Ruiz: Great. Good morning, everyone. Another one for PYLARIFY. I was curious if your strategic partnerships already gaining traction, is that driving your guidance raise? And since you just mentioned net price a little bit, I was curious if that’s gonna be sustained through the year?

Bob Marshall: So, I’ll take that one. So I guess from that from a strategic partnership, you know, while Europe is a large market, the launch out there is getting — just getting underway. So from that perspective, the contribution is de minimis. And that the guide is really predicated on the US market and in our efforts here in the US. In terms of the contribution and strategic partnerships using PYL, if you will, within other clinical studies — again, that — that number, again, is not that significant on a grand — in the grand scheme of things.

Paul Blanchfield: I think we’re on — the other piece to just think through is the strategic partnerships with our key customers in the US. As part of the broader remarks we didn’t know we haven’t continued to enter into those strategic partnerships with key customers, we began that in 2023, we continue to see traction in 2024; that’s naturally been with one of the drivers but I would still say, you know, overall — the overall market growth continues to grow. And as the market leader, strategic partnerships are really around solidifying our position, and ensuring that PYLARIFY remains the number one PSMA PET imaging agent going forward. I think we are very pleased with our progress, overall. But it is one of multiple strategies to ensure that PYLARIFY continues to grow.

And we feel comfortable with its competitive position, its clinical and commercial value proposition, and noting that the TPTs, which drives some of the strategic partnerships, impacts 95% of the approved market currently. And so these products are not interchangeable; each of them have differentiated clinical and commercial attributes. And we really deeply understand our customer base, including their site of care mix, whether that’s hospital outpatient or otherwise, their payer mix, specifically the Medicare fee for service. And as such, we are able to work with them to mitigate the potential impact of any financial exposure. Given the competitive nature of the business, I’m sure there’ll be more questions, but we don’t want to elaborate further at this point.

Operator: Thank you. One moment for next question. Our next question comes from the line of Richard Newitter from Truist Securities.

Richard Newitter: Hi, thanks for taking the questions and congrats on a great quarter. If PYLARIFY is not blockbuster status yet, I can only imagine what that threshold looks like. But — maybe just to start-off, the — on the contracting question that Ron has just asked, can you give us any sense as to what percentage of the market or the market that would be impacted by transitional pass-through. Do you think you can get under some sort of contract or dealt with in your negotiations by the time traditional pass-through expires? And any sense as to kind of where you are today relative to that — the goal percentage? And then I have one follow-up.

Brian Markison: Yes. So Richard, we have a very strong sense of what the future looks like for PYLARIFY. And I’m going to let Paul elaborate, but our strategic agreements with our customers are multi-year in duration. You know, they’re all been in the works for quite some time, and the preparation for this has been — like I said, well underway for a while. But I’ll call blockbuster at $1 billion this year; so I’ll help you out with that one. Paul, go ahead.

Paul Blanchfield: Thanks, Richard and I appreciate the congrats. So as we’ve shared in the past, TPT impacts the intersection of site of care and paramedics [ph] and I alluded to this in responding to Roanna. That is really the hospital outpatient setting, and the Medicare fee-for-service. And when you look at that intersection, it really only affects about 20% of PYLARIFY revenues. It is concentrated in the hospital space, and so we’ve understood this since the launch of PYLARIFY and the receipt of TPT. We began entering into long-term, as Brian mentioned strategic partnerships, last year. We are pleased with our progress and I think we see continued growth in the market. But we really bring a high touch interaction with our customers; there is significant overlap as we look with DEFINITY, which has been on the market for 20 years, many of which we have long-term relationships.

And so the amount of interactions that we’re having with our customers to understand the impact, to understand their exposure and their sensitivity; we continue to make progress there. We’re pleased with the progress. We’re obviously not going to share any specifics about where we are in being able to wrap that up, given the competitive nature of the business. But suffice it to say, we continue to be incredibly confident with PYLARIFY’s leadership position, even amidst the potential [indiscernible] pass-through at the end of this year.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Larry Solow from CJS Securities.

Larry Solow: Great. Good morning. Thanks. I echo the congratulations and a formal welcome to you, Brian as well. I guess just sticking with the PYLARIFY theme and the transitional pass-through. Can you just — any comments on just the cadence of the year in terms of sales? And as we get into the latter part of the year, do you see some impact — as some of these start preparing as it’s hard to switch over a patient during treatment. But do you see some impact from the pass-through ahead of that actual exploration? Maybe even modest, but some kind of impact; just thoughts on cadence and sales of PYLARIFY for the year based on that. Thanks.

Bob Marshall: So Larry, I’ll pick up sort of the cadence of sales expectation. I keep referring to the sort of the sequential seasonal trends that we’ve seen over the last year or plus, where we really do see sort of — if you think in terms of quarterly splits, we would expect to see Q1 as the highest sequential improvement than Q4, then Q2, then Q3, in sort of highest to lowest — sort of cadence, if you will. But beyond that, I’ll let Paul take it from there.

Paul Blanchfield: Thanks, Larry. I think as Bob mentioned, we continue to see that there are natural seasonal impacts. When we look at the summer months, physicians and imaging center staff do need to go on vacation; so we do expect some of that. I think, overall for the year, the company guided to mid-20% PYLARIFY growth range with the vast majority of that being volume, and a somewhat minor net price impact. Naturally in the first quarter we took a 6% price increase at the beginning of this year, we’re going to see a little bit more contribution of that now. But as those strategic partnerships further expand, we will see volume be the larger driver, but otherwise, I would stick with Bob’s overall commentary on the sequential component.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Yuan Zhi from B. Riley.

Yuan Zhi: Good morning. Congrats on another great culture [ph]. We’ve heard you and your partners, expanding the availability of PYLARIFY in New York and Midwest. I’m curious, is it based on your demand forecast or just building extra capacity there to accommodate the customer’s request? Thank you.

Paul Blanchfield: Thanks, Yuan. Yes, we did expand our PMF network in the first quarter, we now have 58 active PMFs, and we did add four in the quarter in New York, California, Ohio and in Florida. This is really, in some cases, it is about additional capacity. In many cases, it is really around the right out the door times. Given the overall growth of the PSMA PET imaging market that has been substantial, we are seeing demand go earlier in the day, as well as later in the day. And while F-18 has the longest half life of an approved PSMA PET imaging agent of 110 minutes, we still need to be able to make product multiple times in the day to continue to serve that increase in demand. And so, in building out our PMF network, some of it is redundancy and some of it is really around the capacity to fuel growth at existing sites.

We want to make sure that we have the right timeslot. Our F-18 is a fantastic isotope given the size of the PSMA market with FDG doing approximately 2 million doses, and we can tap into that. There’s naturally a role for other agents with shorter half life that can be made on a generator, specifically at the margins. But we continue to expand our F-18 capacity to be able to drive that, and we are seeing the majority of growth from those new activated sites, be new physicians and new time slots, rather than necessarily cannibalizing existing sites where we’re bringing in product elsewhere.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Justin Walsh from Jones Trading.

Justin Walsh: Hi, thanks for taking the question. It’s been great to see your pipeline development and continue to expand with the Perspective [ph] deal here. Where do you see your pipeline developing overtime?

Brian Markison: We see it developing on two fronts. We’re going to be highly selective and maintain our leadership impediments imaging; I think that’s very clear. And obviously radioligand therapy, we’re already in the space with the Point partnership, Perspective partnerships. So we are definitively going to be spending a lot more time at BD and M&A in radioligand therapy, and building up the pipeline on that front.

Operator: Thank you One moment for our next question. Our next question comes from the line of Andy Hsieh from William Blair.

Andy Hsieh: Great. Thanks for taking our questions. And congratulations on a beat and race quarter [ph]. So a question for you Brian, in light of several important developments in the past 24 or 48 hours, right. So we saw Marianna [ph] getting acquired by Novartis, the complete response reported by clarity in in prostate cancer. Just — maybe from the big picture perspective, share your worldview on the radiopharmaceutical field? And how the FDAs critical really play there? And maybe just a quick one related to radiopharma as well. We saw Novartis showing overall survival hazard ratio down to the less than 1.0 range. So does that impact your confidence level heading into the Q3 update? Thank you.

Brian Markison: Well, with your last comment first. It certainly is encouraging that the passage of time will see a reduction in the point estimate around overall survival. But look, we await the flip of the cards, if you will, and that’s why you do the clinical trial to get the answer. So, we’re pretty excited about it but at the same time, the data will tell us what it tells us at the right time. And as far as the recent activity in the industry, I think it certainly validates the Lantheus platform, if you will. And I think we’re seeing a lot of things. I think Novartis is clearly among the big pharma of players ahead of the pack, right. Their investments are fairly deep, fairly broad, and their commitment to radioligand therapy is is fairly clear.

I think when you look at the other big pharma investments, they seem to be platform acquisitions with one lead asset, and they’re hoping that works out but also a lot of science projects. I think we’re gonna be — I think so very selective in what we pick up and what we look at. We have that expertise; we don’t need a platform because we are the platform. And I think just stay tuned and you’ll see some activity from us in the near future.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Kemp Dolliver from Brookline Capital Markets.

Kemp Dolliver: Great, thank you. Back to PYLARIFY, given your comments about growth in imaging — your business and imaging centers and some of the other initiatives you’ve undertaken; has the mix of site administration changed?

Paul Blanchfield: That’s a great question. Really appreciate the focus there. Generally speaking, the site mix around hospitals, freestanding imaging centers, and government accounts has not changed materially. We generally view kind of the book-of-business as being relatively stable with about two-thirds hospitals, a little bit less than one-third free-standing imaging centers, and then government facilities, both VA, Walter Reed [ph] and others being in that mid single digit range. So overall, we continue to activate new prescribers but the largest growth is really just increasing demand and prescriptions being sent to those existing sites, all in a relatively comparable portion. Now overall, we do see increasing Medicare Advantage relative to fee-for-service, and that’s just — not necessarily a PYLARIFY trend, but overall, kind of a national trend as Medicare Advantage continues to become more important, but the overall site mix relatively comparable year-over-year.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Tara Bancroft from TD Cowen.

Unidentified Analyst: Hi there, this is Greg [ph] speaking on behalf of Tara. So you have a substantial cash balance that should continue to grow with increased revenue year-over-year. So can you tell us more about your plan for capital allocation, either in terms of R&D marketing for PYLARIFY or potential plan for business development?

Bob Marshall: So I’ll take that. This Bob. Yes, you’re right. You know, we had a record quarter for free cash flow at $118 million; so that was — it was great. But I think what you also saw us do in the quarter is deploy $98 million of that with the Perspective transactions. So I think from the perspective of what are we going to do with the money, we constantly — between management and the board, evaluate capital deployment strategies. Clearly, as Brian indicated in his remarks, we’re going to be — we are going to be busy on the business development front. But Paul also noted in internal development, but we are also focused on capital structure optimization, and that can include any number of deployment options. But as we think through the fact that we have this dry powder, it affords us the ability to look at the landscape of business development opportunities to continue to add to the pipeline, and be able to strategically advance important projects internally to solidify our portfolio that sets us up for growth for the long-term.