Lantheus Holdings, Inc. (NASDAQ:LNTH) Q2 2024 Earnings Call Transcript

Lantheus Holdings, Inc. (NASDAQ:LNTH) Q2 2024 Earnings Call Transcript July 31, 2024

Lantheus Holdings, Inc. misses on earnings expectations. Reported EPS is $0.879 EPS, expectations were $1.83.

Operator: Good morning. Welcome to the Lantheus Fourth Quarter and Full Year [ph] 2024 Conference Call. This is your operator for today’s call. Please note that all lines have been placed on mute to limit background noise. This call is being recorded. 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’ll now turn the call over to your host for today. Mark Kinarney, Vice President of 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, Bob Marshall, our CFO, Jeff Humphrey, our Chief Medical Officer, and Amanda Morgan, our Chief Commercial 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 SEC under Form 8K reporting our second quarter 2024 results. The release and today’s slide presentation are in the investors section of our website. 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.

Discussions during this call will also include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included in the investors section of our website. I will now turn the call over to our CEO, Brian.

Brian Markison : Thank you, Mark, and good morning, everyone. At Lantheus, we are the leading radiopharmaceutical-focused company with a clear purpose to find, fight, and follow disease to deliver better patient outcomes. Last quarter, we outlined our strategy to enhance our leadership by maximizing the value of our existing portfolio and expanding our innovative pipeline of radiopharmaceuticals through focused business development and M&A, all while sustaining a strengthening and attractive financial profile. Our continued operational performance, financial discipline, and growing pipeline will enable us to create long-term sustainable value. We delivered another strong quarter led by our commercial products, PYLARIFY, DEFINITY, and TechneLite.

I am particularly proud to share that since the beginning of 2024, our products have positively impacted the lives of more than 3.4 million patients and their families. You will hear more about the quarter from Paul and Bob in just a few moments. Beyond our commercial portfolio, we progressed our pipeline and utilized the strength of our balance sheet to execute three strategic transactions. We are expanding our pipeline with a mix of late and early stage assets that have the potential to address high unmet medical needs. Most recently, we announced the acquisition of NAV-4694, a late-stage next-generation F18 PET imaging agent candidate targeting beta amyloid and Alzheimer’s disease. We entered the Alzheimer’s diagnostic space in 2023 when we acquired MK-6240, our novel clinical-stage tau-targeting F18 PET imaging agent candidate, and we now have two complementary next-generation Alzheimer’s disease diagnostic candidates that we believe could provide critical insights for diagnosis, staging, and monitoring.

As more therapeutic options become available, it is pivotal time for us to advance new diagnostics to address Alzheimer’s disease. We also acquired the global rights to Life Molecular Imaging’s RM2 clinical-stage radiodiagnostic and radiotherapeutic pair. Gallium RM2 and Lutetium RM2, also known as LNTH-2401 and LNTH-2402, target the gastrin-releasing peptide receptor, or GRPR. This potentially best-in-class diagnostic pair fortifies our oncology pipeline and will potentially take us into new disease areas. GRPR is minimally expressed in healthy prostate cells and overexpressed in 75% to 100% of prostate cancer cells, and it’s highly correlated with androgen expression. RM2 could potentially be used in earlier stages of disease. In addition to 15% to 25% of metastatic castration-resistant prostate cancer patients having low to no PSMA expression, we believe this theranostic pair could be a valuable addition to the prostate cancer community.

We plan to work with Life Molecular to initiate a Phase I/IIa prostate cancer study as soon as practical. Additionally, this quarter we licensed two product candidates from Radiopharm Theranostics. This includes an LRRC15-targeted monoclonal antibody, which is a potential first-in-class, highly specific radioconjugate with both orphan drug and rare pediatric disease designations from the FDA for the treatment of osteosarcoma. The agent is designed to target the surrounding tumor microenvironment cells, expressing the protein, potentially treating a broad range of cancers. The second candidate is a TROP2-targeted nanobody radioconjugate, which has best-in-class potential and is advancing in preclinical development. We look forward to updating you on our progress as we continue to thoughtfully build out our portfolio.

And with that, I’d like to now turn the call over to Paul to provide an operational update.

Paul Blanchfield : Thank you, Brian. I’m excited to share details on another remarkable quarter. PYLARIFY generated net sales of more than $273 million, up nearly 30% from the prior year period, driven by continued PSMA PET diagnostic growth and sustained preference for PYLARIFY as the number-one utilized PSMA PET imaging agent and the clear standard for patients and healthcare providers. Existing accounts continue to grow as our sales and marketing efforts, including our Let’s Be Clear campaign, generate awareness and ultimately demand for PYLARIFY among strategic accounts and referring physicians. PYLARIFY remains the only PSMA PET imaging agent that is widely available through a diverse F18 distributor network that we continue to enhance, ensuring convenient and reliable supply.

PYLARIFY has now been administered in all 48 contiguous states, as well as Washington, D.C., Puerto Rico, and outside of the U.S. through our European partnership. Earlier this month, CMS released the calendar year 2025 Proposed Hospital Outpatient Prospective Payment System, or OPPS rule, which recognizes the value and need for broad access to diagnostic radiopharmaceuticals, including PYLARIFY. The rule proposes separate payment for diagnostic radiopharmaceuticals with per-day costs greater than $630, following the expiry of Transitional Pass-Through Payment, or TPT. This represents significant progress for the field of diagnostic radiopharmaceuticals and, most importantly, sustained patient access. If implemented as a final rule in November, CMS would maintain separate payment for PYLARIFY for the approximately 20% of patients with traditional Medicare fee-for-service insurance coverage who are treated in the hospital outpatient setting, in addition to the PET-CT procedural payment.

In the proposed rule, separate payment would be based on Mean Unit Cost, or MUC, beginning in 2025 and potentially transition to ASP at a future date once manufacturers have an opportunity to submit, certify, or restate relevant ASPs. CMS outlined its proposed payment rates, including PYLARIFY, in Addendum B of the proposed rule. As we are in the midst of a 60-day comment period, we want to limit speculation on this topic. Naturally, we will continue to work with industry stakeholders and CMS to maximize patient access and look forward to updating you further when we see the final rule in November. In parallel to CMS’s proposed rule, we will continue to support the passage of legislation to codify separate payment for innovative diagnostic radiopharmaceuticals.

CMS’s proposal represents significant progress, and we will continue to implement our multifaceted strategy to sustain broad patient access to PYLARIFY. This entails differentiating PYLARIFY clinically and commercially through our educational and promotional efforts and entering into long-term strategic partnerships with our key customers. These efforts will further solidify PYLARIFY’s leadership and support growth in 2025 and beyond. PYLARIFY has seen significant adoption since its launch, and we expect the current addressable market to grow from over $2 billion in 2024 to north of $3 billion by 2029. In addition, PSMA PET scans still only represent approximately 30% of prostate cancer scans, with conventional imaging, such as bone scans, MRI, and CT, making up 70% of prostate cancer scan volume.

Clearly, there remains significant near and long-term opportunity for PSMA PET, and PYLARIFY is well positioned to be the first blockbuster radiopharmaceutical diagnostic. We are pleased with our progress and remain fiercely committed to conveying PYLARIFY’s clinical and commercial differentiation to expand the overall market and solidify PYLARIFY’s clear leadership. DEFINITY continued its strong momentum, with second quarter net sales of approximately $78 million, up almost 11% year over year. DEFINITY’s drivers of success continue to be its clinical and commercial value proposition. Decades of experience in clinical use and our cardiology franchise’s focus on operational excellence. With our expanding pipeline, including the three transactions Brian noted, we continue to build out our R&D team and capabilities.

As announced in May, our new Chief Medical Officer, Dr. Jeff Humphrey, brings tremendous oncology and neurology drug development expertise, and his leadership and expertise has already and will continue to help advance our pipeline. Within our prostate cancer portfolio, PNT2002 is our investigational PSMA-targeted radioligand therapy for the treatment of patients with metastatic, castration-resistant prostate cancer. In December 2023, we reported that SPLASH, the Phase III registrational study, achieved its primary endpoint with a statistically significant 29% reduction in the risk of radiographic progression or death. In the coming weeks, we expect to have reached approximately 75% of protocol-specified OS events and plan to share more mature overall survival data in the third quarter.

Additionally, we are pleased that the FDA accepted our abbreviated new drug application for PNT2003, a product candidate for the treatment of neuroendocrine tumors. If approved and pending positive resolution of the Hatch-Waxman litigation, PNT2003 could launch in 2026, making it the first radioequivalent to lutetium dotatase. As Brian mentioned, the acquisition of NAV-4694 expands our Alzheimer’s diagnostics pipeline. With NAV-4694 and MK-6240, we have two unique diagnostic candidates to aid in addressing the tremendous unmet need among Alzheimer’s patients. The FDA’s recent approval of another amyloid beta-directed antibody includes in the dosage and administration section of the label the need to confirm the presence of amyloid beta pathology prior to initiating treatment.

We view this as a positive for the future of pet imaging for Alzheimer’s disease. Also last month, the National Institute on Aging and the Alzheimer’s Association published revised criteria for the diagnosis and staging of Alzheimer’s disease. One of the guidelines’ main principle is that Alzheimer’s disease should be defined biologically using protein-based biomarkers and not only based on a clinical assessment. These guidelines recommend that biomarkers, including both amyloid and tau pet imaging, may be used to diagnose Alzheimer’s disease and provide an indication of its severity. We are excited at the prospect of aiding in the diagnosis, staging, and monitoring of Alzheimer’s disease. Recently, we held a pre-NDA meeting with the FDA, and we expect to submit an NDA for MK-6240 in 2025.

We look forward to sharing more about the regulatory pathways and timeline for MK-6240 and NAV-4694 in the future. I will now turn the call over to Bob.

Bob Marshall : Thank you, Paul, and good morning, everyone. I will provide highlights of the second quarter of 2024 financials, focusing on adjusted results with comparisons to the prior year quarter, unless otherwise noted. Turning to the details, consolidated net revenue for the second quarter was $394.1 million, an increase of 22.5%. Radiopharmaceutical Oncology contributed $273.3 million of sales, up 29.3%, attributable entirely to the continued strength of PYLARIFY and generally in line with expectations and seasonal trends we’ve noted over the last year. Precision diagnostic revenue of $112.1 million was 14.9% higher. Highlights include sales of DEFINITY at $78.1 million, 10.7% higher, along with TechneLite revenue of $28.2 million, up 30.5% due to opportunistic sales in the quarter.

Lastly, strategic partnerships and other revenue was $8.7 million, down 31.7% due to the prior year comparable having $7 million of RELISTOR-related royalties not repeated this year, offset by a strong MK-6240 contribution. Gross profit margin for the second quarter was 68.4%, a decrease of 121 basis points from the second quarter of 2023, due largely to an approximate 80 basis point headwind due to the previously noted RELISTOR royalty sale mid-last year. Further, benefits from favorable overall product mix, led by robust volumes of PYLARIFY and DEFINITY, were offset by higher than forecasted TechneLite volumes, all amidst higher contracted material and overhead costs, as well as expenses tied to PYLARIFY lifecycle management and PMF network expansion.

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 continues to invest in the PYLARIFY franchise, as well as development of our clinical pipeline. R&D expenses increased in the quarter, notably to advance MK-6240, as well as business development evaluations not previously forecasted across multiple functions. Operating profit for the quarter was $171 million, or an increase of 14%. Other income and expense at $4.2 million of income is a result of net interest income offset in part by interest expense in our existing debt. Total adjustments for the quarter were $90.9 million of expense before taxes. Of this amount, $18.5 million and $10.1 million of expense is associated with non-cash stock and incentive plans and acquired intangible amortization, respectively.

$38.3 million of IP R&D and transactional expenses relate to the deals announced in the quarter, along with $22.5 million of unrealized loss tied to our equity investment and perspective, with the remainder relating to acquisition, integration, and other non-recurring expenses. Our effective tax rate was 27.6%. The resulting reported net income for the second quarter was $62.1 million and $126.8 million on an adjusted basis, an increase of 15.7%. GAAP fully diluted earnings per share for the second quarter were $0.88 and $1.80 on an adjusted basis, an increase of 16.4%. Now turning to cash flow, second quarter operating cash flow totaled $84.7 million, $117 million over Q2 last year when we paid the PYLARIFY CVRs. Capital expenditures totaled $11.2 million, essentially flat with the prior year.

Free cash flow, which we defined as operating cash flow less capital expenditures, was $73.5 million, an increase of $116.5 million over the prior year. During the quarter, the company invested $32.9 million to acquire NAV-4694. It is worth noting that the other transactions we’ve announced in recent weeks were funded in July and are not reflected in the use of cash in the Q2 financials. Taken together, cash and cash equivalents, net of restricted cash, now stand at $757 million. We have access to our $350 million undrawn bank revolver and are comfortable with our strong liquidity position. Now turning to our updated guidance for the full year 2024, as well as some details for the second half of the year, notably adjusted EPS. We are affirming our view of revenue for the full year in the previously implied second half of the year, drawing particular attention to the seasonal patterns between Q3 and Q4, as we have continuously noted.

As a reminder, we estimate full year consolidated revenue to be in a range of $1.5 billion to $1.52 billion, with PYLARIFY expected to grow mid-20%. With regard to PYLARIFY, we expect the Q3-Q4 revenue split to favor Q4 on an absolute dollar basis, driven by fewer patient visits during the summer months, as we have seen traditionally. Volumes will continue to grow throughout, offset by the impact on net revenue from our strategic partnerships with key customers, which will begin to manifest more fully as we go deeper into the year. Our prior adjusted EPS guidance of $7 to $7.20 naturally did not take into account the investments we subsequently made to support our long-term future growth, as well as the dynamics of our capital structure. Therefore, we are adjusting our view of earnings to account for the cumulative effect of these transactions we’ve announced over the last several weeks, and in anticipation of now filing an NDA for MK-6240 in 2025.

Much of the anticipated investment in Q4 2024, approximately $0.25, is within the R&D line and will vary on a year-to-year basis as we near commercialization. Additionally, at the current share price and based on calculations tied to our convertible debt instrument, you should model fully diluted weighted average shares outstanding for the second half of the year to be approximately 74.5 million shares and about 72.5 million for the full year. Therefore, fully diluted adjusted earnings per share should be in a range of $6.60 to $6.70. As has been the case all year, this estimate does not include any incremental investment for PNT-2002 nor any further business development that might be completed this year. Lastly, you’ll note that we steered away from quarterly guidance to reflect our focus on solid near-term decisions to deliver longer-term growth.

In the future, we will offer full-year guidance and sufficient color for the investment community to track our progress throughout the year. With that, let me turn the call back over to Brian.

Brian Markison : Thank you, Bob. With PYLARIFY on track to surpass $1 billion in sales and be the first radiopharmaceutical diagnostic blockbuster and DEFINITY maintaining 80-plus percent market share, Lantheus continues to maximize the value of our commercial portfolio. As demonstrated through our three strategic transactions in the second quarter and the progress of our current product candidates, we are fully committed to advancing and expanding our pipeline. We will continue to focus on radiodiagnostics and radiotherapeutics that can make a difference for significant patient populations. Lastly, we will continue to sustain an attractive financial profile by delivering strong performance for our commercial portfolio and deploying our longstanding radiopharmaceutical expertise and capital resources to invest in and bolster our pipeline through strategic business development.

In closing, we will continue to advance innovation and realize our purpose to fight and follow disease to deliver better patient outcomes as the leading radiopharmaceutical-focused company. And with that, we are now ready to take your questions. Operator, please go ahead.

Q&A Session

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

Anthony Petrone : Thank you, and congratulations on the quarter here. Maybe two questions for me. One will be on PYLARIFY, and the second will be on the revised earnings guidance. So on PYLARIFY, maybe just to level set, you know, the viewpoints from the company on the CMS recommendation to unbundle. It seems like that certainly was, you know, a positive proposal from CMS. There’s a debate on how pricing will settle out once we get into the final ruling period in late October, November. So maybe just to level set, what we’ve learned in proposal season and the expectations into the final rule for PYLARIFY? And then the second question on the earnings guidance, clearly a big step up here in R&D. Brian, you called out MK — Bob and Brian, you called out MK-6240, but also other business development costs in there.

I think there perhaps is also some exposure to the perspective deal in there. So maybe just the moving parts on the step up in R&D, and is this the runway we should be expecting going forward? Thank you.

Brian Markison : Okay, and thanks for the questions. Good morning. Before Paul launches into the CMS topic, we are trying to avoid too much speculation here since we’re within the comment period. So you win the over-under. We’re going to answer your question, but for the rest of the folks listening on the line, we will avoid this topic. And then after Paul goes, then Bob will do some clarification on EPS, so, Paul, if you don’t mind.

Paul Blanchfield : Thanks, Brian. Thanks, Anthony. Good morning. As noted in the prepared remarks, we are pleased that CMS recognizes the value of diagnostic radiopharmaceuticals, including PYLARIFY, and the need to pay separately for diagnostic radiopharmaceuticals. If the proposed rule that was put forth becomes final in November, CMS would be maintaining separate payment for PYLARIFY for the 20% of patients that are subject to TPT expiry, namely those with traditional Medicare fee-for-service treated in the hospital outpatient setting. As you noted, the proposed separate payment is based on Mean Unit Cost, or MUC, beginning in 2025, and as noted in the CMS language, could potentially transition to ASP once manufacturers have an opportunity to submit, certify, or restate relevant ASPs. It’s important to note that CMS highlighted that they utilize MUC as manufacturers of radiopharmaceutical diagnostics are not required to, and, indeed, many do not report ASPs for radiopharmaceutical diagnostics once off pass-through.

Lantheus does and will continue to submit PYLARIFY ASP to CMS going forward. As Brian noted, we are in the midst of a 60-day comment period, and we’re going to continue to work with industry stakeholders and engage with CMS to maximize patient access. Overall, this is significant progress for sustained patient access, and the field of diagnostic radiopharmaceuticals overall not only PYLARIFY, but also future potential products we have in our pipeline, like MK and NAV and Alzheimer’s.

Bob Marshall : Thanks. And so, Anthony, when you think about, you know, the guide, naturally, we don’t forecast impacts of transactions. And in this case, in addition to that, you know, a significant opportunity to advance MK-6240 for an NDA filing in 2025. As far as what to expect as we go forward, you know, you’re right. You outlined it actually in your own question in terms of the $0.25 dilution this year from the number of transactions, where we’ve added a number of really interesting, promising pipeline assets. But as we look forward, obviously, our investment will be commensurate with the opportunity from a commercial perspective. And thinking about commercial, we do expect that expenses will vary over time, much like you saw us do with the PYLARIFY opportunity.

If I take you back to late 2020, early 2021, we were investing ahead of the curve to make sure that we were ready to be able to commercialize that asset and maximize the market opportunity. And we do those types of investments with an eye towards return on investment as well as our ability to execute. So, we’ll give more color on that as we get further into 2025 and obviously ’26 as things progress. And we’ll make sure that the investment community can build out models and, you know, track overall progress.

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

Roanna Ruiz : Great. Morning, everyone. Adding on a question from the first one, I was curious, what are your thoughts behind the potential PYLARIFY revenue growth trends when transitioning from 2Q to 3Q? And I was also curious how your ongoing strategic contracts with top accounts might be an incremental tailwind going into second half this year.

Bob Marshall : Good morning. I’ll start. This is Bob. And then I’ll turn it over to Paul for the last bit. In terms of seasonal trends, I think, you know, my prepared remarks, I was trying to be specific about how you would expect Q3 and Q4 with absolute dollar, you know, peak sales, if you will, would be in Q4 versus Q3. So you would split it that way. And that’s in line with seasonal trends that we have seen historically, which I think can be broadened, if you will, across more than just PYLARIFY, but to broader healthcare. But I did also note that you would expect volumes to continue to grow throughout the year. And if you were to look at those volume growths, they would be very much in line with our seasonal trends that we’ve noted. But for more on color on that, I’ll give it to Paul.

Paul Blanchfield : Thanks, Bob. Good morning, Roanna. Strategic partnerships, as mentioned in the prepared remarks, remain a core part of our multifaceted strategy to sustain PYLARIFY’s clear position as the number one PSMA PET imaging agent. We view these partnerships with key customers as incredibly beneficial to ensure that PYLARIFY remains that PSMA PET agent of choice and accessible to all patients, even amidst three other competitors in the market. Conversations with these key customers continue to go well, and we are pleased with our progress. Given the competitive nature of our business, I think you’ll understand why we don’t necessarily want to elaborate further on the progress or the specificity around these partnerships, but we’re pleased with the progress and we continue to push forward.

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

Richard Newitter : Hi. Thanks for taking the question. I was wondering if you could maybe help us size the Alzheimer’s opportunity for you in any way. That’s clearly coming into much nearer term or intermediate term focus. How big could this be relative to a market opportunity, say, like PYLARIFY? And I would imagine the scan per patient component to that is going to be multiple of what is involved with PSMA PET imaging. And then if I could, just up front, just piggybacking off the last question, it sounds like, even with MUC pricing, you feel better about your bargaining position or you should be in a better bargaining position with the discounting conversations or the contracting conversations you’re having than you were prior to the CMS proposal. Is that a fair observation? Thanks.

Brian Markison : Yeah, thanks, Rich. The answer to your last question is no comment, but we’re very encouraged by what we’re seeing. So it’s almost a yes. Anyway, back to the Alzheimer’s field. You know, we’ve quoted before a fairly meaningful TAM, in excess of a billion. I’m not going to get into that. We’re placing a bet here. And if you look at all the recent innovation, particularly recent approvals in Alzheimer’s therapeutics, this field’s about to explode. And, you know, we’re at the very beginning of it with, we believe, two agents that are considered next generation or best in class, and we want to be there right at the front of it. You know, for example, MK-6240 is currently in over 90 trials. I believe 83 of them are in academic centers, the top in the country, in the world.

So NAV, again, possibly the most sensitive and specific beta amyloid marker tracer that could be available once we file. So we’re highly encouraged. We’re placing a bet, and we’re going to be at the intersection when this market explodes.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Matt Taylor from Jefferies.

Matt Taylor : Hi, good morning. Thanks for taking the question. Just wanted to ask about the two main things that were updated on the beginning of the prepared remarks. One is, can you talk about your ability to grow PYLARIFY next year if we do see pricing that is lower than peers based on the CMS update in that segment of the market? And Bob, I was hoping you could parse that a little bit more, the R&D step-up between the MK-6240 NDA and the transactions to help with our modeling for the R&D step-up this year and going forward.

Brian Markison : Paul, you want to grab the first part?

Paul Blanchfield : Morning, Matt. So obviously we were incredibly pleased as we shared with the proposed CMS rules. As we affirm today, we continue to expect PYLARIFY to grow substantially this year in that mid-20% range, the vast majority of it driven by volume with some slight contribution from price as our earlier pricing increases at the beginning of the year have a moderating impact based on strategic partnerships. I think we are incredibly excited and positive about the future prospects of PYLARIFY. The PSMA PET market right now is annualizing just north of $1.5 billion if you look at all relevant players in the second quarter and you annualize that. That’s compared to a total addressable market that this year is north of $2 billion and we expect to grow to north of $3 billion by the end of the decade.

And then if you add in that, that 70% of prostate cancer scans are still with less specific conventional imaging and only 30% is with what we would call this next generation of PSMA PET scans led by PYLARIFY. We think there’s significant opportunity for this market to expand and to continue to grow. Naturally, we’ve been putting in place a number of initiatives to ensure PYLARIFY’s leadership and the market to continue expand led by our commercial and clinical brand differentiation in the market through our commercial teams as well as our marketing efforts. And so we haven’t put a number on 2025 at this point yet, but we remain very positive that PYLARIFY and the overall market will continue to grow and that PYLARIFY will retain its leadership position.

Bob Marshall : And Matt, just to your question about helping with modeling on the different R&D assets, if you will, of the clinical pipeline. As I look at the totals, I would put 70% of it really kind of falls on NAV-4694 and RM2 with more or less the balance going to MK-6240. That obviously will, the MK-6240 will evolve probably quicker in the sense of an NDA filing projected for 2025, where, of course, as we get closer to commercialization effort, things will change, but I’ll provide color on that when we get to 2025.

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

Tara Bancroft : Hi, good morning. So I was hoping you could explain a little bit more of your thinking on the potential impact of other entrants to PYLARIFY in the out years. What assumptions do you have there for market share and what goes into your confidence in maintaining your share? Thanks.

Paul Blanchfield : Thanks, Tara. We certainly are aware of the clinical development environment for other players. I think overall, we believe that PYLARIFY has significant and sustainable competitive advantages, both commercially and clinically that we’ve outlined before. We take new competition incredibly seriously. Overall, I think we believe that first and foremost raises awareness in the marketplace where there is broader voice to demonstrate the potential for PSMA PET imaging. And so I think we’re very positive about PYLARIFY’s current position. We think we continue to have a leading product that has demonstrated superiority out there on the marketplace with what we’re able to be able to help physicians make more informed decisions to manage prostate cancer patients.

And so we take new entrants quite seriously, but we continue to invest, to invest in lifecycle management, in product improvements, as well as in our commercial expertise to continue to grow and lead in this space for many years to come. Amanda, anything you want to add?

Amanda Morgan: No, I think it’s all good.

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. Thank you. Good morning. I guess two quick follow-ups, if I may just squeeze two in. I guess said another way or asked another way, does the CMS proposals at all change your ongoing negotiations and sort of your strategic initiatives in terms of locking in customers? Do you have to play a little bit of a waiting game now? Does that change at all? And then second question, just you mentioned the total market size today in the U.S. is about $1.5 billion, and that basically just sounds like you’re adding up Lucix [ph] and PYLARIFY. Are there any other competitors doing anything meaningful or making any inroads on that market? Thanks.

Brian Markison : Yeah, no, thanks for the questions. As far as our commercial game plan, nothing changes. We’re committed to our strategic partnerships. We’re committed to bringing the best product to more people, so nothing changes. As far as competition is concerned, look, we monitor it. We’re aware of it. Anything a competitor does is meaningful, and we’ll assess how we respond to it, but I’ll let Amanda elaborate a little bit on that point.

Amanda Morgan : Thanks, Brian. So from a competitive dynamic perspective, PYLARIFY is the clear market leader in PSMA PET imaging with more than 400,000 scans since we’ve launched. We believe our continued market leadership will reflect our clear clinical and commercial value proposition. We’ve seen our market leadership continue to expand and solidify with our absolute annual revenue growth, outpacing that of what we see with our competitors. In addition, our market share remains relatively stable as we shared during the call in the mid-60% range, even amidst three other commercial competitors. And overall, finally, we believe there remains a substantial growth opportunity in the PSMA PET market. As Paul shared with you earlier, it’s evidenced by the $2 billion TAM current addressable market and the $3 billion future addressable market, and with a significant number of prostate cancer scans that are performed with conventional imaging instead of PSMA PET.

So we continue to focus on ensuring PYLARIFY continues to grow and remains the market leader. And in the near term, we’ve affirmed our revenue guidance and expect PYLARIFY to grow in the mid-20% range, predominantly driven by volume.

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 the commercial progress of PYLARIFY. We are a little bit surprised to see the MK-6240 NDA submission scheduled in 2025. So can you maybe clarify what was discussed with FDA and what would be the target indication for this agent? And then can you maybe quickly comment on your current thoughts on the share buyback and dependence? Thank you.

Brian Markison : Yeah, so we’ll start with the share buyback first comment. Bob, you want to flag that?

Bob Marshall : All right, so I’ll start with that. So from a buyback perspective, obviously when we think about capital allocation, we broadly consider all elements. Obviously, our first priority is going to be business development. You see us execute that here in Q2. We still have plenty of dry powder, but we also have a full pipeline. It’s a topic that we have continuously taken up with the board, and we will continue to evaluate those opportunities as it becomes appropriate.

Jeff Humphrey: Yes, and thanks for the question about MK-6240. We’ve recently held a pre-NDA meeting with FDA, and we expect to submit the NDA for MK-6240 in 2025. We look forward to sharing more about the regulatory pathways and timelines for MK and NAV in the future. Thanks for the question.

Operator: Thank you. One moment for our next question. Our next question comes from the line of David Turkaly from Citizens JMP.

David Turkaly: Hey, great. Maybe just one for Bob, and I appreciate the commentary you made on seasonality, but as we kind of look at the back half, I know you don’t want to explicitly call out 3Q versus 4Q by product, but it looks like, maybe to clarify, it could be sort of flattish or maybe even down in 3Q versus 2Q just to kind of get that cadence right for the year. Is that kind of a fair assumption?

Bob Marshall : You know, as we look at it, I mean, we’ve given enough pieces and parts to do the math, I think, and sequentially you’re going to see it, particularly from a gross, PYLARIFY volume perspective, it will continue to increase from a volume perspective. We do think, though, that those seasonal trends, as the strategic partnership of key customers come into play, will mitigate more fully as we get into the back half of the year. But to be fair, I mean, our overall guidance hasn’t changed from our perspective from a mid-20% growth rate. So the view really hasn’t mitigated itself throughout the balance of the year. So, yes, I do expect that Q3 will be the lower of the two quarters for planning purposes.

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. Can you provide any color on your expectations for the upcoming splash readout and what you would like to see there to convince you to move forward with your POINT, Lilly partnership?

Brian Markison : Yeah, thanks for the question. You know, look, we’re going to see additional data coming this quarter. We’ve said that before. And, you know, as the trial progresses, we don’t exactly control the timeline, but we have a great feel that it’ll be this third quarter. Our expectation is to move ahead. And that’s the best I can tell you at this time. We’re pretty comfortable with what we’re seeing and what we have seen in meeting our primary endpoint. And obviously the overall survival crossover analysis and the confounding of it is something that’s been an industry topic now for over a year. We like the asset. We’d like to move ahead. We’re encouraged by what we’ve seen already with our primary endpoint. And we’ll update the world when we know what we have.

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

Andy Hsieh : All right. Thanks for taking our question. I’m just wondering if you could educate us on the potential product profile differentiation of NAV-4694. I guess in the market, Amy did have it approved for over a decade now. That’s from Eli Lilly. Just wondering how you plan to provide that positioning differentiation as you kind of launch into a field that already has existing standard of care? Thank you.

Brian Markison : Jeff, do you want to kick that off?

Jeff Humphrey : Yeah, thank you. Thank you. So for NAV, it’s currently in Phase III development as expected. We expect to bring it through pivotal trials and into commercialization. The agent has higher sensitivity and specificity and less off-target binding in the brain that potentially allows for clearer images, better understanding of the anatomic distribution, and importantly, earlier detection of beta amyloid. That earlier detection may lead to earlier treatment and potentially better outcomes. Thanks for the question.

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 : Hi, thank you. What is your ability to leverage your existing commercial footprint for both 6240 and then potentially PNT2002?

Brian Markison : I think that’s a great question. I appreciate it. Do you want to take it, Paul?

Paul Blanchfield : I appreciate the question. I think we’re excited to build from a position of strength from our long history and existing capabilities in radiopharmaceuticals, both diagnostics and what we’re building in therapeutics. And I’d cover a few specific points. Within the Alzheimer’s space, both NAV and MK are F18-based products, so they will be manufactured and we would be able to lever the existing PMF network with the out-the-door times and the production slots that we’ve been working with our key partners that now are across 58 different pet manufacturing facilities in the country. And so we believe that comes from a position of strength to be able to build on that and enhance those relationships from a production and delivery perspective, of which we all know that in radiopharmaceuticals and diagnostics in particular, that can be a hurdle for new entrants and others in the market.

From a commercial perspective, if we look at where the imaging agents would be administered and scanned for Alzheimer’s, we are already in the vast majority of PET-CT sites across the country. Those same sites would be adding capacity to be able to scan for Alzheimer’s agents, both tau tangles and those targeting beta amyloids. And so we would be able to lever our existing infrastructure and capabilities there. Naturally, going into Alzheimer’s would require increased support around referring physicians, recognizing that with PYLARIFY, we’re currently calling on urologists and oncologists, but neurologists and those memory clinics and others that we’ll be seeing and treating Alzheimer’s patients would require investment. As Bob has mentioned, we make investments commensurate with the commercial opportunity, but we do have significant infrastructure there that we could lever.

From a therapeutic perspective, specifically with PNT2002, similarly, if we look at the treating sites for PET-CT, there’s about 2,000 in the country and there’s about 300-plus radiopharmaceutical therapeutic sites, with almost all of those therapeutic sites having imaging. And so we already have relationships at these sites that would be treating for PNT02 as well as PNT03, and we would be able to lever that infrastructure. Again, we would make commensurate investments on the referring physician landscape for 03. It would be with the neuroendocrine treating physicians, which could be medical oncologists, as well as radiation oncologists and the like. We already have some presence there with PYLARIFY, but naturally we would make appropriate investments commensurate with the opportunity.

And so we feel we’re coming from a position of strength where we lever our existing manufacturing as well as commercial relationships and look forward to bringing these exciting agents, if approved, to the market.

Operator: Thank you. [Operator Instructions]. Our next question comes from the line of Richard Newitter from Truist Securities.

Richard Newitter : Hi, thanks. Just two quick follow-ups. It sounds like the vast majority of the bridge from your old earnings guidance to the new is, you know, some higher share count, we estimate about $0.15. And then it sounds like the R&D step-up is most of the rest, or $0.40-plus of the rest. Is that right? Or is there anything else in op-ed consumption or even gross margin? I think your last gross margin guide was around flat year over year with $0.23. Does that still stand? And then just on PYLARIFY, can you grow PYLARIFY next year? I think the street has a mid-single-digit growth rate for PYLARIFY. I’m just wondering if, you know, that’s a reasonable level. I think in your prepared remarks you said you were confident in PYLARIFY continuing to grow into the future? So reconcile that, please. Thank you.

Bob Marshall : Rich, your reconciliation is basically spot on. You know, when I started sort of the guidance paragraph, I did say that, you know, naturally when we started from our starting jumping off point of $7, $7.20, we hadn’t taken into consideration, this acceleration in R&D spend, the transactions that we do because you don’t forecast that kind of stuff. Sometimes these opportunities arise and you take advantage of it. So from a reconciliation perspective, you’ve got exactly the share count, which is just a mathematical issue. And then you’re right. The rest of it, the majority of the additional spend is R&D-based. But that considers, both what we spent in Q2 as well as Q3 and Q4. So, again, yeah, I mean, our underlying operational profile hasn’t really changed other than the ability now to invest in an R&D pipeline that will launch us into our future in terms of additional growth drivers.

Paul Blanchfield : Rich, maybe just some added color.

Bob Marshall : Go ahead, Paul.

Paul Blanchfield : Rich, maybe just some added color on 2025. Today we’re talking about ’24 and what we’re able to deliver to have PYLARIFY be the first ever radiopharmaceutical diagnostic blockbuster with over a $1 billion in sales. We’ve guided to PYLARIFY growing mid-20%. We grew almost 30% year-over-year this quarter. We’re highlighting that the current market is annualizing at about $1.5 billion and has the potential this year to be north of $2 billion and continue to grow. And so we believe we are well positioned. Naturally, there will be a time and a place when we give specific 2025 guidance. But suffice it to say, a product that’s been growing 30% in the first half of this year, 30% year-over-year, with our guide to be in the mid-20%, we still have ample room and momentum to continue to grow and to lead.

And the recent CMS proposed rules only further support that story, in addition to the commercial differentiation, the continued lifecycle management. And so we remain very positive on PYLARIFY’s near and long-term growth potential.

Operator: Ladies and gentlemen, there are no further questions at this time. Thank you for participating in today’s conference. This concludes the program. You may disconnect and have a wonderful day.