Lantheus Holdings, Inc. (NASDAQ:LNTH) Q4 2022 Earnings Call Transcript

Lantheus Holdings, Inc. (NASDAQ:LNTH) Q4 2022 Earnings Call Transcript February 23, 2023

Operator: Good morning, ladies and gentlemen, and welcome to the Lantheus Fourth Year and Full Year 2022 Financial Results Conference Call. This is your operator for today’s call. Please note that all lines have been placed on mute to prevent any background noise. This call is recorded for replay purposes. A replay of the webcast will be available on 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, Mark Kinarney, Vice President of Investor Relations. Mark?

Mark Kinarney: Thank you and good morning. Welcome to Lantheus’ fourth quarter and full year 2022 financial results conference call. With me on today’s call are Mary Anne Heino, our President and CEO; Bob Marshall, our Chief Financial Officer; and Paul Blanchfield, our Chief Operating Officer. Mary Anne will begin the call with introductory remarks and then turn the call over to Paul to provide an operational update. Bob will cover our financial results and provide 2023 guidance. Mary Anne will provide closing remarks and then we will 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 fourth quarter and full year 2022 results.

You can find the release in the Investors section of our website at lantheus.com. For those of you not on the webcast, you can find the slide presentation on the Investors section of our website under the Presentations tab. Before I get started, I would like to remind you that our comments during this . Actual results may differ materially from those indicated by forward-looking statements due to a variety of risks and uncertainties. Please note that we assume no obligation to update these forward-looking statements, except as required by applicable law, even if actual results or future expectations change materially. Please refer to our SEC filings for a detailed discussion of these risks and uncertainties. Also, discussions during this call will include certain non-GAAP financial measures.

Reconciliation of these measures to the most directly comparable GAAP financial measures is also included on the Investors section of our website. With that, it is my pleasure to now turn the call over to Mary Anne.

Mary Anne Heino: Thank you, Mark, and good morning to everyone joining us on today’s call. 2022 was a banner year for Lantheus. Our fourth quarter and full year results that we announced this morning, reflect the outstanding work of the nearly 700 employees at Lantheus, who have been executing against our strategic plan. With disciplined investments and purposeful attention to the markets we serve, we have accelerated our growth, diversified our portfolio and continued to position Lantheus as a category leader. Importantly, we continue to fulfill our mission to find, fight and follow disease to deliver better patient outcomes. And I’m incredibly proud that we impacted the lives of more than 6 million patients in 2022 alone. Our performance in 2022 was simply outstanding, with record revenues, earnings per share and cash flow.

As a result of value creation at the enterprise level, we were elevated from the S&P SmallCap 600 to the S&P MidCap 400 Index in October. We continue to be the category leader for both our key products. PSMA PET with PYLARIFY solidified its position as the number one PSMA Pet agent with commanding market share versus the competition. Over the course of 2022, we expanded our manufacturing capacity by activating an additional 16 PET manufacturing facilities or PMFs, achieved coverage with over 90% of covered lives having access to PYLARIFY and contracted with 100% of our targeted academic centers, to ensure PSMA PET with PYLARIFY is the imaging agent of choice in prostate cancer. Most importantly, we are thrilled to report PSMA PET with PYLARIFY was used in more than 100,000 patients scans in 2022.

DEFINITY continues to be the number one ultrasound enhancing agent in its 22nd year on the market. Last February, we received FDA approval for our supplemental new drug application for an on-campus manufacturing facility. This facility provides us with supply chain optionality and the opportunity for margin expansion, as we progressively include inventory from this manufacturing line into our supply chain. And again, important to our mission to find, fight and follow disease, in 2022, DEFINITY was the agent of choice in approximately three million patient echocardiography exams. In the fourth quarter, we announced an additional strategic collaboration in our microbubble franchise. Microbubbles have been instrumental in cardiac imaging for years and now are being used for other applications.

Our newest partner SonoThera, a biotechnology company dedicated to treating the root cause of human diseases through genetic therapy will combine its non-viral vector gene therapy delivery technology with our microbubble in several applications. We believe microbubble ultrasound enhancing agents have the potential to improve gene therapy treatment by enhancing the delivery of genetic payloads to tissue and we are excited to be part of this important innovative development. 2022 was also an exciting year with respect to building out our portfolio. We continue to invest in our pipeline and reported progress with two of our product candidates, 1095 our PSMA-targeted I-131 prostate cancer therapeutic; and NM-01, our novel imaging agent currently under development for the assessment of PD-L1 expression in non-small cell lung cancer.

For 1095, we enrolled the last patient in our ARROW Phase II trial for patients with metastatic castration-resistant prostate cancer, who will be followed for one year after their first treatment for all efficacy endpoints. For NM-01, we initiated PELICAN, a Phase IIa trial and began enrolling patients in May. In addition to advancing our current pipeline assets, we also expanded our pipeline with strategic in-licenses and a recently announced acquisition. In December, we licensed exclusive worldwide rights, excluding certain territories for two therapeutic product candidates from POINT Biopharma, PNT2002 and PNT2003. As the leader in radiopharmaceuticals with extensive radio isotopes supply chain and distribution experience, a well-established commercial infrastructure and longstanding relationships with relevant healthcare stakeholders and hospitals, we are uniquely positioned to unlock the significant commercial potential of these two product candidates, which we believe will enhance the long-term revenue and earnings growth potential for Lantheus.

PNT2002 is a PSMA-targeted lutetium based radioligand therapy for metastatic prostate cancer. PNT2003 is a somatostatin receptor targeted radioligand therapy with non-carrier added lutetium for gastroenteropancreatic neuroendocrine tumors. Both are late-stage product candidates that if approved, will address therapeutic areas in markets with significant unmet need and where Lantheus already had a presence. PNT2002 broadens Lantheus’ prostate cancer franchise, which is currently anchored by PYLARIFY, the number one PSMA PET imaging agent in the United States. PNT2003 will allow us to expand our radio pharmaceutical therapeutic offerings beyond AZEDRA, the only FDA-approved radioligand therapy for pheochromocytoma and paraganglioma, which are rare neuroendocrine tumors.

We also recently announced our acquisition of Cerveau Technologies. This acquisition leverages our expertise in radiopharmaceutical diagnostics and specifically F 18 PET products and expands our pharma services offerings into neurodegenerative diseases. The asset acquired from Cerveau is a novel clinical stage PET imaging agent called MK-6240 that targets Tau tangles in Alzheimer’s disease. It has the potential to aid in diagnosing staging and informing treatment selection as well as response to therapy for Alzheimer’s disease. MK-6240 is currently being used in more than 60 academic and industry late-stage clinical trials hosted by more than 16 pharmaceutical companies around the world for Alzheimer’s disease therapeutic candidates under development.

Our goal is to progress MK-6240 for even greater expanded use in global clinical trials and adoption of this agent as the preferred biomarker for identifying the presence of Alzheimer’s disease and monitoring its progression in afflicted patients. Finally in 2022 two of our partnered assets reached important milestones. Our partner Curium who is seeking to bring the first commercially available F 18 based PSMA PET imaging agent to Europe in June submitted their marketing authorization application to the European Medicines Agency for approval. This brings the potential promise of F 18 based PSMA PET one step closer for men in Europe. In addition last fall we announced jointly with our partner GE Healthcare that the Phase 3 clinical trial of F 18 based PET diagnostic radiopharmaceutical flurpiridaz met the co-primary endpoints of specificity and sensitivity for detecting coronary artery disease as well as a key secondary endpoint demonstrating higher diagnostic efficacy of flurpiridaz as compared to SPECT myocardial perfusion imaging.

As you can see from the highlights I just mentioned we’ve made significant process — progress on our strategy to accelerate growth diversify our portfolio and position Lantheus as a category leader in the markets in which we compete. In 2023, we are committed to continuing to deliver value to our patients, customers, employees and our shareholders. With that, I’ll now turn the call over to Paul for an operational update on our key products.

Paul Blanchfield : Thank you Mary Anne, and good morning everyone. As Mary Anne mentioned, 2022 was a year of significant progress. As we solidified PSMA PET with PYLARIFY as the market leading PSMA PET diagnostic imaging agent for the US prostate cancer community. Our fourth quarter results demonstrated impressive market leadership as well as continued growth of the overall PSMA PET imaging market. We are pleased with PYLARIFY success and the impact it has made on the lives of men living with prostate cancer. PYLARIFY generated net sales of $527.4 million for the full year 2022 with fourth quarter revenues of $160.6 million, up nearly 12% sequentially from the third quarter. This reflects over 100,000 patient scans employing PSMA PET with PYLARIFY in 2022.

While much of our effort since launch has focused on demand satisfaction including activating our PMF network and ensuring 90% of covered lives have access to PYLARIFY, we focused our promotional efforts in the second half of 2022 on driving brand awareness of PSMA PET with PYLARIFY to the 5,000 healthcare professionals that clinically manage the vast majority of prostate cancer patients. We believe our promotional efforts have been effective as we have delivered sequential quarterly growth of nearly 12% with the majority of growth driven by existing accounts. In addition to strong performance within existing customers, we continue to add new accounts throughout the quarter. Overall, from a demand perspective, we are pleased with the underlying trends and the range of ordering across both existing and new customers.

Last month, we updated the TAM for PSMA PET imaging agents after analyzing the results of our completed primary research that was powered to be statistically significant and the results of the recently updated SEER database. These changes, translate into a TAM of approximately $1.6 billion, up from our prior $1.1 billion estimate. There are two specific areas with revised or updated considerations namely, an increase in incidence and prevalence which we expect to average 2% to 3% going forward and a revised consideration for the number of scans per patient with suspected recurrence and for radioligand therapy patient selection. As a result, we now believe the current market potential for PSMA PET imaging could be up to 350,000 annual scans, an increase from our previous estimate of 250,000 annual scans.

To support the demand for PYLARIFY, we continue to expand our PMF network with 37 activated sites at the end of 2022, up from 21 sites at the end of 2021. These additional manufacturing facilities provide geographic breadth, out-the-door time flexibility and added optionality to our existing network. These additions as well as operational enhancements we made in 2022, such as adding additional synthesis boxes, enabled us to continue to serve our customers on-time, in full at a rate of 98% for the second half of 2022. We believe this demonstrates our operational excellence that we strive to deliver to all of our customers. We continue to be excited about the launch and reception of PSMA PET with PYLARIFY to-date and believe there is significant potential for us to grow the market and ensure PYLARIFY remains the number one PSMA PET imaging agent in the U.S. prostate cancer community.

Switching to our microbubble business, 2022 was a year in which we were able to grow DEFINITY and remain the number one ultrasound-enhancing agent, while navigating market dynamics. Our drivers of success continue to be our clinical differentiation, distribution model, supporting data and publications and dedicated sales team. We grew our DEFINITY business more than 7% in the fourth quarter, while maintaining greater than 80% share of the U.S. ultrasound-enhancing agent market. I will now turn the call over to Bob, for a financial update.

Bob Marshall: Thank you, Paul and good morning everyone. I will provide highlights of the fourth quarter and full year financials focusing on adjusted results, unless otherwise noted. Turning to the quarter, revenue for the fourth quarter was $263.2 million, an increase of 103.1% over the prior year quarter. Revenue for the full year was $935.1 million, an increase of 119.9% over the prior year period. And as a reminder, this full year number includes the $24 million settlement with Novartis in Q1 of 2022. Now turning to the details, beginning with precision diagnostics. Revenue of $94.4 million was 8.4% higher from the prior year quarter. Sales of DEFINITY net of rebates and allowances were $63.6 million, 7.3% higher as compared to the prior year quarter.

DEFINITY closed out 2022 with $245 million of net sales, an increase of 5.3% over the prior year. TechneLite net revenue was $24.7 million, up 12.2% from the prior year quarter due to approximately $5.5 million in opportunistic sales stemming from competitive supply chain challenges. During 2022, total opportunistic sales contributed approximately $10.7 million of TechneLite’s full year $88.9 million performance, which was down 2.7% from the prior year. As a reminder and for modeling purposes in 2023, we exited our thallium and gallium businesses at the beginning of the — excuse me — at the end of the third quarter. Total 2022 sales for these products were $2.3 million, which will not repeat in 2023. Radiopharmaceutical oncology contributed $161 million of sales in the quarter, up 352.8% from the prior year attributable to the continued sequential and year-over-year growth of PYLARIFY sales of $160.6 million in the quarter as noted by Paul earlier.

Full year sales totaled $527.4 million. AZEDRA contributed $0.9 million in the quarter and $4.1 million on the full year flat with 2021. Lastly, strategic partnerships and other revenue was $7.2 million, up 5.8% from the prior year quarter, driven primarily by the RELISTOR royalty. For the full year including the settlement with Novartis, revenue was $46.9 million. Gross profit margin for the fourth quarter was 66.8%, an increase of 10.2 percentage points. Over the fourth quarter of 2021 on a similar basis, gross profit margin increased sequentially from the third quarter unfavorable product mix from PYLARIFY, DEFINITY and TechneLite. Operating expenses at 21.2% of net revenue were 13.5 percentage points favorable over the prior year rate of 34.7% and within previously guided spending levels.

Increases in sales and marketing and research and development reflect the investment in headcount support ongoing commercial, as well as medical efforts in addition to increases in market research, travel and sales operations activities. G&A improved 439 basis points as a percentage of revenue in the quarter, while investing in our ERP project, which remains on target. Other income and expense at $4 million of expense is a result of net interest expense and the release of a portion of our uncertain tax positions or UTPs offset in part by the settlement of our interest rate swap, which resulted in a $5.5 million gain. Operating profit for the quarter was $119.8 million or an increase of 325% over the same period prior year. Total adjustments in the quarter totaled $292 million of expense before taxes.

Of this amount $8.1 million and $8.3 million of expense is associated with non-cash stock and incentive plans and acquired intangible amortization, respectively. Also in the quarter we expense R&D relating to the license agreements with POINT Biopharma together with $5.9 million of related costs to consummate the agreements. Further the company reduced contingent receivables by $8.2 million and increased contingent liabilities by $1.1 million in the quarter. The remainder is related to acquisition, integration and other nonrecurring expenses. Our effective tax rate was 16.6% in the quarter. During the quarter, based on newly acquired information, we released other income as an expense and through the tax provision as a benefit another portion of our UTP provisions, dating back to our 2008 sales from BMS for which we are fully indemnified.

The net result does not influence net income, but does distort the underlying effective tax rate or ETR for the period. The full year ETR was 24.4%. The resulting reported net income for the fourth quarter was a loss of $119.2 million and a profit of $96.6 million on an adjusted basis, an increase of 460.4% over the prior year period. GAAP fully diluted earnings per share for the fourth quarter was a loss of $1.74 and a profit of $1.37 on an adjusted basis, an increase from the prior year of 450.8%. On a full year basis, GAAP fully diluted earnings per share were a profit of $0.40 and a profit of $4.22 on an adjusted basis, an increase of 755.1% over the prior year. Now turning to cash flow. Fourth quarter operating cash flow totaled $105.4 million, as compared to $13.9 million in Q4 2021.

Capital expenditures totaled $4.7 million, essentially flat with the prior year quarter. Free cash flow which we define as operating cash flow less capital expenditures was $100.6 million, an increase of $91.3 million from the prior year period. In addition to accelerating free cash flows driven by significant growth of revenue in a levered P&L offset in part by prudent investment, the company actioned several financing activities. During the fourth quarter, the company refinanced revolving senior credit facility increasing the borrowing capacity to $350 million and refinanced the remaining term loan A into a newly issued $575 million of instrument C or net share settlement convertible notes. The notes carry a 2.625% fixed interest rate coupon with a 42.5% conversion premium.

Together with the concurrent $75 million share repurchase, the effective interest rate remains below current variable debt capital market options to a share price above $100. Also during the quarter, the company paid POINT Biopharma $216 million in accordance with the license agreements for PNT2002 and PNT2003, two product candidates that we believe will help sustain double-digit top line growth in the mid- to long-term. Taken together cash and cash equivalents, net of restricted cash now stand at $415.7 million. We have access to our new $350 million undrawn bank revolver and are comfortable with our strong liquidity position. Now before turning to consolidated guidance for the company, I’d like to take a moment to reflect on how our latest acquisition of Cerveau and its radiopharmaceutical Tau diagnostic MK-6240 will impact our financials.

We estimate the transaction will contribute approximately $10 million of revenue for our Pharma Services business booked within strategic partnerships and other and be neutral to adjusted EPS for the full year 2023. We also expect the deal to become accretive to the company beginning next year. Additionally, I would like to reiterate for year-over-year comparative purposes that we booked a settlement with Novartis in Q1 of 2022 for $24 million in revenue and $0.25 of adjusted EPS which will not repeat in 2023. Turning now to guidance for 2023 full year as well as the first quarter. We expect growth to remain robust with solid double-digit growth for PYLARIFY supported by mid single-digit growth of DEFINITY for the full year, though higher earlier in the year due to favorable prior year comparables.

We forecast PYLARIFY to be in a range of $740 million to $760 million for the full year. Taken together with other revenue contributors, we estimate full year revenue to be in the range of $1.14 billion to $1.16 billion, an increase of approximately 22% to 24% over 2022 and 25% to 27% ex the Novartis settlement. For modeling purposes, gross profit margin should be incrementally ahead of 2022 in conjunction with continued investment in expanding the PMF network. We continue €“ we anticipate that our operating expenses will be higher as a percentage of revenue over 2022 at approximately 24%. This increase incorporates approximately $20 million to $25 million of added sales and marketing investment as well as additional funding for research and development associated with both the POINT Biopharma agreements and collaboration activities and expenses associated with the acquired Cerveau business.

Also the base business will have incremental focused investments, notably within sales and marketing and research development to support and fuel the growth the company is experiencing and expect in the future. Lastly within G&A, as I have noted over the last year, we are in the implementation phase of our ERP project and those expenses are captured in this line item. Interest expense should be reflective of our now current capital structure and the tax rate will normalize to approximately 27.5%. Therefore, for the full year, we expect fully diluted adjusted earnings per share to be in the range of $4.95 to $5.10. For the first quarter, net revenue should be in a range of $280 million to $285 million. I will not be providing product specific views given that we are two-thirds of the way through the quarter which has informed this estimate.

Fully diluted adjusted earnings per share should be in the range of $1.28 to $1.32. Lastly for modeling purposes, depreciation and amortization for full year 2023 should be approximately $12 million and $36 million respectively, generally spread evenly throughout the year. Fully diluted shares outstanding should be in a range of 70 million to 71 million after taking into consideration the share repurchase executed concurrently with the convertible notes offering. With that let me turn the call back over to Mary Anne.

Mary Anne Heino: Thank you, Bob. 2022 was a tremendous year for Lantheus. We significantly exceeded revenue and EPS targets for both the quarter and the year. We firmly established PSMA PET with PYLARIFY as the category leader. We executed M&A activity directly in line with the strategic priorities we have to ensure continued growth for the company. And we are also generating the free cash flow and a strong capital structure that ensures we can fund and can continue to fund our strategic priorities into the future. We believe our plans for 2023 and beyond will deliver value to our patients, the healthcare professionals we serve and our shareholders. In closing, I’d like to thank each and every one of my employees without whom Lantheus’ significant achievements would simply not have been possible.

The commitment of Lantheus employees is second to none and they work tirelessly every day to advance our purpose to find, fight and follow disease to deliver better patient outcomes. With that Bob, Paul and I are now ready to take your questions. Operator, please go ahead.

Q&A Session

Operator: Thank you. One moment for our first question. Our first question comes from Richard Newitter with Truist. Your line is open.

Richard Newitter: Hi. Thanks for taking the questions.

Mary Anne Heino: Good morning, Rich.

Richard Newitter: Hi. How are you? Congrats on a great finish to the year here. I have a couple here. First maybe just starting off with the TAM. Thank you for the detail there on what drove the step-up from $1.1 billion to $1.6 billion. I’m just curious I think previously at your Analyst Day, you had also identified some incremental TAM expansion opportunity once you get pre-chemo indications for radioligand therapies in the future. I think you had quantified that somewhere in the $400 million $500 million range. And I think you had assumed one scan or 1.5 scans per patient there. I’m just curious, is that incremental still to the $1.6 billion you updated? And is the $400 million to $500 million kind of add-on the right way to think about that given that you’re increasing your scans to patients? I’m just trying to get a sense for where the TAM could be headed once we get potential approvals there.

Paul Blanchfield: Yes. Rich thanks for the question.

Mary Anne Heino: Yes. You know what Rich, I’m going to pop that over — go ahead Paul.

Paul Blanchfield: Rich, this is Paul. I’ll take this. Thanks Rich for the question. So just to recap, last year as we highlighted we were at a TAM of about $1.1 billion. We updated in January to $1.6 billion. That is only inclusive of current label clinical guidelines as well as what we’re seeing in medical practice and the number of scans per patient. What we had highlighted last year in May at the Investor Day was an incremental approximately, you’re correct, 100,000 scans, $400 million to $500 million potential, but that was for both the addition of intermediate favorable in the initial education as well as the potential advancement into pre-chemo setting, in other words first and second line for patient selection for the prostate cancer community.

And so that’s a potential incremental that we would update our TAM accordingly, when guidelines were updated or new indications for PSMA therapeutics were approved. So those are not inclusive at this point in the $1.6 billion and would recognize additional upside as new approvals and indications update in addition to just regular 2% to 3% growth in incidence and prevalence going forward.

Richard Newitter: Okay. And just to clarify there though, the scan assumptions to get to that $400 million to $500 million for those indications, it was I think 1 or 1.5 per patient or thereabouts just given that you’ve increased your scan for patient assumptions kind of on your existing indications, is it fair to assume $400 million to $500 million as a floor and that could also be higher on more scans per patient?

Paul Blanchfield: I think it’s fair to say that medical practice continues to evolve. What we shared last May was certainly based on where medical practice was then. In January, we didn’t come out and update what those numbers would be. But we would naturally reassess with appropriate market research guidelines and physician practice to inform what that would be. But I don’t think your assumption is incorrect.

Richard Newitter: Okay. And then on PYLARIFY guidance, I guess $750 million at the midpoint for 2023 nice healthy double-digit growth. I’m curious if you could comment a little bit on what your assumptions are for the cadence and sequential improvement moving through the year. And also, if you could comment on, where you see market penetration and your share of the market maybe just based on the $1.6 billion as you’re exiting next year. And what if any changes in the competitive landscape are factored into that $750 million midpoint?

Mary Anne Heino: So, Rich, I’ll address that first, and then folks can pop in. But I think what you’re hearing us explain is that, there continues to be additional potential in this market not only from new indications, which would be awarded to therapeutic candidate, but also from physician adoption of using PYLARIFY €“ PSMA PET with PYLARIFY either in different areas across what’s already within our indications or using it more frequently. And we will just say, we’ll continue to update as we credibly have that information to offer, but we would fully expect it to continue to expand the TAM. And that does not include geographic expansion or life cycle management expansion which could occur in indications or therapeutic areas outside of prostate cancer and that’s something we’ll also continue to update as we look throughout the year.

But we €“ I don’t want to leave the impression that we are creating medical practice. We are influencing medical practice by having brought such a strong innovative product to the market but we are monitoring medical practice to see how they are adopting and briefing it. To your question about cadence for the year as Bob mentioned, when he was first offering guidance this far into the quarter it’s just not appropriate to give any product-specific guidance for the rest of the quarter. I think it’s fair to say, you’ll continue to see PYLARIFY grow as well as our other products. But at this time, we would not be offering any specific cadence-type guidance for the products or for end of year.

Richard Newitter: Great. And if I could just squeeze one last one in. Thank you for the color $10 million on Cerveau revenues in the guide this year. I’m curious, if we should expect or if there is any contemplation of revenue contribution from some of your other kind of royalty-driven product areas like Flurpiridaz and Curium and for PYLARIFY sales in Europe. How should we think about the potential for revenue contribution from those in 2023? And is there any assumption of revenue contribution in the guide? Thank you.

Mary Anne Heino: Yeah, I’m going to forgive you for the pronunciation. And I think, if you look at what we’ve offered as general timelines for what would lead to the approval process for flurpiridaz, you would not anticipate seeing any revenue for that product either both by GE Healthcare or royalty back to us in 2023. For the rest of €“ with our Pharma Services partnership we do book revenue for the use of piflupolastat in clinical trials. So that is rolled up into our PYLARIFY number. So we’re not asking you to try to separate it or model it. And for the rest of our partnerships at this time aside from of course RELISTOR, which is a pure royalty stream which Bob has been fairly explicit about, I would not have you potentially or purposely model any other direct revenue.

Richard Newitter: Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Anthony Petrone with Mizuho. Your line is open.

Anthony Petrone: Thanks. And congratulations on the year and just a strong build-out going back years ago covering the name €“ the acquisition of Progenics as to where we are today. So congratulations to the team. Maybe one on the TAM expansion, Paul $1.6 billion. Just a follow-up to Richard’s questions, when we think about testing intensity we also picked up that you are seeing some testing intensity actually with hormone therapy. We also have radioligand therapies in there. And I think the number of scans for each therapy is slightly different. So when we think about patients actually going into therapy and then being monitored with PYLARIFY, how does that spread sort of play out? Is it more intense with radioligand? How is it with hormone therapy? And then I’ll have a couple of follow-ups. Thanks.

Mary Anne Heino: Sure. So I’m going to start and then I’m going to turn to Paul because again I want us to continue to be clear in that we are monitoring how the market is embracing these products. Our indications put aside the pending potential approval of additional Radioligand therapy or additional uses in Radioligand therapies. Our two indications really do cover the full spectrum of prostate cancer and its treatment in men. However, what we use for practice guidelines is what the NCCN and SNMMI and other similar bodies like that put out in their professional opinion as to how these products should be used. And as you are encapsulating it yourself when you say that there seems to be different practice regimens emerging that is so true.

Our physicians continue to learn where the value is for PSMA imaging and specifically for imaging with PYLARIFY. We expect to see changes there. When the medical practice has spoken I’ll say loudly enough and has generated enough science then those practices get solidified into guidelines, which then become practice guidelines for our physicians. So it’s a bit of a give-and-take skill. So for our purposes we are assuming that for usage within therapy now you mentioned hormone therapy, I’m not going to specifically rest on that. But I will say on the approved Radioligand therapy that yes to-date we are estimating at least 1.8 scans per patient for those patients undergoing those therapies. In other parts of our very broad application and patients are using annually.

But this information it continues to evolve because the practice continues to evolve.

Paul Blanchfield: Yes, Mary Anne maybe I would just add in. Anthony, just to add in — agree with everything Mary Anne said. I think what we’re letting as Mary Anne mentioned is the market speak. We conducted a thorough third-party market research to assess how physicians across urologists, oncologists, radiation oncologists are assessing the market, how they’re using PSMA PET imaging specifically PYLARIFY, and there’s certainly a range out there depending on how many scans and how this is going to be used whether a course of therapeutic treatment for Radioligand therapy as you mentioned could be four courses or six courses. The current estimates that we rolled out after that in but we’re still very early in the realization of a PSMA PET marketplace where clinical practice is evolving.

We’ve only had Radioligand therapeutics on the market for less than a year. And so there’s a number of patients still going through there and medical practice will continue to evolve. What we’ve said is that we’ll continue to update the total addressable market when we see guidelines change, when we see the FDA grant new indications or when we have enough substantive third-party research. But suffice it to say, we’ve already seen the TAM increase significantly to 1.6 today. And through merely incidence and prevalence to say nothing of additional medical practice guidelines and approvals we could see that evolve going forward.

Anthony Petrone: Very helpful. Two quick follow-ups. I’ll hop back in. So one is just on the competitive landscape. We get questions from investors quite often on that. Maybe just an update of the competitive dynamics, another competitor is coming on market later this year. There’s two competitors in the market today. How does that play out over time? And if you can — can you provide any update on the initiative to secure a J-code for PYLARIFY going forward? Again congratulations.

Mary Anne Heino: Thanks, Anthony. I’ll start and then I’ll turn it over to Paul again. But I think we’ve said this before. We welcome and we have raised additional competitors into this market because this is a new market that needs to be grown. And the best way to do that is to have more voice and more activity in the market. Now, having said that, I will also say, we will continue to hold our commanding presence in the market as the category leader with PYLARIFY. But the entrance of other products into the market and I’m sure you’re referring to the Blue Earth F 18 product that can — may come into the market later this year, just based on general regulatory timelines. We would look forward to having another player in the market.

As I said, in that — in those markets, however, we view it and we view it many different ways, because we intend to be very prepared for anything that happens in our market. We intend to remain as the commanding leader with PYLARIFY in that market. Paul, do you want to add there?

Paul Blanchfield: Yes. Thanks, Mary Anne. I would echo that, Anthony. I think, as you’ve seen us in the history of Lantheus is, when we go into a market, we aim to be leaders in that market and we aim to sustain that market leadership. With PYLARIFY, I don’t think we think that’s anything different. When we look at the significant first-mover advantage and our ability to build out a PMF manufacturing network of now 37, with what we believe is sustainable advantageous and appropriate out-the-door times, geographic breadth, not to mention 98% on-time and full in the second half of 2022. We look at the contracting that we’re unable to do and the customers that we’ve been able to bring on board. We look at our market access coverage of being able to achieve early last year 90% of covered lives.

And then, lastly, I think you’re seeing the results of our commercial excellence of being out to do — go out into the marketplace and to generate demand by educating physicians. I think, that’s really the bread and butter of what Lantheus does incredibly well in these markets. And so, we would expect that to be able to continue. And as Mary Anne mentioned, we expect and we anticipate competition. We continue to believe that we can be the leader in PSMA PET and we think we saw that continue to play out in the fourth quarter, whereas Mary Anne mentioned, we had commanding market leadership and we would expect that to continue. Now, to your point earlier on the J-code comment, which is more of a broader question, I presume, around pass-through.

There’s a number of things that we think about with regards to pass-through, that we are supporting trade associations in the reintroduction in this new Congress and eventual passages we believe of the FIND Act, which would transform the current transitional pass-through status. We continue to work with CMS and regulators on updating, as you mentioned, potential J-codes and how they interpret, the marketplace and really what they group for PET CT scans, whether they break out by different categories or group holistically. And then, we also believe there’s a number of commercial levers available to us, not to mention, our first-mover advantage. And so, we’re working on all of those to ensure that we can continue to expand this market and that we can continue to be leaders for many years to come.

Anthony Petrone: Thank you.

Operator: Thank you. And our next question comes from Roanna Ruiz with SVB Securities. Your line is now open.

Roanna Ruiz: Hey, good morning, everyone. So a couple of questions on —

Mary Anne Heino: Good morning.

Roanna Ruiz: Good morning. A couple of questions on PYLARIFY. I wanted to ask about the level of demand-driven growth that you saw in fourth quarter, particularly in the segment where it’s used to determine eligibility for Pluvicto. And are you sensing any sort of pent-up demand among hospitals getting patients on Pluvicto that might read through to PYLARIFY coming up this year?

Mary Anne Heino: I’ll let Paul answer that.

Paul Blanchfield: Happy to, Mary Anne. So I think two parts to the question. One, where we’re seeing growth and I think as you heard me comment, the nearly 12% sequential, meaning third quarter, fourth quarter growth, but we saw the majority of that coming from increasing demand generation. That’s either additional referrals from existing accounts or new HCPs referring for PYLARIFY scans. And so, as we’ve mentioned, since really the middle of last year, where we were adding a new account, we expect the majority of our growth to come from being able to raise awareness on who the right patient keynote types are to receive PYLARIFY imaging, to refer those to the right imaging centers and then for PYLARIFY to continue to be the PSMA PET imaging agent of choice. With regard to — could you clarify your second question? I apologize.

Roanna Ruiz: I was just curious if there’s any sort of positive read-through from demand for the radioligand therapy Pluvicto to requiring scans with PYLARIFY.

Paul Blanchfield: Thank you. I appreciate the clarification. So I think overall we see broad growth across both our current indication, as well as which would encompass patient selection as those patients are recurring, as well as in the prior to definitive therapy or initial staging, as we sometimes call it. I think we’re still at the early stages of Pluvicto, coming into the market. You can refer to Novartis’ public comments. But when you back into the number of patients that are being treated with radioligand therapy as its approved today, versus the total marketplace, I still think we’re in the single digit, with regard to the kind of the total market size and what we’re seeing in realizations. And so, if I refer you back to what we looked at for our TAM, less than 10% of the annual scan potential was in PSMA-targeted radioligand therapy, as it is currently indicated.

Now as that expands, into the earlier question into pre-chemo or other settings, those populations grow and have a more meaningful impact. But to date, I think we view the overall impact of that to be relatively small, but optimistic that it can grow over time.

Roanna Ruiz: Yes. Got it. Super, helpful. And looking ahead, I just wanted to check are there any seasonality trends or payer dynamics that we should consider for PYLARIFY into the first quarter? And can we make any comparisons to, what happened in first quarter last year?

Mary Anne Heino: So, we have not identified any seasonality associated specifically with PYLARIFY. It’s something that we have talked in the past with about DEFINITY but that’s mainly that span in the second and third quarter. But, we have not to date, and it may be just that we don’t have enough history yet, with the product but we have not identified any seasonality trends.

Roanna Ruiz: Okay. Got it. And I just wanted to check, how you’re progressing as well with the expansion of capacity and redundancy for PMF across the US. Do you think that you’re sort of reaching into areas that really could benefit the most, from more depths and more coverage in the US.?

Mary Anne Heino: So, this is completely purposeful. Having already used 20 — back half of 2021, and then full 2022 to ensure that we had the ideal network to address capacity, and demand wherever it was. Now we get to be selective, and look and see where it kind of behooves us and behooves the patients and the physicians we serve, to have either double down on capacity or to have additional — full additional sites or double down in capacity out of single site. This is all tweaking, that we will now be doing permanently.

Paul Blanchfield: Mary Anne, maybe just to add on to that and I commented in my prepared remarks. When we look at our PMF build-out, it’s really around three things at this point. It’s around geographic breadth, and we’re serving customers in 46 of 50 states. So we feel very good about our geographic breadth, across the marketplace. There are still a few markets. We’ve noted, if you look on the map on pylarify.com, Central and Northern Florida, we still plan to build out additional capacity. I think the second key piece is, around out-the-door times. And this is really as the PSMA PET market, and specifically PSMA PET with PYLARIFY scan, have grown significantly. Imaging centers and hospitals are adjusting their workflows to want to lever PSMA PET with PYLARIFY in the morning, in the afternoon and the late afternoon.

And so, it’s also about meeting customers as they continue to evolve. And that means, given the half-life of radio isotopes overall, even with F 18 having 110-minute half-life, we still do have continued tweaking to do out there to continue to meet customers as their needs evolve and their volume continues to grow. And then lastly, it just adds optionality, and we think that’s incredibly important to be able to deliver customers as we’ve seen already in the second half of 2022, at 98% on time in full. We believe that demonstrates that we’re continuing to able to meet the needs of our customers. And that’s important for us to do growing over time, as the overall market and specifically PSMA with PYLARIFY continue to grow.

Operator: Thank you. One moment for our next question. And the next question comes from Matt Taylor with Jefferies. Your line is open.

Matt Taylor: Hi, good morning. Thanks for taking the question and congrats. So my first question was I was hoping, you might help us think about the European TAM. Could you be specific about the number of scans, you think there could be there for PSMA PET and considering differences in pricing? Do you have any estimates for, what the TAM could be for PYLARIFY there?

Mary Anne Heino: Good morning, Matt. This is Mary Anne. We have not offered any guidance on what would be the European TAM for PSMA PET imaging at this time. I think it’s fair to say as we get closer to actual entry into the market, and again, it’s just through our partner Curium that we may then have line of sight to what their expectations are, but we are not offering that at this time.

Matt Taylor: Okay. And then just as a follow-up, I know you’ve illustrated a lot of the advantages that you have with PYLARIFY being first-mover and laying down a lot of this infrastructure. I’d just like you to address obviously in a year or so we could have another F 18 agent coming in. Could you talk about how you think your moats basically can hold up to additional F 18 competitors? What are some of the key things you’ve already done and that you can do between here and additional competition coming in to solidify that?

Mary Anne Heino: So Matt, I will start and again I’ll turn it over to Paul. But I think we’ve already seen that to date. There is already a very prevalent positive physician experience with PYLARIFY. There is huge satisfaction with using this product because of the images it produces and then what it allows for the physician in interpreting a patient’s disease. That is an experience that physicians don’t — do not give up lightly and the example here is DEFINITY. We had again 22nd year in the market two competitor — one competitor right from the start which is essentially GE Healthcare with a product that was very similar, and yet the patient experience and the patient preference for the past two decades has been DEFINITY. That is part of the larger value proposition that we bring to any market we serve.

We continue to have the largest dedicated sales force. Now it’s true in PSMA PET imaging as it has been true for again two decades with DEFINITY. And tied to that is customer satisfaction and our intent to ensure that our customers have what they need when they’re either performing an ultrasound or now performing a PET scan. That is something that I think is a strong moat. As I said earlier, we welcome competition. This is a huge market. The best thing that will happen for physicians and patients is to have more noise and voice brought into this market to describe the innovation that is now available with PSMA PET imaging, but we intend to have that also tied to our strong reputation and the value proposition that we bring to everything we do.

Operator: Thank you.

Paul Blanchfield: Maybe I’ll just — and Mary Anne just a bit because I agree with everything you said. But I think this really comes down to what Lantheus does incredibly well. These are complicated nuanced markets. We look at the number of PMFs we’ve been able to build out to meet customer needs with the appropriate out-the-door time. We’ve noted previously and reiterate today that we do have through some of our PMF partners preferred out-the-door times that we have through 2027. We think our access, specifically our market access and what we’ve been able to achieve with one of the larger if not the largest market access teams to achieve 90% coverage. We think that takes time and demonstrates our capabilities and scale. We look at contracting with what Lantheus has been able to do and reach 100% of academic accounts quite quickly to be able to serve customers on time and full.

And then I think about the differentiated sales and marketing execution which we really focus on, on a daily basis and don’t take anything for granted. We’re out there driving demand ensuring that physicians understand the differentiated benefits of PSMA PET with PYLARIFY. And we think the amount of repeat ordering that we’ve seen we think the prevalence of prostate cancer where patients are going to be coming in. We think that provides an opportunity for us to maintain the stickiness and the market leadership going forward. And then we also think about the clinical profile when we speak to physicians and to not only imaging physicians but referring physicians and the benefits they see and the change in management that’s happening on a patient level, we believe those are all differentiators that will continue to ensure that we remain the leader going forward.

Naturally, there’s other opportunities that we have in place and we would assess those going forward from a competitive perspective. I’m not going to share more about that at this point. But we feel confident in our position going forward.

Operator: Thank you. Our next question comes from Larry Solow with CJS Securities. Your line is now open.

Larry Solow: Great. Thanks, good morning and congratulations on a good year. And I echo Anthony’s comments on the — we’ve been covering you guys since 2018. So it’s been a fun five years and look forward to another fun five years going forward. I guess the first question — a lot of my questions are answered, but just PYLARIFY on just marketing efforts, promotional efforts going forward, I know you mentioned building out more PMF facilities and improving the out-the-door time. Just — what about just in terms of promotional spend are you reaching out are there still areas local — you’re reaching out to more local doctors or regional doctors that maybe where the awareness isn’t as great as one might expect? Just trying to figure out where some of your spending and marketing is going towards?

Mary Anne Heino: Good morning, Larry. I’m going to turn it over to Paul to answer, but then I’m just going to ask for favor. After the financial question, he’s sitting here so prepared and no one has asked him a question.

Larry Solow: I’m going to ask Bob. I’m going to hit him up with a financial question. Absolutely. Get ready Bob.

Mary Anne Heino: Thanks so much.

Paul Blanchfield: Thanks, Mary Anne, and thanks Larry. As I mentioned earlier, we really used the first call it year to 15 months of launch to ensure that we could satisfy demand through what you highlight in setting up PMF to serve the whole marketplace in educating and contracting with imaging centers and hospitals to be able to ensure that they could order that they could receive the product in the time frame that we set. In the second half of the year in the middle — really in the second half of 2022, we shifted our focus from a promotional perspective classic sales and marketing to referring physicians to the 5,000-plus physicians that make up the majority of management of prostate cancer patient to ensure they understand the benefits of PSMA PET with PYLARIFY.

And while we are very pleased with the results including the sequential growth of almost 12% quarter-over-quarter, there’s still significant opportunity. We’ve highlighted a $1.6 billion TAM with growth opportunities going forward. And if we were to annualize our results is what we’ve seen with competitive results, it’s approximately 50% penetrated as of the fourth quarter. And so there are still a significant number of physicians that are not prescribing PYLARIFY. There are a significant number of physicians who see prostate cancer patients that aren’t necessarily using PSMA PET with PYLARIFY for all of their patients. And so, this is really as I mentioned before what Lantheus does well to go out there under the referring community, to educate on the benefits of PSMA PET with PYLARIFY for what we can do and that’s really where we see the continued growth to come.

And that’s what we continue to invest, to ensure that we can realize an even greater portion of that TAM and remain the market leader. Maybe on some of the specifics, Bob, I don’t know if you have any comments on our overall sales and marketing piece, but that’s what I would answer.

Bob Marshall: No, Paul, nothing really anything to add to that. So go ahead Larry.

Larry Solow: Maybe just leading into that just Bob I guess on the operating expense line you mentioned margins will be more flattish this year or maybe even a little bit down. The sales and marketing expense — actually you’ve done a pretty good job leveraging that and you brought it down to under 10% I think this quarter. Does that piece — is there a leverage on that going forward, or is it just a short-term thing in ’23, or is ’23 impacted more by investments in POINT or the other things, or is that more — POINT more on the R&D line, which is also lower than I thought this year or in this quarter at least kind of feel. So, I’m just trying to get a better outlook for where the expenses are going to go up next year SG&A versus R&D? And how POINT really sits at — fills in there?

Bob Marshall: Thanks, Larry. So, I guess the best way to characterize it is instead of really kind of looking at it as a full year to kind of take Q4 and annualize those operating expenses. And so, if I could bridge it kind of forward to where we’re going to be. I mean the biggest piece is going to be both, what is the work that we will be doing from both sales and marketing readiness, as well as R&D work in collaboration, if you will with POINT, doing that in Cerveau, I mean it gave you the math effectively being neutral to earnings so between $20 million and $25 million and it’s mainly spread between what is sales and marketing and R&D. We also then would have additional R&D expenses that we expect this year. So we do expect additional investments to drive our portfolio, particularly as you think through life cycle management of some of our key products that will drive approximately $15 million of additional expense that over what you have seen thus far.

The other parts too are another piece of it really kind of spread amongst the different G&A, R&D, sales and marketing around headcount. And we made decisions throughout 2022 which will annualize as well as the fact that merit in this little bit of inflation in our case a little higher than normal, from what you see in prior years. But there’s also additional investment that we are putting into supporting the growing company. I can just point to areas like accounts payable, accounts receivable, places that parts of sales, logistics and so forth just to make sure that we are supporting the business as it grows. And that’s where the majority of the investment will be. Our goal is always to deliver a levered P&L. And you can see that quite clearly in the 2022 result.

And we will certainly continue to be able to generate decent profitability as you can see by the guidance as well as free cash flows that are really driving the business forward.

Operator: Thank you. One moment for our next question. And our next question comes from Yuan Zhi with B. Riley. Your line is now open.

Yuan Zhi: Good morning. Congrats on another great quarter. Thank you for taking our questions. Glad to see the acquisition of Cerveau one small step into CMS. So how should we think about the positioning of Tau-based imaging relative to amyloid-based imaging? The latter is having a hard time to get CMS coverage even though amyloid is directly related to the approved, Alzheimer’s disease drug. Then I have a couple of follow-up questions.

Mary Anne Heino: So I think that’s a very small scientific question. I’m not sure that, if we can take on the breadth of the answers here today that it would seem more like a scientific interchange. But I think you’re right in distinguishing that there is different — currently the different application for the use of amyloid imaging versus Tau imaging they’re both common to Alzheimer’s disease, but our understanding scientifically is that Tau plays a stronger role in being predictive of progression here negative progression, because we’re talking about lack — loss of cognition and loss of mental functioning. And so our belief and our strategic choice in aligning with Cerveau for MK-6240 which images Tau tangles is that will emerge as the more important, because it’s a more clinically significant determinant of a patient’s status not only in determining where they are in their disease, but then more importantly determining whether they might be — they are responding to therapeutic intervention.

Operator: Thank you. One moment for the last question comes from Justin Walsh with Jones Trading. Your line is now open.

Justin Walsh: Hi all. I’ll add my, congrats to the pile. Obviously you’re heavily invested in the PSMA-Targeted radiopharmaceutical space at this point. My question is related to, how you anticipate the therapeutic market developing. Specifically, I’m curious about your thoughts on, how next-generation assets could affect the landscape given that you have PNT2002 intended to compete directly with Pluvicto, but also iodine-131-based LNTH 1095 in the pipeline and actinium-225-based PSMA PET out-licensed to bear.

Mary Anne Heino: Yes. I think you’ve — in some ways you’ve already answered your question right because what we’re seeing is we’re seeing a prevalence of different approaches. Now you have an actinium-based product you have a lutetium-based product you have an iodine-based product, but what it signals much more broadly is the acceptance and the consideration of radioligand based therapies for treatment in mainstream diseases in this case, prostate cancer. I think we’ve talked many times about how broad this patient population is. As is typical with discovery and introduction they are being studied first in very later stage patients. So third line post-metastatic castration-resistant — metastatic cancer but with good discovery with continued investment in science you could see as you have to do with other oncologic applications the use of these products moving forward into earlier treatment lines.

And we think that’s terrific. Having a variety of different kind of shots on goal here is important, because we’re still trying to understand the I think the genotype of prostate cancer patients to determine even more precisely which drugs might

Paul Blanchfield: Disconnected the chat.

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