Yuan Zhi: Yeah. Good morning. Congrats on a good quarter and the 2024 guidance. And thank you for taking our questions. I have three, if I may. First, on the Medical side, can you maybe talk about some of the headwinds we are facing in the healthcare industry? As the Medicare physician fee schedule increases, do you see an impact to the Radiation Therapy Quality Assurance part of the business? You touched some on the new clinic versus volume increase.
Thomas Logan: Yeah. Firstly, Yuan, welcome. It’s a pleasure to have you on the call today. As it relates to Medical and your specific question about headwinds coming from CMS and Medicare reimbursement, as it relates to RTQA, in the broader context when we think about the RTQA or Radiation Therapy Quality Assurance business, which is today about half of our total medical revenue. What we have seen over the last couple of years, is that much of our growth or the overweighting of our growth has been in global markets. And we’ve called out the fact that in large measure this is driven by enhanced capabilities that we have developed in the region in terms of service support and broad-based promotion and commercial activities in the region.
But when we step back and kind of look at market demand drivers overall in this market, there are really two main factors. Number one is the fact that today the world has only about half of the radiation therapy clinics that it should have. If we were to apply Western standards throughout the developing world. That typically is in the form of linear accelerators, but it really can be extended to all forms of external beam therapy in the market. But bridging that gap or narrowing that gap is an important overall factor in global demand for radiation therapy, capital equipment and the RTQA solutions that we provide in general. So that certainly is a factor in the disproportionate international growth that we’re seeing in the sector that has offset domestic conditions that have been a little bit softer, in part because of margin compression or inversion on the part of the US healthcare providers in this post-pandemic era.
But part of it may factor into CMS reimbursement rates. The second major factor in market growth overall is simply an aging population demographic in the developed West. As people get older they are more likely to get cancer and certainly in much of the G20 footprint, if you will, there are aging population demographics overall. And so in general, it is our view and it has been our experience, that even though the specific CMS net reduction in reimbursements to the Rad Onc or radiation oncology community is about 2% this year. Our view is that the other factors in particular in the American market the aging population demographic the cancer incidence rate offsets that and is further supported by a reversion back to positive operating margins on the part of US healthcare providers.
All of which is to say that we’ve considered that in our guidance, but we continue to feel constructive about our ability to grow this market.
Yuan Zhi: Got it. Yeah. Thank you so much for the thorough response there. Then on the radiopharma side, you have touched some in the prior question. So based on what we have observed in 2023, the successful product launch of PLUVICTO and expansion of clinical pipelines in clinical trials, do you anticipate a similar trend in 2024? In other words, what factors do you think would move the performance of this segment higher or lower? Is there anything that is specific that we should be looking for in 2024?
Thomas Logan: Yeah, we certainly, again, are very bullish on the radiopharmaceutical market in general but most specifically, this revolution that we’ve talked about that’s taking place in therapeutic radiopharmaceutical applications overall. You mentioned PLUVICTO, which in its first year, I think was better than $800 million drug. This is for those who don’t follow the industry specifically, this is a therapeutic or a radiotherapeutic application for prostate cancers. If you look in the approval pipeline for other theranostic applications, as you might imagine, it’s a very rich pipeline. There are additional PSMA or prostate-focused solutions, breast, lung, endocrine system. Our view is that, again, as others have stated, this is a market that really is undergoing a revolution that will change the nature of cancer care.
Not that this will become the single kind of magic bullet that will cure cancer, but rather, it’ll be an important component of broad-based cancer care solutions and will lead to a different dynamic mix between surgical oncology, conventional chemotherapy, external beam therapy and this theranostic application. So we do expect that we’re going to continue to see rateable growth in the market. And as noted before, our focus really is on how do we continue to grow and evolve our position in the value chain for radiopharmaceutical solutions. And we’re very, very excited about the ec2 deal and how that will enable us to evolve our position in the marketplace. But there’s much more work for us to do here.
Yuan Zhi: Got it. Yeah. Thanks for the helpful color there. And my last question here is just want to better understand the 2024 guidance for 5% to 7% top line growth in the context of the past two years’ performance. There was a strong recovery in 2022 after a weak performance during COVID with a continued recovery into 2023, which was 12%. Should we anticipate a more stable growth rate of 5% to 7% going forward? Of course, there’s long-term tailwinds on the Technologies side as well as the radiopharma or the Medical side.
