Lantheus Holdings, Inc. (LNTH) Earnings Call Transcript & Summary

Hi. Good morning, everybody. This is Erin Wright. I cover life sciences tools, diagnostics at Crédit Suisse and welcome to our 2020 virtual Health care conference this year. It's obviously a virtual format. So a little bit different. If you do have questions that you do want to ask the company, following their presentation, you can e-mail me at erin.wright@credit-suisse.com. And we'll be happy to pass those along. And without further ado, I'd like to introduce Lantheus and the management team. We have Mary Anne Heino, the President and CEO, on the line, who's going to give a presentation to us today as well as Bob Marshall, who's the CFO and Treasurer. He's also on the line for further questions. With that, I will pass it on to Mary Anne. Welcome. Thank you so much for coming, and we can get started with the presentation.

Thank you, Erin, and thank you, everyone, for joining. I hope as we start this presentation, everyone finds them, and their selves and their families safe in during the pandemic that we are all undertaking at this time. But before I actually get into our presentation, if we go to the next slide, I need to share this cautionary statement regarding forward-looking statements with you. And it's also available on our website as will be the presentation. And essentially, what it covers is the statements I make may include forward-looking statements and our estimates about our future results. And I have you read the statements, so that you make the appropriate decisions as to what your investment positions will be. If we move forward, this is an agenda of the topics that we'll cover today. I'd really like to spend some time, especially on PyL and then on our pipeline, as I think we have some exciting news share in both of those areas. But if we move forward first, I'd like to show you a picture of Lantheus' corporate history. And what this really demonstrates is the rich and long history that Lantheus has enjoyed, especially in the nuclear medicine space, which is important because, as I speak to you about PyL and 1095 and our product 1195, each of these products will continue to compete in the very space that we have 60-plus years of experience and recognition in as a world leader and an innovator. As you look to where we are today, we completed our acquisition of Progenics Pharmaceuticals back in June of this past year. And with that came a suite of exciting products, not only commercial products, but also pipeline products. And that really brings us to where we are today, which is as a company, we are really pivoting away from what has been our legacy. If our legacy is purely diagnostics. We are now entering a future in which our future will include not only radiotherapeutic-based products but also nuclear-based diagnostic products as well as our continued presence in the ultrasound market with our leading product affinity and the many possible opportunities that we see there. If we move to the next slide, I'll show you why we chose the markets where we will continue to concentrate all of our efforts. If we look globally, the not only is a diagnostic imaging market in itself continuing to grow with a 12% CAGR that is forecasted out over through 2024. More importantly, if you look to the right of this slide, the global nuclear medicine market or radiotherapeutics, as I'll refer to them, as an even more exciting CAGR of predicting 14% growth over the same time frame. And within that, there's groups of products that have an even greater CAGR that is predicted. And that is essentially where we are pointing our strategic efforts for not only our pipeline of products, our M&A activities, but the development thereof and further development of the products that we have already commercialized. If we look to the next slide, I'll look at some of the commercial -- current commercial products DEFINITY remains our flagship product. This is a product that continues to deliver double-digit growth year-on-year in a market that still has opportunity, and I'll speak to that specifically. We have, of course, been impacted across our entire product line by the pandemic. But as I've noted in our earnings calls throughout the year, we enjoyed what we saw as being faster recover with DEFINITY as compared to what was being offered as recovery of elective procedures out throughout the markets. And we see ourselves with DEFINITY at a point where we almost fully recovered to pre-COVID levels, and we anticipate that 2021 will, in fact, be a year demonstrating full recovery for that product. There are some differences across our other products, and I'll speak to them specifically. With our product TechneLite. For the past quarter, we did note 13.6% sequential growth. That product does remain a slightly more impacted by the pandemic, which is really related to the logistics of the nuclear medicine performing rather than ongoing demand for the product. Our product Xenon has been impacted by the pandemic in a different way. This is a product that by definition as a diagnostic agent requires inhalation. And what we've seen across hospitals uniformly of the institution of protocols, limiting use of any inhalation respiratory procedures, whether they be diagnostic in nature or sometimes therapeutic in nature, just because of the transmission concern that underlie the very aspect of offering an inhalation therapy where exhalation is, of course, part of that as well. So with that product, we anticipate that we will not see full recovery until well into 2021 as hospitals and societies who also are applying on these products come to grabs and come to bear with solutions as to how to safely offer these procedures and these products to patients in institutional settings. Finally, our product is AZEDRA, which was part of our acquisitions from Progenics, continues to demonstrate utilization in the established center of excellence network that we had already built prior to the pandemic build -- beginning. However, we have been severely limited in our ability to enter hospitals with any type of commercial or even medical influences when the pandemic started. And therefore, we're very hampered in our efforts to to drive further incremental identification of patients who will benefit from this therapy. That remains a strong goal for us, but it remains one that will have to go hand-in-hand with the reopening of hospitals for access to commercial folks. If we go to the next slide, we'll take a look specifically at DEFINITY. I mentioned that this was a product that still had significant opportunity available in the U.S. market and this slide demonstrates that. Currently, we see approximately 35.2 million echocardiograms being conducted annually. This is a diagnostic procedure that really hits on all levels. It's easy to perform, it's relatively inexpensive versus other diagnostic procedures. It's noninvasive and yet it yields tremendous information about the cardiac status of the patient. So as a diagnostic procedure, it is being more and more in grace in the U.S. medical health care market. And in fact, with the onset of the pandemic, what we noted from our customers and anecdotally is that echocardiography as a diagnostic procedure was being used preferentially in hospitals for patients' diagnostic needs related to cardiac status. The reason being that because of the nature of the equipment, you can easily transport echocardiography equipment to the patient's bedside to perform procedures, whereas with most other diagnostic procedures, you're talking about very heavy fixed equipment for which the patient has to be transported throughout the hospital and usually to lower levels of the hospital so that the procedures and diagnostic procedures can be done. The mad marry of the ability to transport the equipment directly to the patient's bedside and the valuable information that can be offered was a reason that echocardiography was more in place during the pandemic, and we'll look to see how that perseveres as we come out of pandemic and beyond. But without that in speaking just to the general market, as I mentioned, 35.2 million echocardiography procedures done annually of that a subset is defined as being suboptimal. And by suboptimal what that infers is that being procedure itself is not diagnostically certain because the pictures or the images that are being created are not crisp enough and not well-defined enough to rule in or out whether cardiac disease is present for a person. That is for the suboptimal image and that is the call to action to add an image enhancing agent of which DEFINITY is the leading image enhanced agent in the United States and actually in the worldwide market. We see continued growth in that, that suboptimal segment itself has not been penetrated. And in addition, that suboptimal segment continues to grow because underlying nature of how are the procedures make to consider its suboptimal marries up to some social, I would say, demographics that we continue to see in the United States, which is rising obesity and other conditions that, again, make it hard for those ultrasound images on initial examination without an image enhancing agent to be crystal, crisp and clear and therefore to be diagnosed. If we take a look now at our current nuclear SPECT market on the next slide, what I show here on the left-hand side is the current annual U.S. nuclear imaging studies. And what you can see, if you notice the yellow and the purple parts of the bar graph is that the current U.S. market for nuclear imaging studies is dominated by what are called SPECT studies. And this is single photon emission computed tomography and this will establish a longstanding diagnostic modality that concentrates on using nuclear isotopes, in this case, essentially in using molybdenum-99 or technetium-99 as the isotope that is used in conjunction with the SPECT imaging capability to identify functional aspects of different parts of the body. Currently, the examination of the heart accounts for up to 60% of total studies, which you see there as noted as myocardial perfusion studies. And the rest of those studies is second largest number of studies done or studies examining bone, again, using technetium-99 and using SPECT imaging. As you see on the top part of the graph, PET imaging currently accounts for about 17% of all U.S. nuclear imaging studies. Now I'll focus you on the right-hand side of the slide. And here, what I'm showing you is the rapid growth anticipated in global use of radiotherapeutics, and that is combining an isotope as either solely as a therapeutic agent or in conjunction with other agents as a combination therapeutic agent. And this is an emerging and very exciting field that has made great strides. And as you can see in the graph, it's predicted to make very, very strong advancement. With that need for global radiotherapeutics, with that drive that we see will come the need for diagnostic procedures that can be used in combination with it. And that is where we are focusing our efforts not only as a long-standing diagnostics company, but now also is a radiotherapeutic company. If we move on to the next slide, I'll show you here one of those examples. AZEDRA, which is the product that we acquired along with the rest of the portfolio, with or Progenics acquisition is a radiotherapeutic. In this case, the isotope used in combination I-131. And AZEDRA is the first and only FDA-approved treatment for adult and pediatric patients for these conditions that are noted as PPGL, which are pheochromocytoma and paraganglioma. The exciting thing about AZEDRA it's two: one, this is an area where there really are a few future treatment options. And unfortunately, this is a disease that needs treatment for patients. So we're excited to be able to bring this product to market. As I noticed -- as I noted earlier, because of the current limitations that hospitals are placed on allowing anything but patients to at the hospitals, we're very limited in our ability to impact treatment identification and treatment decisions. But that is a goal for us with this product and with the lifecycle management of this product as we see over the coming months, hopefully, the easing of those restrictions come kind of concurrent with what we will hope to see is the easing of the pandemic throughout the United States. If we move on to our next slide, I'll move into a discussion of PyL, and this is a very exciting prospect we have. This is our prostate cancer PET imaging agent, this is a PSMA-targeted agent, and this product will address the status or the diagnostic status of prostate cancer in men in the United States market to begin. We submitted our NDA on September 29. We did request priority review. We'll not know whether we received full acceptance of our application and then whether we've received priority view until early December of this year. From an incidence and prevalence perspective, prostate cancer is a very large market, unfortunately. 192,000 new cases diagnosed each year and an ongoing prevalence of 3.2 men annually in the U.S. alone. This product, PyL will address approximately 130 annual potential scans that need to be performed on men who are looking at whether their prostate cancer has progressed and if so to where throughout the body my metastasis to be located. So the potential of 130 annual potential scans includes the 50,000 men each year or newly diagnosed with what's called biochemical recurrence, which is the return of prostate cancer in some parts of the body, despite efforts to eradicate any evidence of cancer prior to that as well as then the ongoing need for on a prevalence basis of that group of men for additional scans as they continue to be monitored. We see this as a potentially $500 million annual market. We think our product has the absolute ability to be a leading agent in this market, and we're tremendously excited about bringing this to market. On the next slide, I show you the 2 studies that were pivotal in forming what we submitted as our NDA for the product. This is our OSPREY study and our CONDOR study. And as you look across to the right, you can see in both studies, we studied three very important aspects of prostate cancer. The first is for positive predictive value for detection of the tumor in the prostate gland itself, which is usually the first diagnosis that's considered. If the -- if disease is localized and contained within the prostate gland only, then there are more treatment options for judgment that allow for the possibility of true remission or true full treatment for the decease. The second aspect that we studied in the studies was positive predicted value for the detection of cancer cells in the local area of the pelvic lymph nodes. And finally, to the right, we also studied positive predictive value for the detection of extra pelvic metastatic lesions, which means that the disease has traveled outside of the local prostate area and there's evidence of capacities in other parts of the body. These are -- these form -- these 2 studies, which were very well done and very well and had strong outcome, form the basis of our NDA and for 2 indications that we're seeking, we'll not know until we have interaction with the FDA and get much closer to approval that those -- both those indications or which of those indications will be awarded. But we see this as a tremendous opportunity for the prostate cancer community to bring a valuable agent for detection of tumor wherever it sits with these judgment, at whatever stage of disease, and we'll continue to keep updated as to what the status of our NDA is, and then as we go towards approval. If we go to the next slide. This is one of the areas that we are now bringing out to the medical community in preparation for our potential approval. We have launched a PSMA-targeted prostate cancer imaging awareness website. And that is because if our product is approved, it will be the first F 18-based PSMA-targeted prostate cancer imaging agent. There are other agents currently on the market that are not PSMA-targeted among the urologic community as well as the medical oncology community, PSMA, is recognized as the strongest analog to presence of prostate cancer because PSMA is clearly over expressed on prostate cancer cells. Our imaging awareness website includes 4 different areas of focus. The first is technology, which we believe PET-based imaging is the right diagnostic modality to use in this case for this type of imaging. The second is target, which is PSMA as a target, and I spoke to that PSMA is the clearest analog for presence of prostate cancer. The third is the TRACER. Our TRACER is F 18 and the advantages of F 18 versus potential other isotopes that could be used in agents, we feel is clear. As a higher energy agent, there is a higher positron yield with F 18 and that corresponds to crisper images or clearer images that can be produced. And finally, the fourth area we're targeting is tools. We are also developing alongside this in preparation for launch an artificial intelligence-based tool that can be used in conjunction with physicians reading to augment their read of images, especially when concerned smaller sites of metastases throughout the body. This is available if you'd like to see yourself at foursightprostatecancer.com. If we look at our next slide. This is a look at our manufacturing and distribution process. Because it's a new agent and will be the first F 18-based PSMA-targeted agent. I think it's important that the manufacturing and distribution process is understood. This is it what we produced at a PET manufacturing facility. These facilities are located throughout the United States. They're well-established. PET manufacturing has been well-established in oncology for over a decade, and there's a very sufficient network throughout the United States for producing these types of products. The first stepping-up in this process is the use of a cyclotron where the isotope is actually created. And that is, as I mentioned F 18. F 18 is then combined with the PyL drug cursor into what's called a synthesis box, which is actually, you can think of it as a manufacturing line because coming out of that synthesized -- synthesis box you have finished drug product. In this case, you have the finished into a bulk vial, which is a point in consideration that I'll speak to. Once that bulk vial is created, then the product is prepared into patient-ready doses. As each dose of this product, light doses are also of products that are produced at radiopharmacies as patient specific. It is produced specifically for the patient's weight and the time the patient will undergo its exam so that it marries very closely to what dose is needed at that time. With the aspect of a fatigue, because if it's 110-minute half-life, there is a valuable advantage of having a wider network that's available. This product will be transported within a 2 to 3-hour ratings for most hospitals, which marries very well with the distribution network of PNF facilities throughout the United States. And then finally, as I mentioned, this is a unique dose created singly for each patient typically, those studies are done in the afternoon in nuclear medicine departments that have access to PET imaging machines. The reason for the afternoon use is typically because FDG studies, which are the other major group of studies that require PET imaging are typically done in the morning because patients undergoing FDG studies require fasting. And so out of kind of differing's to those patients, nuclear medicine to [indiscernible] is for use of their PET imaging machines usually with FTG patients in the morning, and we anticipate they'll be booking most of their PyL PET imaging patients for afternoon. If we go to the next slide, I'll begin now speaking about our pipeline. And this is absolutely related to this, within our pipeline, we hold other radiotherapeutics products as well as other radio diagnostic products, and you can see that here. 1095, as you see, highlighted in blue, will be our radiotherapeutic product for prostate cancer. And I'm happy to announce that we just resumed enrollment in our Phase II clinical trial for that product. Enrollment had been paused as was [indiscernible] of most clinical studies at the onset of the pandemic. And now as we've reopened enrollment, it will be a site-by-site determination dependent on what the infection rates are in different areas throughout the country. But from our perspective, we are open to reenroll it and ability to provide doses as needed to all clinical sites. We are in Phase II, we're very much looking forward to the point in time where we've accumulated enough patients information to really see the promise of this drug, and we'll continue to share with you information about that as we move forward. As we look across the rest of the pipeline, the aPromise drug you see here is the artificial intelligence software that I referred to when I was talking about the ability to augment physicians reading of PyL scans. Our own LMI F 18 1195 is a radiodiagnostic that we are developing, that has emphasis and ability to detect -- emphasis around neuroendocrine tumors. And as you look at our external pipeline, you see the many partnerships that we have, again, that are based in the radio space. Our own Flurpiridaz F 18, which we have partnered with GE, our own in-licensing of NM-01, which will be a bio-marking product that can be used in clinical trials for better patient identification through our trials. 1404, which is a radiodiagnostic that's partnered with ROTOP in Europe, our PSMA TTC Thorium product, which is partnered with BAYER and on and on. I won't go through each of these items on our pipeline. If we move to the next slide, I'll begin to speak very briefly about our current work in pharma services and partnerships. And on this side, you see, you've been very busy. These 3 partnerships were signed in the last quarter, as we had just announced on our earnings call. And the first 2 involve orthotic PyL. In this case, both GE -- I'm sorry, the first 1 involves 2 partnerships for our product, Pyl, both REGENERON and BAYER have signed partnerships with us for the use of PyL as a diagnostic in clinical trials that they are conducting for prostate cancer therapeutics. Our GE Healthcare partnership relates to another one of our artificial intelligence products and that is our bone scan index product for aBSI. And finally, our INSIGHTEC partnership is another one of our micro-bubble partnership signed with DEFINITY, where DEFINITY will be the micro-bubble used in our combination product in this case, again, as with one of our other partnerships for this study, a potential treatment of glioblastoma, which unfortunately is a very aggressive cancer, which requires additional products and different agents that can help in fighting this terrible disease. If we go to our next slide, I'll talk a little bit about our financial update. We just announced our third quarter earnings, and we were very pleased with them. As you can see from a revenue perspective, we had slight growth over same period last year. Our results obviously hampered by the pandemic, which, again, showing good recovery. I'll drop down now to free cash flow. As you see on the lower left-hand side, we are very, very pleased to be able to bring you the report, positive free cash flow, especially this soon after completing the transaction. And the same is true of our adjusted net income and adjusted EPS, I can also share that versus what had been consensus for our analysts, we were well ahead of where our analysts had us for adjusted EPS. And at the Q&A session, Bob Marshall, our CFO, is with me on this call. He's happy to take any of the questions that you may have about our financial or current financial results. If we move to the next slide. In summary, I'd like to just focus on some of the things I spoke to today. Overall, we see, as a company, steady financial recovery, certainly led by DEFINITY, which remains our flagship product for our revenue creation as well as for margin creation. We're thrilled to have submitted our PyL NDA at the end of September. And as I mentioned, we anticipate hearing back from the FDA in early December, and we see this as a very large opportunity for the company. We're also pleased with the pace and the number of strategic partnerships that we've been entering into. We look forward to continuing to build data around our product 1095 as we're able to accumulate more patients now into that Phase II trial. And finally, we are -- as we look at our financial results and our liquidity position, we're pleased with the results of fact and also the trend that we see continuing in those results. So with that, I'll conclude my remarks for over the company, and I will turn it back to Erin.

Great. Great. Thank you so much, Mary Anne. I appreciate the presentation. Just a few minutes left, but how would you say -- or how would you characterize the integration thus far at Progenics relative to your expectations? And also, how should we be thinking about the timing and magnitude of the PyL contribution, especially kind of heading into next year and beyond in terms of the market opportunity?

Sure. So first of the integration, we're very pleased with how the integration is going. We took this on, obviously, in the toughest of times. It was a very long time coming to the transaction was complex for different reasons. As we considered it, and it took a long time to close it. We didn't close until mid-June, perhaps having closed it in the middle of the pandemic and having to do it incredibly virtually. I think the 2 teams have come together wonderfully. And I think the PyL NDA submission is testament to that. We lost a few short weeks. So the NDA submission time line that was related to an equipment consideration at one of the PMS that we are using. But otherwise, our teams never lost any momentum in putting together what I think is a terrific, comprehensive file. So that's just one example. From a synergy perspective, we are on track with all of the synergy milestones that we had noted that we would reach as part of the transaction, post-transaction integration and the same is true of our strategic milestones within the company. From a systems perspective, from a people perspective and then from an important project perspective, we are on track with everything we see there. From a PyL perspective, I think that's an important question you ask, right. I'll speak to it because I like everyone to kind of be aware of process and what '20 and '21 will look like. '20, essentially, the milestone we're looking for in '20 is here, you're back to the FDA in early December that our file has been accepted and then as to whether we have received priority review status or not. And as I said, we'll know that in early December. In '21 depending on whether we have priority review or not, we were looking at with priority review, somewhere around an April approval and without priority review somewhere around the September approval. The important thing to note as far as what is possible from a revenue perspective in 2021, is that post-approval because of the type of agent this is we will need to apply to CMS given that there's a high Medicare base to this population of patients for which this product will be used, we will apply to CMS but which will pass through pricing. And that is a special program that PMS -- that CMS has, that recognizes the kind of the unique pricing of radio products when they're used diagnostically or could be therapeutically, in this case, certainly diagnostically. And by an administrative consideration, CMS only accepts applications on a quarterly basis, and then they only list their outcome of those applications where the actual coating associated with them, which will be used for reimbursement by our customers online with the next quarter. So there could be, depending on when you're approved and when the start of the next quarter is that you can get your application in and then next quarter 4, having a look at coating in place. There could be a delay to appreciable revenue. The product can be used in the interim. There are processes available within CMS that allow for exception for submitting for reimbursement for products that do not get that coating, but it is a [indiscernible] product -- process to use. On the commercial side, we will work, and this is true of diagnostic products as well as pharmaceuticals. We will work very, very strongly before launch to ensure that we have commercial contracts in place. The major commercial payers will offer reimbursement for the product. And there is a precursor product out there. It's not PSMA-based, it's PSA-based. For that product somewhat kind of led the market into the concept of reimbursement for these types of products, and we will certainly -- we'll use that momentum as we approach commercial payers with what we think is a stronger value proposition for the reimbursement of PyL. I don't know if you have any other questions, Erin or questions from the audience?