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

Great. Thanks so much. So welcome, everybody, and good morning. Thanks for joining us this morning for Lantheus. My name is Matt Miksic. I cover medical devices here at Credit Suisse, and we're very pleased to have with us the team from Lantheus. Mary Anne Heino, President and CEO; Bob Marshall, CFO; and Mark Kinarney, Senior Director of Investor Relations. So team, thanks so much for joining us this year. I'm going to pass it over to you to run through a slide deck and a presentation and time for meeting at the end, we'll go through a couple of questions.

Thank you, Matt. Good morning, everyone. It's great to be here. I'm Mary Heino, President and CEO of Lantheus, and I'm pleased to have this time to share with you some thoughts about where we are where we're taking this company. So Mark, if you move forward, I will share the necessary safe harbor statement slide. which is also available on our website. And I'll just remind everyone that I may make some forward-looking statements, and you should not be the sole basis for your decision to invest in Lantheus. If you move forward, Mark? What we really are with Lantheus is at this point in our own history, after 65 years of what has been really very consistent innovation, we are really poised moving into our future and not really what I'm going to talk about today. But it really is worth noting that there's a long, proud history of innovation at Lantheus. And what comes with it, that's very important is a history of expertise in the very areas that we're going to, as we pivot, take into our future. And that's really where I'm going to focus my conversation today. If you move forward, Mark, these are the 3 areas that we're really concentrating strategically for Lantheus. And this is where I'm going to focus my comments today in the area of Precision Diagnostics, where in non-oncologic conditions, we see ourselves really helping the HCPs, the health care professionals that we work with in finding and following diseases. In the area of Radiopharmaceutical Oncology, those same health care practitioners finding and following cancer and we -- here we've made very significant progress over the last 2 years in rounding out and building out not only the portfolio we currently have, but more importantly, the portfolio in the future that will bring to market. And then finally, in the area of Strategic Partnerships and Other, this is a very new area for us that we've built out where we see ourselves not only as very strategically a partner to other companies. But as partnering our own efforts to build out on the future of our portfolio in very exciting areas around biomarkers and diagnostics that will bring very strong value to given areas of life science now see evolving. And that's where I'll focus a lot of my comments also as we move forward. So next slide, Mark. Those comments now come to this. This is the same those 3 areas shown across our portfolio where our products fit. And I am going to make comments with very specific director on some of these products, but it's worth noting how these categories kind of shake out and where we put our products. If you look into the first category of Precision Diagnostics, this is really anchored by our product DEFINITY, which continues to be a very important contributor, not only to our top and bottom line, but strategically to our portfolio. And you note that by looking over to the third category under Strategic Partnerships because there are several of those partnerships, if you look in the middle of that box that are centered around our microbubbles, and I'll speak to that again later. In the center category, which is our Radiopharmaceutical Oncology category. I'll talk very much to our recent launch of PYLARIFY and now PYLARIFY AI. These are the cornerstones of our prostate cancer portfolio. And this is part of our effort right now to take these products out to the prostate cancer treating community in the United States. And this is something that has been very successful. It's regarding a lot of our energy lately, but we're very, very pleased with the efforts we're seeing there. If we look into the third category, this is an area that we've built out only over the last 2 years that has been very successful for us and really drives our future and where we see ourselves as partner of choice to many of the large pharma companies out there in life sciences and also our own partner in building out our portfolio in bringing products to market, and I'll touch on that as we go forward. Mark, let's drive forward. and with start talking about specific products, you can flip again mark and we'll get taken to our microbubbles and we'll start talking about DEFINITY. This is a product that reached its, as we say, 21st birthday this year, where we take, in this case, 20 is the [ new 5 ] heading into its 21st year. And this is a product that competes in the echo contrast, echocardiography market in the United States. We also have present OUS, but our main market is really in the United States. And this is a market that continues to grow and that continues to have significant opportunity for us. The baseline market here is echocardiography. And this is a market that in the current U.S. market, over 30 million echos are performed annually. And the need for contrast is in those echoes where the underlying echo as you can see on the left-hand picture here is what is defined as unenhanced or suboptimal. And what that means is that the results of the echocardiograms are subdiagnostic. A good, clear diagnostic picture is not offered and therefore, the physician is left unable to make a clear diagnosis for his patient. If you look at the right side picture, which is a picture that now has been enhanced with the use of DEFINITY, you had a very clear image of a left ventricle. And with that clear image, you can then make a clear diagnosis as to whether this patient is disease-free or whether this patient requires either additional testing or intervention for what is evident for presence of disease. That is the [ quality ] action for use of contrast in these patients. And medical literature would suggest that up to 20% mobile echocardiocaphy studies should have contrast added. That is the addressable market for DEFINITY. And as we move forward, if we look at the opportunity for DEFINITY. That is the opportunity that we continue to address in the U.S. market. We've been very successful with our medical education and sales efforts in bringing education as to where and when to add contrast to these studies, and we continue to do that. We have the largest customer-facing sales force and the echo community for these efforts, and we continue to build out our franchise to address it. Most recently, we added another formulation to the market. That is our product DEFINITY RT, which was approved earlier this year. This is a room temperature formulation. Not only does it allow us to cover the market, so to say, with choice, but also from a partnering perspective, this is the formulation that is most preferred by the partners who are using this formulation and their development efforts for other uses of microbubbles and that is something that is very exciting to us. In addition to its very optimal use, I'd say, in echocardiography as a contrast agent, there are many other uses for this type of bubble. It can be used as a carrier. It can be used as an agent simply to create path in different parts of the body. And our partners, as you see listed along the bottom of the slide are doing just that with our DEFINITY bubble. And we are working with them in their clinical development programs to advance the use of this bubble and their clinical development programs to bring into market. We also have in our own life cycle management efforts, other potential applications of DEFINITY, and I speak to those in some of my comments in our quarterly calls. If we move forward, I'll speak to in our Radiopharmaceutical Oncology segment, PYLARIFY. And this is a product that we brought to market earlier this year, was approved in late May, and it is a source of tremendous excitement, not only for us, but I think it's fair to say for the prostate cancer treating community as well. I mentioned, it was approved in late May, Mark if you move forward. This is approved after receiving priority review status by the FDA, which we feel is in recognition of the innovation that it brings to the treating community. We were approved for the 2 indications that you see here, the prostate cancer in gentlemen is a disease that unfortunately is present in a large number of men, and I'll speak to that. And these 2 indications represent 2 very different time points in the disease as is experienced by gentlemen with the initial indication is for suspected metastases, in gentlemen who are candidates to what's called initial definitive therapy. And the second is for suspected recurrence in men who've already received initial definitive therapy but are unfortunately experiencing what is evidence of return of disease by [ event ] of seeing elevation of PSA levels in their blood. I'll speak a little bit now to what the market is and what the incidence and prevalence is in this disease. The number of eligible patients for prostate cancer scanning on an annual basis is approximately 170,000. And I think scanning more specifically than patients because as I said, these patients tend to be scanned more than 1 time across their disease process. And if you dollarize that number of scans. We believe that the addressable market has a value in excess of $600 million in the U.S. and that is the market that I am speaking to here because that is where our approval was granted earlier this year. If you move to the next slide, Mark, I'll speak a little bit more to incidents and prevalence. Unfortunately, this is a disease that does affect a large number of patients. The current statistics would offer that approximately 250,000 cases are identified each year. And with that, there are approximately our 34,000 deaths. Luckily, there are a prevalence of approximately 3.1 million men who live with this disease. And as I mentioned, from diagnosis on there is about a 15-year time frame for which these men live. It is a disease that does tend to affect older men. This is the -- approximately 60% of these men are 65 or older. And over the course of a lifetime, approximately 1 and 8 men will be diagnosed with this disease. If we move forward, we'll talk about what it looks like. As I mentioned, this is a disease where a gentleman will have the opportunity to be tracked over the course of the disease, which is good because then Between that and work with the physician, there are multiple opportunities to discuss and to take the opportunity to look at what treatment is possible. And that's what we really feel we bring with PYLARIFY to the market, options for physicians and their patients to discuss because what you can see with PYLARIFY -- the specificity of what you can see with PYLARIFY offers a physician additional information that they can use in their treatment options for patients. And this slide is simply meant to show at a treatment points PYLARIFY scan might be used by extent of our indications in that treatment paradigm that may be used between a physician and patients. But if we move on, we'll talk about what we feel the innovation of PSMA imaging offers and what then it confers as advantages of PYLARIFY. PYLARIFY is a PET-based image. So this is a PSMA, which is prostate-specific membrane antigen, which is an antigen that is on the extracellular surface of prostate cancer cells and PET-based imaging, which is a radioisotope-based imaging, F 18 based imaging is able to illuminate and therefore, visualize that particular antigen under PET scanning in gentlemen. PET scans are very useful because these have a very high detection rate, you can see at a very kind of micro cellular level, you can see these cells and you can see the whole body. So you can literally visualize an entire gentleman's body and see at the cellular level, the presence of these cancer cells. PSMA is the advantage here because that is on prostate cancer extra cellulite. So you know you're being very specific to prostate cancer. The use of the F 18 isotope is advantageous here because the images that you can receive and see with this are very crisp and very clear. And from a product perspective, the use of this as the isotope that is combined with the, I would say, the API allows for broad distribution because of its half life. It has a 110-minute half-life. And when you live and work in the nuclear medicine world as Lantheus has for over 60 years, the choice of isotope is always very important in your distribution consideration. And finally, what are the clear advantages here and something that many of us see across different areas of our life. But we are also now advantaged by artificial intelligence, which is in life sciences as it is entering into so many other parts of our lives. But we were fortunate to be able to develop an artificial intelligence application that can be used and has already been approved for use with PYLARIFY, it's called PYLARIFY AI. This is a 510(k) approved application that was approved just a few months ago and it's proprietary to PYLARIFY, and I'll speak a little bit more to that later. But again, we feel the innovation of PSMA imaging in conjunction with the use of the F 18 isotope and certainly then with the advantage of AI-enabled augmented reading, really brings a certain innovation to prostate cancer diagnosis that the market and the physicians who are treating these patients were waiting for, and we think the results we've seen so far from the launch are certainly a testament to that. Let's move forward and we'll talk a little bit about the launch. As I mentioned, we were approved in late May with a PET-based isotope, the channel to market is to what's called PET Manufacturing Facilities or PMS. Each of these is an individually approved manufacturing site because the product is literally manufactured at the site and then delivered to imaging centers where it's used in patient-ready doses. To date, we have activated or we received approval in conjunction with our partners from the FDA for 20 PET manufacturing facilities. They are indicated here on this map. The benefit of having an F 18 based isotope as your isotope tracer is that it can travel. So not only is it available as you see here in the geographic areas, somewhat designated by these circles. But where needed, we can actually fly these doses from the sites into key markets, and that's what we're showing here with our plans as we describe plane, trains and automobiles to service all of those areas that are key markets for us. We will continue to build out the capacity and the availability of this with our goal of having, as we described, broad availability of PYLARIFY by year-end and beyond. Essentially as wherever there is needed demand for this product, we continue to add pet manufacturing facilities into our overall capacity goal so that there's -- wherever there is a need for the product we will work with our channel partners to ensure that it is there. It is a partnership that is well known to Lantheus and that already well exists in the marketplace. The model here that's already well established, it's a product that's known as FDG. It is also a PET-based diagnostic used extensively in oncology imaging. It is used in over 2 million images a year and was really the original product that was the driver for building out what is a well-established PMS network in the United States nuclear medicine market. If we move forward, we'll talk a little bit more about the launch. We were very pleased that 2 very prestigious guideline driving communities first National Cancer -- Comprehensive Cancer Network; and second, the Society for Nuclear Medicine and Medical Imaging, both represented and recognized the innovation that PYLARIFY, recognize brings to market and added Piflufolastat, which is our generic name to their guidelines in the treatment of prostate cancer and did it very quickly. After we were approved, we feel this really recognized as the innovation that this brings to the medical community. And it also, from an insurer perspective, it gives the kind of the -- I would say, the help we need to bring this information to insurers to buy coverage for PYLARIFY and so we've been working very diligently on that. As we look then to that work on our next slide, Mark, we have been working since launch to ensure that there is market access for PYLARIFY. So I think if I think about the 3 areas that we've been working most diligently in execution, the first is building out that manufacturing network that I referred to. The second has been in contracting to ensure that with our customers PYLARIFY is contracted and available that way. And the third is in market access in ensuring that coding coverage and reimbursement are also in place so that the kind of the trifecta this product is available, product is contract and product is covered that all those 3 are kind of covered and kicked off so that PYLARIFY is available to physicians for the patients that they want to use in an imaging and has been a very successful effort for so far. Not done by any means because this is a launch and a launch means good hard work that continues and build, but we continue to work across. Two very important things here is, as I mentioned, when I showed you the kind of the patient perspective here. This is predominantly a Medicare-based patient population. And so one of the important market access initiatives here is what's called pass-through. This is Medicare coverage for PET-based isotopes that allows for separate coverage of the isotope for a period of time. And that pass-through application was submitted, and we feel -- expect will be approved by January 1, that timing, we feel is optimal because that really [ marries ] also with what will be the completion and the broad availability of that manufacturing network that I referred to earlier. So that we think will go into effect as of January 1. We also have applied and have been notified that our HCPCS code will also be in place by that time. So it really aligns very well with the rest of the effort that we've had in place with this launch. We've got our field team built out. Similar to what our strategy was with DEFINITY, we are confident that we will have the largest PSMA diagnostic facing deal team for this product, and we will use that to build awareness for our product and again, to keep addressing those other areas of contracting and market access for this product. So everything is a go here, and we feel everything is on track with our goals. Finally, if you go to the next slide, Mark, I'll speak to PYLARIFY AI. This was a separate kind of simultaneous effort that we worked on, and we were very successful with receiving 510(k) clearance approximately 2 months ago for this product. It's the first and only FDA-cleared artificial intelligence enabled PSMA digital application. And this has been really trained the way that you build one of these applications is you train it by using images, and this has been trained on over 30,000 PSMA images. It will be proprietary to PYLARIFY. And we're very pleased to announce it's already being used and trialed in 5 leading cancer centers. It was approved was approved under the name aPROMISE. We're going to launch it under the name PYLARIFY AI. I'm going to really kind of consolidate that onto we'll formalize that launch, I'll say, at the upcoming RSNA meeting. So we're looking forward to that as well. I'll move on and talk a little bit about our product, AZEDRA. This is the first and only approved product for PPGL, which are 2 rare cancers. This is a product, Bob talked a little bit about this at our last earnings call, but this is a product that we have seen some, I would say, pressure on usage during the spikes that we've seen with the pandemic. And the reason for that is that this is a product that does require specialized services and care for inpatients when it is used. It's also a radioisotope-based product, and it's a very specialized treatment population as well. So we have seen some decrease, I would say, in usage of the product when we've seen spikes in inpatients related to COVID, and that was certainly true during third quarter that we just reported. We're still very committed to this product and we have been building out our team, but we do recognize that there we see staffing challenges with Matt, I know that you've written it out extensively in some of your notes and when we see rising inpatient related to COVID, which I hope that we are for all the right reasons past now. We do recognize that at those times, the physicians who treat these patients and the patients themselves tend to delay treatment as an indolent disease by nature. And so it is a disease treatment that sometimes is put off when patients would prefer not to enter the hospitals at that time. But it is absolutely a product that we remain committed to. I'll turn now, Mark, if you move forward, and we'll talk to that third category that we have, which is Pharma Services and Other Partnerships. This is a category that we've built out over the last 2 years, which we've been thrilled with the amount of activity and the amount of what we've been able to produce here. The way to think about it is to look down the left-hand of this slide. And when you do that, you see the kind of the 3 areas that we're focusing in. In prostate, we are very pleased with what we've been able to do already with piflufolastat F 18, which is the, again, the product need for PYLARIFY. But here, we've built out already presence by using our agent in the therapeutic trials that are underway with therapeutic PSMA agents and we already have clinical supply agreements with premier companies that are undergoing clinical trials for their therapeutic agents, including Regeneron, Bayer and Point Biopharma as well as using it in our own work. And we continue to also build out other artificial intelligence applications, including aBSI, which is a bone -- as prostate cancer -- as PYLARIFY AI is to prostate cancer aBSI is to bone cancer, and we have approvals without already in both the U.S. and in EU. In the center area here, you see our work with NM-01. This is a collaboration with a company called NanoMab, very, very interesting and very exciting. And this is immuno-oncology, and this is in the area of biomarkers and we have some upcoming milestones in that, that we'll be talking about not in too distant future. And in the bottom area, you see Pan-Oncology, we have a very exciting agreement with Ratio Pharmaceuticals is for a [ Fabry ] biomarker, which is also a very much evolving and opening area, a study that we think will be very important to life sciences, and we're very excited to be part of that. So this is an area that not only does bring us into partnerships with premier companies but also serves as our own pipeline for areas that we can develop either diagnostic -- companion diagnostics or biomarkers or potentially therapeutic products. And you see along the bottom of the slide, some of the wonderful partners that we're working with there. So I will use that as kind of my transition to our own pipeline. And if you move ahead one more slide, Mark, this is a slide that depicts our pipeline. I won't go through all of it. I'm going to kind of only speak to one product, and that is the product that you see on top here, which is our pipeline and 1095. And if you flip to the next slide, Mark, I'll focus on the recent development we had here. 1095 is our pipeline candidate for therapeutic in prostate cancer treatment PSMA-based therapeutic and prostate cancer treatment. We have an ongoing trial that we call ARROW, and this is for treatment of metastatic castration-resistant prostate cancer. And we reached an important point in our trial. We reached our interim analysis point. And this was predetermined point that we had outlined in our study. And we're pleased to report that as is what happens when you reach an interim analysis, the data were sent to an independent data monitoring committee and the recommendation impact from that cite that our study continue without modification. And as is very, I would say, consistent with that, that is the only announcement we make there. Any other announcements could bias the actual continued progress of the study, but we were very pleased with that outcome. We see this as our important part of our portfolio that is based around prostate cancer and based PSMA, and we're pleased with the results that we have there, and we'll continue to update the community on the progress as we hit other milestones with that study. So if you move forward, we have a few slides here on financials. I'm going to cover them briefly because I can because they're very high level. Is there any more data specific, I would have to turn to Bob, but I won't be because, you'll see as you see the slides, what they contain. So Mark, and here in summary, a summary of our recent financials. We've worked very hard from since our IPO, as shown here, to make sure that we have what we consider a good debt level, good use of debt -- say and then good debt levels. And as you can see through Q3 of 2021, we have brought that debt down. Now that's a very long picture, the 215 (sic) [ 2015 ] to Q3 2021. And in the interim, we have appropriately used debt to fund what we needed. But overall, we continue to bring it down. And that also shows in the center of the slide with an average 1.95 net leverage time. Now that is also current. In the interim across years, we've used leverage whenever it needed to fund our activities. And I'd say we're very pleased with how we've used it and what the outcome that has been. As you see from -- in the middle there, these are the most recent results that we just reported last week and we are kind of where we stand with our balance sheet. But if you look on the right, we're very kind of pleased that where we see on the current cash on hand, we have over $90 million cash on hand, and we still have full availability to our $200 million revolver in our, I would say, our strategy is to continue to look internally at what we have available to us in our own portfolio and then externally at what opportunities are available in the market to continue to drive our future forward, which is to be a premier isotope based in, of course, those 3 categories I showed you, Precision Diagnostics, Radiopharmaceutical Oncology and then really involved in Pharma Services to ensure that as the life sciences community kind of wrap their arms around what we're doing with biomarkers and Precision Diagnostics and Companion Diagnostics that we are very much part of that whenever it involves either Precision Diagnostics or radioisotope-based products, and that's our strategy. So I will conclude my comments if we move forward one more slide with our updated guidance that we just offered. As you can see here, with last week as we reported the third quarter and then deep guidance for full year as is somewhat typical for us. We took our guidance up. So we're pleased to take both our revenue and our EPS guidance up from what it had been previously, and we're looking forward to finishing out the year strong and that is something as we look at what the PYLARIFY launch has afforded us and what DEFINITY to afford us is progress and performance that we think is somewhat typical of what we're capable of and what we continue to offer to shareholders and what we will do to offer to shareholders. And if you move to the next slide, in summary, I think that's what really is kind of offered here on this slide. We continue to see good progress across our major products. We're thrilled with our PYLARIFY launch. And overall, with our financials, we continue to see good reason to invest not only in the programs we have, but to look for other worthy programs to invest in as we move forward with our company. So I'm happy to take any questions that you might have, Matt, or if there's any of that might have been submitted by the audience? You're muted Matt. Now in our company, when you do that, you have to contribute $10 to the prostate cancer foundation. So you're still on mute.

So thanks for that. I want to spare you all the tapping while you were presenting. So 1 follow-up on PYLARIFY. Interestingly how you talk about the approval and the plans and the execution and everything that you're lining up to make that product a success to of nowhere in there was a comment about the current environment and whether that's -- what kind of challenges you're having to overcome? Or how much of a challenge that is or how you're accommodating for whether it's staffing or access or ability to get into new centers, it'd be interesting to hear what the factors are in the environment on the launch?

So it's a great question, Matt. And if you ask me that for DEFINITY, I could be very specific because we have so much relative comparative data because it's been in those markets for so long. I don't have a relative comparison for you for PYLARIFY. So I can -- I can say that the -- when -- from a staffing perspective, the staff as EMS were very specially trained. So if we were to see COVID spikes at PMS, it could be problematic because it would be hard to replace those staff. But luckily, we have not seen that become an issue for us. And again, for every right reason, I think we'd all like to say the infection rates come under control, and we'd like to see -- no the entire pandemic come under control. We also from -- when we talk about staffing challenges, I think we've seen that more hospitals more so than at freestanding images to -- and per your reports that I read and I do read every day. I think the talk has been more about nursing, and I am a nurse myself. But I think the national concern is more about nursing now. I will say, we have been keeping our eyes on sonography levels because sonographers are also specially trained group and we look at what the graduation levels are and what the census is there. But I can't say that we've really seen an issue nationally yet that pertains specifically to PYLARIFY, thankfully. And we have not seen -- we certainly have not seen an access issue of patients being able to access in a few centers.

All right. Okay. So talk it up to maybe specialized nature of the staff and the site of care or site of these imaging centers that have been off campus towards...

The other thing I will say, Matt, which is true also about Lantheus is these are PMS or GMP facilities. These are sterile manufacturing environment facilities. So they know how to stay clean and that's clean even coming into the pandemic, and we saw this at Lantheus we work very quickly, everyone who was with GMP employee, and we got them off campus. And the rest of our campus that was dedicated to GMP manufacturing, we already knew how to run a very sterile environment, and we really we're very, very successful in warding off any infection for a very long time because that's how we're used to operating.

That's great. The other is maybe how you're thinking about the sort of impact? Or is there opportunity around the AI programs that you're just beginning to launch. Is that what does that require in terms of skill set internally? What does that require in terms of training and skill set and driving adoption in the near term? And then maybe what's the what are you presenting to clinicians and your customers about the benefits of putting some they want that in place?

So we are very fortunate that as part of the Progenics acquisition, we acquired EXINI, which Progenics had acquired prior. So EXINI is an artificial intelligence-based company. So we have our own internal engine to ensure that we can think about and drive and produce an artificial indulgence applications for any product that we choose as we develop. And I do think it will become, at some point, part of the mandate is 1 of the pieces that I didn't speak to you about PYLARIFY AI is the efficiency piece. But when you enable a reader, a radiologist or a nuclear medicine physician, when they have the benefit of having an AI-enabled application as part of their reading program, it also drives efficiency. It takes down reading time. So this is also not only does it augment what they can see and how much data they can -- they have available to them. It also improves reproducibility, but it just -- it also drives efficiency. And so that's one of the benefits that we'll be driving. Now it does require training. And that's one of the services that we will provide. We're working with outside partners who will actually bring and install these programs into the institutions that will adopt them, and they will drive the training and the uptake and the usage and the servicing of the application on the equipment.

Okay. So early days, but promising and opportunities to drive true competition team for the...

For the IPs we're doing it with outside partners for the whole rest of the launch gets us. It's what we do, and we're enjoying every minute of it. It's incredibly hardware. And it is a launch, and so it takes good execution, but that is what we do.

Well, it sounds exciting. We're just about at time. So we should step there. But thanks so much for your time.

Thank you. Thank you for having us.