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

Morning, everybody. My name is Luke Sergott, I cover life science tools here at Barclays. It's my pleasure to have Mary Anne Heino from Lantheus Holdings, which she's going to give us an update in our presentation today.

Thank you, Luke, and good morning, everyone. As Luke said, I'm Mary Anne Heino, I am President and Chief Executive Officer of Lantheus. I will warn you, I have a lot of material here today, so I'll move through some of it quickly, so we can get some questions if we have them. The first thing I have to show is the safe harbor statement. So please, this is also available on our website. Please take a moment to read it there, but this says you should very much interpret what I say as my opinion and the opinion of the company and not necessarily a reason to invest, although I do think it's a great idea. So why don't we get into the presentation. For those of you who are not aware, Lantheus, this is a 65-plus-year-old company that has a long legacy of innovation and actually reinnovation in the same space, and that is a nuclear imaging space. We still hold the record for having the most used radiopharmaceutical imaging agents in the United States medical markets. That's our product Cardiolite. We have a history of over 50 years of supplying generators, what are called technetium generators, which are essentially the engine of how you produce nuclear imaging doses. We're 1 of the 2 major companies that offer them into the U.S. market. We have held for over 20 years the #1 slot worldwide with our contrast imaging agent, DEFINITY, and that's certainly true in the U.S. market, but it's also true overall worldwide for total usage. And finally, most recently, we have launched PYLARIFY, which is a first-in-class and best-in-class PSMA PET imaging agent for prostate cancer, and I'll talk extensively about that in my presentation. If we move ahead, these are the 3 categories under which we report our revenue. We have one segment of revenue reporting with these 3 categories. That makes sense to us because strategically, it also aligns with how we think about our products. If we move to the next slide, I'll show you what products actually fit under those categories. As you can see in precision diagnostics, these are the products that represent more of our legacy imaging agents, including those in our nuclear medical imaging area as well as the product I referred to, DEFINITY and our new formulation, DEFINITY RT. In the center column, you see radiopharmaceutical oncology. This is a newer effort for us, and it's something that really came about with strong fruition when we completed our acquisition of Progenics Pharmaceuticals. And it's there that we inherited the agent that is now commercially called PYLARIFY, which we launched last year, remains the only commercially available PET PSMA imaging agent in the United States market. Under this category also, we have our therapeutic product, AZEDRA, which I'll speak to a little later and then some very interesting and exciting pipeline candidates. Our third column also represents something that is a strategic imperative for the company. This is a business unit that we created approximately 2 years ago, that we call strategic partnerships. And it's in this area that we are actively sourcing and then developing biomarkers and other AI-enabled products that really allow us to combine in value, not only with our own products, but to work in partnership with other companies and their clinical development pipelines. This is a really exciting area that's developing in life sciences and somewhat follows the mandate that you have to be able to demonstrate that your product works in the patient category that you are seeking approval in and that you can demonstrate efficacy by other than what have been, I would say, traditional markers that we've used in clinical trials. These are biomarkers that are more specific to disease process and can absolutely demonstrate presence of disease and then response to treatment with therapeutics. So it's a very exciting area for us that we've been very active in and, I would say, very successful as well. We move ahead, I'll begin talking about our different products individually. Market move ahead again. First is our microbubble franchise, which is held by our lead products, DEFINITY and DEFINITY RT. These are contrast bubbles that are actually created that continue to gas. And so when injected into the body. In this case, under the process of ultrasound, you can essentially light up different areas of the body and then assess for normal function or abnormal function in those areas. In our case, DEFINITY's used almost exclusively for less ventricular imaging of the heart for cardiac ultrasound. This is a procedure that's done very routinely in the United States. The only thing that's done more routinely is EKGs, and it's a procedure that yields great and very fruitful information about not only the total heart, but particularly about the less ventricular wall of the heart, which is so important to good cardiac functioning with contraction. As I said, we are the #1 agent we have been for the 20-plus years we've been in the market, hold greater than 80% share. And you see here an example of an unaided image from a contract perspective. And then on the right-hand side, a DEFINITY agent. It really is like taking a flashlight and putting it behind the heart to look at all the different areas of the heart. We have -- in this market, although we've been in the market for what is a very long time, 2 decades, there's significant opportunity. Mark, if you can move forward. There's significant opportunity that remains in this market because this, as I said, a fairly noninvasive diagnostic procedure that yields a lot of information around the heart. So we continue to very actively market this product. so much so that we invested in having a second formulation and bringing that to market. Our original formulation was refrigerator -- required refrigeration, our new formulation RT room temperature does not require formulation. And with having these 2 formulations, we now competitively cover the U.S. market forward types of formulations that are available. And we also make ourselves very importantly the ideal agent of choice for anyone else who's looking to use a microbubble in any of their product development efforts. So as part of some complex product kits, a microbubble might be needed as an agent to either kind of guide where product is going to demonstrate that a product is there. And our room temperature formulation is the ideal choice for partners who are working with us, and we are the #1 there as well in leading clinical programs with microbubble usage for other product types with other agents. If we move ahead, I'll talk about PYLARIFY. This is our very exciting launch that we demonstrated and we began last June after receiving priority review status by the FDA and accelerated approval in late May of last year. Mark, if you can move forward. This is an agent PSMA, prostate-specific membrane antigen imaging agent that is done under PET imaging and is fermented with prostate cancer. We received from the FDA based on the clinical trials that we had submitted with our dossier 2 very broad indications. The first is for men who are suspected of having already metastasis when they're undergoing analysis or consideration for what's called initial definitive therapies. So that's a first major diagnosis when you know that gentlemen has cancer. But you're at that point, concerned that the cancer might not be constrained to only the prostate gland and the very nearby lymph node, you suspect that there could be metastasis distally somewhere in the body. You can use this agent to whole body image and look for any presence of PSMA. PSMA is the antigen specific to external membrane of prostate cancer cells. So if you can identify a PSMA cell anywhere in the body, you know that you're looking at a prostate cancer cell. The other indication that we received is for men who have already undergone treatment and unfortunately, are suspected of having recurrence, and this is very typical. I'm going to show you some stats in a second here. But unfortunately, it's very typical for men who have been initially diagnosed to also have a recurrence of disease at some time later in their prognosis. If you move forward, these are the stats for prostate cancer. Unfortunately, there's a very high not only incidents, but also prevalence of it, so much so that we estimate the market annually to be valued at approximately 220,000 scans. And I say scans because a patient may have more than one scan. So we define the market as total number of scans, not patients. That takes place when you dollarize the market under total addressable market of more than $900 million. And I will say even since our launch, this has been a figure that has been moving north, there has been some considerations from the medical community about how they want to use this product that suggests, again, these larger market values. The next slide does show the incidence and prevalence. Unfortunately, 1 in 8 men will be diagnosed with prostate cancer during their lifetime and 50% of those men will have a recurrent further diagnosed at some point after treatment begins and they're approximately 3.1 million men, and this is just the U.S. cases who are living with prostate cancer today. As you can see from the bottom, this is a disease that tends to be diagnosed at an older age. So approximately 65 or 66 is the initial diagnosis. These gentlemen typically live for up to 15 years. So there's a long period of treatment and intervention, while the disease is being managed for these men. If you can move forward, Mark? These are the diagnostic areas where PYLARIFY has already been approved and is being used. As you can see, and this comes back to what I just mentioned about the very long lifespan that gentleman has once he's diagnosed with prostate cancer, there are many different intervention points that are taken with these patients. The 2 indications that we received referred to those 3 different intervention points that you see that are outlined here. And that is where we estimate that there's up to 220 scans -- 220,000 scans annually that could be done with this patient population. If we continue, these are the different features of PYLARIFY that we feel truly do then convert into what are very strong market advantages. First and foremost, PET imaging. Prior to the availability of PYLARIFY, there was no commercially available PSMA-based PET imaging agent. PET imaging is important because of the high level of detection that you can achieve just because of the maturity and of the sophistication of the scan itself as compared to other imaging modalities. So here, you can really see bone, you can really see metastases that are within bone just because, again, of the resolution that's available or achievable with PET scan imaging. The second is PSMA targeting. As I mentioned, PSMA is an antigen that is specific only to prostate cancer and present on the external membrane of prostate cancer cells. So if you can image for something that specifically, you can feel very confident and very definitive about the diagnosis that you're seeing. This was an agent or this class of agents, was very much anticipated in the United States market. They had already been available in Europe and for being available in Europe, they have been fairly immediately incorporated into medical guidelines saying that this is the imaging approach of choice for men with prostate cancer for both initial diagnosis and for suspected recurrence. The third advantage that we carry and that we are unique, again, in the marketplace with is the choice of isotope in nuclear medical imaging, we're always combining an isotope with an inert agent. The inert agent goes where you wanted to in the body and the isotope lights it up once it gets there. So in this case, this is F 18 combined with our inert molecule, which forms then the product PYLARIFY. And F 18 is very much the desired isotope. Isotope have properties and those properties then can be how much -- how easier they can be used or how much broader they can be used. In the case of F 18 versus the other possible isotope that's being used here, which is gallium. F 18 has a longer half life. So if we all go back to gamer school, half-life is the time it takes for something to degrade in half. What that conveys to in the marketplace is how far you can travel with the product, how far it can be distributed. So these products are distributed from a hub-and-spoke type methodology from what I call PMF or PET manufacturing facilities. And having a longer half-life allows you to have a broader, wider distribution network for your product. The other advantage of F 18, again, this has to do with place on the overall chemical table is the sharpness of image that you can achieve with this particular isotope, which has to do with the smaller, denser array of how the isotope actually degrades and creates clear images versus a broader array of desiccation, which you may see with some other products. And then finally, and this is something that comes out of our strategic partnerships area, and it's something that we're very committed to for all of our product development, we have launched along with PYLARIFY, PYLARIFY AI. This is the only currently FDA-cleared artificial-enabled software that is used specifically and only with PYLARIFY to augment reading ability by the clinicians who are reading the scan. So not only does it allow for the pickup of more data, it allows for then more consensually over time because I showed you how many times that gentleman might be interacted with for standardization of how you're reading images and what image you're capturing. That's a very important clinical differentiation for treatment determination. What has changed since the last time that I image this gentleman. And the more you can be confident that what you're seeing is truly represents change and not just differences in interpretation, the more definitive your diagnosis can be. If we move ahead. These are the areas that we have now PYLARIFY available across the United States. As I mentioned, it's called the PMF manufacturing network. We've built a very broad one that already covers over 80% geographic coverage of the U.S. population. There are some small sites in the United States that are distant and hard to cover. But essentially, we have met our goal with broad U.S. geographic population coverage. We'll continue to build this out as we move through launch by adding additional capacity in large cities and also finishing out moving into some smaller areas, but a terrific job done by my team to get us to where we are as we sit here today. If we move forward, I mentioned before about the guidelines in Europe being changed soon after the product was approved there. The same is true in the United States. In the United States, the major guidelines that are looked at for these types of treatments are the national comprehensive cancer network, or the NCCN, as well as in the major medical societies that are noted for your specific area. In our case, it will be Society of Nuclear Medicine and Medical Imaging, as you see on the right, SNMMI. And of course, ASCO that does speak to or applying to everything oncology related. In the case of PYLARIFY, within several months of approval. And I would say ahead of what their normal cadence is, these products were added into the guidelines and again recommended as an initial staging of use for patients with suspected prostate cancer. Finally, I'll talk to you one of the more important things as I said, this was first-in-class and best-in-class. Whatever your first-in-class, it means that you also have to make sure that you have good market access because this is not something that would typically be covered by different insurance policies. This is another area of very, very strong achievement that we've had where not only have we been incorporated into the CMS reimbursement system, but also into the major commercial. In this case, you're called RBMs, which are the radiologic equivalent of PDM, RBMs are the group insurance covers that manage this type of benefit. And we've been also incorporated into the major RBM covers as well already, having only launched last June. So great progress, which I think really does represent how much innovation is present here and how much kind of demand in anticipation their work for these products to be available in the U.S. market. As I mentioned, our knowledge -- to our knowledge, while there's been another commercially approved product, we are the only commercially available PSMA PET imaging agent in the U.S. market. This is just a view of one of the images that you -- with PYLARIFY AI, as I mentioned, the real -- the benefit here really is not only the sophistication of additional quantification of disease and where it is, but then the standardization of being able to image that over time. I'll move on to our product, AZEDRA. This is our therapeutic nuclear product, and this is the -- you go ahead, Mark, the only product currently approved for patients with both pheochromocytoma or paraganglioma, both orphan oncology diseases that strike, as you can see on the left-hand side, up to about 2,600 patients a year. This is the product that we also inherited with our acquisition of Progenics. And as I do note, I think AZEDRA is a product that has -- across our portfolio, was perhaps most impacted by the pandemic in that these patients require intensive in-hospital treatment over a very short intensive period of time when they're receiving their treatment. And because their disease is term indolent, which means that it's not -- it doesn't present as acute in any one moment, there is the tendency where needed to offset the treatment of these patients. And we did see that during the pandemic, a, because it is labor-intensive to treat these patients, staffing issues really were used then to satisfy, I would say, other areas of the hospital. And again, because of the nature of their disease, there is the possibility and agreement between physicians and patients to offset the actual treatment time. So as we come out from under this pandemic or into the endemic as we call it. We've been working very hard to make sure that everything else is in place about awareness and about available treatment. So that when these patients do come back in a response to treatment, AZEDRA will be their product of choice for the pheochromocytoma or paraganglioma. If we move ahead, I'll speak to this third area that we've built out in our company, which we call Pharma Services. This is an area, again, as I said, we're very focused on what is emerging in life sciences as the mandate for biomarkers and other evidence of diagnosis, evidence of treatment response that's occurring across life sciences. We've made some very, very critical, I would say, acquisitions or partnerships over the last 2 years to ensure that in the major areas where this is being looked at, we have products that can be available either in partnership or for our own development. Our first is PYLARIFY again, in this case called piflufolastat because that's our generic or a product name. This is a product that's currently being used in now major prostate cancer therapeutic trials to first establish the presence of disease and then during the trial to establish that their disease response or treatment response to whatever the therapeutic agent that's being used. As you can see here, we have already supply agreements with Regeneron, Bayer and POINT Biopharma for the use of all product in their clinical trials for their therapeutic agents. The second category here is our NM-01 PD-L1. This is also an exciting and very growing area in immuno-oncology that also requires demonstration of presence of disease, PD-L1-related disease so that you can then have expected response from the therapy. This is a product we're developing there. And then finally, another growing area is called FAP, or fibroactive plasma. I'm not sure I got that acronym correct. But this is also in a much broader area for oncology application for, again, establishing presence of disease and then response to disease. And we now have products representing across all 3 of those categories. I'll touch briefly on our pipeline because I really want to get to some of our financial work. This is a pipeline that we currently have. I will say a lot of our agents when we completed the Progenics acquisition, the pipeline that Progenics has had already been partnered out in many of those agents, and these are partnerships that we continue to develop. And then with our own internal development fees we have there, further therapeutic development with our agent 1095 for prostate cancer. So this is our own therapeutic candidate there. And then our product 1195, which is being used or will be used in neuroendocrine tumors and it's under development. And that's a diagnostic. If we move ahead. I'll skip, Mark, we'll go right through the financials. I'd like to just take a moment to really focus on the financials and what we've accomplished here. We came out with our IPO in 2015 with -- at that time, especially from a leverage perspective, we were levered over 4x. So we have a very, very high level of debt and we've worked very purposely. And I would say, very successfully in bringing our overall debt levels down. As you can see now as the fourth quarter, we're down to $175 million, which represents only 1.5x net leverage. This is something we've accomplished despite all the investments that we've made. And despite the significant acquisition that we made of Progenics. We continue to look at what that right leverage amount is for our balance sheet while we're also looking at external opportunities in what we want to do next with the company. As you can see, we're very solid from a kind of how we come out into the market. We have cash on hand, which I'd say we've held fairly constant at almost $100 million. And we have also an available credit line of $200 million with -- we currently have not access but can, should an opportunity come that we'd like to take action on out in the market. Taking a look at our first quarter, what we referred to -- reported first quarter and then what we guided to for the year, this really also is an incredible testament to the year we had, how these differ if you look at this versus prior 12 months. But for the first quarter, we've guided to $160 million to $170 million with an adjusted EPS of anywhere between $0.45 and $0.50. And then for us, very exciting for the year, we now anticipate that our revenue -- our full year revenue will be between $685 million to $710 million and an EPS of $1.95 to $2.05, which is essentially 4x what our quarter was and also for what our full year was for 2021. So just a terrific performance by the company. I can say that because I'm one at $660 million, so it's really not been about me, it's been about the collective effort of the incredible employee base that we have at Lantheus. I will say, despite the pandemic and the conditions that we saw last year, especially as it relates to employee and employee demand, we were able to attract over 160 people to our company of incredibly high quality and caliber and that's how we affected the launch that we did with PYLARIFY last year and that continues on right now. So if we move to closing, I'll say we -- from a financial basis, we really feel that our fourth quarter and full year for '21 sets us up wonderfully for 2022. The -- what we achieved for our shareholders was also we feel quite remarkable, 114% return from an annual share perspective and annual credit -- from a share price perspective. And finally, we have great momentum coming into 2022. Our products are solid. The markets we serve are solid and growing, and we think that bodes well not only for where we are, but also for strategically some of the actions that we might possibly like to take. So with that, I'll close out my comments, and I'll open if there are any questions from the audience. Okay. Well, that was a lot of content in what was really only 24 or 23.5 minutes. So not sure, yes. I'm not sure how many of you were meeting with the rest of today, but you're also welcome to contact Mark Kinarney with any individual questions I might have paused over to briefly. And I'll just wish everyone a great conference and stay healthy.

Thank you.