Lantheus Holdings Inc (LNTH) 2024 Q2 法說會逐字稿

Good morning. Welcome to the Lantheus fourth-quarter and full-fear 2024 conference call. (Operator Instructions) This call is being recorded. A replay will be available in the Investors section of the company's website approximately two hours after the completion of the call and will be archived for at least 30 days.

I will now turn the call over to your host for today, Mark Kinarney, Vice President of Investor Relations. Mark?

Thank you. Good morning and welcome to today's call. With me today are Brian Markison, our CEO; Paul Blanchfield, our President; Bob Marshall, our CFO; Jeff Humphrey, our Chief Medical Officer; and Amanda Morgan, our Chief Commercial Officer. We will begin the call with prepared remarks and then open the call for Q&A.

This morning, we issued a press release which was furnished to the SEC under Form 8-K, reporting our second quarter 2024 results. The release and today's slide presentation are in the Investors section of our website.

Any comments made during our call could include forward-looking statements. Actual results may differ materially from these statements due to a variety of risks and uncertainties which are detailed in our SEC filings. Discussions during this call will also include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures is included in the Investor section of our website.

I will now turn the call over to our CEO. Brian.

Thank you, Mark, and good morning, everyone. At Lantheus, we are the leading radiopharmaceutical focused company with a clear purpose to find, fight, and follow disease to deliver better patient outcomes.

Last quarter, we outlined our strategy to enhance our leadership by maximizing the value of our existing portfolio and expanding our innovative pipeline of radiopharmaceuticals through focused business development and M&A, all while sustaining a strengthening and attractive financial profile.

Our continued operational performance, financial discipline, and growing pipeline will enable us to create long-term sustainable value. We delivered another strong quarter, led by our commercial productsPYLARIFY, DEFINITY, and Techne Lite. I am particularly proud to share that since the beginning of 2024, our products have positively impacted the lives of more than 3.4 million patients and their families.

You will hear more about the quarter from Paul and Bob in just a few moments. Beyond our commercial portfolio, we progressed our pipeline and utilize the strength of our balance sheet to execute three strategic transactions. We are expanding our pipeline with a mix of late and early stage assets that have the potential to address high unmet medical needs.

Most recently we announced the acquisition of NAV-4694, a late-stage next-generation F18 PET imaging agent candidate targeting beta amyloid in Alzheimer's disease. We entered the Alzheimer's diagnostic space in 2023 when we acquired MK-6240, our novel clinical stage tau targeting F18 PET imaging agent candidate. And we now have two complementary next-generation Alzheimer's disease diagnostic candidates that we believe could provide critical insights for diagnosis, staging. and monitoring. As more therapeutic options become available, it is pivotal time for us to advance new diagnostics to address Alzheimer's disease.

We also acquired the global rights to Life Molecular Imaging's RM2 clinical-stage radio diagnostic and radiotherapeutic pair. Gallium RM2 and Lutetium RM2, also known as LNTH-2401 and 2402 target, the gastrin releasing peptide receptor or GRPR. This potentially best-in-class diagnostic pair, fortifies our oncology pipeline and will potentially take us into new disease areas.

GRPR is minimally expressed in healthy prostate cells and overexpressed in 75% to 100% of prostate cancer cells and is highly correlated with antigen expression. RM2 could potentially be used in earlier stages of disease. In addition to 15% to 25% of metastatic castration resistant prostate cancer patients having low to no PSMA expression. We believe this theranostic pair to be a valuable addition to the prostate cancer community.

We plan to work with Life Molecular to initiate a Phase 1/2a prostate cancer study as soon as practical. Additionally, this quarter, we license two product candidates from Radiopharm Theranostics. This includes an LRRC15 targeted monoclonal antibody, which is a potential first-in-class, highly specific radio conjugate with both orphan drug and rare pediatric disease designations from the FDA for the treatment of osteosarcoma.

The agent is designed to target the surrounding tumor microenvironment cells expressing the protein potentially treating a broad range of cancers. The second candidate is a TROP-2 targeted nanobody radio conjugate, which has best-in-class potential and is advancing in preclinical development. We look forward to updating you on our progress as we continue to thoughtfully build out our portfolio.

And with that, I'd like to now turn the call over to Paul to provide an operational update.

Thank you, Brian. I'm excited to share details on another remarkable quarter. PYLARIFY generated net sales of more than $273 million, up nearly 30% from the prior year period, driven by continued PSMA PET diagnostic growth and sustained preference for PYLARIFY as the number one utilized PSMA PET imaging agent and the clear standard for patients and health care providers.

Existing accounts continue to grow as our sales and marketing efforts, including our, Let's Be Clear campaign, generate awareness and ultimately demand for PYLARIFY among strategic accounts and referring physicians. PYLARIFY remains the only PSMA PET imaging agent that is widely available through a diverse F18 distributor network that we continue to enhance, ensuring convenient, and reliable supply.

PYLARIFY has now been administered in all 48 contiguous states as well as Washington, D.C., Puerto Rico and outside of the US through our European partnership. Earlier this month, CMS released the calendar year 2025 proposed Hospital Outpatient Prospective Payment System, or OPPS rules, which recognizes the value and need for broad access to diagnostic radiopharmaceuticals, including PYLARIFY.

The rule proposes a separate payment for diagnostic radiopharmaceuticals with per day cost greater than $630 following the expiration of Transitional Pass-Through payment or TPT. This represents significant progress for the field of diagnostic radiopharmaceuticals and most importantly, sustained patient access. If implemented as a final rule in November, CMS would maintain separate payment for PYLARIFY for the approximately 20% of patients with traditional Medicare fee-for-service insurance coverage who are treated in the hospital outpatient setting.

In addition to the PET/CT procedural payment. In the proposed rule separate payment would be based on mean unit cost or MUC, beginning in 2025 and potentially transition to ASP at a future date once manufacturers have an opportunity to submit certify or restate relevant ASPs. CMS outlined its proposed payment rates, including PYLARIFY, in Addendum B of the proposed rules.

As we are in the midst of a 60-day comment period, we want to limit speculation on this topic. Naturally, we will continue to work with industry stakeholders and CMS to maximize patient access and look forward to updating you further when we see the final rule in November.

In parallel to CMS' proposed rule, we will continue to support the passage of legislation to codify separate payments for innovative diagnostic radiopharmaceuticals. CMS's proposal represents significant progress, and we will continue to implement our multifaceted strategy to sustain broad patient access PYLARIFY. This entails differentiating PYLARIFY clinically and commercially through our educational and promotional efforts and entering into long-term strategic partnerships with our key customers.

These efforts will further solidify PYLARIFY's leadership and support growth in 2025 and beyond. PYLARIFY has seen significant adoption since its launch, and we expect the current addressable market to grow from over $2 billion in 2024 to north of $3 billion by 2029.

In addition, PSMA PET scans still only represent approximately 30% of prostate cancer scans with conventional imaging such as bone scans, MRI, and CT, making up 70% of prostate cancer scan volume. Clearly, there remains significant near and long term opportunity for PSMA PET and PYLARIFY is well positioned to be the first blockbuster radiopharmaceutical diagnostic. We are pleased with our progress and remain fiercely committed to conveying PYLARIFY's clinical and commercial differentiation to expand the overall market and solidify PYLARIFY's clear leadership.

DEFINITY continued its strong momentum with second quarter net sales of approximately $78 million, up almost 11% year-over-year. DEFINITY drivers of success continue to be its clinical and commercial value proposition, decades of experience in clinical use and our cardiology franchises, focus on operational excellence.

With our expanding pipeline, including the three transactions Brian noted, we continue to build out our R&D team and capabilities. As announced in May, our new Chief Medical Officer, Dr. Jeff Humphrey, brings tremendous oncology and neurology drug development expertise and his leadership and expertise has already and will continue to help advance our pipeline.

Within our prostate cancer portfolio, PNT2002 is our investigational PSMA-targeted radioligand therapy for the treatment of patients with metastatic castration resistant prostate cancer. In December 2023, we reported that SPLASH, the Phase 3 registrational study achieved its primary endpoint with a statistically significant 29% reduction in the risk of radiographic progression or death. In the coming weeks, we expect to have reached approximately 75% of protocol-specified OS events and plan to share more mature overall survival data in the third quarter.

Additionally, we are pleased that the FDA accepted our abbreviated new drug application for PNT2003, a product candidate for the treatment of neuroendocrine tumors. If approved and pending positive resolution of the Hatch-Waxman litigation, PNT2003 could launch in 2026, making it the first radio equivalent to lutetium database.

As Brian mentioned, the acquisition of NAV-4649 expands our Alzheimer's diagnostics pipeline with Nav-4649 and MK-6240, we have two unique diagnostic candidates to aid in addressing the tremendous unmet need among Alzheimer's patients. The FDA's recent approval of another amyloid beta directed antibody includes in the dosage and administration section of the label. The need to confirm the presence of amyloid beta pathology prior to initiating treatment.

We view this as a positive for the future of PET imaging for Alzheimer's disease. Also last month, the National Institute on Aging and the Alzheimer's Association published revised criteria for the diagnosis and staging of Alzheimer's disease.

One of the guidelines of the main principle is that Alzheimer's disease should be defined biologically using protein-based biomarkers and not only based on a clinical assessment. These guidelines recommend biomarkers, including both amyloid and tau PET imaging, may be used to diagnose Alzheimer's disease and provide an indication of its severity.

We are excited at the prospect of aiding in the diagnosis, staging and monitoring of Alzheimer's disease. Recently, we held a pre-NDA meeting with the FDA, and we expect to submit an NDA for MK-6240 in 2025. We look forward to sharing more about the regulatory pathways and time lines for MK-6040 and NAV-4649 in the future.

I will now turn the call over to Bob.

Thank you, Paul, and good morning, everyone. I will provide highlights of the second quarter 2024 financials focusing on adjusted results with comparisons to the prior year quarter, unless otherwise noted.

Turning to the details, consolidated net revenue for the second quarter was $394.1 million, an increase of 22.5%. Radiopharmaceutical oncology contributed $273.3 million of sales, up 29.3% attributable entirely to the continued strength of PYLARIFY and generally in line with expectations and seasonal trends we've noticed over the last year.

Precision diagnostic revenue of $112.1 million was 14.9% igher. Highlights include sales of DEFINITY at $78.1 million, 10.7% higher, along with TechneLite revenue of $28.2 million, up 30.5% due to opportunistic sales in the quarter.

Lastly, strategic partnerships and other revenue was $8.7 million, down 31.7% due to the prior year comparable having $7 million of RELISTOR-related royalties not replaced not repeated this year, offset by a strong MK-6240 contribution.

Gross profit margin for the second quarter was 68.4%, a decrease of 121 basis points from the second quarter 2023 due largely to an approximate 80 basis point headwind due to the previously noted RELISTOR royalty sale mid-last year. Further benefits from favorable overall product mix led by robust volumes of PYLARIFY and DEFINITY, were offset by higher than forecasted TechneLite volumes, all amidst higher contracted material and overhead costs as well as expenses tied to PYLARIFY lifecycle management and PMF network expansion.

Operating expenses at 25% of net revenue were 202 basis points higher than the prior year rate and ahead of expected spending levels. The company continues to invest in the PYLARIFY franchise as well as development of our clinical pipeline. R&D expenses increased in the quarter, notably to advanced MK-6240 as well as business development evaluations not previously forecasted across multiple functions.

Operating profit for the quarter was $171 million or an increase of 14%. Other income and expense at $4.2 million of income as a result of net interest income offset in part by interest expense in our existing debt.

Total adjustments for the quarter were $90.9 million of expense before taxes. Of this amount, $18.5 million and $10.1 million of expense is associated with non-cash stock and incentive plans and acquired intangible amortization, respectively. $38.3 million of IP R&D and transactional expenses relate to the deals announced in the quarter along with $22.5 million of unrealized loss tied to our equity investment in perspective with the remainder relating to acquisition integration and other non-recurring expenses.

Our effective tax rate was 27.6%. The resulting reported net income for the second quarter was $62.1 million and $126.8 million on an adjusted basis, an increase of 15.7%. GAAP fully diluted earnings per share for the second quarter were $0.88 and $1.80 on an adjusted basis, an increase of 16.4%.

Now turning to cash flow, second quarter operating cash flow totaled $84.7 million, $117 million over Q2 last year, when we paid the PYLARIFY CVRs. Capital expenditures totaled $11.2 million, essentially flat with the prior year. Free cash flow, which we define as operating cash flow less capital expenditures, was $73.5 million an increase of $116.5 million over the prior year.

During the quarter, the company invested $32.9 million to acquire NAV-4694. It is worth noting that the other transactions we've announced in recent weeks were funded in July and are not reflected in the use of cash in the Q2 financials. Taken together, cash and cash equivalents, net of restricted cash, now stand at $757 million. We have access to our $350 million undrawn bank revolver and are comfortable with our strong liquidity position.

Now turning to our updated guidance for the full year 2024, as well as some details for the second half of the year, notably adjusted EPS. We are affirming our view of revenue for the full year and the previously implied second half of the year, drawing particular attention to the seasonal patterns between Q3 and Q4 as we have continuously noted.

As a reminder, we estimate full year consolidated revenue to be in a range of $1.5 billion to 1.52 billion, with PYLARIFY expected to grow mid 20%. With regard to PYLARIFY, we expect the Q3, Q4 revenue split to favor Q4 on an absolute dollar basis, driven by fewer patient visits during the summer months as we have seen traditionally.

Volumes continue to grow throughout, offset by the impact on net revenue from our strategic partnerships with key customers, which will begin to manifest more fully as we go deeper into the year. Our prior adjusted EPS guidance of $7 to $7.20 naturally did not take into account the investments we've subsequently made to support our long term future growth as well as the dynamics of our capital structure.

Therefore, we are adjusting our view of earnings to account for the cumulative effect of these transactions we've announced over the last several weeks and in anticipation of now filing an NDA for MK-6240 in 2025. Much of the anticipated investment for 2024, approximately $0.25 is within the R&D line and will vary on a year to year basis as we near commercialization.

Additionally, at the current share price and based on calculations tied to our convertible debt instrument, you should model fully diluted weighted average shares outstanding for the second half of the year to be approximately 74.5 million shares and about 72.5 million for the full year. Therefore, fully-diluted adjusted earnings per share should be in a range of $6.60 to $6.70. It has been the case all year, this estimate does not include any incremental investment for PNT2002, nor any further business development that might be completed this year.

Lastly, you'll note that we've steered away from quarterly guidance to reflect our focus on solid near term decisions to deliver longer-term growth. In the future, we will offer full year guidance and sufficient color for the investment community to track our progress throughout the year.

With that, let me turn the call back over to Brian.

Thank you, Bob. With PYLARIFY on track to surpass $1 billion in sales and be the first radiopharmaceutical diagnostic blockbuster. And DEFINITY maintaining 80%- plus market share, Lantheus continues to maximize the value of our commercial portfolio. As demonstrated through our three strategic transactions in the second quarter and the progress of our current product candidates, we are fully committed to advancing and expanding our pipeline.

We will continue to focus on radio diagnostics and radiotherapeutics that can make a difference for significant patient populations. Lastly, we will continue to sustain an attractive financial profile by delivering strong performance for our commercial portfolio and deploying our long-standing radiopharmaceutical expertise and capital resources to invest in and bolster our pipeline through strategic business development.

In closing, we will continue to advance innovation and realize our purpose to find, fight, and follow disease to deliver better patient outcomes as the leading radiopharmaceutical focused company.

And with that, we are now ready to take your questions. Operator, please go ahead.

(Operator Instructions)

Anthony Petrone, Mizuho Group.

Thank you, and congratulations on the quarter here. Maybe two questions for me. One will be on PYLARIFY, and the second will be on the revised earnings guidance.

So on PYLARIFY, maybe just to level set the viewpoints from the company on the CMS recommendation to unbundle. It seems like that certainly was a positive proposal from CMS. There's a debate on how pricing will settle out once we get into the final ruling period in late October, November. So maybe just to level set, what we've learned in proposal season and the expectations into the final rule for PYLARIFY?

And then the second question on earnings guidance. Clearly a big step up here in R&D. Brian, you called out MK -- Bob and Brian, you called out MK-6240, but also other business development costs in there. I think there perhaps is also some exposure to the perspective deal in there. So maybe just the moving parts on the step-up in R&D, and is this the run rate we should be expecting going forward? Thank you.

Okay, and thanks for the questions. Good morning. Before Paul launches into the CMS topic, we are trying to avoid too much speculation here since we're within the comment period. So you win the over-under. We're going to answer your question. But for the rest of the folks listening on the line, we will avoid this topic. And then after Paul goes and Bobo will do some clarification on EPS, so, Paul, if you don't mind.

Thanks, Brian. Thanks, Anthony. Good morning. As noted in the prepared remarks, we are pleased that CMS recognizes the value of diagnostic radiopharmaceuticals, including PYLARIFY and the need to pay separately for diagnostic radiopharmaceuticals.

If the proposed rule that was put forth becomes final in November, CMS would be maintaining separate payment for PYLARIFY for the 20% of patients that are subject to TPT expiry, namely those with traditional Medicare fee-for-service treated in the hospital outpatient setting.

As you noted, the proposed separate payment is based on mean unit cost or MUC beginning in 2025. And as noted in the CMS language could potentially transition to ASP once manufacturers have an opportunity to submit, certify, or restate relevant ASPs.

It's important to note that CMS highlighted that they utilize and you see as manufacturers of radiopharmaceutical diagnostics are not required to. And indeed, many do not report ASP for radiopharmaceutical diagnostics once off pass through. Lantheus does and will continue to submit PYLARIFY ASP to CMS going forward.

As Brian noted, we are in the midst of a 60-day comment period, and we're going to continue to work with industry stakeholders and engage with CMS to maximize patient access. Overall, this is significant progress for sustained patient access and the field of diagnostic radiopharmaceuticals overall, not only PYLARIFY, but also future potential products we have in our pipeline like MK and NAV in Alzheimer's.

Thanks. So Anthony, when you think about the guide, naturally, we don't forecast impacts of transactions. And in this case and in addition to that, with significant opportunity to advance MK-6240 for an NDA filing in 2025.

As far as what to expect as we go forward, you're right, you outlined it actually in your own question in terms of the $0.25 dilution this year from the number of transactions where we've added a number of really interesting promising pipeline assets. But as we look forward obviously, our investment will be commensurate with the opportunity from a commercial perspective.

And thinking about commercial, we do expect that expenses will vary over time much like you saw us do with the PYLARIFY opportunity. If I take you back to late 2020, early 2021, we were investing ahead of the curve to make sure that we were ready to be able to commercialize that asset and maximize the market opportunity.

And we do those types of investments with an eye towards return on investment as well as our ability to execute. So we'll give more color on that as we get further into 2025 and obviously '26 as things progress, and we'll make sure that the investor community can build out models and track overall progress.

Roanna Ruiz, Leerink Partners.

Great morning, everyone. Adding on a question from the first one, I was curious, what are your thoughts behind the potential PYLARIFY revenue growth trends when transitioning from 2Q to 3Q? And I was also curious how your ongoing strategic contracts with top accounts might be an incremental tailwind going into second half this year.

Good morning. I'll start. This is Bob. And then I'll turn it over to Paul for the last bit. In terms of seasonal trends, I think in my prepared remarks, I was trying to be specific about how you would expect Q3 and Q4 with absolute dollar, the peak sales, if you will, would be in Q4 versus Q3. So you would split it that way.

And that's in line with seasonal trends that we have seen historically, which I think can be broadened, if you will, across more than just a PYLARIFY but broader health care. But I did also note that you would expect volumes to continue to grow throughout the year. And if you were to look at those volume growth, they would be very much in line with our seasonal trends that we've noted.

But for more on color in that, I'll give it to Paul.

Thanks, Bob. Good morning, Roanna. Strategic partnerships, as mentioned in the prepared remarks, remain a core part of our multifaceted strategy to sustain PYLARIFY clear position as the number one PSMA PET imaging agent. We view these partnerships with key customers that incredibly beneficial to ensure that PYLARIFY remains that PSMA PET agent of choice and accessible to all patients even amidst three other competitors in the market.

Conversations with these key customers continue to go well and we are pleased with our progress. Given the competitive nature of our business, I think you'll understand why we don't necessarily want to elaborate further on the progress or the specificity around these partnerships, but we're pleased with the progress and we continue to push forward.

Richard Newitter, Truist Securities.

Hi. Thanks for taking the question. I was wondering if you could maybe help us size the Alzheimer's opportunity for you in any way to clearly coming into much nearer term or intermediate term focus. How big could this be relative to market opportunities say like PYLARIFY? And I would imagine the scan per patient component to that is going to be multiples of what is involved in PSMA PET imaging.

And then if I could just upfront, just piggybacking off the last question. It sounds like even with and you see pricing, you feel better about your bargaining position. You should be in a better bargaining position with the discounting conversations or the contracting conversations you're having when you were prior to the CMS proposal. Is that a fair observation things?

Yeah, thanks, Rich. The answer to your last question is no comment, but we're very encouraged by what we're seeing. So it's almost yes. Anyway, back to the Alzheimer's field, we've quoted before a fairly meaningful TAM in excess of [$1 billion]. I'm not going to get into that. We're placing a bet here.

And if you look at all the recent innovation particularly recent approvals in Alzheimer's therapeutics, this field is about to explode. And we're at the very beginning of it with, we believe to agents that are considered next generation or best in class, and we want to be there right, right at the front of it.

For example, MK-6240 is currently in over 90 trials. I believe 83 of them are in academic centers, the top in the country in the world. So NAV, again, possibly the most sensitive and specific beta amyloid marker tracer that could be available and once we file. So we're highly encouraged. We're placing a bet and we're going to be at the intersection when this market explodes.

Matt Taylor, Jefferies.

Hi, good morning. Thanks for taking the question. Just wanted to ask about the two main things that were updated on the beginning of the prepared remarks. One is, can you talk about your ability to grow PYLARIFY next year if we do see pricing that is lower than peers on based on the CMS update in that segment of the market?

And Bob, I was hoping you could parse out a little bit more the R&D step up between the MK-620 NDA and the transactions to help with our modeling for the R&D step-up this year. And going forward.

Paul, you want to grab the first part ?

Morning, Matt. So obviously we were incredibly pleased as we shared with the proposed CMS rules. As we affirm today, we continue to expect PYLARIFY to grow substantially this year in that mid-20% range. The vast majority of it driven by volume with some slight contribution from price as our earlier pricing increases at the beginning of the year on have a moderating impact based on strategic partnerships.

I think we are incredibly excited and positive about the future prospects of PYLARIFY the PSMA PET market right now is annualizing just north of $1.5 billion if you look at all relevant players in the second quarter and you annualize that, that's compared to a total addressable market this year is north of $2 billion, and we expect to grow to north of $3 billion by the end of the decade.

And then if you add in that 70% of prostate cancer scans are still with less specific conventional imaging and only 30% is with we would call this next generation of PSMA PET scans, led by PYLARIFY, we think there's significant opportunity for this market to expand and to continue to grow. Naturally, we've been putting in place a number of initiatives to ensure PYLARIFY leadership and the market to continue to expand, led by our commercial and clinical brand differentiation in the market through our commercial teams as well as our marketing efforts.

And so we haven't put a number on 2025 at this point yet, but we remain very positive that PYLARIFY on the overall market will continue to grow. And the PYLARIFY will remain retain its leadership position.

And Matt, just to your question about helping with modeling on the different R&D assets, if you will, of the clinical pipeline. As I look at the totals, I would put 70% of it really kind of falls on NAV-4694 and RM2 with more or less the balance going to MK-6240. That obviously will the MK-6240 will evolve probably quicker in the sense that of an NDA filing projected for 2025, where of course, as we get closer to our commercialization efforts, things will change. But I'll provide color on that when we get to 2025.

Tara Bancroft, TD Cowen.

Hi, good morning.

So I was hoping you could explain a little bit more of your thinking on the potential impact of other entrants to PYLARIFY in the out years. what assumptions you have there for market share and what goes into your confidence in maintaining your share?

Thanks, Tara. We certainly are aware of the clinical development environment for other players. I think overall, we believe that PYLARIFY has significant and sustainable competitive advantages, both commercially and clinically that we've outlined before. We take new competition incredibly seriously.

Overall, I think we believe that first and foremost raises awareness in the marketplace where there is broader voice to demonstrate the potential for PSMA PET imaging. And so I think we're very positive about PYLARIFY current position.

We think we continue to have a leading product that has demonstrated superiority out there in the marketplace with what we're able to be able to help physicians make more informed decisions to manage prostate cancer patients. And so we take new entrants quite seriously, but we continue to invest in lifecycle management and product improvements as well as in our commercial expertise to continue to grow and lead in this space for many years to come.

Amanda, anything you want to add?

No. I think it's all good.

Larry Solow, CJS Securities.

Great, thank you. Good morning. I guess two quick follow-ups, if I may just squeeze two in. I guess said another way or asked another way. Does the CMS proposals at all changed your ongoing negotiations and sort of your strategic initiatives in terms of locking in customers. I mean, do you have that you have to play of a waiting game now has that changed at all?

And then second question, just you mentioned the total market size today in the US is about $1.5 billion. That basically just sounds like you're adding up the logistics and your PYLARIFY. Are there any other competitors doing anything meaningful or making any inroads on that market?

Yeah. No, thanks for the questions. As far as our commercial game plan, nothing changes. We're committed to our strategic partnerships. We're committed to bringing the best product to more people. So nothing changes as far as competition is concerned, look, we monitored were aware of it. Anything a competitor does is meaningful, and we'll assess how we respond to it. But I'll let Amanda elaborate a little bit on that point.

Yeah. Thanks, Brian. So from a competitive dynamic perspective, PYLARIFY is the clear market leader in PSMA PET imaging with more than 400,000 scans since we've launched. We believe our continued market leadership will reflect our clear clinical and commercial value proposition.

We've seen our market leadership continue to expand and solidify with our absolute annual revenue growth, outpacing that of what we see with our competitors. In addition, our market share remains relatively stable as we shared during the call, in the mid 60% range, even amidst three other commercial competitors.

And overall, finally, we believe there remains a substantial growth opportunity in the PSMA PET market. As Paul shared with you earlier, as evidenced by the $2 billion TAM current addressable market and the $3 billion future addressable market and with the significant number of prostate cancer scans that are performed with conventional energy instead of PSMA PET.

So we continue to focus on ensuring PYLARIFY, continues to grow and remains the market leader. And in the near term, we've reaffirmed our revenue guidance and expect PYLARIFY to grow in the mid 20% range predominantly driven by volume.

Yuan Zhi, B. Riley.

Good morning. Congrats on the commercial progress of PYLARIFY. We are a little bit of surprise to see the MK-6240 NDA submission is scheduled in 2025. So can you maybe clarify what was discussed with FDA and what would be the target indication for these agents and banks? And then can you maybe quickly comment on your current thoughts on the share buyback and dividend? Thank you.

Yeah. So we'll start with the share buyback first comment. Bob, you want to flag that?

All right. So I'll start with that. So from a buyback perspective, obviously, when we think about capital allocation, we broadly consider all elements. Obviously, our first priority is going to be business development. You see us execute that here in Q2. We still have plenty of dry powder, but we also have a full pipeline. It's a topic that we have continuously taken up with the Board, and we will continue to evaluate those opportunities as it becomes appropriate.

Yes. And thanks for the question about MK-6240. We've recently held a pre-NDA meeting with FDA and we expect to submit the NDA for MK-6240 in 2025. We look forward to sharing more about the regulatory pathways and timelines for MK and NAV in the future. Thanks for the question.

David Turkaly, Citizens JMP.

Hey, great. Maybe just one for Bob, and I appreciate the commentary you made on seasonality. But as we kind of look at the back half, I know you don't want to explicitly call out 3Q verses 4Q by product. But could that -- I mean, it looks like maybe clarify could be sort of PYLARIFY or maybe even down in 3Q versus 2Q, just to kind of get that cadence rate for the year. Is that kind of a fair assumption?

As we look at it, I mean, we've given enough pieces and parts to do the math, I think and sequentially you're going to see it particularly from a growth PYLARIFY volume perspective. It will continue to have increase from a volume perspective.

We do think, though that those seasonal trends from it as these strategic partnerships with key customers come into play will mitigate more fully as we get into the back half of the year on. But to be fair, I mean, our overall guidance hasn't changed from our perspective from a mid-20% growth rate. So the view really hasn't mitigated itself throughout the balance of the year. So yeah, I do expect that Q3 will be the lower of the two quarters for planning purposes.

Justin Walsh, Jones Trading.

Thanks for taking the question. Can you provide any color on your expectations for the upcoming splash readout and what you would like to see there to convince you to move forward with your POINT, Lilly partnership?

Yeah, thanks for the question. Look, we're going to see additional data coming this quarter. We've said that before. And as the trial progresses, we don't exactly control the time line, but we have a great feel that it will be this third quarter, our expectation is to move ahead. And that's the best I could tell you at this time.

We're pretty comfortable with what we're seeing and what we have seen in meeting our primary endpoint. And obviously, the overall survival crossover analysis and the confounding of it is something that's been an industry topic now for over a year. We like the asset, we'd like to move ahead. We're encouraged by what we've seen already with our primary endpoint, and we'll update the world when we know what we have.

Andy Hsieh, William Blair.

All right. Thanks for taking our question. I'm just wondering if you could educate us on the potential product profile differentiation of NAV-4694. I guess, in the market, Amy did have it approved for over a decade now that from Eli Lilly. Just wondering how you plan to provide that positioning differentiation as you launch into a field that already has existing standard of care? Thank you.

Jeff, do you want to kick that off?

Yeah, thank you. So for NAV, it's currently in Phase 3 development as expected. We expect to bring it through pivotal trials and into commercialization. The agent has higher sensitivity and specificity and less off-target binding in the brain that potentially allows for clear images, better understanding of the anatomic distribution and importantly, earlier detection of beta amyloid that earlier detection may lead to earlier treatment and potentially better outcomes. Thanks for the question.

Kemp Dolliver, Brookline Capital Markets.

Hi, thank you. What is your ability to leverage your existing commercial footprint for both 6240 and then potentially PNT2002?

I think that's a great question. I appreciate it. Do you want to take it, Paul?

I appreciate the question. I think we're excited to build from a position of strength from our long history and existing capabilities in radiopharmaceuticals, both diagnostics and what we building in therapeutics. And I'll cover a few specific points.

Within the Alzheimer's space and both NAV and MK are F18 based products. So they will be manufactured and we would be able to lever the existing PMS network. We have the out-the-door times and the production slots that we've been working with our key partners that now are across 58 different PET manufacturing facilities in the country.

And so we believe that comes from a position of strength to be able to build on that and enhance those relationships from a production and delivery perspective of which we all know that in radiopharmaceuticals and diagnostics in particular that can be a hurdle for new entrants and others in the market.

From a commercial perspective, if we look at where the imaging agents would be administered and scanned for Alzheimer's, we are already in the vast majority of PET-CT sites across the country on. Those same sites would be adding capacity to be able to scan for Alzheimer's agents, both tau tangles and those targeting beta amyloid.

And so we would be able to lever our existing infrastructure and capabilities there. Naturally going into Alzheimer's would require increased support around referring physicians. Recognizing that with clarify we're currently calling on urologists and oncologists, but neurologists and those memory clinics and others that we'll be seeing and treating Alzheimer's patients would require investment. As Bob has mentioned, we make investments commensurate with the commercial opportunity, but we do have significant infrastructure there that we could lever.

From a therapeutic perspective, specifically with PNT2002, similarly, if we look at the treating sites for PET-CT, there's about 2,000 in the country and there's about 300-plus radiopharmaceutical therapeutic sites with almost all of those therapeutic sites having imaging. And so we already have relationships at these sites that would be treating for PMT02 as well as PMTo3, and we would be able to lever that infrastructure.

Again, we would make commensurate investments on the referring physician landscape for 03. It would be with the neuro endocrine treating physicians, which could be medical oncologist as well as radiation oncologists and the like. We already have some presence there with PYLARIFY. But naturally, we would make appropriate investments commensurate with the opportunity.

And so we feel we're coming from a position of strength where we lever our existing manufacturing as well as commercial relationships and look forward to bringing these exciting agents if approved for the market.

(Operator Instructions) Richard Newitter, Truist Securities.

Just two quick follow ups. It sounds like the vast majority of the bridge from your old earnings guidance to the new is, some higher share count, but we estimate about $0.15 and then it sounds like the R&D step-up is most of the rest are $0.40-plus of the rest. Is that right?

Or is there anything else in [OpEx] assumptions or even gross margin? I think your last gross margin guide was around flat year over year with $0.23. Does that still stand?

And then just on PYLARIFY, can you grow PYLARIFY next year? I think the street has a mid-single-digit growth rate for PYLARIFY. I am just wondering if that's a reasonable level. I think in your prepared remarks, you said you are confident in PYLARIFY continuing to grow into the future? So reconcile that, please.

Rich, your reconciliation is basically spot on. When we started the guidance paragraph, I did say that naturally when we started from our starting jumping off point of $7 $7.20, we hadn't taken in consideration this acceleration in R&D spend the transactions that we do because you don't forecast that kind of stuff.

Sometimes these opportunities arise and you take advantage of it. So from a reconciliation perspective, you've got exactly the share count, which is just a mathematical issue.

And then you're right, the rest of it, the majority of the additional spend is R&D based. But that considers both what we spent in Q2 versus end as well as Q3 and Q4. So again, yeah, I mean, our underlying operational profile hasn't really changed other than the ability now to invest in an R&D pipeline that will launch us into our future in terms of additional growth drivers.

Rich, maybe just some added color on 2025. Today, we're talking about '24 and what we're able to deliver to have PYLARIFY be the first ever radiopharmaceutical diagnostic blockbuster with over $1 billion in sales. We've guided to PYLARIFY growing mid-20%. We grew almost 30% year over year this quarter.

We're highlighting that the current market is annualizing at about $1.5 billion and has the potential this year to be north of $2 billion and continue to grow. And so we believe we are well positioned naturally there will be a time and a place when we give specific 2025 guidance.

But suffice it to say a product that's been growing 30% in the first half of this year, 30% year over year with our guide to be in the mid-20%. We still have some ample room and momentum to continue to grow into lead and the recent CMS proposed rules only further support that story in addition to the commercial differentiation, the continued lifecycle management. And so we remain very positive on PYLARIFY near and long-term growth potential.

Ladies and gentlemen, there are no further questions at this time. Thank you for participating in today's conference. This concludes the program. You may disconnect and have a wonderful day.